Telecom giant America Movil S.A.B. (AMX) reported that it expects 3.5 million more pay TV customers in 2012 and another 4.5 million in 2013. In Latin America, the company foresees more than double its current 10 million pay television subscriber base by 2013. Recently, the company also reported a 3 million growth in its pay TV subscriber base.
The projected growth in the Pay TV segment emphasizes America Movil’s strong focus on expansion plans as it explores new markets and gradually grows beyond its customary phone business.
By the look of things, we can say that America Movil’s acquisition of Pay TV firm Net Servicos, the largest multi-service cable company in Latin America, worked in favor of the former. Pursuant to the acquisition, America Movil became the flagship company to provide pay TV services in the region.
In Latin America, the company’s pay television service is gaining almost 250,000 new customers every month. However, the Mexican television market remains completely untapped by the company as it remains prohibited from providing any television services in that country. Given the growing competitive pressure in the field of Pay TV from companies like Grupo Televisa (TV) and DIRECTV and TV Azteca, we expect this significant loss of market opportunity to adversely affect the service revenues of the company in future.
America Movil remains an undisputed market leader in telecom industry with its 225 million wireless subscribers in Latin America and 51.5 million fixed revenue generating units. The company is set forth to capture a potential market share with key acquisitions of Telefonos de Mexico (TMX) and Telefonos Internacional. However, the company’s near future remains highly challenged by rival forces in the Mexican market along with competitive threats from Telefonica (TEF), a leading wireless operator in Brazil.
Currently, we maintain a long-term Neutral recommendation on America Movil with the Zacks #3 (Hold) Rank.
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