Mexico’s antitrust regulator “COFECO” is expected to rule on America Movil’s (AMX) $21 billion proposed consolidation plan today. Latin America’s largest wireless carrier, which is controlled by Mexican billionaire Carlos Slim, launched a plan in January 2010 to acquire Mexican wireline operators Carso Global Telecom and Telmex Internacional (TII) or Telint.
This represents one of the biggest consolidation initiatives in Latin American telecom. America Movil is consolidating to strengthen its position in the fiercely competitive Mexican wireless market. However, COFECO may give a conditional approval for the deal given the concern over the Mexican carrier’s dominance in the domestic telecom industry.
Mexico-based landline operator Carso Global Telecom is the holding company of Telint and Mexico’s incumbent fixed-line carrier Telefonos de Mexico (TMX) or Telmex, both of which are owned by Carlos Slim. Telint (spun off from Telmex in 2008) operates in multiple Latin American countries and markets triple-play (voice, data and video) services.
Per the deal, America Movil will offer 2.0474 shares of its stock for every one share held in Carso Global Telecom. The deal, should it materialize, will make America Movil a telecom powerhouse, strongly positioning it against its major 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 would integrate Telint, Telmex would retain a separate management structure and operate independently.
America Movil currently dominates the Mexican wireless market with a roughly 72% share and approximately 194.3 million customers. However, it is gradually losing market share to stiff competition from Telefonica and cable operators.
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 expected to conclude the impending wireless spectrum (radio airwave) auction by mid-2010, which will open the country’s wireless market to more competition.
The proposed merger, if successful, will make America Movil a full-service provider enabling it to offer converged wireless, wireline voice, broadband and video services to over 250 million subscribers. Besides offering significant operational synergies, the deal will provide the carrier an opportunity to market triple and/or quadruple-play bundled services across 18 countries.
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