Argentina’s Telecom Megamerger to Create New Stock Market King

  • Mercado Libre, YPF to be surpassed by $11.5 billion entity
  • Billionaire David Martinez to control largest ownership stake

Billionaire David Martinez may have a tougher time keeping a low profile now that he’s presiding over a merger that will create Argentina’s biggest public company.

Telecom Argentina SA’s combination with Cablevision SA will produce a telecommunications powerhouse with a market value of $11.5 billion, according to brokerage TPCG. The top shareholder of the new company will be Martinez, a native of Monterrey, Mexico, who splits his time between New York and London and rarely grants interviews.

The combined company will be the first in Argentina to be legally permitted to offer packages of wireless, landline, fixed internet and television services to consumers. The deal was a result of President Mauricio Macri’s reform policies and “will trigger service quality and the digitization of the country,” putting pressure on Telefonica SA and America Movil to invest and cut prices, Argentina Communications Minister Oscar Aguad said in a July 4 phone interview.

Martinez, a one-time candidate for priesthood who instead became a distressed-debt wizard, shouldn’t face hurdles in getting regulatory approval for the deal, Aguad said. Telefonica, which provides wireless, landline and internet plans in Argentina but isn’t yet allowed to offer video, has said it’s unfair to let its rival get a head start on selling the full package of services.

The valuation TPCG calculated for the combined Telecom-Cablevision assumes its shares will trade in line with the average of Latin American peers, said Florencia Mayorga Torres, an analyst at the brokerage. That would make the company cheaper than well-established providers of multiple telecommunications services, such as Mexico’s America Movil SAB, Chile’s Entel SA and Brazil’s Oi SA, she said.

Among Argentine companies, the equity value would slightly surpass Mercado Libre Inc., at $11.4 billion, and state-controlled YPF SA, at $8.7 billion.

Under merger terms announced last weekend, Telecom Argentina will issue 1.19 billion new shares to the owners of Cablevision. After the deal closes, Cablevision’s holders will own 55 percent of Telecom Argentina, with the phone company’s investors holding the rest.

Martinez holds stakes in both companies. Including several indirect stakes in Nortel Inversora SA, his ownership of the combined company will be as much as 40.5 percent. The second-largest shareholder will be Argentine media giant Grupo Clarin SA, which will indirectly own 33 percent of the new company.

Martinez’s total fortune is valued at $3.7 billion, according to the Bloomberg Billionaires Index, an estimate that assumes he remains sole owner of Fintech.
Representatives from Telefonica and America Movil didn’t reply to requests for comment.

— With assistance by Carolina Millan

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE