Changes in the Mexican regulatory environment have begun taking
its toll on the telecom giant,
America Movil S.A.B
). The company has been reportedly planning to dispose off its
assets to counter possible risks that stand in the way of its
profits, owing to restrictive new laws thrust upon large telecom
companies in the country. Further, America Movil is planning
to split wireless towers from its existing business and is also
seeking to renounce its rights to gain control on satellite-TV
operator - Dish Mexico.
The decision will likely lead America Movil to divest some of
its assets to a new independent company, which will lower its
market share below 50% to blend in with current regulatory
requirements. At the moment, the company boasts a large share of
Mexico's landline and mobile-phone subscribers, which makes it all
the more vulnerable to the new telecom regulations. America Movil's
wireline division - Telmex - currently controls around 80% of the
Mexican fixed-line business, whereas its wireless equivalent -
Telcel - holds about 70% market share.
Other behemoths in Mexico also facing the brunt of regulators
NII Holdings Inc.
Grupo Televisa S.A.B.
While America Movil remains in news for approaching IFT
(Instituto Federal de Telecomunicaciones) with its new
restructuring structure, the company is yet to come out with a
concrete plan, according to the reports. Further, the company
has not specified any details regarding the sale of its assets.
Under the new law, America Movil has 365 days to implement its
restructuring plan and during this period, the company will remain
subjected to prohibitions as a dominant carrier in Mexico.
According to market news, America Movil has lost around $17
billion in market value since the proposal of the new law by
President Enrique Pena Nieto. We believe if the company fails to
abide by the new regulations and no concrete restructuring takes
place within the stipulated time, America Movil may experience
further deterioration in market value going forward.
At present, America Movil has a Zacks Rank #3 (Hold).
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