After almost nine months of issuing the initial tender to sell its Dominican unit, Orange (NYSE: ORAN) has divested its operations in the Central American nation to Luxembourg-based Altice for $1.4 billion. The news boosted the stock price as it ended 2.31% higher on Wednesday trade on NYSE.
Orange, is a leading telecom player in Dominican Republic, and has more than 3.4 million customers. However, Claro, owned by America Movil S.A.B de C.V. (NYSE: AMX), is the largest service provider in the Dominican Republic and controls more than half of that market.
Last July, the French telecom giant decided to offload its Dominican operation and attracted bids from several companies including major Central American operators like Digicel, and Cable and Wireless Communications. However, in late Nov, the company agreed to sell its asset to Altice, following necessary regulatory approvals.
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The asset sale is believed to be a part of the strategy opted by the company to reduce its non-core assets and concentrate on the central ones. Orange is also considering options to either reduce its stake or sell its Kenyan and Ugandan operations, both of which have been struggling in recent years amid stiff competition.
Although Orange is exiting Dominican Republic, Altice is expanding its operation in the country. Altice has already acquired Tricom SA and Global Interlink in the Dominican Republic. Upon combining with Orange, Altice will have an approximate customer base of 4 million.
The transaction is expected to augment Altice's presence in the Caribbean, where the company offers wireless, broadband and pay-TV services in Martinique, French Guyana and Guadeloupe.
On the flip side, teledensity of around 90% does not present Orange with of a long-term opportunity in Dominican Republic. We believe that the sale of the Dominican arm brings in the much needed cash for the company to reduce its debt burden and concentrate on Europe and other emerging nations.
Orange currently carries a Zacks Rank #3 (Hold). Other stocks worth considering within this sector are SK Telecom Co Ltd. (NYSE: SKM) and Shenandoah Telecommunications Co. (NASDAQ: SHEN). Both the stocks currently carry a Zacks Rank #1 (Strong Buy).
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