AT&T to Invest Heavily in Mexico in Bid to Compete with America Movil

AT&T is talking of making heavy investment in Mexico, with the U.S. telecom giant implying that its ultimate aim is to replace Carlos Slim’s America Movil as Mexico’s number one telecom player.

Thaddeus Arroyo, AT&T’s Mexico chief executive, told the Financial Times that his company intends to invest heavily in the next five years to widen its subscriber base and establish what he called “industry leadership.”

Several weeks ago, Mexican regulators approved AT&T’s US$1.9 billion acquisition of Nextel. This is AT&T’s third major expansion in Latin America after it purchased Grupo Iusacell for US$2.5 billion and also acquired DirecTV last year.

Yet these acquisitions gave it just an 11% market share in Mexico.

Meanwhile, Iusacell reported a $27 million first quarter operating loss. At the time of the acquisition  in January, Iusacell claimed to have 9.2 million subscribers, but AT&T now says that the company has just 5.97 million subscribers.

AT&T’s success lies in its ability to build expensive LTE (4G) networks across the country. Today, Carlos Slim’s Telcel is the only provider of 4G services in Mexico.

Under Mexico’s telecom reforms, Telcel is obligated to open up its own infrastructure and let other companies connect to its network without any cost. This has greatly enhanced AT&T’s prospects, although the U.S. firm is still a minnow in the Mexican telecom market.

Nextel Mexico’s network covers an area that is home to about 76 million people, while Iusacell reaches 70% of Mexico. AT&T will now combine Iusacell with Nextel’s network, creating the first-ever North American Mobile Service area, covering over 400 million consumers and businesses in both Mexico and the United States.

AT&T is in the process of adding unlimited mobile and landline calling to Mexico on its service plans as well as through its Cricket Wireless subsidiary.

With 246 million wireless subscribers, America Movil – whose subsidiaries include Telmex, Embratel and Claro – is by far the largest telecom operator in Mexico, where it controls 70% of the mobile business and 80% of the fixed-line market.