El Salvador: Superintendence reviews data on Telefónica’s departure from the region

The financial troubles faced by Spanish telecomm giant Telefonica has forced it to rethink its structure, which includes the sale of some of its operations in Central America, managed under the Movistar brand, affecting assets throughout the region.

The first major agreement was for the sale of operations in Guatemala and El Salvador, for which regional rival América Móvil paid US$648 million. The second, which involves the markets of Nicaragua, Costa Rica and Panama -where Movistar had a leading position- rose to US$1,650 million in a deal with European-backed Tigo after a bid involving AT&T and Liberty Latin America.

In total, Telefónica served a community of 12.7 million users in the Central American region. The exit will provoke a reconfiguration in the market and will leave only two major regional competitors: América Móvil (Claro) and Millicom (Tigo), both of whom also offer specialized computer services and broadband access.

The General Superintendence of Electricity and Telecommunications (Siget) of El Salvador has withheld the current market participation data for the telephone operators. The market is one of the most competitive in the isthmus, and today it has five operators in the field: Claro, Digicel, Movistar, Red and Tigo. América Móvil (parent company of Claro) reached a purchase agreement for US$333 million, which is awaiting endorsement by the competition regulator.

In 2012, the Superintendence of Competition denied Claro’s request (América Móvil) to buy Digicel’s operation in El Salvador because, it said at the time: “it has a high probability of generating adverse effects on the dynamics of competition and the welfare of consumers in the fixed and mobile telephony markets.” However, the SC has also said that each case is different, so its verdict in the Digicel case can not be taken as indicative of a future decision.