Recently, U.S. telecom behemoth AT&T Inc. (T) completed the acquisition of Iusacell, the third largest wireless service provider in Mexico. The deal was valued at $2.5 billion ($1.7 billion in cash + acquisition of $800 million of Iusacell’s outstanding debt).
Notably, Iusacell currently serves approximately 9.2 million subscribers. At present, America Movil SAB (AMX) controls nearly 70% while Telefonica SA (TEF) commands around 20% of the Mexican wireless market.
Last year, the government of Mexico reformed its telecommunications sector, which was highly monopolistic with one or two companies dominating the market. As the new reforms open up considerable scope for investment in Mexico, AT&T is striving to capitalize on the opportunity.
Mexico is the largest economy in the Latin America region with a growing middle class population eager to spend more on high-speed wireless networks for facilitating the use of smartphones and tablets. Also the wireless penetration rate is relatively lower in the country compared to the U.S.
Meanwhile, AT&T has decided to acquire DIRECTV (DTV), the largest satellite TV operators in the U.S. DIRECTV boasts a strong presence in several Latin American countries. The deal, which is valued at $48.5 billion, is currently under regulatory review. AT&T currently carries a Zacks Rank #3 (Hold).
In a separate development, AT&T recently announced that it has incurred a massive $10 billion non-cash charge in the fourth-quarter of 2014. Of the total, $7.9 billion is related to actuarial gains and losses on pension and post-employment benefit plans.
AT&T also recorded a $2.1 billion non-cash charge as it abandoned some copper used for landline connections. Copper-wired landline connections are quickly disappearing owing to a shift in consumers’ taste toward fiber-wired landline and wireless connections.
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