Global telecom markets are split into two, the developed markets of North America, Europe and parts of Asia and the developing markets, these being South America, Africa and other parts of Asia. The term "developing" is no reflection of the country or region in question but a reflection of the 'phone penetration. Successful carriers in developed markets are looking to buy up businesses in developing markets in order to keep growing their subscriber base and ultimately drive profits. Today, we're looking at the story that Japanese carrier SoftBank is looking to buy Mexican's third largest carrier, Grupo lusacell in order to take advantage of growth opportunities in Latin America. Luscacell currently has around 8% of the Mexican mobile market and owner, Ricardo Salinas, announced earlier in September that he would soon announce a new "world-class strategic partner" for the operator. It would appear that talks have been ongoing for some time. Mexico is currently in the process of adopting new laws to open up the telecommunications market, especially to overseas companies, encourage competition and reinforces oversight and regulation. We've recently covered some of the possible deals that may be taking shape and this deal is a part of it.
SoftBank are a large Japanese telecommunications and Internet business and the owners of Sprint, the third largest North American carrier. The business was formed in the early 1980s and is notable for having the iPhone exclusive in Japan until the 2011 iPhone 4S. We know that SoftBank have been in discussion with T-Mobile USA with a plan to combine Sprint and T-Mobile in order to better compete with the two larger US carriers, Verizon and AT&T. Unfortunately, the merger never happened because of growing opposition from North American regulators. We know that SoftBank have around $4 billion to use as a warchest for potential acquisitions and for the sake of investors, needs to find a home for this cash. Softbank have also been linked with Vodafone and are an aggressive business with global ambition. A tie up with Latin America would give the Japanese giant exposure to this valuable developing market.
It seems logical enough for a carrier in a developed and saturated mobile market to eye up a business in a less saturated market and it makes perfect sense for Softbank to go for luscacell, especially given the shake up in the Mexican market. Grupo lusacell's position as the number three Mexican carrier means that there's plenty of growth opportunity too.