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



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.

Article continues below advertisement

Growth opportunity in Mexico

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.

Mexico’s competitive landscape

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.


More From Market Realist