AT&T share price down, to acquire NII Holdings’ wireless business

AT&T announced on Monday it had agreed to acquire bankrupt NII Holdings Nextel in a $1.88 billion deal as the second-largest US mobile-phone operator pushes further into the Mexican market.

Under the deal AT&T will obtain all of NIIs properties in Mexico, including spectrum licenses, network assets and retail stores, AT&T said in statement. However, the prices does not include a non-disclosed amount of debt from NII.

Last September NII filed for bankruptcy protection in the US after the company could not cope with its $5.8 billion debt amid increased competition in both Mexico and Brazil. If the deal get approved by the US Bankruptcy Court, NII intends to utilize the proceeds in order to breathe life into its Brazilian operations.

“The sale of Nextel Mexico represents an opportunity to reduce our operational risk, deliver value to our stakeholders and provide the liquidity that will position us to emerge from Chapter 11 reorganization,” NII Chief Executive Officer Steve Shindler said in a statement.

Meanwhile, AT&T plans to combine Nextel Mexico with Iusacell, which the Dallas-based company acquired in a $2.5 billion deal last year, in order to more quickly improve and expand its services outside of major metropolitan areas.

The move to merge Nextel Mexicos network, which covers around 76 million people, and its 3 million subscribers with Iusacell, Mexicos third-largest wireless operator, and its 8 million users is aimed at bringing greater competition to the countrys two-player telecom market.

America Movil, owned by business magnate Carlos Slim Helú, dominates the market with around 70% share, followed by Telefonicas 20%.

However, due to anti-monopoly laws, Mr. Slim has put some of America Movils assets for sale and although AT&T has been linked as a possible buyer the company has not confirmed its interest.

The transaction, which is subject to regulatory approval by Mexico’s telecom regulator, is expected to close by mid-2015. AT&T is also waiting for the wachtdogs support on its $48.5-billion takeover deal with DirecTV, which marked AT&T first effort to enter Mexico via DirecTVs operations in the country.

AT&T Inc lost 1.24% on Friday and closed at $33.37 in New York. On Monday the stock lost 0.67% to $33.15 at 15:40 GMT, marking a one-year decrease of 0.87%. The company is valued at $173.09 billion.

According to the Financial Times, the 25 analysts offering 12-month price targets for AT&T have a median target of $34.00, with a high estimate of $40.00 and a low estimate of $25.00. The median estimate represents a 1.89% increase from the last close price.