MADRID, Feb 25, 2025 (BSS/AFP) - Spanish telecommunications giant Telefonica agreed to sell its Argentine subsidiary to Telecom Argentina for $1.2 billion on Monday, prompting libertarian President Javier Milei's government to announce an investigation over competition concerns.

The transaction with the company controlled by Argentine media giant Clarin Group is part of Telefonica's drive to "gradually reduce" its exposure in Latin America, the company said in a statement submitted to Spanish markets regulator CNMV.

Telecom Argentina, also present in Paraguay and Uruguay, said the acquisition of Telefonica Moviles Argentina would accelerate the rollout of 5G and fibre-optic networks as well as increase broadband and mobile telephone coverage.

"Argentina will have digital infrastructure of international level and quality, boosting the development of important sectors of the economy," it said in a statement.

But the deal must overcome regulatory hurdles, with Milei's office announcing that the Argentine communications and competition authorities would assess it.

The acquisition could leave around 70 percent of telecoms services in the hands of one group, "which would generate a monopoly formed thanks to decades of state benefits" that Telecom Argentina enjoyed, Milei's office said in a statement.

"The national government will take all measures to guarantee users' right of choice, free competition and access to telecommunications services."

Telefonica has launched a strategic shift towards its key markets in Spain, Britain, Brazil and Germany in a bid to reduce its debt and bolster profitability.

It has recently sold its subsidiaries in Guatemala and Costa Rica and concluded a deal to cede its Colombian branch.

Telefonica has been through a turbulent period since Saudi group STC took a 9.9-percent stake in September 2023.

That led the Spanish state to re-enter the group's capital to defend its "strategic" role of providing services to the country's armed forces.