América Móvil buys Smartcom from Endesa in USD472 million deal

4 Aug 2005

Mexican-owned mobile group América Móvil (AM) has agreed to buy 100% of Chile’s third largest wireless operator Smartcom from Spanish power utility Endesa for USD472 million. Móvil beat off bids from Chilean cable operator VTR and US-owned digital trunking company Nextel to enter its thirteenth mobile market in the region, following its purchase of Paraguayan cellco Port-Hable from Hong Kong’s Hutchison Telecommunications earlier this year. Its latest acquisition still awaits the go-ahead from Chile’s anti-monopoly committee, the TDLC, as well as regulator Subtel, but this is unlikely to pose a problem as AM has no existing operations in the country. Subject to regulatory approval, AM now offers mobile services in Mexico, the US, Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay and Uruguay, and had a total subscriber base of over 74 million by the end of June 2005. It is also interested in establishing a presence in Bolivia, Panama and Venezuela.

Smartcom launched CDMA services under the name Chilesat PCS in 1998 before being taken over by Endesa and renamed Smartcom in 2000. It remains the smallest of Chile’s three cellcos with 1.7 million subscribers at the end of June. It launched 3G services in September 2004 after rolling out a CDMA2000 1xEV-DO platform, but had signed up less than 5,000 users of the technology by the end of the second quarter. Its domestic market has undergone major changes in the last year, with Telefónica Móviles’ taking control of CTC Telefónica Chile and BellSouth Chile, and merging the two units under its Movistar banner to leapfrog rival GSM operator Entel PCS as the market leader. Entel itself recently changed ownership when a local consortium bought Telecom Italia’s 54.8% stake in a deal worth USD934 million.

Previous press reports had flagged up Entel as a likely candidate for purchasing Smartcom, but according to the company’s Chief Financial Officer, Felipe Ureta, the Entel management decided against a bid because it did not consider its smaller rival’s ciustomer base to be of sufficient quality. Ureta also said that Smartcom’s CDMA infrastructure would present further problems relating to migration and tariff structures. He commented that “América Móvil is a great player…but I think they will have tough times since CDMA handsets are more expensive than GSM ones, so…they will have no competitive advantages.”

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