Mexican telecom giant America Movil (AMX) has announced its plan to acquire a Miami based digital TV service provider, DLA Inc. Owned by Cisneros Group of Companies, one of the largest privately held entertainment firms in South America, DLA provides digital entertainment service in Latin America and the U.S.
The deal, financial details of which were not disclosed, is expected to close in the final quarter of 2011 after customary approvals. With the acquisition of DLA, America Movil is expected to tap the budding digital content market in South America.
DLA currently offers entertainment services like video-on-demand, broadband services accessible through any Internet-enabled device and PatTV services with 18 channels in association with top entertainment company like Walt Disney Co. (DIS). Given these services, we believe the acquisition will boost America Movil’s smartphone and PayTV subscribers’ base by expanding its digital entertainment services across networks.
Further, the deal is expected to support the company’s entry into Mexican television market, where it has been debarred of such rights. Of late, America Movil through its subsidiary, Telmex (TMX) has been into a legal tussle with Mexican regulatory on delivering any content service in the country.
Going forward, the acquisition will also provide America Movil a competitive advantage in Latin America from companies like Netflix Inc. (NFLX) that has already entered the content market with the launch of online video rental in more than 41 countries in Latin America.
Currently, we maintain a long-term Neutral recommendation on America Movil supported by a Zacks #3 Rank (Hold).
