South Korean institutional investors will invest 70 billion won ($61.8 million) in Transtelco Inc., a Mexican telecom service provider that owns optical fiber network covering both Mexico and its neighbor the United States on expectations for fast growth in high-speed internet market in North America.
According to financial industry sources on Thursday, Korean institutional investors will put together nearly 70 billion won in Transtelco through Lindeman Partners Asset Management. The investment will be made by purchasing part of senior debt backed by the Mexican firm’s key assets such as its optical fiber network in Mexico and the U.S. and the rights for using radio frequency in the region from Deutsche Bank. Transtelco borrowed money from Deutsche Bank to repay high-interest debt that it financed in 2013 to acquire another Mexican network provider XC Networks.
The Korean investors expect the investment to deliver a return of 6 percent per annum over the next five years as North American network market has a high growth potential. While the distribution rate of fiber-optic network tops 70 percent in Korea and Japan, those of Mexico and the U.S hover at mere 10 percent, which otherwise means that much of room to grow.
It is the first time for Korean institutional investors to invest in a Mexican telecom network service provider.
Established in 2001, Transtelco is Mexico’s only fiber-optic service provider that owns network covering both Mexico and the U.S. It has expanded its share in the region by taking over SubCom, owner of internet backbone covering regions between Laredo, a U.S. city bordering Mexico and Mexico City in 2012 and XC Networks in the following year.
By Kang Doo-soon and Cho Jeehyun
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