Mexican telecom giant
America Movil S.A.B de C.V.
) has picked up a 4.1% stake in Austria's biggest telecom company
Telekom Austria. We believe that increased competition in the Latin
American telecommunication market has urged the company to look for
opportunities in Europe.
It is believed that if America Movil can combine its stake with
Telekom Austria shareholder Ronny Pecik, it will own 25% and will
be second to the largest investor, Austrian state holding company
Telekom Austria operates in 8 countries across eastern and
central Europe and possesses a subscriber base of 23 million with
an annual turnover of around $5 billion. The latest transaction
follows America Movil's bid last month to increase its stake to 28%
in the Dutch telecom giant KPN group from the current 4.8%, as the
company tries to expand in Europe.
America Movil is the biggest telecom carrier in Mexico. In order
to improve its foothold in the fiercely competitive Mexican market,
the company acquired local fixed-line operator Carso Global Telecom
Further, to consolidate its position in the Brazilian market,
America Movil completed the remaining 20% acquisition of satellite
service provider StarOne S.A in 2011. The company has also acquired
Net Servicos - the largest cable MSO in Latin America - and has
collaborated with Claxon interactive Group to acquire Miami-based
digital TV service provider, DLA Inc.
Although this acquisition has placed America Movil in a dominant
position, the proposed Televisa-Lusacell deal (where Mexican
] has bid for 50% of wireless operator Lusacell) can challenge its
broadcasting and cable division. Moreover, the pending wireless
spectrum auction in Mexico will further intensify competition.
Owing to the economic uncertainty in Europe, emerging market
players like America Movil are expanding their footprint in the
region and looking to acquire companies at a cheaper valuation. We
believe that the Telekom Austria stake will provide the company
with technological knowledge and improve its financials as the
business in Latin America is generally low margin.
Moreover, stiff competition from peers
Leap Wireless International Inc.
Metro PCS Communication Inc
) makes the situation more challenging for America Movil in
We, thus maintain our long-term Neutral recommendation for
America Movil S.A.B. de C.V. Currently, America Movil S.A.B. de
C.V. has a Zacks #3 Rank, implying a short-term Hold rating on the
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