Mexico's competition regulator approved AT&T's (NYSE: T) $2.5 billion purchase of No.3 Mexican carrier Iusacell, with certain conditions, clearing the way for the deal to close sometime in the first quarter of 2015.
According to Reuters, the Federal Competition Commission placed conditions on the deal to "avoid risks to the process of competition" in markets where Iusacell would compete with Carlos Slim's América Móvil, which until this past summer had AT&T as a minority investor.
Iusacell had been operated as a joint venture between Mexico's biggest broadcaster Televisa and Grupo Salinas, the holding company of billionaire Ricardo Salinas. The Mexican antitrust regulator also said it approved Televisa's sale of its 50 percent stake in Iusacell back to Grupo Salinas. AT&T will then buy Iusacell from Salinas.
As Total Telecom notes, Grupo Salinas will have its fixed and mobile assets split up and will hold onto its fixed-line business, which includes broadband, telephony and TV provider Total Play, while AT&T will purchase Iusacell and its subsidiary Unefon.
Via the deal, AT&T said it will get Iusacell's 8.6 million wireless customers and its 3G GSM/UMTS network that covers roughly 70 percent of Mexicans, which AT&T has pledged to expand to "millions more" Mexicans if the transaction is approved. AT&T has claimed the deal will allow it to create the first-ever North American "Mobile Service area" covering over 400 million consumers and businesses across the U.S. and Mexico.
AT&T CEO Randall Stephenson said in November he was "very enthusiastic" about the Mexican market and the government's rules for opening up the telecommunications sector. For example, the country's new rules require market leader América Móvil to offload assets as part of an effort to get its market share in Mexico below 50 percent from around 70 percent. Speaking at an investor conference Stephenson said that the rules "make it very, very attractive for companies to come in and invest" in expanding network coverage and capacity. Stephenson said AT&T is looking to invest in Mexico to accelerate mobile broadband adoption there, likely via LTE, which Iusacell has not deployed.
Stephenson was coy about whether AT&T would invest in additional wireless carriers in Mexico and the Latin American market, as some analysts have speculated. He said "Iusacell is a terrific platform" with a strong spectrum portfolio, though its network will need to be built out. He noted that Nextel International has some "Mexican assets we would find attractive," but added that because the company is going through bankruptcy proceedings it's difficult to know what assets might emerge to be purchased.
AT&T in June divested its 8.27 percent stake in América Móvil for $5.57 billion to shareholders Inmobiliaria Carso and Control Empresarial de Capitales. AT&T sold the stake as part of the regulatory approval process related to its proposed $48.5 billion acquisition of DirecTV (NASDAQ: DTV), which is still being evaluated by U.S. regulators.
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