Spanish telco Telefonica has agreed to buy Protel, Motorola’s Mexican mobile operator.
Spanish incumbent telco Telefonica has signed a ‘memorandum of understanding’ with Motorola to buy its wireless operations in Mexico for $2.6 billion. This is good value considering the enormous potential of the Mexican mobile market. Protel owns operators in northern Mexico and around Cancun, but not in greater Mexico City, home to 18 million people. So Telefonica will not have to compete with Telcel, the mobile arm of the incumbent telco Temex, in the country’s capital.
The deal fills a gap in Telefonica’s Latin American strategy – Telefonica is already a dominant player in Latin America’s telecommunications market, with a presence in Argentina, Brazil, Chile and Peru. Telefonica’s only investments in Mexico so far have involved its Internet unit, Terra Networks, and its recently acquired data-transmission company Optel.
Mexico’s mobile phone penetration is only around 10% percent. The country has a population of 100 million, so this represents a huge potential customer base. Additionally, President-elect Vicente Fox plans to further deregulate the country’s telecommunications market. This can only be good news for foreign operators.
The deal will also enable Telefonica to promote WAP services with Terra Networks, which entered Mexico last year when it bought the country’s leading Internet portal, Infosel. WAP is popular in Latin America, with Internet portals offering applicable services in a market with low PC penetration.
The timing of the deal is also good for Telefonica. Its wireless unit, Telefonica Moviles, is expected to go public in Spain on November 22. The Motorola deal will add substantial value. The Mexican acquisitions would add a million new clients to Telefonica Moviles, raising the company’s worldwide client base by approximately 5%. Overall, the purchase is an excellent move for the Spanish operator.
