Two of Mexico’s fixed-line telecoms operators on Thursday detailed a merger agreement that will enable them to compete more effectively in the market.
Conglomerate Alfa has inked a deal that will see it combine its Alestra business services operator with fixed-line telco Axtel.
Axtel will remain as an operating and publicly-traded holding company, Alfa said. It will issue new shares to be held by Alfa, giving it around 51% ownership of the combined company.
The value of the deal was not disclosed.
Together the two operators generate annual revenues of 11 billion pesos (€584 million) from enterprise customers and MXN4 billion from the consumer market. They have 37,500 km of backbone, metro and fibre network infrastructure and 6,000 square metres of data centre space.
However, the pair have a long way to go before they will be able to seriously challenge dominant player Telmex, owned by America Movil.
According to the latest data from regulator IFT, America Movil had a 62.5% share of Mexico’s 20.9 million fixed lines at the end of the first quarter of 2015, while Axtel’s market share came in at just 3.9% and Alestra formed part of the ‘others’ category that made up 1.4% of the market. As such, the m erged entity will remain more than ten times smaller than the incumbent.
"The merger between Alestra and Axtel enhances their competitive advantages and positions the company to continue to meet the growing demands of the Mexican telecom and IT markets," said Alfa president Alvaro Fernandez Garza, in a statement.
He will become co-chairman of the board of the new entity, alongside Axtel chairman and CEO Tomas Milmo Santos.
Rolando Zubiran, who currently serves as chief executive of Alestra, will take on the role of CEO of the merged entity, while Axtel CFO Felipe Canales will become finance chief.
The deal is subject to various closing conditions, including regulatory approvals. The firms expect it to close by the end of this year or in early 2016.
