Telefónica offloads Central American assets to Carlos Slim's América Móvil

In order to reduce its debt, Telefónica is selling two operations in Central America to América Móvil. (Telefónica)

Telefónica took a small bite out of its debt load by selling off two of its operations in Central America to América Móvil for $648 million.

América Móvil, which is owned by billionaire Carlos Slim, has competed against Telefónica in Latin America for several decades, but Telefónica has struck a deal to sell its operations in Guatemala and El Salvador.

Telefónica's regional subsidiary, Telefonica Centroamérica Inversiones, in which Telefónica owns a 60% stake while Corporación Multi Inversiones owns the remaining 40% stake, has reached a deal to sell all of Telefónica Guatemala and 99.3% of Telefónica El Salvador to América Móvil.

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América Móvil is forking out $333 million for Telefónica Móviles Guatemala and has agreed to pay $315 million for the majority stake in Telefónica El Salvador. The deal for Telefónica Guatemala has closed, but the sale of Telefónica El Salvador needs to clear regulatory conditions.

Telefónica said the deals were part of its effort to reduce its debt, improve its portfolio and strengthen its balance sheet. The transactions are expected to generate capital gains before taxes of around $136 million, mainly from the sale of Telefónica El Salvador.

Telefónica reported a debt of $48.3 billion during its third-quarter earnings report in October, which was 10% lower than the same quarter a year ago. Telefónica operates primarily in its home country of Spain, as well as in Germany and the U.K.

RELATED: Telefónica takes aim at new growth strategy

In November, Telefónica Chairman and CEO José María Álvarez-Pallete announced a new internal program that was designed to target new growth while making the company more relevant to its subscribers.

Telefónica has been actively building out the virtualization of its networks and cloud platforms, and has also been gearing up for 5G. Earlier this month, Telefónica announced it was using Wind River's cloud platform for its UNICA project. Telefónica started working on UNICA four years ago to move away from legacy networks by installing virtualization technologies through NFV while also implementing software-defined networking and cloud technologies.

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