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América Móvil’s CTE-Telecom to invest US$137mn in El Salvador

Bnamericas Published: Wednesday, April 27, 2022
América Móvil’s CTE-Telecom to invest US$137mn in El Salvador

América Móvil’s El Salvador subsidiary CTE-Telecom is expected to invest around US$137mn in its operations this year, according to Fitch Ratings.

CTE-Telecom, which operates under the Claro brand, is the leading telco in El Salvador and also operates in neighboring Guatemala.

In El Salvador, it has around 86% of the fixed telephony market, 35% of the mobile market, 58.8% in residential internet and 50.8% in pay TV. 

“These factors place the company in a good position to face the competition observed in the segments it serves, especially in mobile telephony. They also allow the company to have solid cash generation to cover operating and investment needs with operating cash flow and make [dividend] distributions to shareholders,” Fitch wrote in a report.

According to the ratings agency, the company is well structured financially, not least because its funding is backed by Mexican holding América Móvil, but also because it has presented a good cash-generating profile itself.

Furthermore, CTE-Telecom has managed to maintain historically positive free cash flow and is expected to keep cash generation high enough to cover its operations and make required capital investments "without incurring in indebtedness with third parties."

According to Fitch, the company's focus on customer service has allowed it to have a low churn rate, close to 1.3% as of March, compared to an average of 1.9% for its main competitors – such as Telefónica's Movistar, sold to UK fund General International Telecom, and Millicom's Tigo.

Fitch projects CTE's Ebitda to grow at a rate close to 2% per year between 2022 to 2025, with margins of 36.5%, on average, and capex to represent an average of around 25.4% of revenues in the period – a high capex-to-sales ratio compared to most Latin American telcos.

IPTV

Last week, Claro El Salvador launched its fiber-based IPTV service in the country commercially. 

The service was already operating in some areas since last year, but the company's network has grown and the telco has decided to promote IPTV for mass sale.

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