White & Case partner Raúl Fernández-Briseño speaks with Rani Mehta about advising Altan on the Red Compartida mobile network PPP (public-private partnership)
How did you get involved in the project?
We were asked to meet with the management team of the consortium, as they were trying to put together a legal team for the bidding process. They wanted a law firm with experience in M&A transactions, a specialty in telecommunications and with a strong capability in bidding projects for the federal government. We met all the requirements that they were looking for and after a couple of meetings we put together a team for negotiating the M&A, telecommunications, PPP [public-private partnership], tax and development matters.
What was your role on the financing?
We did not negotiate the financing documents but we participated in the coordination with all the shareholders and provided some support to financing shareholders. We coordinated and made available to the counterparties a lot of support and information and documentation for this financing to be signed.
What were the most challenging aspects of this transaction?
First we had to put together a team for the bid and put together all the technical, legal and economic documentation for the bid. This was challenging because we had to include documentation and information for many areas. Time was of the essence and there were a large number of guidelines in place to be qualified to participate.
We had to work with 10 different shareholders (representing different types of shareholders). These included long-term investors, institutional investors and private equity investors. The shareholders come from different jurisdictions and bring different perspectives. For example, IFC was an institutional investor and a global investor. Miguel Escobedo was a Mexican lawyer, and there was Eugenio Galdón, a Spanish entrepreneur.
There were also the telecom companies, Axtel and Megacable, and we had to create a special series of shares with no corporate rights for those two companies to participate. We also had to take charge of the tax strategy for the company.
Additionally, we created the Mexican SPV to put money in the company and had a role in creating, negotiating and executing all these documents. These included engineering and construction contracts, contracts with tower companies and contracts regarding the fibre that will be used for the initial deployment of the project.
There was a special regulator created by the Mexican government to supervise this specific PPP – Promtel, which was the first telecommunications PPP in Mexico. One piece of complexity, from a regulatory perspective, was dealing with this brand new agent. The agency will be supervising and regulating the PPP project.
How will the creation of the special regulatory agency affect future telecommunications transactions in Mexico?
It will help to give certainty to similar projects.
Why were Altan and Rivada Networks the only competitors for this contract?
I assume that the complexity of the project meant only two consortiums with several players managed to reach the last stage of bidding. In fact, only one of the bidders, Altán, was able to produce all the documents required under the bidding guidelines.
Is there more legal work to do for the project?
White & Case is acting as lead counsel for Altán Redes. The main areas where we are providing advice are: corporate, commercial agreements, telecommunications agreements and regulatory.
What broader trends have you noticed in Mexico’s energy and infrastructure sectors?
The most relevant trend related to this transaction will be the presence of different kinds of investors in infrastructure projects. We have institutional investors, private equity entities, long-term entities, as well as the Mexican development bank for infrastructure projects. This is a major trend that will be repeated in the near future in Mexico, not only in telecoms, but in other sectors.
What do you attribute this to?
Mexico is an emerging market with a stable economy, stable increase in population, and a stable political environment compared to other Latin American countries, and it’s a country that is growing. The legal framework has been amended to give certainty to investors and there has been a lot of reform that allows foreign investors to come to Mexico with hardly any restraints. The legal framework works and is being respected by institutions.
FURTHER INFORMATION
Red Compartida mobile network PPP (public-private partnership)
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