Mexico's largest television broadcaster Grupo Televisa, SAB (TV) will buy a 50 percent stake in Mexican mobile operator Grupo Iusacell S.A. de C.V. for $1.6 billion, the Wall Street Journal reported Wednesday, citing a person close to the planned transaction. The deal is part of Televisa's efforts to enter the lucrative Mexican wireless market, which is dominated by billionaire Carlos Slim's companies.
Televisa, which is controlled by media entrepreneur Emilio Azcarraga, runs broadcast channels, provides satellite TV service as well as TV, Internet and phone service or "triple play" through its cable businesses.
Iusacell, the smallest of Mexico's four mobile operators, holds 5 percent of the Mexican cellphone market with about four million subscribers. Iusacell is owned by Ricardo Salinas Pliego, who also controls TV Azteca SAB, Mexico's second-largest broadcaster.
Televisa reportedly views the planned deal with Iusacell as important for the company to enter the mobile market, especially the mobile-data market, and open up a strong revenue stream.
The WSJ reported that the deal marks a bitter battle between Mexico's two largest broadcasters and Carlos Slim. Slim's companies, America Movil SAB and Teléfonos de México SAB, have about 70 percent of Mexico's mobile subscribers and about 80 percent of its fixed telephone lines.
The TV companies are reportedly demanding lower interconnection rates from Slim's Mexican mobile-phone company, Telcel. The companies have said that Telcel's high interconnection rates make it impossible for other businesses to compete with his companies.
Slim's companies, in turn, have accused Televisa, TV Azteca and other cable companies of manipulating Mexico's television market and advertising rates. Televisa and TV Azteca have stopped running advertisements for companies controlled by Slim this year.
Though Slim wants to expand into television in Mexico, his companies have been barred by federal regulators in Mexico from offering TV broadcast service due to concerns about competition. Meanwhile, Mexican cable-TV operators are bundling TV, broadband-Internet and phone services into lucrative "triple play" packages.
The planned alliance with Iusacell marks Televisa's second attempt to enter the mobile-phone market. In October 2010, Televisa scrapped its plan to pay about $1.44 billion for a 30 percent stake in Nextel Mexico, the local unit of NII Holdings Inc. The move came after Iusacell filed lawsuits challenging the validity of an auction in which Nextel and Televisa won a 30-megahertz block of wireless spectrum.
However, the new wireless initiative of Televisa may also face legal hurdles as Televisa and TV Azteca will control almost 100 percent of the Mexican TV broadcasting market together.
TV closed Wednesday's regular trading session at $24.06, down $0.65 or 2.63 percent on a volume of 4.23 million shares.
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