Will AT&T Mexico Foray Spur America Movil In U.S.?

AT&T's $1.7 billion deal to buy Mexico's No. 3 wireless firm, Iusacell, confirms its ambitions to expand into Latin America.

Whether Mexico-based America Movil (NYSE:AMX), that country's No. 1 wireless firm, fires back by bidding for T-Mobile US (NYSE:TMUS) is the next question. It's possible, analysts say.

A U.S. auction of radio spectrum slated to start on Thursday could provide a partial answer.

AT&T bid to buy Mexican wireless firm Iusacell could prod Mexico's America Movil to acquire T-Mobile US. View Enlarged Image

America Movil already owns TracFone, one of the largest prepaid wireless phone services providers in the U.S. But America Movil doesn't own a U.S. wireless network. TracFone, with 25.9 million subscribers as of Sept. 30, leases network capacity from AT&T (NYSE:T) and Verizon Communications (NYSE:VZ).

America Movil has registered as a possible bidder in the AWS-3, or Advanced Wireless Service No. 3, auction. One of the world's richest men, Carlos Slim, controls the company.

The upcoming auction marks the first major sale of U.S. airwaves since 2008. Some 65 megahertz of spectrum will be auctioned, with the lion's share expected to go to AT&T, Verizon and possibly T-Mobile US.

Iusacell Covers Most Of Mexico

AT&T's purchase of Iusacell from Grupo Salinas, announced Friday, has raised speculation over America Movil's next move. Iusacell, with 8.6 million subscribers, offers service to about 70% of Mexico's population.

"(Iusacell) marks AT&T's first foray into wireless in Latin America and could mark the beginning of a buying spree over time," said William Power, an analyst at RW Baird, in a research report. "With AT&T now having the ability to offer seamless coverage across the U.S. and Mexico, with a network covering 400 million people, it could increase America Movil's interest in a bigger U.S. presence beyond its TracFone subsidiary."

AT&T is seeking U.S. approval to acquire satellite TV operator DirecTV Group (NASDAQ:DTV), which also sells pay-TV services in one other region — Latin America. DirecTV has 12.35 million subscribers in Latin America, not including its 41% stake in Sky Mexico. AT&T hopes to close its DirecTV acquisition in early 2015.

America Movil owns satellite and cable-TV companies in Latin America that sell services under the Claro brand, including Net Servicos, Brazil's No. 1 pay-TV firm. America Movil has more than 20 million pay-TV customers and 241 million wireless subscribers in Latin America, with nearly half in Mexico and Brazil.

If AT&T makes more wireless acquisitions in Latin America, it will take on a former ally in America Movil. After AT&T announced the DirecTV deal, it sold off its 8.4% stake in America Movil.

 

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