Intense competition and mobile-fixed technology convergence will continue exerting pressure on VTR’s operations in Chile, where the company faces six major players.
That’s according to a just released consolidated financial report, audited by KPMG and filed by VTR Finance with US regulator SEC.
“The Chilean market for video, broadband internet, and fixed and mobile telephony services is highly competitive and rapidly evolving. Technological improvements allow operators to provide a variety of services through their networks. For such reason, service providers are able to offer several options of bundled services for very competitive prices,” the telco said.
VTR added that technology convergence, with new interoperable technologies, together with the fast expansion of smartphones, blurred the lines between fixed and mobile services.
“Consequently, our business has faced and is expected to continue to face significant competition across all of our product and service offerings,” the report said.
Other challenges to operations, according to the document, are macroeconomic factors and foreign currency impacts.
JV
VTR is part of a 50:50 joint venture controlled by Liberty Latin America and América Móvil, temporarily dubbed ClaroVTR, providing bundles of video, broadband internet and fixed-line telephony services.
The merger, announced in September 2021, was approved and completed one year later.
In addition, VTR offers mobile voice and data services as an MVNO, under an arrangement with Telefónica’s Movistar, with which it contracts to carry the mobile traffic of its customers.
VTR is the second largest multi-channel TV provider in Chile and the largest broadband internet and fixed-line telephony services provider in terms of subscribers.
In video, it competes primarily with DTH and IPTV service providers, notably Movistar and DirecTV.
In broadband internet services and online content, its chief competitors are non-cable-based ISPs, such as Movistar and Entel, and cable-based providers, such as GTD, as well as Mundo Pacífico and WOM.
Its main fixed and mobile telephony competitors are Movistar and Entel.
CONCERNS
In 2022 and 2021, the company generated an operating loss of 314bn pesos (US$408mn) and operating income of 32bn pesos, respectively. Working capital was negative at 161bn pesos and 87bn pesos, respectively, with net capital deficiency of 491bn pesos and 76bn pesos.
Cash flow provided by operating activities was 5bn pesos and 135bn pesos.
“These previously mentioned trends/conditions raise substantial doubt regarding the ability of the company to continue to operate as a going concern,” VTR said.
According to the company, the continuity of operations this year hinges on the effectiveness of a business plan approved by the board, which includes access to new financial resources, like monetization of fixed and/or financial assets, shareholder loans and capital contributions.
The company might have sufficient resources to repay or refinance debt and fund liquidity requirements this year, according to the report.
“However, as our debt maturities grow in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete refinancing transactions or otherwise extend our debt maturities.”
FOOTPRINT
VTR’s operations focus on Santiago and Arica, Iquique, Antofagasta, La Serena, Talca, Chillán, Concepción, Temuco, Puerto Montt, Viña del Mar, Valparaíso and Rancagua.
The group ended 2022 with 2.5mn total subscriptions (RGUs), down from 2.82mn.
The video, internet and telephony segments registered reductions. Total mobile subscriptions grew to 355,400, from 251,200 in 2021, 77% of which were postpaid plans.
VTR covers over 58% of Chilean homes, with some 4.29mn homes passed. “The network extension will occur in phases with priority given to the most accretive expansion opportunities. During 2022, our network extension and upgrade program passed approximately 5,137,700 homes across our footprint,” VTR said.
The expansion may be continued, modified or even canceled depending on different factors, including financial and operational ones, it said.
WOM
A key point is the legal challenge attempted by rivals. VTR holds fixed-wireless telephony concessions in the 3.5GHz band in different regions of the country.
These are not the 3.5GHz ones awarded in the 5G auction, in which VTR did not participate and where Claro, Movistar, Entel and WOM acquired spectrum.
VTR’s concessions have renewable 30-year terms, expiring in 2036.
Recently, Chile’s antitrust watchdog TDLC overruled this limitation and the obligation to open a public tender. WOM appealed the decision before the supreme court, which accepted the measure last month.
