Looking to gain a foothold in Mexico, AT&T, the second largest wireless provider in the United States after Verizon Wireless, has agreed to buy the country’s third largest wireless company, Iusacell, for $2.5 billion.
Under the arrangement of the deal, AT&T will pick up Iusacell’s debt along with its wireless properties, including its network assets, licenses and retail stores. AT&T will also pick up the company’s 8.6 million subscribers. Iusacell’s network currently covers 70 percent of Mexico’s 120 million residents. The newly proposed cross-border network service area would cover 400 million consumers and businesses in both Mexico and the United States. AT&T further plans to expand this combined network to cover millions of additional consumers and businesses.
“Mexico is still in the early stages of mobile Internet capabilities and adoption, but customer demand for it is growing rapidly,” AT&T chairman and CEO Randall Stephenson stated in announcing the deal. “This is an opportunity for us to provide Iusacell the financial resources, scale and expertise to accelerate the roll-out of world-class mobile Internet speeds and quality in Mexico, like we have in the United States.”
The move is just the latest acquisition of AT&T as it positions itself to expand both its businesses and geographic reach. AT&T is currently in the process of acquiring DirecTV for $48.5 billion. The deal would garner it a nationwide satellite business, as well as 18 million subscribers in Latin America. Iusacell could also be a launching pad for other acquisitions in Mexico.
AT&T is entering the telecommunications market in Mexico at a time where new telecommunications legislation and a new national mobile broadband network by the government are expected to increase wireless competition in the country. Indeed, the new telecommunication laws are the primary reason why América Móvil, whose Telcel operation controls around 70 percent of Mexico’s mobile market, is currently divesting itself of its network assets. Owned by billionaire and telecommunications tycoon Carlos Slim, América Móvil aims to reduce the company’s Mexican market share to comply with the stiff new regulations.
The deal is pending review by Mexico’s telecom regulator IFT (Instituto Federal de Telecomunicaciones) and Mexico’s National Foreign Investments Commission. AT&T also noted the acquisition first requires Grupo Salinas, 50 percent owner of Iusacell, to close its intended acquisition of the remaining half of Iusacell it does not own.
The deal is expected to close the first quarter of 2015.
AT&T Looks to Establish First North American Mobile Service Area (PDF)