On February 9, Am’rica M’vil (AMX) announced its plans to spin-off its CALA tower assets. While this move has been in the back of our minds for a while, it has now hit us with its magnitude and the real impact it is likely to have on the CALA telecom tower landscape.
The announcement followed the release of AMX’s quarterly figures, which showed an 80% jump in profit and a sharp increase in post-paid mobile subscribers. Net profit of US$1.87bn in Q420 was also driven by a favourable exchange rate.
To date, this is the information TowerXchange was able to gather on the move.
As many as 37,000 sites will be transferred to a new entity, which will be owned by AMX’s shareholders to begin with. However, given the precedent set by Telesites, shareholders could decide for an IPO to take place in the future. The new entity will be ’entirely focused on the development, construction and co-location of towers for wireless services’ and it will involve all CALA markets where AMX is present.
The portfolio of assets is spread across multiple geographies. Here is a breakdown of AMX’s presence in CALA and beyond:
United States: TracFone and Claro Enterprise Solutions
Mexico: Telcel and Telmex
Central America (Guatemala, Honduras, Nicaragua, El Salvador and Panama): Claro
Caribbean (Puerto Rico, Dominican Republic and Jamaica): Claro
South America (Argentina, Brazil, Ecuador, Colombia, Chile and Peru): Claro; Embratel / Net (Brazil only)
Europe (Austria and Eastern Europe): Telekom Austria Group
The spin-off relates only to AMX’s tower assets and not to its fibre and will involve every market in CALA. The move could exclude Mexico and Costa Rica though, where Telesites already operates. AMX expects to complete the reorganisation of assets by the end of 2021.
The new entity will have its own management and operate independently from AMX. For the time being, AMX hasn’t clarified whether it will spin-off its 16,000 Austrian assets as well but it is reportedly working with Telekom Austria to assess whether a tower move makes sense in Europe too.
The European market is experiencing a frenzy of its own and this spin-off follows the announcement by Telef’nica of the agreement it has reached with American Tower to sell Telxius for a staggering US$9.4bn. Telxius operates around 30,722 towers in Brazil, Chile, Peru, Argentina, Germany and Spain.
Telesites: a successful lesson learnt
That said, AMX’s spin-off should not come as a surprise. In fact, back in 2015 the operator launched Telesites to answer to the regulatory efforts to cut its dominant position in the Mexican market. Following the spin-off, Telesites went on to IPO on the Mexican Stock Exchange but to date, over 60% of the towerco remains in the hands of the Slim extended family.
Also, Telesites has proven a successful venture. As per its last quarterly results in Q320, the towerco owned 17,964 sites between Mexico (17,660) and Costa Rica (304). And since its creation in 2015, it has grown its portfolio by 30% (approximately 5,500 sites).
Back in 2020, Telesites transferred 6,500 sites to a FIBRA, an entity which operates similarly to a U.S. REIT, which went on to IPO and raised US$600mn on the Mexican Stock Exchange.
The spin-off is going to capitalise on the momentum generated by 5G as well as on the efforts to finalise 4G rollouts across CALA. The timing couldn’t be better ’ in fact, AMX’s portfolio will become available to its competitors when they are hungrier than ever for site densification. And when key locations, especially in urban and suburban areas, will be in high demand.
AMX has always been known for building sites in prime locations and this will pose an additional threat to independent towercos who have been relying on co-location as a reliable growth channel in the advent of the 5G era.
The new spin-off will benefit not only from an extensive portfolio of assets across key CALA markets such as Brazil, Colombia, Argentina, Peru, Chile, the Dominican Republic and more, but also from AMX’s site retention strategy. In fact, the MNO has never divested its towers in any market beside Telesites’ 2015 spin-off. We can therefore expect a wide portfolio of assets to become available for co-location from Mexico all the way to Argentina.
Yet another threat for CALA towercos
Some towercos will be threatened more than others, especially in those markets where they were enjoying a dominant position ’ I am thinking of markets such as the Dominican Republic ’ or where competition is already quite fierce such as in Brazil and Colombia, and where towercos were betting on BTS assignments and now have to deal with yet another competitor with a wealth of sites on offer.
One thing yet to be seen though is how many of the existing sites in AMX’s portfolio will be suitable for co-location. While the MNO might have switched strategy over the past few months and built with a multi-tenant approach in mind, legacy sites might have been constructed for a single operator. So although the location could be sought-after, whether sites are effectively suitable for multiple pieces of equipment is yet to be seen.
Regardless of the technical considerations coming into play, AMX’s spin-off will stir the CALA market, create more competition, open new opportunities for MNOs to find quick co-location spots and pose yet another challenge to towercos.
While this isn’t good news for everyone, AMX’s strategy is following a consolidated trend, especially across Europe. Orange and Vodafone’s spin-offs are two of the most prominent strategic moves by European MNOs. Additionally, AMX will benefit from shifting its portfolio of passive assets towards a more profitable future, especially as the MNO expects to invest as many as US$8bn in capex for 2021 ’ a high investment inclusive of the capital required to purchase 5G frequencies.
TowerXchange will keep analysing the evolution of this new entity across CALA, aiming at providing further insights in the run up to the next edition of the TowerXchange Meetup Americas.
