• Billionaire's participation would counter AT&T's Mexico moves
  • Spectrum is coveted for far distance, wall-pentrating signals

A year ago AT&T Inc. made a surprise entry in Mexico, the backyard of its longtime ally Carlos Slim. The billionaire now has an opportunity to expand on AT&T’s turf.

The U.S. is about to auction off airwaves surrendered by television stations, prized by wireless carriers because they go far and penetrate walls and windows. Sprint Corp. has already bowed out of the bidding over debt concerns, while Verizon Communications Inc. is expected to limit its participation. That leaves a prime opening for Slim -- who already controls the largest prepaid mobile phone service provider in the U.S., Tracfone -- to enlarge his telecom empire and counter AT&T’s aggressive push south of the border.

Slim may either buy spectrum for future resale or as part of a strategic plan to acquire a wireless network, since Tracfone only leases capacity on other carriers’ networks and resells services under its own brand. The timing couldn’t be better, as North America is evolving into one big wireless calling area. America Movil SAB, AT&T, T-Mobile US Inc. and Telefonica Mexico have all ended cross-border roaming, which makes a bid by Slim’s America Movil for U.S. airwaves “very logical,” said Roger Entner, an analyst with Recon Analytics LLC.

“It would be a very interesting opening gambit from Carlos Slim,” Entner said. “He has the money. He has the experience. He knows the market.”

An America Movil press official declined to comment on the company’s plan in the U.S.

Slim has been looking to expand outside of Mexico, where he’s struggling to maintain growth. Last year, President Enrique Pena Nieto signed laws that forced America Movil to reduce market share in the country below 50 percent or face antitrust penalties. The company initially decided to break up some Mexican assets but then reversed course because of AT&T’s moves in Latin America. The Dallas-based carrier bought two competing businesses in Mexico -- NII Holdings Inc.’s Nextel Mexico business and Grupo Iusacell SA. AT&T also sold holdings in America Movil after a 24-year relationship to avoid a conflict of interest with another new acquisition, DirecTV, which competes with America Movil for pay-TV customers across Latin America.

‘Dark Horses’

While the deadline for potential bidders in the U.S. auction is still three months away, Sprint’s decision to skip it and Verizon’s lack of interest have prompted speculation about who might jump in.

The auction, given the valuable low-frequency spectrum at stake, may attract companies from all corners of the communications sector. T-Mobile Chief Executive Officer John Legere said during the company’s earnings call this week that he expects “dark horses” to show up and bid, which would provide “clarity” for changes in the wireless industry’s structure.

“If the world believes that as all content will find its way to the Internet and all Internet will be viewed mobilely, if we really believe that structure will be managed by four wireless carriers vertically integrating and reverse and horizontally moving into rest of these industries, it’s crazy,” Legere said.

Roaming Plans

Bidders have until Jan. 28, 2016 to file an application with the U.S. Federal Communications Commission to participate in the auction, which is slated to begin two months later. If America Movil elects to bid, the Mexico City-based company would still need to acquire a wireless carrier or build a network from scratch, which could prove expensive.

Dish Network Corp. is in the same situation: The satellite-TV provider has been stockpiling spectrum licenses yet has no network. The company has been in talks to buy T-Mobile from Deutsche Telekom AG, though discussions have stalled over concerns related to valuation and structure, people with knowledge of the matter said in July.

“The prices of the available U.S. carriers are too high,” said Walt Piecyk, an analyst at BTIG LLC. “If you are buying spectrum first, you are signaling an intent that you have further plans in the U.S.,” which would drive up the price of any possible acquisition target, he said.

One of the reasons carriers introduced the new roaming plans was to give customers a less expensive way to communicate between the U.S. and Mexico. America Movil currently offers a plan that lets its postpaid Telcel subscribers in Mexico call the U.S. without incurring roaming charges for an additional 50 pesos ($3) a month.

“As the demographics of the U.S. change and as Hispanics grow as a percent of the U.S. population, that becomes a pretty compelling business model to pursue,” said John Butler, a telecommunications analyst for Bloomberg Intelligence. “You could see where strategically it might make sense for them,” he said of America Movil’s possible participation in the U.S. airwaves auction.

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