Telefonica is looking at potential partnerships or acquisitions in Mexico to challenge the dominance of America Movil in the market, reports Bloomberg.
The news that Telefonica is looking to boost its presence comes ahead of a reform of Mexico’s telecoms industry to reduce the dominance of America Movil.
Sources said the Spanish operator group had discussions with operator Iusacell, which is part-owned by pay-TV provider Grupo Televisa, and cable provider Megacable. Telefonica is believed to be working with Banco Santander and Banco Bilbao Vizcaya Argentaria to explore potential options.
However, it is believed the owners of Televisa and Megacable are unwilling to relinquish control of their assets, making deals with these companies unlikely.
Telefonica’s Movistar, which is the second-largest operator in Mexico, said recently it has 19.1 million mobile connections in the country as of the end of the third quarter.
In contrast, America Movil’s Telcel is the dominant player with 72.5 million connections (as of the end of the third quarter), according to GSMA Intelligence estimates.
Iusacall, which is co-owned by Televisa and billionaire businessman Ricardo Salinas, had an estimated nine million connections, while Nextel was in fourth place with 3.7 million connections.
The reform of the Mexican telecoms market will see the creation of a new regulatory body, Ifetel, which is in charge of granting and revoking telecoms and media licences. The body will also have the power to classify any company with a market share greater than 50 per cent as being dominant, enabling it to force those companies to sell assets.
Telefonica first started to operate in Mexico in 2001. Its Q3 2013 revenue for the market was €373 million, down 6.4 per cent year on year. Its OIBDA margin for the period was 18.1 per cent, the lowest of any of its mobile businesses.
Telefonica is looking to strengthen its position in several markets, including Germany, where it agreed the purchase of E-Plus from KPN which, together with its O2 business, would make it the largest operator in the market. It also increased its indirect stake in Telecom Italia but sold assets in Ireland and the Czech Republic.