AMX Invests in Telekom Austria - Analyst Blog

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Mexican telecom giant America Movil S.A.B de C.V. ( AMX ) 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 OeIAG.     

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 in mid-2010.

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 broadcaster Grupo Televisa [ TV ] 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. ( LEAP ) and Metro PCS Communication Inc ( PCS ) makes the situation more challenging for America Movil in USA.

Recommendation

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 stock.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMX , LEAP , PCS , TV

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