Telefonica Steps Up Negotiations to Buy Mexico’s Iusacell

Spanish telecom giant Telefonica appears to have accelerated talks to acquire Mexico’s third largest telecom operator, Iusacell. Madrid-based Telefonica said in a brief statement to Spain’s stock-market regulator that it …

Spanish telecom giant Telefonica appears to have accelerated talks to acquire Mexico’s third largest telecom operator, Iusacell. Madrid-based Telefonica said in a brief statement to Spain’s stock-market regulator that it was in talks but that no deal has been reached.

Reports about Telefonica’s talks with Iusacell first emerged in February this year, but the negotiations were put on hold as the two companies wanted to be clear about telecom reforms in the North American country.

Now, with the reforms in place, Telefonica has intensified talks to buy out its Mexican competitor. According to reports in the Spanish press, it has offered about US$4 billion for stakes in Iusacell.

The acquisition — if it goes ahead — would pose a serious threat to Carlos Slim’s dominance of the Mexican telecom market. According to one estimate, America Movil controls about 70% of Mexico’s mobile market and 80% of the fixed-line market.

But Carlos Slim’s firm may have to offload some of its assets after Mexican regulatory bodies imposed a 50% market share limit in May last year.

Iusacell is co-owned by Mexican broadcaster Grupo Televisa SAB and billionaire Ricardo Salinas. The carrier, which controls about 7% of the Mexican mobile market, was valued at $3.2 billion when Televisa acquired a 50% stake in the company in 2012.

A report by the Wall Street Journal says Ricardo Salinas would not sell his stake in Iusacell. Salinas bought his stake in the operator from Verizon Communications and Vodafone after they realized they could not compete against Slim’s companies.

Telefónica looks to be doing everything it can to take on America Movil in Mexico. Recently it agreed to allow Britain’s Virgin Mobile to use its network to provide mobile services in Mexico. It also has a network sharing agreement with Iusacell.

Moreover, analysts say, Mexico’s current telecom reform plays to its favor. For if America Movil reduces its market share to 50%, Telefonica will be able to take Carlos Slim head on.

According to Bloomberg, Telefonica entered Mexico in 2001 and by the end of September 2013 it had over 19 million mobile-phone customers in the country. Mexico City-based Iusacell had 7.4 million at the end of 2012, the last time Televisa provided a figure. America Movil boasted 72.5 million, while the smallest competitor, NII Holdings Inc., had 3.7 million.

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