Telefonica is reportedly in talks to combine Iusacell, Mexico’s third-largest mobile operator, with its own operations as it looks to take the fight to America Movil.
The Spanish-based operator group already has a presence in Mexico under the Movistar brand, which had 19.2 million connections at the end of the fourth quarter of 2013 according to GSMA Intelligence figures.
The addition of Iusacell’s 9.2 million connections would give the combined operator 28.4 million connections, still some way short of America Movil’s Telcel, which had an estimated 73.2 connections.
Iusacell and Telefonica already share networks to cut infrastructure costs and help them compete more effectively against America Movil.
Despite America Movil’s leadership in the market, the fact that a merged Movistar and Iusacell would control almost all of the remaining market means it could draw regulatory scrutiny.
In addition, the decision about whether to go ahead with a merger will be affected by a forthcoming bill from Mexican legislators aimed at boosting competition in the country’s telecommunications industry.
America Movil revealed in December that Mexico’s new comms regulator, the Federal Telecommunications Institute (IFT), was to investigate the company’s market dominance, as part of the government’s plans to reform the country’s telecoms sector.
America Movil has previously said it expects to be declared dominant by the regulator.
The IFT has until 9 March to determine which players are dominant in the telecoms and TV markets and apply measures to make them more competitive.
Possible remedies could include regulating America Movil more heavily than its rivals, for instance by charging it higher termination rates or forcing it to unbundle its network. A forced sale of assets is even possible.