Spain's Telefonica says eyeing deal in Mexico

MADRID Wed Jul 30, 2014 5:11am EDT

People are reflected as they walk past Spanish telecom group Telefonica's flagship store in central Madrid November 8, 2013.   REUTERS/Sergio Perez

People are reflected as they walk past Spanish telecom group Telefonica's flagship store in central Madrid November 8, 2013.

Credit: Reuters/Sergio Perez

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MADRID (Reuters) - Spain's Telefonica (TEF.MC) is in talks over a possible deal in Mexico, where it has been eyeing acquisitions for months to strengthen its position against former monopoly America Movil AMX.MX, the telecoms group said on Wednesday.

The Spanish firm said it had not reached any agreement. Sources close to the group said any deal was not likely to be imminent.

Earlier on Wednesday website El Confidencial, citing unnamed sources close to the talks, had reported Telefonica was close to acquiring Mexico's third largest wireless telecoms company Iusacell, worth up to 3 billion euros ($4 billion).

Telefonica declined to comment specifically on whether it was negotiating an acquisition of Iusacell.

Telefonica has about 20 percent of Mexico's cellphone market while Iusacell has about 8 percent, well behind America Movil, which has about 70 percent.

But America Movil said earlier this month it was ready to divest assets in an unprecedented step to cut its market share below 50 percent in response to the toughest battery of regulations in over 20 years, fuelling competitors' hopes that the market would become more competitive.

Analysts however said a potential tie-up between Telefonica and Iusacell, while positive, would not drastically change market conditions in Mexico, which accounts for just around 1 percent of the Spanish firm's core profit.

(Reporting by Julien Toyer and Andres Gonzalez, editing by Louise Heavens)

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