Nextel Communications Inc. charted a new frontier in its acquisition strategy with plans to buy most of Wireless Ventures of Brazil Inc., owner of Brazil’s only nationwide specialized mobile radio license.
Nextel of McLean, Va., said it reached definitive agreements with Wireless Ventures, of Arlington Va., to purchase 81 percent of the company’s stock in exchange for $186 million in Nextel stock.
Wireless Ventures is licensed to cover an area including Brazil’s 10 largest cities with a combined population of about 60 million. This means Nextel’s purchase price equals about $4 per potential customer, said the company. Those cities include Sao Paulo, Rio de Janeiro and Belo Horizonte.
Nextel’s wholly owned subsidiary, McCaw International Ltd., plans to build an enhanced SMR network based on Motorola Inc.’s integrated Digital Enhanced Network technology. Nextel said Motorola committed $125 million toward network buildout.
The acquisition is pending U.S. government approvals and Nextel expects it will close by the end of the year. Motorola’s iDEN equipment is on order and Nextel hopes to begin service before the end of next year, said company spokesman Bob Ratliffe.
How big a market is Brazil? There are 1.5 million people currently on the waiting list for cellular service, said Ratliffe.
Brazil reported 1.2 million cellular subscribers in June and a current growth rate of 70 percent. The majority of customers are served by one of 27 local operators, which belong to state-owned telephone company Telecomunicacoes Brasileiras SA.
“Brazil is a market that still has major needs for telecommunications infrastructure,” said Nextel Chairman and Chief Executive Officer Daniel Akerson. He said Nextel can offer iDEN service at a competitive price in Brazil, which is “possibly one of the most attractive wireless markets in the world.”
The country accounts for 50 percent of Latin America’s gross national product, and of that amount, Sao Paulo is responsible for half, noted Ratliffe.
Wireless Ventures and affiliated companies own or have the option to buy more than 1,300 channels throughout Brazil. The company is owned principally by Telcom Ventures, headed by the Rajendra Singh family of Virginia and affiliates of the Carlyle Group, an investment company. Telcom is the indirect majority owner of LCC International wireless engineering consulting firm.
NEC Corp., L.M. Ericsson and Northern Telecom Ltd. dominate the Brazilian infrastructure market. Motorola and Nokia Mobile Phones last summer announced plans to construct handset manufacturing plants there.
In addition to Nextel’s broad reach in the United States, including its planned acquisition of the nation’s second largest SMR operator, Pittencrieff Communications Inc., the company has operations in Canada (through ownership in Clearnet Communications Inc.), Mexico and Argentina. Nextel and its partners will hold 800 MHz spectrum with the potential to reach 479 million people.
