MEXICO CITY -- Making its bid for one of the biggest prizes in the Mexican economy, AT&T; Corp. announced a $1 billion alliance yesterday with a Mexican partner, Grupo Industrial Alfa S.A., that would provide long-distance telephone service when the government-approved monopoly ends in 1997.
Analysts had expected AT&T; to decide to enter the expanding Mexican market, but were surprised by its selection of Alfa, an industrial group that manufactures diverse products ranging from cold-cut meats to flat steel, but has no telephone experience.
AT&T; had been expected to choose Telefonos de Mexico, the privately run national telephone company known as Telmex.
Victor A. Pelson, executive vice president of AT&T; and chairman of its global operations team, explained that negotiations with Telmex were broken off because of concern about possible regulatory problems in the United States.
The Southwestern Bell Corp. bought 10 percent of Telmex when the company was privatized in 1990. But the Federal Communications Commission bars regional phone companies in the United States from entering the long-distance market. Mr. Pelson said that because of Southwestern Bell's involvement, the FCC could prohibit Telmex from providing long-distance service into the United States.
MCI Communications Corp. and the Sprint Corp. also have joined Mexican partners to vie for one of the treasured long-distance concessions to be granted by the government. The GTE Corp. and Motorola Inc. also have expressed interest. But none of these would bring to the table the combination of AT&T;'s technological advantages and the financial resources of Alfa, which had sales in 1993 of $2.5 billion.
At a news conference here yesterday, officials of both AT&T; and Alfa said that over the next four to six years, they were prepared to invest $1 billion to create a network that would compete with Telmex in long-distance service.
Alfa would own 51 percent of the new venture, and AT&T; the remaining 49 percent.