Speculation Grows Over Telefonica’s Potential Acquisitions

Speculation is mounting that Telefonica will make a bid to acquire Axtel or MegaCable to retain its share in Mexico’s telecom market, which is undergoing a dramatic transformation …

Speculation is mounting that Telefonica will make a bid to acquire Axtel or MegaCable to retain its share in Mexico’s telecom market, which is undergoing a dramatic transformation following government reforms and AT&T’s purchase of Iusacell and Nextel.

But the Madrid, Spain-based operator has neither denied nor confirmed that it was moving in to purchase. Megacable is the second largest cable operator in Mexico, with a market share of around 40%, while Axtel is a small fixed-line operator.

Speculation has grown since the publication of a recent article by The Financial Times, in which Francisco Gil Díaz, Telefónica’s Mexico president, said the acquisition of MegaCable and Axtel could help the Spanish firm consolidate its position in the North American country.

Operating under the brand Movistar, the Spanish telecom giant is the second biggest operator in Mexico and has reportedly invested US$ 13.5 billion in the country over the past decade. Last year, there was similar speculation that Telefonica would acquire Iusacell, but it ended up being bought by AT&T instead.

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The arrival of AT&T is posing a threat to Telefonica, so much so that aggressive expansion is the only option for the company to retain its market share in the country.

Months ago, Telefónica sold out its British subsidiary O2 UK. Analysts expect that the Spanish telecom giant will use the proceeds of this sale to bolster its operations in emerging markets, particularly Mexico and Brazil.

Last September, Telefonica launched a 4G-LTE network in Mexico and reports say it will expand this high-speed network to 20 more cities by the end of this year.

Telefonica controls 20% of the Mexican telecom market, a small figure compared to the 70% of America Movil.

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