Spain's Telefonica in exclusive talks to divest Mexican operations to Beyond ONE

Spanish telecom giant Telefonica is in advanced talks to sell its business in Mexico to Beyond ONE, the Dubai-based owner of Virgin Mobile Mexico, three sources familiar with the matter said to Reuters.

The possible transaction comes as Telefonica continues an approach to exit lower-margin Latin American markets and target four core geographies.

Under the stewardship of the CEO Marc Murtra, Telefonica has stepped up efforts to divest in Spanish-speaking Latin American markets in a bid to simplify operations and increase profitability.

The company has called out Brazil, Britain, Germany and Spain as focused markets, and a new strategy will be revealed in the latter half of 2025.

Divestment strategy accelerates

Telefonica has, at the same time, offloaded other assets within the region, with its divestment in Mexico being just one of a series of divestments across the region.

The company also sold its Argentina unit in February, agreeing to sell it to Telecom Argentina for $1.245 billion.

Five months ago, it struck an agreement to divest its Uruguayan business to Luxembourg-based Millicom International for $440 million.

It is also working with advisors on possible divestments of its Chilean and Ecuadorian businesses.

Telefónica has not responded publicly to the ongoing discussions in Mexico.

Beyond One also did not respond to requests for comment beyond the previously announced acquisition of Virgin Mobile Latin America in 2023.

Valuation and regulatory hurdles

According to a June research report by Kepler Cheuvreux, the Mexican firm might be worth roughly €520 million ($609 million).

This valuation reflects both the size of Telefonica's operations in the country and the competitive nature of the Mexican telecom industry, which is dominated by América Móvil.

However, one source stated that a newly established antitrust commission in Mexico could add ambiguity to the regulatory approval process.

If established, the new commission would have oversight authority over telecom businesses, potentially delaying any major mergers in the sector.

According to the sources, while the conversations are exclusive, no formal agreement has been reached and is still pending regulatory and internal approval.

They sought anonymity since the discussions were confidential.

Beyond ONE expands regional footprint

Beyond ONE entered the region last year with its acquisition of Virgin Mobile Latin America. As a mobile virtual network operator (MVNO), Virgin Mobile sells services by renting infrastructure from other carriers.

This will presumably make it a better-fit buyer for Telefonica's Mexican assets (where it already has a presence), when compared to other potential suitors, as well as in Colombia.

Beyond ONE would massively increase its presence in Mexico by adding Telefonica's operations, adding customers in a market that's been slow to embrace MVNOs, but still accounts for a small portion of the country's wireless landscape overall.

Telefonica’s strategic pivot

CEO Murtra's focus on lowering exposure in markets where returns do not exceed the company's cost of capital is consistent with broader trends across global telecom operators, many of which are consolidating operations and stressing efficiency.

Telefónica's revenues in Latin America are under strain due to growing competition and costly infrastructure costs, making departures from these areas imperative for long-term stability.

The company's primary markets, which include Spain, Germany, the United Kingdom, and Brazil, have higher margins and more predictable regulatory frameworks.

Telefonica hopes to increase returns and simplify its operational structure by reallocating resources to these geographies ahead of the new strategy's launch later this year.

If accomplished, Telefonica's sale of its Mexican business would be another big step forward in the company's regional restructuring, as well as a significant move for Beyond ONE as it expands its foothold in Latin American telecom markets.