AT&T Inc said it will buy bankrupt NII Holdings Inc's wireless business in Mexico for $1.875 billion, less outstanding net debt.
NII Holdings, the parent of Nextel operators in Latin America, filed for bankruptcy protection in the United States in September after struggling with $5.8 billion in debt and fierce competition in Brazil and Mexico.
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AT&T plans to combine Nextel Mexico with Iusacell, which the company acquired in November for $1.7 billion.
While Nextel Mexico has about 3 million subscribers, Iusacell, Mexico's third-largest wireless operator, has over 8 million subscribers.
Mexico's telecom market is almost split between billionaire Carlos Slim's America Movil, with about 70 percent of the market, and Telefonica, with nearly 20 percent.
Some of America Movil's assets are up for sale and AT&T had been tipped as a buyer, but the U.S. telecom company had downplayed any interest.
The Nextel Mexico transaction is subject to a bankruptcy auction and approvals by the U.S. Bankruptcy Court for the Southern District of New York, AT&T said in a statement.
(Reporting by Supantha Mukherjee in Bengaluru; Editing by Sriraj Kalluvila)