AT&T to take on Slim’s telecoms empire
AT&T is taking on Carlos Slim’s Mexican telecoms empire by buying one of his main rivals and competing aggressively for his customers, as it seeks to capitalise on a big shake-up of the country’s wireless industry.
The second-largest US telecoms network said on Friday it would purchase Lusacell from Grupo Salinas in an all-cash deal that values Mexico’s number-three mobile group at $2.5bn including net debt of $700m.
The deal brings to an end AT&T’s decade-long partnership with Mr Slim’s América Móvil, which began to crack in July when the US group sold its 8 per cent stake in the Mexican wireless group back to the tycoon for $5.6bn and removed its two directors from the board.
AT&T sold the stake to win regulatory approval for its $48.5bn takeover of DirectTV, the satellite group that has a presence in several Latin American countries where Mr Slim also operates.
Its purchase of Lusacell marks a swift return to Mexico, and comes amid a sweeping overhaul of the telecoms market in the country, where regulators are forcing Mr Slim to break up his empire and sell large chunks of it to rivals to spur competition.
John Stankey, chief strategy officer, described the relationship with Mr Slim as a “marriage” where the two parties had drifted apart. “We parted friends, but now that we’re competitors we’re going to do what we have to do”.
Mr Stankey said AT&T intended to become Mexico’s second-largest wireless network. This would mean aggressively growing Lusacell’s 8.6m subscriber base by taking millions of customers off Mr Slim and the current number two, Telefónica’s Movistar.
He said Lusacell already had a network covering 70 per cent of Mexico’s 120m population and that the group could “comfortably grow with the right kind of capital investment” and “tuck-in acquisitions” that would be easy to integrate.
He refused to rule out bidding for the assets Mr Slim is being forced to sell, saying the group was “keeping all options open”, but that the values being discussed were “not necessarily all that attractive”.
AT&T will market the group as the “first-ever North American mobile service” with 400m subscribers. It will offer the same prices and plans to customers in both the US and Mexico, as it seeks to capitalise on immigration trends and the strong family ties between the two countries.
“The US’s large and growing Hispanic population has close ties to Mexico and many current AT&T business customers have operations in Mexico,” AT&T said.
Randall Stephenson, AT&T chairman and chief executive, said: “Our acquisition of Lusacell is a direct result of the reforms put in place by President Peña Nieto. Those reforms together with the country’s strong economic outlook, growing population and growing middle class make Mexico an attractive place to invest.”
Lusacell’s Total Play business will be spun out to Grupo Salinas’s existing shareholders. AT&T expects the deal, which is subject to review by the Mexican telecoms regulator, to close in the first quarter of 2015.
Smartphone penetration in Mexico is about half that of the US and lags behind the rest of Latin America. AT&T is hoping that as the price of handsets declines it will be able to benefit from higher adoption and increased mobile internet usage.