Entel Falls in Santiago on Concern Peru Deal Overpriced

Chile’s second-largest mobile operator, Empresa Nacional de Telecomunicaciones SA, was set for its biggest 10-day drop in four years on concern it had agreed to pay too much for NII Holdings Inc.’s Peruvian unit.

Shares fell 0.2 percent to 9,062.10 pesos at 2:01 p.m. in Santiago and have dropped 9.2 percent over the past 10 days, the steepest decline in such a period since March 2009, according to data compiled by Bloomberg.

The stock began tumbling on April 1 after local newspapers reported without saying where they got the information that the company planned to buy assets in Peru. Shares have dropped 7.5 percent since Entel announced after the close of trading on April 4 that it had agreed to buy Nextel Peru from NII Holdings for $400 million.

“The market is punishing the stock as it may consider the price excessive for a money-losing operation,” Rodolfo Tapia, an analyst at Banco Penta, said in a telephone interview.

Nextel Peru posted a loss before interest, tax, depreciation and amortization of $36 million in 2012 on revenue of $343 million, according to an April 4 report from JPMorgan Chase & Co. Entel said in a filing with Chile’s securities regulator that it plans to reduce its dividend to 50 percent of profit to fund the acquisition. The payout was previously 80 percent, according to Banco Santander SA.

Entel plans to invest $350 million to $400 million in the first two years after the acquisition to upgrade the Nextel network in Peru, Felipe Ureta, Entel’s chief financial officer, said on a conference call April 8.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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