CANTO Weekly Newsletter- BNAmericas 03/03/17

CANTO Weekly Newsletter- BNAmericas 03/03/17

Sprint, Open Mobile to create new player in Puerto Rico – Puerto Rico
Cuba’s Etecsa sets prices for residential internet – Cuba
Digicel to virtualize infra in CentAm, Caribbean – Caribbean, Central America
Digicel partners with Affirmed Networks for 5G transition – Jamaica
Moody’s downgrades ratings of America Movil – Regional

Sprint, Open Mobile to create new player in Puerto Rico – Puerto Rico
Mobile operators Sprint and Open Mobile reached a commercial agreement whereby both telcos will provide services in Puerto Rico and the US Virgin Islands under the auspices of a new company.
The agreement comes almost a month after rumors that Sprint would take the final steps to acquire Open Mobile in Puerto Rico, but the telcos have now opted to join forces instead.
The new company will create a stronger competitor that will offer postpaid, prepaid, Lifeline and business services, said Sprint in a press release. Additionally, the new company will leverage on the two companies’ capabilities to offer broader coverage and greater speeds.
Open Mobile will benefit from Sprint’s roaming agreements and mobile phone inventory, while Sprint will take advantage of Open Mobile’s coverage in Puerto Rico.
The creation of the new company will formally begin once the US telecom regulator, FCC, approves the transaction between the two telcos. The process could take between nine months and a year, according to Miami-based Spanish language daily El Nuevo Día. Afterwards, the process to consolidate the operations of the two companies will begin.
The amount agreed upon for the transaction was not disclosed. Sprint and Open Mobile will hold 68% and 32% of the common shares, respectively, and 55% and 45% of the voting shares.


Cuba’s Etecsa sets prices for residential internet – Cuba

Cuba’s state-run telco Etecsa will charge the equivalent of between US$15 and US$115 for monthly residential internet plans, allowing users to navigate for 30 hours at speeds ranging from 128kbps to 2Mbps. Subscribers will be able to buy more than one 30-hour plan per month.
The average official salary in Cuba is US$25 a month, while a survey conducted last year showed that 54% of Cubans earn US$50 to US$200 monthly.
Etecsa launched a residential internet pilot program with 2,000 users in Old Havana at the end of last year. This week users were informed on the price they will have to pay in order to maintain their connections.
An employee of the state-run company told media outlet 14ymedio that subscribers must pay within seven days or the service would be suspended. If this were the case, users have 30 days to pay and rehabilitate the service, otherwise their accounts will be disabled.
However, subscribers have not been able to sign their contracts because the system is not in place yet.
Etecsa has enabled over 200 public wi-fi spots across the country since 2015. The country had an internet penetration of 28% in September of last year according to mobile operators association GSMA, one of the lowest in Latin America.


Digicel to virtualize infra in CentAm, Caribbean – Caribbean, Central America

Mobile operator Digicel has selected Affirmed Networks’s mobile content cloud (MCC) solution as part of its Digicel 2030 global transformation program.
The program seeks to migrate the company’s infrastructure to a virtualized architecture in the run-up to the arrival of 5G mobile technology. The solution will be deployed across Central America, the Caribbean and Asia Pacific.
The MCC solution will allow Digicel to deploy a distributed virtualized network delivering consumer, enterprise, and internet of things services in the 31 markets where it operates, Affirmed Networks said in a press release.
Digicel needs flexible solutions to improve network capacity, as many of the markets it serves are islands located in the Caribbean and Asia Pacific. This deployment grants Digicel the flexibly to tailor services based on the needs of each individual market, and to centrally manage delivery.
By automating its network, the telco expects to reduce operational expenses and the complexity associated with managing its network.
Meanwhile, Digicel continues its LTE deployments in the Caribbean and Central America. The telco expects to launch commercial LTE services in El Salvador in the first half of this year.


