In an effort to consolidate its position in the fiercely competitive Mexican wireless market, Latin America’s largest wireless carrier America Movil (AMX) is reportedly planning to acquire Mexican wireline operators Carso Global Telecom and Telmex Internacional (TII) or Telint. This represents one of the biggest consolidation initiatives in the Latin American telecom market. America Movil’s shares fell 4.8% ($2.41) on the NYSE on January 14, 2010, closing at $47.60.
Mexico-based landline service provider Carso Global Telecom is the holding company of Telint and Mexico’s incumbent fixed-line operator Telefonos de Mexico (TMX) or Telmex. Telint (spun off from Telmex in 2008) operates in multiple Latin American countries including Brazil, Argentina, Colombia and Chile and markets triple-play (voice, data and video) services.
America Movil, which is controlled by Mexican billionaire Carlos Slim, will offer 2.0474 shares of its stock for every one share held in Carso Global Telecom. The proposed transaction is subject to a number of approvals, including clearance from Mexico’s antitrust regulator “Cofeco”.
The deal (worth more than $20 billion), should it materialize, will make America Movil a telecom powerhouse strongly positioning it against its principal rival Telefonica (TEF) and emerging competitors. The Mexican operator will get a 60.7% stake in Telint and an indirect 59.4% stake in Telmex, which are currently held by Carso Global Telecom.
America Movil will subsequently offer 0.373 shares or MXN11.66 ($0.92) in cash for each Telint share to buy the remaining 39.3% stake in the entity. Carso Global Telecom and Telint will be de-listed from the markets where they trade following the closure of the transactions. While America Movil will integrate Telint, Telmex would retain a separate management structure and will operate independently.
Through its largest subsidiary Telcel, America Movil currently dominates the Mexican wireless market with roughly 72% share and with approximately 194.3 million customers, facilitated by its well-known brand, extensive distribution network, nationwide coverage and the country’s benign regulatory environment.
Although America Movil has a commanding position in the Mexican wireless market, it is gradually losing market share due to stiff competition from the Spanish telecom giant Telefonica and cable offerings. Competition is heating up in the Mexican mobile space as the country’s largest media company Grupo Televisa (TV) is set to offer wireless services and bundled offerings. Mexico is preparing for the wireless spectrum (radio bandwidth) auction which has been designed to open the country’s wireless market to greater competition.
The proposed consolidation, if successful, will make America Movil a full service provider enabling it to offer converged wireless, wireline voice, broadband and video services to more than 250 million subscribers. Besides offering significant operational synergies, the deal will provide the carrier an opportunity to market triple as well as quadruple-play bundled services across 18 countries. The consolidation should help diversify telecom services in Mexico and Latin America.
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