AT&T to Compete with America Movil After Acquiring Iusacell

AT&T has agreed to acquire Mexican wireless carrier Iusacell for US$2.5 billion in a deal that puts the U.S. telecom giant in direct competition with Carlos Slim’s America Movil.

Dallas-based AT&T gained a foothold in the Latin American telecom market when it acquired DirecTV earlier this year. Yet the acquisition of Iusacell, which serves about 6.5 million Mexicans, marks the formal expansion of AT&T into this lucrative  market.

Iusacell’s network covers about 70% of Mexico, but the U.S. firm is talking of adding a million more subscribers by further bolstering the network.

In addition, AT&T wants to link its U.S. network with Iusacell’s in Mexico in a bid to offer service covering both the nations. The expanded network will ultimately cover 400 million people in Mexico and the United States.

This will benefit “U.S. customers calling or visiting Mexico, and Mexican customers calling or visiting the United States – whether they live near the border or thousands of miles away,” said AT&T in a press release.

This is a game-changer for the Mexican telecom sector which was reformed only last year. Analysts say AT&T’s arrival will increase competition and bring down telecom price across Mexico. Furthermore, America Movil’s monopoly will be broken once and for all.

Iusacell offers wireless service under both the Iusacell and Unefón brand names with a network that covers approximately 120 million people.

AT&T said it was attracted by President Enrique Peña Nieto’s reforms and Mexico’s growing economy and middle class population.

“Mexico is still in the early stages of mobile Internet capabilities and adoption, but customer demand for it is growing rapidly,” said Randall Stephenson, AT&T Chairman and CEO.

“This is an opportunity for us to provide Iusacell the financial resources, scale and expertise to accelerate the roll-out of world-class mobile Internet speeds and quality in Mexico, like we have in the United States.”

The country today enjoys a strong credit rating, relatively low inflation and low unemployment. Moreover, Mexico and the United States are connected geographically, economically and culturally.

Iusacell operates a 3G wireless network based on the global GSM/UMTS technology that AT&T uses in the United States. Iusacell owns between 20 and 25 MHz of 800 MHz spectrum, primarily in the southern half of the country, and in major cities such as Mexico City and Guadalajara, and it has an average of 39MHz of PCS spectrum nationwide.