Mexico’s Televisa, Nextel break up partnership

By Cyntia Barrera Diaz

MEXICO CITY (BestGrowthStock) – Broadcaster Televisa and NII Holdings Inc’s Nextel unit have parted ways, ending a short-lived venture aimed at tapping the wireless phone market in Mexico, the companies said on Monday.

NII Holdings shares edged lower in morning trading, while Televisa gained close to 2 percent.

The companies had agreed in February to join forces to buy a chunk of spectrum in a government auction and then deploy Nextel’s 3G, or third-generation, network that would allow them to better compete against tycoon Carlos Slim’s America Movil (AMX.N: ) (AMXL.MX: ), the market leader.

Televisa had said it would invest $1.44 billion for a 30 percent stake in Nextel, plus an option to purchase an additional 7.5 percent.

Gustavo Cantu, Nextel’s vice president, told Reuters that after making a thorough revision of the implications of their joint business, both companies decided to go separate ways.

“Televisa is a very diversified company and they perceived other kind of risks … regulatory risks that would reflect on its other businesses,” Cantu said.

Televisa has broadcast, cable, satellite, publishing, and gaming businesses and it is the main content provider for U.S. Spanish-language broadcaster Univision (UVN.UL: ), where it recently announced a $1.2 billion investment.

The Mexican broadcaster was not available for comment.

Since the two companies agreed on the split, neither is paying a break-up fee, Cantu said.

NII Holdings and Nextel will continue to work on deploying a third-generation network across Mexico, with the first phase of the commercial launch expected to occur in the next 12 to 18 months.

Reports on Thursday that Televisa (TLVACPO.MX: )(TV.N: ) would pull out from the venture with Nextel sent NII Holdings (NIHD.O: ) shares tumbling more than 12 percent in the U.S. market.

NII Holdings said it and Televisa had agreed to discuss entering into commercial agreements. Televisa made no mention of this.

Cantu could not elaborate on the possible commercial deals or when they could be signed. Nextel purchased some $14 million in advertisement with Televisa for this year and that commitment remains intact, he said.

“While the news is negative — most investors with whom we have spoken had assumed that the equity component was off the table and were hoping for some commercial agreement,” Wells Fargo analyst Gray Powell said in a report.

MOVING AHEAD

Despite the breakup and the initial plunge in NII Holdings stock last week, the news may not be that bad for either company, analysts have said.

Televisa could still offer mobile phone services using a model similar to that of cable television company Megacable (MEGACPO.MX: ), which in August signed a deal to use Spanish telecom Telefonica’s (TEF.MC: ) network to offer cellphone service.

The Mexican broadcaster could also sell content to Nextel, promoting that company’s mobile phone services with its cable companies and satellite television unit SKY.

NII Holdings has about $2 billion in cash that could provide most of the funds needed for Nextel’s expansion plans in Mexico.

“We are in a strong financial position with the funding necessary to carry out our deployment plans” in Mexico, NII Holdings’ Chief Financial Officer Gokul Hemmady said in the release on Monday.

Some analysts have even suggested that not selling a minority stake in Nextel to Televisa would ultimately be much better for NII Holdings.

Market watchers still believe NII Holdings could decide to put itself up for sale once it completes and consolidates its 3G operations across Latin America. The company has units in Mexico, Brazil, Argentina, Peru and Chile.

U.S.-traded shares of NII Holdings were down 0.92 percent at $37.68 on Nasdaq, while Televisa rose 1.74 percent to 55.62 pesos in Mexico.

(Additional reporting by Patrick Rucker, editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman)

Mexico’s Televisa, Nextel break up partnership