América Móvil, the largest wireless carrier in Latin America, today announced that its board of directors has approved a plan to spin-off up to 37k towers in Latin America. The spin-off of 37k towers by América Móvil intends to maximize the value of its digital infrastructure by forming an independent tower company. Specifically, the new tower company will be entirely focused on development, construction, and co-location of towers for wireless services. América Móvil expects to complete the spin-off of its tower assets during 2021.
Largest Wireless Carrier in Latin America – América Móvil
América Móvil is the largest telecom company in Latin America, with 362 million access lines, of which 281 million are wireless subscribers. In Latin America, América Móvil operates in a broad set of geographies, including Argentina, Brazil, Caribbean, Central America, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, and Uruguay.
Overall, the company’s two largest countries of operation are Mexico and Brazil. Firstly, in Mexico, América Móvil operates under the brand Telcel, which has 76.6 million subscribers, equating to ~63% market share. Secondly, in Brazil, América Móvil operates under the brands Claro and Nextel, which have 60.0 million subscribers, equating to ~27% market share.
Notably, Carlos Slim, Mexico’s richest man, controls América Móvil, owning ~70% of the company.
Tower Company Spin-Off – América Móvil
In December 2015, América Móvil completed a spin-off of its Mexican tower assets into a publicly-traded vehicle called Telesites S.A.B. Therefore, the current spin-off of 37k towers in Latin America will comprise tower assets from América Móvil’s other geographies across the region. Notably, América Móvil has 10k+ towers in Brazil, 7.5k towers in Colombia, 4.5k+ towers in Argentina, 4k towers in Peru, and 2.4k towers in Chile.
América Móvil’s spin-off of towers in Latin American is unique. Indeed, the company is one of only a few wireless carriers in the region which currently owns a tower portfolio at such scale, across so many geographies.
América Móvil Towers – Spin-Off Rationale
In July 2020, América Móvil began the process to evaluate strategic alternatives for its tower assets. At the time, América Móvil’s goal was to unlock value in its tower assets by selling or spinning-off its towers. This is because, tower assets trade at significantly higher EBITDA multiples than the overall telecom service company. In turn, América Móvil can use the proceeds, from what is now a spin-off, to reduce its debt levels.
Additionally, América Móvil notes that capital is scarce. Therefore, the company has decided to divert capital away from owning tower assets. Instead, capital will be re-allocated towards commitments such as 5G network build-outs and 5G spectrum license purchases. For example, América Móvil is deploying its 100 MHz of spectrum depth in the 3.5 GHz band in Mexico. Additionally, the company wants to augment its spectrum holdings through further purchases in a number of 5G spectrum auctions. Specifically, 5G spectrum auctions are taking place across Latin America in 2021 and 2022, including auctions in Brazil and Colombia.
Overall, América Móvil demonstrates a global trend among wireless carriers of unlocking value through a separation of their tower assets into a new publicly-traded vehicle. Indeed, this is particularly exemplified by Vantage Towers’ forthcoming European IPO at a €20bn+ valuation. Specifically, Vantage Towers is a subsidiary of Vodafone Group and is being spun-off into a separately publicly-traded company during 2021.
América Móvil Towers – Valuation for Spin-Off in 2021
Currently, América Móvil has not indicated their expectations for the valuation of their tower assets in Latin America. However, we base our analysis on recent tower company M&A transactions in Latin America and trading multiples for Telesites S.A.B. As a result, it is conservative to assume a $200k per tower valuation for América Móvil’s tower assets. Therefore, a spin-off of 37k towers by América Móvil, results in an enterprise value of $7.4bn for the tower company.
