Will AT&T Overtake Verizon Wireless With Its Newest Move?

Source: AT&T.

The U.S. wireless industry today is defined by two distinct competitions. Sprint and T-Mobile are locked in a bitter battle for third place, while AT&T and Verizon fight for the top spot.

Now, AT&T might havefired the latest shot in its bid to unseat Verizon as the No. 1 wireless provider.

Last week, the Dallas-based telecomclosed its $2.5 billion purchase of Mexican wireless provider Iusacell, gaining approximately 9.2 million Mexican subscribers and a wireless network that covers nearly 70% of the nation's 120 million citizens, per an AT&T press release . As a part of new Mexican President Enrique Pena Nieto's reforms to address monopolies , particularly when it comes to American Movil 's Carlos Slim (the world's second-richest man), AT&T was allowed entrance into the country.

Addressing the purchase, AT&T CEO Randall Stephenson commented on a "North American Mobile Service area," and on Monday the company further defined its CEO's vision by announcing unlimited calling to Mexico at no additional charge as a part of its $5 monthly World Connect Value package. This is a much better deal than Verizon's $0.99 per minute rate through its Global Services package. Sprint and T-Mobile also offer international mobile-to-mobile calling packages, but both services cost $15 per month. Sprint provides unlimited minutes, while T-Mobile provides 1,000 minutes of talk.

The U.S.has over 30 million self-identified Hispanics of Mexican origin , many with family members in Mexico, so AT&T's acquisition is a big deal and could result in U.S. subscriber growth at the expense of the other three telcos.

A win-win north and south of the border

According to research firm Strategy Analytics, Verizon as of the third quarter of 2014 had roughly 7 million more U.S. wireless subscribers than AT&T. . So AT&T's latest acquisition could be a game changer for subscriber growth, on both sides of the Rio Grande. AT&T could pull subscribers from Verizon, Sprint, and T-Mobile with its Mexico-focused World Connect Value package, and it could win subscribers from American Movil's Telcel with an upgraded network and .

This is an interesting play for subscriber growth in the U.S. wireless market. Led by T-Mobile -- and recently a resurgent Sprint with its "Cut Your Bill in Half" promotion -- the focus has been on lowering the monthly bill in order to provide value to would-be subscribers. AT&T's unlimited calling to Mexico deal is a demographic twist on this value proposition.

There's more for AT&T in Mexico and Latin America

AT&T is also in the midst of acquiring DIRECTV in order to enter the pay-TV market in a meaningful way. While nobody knows what the Federal Communications Commission will decide, the merged companywould command less market power than the Comcast / Time Warner Cable merger -- for shareholders, this points toward an easier path to approval.

When it comes to DIRECTV's growth, Latin America is the clear driver. Taking advantage of the growing middle class in the region (including its 41% ownership in pay-TV provider Sky Mexico), it has grown subscriptions at a 26% annualized clip and revenue at a 24% rate over the past three annual reports. While an FCC rejection would not necessarily doom AT&T's chances to own this high-growth business segment, it would make the process significantly more difficult.

AT&T investors have been focusing on the U.S. wireless business for revenue and earnings growth. While that will always remain an important part of AT&T's business, it is entirely possible growth will come from Mexico and Latin America. With that in mind, AT&T investors should follow its moves in those markets accordingly.

Your cable company is scared, but you can get rich

In the long run, you know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

The article Will AT&T Overtake Verizon Wireless With Its Newest Move? originally appeared on

Jamal Carnette owns shares of Apple, AT&T, and Verizon Communications. He also wouldn't mind Carlos Slim's wealth. The Motley Fool recommends Apple, Google (A shares), Google (C shares), Netflix, Verizon Communications, and Visa. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), Netflix, and Visa. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More