AT&T Completes Nextel Purchase for US $1.875 Billion

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.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world.

Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance. Click here to contact a Tarifica Analyst

América Móvil Not Selling Frequencies or Infrastructure

Mexican mobile operator América Móvil has no plans to sell frequencies or infrastructure to reduce its dominant position in the country’s market, CEO Daniel Hajj told investors in a conference call. Hajj also said that the operator will analyze the new configuration of the Mexican telecom market with the entry of U.S. operator AT&T with the announced its acquisition of operators Iusacell and Nextel. “We’re reviewing exactly how the market is going to be in Mexico and then we’re going to decide what we’re going to sell to reduce our market share in order to avoid being a preponderant player,” Hajj said. “We are interested in divesting and reducing our market share but we do not know exactly how we want to do it.” On 17 April, shareholders of América Móvil approved the company’s plans to spin off some of its mobile infrastructure in Mexico into the new company Telesites, which would be listed separately on the stock market.

In July, América Móvil announced that it would break up its assets in order to bring its market share below the 50 percent level required by Mexican regulator to avoid a ruling of dominance. However, since then it has not presented a concrete plan to achieve that. Spinning off infrastructure into a separately listed company will not in itself reduce dominance, and Hajj’s remarks show that the company is still quite far from deciding how to proceed in Mexico’s new regulatory climate. This wait-and-see approach is understandable in light of the current uncertainty as to how AT&T’s acquisitions will play out in the marketplace. 

Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance.

Tarifica is a division of T3i Group, a diversified telecom information provider. To learn more about Tarifica, please visit www.tarifica.com. 

Mexico Kicks off Process for Wholesale Shared Network

Mexico’s Ministry of Communications and Transport has published a formal request for expressions of interest from companies and consortiums interested in designing, financing, deploying, operating and marketing a wholesale mobile telecommunications network. The project, a key part of President Enrique Peña Nieto’s campaign to boost competition in Mexico’s wireless market, is expected to require an investment of roughly US $10 billion. Under President Peña’s plan, the new network would be run as an independent “carrier of carriers” and would be available to any interested mobile service provider at regulated rates. The hope is that increased competition from this shared wholesale public network will translate to increased access to mobile and broadband service and lower prices for consumers.

The entire Mexican telecommunications landscape is in the process of overhaul. The country’s dominant mobile network operator, América Móvil, is now actively seeking to offload assets to get its 70 percent market share in the industry down below 50 percent, as now dictated by regulatory law. U.S. operator AT&T is continuing its expansion into Mexico; last month it reached an agreement to buy Nextel Mexico after having acquired Iusacell less than six months ago. If the deal with Nextel is approved, AT&T will surpass Mexico’s number-two operator, Movistar, and, as reported last month, might potentially pose a challenge to América Móvil. 

Add to all this the formal request for expressions of interest in building a huge telecommunications infrastructure, and President Peña is well on the way to boosting the competitive landscape of Mexican telecom. We think the sharing of infrastructure among possibly hundreds of mobile service providers is a smart way to go. More and more, competitors are becoming partners in order to lower the considerable investment required to build mobile infrastructure. With a decreased barrier to entry, the Mexican market should become more attractive to a new cast of players. The “carrier of carriers” concept is an efficient one; duplication of infrastructure is eliminated, risk is spread and prices can be more competitive. Therefore, everyone stands to gain.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: http://www.tarifica.com/contactus.aspx