U.S. telecom behemoth AT&T Inc. (T) has decided to extensively explore the Mexican telecom market for future growth. In keeping with this objective, the company has decided to acquire the Mexican operations (popularly known as Nextel de Mexico) of currently bankrupt wireless operator NII Holdings Inc. Notably, just a couple of weeks ago, AT&T completed the acquisition of Iusacell, the third largest wireless service provider in Mexico.
As per the latest endeavor, AT&T will acquire NII Holding’s wireless properties in Mexico, including spectrum licenses, network assets and retail stores for a total consideration of approximately $1.875 billion less the outstanding net debt of the business at closing of the deal.
The transaction is subject to a bankruptcy auction and approvals by the U.S. Bankruptcy Court for the Southern District of New York and also subject to approval by Mexico’s telecom regulator IFT and is expected to be completed by mid-2015.
Acquisition of Nextel de Mexico will add around 3 million subscribers in AT&T’s kitty. Earlier, the takeover of Iusacell had added around 9.2 million subscribers to AT&T’s base.
Thus, combined synergies from the Iusacell and Nextel de Mexico buyouts will position AT&T as a formidable player in the lucrative mobile market of Mexico. 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.
Nextel de Mexico had deployed a nationwide 3G network using HSPA technology in which AT&T has strong technical efficiency. Further, the company launched 4G LTE services in three major cities, namely, Mexico City, Guadalajara and Monterrey.
AT&T has already initiated an innovative service which allows unlimited calling from the U.S. to any number in Mexico without imposing any additional charge. Individuals and business enterprises interested in this offer will have to subscribe to the AT&T World Connect Value package.
Meanwhile, existing customers will enjoy this new service free of cost. The new product is a part of AT&T’s larger strategy to develop a pan-North American mobile service zone to serve individual consumers and business enterprises of the U.S. and Mexico.
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 including Mexico. The deal, which is valued at $48.5 billion, is currently under regulatory review. AT&T currently carries a Zacks Rank #3 (Hold).
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