Digicel partners with Affirmed Networks for 5G transition – Jamaica

By Affirmed Networks
March 1, 2017
Affirmed Networks, the leader in virtualized mobile networks, today announced that Digicel, an innovative mobile communications provider with operations in 31 markets, has selected its virtualized Mobile Content Cloud (MCC) solution for deployment across the Caribbean, Central America and Asia Pacific. This selection is a cornerstone in Digicel’s recently-announced “Digicel 2030” global transformation program designed to provide customers with a “superior superfast network experience.” The evolution to a 5G-ready, virtualized architecture will allow Digicel to embrace LTE today and 5G in the near future.
Digicel recognized the inflexibility of legacy solutions to improve network capacity across the markets it serves. Many of these markets are individual islands located across the Caribbean and Asia Pacific. Affirmed Networks’ fully-virtualized Mobile Content Cloud solution, enables Digicel to deploy a distributed virtualized network delivering consumer, enterprise and IoT service offerings across their dispersed geographies. The Affirmed MCC delivers the flexibility required to meet the changing needs of each market.
This deployment enables Digicel to flexibly tailor services based on the needs of each individual market, and to centrally-manage the services being delivered to the more than 31 countries in their coverage area. Overall operational expense and complexity associated with managing the network across their vast footprint is significantly reduced through service automation.
“As part of our 2030 network transformation program we are focused on providing our customers – regardless of location – with the best possible communications experience. Our move to a virtualized architecture supports this goal, allowing us to put in place a network capable of handling the unique needs and requirements of subscribers across diverse markets,” said Colm Delves, Group CEO, Digicel. “Throughout our transformation program we have been impressed with Affirmed Network’s market leading solution as it has delivered the ability to quickly deploy a next-generation network that will allow us to execute against our broader vision as a company and maximize our customers service experience.”
“With a focus on quality of their network and the services they offer, Digicel is an important force driving growth and prosperity in their region,” said Hassan Ahmed, Affirmed Networks’ Chairman & CEO. “We are honored to support their continued innovation by providing Digicel with a fully virtualized, advanced, agile network capable of delivering LTE services today, and supporting 5G services as they become more broadly available.”
Today, Affirmed Networks has more than 50 customers across five continents, including some of the world’s largest and most innovative operators.
About Digicel
Digicel Group is a leading global communications provider with operations in 31 markets in the Caribbean, Central America and South Pacific. After 15 years of operation, total investment to date stands at over US$5 billion worldwide. The company is renowned for delivering best value, best service and best network. Digicel also runs a host of community-based initiatives across its markets and has set up Digicel Foundations in Haiti, Jamaica, Papua New Guinea and Trinidad and Tobago which focus on educational, cultural and social development programmes.
About Affirmed Networks, Inc.
Affirmed Networks has achieved significant attention as its Network Functions Virtualization (NFV) solution has become the standard for the world’s top mobile operators. Currently, the company has been deployed commercially, including in Tier 1 and Tier 2 mobile networks, and is engaged in many trials worldwide. For more information, please visit: www.affirmednetworks.com.


