America Movil (AMX), the leading provider of wireless services in Latin America, has announced its plan to launch the highly anticipated iPhone 3GS, an upgraded version of Apple Inc’s (AAPL) iPhone 3G, in six countries across central and south America by July 31, 2009. The company will initially commercialize the new device in Mexico, Columbia, Guatemala, El Salvador, Uruguay and the Dominican Republic, which will be followed by expansion to other markets under its coverage universe.
The latest iPhone model offers superior features and functionality compared to the iPhone 3G, including faster processor speed, improved battery life and a better camera.
Through its largest subsidiary Telcel, America Movil currently dominates the Mexican wireless market facilitated by its well-known brand, extensive distribution network, nationwide coverage and the country’s benign regulatory environment. The company’s share of the Mexican wireless market was nearly 71% in 2008, with 65% wireless penetration.
America Movil launched its 3G services in Mexico in February 2008 and became the first and only carrier to adopt these 3G offerings. Leveraging its 3G network, the company launched iPhone 3G in Mexico in July 2008, followed by subsequent roll-outs in 10 additional Latin American markets.
Although America Movil still commands a major share of the Mexican wireless market, it is gradually losing its position due to stiff competition from Telefonica’s (TEF) Movistar, which has recently completed commercial launch of its 3.5G wireless network across several Mexican cities — representing a major network advancement.
Additionally, introduction of mobile number portability (subscribers can switch operators without losing their phone numbers) in July 2008 has increased subscriber churn (customers switching to competitors) as more are more customers are migrating to Movistar. Further, America Movil remains significantly challenged by the intensely competitive Brazilian wireless market.
The upcoming launch of the iPhone 3GS is expected to help America Movil to counter competition in a more effective manner. The high-profile handset will essentially boost customer adoptions of the company’s 3G services, thereby stimulating ARPU (average revenue per user) growth while reducing subscriber churn.
We reiterate our Hold rating for America Movil as investment risks across key markets, regulatory issues and weak inflationary/currency conditions may limit the company’s financial performance in the upcoming reporting periods.
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