Fresh from offering some $3.5 billion for a bigger stake in Dutch telecoms company KPN NV (>> KPN KON), America Movil's (>> America Movil SAB de CV) U.S. unit, Tracfone Wireless, has now targeted Simple Mobile, a mobile virtual network operator (MVNO).

The offer price was in the region of $100 million and would not require America Movil to tap debt markets, a person familiar with the deal said.

The move by Slim, the world's richest man, will help his Tracfone business consolidate its presence in the highly competitive U.S. market after showing some contraction in margins and lower client gains in recent quarters.

BTIG Research analyst Walter Piecyk said the deal would help Tracfone power its SIM card-only drive in the United States.

"The acquisition will add important new distribution channels for America Movil and is likely the first step in a broadening strategy," he said in a research note.

Rivals such as Leap Wireless and MetroPCS are struggling with the costs of smartphone subsidies and post-paid operators are cracking down on previously liberal upgrade policies, he added.

Removable SIM cards can be transferred between different mobile devices. Most of the phones offered by Tracfone's largest competitors, which also include Boost and Virgin, do not use SIMs, Piecyk said.

Between January and March, Tracfone added about 360,000 clients, below the 493,000 clients gained in the fourth quarter of last year and 53 percent less than the first quarter of 2011.

A Barclays report said Simple Mobile was a fairly small deal, adding that at the close of March, Tracfone clients were just over 8 percent of America Movil's 246 million wireless subscribers. The company operates in 17 countries.

"We estimate that Tracfone's market share on prepaid subscribers in the U.S. is almost 30 percent after this transaction," the Barclay's report said.

The Simple Mobile transaction is subject to approval from authorities, but it is expected to close in the second quarter of this year, America Movil said.

Jose Otero, president of Signals Telecom Consulting, said the United States has become a crowded market for mobile virtual network operators and the deal will allow Tracfone to solidify its base.

"There is an important decline in users, not only at Tracfone but at other operators as well," Otero said. "There are too many carriers betting on pre-pay. (But the deal) consolidates Tracfone as ... the fifth-largest mobile operator."

NICHE MARKETS

Mobile virtual network operators buy capacity from larger carriers to resell to their own customers. The format gave Slim a quick way to expand in the United States, where competition and regulation is much tougher than in Mexico.

These companies frequently differentiate from each other by targeting particular lifestyles or demographics. While Tracfone is popular among U.S. Hispanics, other groups, for example teenagers, are avid users of its services.

Tracfone is the largest mobile virtual network operator in the United States, where at least 43 such companies operated as of last year, according to the U.S. Federal Communications Commission.

Tracfone, which had more than 20 million subscribers as of March and more than 80,000 retail outlets, offers four brands in the United States: Tracfone, Net10, Straight Talk and SafeLink.

Some analysts dub Slim the "inventor" of the prepaid scheme, which frees customers from binding contracts and allows them to buy air time as they need it.

America Movil, the biggest provider of cellular phone services in Latin America, said on Thursday that Simple Mobile serves more than 1 million active subscribers.

Simple Mobile's website says the company has "over 2.5 million customer activations," suggesting Tracfone may be able to lure back users who are no longer buying air time on a regular basis.

Its business model is also based on prepayment, whereby clients get calls, texts and wireless broadband services.

Otero at Signals Telecom noted that Tracfone's coverage is among the most thorough in the United States, since it buys from the four largest national carriers, plus regional operators, reaching virtually everywhere in the nation.

America Movil shares slipped 0.52 percent in Mexico and traded flat on Wall Street.

(Reporting By Cyntia Barrera Diaz, Veronica Sparrowe and Sinead Carew; editing by Gerald E. McCormick, Dave Zimmerman, Leslie Gevirtz, Gary Hill and Andre Grenon)

By Cyntia Barrera