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AT&T to Buy Iusacell, Plans Lower Capex For 2015

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11/9/2014

DALLAS, Tex. - AT&T (NYSE:T) has entered into an agreement with Grupo Salinas to acquire Mexican wireless company Iusacell for US$2.5 billion, inclusive of Iusacell debt. Under the terms of the agreement, AT&T will acquire all of Iusacell’s wireless properties, including licenses, network assets, retail stores and approximately 8.6 million subscribers.

The acquisition will occur after Grupo Salinas, the current owner of 50 percent of Iusacell, closes its announced purchase of the other 50 percent of Iusacell that Grupo Salinas does not own today.

Iusacell offers wireless service under both the Iusacell and Unefón brand names with a network that today covers about 70 percent of Mexico’s approximately 120 million people. AT&T plans to expand Iusacell’s network to cover millions of additional consumers and businesses in Mexico.

“Our acquisition of Iusacell is a direct result of the reforms put in place by President Peña Nieto to encourage more competition and more investment in Mexico. Those reforms together with the country’s strong economic outlook, growing population and growing middle class make Mexico an attractive place to invest,” said Randall Stephenson, AT&T chairman and CEO. “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. It won’t matter which country you’re in or which country you’re calling – it will all be one network, one customer experience.

Iusacell operates a 3G wireless network based on the global GSM/UMTS technology that AT&T uses in the United States. Iusacell owns between 20 and 25 MHz of 800 MHz spectrum, primarily in the southern half of the country, including Mexico City and Guadalajara, and an average of 39MHz of PCS spectrum nationwide. Iusacell’s Total Play business, including the network assets to support pay TV and wireline broadband services will be spun out to Grupo Salinas’ existing shareholders prior to AT&T closing its acquisition of Iusacell.

Iusacell will continue to be headquartered in Mexico City following the transaction closing.

The transaction is subject to review by Mexico’s telecom regulator IFT (Instituto Federal de Telecomunicaciones) and Mexico’s National Foreign Investments Commission. AT&T expects the transaction to close in the first quarter of 2015.

Separate from its acquisition of Iusacell, AT&T said its Project VIP network investment plan is ahead of schedule. AT&T has essentially completed the expansion of its 4G LTE network, which now covers more than 300 million people in the United States. It has completed the build-out of wired high-speed Internet service to 57 million U.S. customer locations. And the company has deployed fiber connections to 600,000 of its planned 1 million multi-tenant U.S. business locations.

AT&T’s VIP-related capital investment levels will peak in 2014, as the company has said previously. As a result, AT&T expects its 2015 capital expenditure budget for its existing businesses to be in the $18 billion range. This will bring the company’s capital spending as a percent of total revenues to the mid-teens level -- consistent with its historical capital spending levels.

AT&T’s 2015 capex guidance does not affect the company’s commitment, when it closes its acquisition of DIRECTV, to begin enhancing and expanding its U.S. broadband network to 15 million customer locations, primarily in rural areas.

AT&T will provide guidance on the pro-forma financial impacts of its DIRECTV and Iusacell acquisitions when those deals close. Upon completion of both deals, AT&T’s revenues will be more diversified across services and geographies.

AT&T will provide additional 2015 financial guidance in January when it announces its 4Q 2014 results.

AT&T Inc. (NYSE: T)

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DOShea
DOShea
11/9/2014 | 10:11:05 PM
AT&T buys Iusacell, see lower capex in 2015
The acquisition is intriguing, but not as intriguing as AT&T's supposedly separate decision to tighten up its capex next year. Why even try to act like it's separate if it's all in the same press release?
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