What: Grupo Televisa SAB has agreed to sell its 50 percent stake in Grupo Iusacell SA to Grupo Salinas, owned by Ricardo Salinas, for US $717 million.Salinas will own 100 percent of Iusacell and is looking for a “world-class strategic partner” to strengthen the company, which has struggled to compete in Mexico.
Why it matters: More competition is needed for an efficiently functioning Mexican Telecommunications sector. More competition should also increase the incentive to market and advertise telecommunication services. Earlier this year, President Enrique Pena Nieto signed a telecommunications law that promotes competition and reinforces oversight of the telecommunications industry.
Grupo Televisa SAB has agreed to sell its 50 percent stake in Grupo Iusacell SA to Ricardo Salinas for US $717 million. The mobile-phone company had struggled to compete in Mexico. The price is 55% lower than what Televisa paid for the same percentage of shares in 2011.
Following this deal, Salinas will own 100 percent of Iusacell, according to a company’s statement . The billionaire is looking for a “world-class strategic partner” to strengthen the company, he said.Televisa, which had already written down parts of its investment in Iusacell, will book a US $320 million loss on the sale. Adrian Steckel will remain chief executive officer of Mexico City-based Iusacell
Iusacell is the third-largest operator in the country, trailing billionaire Carlos Slim’s America Movil SAB and Telefonica SA, with about 8 percent of Mexico’s mobile market.
“There’s considerable interest by international operators to come to Mexico, and we’re speaking to them to reach an agreement. The new partner needs to have “high technical capacity, to be an international player, and have the financial capacity to face the demand there is in this market, ” Luis Nino, a spokesman for Salinas, said in a phone interview.
In 2011, Televisa agreed to pay US $1.6 billion for a 50 percent stake in Iusacell, a deal which took a year to gain regulatory approval before it could close. Salinas, with a US $9.3 billion fortune, also controls the second-largest broadcaster in Mexico TV Azteca SAB with about 30 percent of the market, compared with Televisa’s 70 percent.
Struggling to gain ground
In 2013, Televisa invested US $123 million in Iusacell while waiting for the outcome of the new telecommunications law before deciding whether to invest further in Iusacell. However, In 2012, Televisa referred to Lusacell as its best way to participate in the rapid growth of Mexico’s wireless business.
Earlier this year, President Enrique Pena Nieto signed a telecommunications law that promotes competition and reinforces oversight of the telecommunications industry.According to Salinas, the new law, which forces Slim’s America Movil to cut its fees and share infrastructure with its competitors, gives Iusacell “certainty and confidence to keep growing.”
Salinas denied that he would sell his Iusacell stake to Madrid-based Telefonica. Still, Iusacell and Telefonica will soon face intensified competition, as America Movil aims to sell assets to a company that doesn’t currently operate in Mexico, part of a strategy to cut its share to below 50 percent to comply with the new regulations. Potential buyers include AT&T Inc. and SoftBank Corp., people familiar with the matter said earlier this month.
“This new regulatory environment is forcing everyone in the telecommunications sector to make strategic decisions, choose where to put their money and what part of the industry they will bet on,” said Nino, Salinas’s spokesman.
Source: Bloomberg
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