America Movil S.A.B.
) has been granted exclusive rights by the International Olympic
Committee to telecast 2014 Winter Olympics in Russia and the 2016
Olympics in Brazil. The rights cover broadcast in Latin America
except for Brazil. The financial terms of the deal were not
disclosed. However, we assume the news remains a sigh of relief
as it can catapult America Movil's suffering market valuation due
to proposed regulatory reforms in Mexico last week.
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America Movil suffered a blow when the New Bill proposed by
Mexican President, Enrique Pena Nieto, highlighted the
implementation of the asymmetric regulations on top of several
other reforms. Following this ruling, America Movil experienced a
significant decline in its share price that swept of billions of
dollars in the market valuation of the company.
However, we expect exclusive broadcast rights to remain accretive
especially to the company's PayTV business. The company's efforts
to expand its PayTV platform in order to offset the slump in
Latin America wireless growth remain encouraging. America Movil
took a major step in fostering its PayTV services by acquiring
PayTV firm Net Servicos in Mar 2011. The transaction boosted its
service revenues with the addition of PayTV service.
Despite facing severe regulatory challenges, we believe America
Movil continues to dominate the Latin American telecom market. It
remains focused on expanding its network capabilities as it
aggressively invests in developing cellular networks in the
geographical zone. America Movil also focuses on building new
generation broadband networks, both in fixed and in the mobile
platforms. This will require an investment of approximately $8
billion over the next three years, as it will require the
expansion of data networks.
However, the company faces stiff competition from carriers like
Grupo Televisa S.A.
NII Holdings Inc.
) in Latin America that can impede its growth prospects.
America Movil has a Zacks Rank #5, implying a Strong Sell