Milei vows ‘monopoly’ probe as Telefónica sells to Clarín

Spanish telecommunications giant Telefónica agreed to sell its Argentine subsidiary to Telecom Argentina for US$1.2 billion on Monday, prompting President Javier Milei's government to announce an investigation over competition concerns.

The transaction with the company, which is controlled by Argentine media giant Grupo Clarín, is part of Telefónica's drive to "gradually reduce" its exposure in Latin America, the company said in a statement submitted to Spanish markets regulator CNMV.

Shortly after the filing, Milei’s administration published a statement arguing that the deal stands to put 70 percent of the country’s telecommunications industry under control of one group. 

The antitrust review marks the biggest regulatory move to date by Milei, who prides himself on cutting red tape and promoting free markets. 

Telecom Argentina, also present in Paraguay and Uruguay, said the acquisition of Telefónica Moviles Argentina would accelerate the rollout of 5G and fibre-optic networks as well as increase broadband and mobile telephone coverage.

"Argentina will have digital infrastructure of international level and quality, boosting the development of important sectors of the economy," it said in a statement.

Regulatory hurdles

The deal must now overcome regulatory hurdles, after Milei's office revealed that domestic communications and competition authorities would assess it.

The acquisition could leave around 70 percent of telecoms services in the hands of one group, "which would generate a monopoly formed thanks to decades of state benefits" that Telecom Argentina enjoyed, Milei's office warned in a statement.

"The national government will take all measures to guarantee users' right of choice, free competition and access to telecommunications services," it added.

Milei has loose ties to some of the executives who lost out on the deal. His foreign minister, Gerardo Werthein, is part of the Werthein family, whose holding company had competed against Telecom Argentina for the deal, according to a report in local newspaper La Nación. 

Werthein is the cousin of Darío Werthein, who leads the holding company.

Eduardo Eurnekian, Milei’s former boss during his corporate career, was also contending to buy Telefónica, according to the La Nación report. 

Telecom Argentina is partly owned by Grupo Clarín, which is also the holding company for one of Argentina’s largest newspapers, Clarín. Milei criticised the paper over the weekend during his trip to Washington for what he called misleading reporting.

Despite broader optimism from corporate executives and Wall Street investors toward Milei’s business-friendly efforts to reform the South American economy, Telefónica’s exit follows a broader wave of multinational companies leaving on his watch, including Exxon Mobil Corp, HSBC Holdings Plc and Mercedes-Benz Group AG. 

Outside a spate of energy and mining deals, long-term investments also haven’t materialised, with companies concerned over how the Milei government will change the country’s currency and capital controls. 

‘Good transaction’

Argentina was one of the first two countries Telefónica entered when it started its international expansion in Latin America in the early 1990s, together with Chile. Its arrival marked one of the most iconic deals of Argentina’s wave of privatisations at the time, and Telefónica endured repeated economic crises in the country.

“We think Telefonica pulled off a good transaction,” ING Senior Credit TMT Strategist Jan Frederik Slijkerman said in a note to clients, adding that the price seemed good “given the difficult circumstances in Argentina.”

Telefónica’s new Executive Chairman Marc Murtra, appointed by the Spanish government in January, is accelerating a plan to restructure the company. 

Recently the firm sought bankruptcy protection for its Peruvian unit in an attempt to restructure its debt, citing a decades-long dispute with the tax authorities in the filing. According to media reports, the carrier is also looking to sell its operations in Mexico and Uruguay.

Previous Chairman José María Álvarez-Pallete announced in 2019 a plan to drastically lower exposure to Latin America, but struggled to do so.

Telefónica has launched a strategic shift towards its key markets in Spain, Britain, Brazil and Germany in a bid to reduce its debt and bolster profitability.

It has recently sold its subsidiaries in Guatemala and Costa Rica and concluded a deal to cede its Colombian branch.

Telefónica has been through a turbulent period since Saudi group STC took a 9.9-percent stake in September 2023.

That led the Spanish state to re-enter the group's capital to defend its "strategic" role of providing services to the country's armed forces.

– TIMES/AFP/BLOOMBERG