Telmex, BCI form company to focus on South America

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MEXICO CITY-Telefonos de Mexico and Bell Canada International announced they will form a new company with an initial capitalization of $3.5 billion to target the South American market.

Telmex and BCI will hold equal interests in the venture.

Telmex and BCI offered SBC Communications Inc. the right to purchase up to a 25-percent interest via contributions of assets and cash. SBC said it intends to participate in the new company.

“We believe this is a great opportunity to employ our Latin America assets more strategically and efficiently,” explained Jim Kahan, senior vice president of corporate development for SBC. “This new company will serve as a powerful platform for all three companies to expand further in this fast-growing region with a full array of broadband, wireless and Internet services.”

SBC will initially contribute its economic interest in the region to ATL, a Brazilian wireless company, and expects to hold a 12-percent initial economic interest in the venture, subject to final adjustments at the time of closing.

The companies said network development initially will be concentrated in Brazil, Colombia and Venezuela, followed by other markets.

The new enterprise will aim to capture the broadband, mobile wireless and Internet opportunities through deployment of competitive networks on both fixed and mobile platforms.

At the end of the first quarter, the new company served more than 2.5 million fixed and mobile customers in licensed territories representing a population of about 220 million. The companies said they have made available $1.8 billion in cash and cash commitments to complete and enhance existing South American businesses.

“Both partners firmly believe in the promise of the South American market and recognize the need for high-quality, advanced connectivity,” said Jaime Chico Pardo, chief executive officer of Telmex.

“The future of this company lies in the deployment of broadband infrastructure to support the spectacular growth of the Internet throughout the region.”

Each company will appoint three directors to the new company’s six-member board. The chairmanship of the board will rotate annually between Telmex and BCI.

The transaction is conditional upon certain regulatory and other consents. The companies said they expect the process to be completed within four months.

Telmex has 6.5 million wireless customers in Mexico and has said it plans to aggressively expand its operations in Latin America. The carrier recently purchased a 60-percent stake in Ecuador’s wireless carrier Conecel. It also has shown interest in purchasing a stake in Honduran state-owned telecom company Hondutel later this month.

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