Digicel plan to sell El Salvador interests rejected by regulator

A PLAN by Denis O’Brien’s Digicel mobile phone group to sell its business in El Salvador to a company owned by wealthy Mexican entrepreneur Carlos Slim has once again been rejected by the regulator there.

The telecoms regulator, called SC, said a “technical, legal and economic analysis” showed a merger would likely have an adverse effect on “competition and the welfare of consumers in the fixed and mobile telephony markets”.

The analysis also revealed that, by international standards, fixed and mobile telephony in El Salvador is characterised by excessively high levels of market concentration, said the regulator.

This is the second time the deal has been rejected in the past 18 months. On December 9th last, America Movil said it would not proceed with the acquisition after the SC demanded it return 20 MHz of spectrum as a condition of the deal being approved.

The transaction dates back to March 2011 when Digicel agreed to acquire America Movil’s Claro business in Jamaica and to sell its businesses in El Salvador and Honduras to the Mexican company.

The Jamaica and Honduras legs of the deal have already been completed.

The total net proceeds for Digicel from the transactions were to have been $355 million.

In response to a query from The Irish Times for a comment, Digicel stated: “We are currently examining the 129-page ruling.”

Digicel acquired the El Salvador business in 2006 and began operating there the following year.

In a document for a recent $1.5 billion bond offering, Digicel said that, while the sale was “subject to governmental approval” and not a certainty, the company anticipated that approval would be forthcoming in the year to the end of March 2013.

“We are subject to business uncertainties while the sale is pending and there is no assurance that we will receive the governmental approval,” added the document.

The company said obtaining the approvals might cause delays in the consummation of the sale or impose additional costs on the company.

The bond document showed that Digicel generated an operating profit of $18.6 million on revenues of $133.7 million in El Salvador in the year to the end of March 2012.

Digicel is the number two operator in El Salvador behind America Movil.