Latin American mobile provider NII Holdings, which operates as Nextel, has signed wholesale agreements with Telefonica that will grant its Mexican and Brazilian customers access to nationwide 3G voice and data services.
Both companies are keen to bring the agreements into effect as soon as possible. The two firms will handle spectrum and infrastructure independently in both markets in order to offer competing services. This is particularly significant in Brazil, where Telefonica has come under fire for its dominance of the mobile market.
NII and Telefonica have stated that the deal “demonstrates the commitment of both operators to create a dynamic competitive environment and is a natural step forward in the networks optimisation process”.
Telefonica’s Brazilian unit Vivo will now be able to achieve a smoother network rollout while extending coverage for Nextel’s customers. Vivo leads the mobile market with 76.6 million connections, while Nextel currently has just 3.9 million, trailing the rest of the ‘big four’: TIM (72.9 million), Claro (67.4 million) and Oi (50 million).
Nextel has also had difficulty gaining ground in Mexico, with only 3.6 million connections. While the market is overwhelmingly dominated by America Movil’s Telcel, which has 72.4 million subscribers, Nextel is still significantly behind Telefonica’s Movistar (19. 1 million) and lusacell (8.7 million).
“The agreement allows both companies to capture the benefits derived from the optimisation of infrastructure investment while maintaining the current market structure in both Brazil and Mexico,” said Santiago Fernández Valbuena, CEO of Telefonica Latin America.
Telefonica and Nextel’s arrangement is similar to other deals struck by Telefonica recently in the region. The operator has MVNO deals in place with Virgin Mobile covering Chile, Colombia and Mexico, and also has an arrangement with Millicom allowing it to deploy LTE networks in Colombia. In addition, Telefonica and Iusacell have a reciprocal wholesale arrangement in Mexico.
Macquarie Securities analyst Kevin Smithen notes that the deal could indicate that NII is angling for a Telefonica buyout. “The deal is also likely to make Telefonica a major creditor to NII Holdings going forward. This could mean that a Telefonica purchase is the end game for NII Holdings, even in the case of a restructuring.”
