Mexican fixed-line minnows Axtel (BMV: AXTEL) and Alestra have agreed to merge in an all-stock deal.
Mexican fixed-line minnows Axtel (BMV: AXTEL) and Alestra have agreed to merge in an all-stock deal.
The long-mooted tie-up is being led by Alestra’s parent Alfa (BMV:ALFA), a diversified Mexican conglomerate, and will see Axtel issue new shares to Alfa, which will hold 51% of the combined group. Axtel’s shares rose more than 6% following the announcement of the deal.
In addition to generating EBITDA synergies from economies of scale and financial synergies from an improved capital structure, the companies hope teaming up will bolster their competitive position.
According to data from Mexican telecoms regulator IFT, the two companies together account for 8.9% of the country’s total fixed-line traffic. Axtel and Alestra said that, combined, they will have 37,500km of backbone, metropolitan and FTTH fibre optics network, and 6,000m2 of data centre space.
Their combined enterprise customers will generate Ps11bn (US$654m) in pro-forma annual revenues and consumer and other segments will provide a further Ps4bn (US$238m).
Closing is subject to the completion of due diligence, regulatory and corporate approvals and definitive contractual agreements. The companies hope to complete by the end of this year or early next year. Axtel was advised by Citigroup and Alfa did not hire any advisers.
Alestra’s CEO, Rolando Zubirán Shetler, will lead the merged entity, and the CFO will be Felipe Canales Tijerina, currently Axtel’s CFO.
Alfa CEO Alvaro Fernández Garza will become co-chairman alongside Axtel’s current CEO and chairman Milmo Santos.
Commenting on the transaction, Santos said: “Axtel’s shareholders will benefit from the evident synergies resulting from the combination of Axtel and Alestra’s operations, which is a key strategic action within the context of the post-reform telecommunications industry in Mexico.”
Regulatory changes in recent years designed to curtail the dominance of América Móvil are expected to lead to greater competition in the fixed-line market over time. Its Telmex unit currently accounts for 61% of the country’s total fixed-line traffic, according to the IFT, but the authority is trying to reduce that figure.
US telco AT&T has entered Mexico following the reforms, buying up and combining mobile operators Iusacell and Nextel. Over time it, or mobile rival Telefonica, may look to offer converged services as they do in other markets. In this scenario, Axtel-Alestra could become a target.
