Bloomberg
New York
AT&T, the second-largest US mobile-phone carrier, agreed to buy Grupo Iusacell SA from billionaire Ricardo Salinas for $2.5bn to expand further into Latin America.
AT&T is gaining 8.6mn subscribers with the purchase of closely held Iusacell, the third-largest wireless operator in Mexico that has struggled to compete against Carlos Slim’s America Movil SAB. The price includes $800mn in debt. The acquisition will take place after Salinas closes a deal to buy the 50% of Iusacell owned by Grupo Televisa SAB, AT&T said in a statement.
AT&T is expanding into Mexico after agreeing earlier this year to pay $48.5bn for DirecTV, which provides satellite- TV service in the US and Latin America. Four months ago, President Enrique Pena Nieto signed a telecommunications overhaul into law that promotes competition and reinforces oversight of the telecommunications industry.
“Our acquisition of Iusacell is a direct result of the reforms put in place by President Pena Nieto to encourage more competition and more investment in Mexico,” AT&T Chief Executive Officer Randall Stephenson said in the statement. “Those reforms together with the country’s strong economic outlook, growing population and growing middle class make Mexico an attractive place to invest.”
Dallas-based AT&T has been on the prowl specifically for deals in Latin America and MexiCo In September, AT&T Chief Strategy Officer John Stankey said that Mexico was poised for investment and that he sees a lot of options, both near-term and long-term, in Latin America.
“If we weren’t looking at Mexico and Latin America more broadly and thinking about what opportunities there were to further shareholder returns down there, and begin to diversify our revenue sources, I think we’d be asleep at the wheel,” Stankey said at an investor conference at the time. He met with Mexican telecommunications regulators that month to discuss the market and the new laws designed to ignite investment.
While the transaction is subject to review by Mexico’s telecom regulator, AT&T said it expects to complete the deal in the first quarter, according to the statement.
The May agreement to buy DirecTV - a deal that’s still awaiting regulatory approval - marked AT&T’s first push outside the US in more than a decade as it tries to counter slowing growth in its home market.
“We feel, as we have said, that we can get the DirecTV deal done early next year,” John Stephens, AT&T’s chief financial officer, said yesterday in an interview. “Sometimes opportunities come up and we make decisions and act accordingly.”
AT&T was among the companies that America Movil contacted about buying $17.5bn of Mexican wireless and landline businesses, people with knowledge of the matter said in September. America Movil has said the buyer needs to be new to the Mexican market to create more competition. “It’s surprising that this comes before DirecTV is closed,” Walt Piecyk, an analyst with BTIG LLC, said yesterday in an interview. “It could be that Salinas was ready and they had to go. They’ve been looking at Latin America and this deal may be an early sign that AT&T has an interest in the assets of its former partner America Movil.”
As part of yesterday’s deal, Salinas is keeping the company’s fiber-optic unit, Totalplay, which has more than 130,000 Internet, landline and pay-TV users in Mexico City, Guadalajara, Cuernavaca and Toluca.
Totalplay plans to expand to 7.5mn households across 24 Mexican cities over the next five years, from 1.5mn households currently.
AT&T said it plans to expand Iusacell’s wireless network beyond the 70% of Mexico’s population that it currently reaches.