AT&T to acquire Mexico’s Iusacell

AT&T has announced it has agreed to acquire Iusacell from Grupo Salinas for $2.5 billion, including the mobile operator’s debt, all wireless properties and its 8.6 million subscribers. However, the transaction will only take place once Grupo Salinas has finalised its purchase of 50% of Iusacell that it currently doesn’t own.

Iusacell, the third largest carrier in Mexico, has a network that covers approximately 70% of the country’s 120 million people. AT&T said it intends to increase coverage to millions more 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 Chariman and CEO Randall Stephenson said. “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.”

Mexico has recently taken action to tighten up its telecoms regulation. The law change is the reason why the country’s most dominant mobile operator Telcel is also on sale, as Carlos Slim-owned América Móvil that owns Telcel attempts to slim down on its market share in Mexico to avoid sanctions through the new laws.

“Our acquisition of Iusacell is a direct result of the reforms put in place by President Peña Nieto to encourage more competition and more investment in Mexico,” Stephenson said. “Those reforms together with the country’s strong economic outlook, growing population and growing middle class make Mexico an attractive place to invest.”

According to AT&T, Mexico’s wireless penetration is lower than the Latin American average, and smartphone use is about half of that of the US. But the US carrier said the two countries are geographically, economically and culturally connected, which makes this move a natural geographic expansion for AT&T.

“Iusacell gives us a unique opportunity to create the first-ever North American Mobile Service area covering over 400 million consumers and businesses in Mexico and the United States. It won’t matter which country you’re in or which country you’re calling – it will all be one network, one customer experience.”

Iusacell owns 20 and 25 MHz of 800MHz spectrum, mostly in the southern part of the country, and about 39MHz of PCS spectrum nationwide.  It operates a 3G network service, and has multi-play offering, Iusacell Total Play, but this will be spun off to Grupo Salinas’ shareholders before AT&T completes the purchase, expected to finalise by the end of Q1 2015.

AT&T has been eyeing up Mexico and Latin America in general for some time. Since changing its competition laws about four months ago, Mexico has created a market much more attractive and fuller with opportunities. As Carlos Slim is forced to relinquish some of his mobile market share in the country, estimated at over 70%, there has been increased interest from foreign players to enter the market as it becomes more competitive.

“It’s quite admirable what the political system has generated in Mexico in terms of reform over the last couple of months,” John Stankey, AT&T Group President and Chief Strategy Officer said in September. “…if we weren’t looking at Mexico and Latin America more broadly [and] what opportunities there were to further shareholder returns down there and begin to diversify our revenue sources, I think we would be asleep at the wheel and we’re not historically known to do that.”

Meanwhile, AT&T is yet to close its acquisition of DirecTV, US-based satellite broadcaster also serving Mexico and the Latin American market. This is excepted to close early next year.