From the perspective of the two companies involved, it appears to be a win-win scenario.
FOR IUSACELL
Iusacell has never been able to get into second gear in the mobile telecoms market, and for years has wallowed with a 4-5% market share and a far third in a three-player race. In recent months, its strategy has been not so much to try to innovate and go forward, but rather to prevent others from doing so, via the courts.
The company did its darnedest to prevent authorities from handing over mobile spectrum won by a consortium of Nextel and Televisa late last year. While license was finally handed over, the hassle caused by Iusacell seemed to be a contributing factor to the consortium falling apart shortly after.
It is ironic then that several months later that Televisa, the very company that Iusacell spent so much time and effort to frustrate from getting into the mobile market, has done just that by becoming a joint owner of Iusacell.
The benefits for Iusacell are as clear as day. Putting in order the operator’s financial situation is a priority. Despite being owned by one of Mexico’s richest men, Ricardo Salinas Pliego, Iusacell has battled with debt problems for years. And it is not surprising that of the US$1.6bn that Televisa will invest, US$1.57bn will be for taking on Iusacell’s converti ble debt.
Iusacell gains a sponsor with deep pockets to invest in introducing new products, expanding the GSM overlay of the operator’s mainly CDMA network, and getting back into the market all through a partner with an extensive distribution network and a range of other products to package together.
FOR TELEVISA
Besides being one of the largest Spanish-language broadcasters, Televisa has been building itself up in the telecoms and cable TV market for a number of years. The company most recently bought up the 41.7% of shares in cable TV operator Cablemás that it did not already own for 4.7bn pesos (US$397mn).
The company also has other cable and satellite assets and is part of a consortium that includes Telefónica and Megacable and that won a concession to operate dark fiber last year.
Mobile was the part of the puzzle that it had lacked. The alliance with Nextel did not work out, but the Iusacell option looks much better. Iusacell is an established operator in the market with a surplus of unused spectrum. It has a niche clientele and an advanced 3G network with value-added services. All of this at least puts Televisa on the first rung of a very long ladder. Mexico’s mobile telecoms sector is dominated by Telcel with 70% of the market and Movistar with 23%.
Televisa will also bring slick new management to the operator.
And most importantly, mobile gives Televisa the opportunity to offer what nobody is offering at the moment in Mexico: quad play. Telmex is still prevented from offering television. Televisa has the potential to offer a very attractive package of internet, pay and open TV, and fixed and mobile telephony, and wrap around all that its exten sive content network, which at the end of the day is where telecoms’ future lies.
REGULATION AND NEW STRATEGIES
Analysts envisage few regulatory obstacles to the deal if it goes ahead. This is Televisa’s first mobile asset, so it would not cause competition problems on that front. Ironically, in getting into bed with Salinas Pliego, Televisa is getting very close to its main rival in the TV stakes, TV Azteca, which Salinas Pliego also owns.
However, in the light of Televisa’s above mentioned ability to offer quadruple play, sector watchdog Cofetel is likely going to have to take a fresh look at the competitive scenario rather quickly.
Telmex (NYSE: TMX) cannot be kept out of the TV market forever, and now with a seemingly new telecoms superpower in the making, the argument that Telmex would dominate if allowed to compete in that space perhaps no longer holds any water.
And regulation would have to be across the board to ensure a level playing field for all.
Operators like Telcel and Movistar are likely going to rethink their strategies and prepare to battle with a new type of beast, the first one that can truly offer a modern, fully convergent, integrated telecoms and media service.
Business News Americas