Megacable Holdings SAB (MEGA.MX), one of Mexico's biggest cable TV companies, said Wednesday that it has signed an agreement to sell the wireless services of Spain's Telefonica SA (TEF) to its clients.

In a joint press release, Megacable said it will start selling mobile telephony in the main cities within its coverage area by the end of the year.

Megacable, which has over 1.7 million cable TV subscribers in more than 200 communities, ranks as one of Mexico's largest providers of "triple play," as the bundling of phone, broadband and pay-TV services is known.

For Telefonica Mexico, the country's No. 2 mobile operator with 18.7 million subscribers, the deal will allow it to reach more subscribers.

Competition is heating up in Mexico's telecommunications industry as carriers seek to offer phone, TV, and data services over both wireless and fixed-line networks.

Earlier this month, local media giant Grupo Televisa SAB (TV) and its partner Nextel Mexico, a subsidiary of NII Holdings Inc (NIHD) and the smallest of Mexico's four mobile operators, won a nationwide wireless license in a government-sponsored auction.

The two companies plan to offer 3G wireless services such as high-speed Internet starting in the second half of next year that will complement the triple-play packages that Televisa already sells through its cable TV subsidiaries.

Telefonica Mexico has started to sell 3G services after winning wireless spectrum in two auctions this year.

As a result, incumbent phone companies controlled by Mexican billionaire Carlos Slim face the biggest challenge to their dominance since the telecoms sector was opened to competition in the 1990s.

America Movil SAB (AMX), Latin America's biggest mobile operator, has a market share by subscribers of about 70%, while Telefonos de Mexico SAB (TMX) owns about 80% of the country's fixed phone lines.

Megacable's CPO shares rose 2.4% to close at 31.63 pesos ($2.43) on Wednesday.

-By Ken Parks, Dow Jones Newswires; 52-55-5980-5177, ken.parks@dowjones.com
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