U.S. operator AT&T has closed its acquisition of NII Holdings’ Nextel Mexico business for US $1.875 billion, after the deal was approved by Mexico’s regulator IFT and the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing the restructuring of NII Holdings, after its bankruptcy filing in 2014. The acquisition excludes around US $427 million of net debt and other adjustments. The deal marks AT&T’s second purchase of a Mexican mobile operator this year; the first was Iusacell, which was acquired for US $2.5 billion in January. In the present deal, AT&T acquired all the companies operating under the name Nextel, along with their spectrum licenses, network assets, retail stores and subscribers, and AT&T said it will now integrate Iusacell and Nextel into a single operator.
In addition, AT&T confirmed plans to create what it described as the first-ever North American mobile service area, which will cover more than 400 million customers and businesses in Mexico and the U.S. The CEO of AT&T Mexico LLC and Iusacell, Thaddeus Arroyo, will lead the combined company.
After AT&T bought Iusacell and was looking to increase its position in Mexico, it faced the choice of whether to buy Nextel or to pick up those assets that América Móvil was planning to sell off. At the time we wrote that the Nextel option had the benefits of lower cost and fewer regulatory issues. As it happened, América Móvil has still not carried out the divestment that was supposed to take it below the 50 percent market share required to satisfy Mexican regulators. But AT&T has moved ahead with an acquisition that adds a significant amount of both infrastructure and customers, and the regulatory headwinds anticipated due to the deal’s status as a bankruptcy sale have turned out not to be a problem. The deal, announced in late January, took only a little over three months to close.
Nextel has around 3 million customers, and its network serves some 76 million people in a nation of 120 million. It controls 25 MHz of spectrum in the 800 MHz band and 30 MHz in the 1.7/2.1 GHz band. With this infrastructure, added to that of Iusacell, which has 70 percent coverage and 8.6 million customers, AT&T will significantly improve its ability to compete and perhaps even to achieve the top spot in the Mexican market. Just as importantly if not more so, the enlarged network capacity and coverage enable the U.S. operator to realize its vision of a combined service region extending across the U.S.-Mexico border. With over 30 million people of Mexican origin residing in the U.S., the market for communication with Mexico is very large—and, of course, rapidly growing. Whether or not the figure of 400 million customers is too high, a unified North American service area stands to win the AT&T/Iusacell/Nextel entity a bonanza of customers and potentially huge revenues from mobile traffic.
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