AT&T (NYSE: T) is going to be in for a long haul in terms of upgrading its wireless network in Mexico. It will take "a couple of years" to reshape and improve the business in Mexico, according to AT&T Mexico CEO Thaddeus Arroyo.
AT&T closed its $1.88 billion deal for Nextel Mexico at the end of April, a few months after it closed a $2.5 billion deal to purchase Mexican wireless carrier Iusacell. AT&T will now compete against Telefónica's Movistar and billionaire Carlos Slim's América Móvil, which controls around 70 percent of the Mexican wireless market. Financial analysts think AT&T will need to make a major financial investment in Mexico for the deals to pay off.
"What we really want to do over the long term is deploy advanced fourth generation services to over 100 million Mexicans ... That will take a number of years," Arroyo told Reuters on the sidelines of a World Economic Forum summit on Latin America in the Riviera Maya.
"It actually will take us a couple of years to ultimately begin to enhance and begin to deploy the experiences that we're looking for," Arroyo said.
AT&T has said that Iusacell, whose previous owner Grupo Salinas never broke down the carrier's financial numbers in detail, posted a $27 million operating loss for the first-quarter. Notably, AT&T also lowered Iusacell's number of subscribers to 5.97 million from the 9.2 million it counted when the deal closed in January.
"Iusacell's reporting methodology differed from AT&T's, and once we completed the acquisition, we conformed it to our reporting standards," AT&T spokeswoman Mari Melguizo told FierceWireless. "This kind of one-time adjustment is standard." She declined to comment further.
Nextel Mexico has around 3 million subscribers.
AT&T's Iusacell controls between 20 and 25 MHz of 800 MHz spectrum, primarily in the southern half of the country, including Mexico City and Guadalajara, and an average of 39 MHz of PCS spectrum nationwide. The carrier's Nextel Mexico business controls around 20 MHz of 800 MHz spectrum and 30 MHz of AWS spectrum.
Like other AT&T executives have done, Arroyo highlighted Mexico's growing middle class and relatively young population as drivers for the carrier's investment in the area. There are also few LTE subscribers in Mexico; AT&T plans to more broadly deploy the technology.
During AT&T's first-quarter earnings conference call, AT&T CFO John Stephens said that AT&T "will be able to utilize the infrastructure of both companies to really help us manage and really prioritize capital investments, so it really will allow us on a combined basis to ramp up the networks much more quickly." According to a Seeking Alpha transcript of his remarks, he noted the companies "clearly have a leading spectrum position in Mexico, which also gives us an opportunity to very efficiently ramp up."
Stephens added that AT&T will "absolutely" spend capital to improve its networks in Mexico. "We intend to get the network quality up to our standards," he said. "And as quickly as prudently possible, we're working through those plans."
Arroyo said that for the company to reach its goal of becoming the market's leader within a decade, it needs to be successful in both prepaid and postpaid markets.
When asked if the company is considering the acquisition of any América Móvil assets, Arroyo declined to commit to anything. "We'll always continue to look at other alternatives in the market, but right now we really have our hands full," he told Reuters.
América Móvil is seeking to offload some assets as part of an effort to get its market share in Mexico below 50 percent, as required by regulators. Last month América Móvil shareholders approved a plan to spin off the company's wireless tower assets into a new company called Telesites. Mexico instituted a new law in July 2014 that seeks to create more competition in the telecommunications market, especially for América Móvil. The company will be forced to open up infrastructure and let rivals interconnect to his network for free, Reuters noted.
- see this Reuters article
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