El Salvador sets rules for America Movil to acquire Telefonica’s operations

Days ago, the Salvadoran Competition Superintendency’s Board of Directors (CDSC) issued a resolution establishing conditions for America Movil to acquire Telefonica’s operations in the country, where the company operates under the ‘Movistar’ brand. Rules set by the Salvadoran regulator include both measures to be implemented before the transaction is made, as well as subsequent obligations.

As part of the established measures, Claro (America Móvil) must give up the right to use 25 MHz of radio spectrum with national coverage in the 850 MHz band, and 30 MHz radio spectrum with national coverage in the 1900 MHz band, currently owned by Telefónica Móviles El Salvador, SA de C.V. ‘in a pure, simple and irrevocable way to the Salvadoran Electricity and Telecommunications General Superintendency (SIGET).  To do this, America Movil must submit a ‘Radio spectrum waiver project’ to be evaluated and approved by SIGET and CDSC.

In addition, and as part of the post-transaction conditions, Claro must keep for seven years, from the day after the transaction date, all the marketing strategies developed by Movistar and Claro. This action, as detailed by the CDSC, does not limit the possibility that Claro can improve prices, features and conditions in favor of its clients. It must also cancel, in all existing contracts on the date of acquisition of Telefonica, any type of clause that penalizes the early cancellation of the already mentioned agreements; and it must give enough information out about the operation developed and, in particular, all the necessary information so that clients who wish to cancel their contracts can do so. Finally, if a new competitor enters the market during the next seven years, Claro will be bound to provide national roaming services to the new player for three years.

As detailed by the CDSC, if Claro fulfills the established conditions, it will be able to acquire Telefónica’s operations in El Salvador. Otherwise, the transaction will be denied. In 2019, America Movil requested the Salvadoran regulator for approval of the acquisition three times, which was declared ‘inadmissible’. Likewise, apart from its operations in El Salvador, Telefonica had also agreed with América Movil to acquire its operations in Guatemala; while its subsidiaries in Panama and Nicaragua were sold to Millicom (which operates in Latin America under the ‘Tigo’ brand); and the one from Costa Rica to Liberty Latin America.