AT&T is set to expand operations in Mexico, announcing this morning plans to acquire NII Holdings’ Nextel Mexico operations for $1.875 billion. The deal will see AT&T purchase the assets out of bankruptcy protection as part of an NII Holdings restructuring plan.
The proposed deal calls for AT&T to purchase companies operating under the name Nextel Mexico and holding all of NII’s wireless properties in Mexico, including spectrum licenses, network assets, retail stores and approximately 3 million subscribers. Nextel Mexico’s network covers approximately 76 million people.
Just 10 days ago, AT&T closed on its $2.5 billion acquisition of Mexico wireless operator Iusacell. That deal included Iusacell’s wireless properties, including licenses, network assets, retail stores and approximately 8.6 million subscribers.
In announcing the Nextel Mexico deal, AT&T again touted plans to offer up what it called the first-ever North American mobile service area tapping into its own U.S.-based network, Iusacell’s footprint and now Nextel Mexico’s operations. AT&T said the combined networks would cover more than 400 million potential customers.
AT&T said it expects the Nextel Mexico deal to close by midyear. Mexico’s telecom regulator Instituto Federal de Telecomunicaciones cleared the Iusacell deal in just two months.
NII Holdings filed for Chapter 11 bankruptcy protection late last year, citing its inability to meet financial obligations. The company had previously sold its Chile and Peru operations, while maintaining operations in Brazil and Argentina, though it has been in talks to sell the latter.
NII Holdings has struggled to migrate its legacy iDEN-based operations to 3G-based services in markets with established 3G players that are also beginning to deploy LTE-based services. The company inherited its iDEN platform as the international service provider for Nextel Communications, which was eventually acquired by Sprint.
AT&T had been reported as interested in the Nextel Mexico assets due to its 800 MHz spectrum holdings that could be useful in AT&T’s attempts to launch LTE services in Mexico. Jennifer Fritzsche, Wells Fargo Securities senior analyst, noted in a research report that Nextel Mexico controls 25 megahertz of spectrum in the 800 MHz band, 30 megahertz in the 1.7/2.1 GHz band and “some” IDEN/SMR spectrum. If combined with the Iusacell holdings, AT&T would have control of more than 70 megahertz of nationwide spectrum with 90 megahertz in some markets.
“We view this move by [AT&T] as positive as the company acquired a valuable resource in [NII Holdings’] spectrum that complements what it received via its Iusacell transaction,” Fritzsche explained. “We believe the spectrum [AT&T] now owns in Mexico will allow the company to build a competitive and high-quality network.”
AT&T is also in the process of acquiring DirecTV, which will include DirecTV’s operations in Latin America. AT&T had previously stated that the region’s pay-TV segment is under-penetrated at just 40%. To help gain regulatory approval in Latin America, AT&T sold off its small interest in América Móvil, which operates across a number of Latin American countries and also owns domestic wireless reseller TracFone Wireless.
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