UPDATE 6-Mexico's Televisa, Nextel break up partnership

* Televisa wanted a 30 pct stake in Nextel

* Companies pondered risks of moving ahead with deal

* Televisa still eyeing mobile market in Mexico (Adds comments from Televisa source, updates stock quotes)

By Cyntia Barrera Diaz

MEXICO CITY, Oct 18 (Reuters) - 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, while Televisa gained more than 1 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 (TLVACPO.MX)(TV.N) 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 reviewing 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 is the main content provider for U.S. Spanish-language broadcaster Univision UVN.UL, where it recently announced a $1.2 billion investment.

A Televisa source acknowledged that the companies were discouraged by a round of recent legal challenges from rivals against the auction where it and Nextel won spectrum.

Televisa and Nextel received the spectrum license earlier this month as rivals complained the price they paid for it was too low. The government says the auction was fair.

On Thursday, a Mexican judge granted an injunction to mobile phone operator Iusacell, blocking Nextel and Televisa from using the spectrum.

"Televisa considered it was not a prudent investment," said the source, who requested not to be named as it was not authorized to talk to the media.

Because the two companies mutually agreed on the split, neither is paying a break-up fee.

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

The U.S. company said it and Televisa had agreed to discuss entering into commercial agreements.

"We remain interested in the opportunity (of the mobile market) but we will keep our options open that may, or may not include a deal with Nextel," the Televisa source added.

Analyst Gray Powell of Wells Fargo said in a report that while the news is negative, investors had expected the plan to fall flat.

MOVING AHEAD

Despite the breakup, 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 provide the funds needed for Nextel's expansion plans in Mexico.

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 1.66 percent at $37.40 on Nasdaq, while Televisa rose 1.52 percent to 55.50 pesos in Mexico. (Additional reporting by Patrick Rucker, editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman and Gunna Dickson)