AT&T’s Motives for Mexico’s Wireless Market

In the earlier parts of the series, we discussed AT&T’s (T) recent acquisitions in Mexico’s wireless industry of Iusacell and Nextel Mexico. Both these companies are small compared to AT&T’s US wireless operations, and AT&T is the second-largest wireless player—by postpaid and prepaid customers—in the US. However, the US is a saturated wireless market in terms of customer growth potential, while Mexico’s wireless market has ample room for growth.

Mexico’s wireless market gives AT&T solid growth opportunities, particularly in mobile broadband. According to the OECD (Organization for Economic Cooperation and Development), mobile broadband penetration in Mexico was only at ~42.5% at the end of 2014. This figure was much lower than the average percentage of OECD countries, which was at ~81.3%. By comparison, the mobile broadband penetration for the US was at ~104% during the same period.

According to AT&T, Iusacell and Nextel are Mexico’s third- and fourth-largest wireless telecom companies, respectively. Iusacell has around 5 million subscribers, and Nextel Mexico has around 3 million. The largest player in Mexico’s wireless market is Telcel of America Movil (AMX). At the end of 2Q15, Telcel had ~72.6 million wireless customers in Mexico. Telefonica Mexico (TEF) has the second-largest wireless subscriber base in Mexico. Telefonica had ~23 million mobile subscribers and connections at the end of 2Q15.

You may take exposure on AT&T while diversifying risk by investing in the iShares MSCI USA Minimum Volatility ETF (USMV). The ETF held ~1.7% in AT&T as of July 31, 2015.