AT&T Inc. (NYSE:T) is buying Nuevo Grupo Iusacell, Mexico’s third largest provider of wireless communications and cellular services, for $2.5 billion. AT&T’s purchase of the Mexican telecoms company is bringing in about 8.6 million subscribers. The purchase covers a net debt of $800 million, translating to an equity of 1.8 billion.
The move by AT&T Inc. (NYSE:T) puts the company at a position where it needs to invest billions of dollars to be at par with Mexico’s two largest players in wireless communications, but analyst see the deal as the company’s strategy for entrenching itself in one of Latin America’s largest economies. The acquisition of Iusacell comes even as AT&T is set to acquire DirecTV in a deal started earlier this year. DirecTV, a $48.5 billion acquisition, will also give the company a foothold with satellite TV subscribers across Latin America, specifically in Mexico and Brazil.
At the backdrop of AT&T Inc. (NYSE:T)’s entry into the Mexican market are the country’s new laws that are intended to stimulate competition and thus improve coverage and service for users. America Movil SAB de CV (ADR)(NYSE:AMX), which currently has a 70% share in the Mexican wireless communications market, is planning to sell assets with the goal of reducing its market share to less than 50%, to avoid regulation. AT&T holds a 9% share in America Movil. The company, however, sold the shares because of the deal with DirecTV, which is a competitor of America Movil in Mexico’s pay-TV market. The new laws specifically looks into possible conflicts of interest, thus, for AT&T to proceed with the DirecTV deal, it has to severe ties with America Movil.
The AT&T Inc. (NYSE:T) acquisition of Iusacell further puts the company as a direct competitor of America Movil, whose shares dropped about 3% after AT&T’s Iusacell deal.
This article has been written by Nonito Guntan.