AT&T Expands into Mexico with Acquisition of Iusacell

by Matt Klassen on November 11, 2014

The saturated American telecommunications market is getting a little crowded for AT&T, as over the last several years the Dallas-based telecom giant has kicked the tires of several possible foreign and domestic acquisitions in hopes of establishing a presence in markets with growth potential. However, with failed bids for T-Mobile here at home, Vodafone in the U.K., and other European assets now behind it, AT&T has turned its attention to a market considerably closer to home, now looking south to Mexico.

Late last week AT&T announced that it has entered into an acquisition agreement with Mexican wireless provider Iusacell for $2.5 billion, a move that serves as a strong entry for Ma Bell into the Mexican market. Not only does Iusacell give AT&T 8.6 million new subscribers and coverage of 70 percent of Mexico’s 120 million people, it gives AT&T something the American telecom market simply can’t provide: growth potential.

The move comes as good news now only for Mexican subscribers who will now likely see 4G LTE network enhancements, but for American ones as well, as operating telecom networks on both sides of the border will mean savings for those who frequently call or visit across the border.

“Iusacell gives us a unique opportunity to create the first-ever North American Mobile Service area covering over 400 million consumers and businesses in Mexico and the United States,” AT&T CEO Randall Stephenson said in a statement. “It won’t matter which country you’re in or which country you’re calling — it will all be one network, one customer experience.”

Not that Mexico is any less competitive than an American market where almost 100 percent of the available subscriber base is already locked into some sort of telecom contract, as AT&T will be entering a Mexican market dominated by Telcel, a company that currently controls 70 percent of that market. The good news for AT&T, however, is that “recent legislation and a planned construction of a new broadband network by the government is expected to boost wireless competition in the country.”

While traditionally US carriers have preferred to exist solely in America, recently both AT&T and Verizon have started to eye foreign assets, expansion seen as the only road to continued growth. To that end, an expansion into Mexico makes infinitely more sense than anything oversees, as network integration, establishing a market presence, and utilizing customer ties between the U.S. and Mexicowill be far easier now than in the U.K. or anywhere else.

As a subset of AT&T’s desire to expand, the Mexican market provides a key that the mature American market simply cannot: smartphone growth. Mexico’s smartphone adoption is about half that of America, according to AT&T, meaning there are many people AT&T can still lure into long, binding contracts…a win for Mexico I suppose.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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