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Telefonica, BellSouth in $5.85 Bln Deal

Mon Mar 8, 2004 09:15 AM ET
By Elisabeth O'Leary and Robert Hetz

MADRID (Reuters) - Spain's top carrier Telefonica on Monday secured a $5.85 billion cash and debt deal to buy the Latin American assets of U.S. carrier BellSouth to become the leading mobile phone operator in the booming region.

Confirming a Reuters report from Friday, Telefonica said buying BellSouth out of Latin America would boost mobile subscribers in the region to 40.5 million, allowing it to leapfrog market leader America Movil, owned by Mexican billionaire Carlos Slim, the region's wealthiest tycoon.

"The deal values 100 percent of the companies acquired (firm value) at $5.85 billion and will be financed with cash generated by (cellphone arm) Telefonica Moviles and debt, with both Telefonica and its mobile unit maintaining solid credit ratios," the Spanish company said in a statement.

BellSouth said the deal, which allows the third-largest U.S. carrier to refocus at home after a joint $41 billion bid for mobile rival AT&T Wireless, would yield $4.2 billion in cash after tax and cut its debt by $1.5 billion. The net book value gain is approximately $1.9 billion, it said.

Spain's largest companies have long had a heavy presence in Latin America, capitalizing on ties of language and culture to dominate the emerging region but paying the price for volatility during periods of economic instability.

Telefonica, which is seeking fresh growth opportunities as it faces stalling domestic growth, said the units in 11 countries, including Argentina, Chile, Peru, Venezuela and Colombia, had revenues of $2.5 billion last year.

"Apart from the consolidation of positions in key markets, the deal brings cost synergies with an estimated present value of some $1.0 billion and will have a bearing on profits for our customers and shareholders," Antonio Viana-Baptista, chairman of wireless unit Telefonica Moviles, said in a statement.

Telefonica shares were flat while those of Moviles had slipped 0.33 percent, against a flat European sector .

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MM [08:32]