Alfa to buy Axtel in new Mexico telecoms consolidation

Mexican industrial conglomerate Alfa said on Thursday it would buy a majority stake in telecoms company Axtel in order to better rival Carlos Slim's America Movil, which dominates Mexico's fixed-line phone market.

Alfa, which is merging Axtel with its Alestra unit, will own 51 percent of the new company once new shares are issued. Axtel will remain traded on Mexico's stock exchange, the two firms said in a joint statement.

The statement did not include financial terms for the deal.

Together, Alestra and Axtel will have a fixed-line market share of less than 6 percent, according to regulator statistics, a tenth of the dominant player Slim's America Movil.

Thomson Reuters data shows Axtel has a market capitalization of US$590 million and debt of some US$544 million, according to its most recent results.

Alestra reported sales of US$97 million for the second quarter of this year, while Axtel had revenue of some US$150 million.

The new firm is expected to have sales in the order of 14 billion pesos to 14.5 billion pesos (US$828.4 million to US$858 million) a year, Alfa's development director Alejandro Elizondo told Reuters, adding that he expected the companies to be fully integrated within two years.

An Axtel spokesman did not immediately respond to a request for comment.

The merger follows a sweeping reform to Mexico's telecoms sector to spur competition and curb the power of multi-billionaire Slim, whose America Movil has some 70 percent of Mexico's mobile market and over 60 percent of fixed business.

The telecoms reform has raised pressure on smaller players to merge, and the Axtel purchase follows the acquisition by U.S. giant AT&T Inc of Mexico's third- and fourth-largest carriers Iusacell and Nextel over the past year.

Alfa's Chairman Álvaro Fernández Garza and Axtel's Chairman Tomas Milmo Santos will be co-presidents of the combined firm and will make decisions by mutual agreement. Alestra chairman and CEO Rolando Zubiran Shetler will be named chief executive of the combined entity once the transaction is completed.