Moody’s downgrades ratings of America Movil – Regiona
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By Moody’s Investors Service
New York, February 23, 2017 — Moody’s Investors Service (“Moody’s”) today downgraded the global scale senior unsecured ratings of America Movil, S.A.B. de C.V. (“America Movil”) and the backed senior unsecured global scale ratings of its subsidiary, Telefonos de Mexico, S.A.B. de C.V. (“Telmex”) to A3 from A2. The outlook on the ratings is stable. This action concludes the review for downgrade initiated on December 15, 2016.
RATINGS RATIONALE
The downgrade of America Movil’s ratings to A3 from A2 reflects Moody’s view that, although the competitive and regulatory environment is likely to become less challenging in Latin America under current telecom service prices, the company’s credit profile remains commensurate with an A3 rating amidst limited industry-growth and slow economic recovery across the region. America Movil has recently demonstrated a strong commitment to debt reduction; however, a combination of tighter profitability and exposure to hard-currency debt partially undermined its efforts to deleverage. While in 2016 the company reduced debt by USD6.1 billion (a decline of 15% in US dollar equivalent), its reported debt rose by 4% in local currency terms mainly as a result of the Mexican peso’s 17% devaluation against the US dollar.
While Moody’s expects America Movil to remain committed to reduce its debt burden through 2018, a limited recovery in EBITDA margin and exposure to hard currency debt will keep Moody’s adjusted leverage over 2.0 times on a sustained basis, which is incompatible to an A2 rating.
Moody’s expects America Movil to prudently manage capex and shareholder distributions in order to reach its publically stated target to remain within a net debt to EBITDA leverage of 1.5 times within two years. In line with its focus on continued debt reduction, we expect the company to generate steady positive free cash flow, which will aid in the deleveraging process.
America Movil’s A3 ratings are supported by its large scale among telecom operators globally and its strong presence in Latin America, complemented by a majority market share for wireless and fixed line subscribers in Mexico. The ratings reflect stable positive free cash flow generation and a multi-regional revenue base coupled with extensive and modern infrastructure to support competitive positions. In addition, the ratings benefit from America Movil’s relatively conservative financial policies.
The stable outlook on America Movil’s ratings incorporates a sustained deleveraging trend to under 2.5 times adjusted debt to EBITDA by year-end 2018, stable revenues, ongoing positive free cash flow and no further decline in EBITDA margins.
America Movil’s ratings could be downgraded if Moody’s believes that adjusted debt to EBITDA will remain above 2.5 times beyond 2018, adjusted EBITDA margins deteriorate toward 25% with no prospects of turnaround or if the company generates negative free cash flow or retained cash flow to debt under 20% on an ongoing basis. If America Movil makes large debt-funded acquisitions or continues to provide significant returns of capital to shareholders while leverage rises, the ratings could also be downgraded. Material market share reductions in key markets, negative regulatory shifts affecting profitability or a deterioration in the company’s liquidity would also put pressure on the ratings.
America Movil’s ratings could be upgraded if adjusted debt to EBITDA falls below 2.0 times, adjusted EBITDA margins recover toward 35% and retained cash flow to debt surpasses 35%, all on a sustained basis.
The downgrade of Telmex’s backed ratings to A3 from A2 reflects the downward action on America Movil’s ratings as well as deterioration in Telmex’s operational performance, characterized by poor revenue growth and tighter margins amid intense competition, regulatory limitations and structural shifts in the telecom industry. Although Telmex’s credit profile is weaker than its parent, America Movil’s implicit support, evidenced by its guarantee of almost 50% of Telmex’s outstanding debt, is incorporated in the rating.
Despite operating challenges and a weaker credit profile in recent years, Telmex maintains strong market shares amid increasing competitive pressures, and its ratings are supported by advantages arising from its leading market position, extensive fixed line network and opportunities arising from growing data demand. The company will benefit from a lighter financial debt profile and lower capital intensity through 2018. While regulatory restraints also remain, there is more limited risk associated with an abrupt regulatory shift under the recently established framework.
The stable outlook on Telmex’s ratings assumes flat revenue growth, limited EBITDA deterioration such that adjusted margins remain close to 25%, positive free cash flow, a low financial debt burden and solid market share positioning.
Since Telmex’s current ratings consider our expectations of support by parent company America Movil, a ratings downgrade could be triggered by a downgrade of America Movil’s ratings or circumstances affecting parent support. America Movil could stop supporting Telmex due to lack of willingness, if for example, competitive pressures, higher technology risk or further unfavorable regulatory changes deteriorate Telmex operations to the extent that the company is no longer a material asset for America Movil. Support can also be affected by a deterioration in America Movil’s financial strength that could no longer allow it to provide financial support or to Telmex.
Telmex’s ratings could be upgraded if America Movil’s ratings are upgraded. If the company is able to reverse poor revenue growth trends, expand EBITDA margins significantly and reduce leverage on a sustained basis while maintaining positive free cash flow, positive rating pressure could arise. A ratings upgrade would also take into consideration America Movil’s financial strength and long-term commitment to the stability of Telmexs ongoing operations.
America Movil, S.A.B. de C.V., headquartered in Mexico City, Mexico, is Latin America’s leading telecom operator with over 363 million accesses, of which 281 million were mobile subscribers as of December 2016. The company offers wireless, fixed and pay TV services to 18 countries in the Americas and various European nations through a controlling stake in the Telekom Austria group. In the last twelve months ended December 2016, America Movil reported revenues of close to USD 52.3 billion.
Telefonos de Mexico, S.A.B. de C.V. (Telmex), headquartered in Mexico City, is a private company that provides voice and broadband access services under a national concession and network coverage in Mexico, with over 60% subscriber market share. During the last twelve months ended December 2016, the company’s revenues of approximately USD 5.6 billion. Telmex is 98.7% owned by America Movil, S.A.B. de C.V. (A2 RUR), the largest telecom company in Latin America.
The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
The following summarizes today’s rating actions:
Downgrades:
..Issuer: America Movil, B.V.
….Senior Unsecured Regular Bond/Debenture, Downgraded to A3 from A2
..Issuer: America Movil, S.A.B. de C.V.
….Junior Subordinated Regular Bond/Debenture, Downgraded to Baa2 from Baa1
….Senior Unsecured Medium-Term Note Program, Downgraded to (P)A3 from (P)A2
….Senior Unsecured Regular Bond/Debenture, Downgraded to A3 from A2
….Senior Unsecured Shelf, Downgraded to (P)A3 from (P)A2
..Issuer: Telefonos de Mexico, S.A.B. de C.V.
….Backed Senior Unsecured Regular Bond/Debenture, Downgraded to A3 from A2
Outlook Actions:
..Issuer: America Movil, B.V.
….Outlook, Changed To Stable From Rating Under Review
..Issuer: America Movil, S.A.B. de C.V.
….Outlook, Changed To Stable From Rating Under Review
..Issuer: Telefonos de Mexico, S.A.B. de C.V.
….Outlook, Changed To Stable From Rating Under Review

Copyright 2015 Business News Americas
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