Vodafone enters Mexican market

The Iusacell purchase is Vodafone's first foray into Latin America

The UK mobile phone giant Vodafone has confirmed that it is to enter the fast-growing Latin American market.

The company will pay $973.4m for a 34.5% stake in Mexico's number two mobile phone network operator Iusacell from a group of its shareholders led by Grupo Peralta.

The deal will make Vodafone Iusacell's second largest shareholder behind the UK firm's partner in the US, Verizon Communications, which has 37%.

Analysts had previously speculated that Iusacell might be swallowed by Spain's Telefonica which already has a substantial presence in the region and last October bought five small Mexican mobile phone companies from the US firm Motorola.

Vodafone Americas Asia president William Keever said: "We believe that Iusacell is one of the most advanced and best managed wireless operators in Mexico, and that the company will see strong growth over the next several years as it benefits from the global trend towards increasing wireless penetration and usage.

Users double in a year

Iusacell provides mobile phone services in central Mexico over an area including Mexico City and Guadalajara that covers 69% of the country's population.

As of June, Iusacell had about 1.5 million subscribers.

"With only 2.2% company subscriber penetration in its four cellular regions, Iusacell represents an extraordinary growth opportunity for Vodafone," Mr Keever said.

Analysts said Mexico had about 11 million mobile phone users by the end of 2000, double the level of a year previously.

Industry sources expect the country will have another 24 million users within five years.

The Vodafone transaction is subject to regulatory approval by the Mexican Federal Competition Commission and the signing of a shareholder agreement between Vodafone and Verizon.

Other purchases

In recent months, Vodafone has bought stakes in Irish and Japanese mobile phone operators.

It is also thought to be eyeing Optus, the Australian operator being sold by Cable & Wireless.

Last week, Vodafone said it had added 13.2 million customers worldwide in the last quarter of 2000, taking its total customer base to 78.7 million.

Vodafone's expansion comes at a time when many mobile phone operators are concentrating on reducing huge debts built up acquiring third-generation mobile phone licences in Europe.

Last week, British Telecommunications said it was selling off its property portfolio in an attempt to release funds for debt repayments.

Hutchison bond sends shares lower

Also on Monday, Hong Kong-based Hutchison Whampoa said it was issuing a $2.5bn bond convertible into Vodafone shares as a means of reducing its stake in the operator.

Hutchison had gained 5.2% of Vodafone when the UK firm acquired German rival Mannesmann, in which Hutchison had a stake.

The Hong Kong-based firm currently holds 3.47% of Vodafone. If two convertible bond issues - both Monday's and one launched last September - are fully taken up, Hutchison's stake will fall to about 1.73%.

News of the bond issue sent Vodafone shares lower in morning trading.

At 1220 GMT, the issue stood at 231.5 pence, down 10.75p or 4.4%.