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UPDATE 2-Telefonica signs deal to use AT&T infrastructure in Mexico

(Adds Telefonica statement)

MEXICO CITY, Nov 21 (Reuters) - Telefonica has signed a contract to use the so-called last-mile network of its U.S. rival AT&T in Mexico, the local chief executive of the Spanish telecommunications company said on Thursday.

Telefonica Mexico CEO Camilo Aya said the deal with AT&T was not exclusive and that the Spanish company's traffic would remain completely separate from that of its U.S. competitor.

Telefonica said in a statement that the deal will lead to an annual positive impact on cash flow of around 230 million euros ($254 million) from 2022, as well as a reduction in net debt of around 500 million euros.

Both companies compete in Mexico with America Movil, the company controlled by billionaire Carlos Slim, which has long dominated the telephone market in Latin America's No. 2 economy.

Aya said the agreement was part of a global trend to better position companies against rivals.

"You need a lot of scale to compete in this business," Aya told reporters at an event in Mexico City.

Miguel Calderon, vice president of regulation at Telefonica Mexico, said the deal would ensure the firm remained in Mexico.

The company was open to working with the Mexican government on its telecom projects, Calderon added. (Reporting by Julia Love and Jessica Jones; Editing by David Alire Garcia, Chizu Nomiyama and Dan Grebler)