U.S. operator AT&T is continuing its expansion to Mexico with an agreement to buy Nextel Mexico for US $1.875 billion. The deal builds on AT&T’s takeover of Iusacell—which was announced in early November 2014—to add another 3 million customers and additional spectrum, retail and network assets. AT&T stated that Nextel’s network, covering some 76 million people, will help it realize its goal of creating a unified North American network spanning the U.S. and Mexico and covering over 400 million people. The acquisition excludes debt associated with Nextel Mexico and is subject to court approval in the bankruptcy proceedings underway in New York for NII Holdings, Nextel’s parent company. NII said a competitive bidding process will need to be held under court supervision, and regulatory approval in Mexico is also needed. The transaction is expected to close by mid-2015.
After the AT&T–Iusacell deal was announced, we wrote that AT&T, in its quest for dominance in the Mexican market, had two options ahead: To buy up the US $17.5 billion worth of assets that América Móvil was selling off, or to buy Nextel. By choosing the latter option, the U.S. giant has accomplished several things. First, clearly, it has spent far less money while still gaining a substantial asset in terms of network. Second, it has placed itself in a more advantageous position with regard to impending regulatory scrutiny, because the size of the América Móvil divestment is so large and would face stiffer headwinds. Third, and most important, if the deal is approved, AT&T will have given itself the reach to surpass Mexico’s number-two operator, Movistar, and potentially challenge top operator América Móvil. Nextel’s network covers 76 million in a nation of 120 million, which will make a major difference in the capacity of the AT&T–Iusacell combined entity to compete in the marketplace. The fact that Nextel is part of a bankruptcy sale is something of a drawback in this deal, but that may be a small price to pay in light of the gigantic cost savings versus acquiring América Móvil’s assets.
AT&T’s ambitions go well beyond dominating the Mexican market; the operator intends to unify its U.S. and Mexican networks and create a transnational integrated market. Considering the vast numbers of Mexican nationals living and working in the U.S. and needing to be in contact with family and friends in Mexico and also to remit money to Mexico, this looks to be a major opportunity for revenue.