Telecom Argentina, one of Argentina’s premier telecommunications service providers, has announced a merger agreement with Cablevisión, Argentina’s biggest pay TV provider accounting for 35% of Argentine pay TV households.
Cablevision shareholders will control 55% of the resulting company after Telecom issues 1.184 billion shares, leaving current Telecom shareholders controlling the other 45%.
Should the deal be waved through by regulators and shareholders, the proposed merger will allow the new company to offer quadruple-play bundled services of fixed and mobile voice and data services, internet, and video. Bundling has of course been around for years in the U.S. and Europe, but Telecom Argentina will be the first to make such an offer in Argentina. Unlike U.S. telecoms however, Telecom Argentina will also include the added benefit of mobile data in its packages, a proposition that is likely to go over well with consumers.
According to Seth Wallis-Jones, a senior analyst at IHS Markit, “the combined company will lead the market and be able to offer a fully converged quad play offering.”
The proposed merger of the companies, whose services are “complementary,” said Cablevision CEO Carlos Moltini, is one result of relaxed telecommunication regulation passed in January by Argentine president Mauricio Macri, which allows for phone companies to additionally offer TV services in a market long dominated by Cablevisión. The Argentine government predicts that the reforms will prompt more than $20 billion in new investments in Argentina over the next four years.
Almost immediately after the legislation was passed, rumors of a merger spread, given that telecom company interested in adding TV services would need to execute large scale upgrades to their network in order to broadcast. Partnering with an pre-existing network avoids that, while allowing for the expansion of services which should appeal to current and future customers.
Going forward, it seems likely that other companies in the region, such as Telefonica or Claro Video, the OTT operation of Carlos Slim’s America Movil, might well be be interested in entering Argentina’s pay TV business. Far greater investment in infrastructure also looks on the cards: While Argentina has greater broadband penetration that other Latin American countries, it still lags far behind North America and Europe in speeds and availability, particularly in rural areas. OTT can be a hard sell if the content won’t load or is of poor quality.
“Some amount of OTT competition is inevitable, but it will have a minimal impact on the traditional pay TV business,” said IHS Markit principle analyst Erik Brannon, adding that current broadband speeds are not sufficient “to deliver a significant quality in the experience.”