America
Movil
(
AMX
), one of the leading telecom carriers in South America, has
recently gained a 15-year license to market its cable television
in Costa Rica. The multi-year agreement also has a renewal option
for another ten years, depending on the company's profitability
from the new business. We expect the contract to not only support
revenue generation but also expand Pay TV services of the
company.
Winning the license in Costa Rica provides a breath of fresh
air to the company, which has been fighting an uphill battle with
the regulators for a cable TV license in Mexico. The
company remains the biggest telecom operator in the Mexican
market. However, it failed to tap one of the most lucrative cable
businesses in the Mexican market, mostly captured by
Grupo Televisa SAB
(
TV
).
Moving to the Costa Rican market, America Movil currently
operates its wireless business in this country though its
subsidiary Claro. Given the new agreement, the company would
finally make its foray in to the cable TV business in the
country, currently dominated by
DIRECTV
(
DTV
) and Televisa under the brand name Sky, followed by
Dish Network Corp.
(
DISH
).
We believe the new business would boost the company's
competitive position in the Latin American Pay TV market. Besides
winning new contracts, the company is also focusing on its
acquisition strategy in order to tap more opportunities. In Jan
2012, the company collaborated with Claxson Interactive Group to
acquire DLA Inc. that adds video-on-demand service on cable-TV
channels in Latin America. It also acquired Pay-TV firm Net
Servicos, the largest multi-service cable company in Latin
America.
The company's recent actions to improve its entertainment
business include the proposed takeover of the
media-and-advertising unit of Mexican live-entertainment company
Corporacion Interamericana de Entretenimiento SAB for MXN$1.67
billion ($131 million). The acquisition is expected to be
completed by the second half of 2013, pending necessary
approvals.
Currently, America Movil carries a Zacks Rank #3 (Hold).
AMER MOVIL-ADR (AMX): Free Stock Analysis
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