AT&T to buy Mexico's third-largest wireless operator Iusacell for $2.5 bn

AT&T Inc yesterday said that it will buy Mexico's third-largest wireless operator, Iusacell for $2.5 billion including its $800-million debt, as part of the US telecom giant's plan to tap into the growing cellphone market in Latin America.

The acquisition comes a few months after AT&T was forced to sell its 10-per cent stake in America Movil to Mexican billionaire Carlos Slim Helu for $5.6 billion in order to avoid anti-trust issues over its $48.5 billion purchase of DirecTV.

The acquisition will occur after Mexican billionaire Ricardo Salinas Pliego's Grupo Salinas, the current owner of 50 per cent of Iusacell closes its announced purchase of the other 50 per cent of Iusacell from broadcaster Grupo Televisa. 

Iusacell had in September said that it would buy back the 50 per cent, currently held by Grupo Televisa for $717 million.

Under the terms of the agreement, AT&T will acquire all of Iusacell's wireless properties, including licenses, network assets, retail stores and approximately 8.6 million subscribers.

Iusacell provides wireless service under both the Iusacell and Unefón brand names with a network that covers about 70 per cent of Mexico's approximately 120 million people.

AT&T plans to expand Iusacell's network to cover millions of additional consumers and businesses in Mexico.

Iusacell operates a 3G wireless network based on the global GSM / UMTS technology that AT&T uses in the US. Iusacell owns 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 39MHz of PCS spectrum nationwide.

Iusacell's Total Play business, including the network assets to support pay TV and wireline broadband services will be spun out to Grupo Salinas' existing shareholders prior to AT&T closing its acquisition of Iusacell.

AT&T said Iusacell represents a natural geographic expansion of its wireless footprint into a country with a growing economy that is interdependent with the US economy.

The Mexican government earlier this year implemented reforms to shake up its telecom and broadcast market, which has weakened the dominance of Grupo Televisa America Movil controlled by Slim.

''These changes have created a friendly climate for foreign investment and gives AT&T the assets necessary to create a first-ever North American Mobile Service area for US customers calling or visiting Mexico, and Mexican customers calling or visiting the US,'' AT&T said in a statement.

''Our acquisition of Iusacell is a direct result of the reforms put in place by President Peña Nieto to encourage more competition and more investment in Mexico. Those reforms together with the country's strong economic outlook, growing population and growing middle class make Mexico an attractive place to invest,'' said Randall Stephenson, AT&T chairman and CEO.

Mexico has the second largest economy and one of the highest per capita GDPs in Latin America but the per cent of Mexico's population that has wireless service lags Latin America overall.

Smartphone penetration in Mexico is about half that of the US and AT&T expects that with prices of smartphone handsets falling and the increasing availability of higher-speed mobile networks in Mexico, it will be able to capture a large slice of the Mexican market coupled with Mexico's growing economy, growing middle class, relatively young population, rising urbanization rates and higher disposable incomes.

The transaction is subject to review by Mexico's telecom regulator and Mexico's National Foreign Investments Commission. AT&T expects the transaction to close in the first quarter of 2015.