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Mexico's Smaller Mobile Networks in Merger Talks

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Telefonica is reportedly in talks to merge with rival network Grupo Iusacell in order to form a viable challenger to America Movil.

America Movil controls around 70% of the Mexican mobile market, and although the government is pushing through reforms to curb its market power, their effect could still take years to show effect, if at all.

America Movil should see its market share cut from 70% to below 50% by 2018 following the passing of a telecoms reform bill, Javier Lozano, head of the Senate's transport and communications committee recently predicted.

The smaller networks may also benefit from a radio spectrum auction which is expected to take place once the government reclaims block of expiring 2.5Ghz spectrum.

However, a merger between Telefonica and Iusacell would then give them most of the rest of the market, effectively creating a duopoly in the country.

Citing unnamed sources, Bloomberg News reported that the two companies have held talks but are still debating the final structure of the merged company. Rumours of a possible deal between the two companies first started to emerge last November.

Iusacell is estimated to be worth around USD3.2 billion, compared to estimates for Telefonica's Mexican subsidiary of USD6.4 billion.

Any merger is expected to be delayed until the Mexican government signs into law the long delayed reforms of the telecoms market, as they could also affect the two smaller companies attempt to join forces.

The two networks already share some of their network infrastructure, which may also reduce any potential cost savings they might hope to achieve post-merger.

On the web: Bloomberg News

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Tags: iusacell  telefonica  Mexico