The reverse merger in Argentina between Cablevisión S.A. and Telecom Argentina S.A. was approved earlier this year in January by pertinent Argentine authorities. As a consequence, the two companies underwent a combination by means of a stock for assets deal in which Telecom Argentina issued new common shares in exchange for fixed assets and a new revenue stream to the sole owners of Cablevisión. In fact, these owners were the second biggest media company throughout the whole Spanish-speaking world known as Grupo Clarín S.A. and Fintech Media LLC. Moreover, Fintech Media was an investment vehicle belonging to the mastermind responsible for having orchestrated this coup. Accordingly, I’m talking about David Martínez Guzmán, a self-made and rising Mexican financier who after working on Wall Street in the 1980s for the emerging markets trading desk at Citigroup Corporation after earning his MBA from Harvard University, decided to return to his native Mexico starting his own vulture fund specialized in sovereign and corporate debt restructurings across Latin America while raising money from relatives. Likewise, the main feat bolstering his war chest was participation in the Argentine debt restructuring building one of the biggest positions transacted in one of the two sovereign bond swaps. By the same token, roughly about a handful of years ago, the Mexican financier began buying out the existing shareholders sharing control of a publicly-traded holding company known as Nortel Inversora S.A. through another investment vehicle of his known as Fintech Telecom LLC after having envisioned a business plan integrating two important players in both the media and telecom sectors in the Argentine market. The purpose of the business plan was to offer bundled services nationwide in Argentina including wireline telecom, wireless telecom, broadband internet and Cable TV.
Furthermore, putting all the pieces together after gaining substantial control over Cablevisión and the holding company controlling Telecom Argentina known as Nortel Inversora last year, David Martínez Guzmán proceeded with a carefully planned business strategy convincing other investors to execute the tie up between these two important companies in the Argentine market. In fact, Cablevisión was for many years the single largest Cable TV operator in Latin America being the accomplishment of Argentine billionaire Eduardo Eurnekian who built the company through integration of several small players and then netting $ 670 million in the mid to late 1990s by selling control of it in two separate transactions to American investors including Cable TV pioneer John Malone. Altogether, Cablevisión held a dominant share of the Cable TV market in Argentina having more than 3 million paying subscribers. Similarly, Telecom Argentina held leading positions being the first or second biggest player in both wireline and wireless telecom services. Consequently, after the combination that took place including the extraction of synergies in overlapping areas like broadband internet service were both companies were active prior to the merger, the new entity that was formed keeping the name of the latter by dissolving Cablevisión is expected to be a formidable and growing player in its market by offering quadruple-play services. Currently, employing over 20,000 Argentine nationals, the company reports total revenue that exceeds $ 5 billion a year.
On the other hand, reaching a market value of $ 10 billion after the stock for assets deal, David Martínez Guzmán holds a 41% shareholding in the new company while Grupo Clarín holds a 33% ownership stake. The remaining common shares, comprising 28% today, belong to various institutional, retail and international investors who held 45% of Telecom Argentina including ADRs listed on the NYSE as well as additional minority shareholdings in Nortel Inversora before execution of the reverse merger when they issued new common shares to two investment vehicles owning in its entirety a privately-held company known as Cablevisión.
To conclude, with the infusion of a solid established operation holding substantial PPE and a sizable paying subscriber customer base, I think this company has the required muscle to grow aggressively through expansion into other markets and the enhancement of its product package offering attractive bundles no other company is able to match nowadays in Argentina. Accordingly, these features translate into an increasing top line boosting the bottom line along the way while bringing healthy growth prospects for the stock price as well which is the idea Mr. Martínez Guzmán had in mind to begin with sparking his interest in the merger.