Nextel/Televisa Deal Cancelled in Mexico

Days after finally receiving their 1.7-GHz licence, Televisa and Nextel Mexico have terminated their agreement to jointly roll out and offer a 3G-based mobile service. Under the deal, Televisa was to have acquired a 30% stake in Nextel Mexico; collectively they planned to invest some 19 billion pesos (US$1.47 billion) over the next five years. In a statement, the two parties put the cancellation of the deal down to “differences in views on the regulatory and other risks associated with the investment", with Televisa adding that its priority is to “concentrate on opportunities directly related to its existing core businesses”.

Tim Perrot, investor relations manager at NII Holdings (owner of Nextel Mexico), was cited by Business News Americas as suggesting that the decision to end the agreement was not due to uncertainties about the proposed joint venture’s business plan. Furthermore, he said that the recent spate of lawsuits brought by Iusacell and its parent company, Grupo Salinas, would not prevent Nextel from exploiting its licence and rolling out its network. He would not comment on whether the lawsuits influenced Televisa’s decision not to proceed, adding that it had the finance in place to go it alone in Mexico. However, he did not dismiss the possibility of bringing a new investor into Nextel Mexico at some point (see Mexico: 5 October 2010: Iusacell to Challenge 1.7-GHz Licence Issuance to Nextel/Televisa; 17 August 2010: Mexican Regulator Announces Results of 1.7-GHz Mobile Spectrum Auction; and 16 February 2010: Grupo Televisa Buys 30% of Nextel Mexico for US$1.4 bil.).

Outlook and Implications

• No Great Surprise: Over the past few days there has been press speculation that the deal would not proceed; that it has not is therefore no great surprise. Despite Perrot’s comments, it appears likely that the moves by Iusacell and its parent to block the 1.7-GHz licence initially granted to Nextel/Televisa was behind the latter’s decision to terminate the agreement. As the sole bidder for the nationwide block of 30-MHz spectrum, Nextel/Televisa was awarded the licence proportionately much more cheaply than Claro and Movistar, both of whom won less spectrum in the 1.7-GHz auction. Televisa may feel that legal challenges would have stymied the consortium’s ability to roll out the network, would have imposed legal and other costs on Televisa, and delayed the period from when the venture would start generating revenues. However, Televisa has not entirely ruled out the possibility of a future deal with Nextel, presumably if and when it no longer faces legal challenges. Televisa or its subsidiaries could also enter the market as an MVNO.

• Nextel Determined: Nextel is unsurprisingly putting on a brave face. A deal with Televisa would potentially have given it privileged access to a range of content (see Mexico: 7 March 2010: Nextel Mexico Mulls More Alliances with Televisa). However, Nextel will be able to enter into other content agreements and decide on its handset strategy prior to launch. There remains a considerable risk to its 1.7-GHz licence, but it appears to have the finance to develop the new network. Nextel’s challenge will be to gain penetration of the high-end consumer market, a segment Televisa knows well.