America Movil S.A.B. de C.V. - Adr (AMX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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We maintain our Neutral recommendation on America Movil. We are encouraged by the company's significant subscriber gain, healthy wireless data service demand and strong momentum in the PayTV segment. The company continues to expand its network services and boost data revenues through deployment of the advanced 3G wireless technology and increased smartphone penetration. The launch of fourth-generation (4G) mobile services in Mexico and other parts of Latin America also bode well for the company. However, we are concerned about the interconnection rate reductions in both Mexico and Brazil, which have considerably pressurized America Movil s margins. Further, the divestment of America Movil s 8.4% stake by AT&T Inc. will increase debt leverage of the company substantially.


Based in Mexico, America Movil S.A.B de C.V. (AMX) is Latin America's largest wireless company with over 338 million subscribers across 18 countries. America Movil was established in Sep 2000 as a spin-off from Tel fonos de M xico (Telmex), the dominant provider of local and long-distance telephone services in Mexico. Since inception, the company has expanded rapidly through acquisitions to become a leading Latin American regional wireless carrier.

America Movil's principal markets are Mexico and Brazil, the two largest economies in Latin America. The company's biggest subsidiary, Telcel, is the largest wireless service provider in Mexico. Telcel is a major business source for America Movil, contributing 27% of the company's total subscriber base. America Movil operates in Brazil through its subsidiaries Claro and Americel. Claro ranks second among the wireless carriers in Brazil, with approximately 68.7 million wireless subscribers. Southern Cone (including operations in Argentina, Chile, Paraguay and Uruguay) and Andean Region (including Ecuador and Peru) accounted for approximately 7% and 8% of America Movil's subscribers, respectively.

Through several other subsidiaries, America Movil is also the leading wireless provider in Colombia and Guatemala. Moreover, the company has acquired wireless operators in El Salvador, Puerto Rico, Jamaica and Nicaragua, representing relatively new markets. In the U.S., the company owns Tracfone, a fast growing prepaid wireless service provider based in Miami. Tracfone is currently the fifth-largest wireless carrier in the U.S. with approximately 25.5 million subscribers.

America Movil offers a vast range of wireless services including prepaid voice services and wireless data services such as SMS, MMS, group messaging, SMS notification and Internet access services. The company's fixed-line services include voice, cable TV, Internet access and data transmission. America Movil generates revenues primarily from subscribers in the form of usage charges, monthly rental and additional charges (include charges for data services and voice-mail), reported as service revenues. The company also generates revenues from the sale of equipment (handsets and accessories). Service revenues accounted for 90% of America Movil's 2013 revenues with equipment sales representing the remaining 10%.

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