Maxcom Chairman Plots Growth as Industry Poised for Mergers

Maxcom Telecomunicaciones SAB’s 3 billion-peso ($233 million) lifeline from shareholders gives the Mexican telephone company a chance to benefit from the industry’s growth and potential mergers, its chairman said.

Maxcom, which has piled up losses for five straight years, is on track to generate “robust and consistent growth,” said Enrique Castillo, the former Ixe Banco SA executive who helped engineer a takeover of Maxcom this year. Favorable regulation and upgraded networks will help the carrier compete against the biggest companies in the sector, such as Carlos Slim’s America Movil SAB, he said.

Earlier this month, shareholders including Castillo’s private-equity firm, Ventura Capital Privado SA, agreed to raise the fresh capital to help the company gain subscribers beyond Mexico City and the four other cities where it mainly operates. That followed a bankruptcy filing this year as the company renegotiated with lenders.

Companies in the industry will probably also combine to take on bigger rivals, Castillo said in a phone interview.

“Right now our only focus is for the company to operate well and to generate value for our shareholders,” Castillo said. “But in this world, particularly in telecommunications, we look ahead and keep seeing consolidation, so we’ll either be consolidators or consolidated.”

Castillo didn’t discuss any specific merger plans. Maxcom has less than 5 percent of the landline phone market in Mexico, compared with about 80 percent for America Movil. It also sells Internet and television service, putting it in competition with Grupo Televisa SAB’s cable and satellite businesses.

‘Different Companies’

Maxcom slid 4.1 percent to 3.25 pesos at the close in Mexico City. The shares have risen 12 percent this year.

“You are looking at two different companies before and after the capital restructuring,” said Andres Audiffred, an analyst with Grupo Financiero Ve Por Mas in Mexico City. “If you add the restructuring of the bonds, the company has a more comfortable maturity profile with lower interest rates, so it’s in a much stronger financial position.” He advises buying the shares.

Earlier this week Maxcom announced that Chief Executive Officer Rene Sagastuy resigned after less than a month on the job. Sagastuy had previously held the same position for a period ending in 2008. Castillo said a new CEO would be selected in a matter of days.

While Sagastuy helped Maxcom emerge from its process of bankruptcy and recapitalization, his departure for personal reasons coincided with the company’s desire to find a leader that fit with its strategy, Castillo said.

Sagastuy’s departure won’t hinder Maxcom because of the experience of Castillo and his team from Ventura, Audiffred said. Sagastuy couldn’t be reached for comment.

“We will start fresh. This company has endured many problems in the past couple of years,” Castillo said. “We want to give it stability and we see this as a way to compete in a hugely changing business.”

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