Telefónica SA agreed on Monday to sell its operations in Argentina to local firm Telecom Argentina SA for US$1.25 billion, though President Javier Milei immediately warned his government would review the transaction as a possible monopoly.
The Spanish mobile carrier signed and closed the deal on Monday after three decades in the country, according to a regulatory filing. Telefónica has been working since late 2019 to cut its exposure to Latin America.
Shortly after the filing, Milei’s administration published a statement announcing it will evaluate the sale, arguing that it stands to put 70 percent of the country’s telecommunications industry under control of one group. The antitrust review marks the biggest regulatory move by Milei, who prides himself on cutting red tape and promoting free markets.
Milei has ties to some of the executives who lost out on the deal. His foreign minister, Gerardo Werthein, is a cousin to Darío Werthein, who leads the family’s namesake holding company that reportedly competed with Telecom for Telefónica’s operations.
Eduardo Eurnekian, Milei’s former boss during his corporate career, was also contending to buy Telefónica, according to the La Nación newspaper.
Telecom Argentina is party owned by Grupo Clarín, the holding company of one of Argentina’s largest newspapers that Milei criticised over the weekend during his trip to Washington for what he labelled misleading reporting. It’s also owned by financier David Martínez, among other smaller shareholders.
Telecom said it financed the takeover with a syndicated loan from Banco Bilbao Vizcaya Argentaria SA, Deutsche Bank AG, Banco Santander SA as well as a bilateral loan from the Industrial and Commercial Bank of China SAU’s Argentina branch.
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 government will unravel the country’s web of currency and capital controls.
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 in Argentina marked one of the most iconic deals of the country’s wave of privatizations at the time, and Telefónica endured repeated economic crises in Argentina.
Executive Chairman Marc Murtra, appointed by the Spanish government in January, is accelerating a plan to restructure the company, focusing on part of Latin America. Recently the company sought bankruptcy protection for its Peruvian unit, and according to media reports, it is looking to sell its operations in Mexico and Colombia.
Previous Chairman José María Álvarez Pallete had announced in 2019 a plan to drastically lower exposure to Latin America, but struggled to do so. The Spanish government has owned 10 percent of Telefónica since last year.
by Kevin Simauchi, Bloomberg
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