Telefonica teams up with AT&T in Mexico

Spanish telecoms giant Telefonica has struck a deal to use some of US rivals AT&T’s infrastructure in Mexico, a move analysts said would better position both to compete with the market’s juggernaut, billionaire Carlos Slim’s America Movil.

Under the agreement announced on Thursday, Telefonica will use AT&T’s wireless ‘last-mile’ equipment – the final link of telecom networks that delivers service to consumers through towers, antennas and fiber-optic cables.

After a three-year transition period, Telefonica will see savings of 230 million euros ($254 million) per year, as well as a reduction in net debt of 500 million euros. Financial terms of the deal with AT&T were not disclosed.

Analysts framed the deal as a lifeline for Telefonica in Mexico, where the company has long struggled to gain traction. Despite a 2013-14 reform intended to lessen its dominance, America Movil still holds nearly two-thirds of mobile lines in Mexico, according to data from telecoms regulator IFT.

AT&T, too, has failed to significantly dent America Movil’s market share since it spent billions to enter the country in 2015 by buying two local carriers.

The agreement will give both Telefonica and AT&T a boost in a brutally competitive market, said Roger Entner, an analyst at Recon Analytics.

“It’s the two upstarts going up against the big guy,” Entner said. “You need to find all the friends that you can when someone has such a dominant position.” (RTRS)