Second-largest U.S. telecom carrier,
) has offloaded 7% of its stake in the largest Mexican operator
America Movil S.A.B de C.V.
), raising about $564 million.
AT&T has sold 540 million shares in America Movil,
bringing its overall holdings in the Latin American carrier to a
historic level of 9%. However, post the stake reduction, AT&T
will remain the second-largest shareholder behind billionaire
owner Carlos Slim Helu.
Dallas-based AT&T has announced that the stake sale is
part of the company's effort to rebalance its asset level and use
the cash for general corporate purposes. The U.S. telecom
behemoth has sold various land and tower assets in the past one
year and is expected to sell some of its other none-core assets
over the next couple of years. Nevertheless, the company will
continue to have two members on the board of America Movil.
The stake sale was executed between May 7 and Jun 4, 2013.In
this period, America Movil's share price plummeted nearly 9.2%.
AT&T's share price fell 4.9% within the same time frame.
America Movil has been struggling in the Mexican market
because of the regulatory reforms that aims to bring more
uniformity and transparency in the sector and curb concentration
of power that lies with predominant players. This has impacted
the company's results as America Movil reported an annualized
decline of 13.6% in the bottom line in its recently concluded
Following the weak results and the unfavourable regulatory
reforms, America Movil experienced a significant decline in its
share price that diminished its market value by billions of
dollars. Since then, the company has aggressively followed a
share repurchase policy to mend the loss and has reduced its
share outstanding by 3.7%.
At the end of the first quarter, AT&T had $3.9 billion in
cash and cash equivalents. We believe that the cash generated
from the divestment will not only improve its liquidity position
but will also allow it to hedge some of the risks that America
Movil is currently facing.
AT&T currently carries a Zacks Rank #3 (Hold). Among other
Telefonica Brazil S.A.
) carry a Zacks Rank #2 (Buy) and is worth considering.
AMER MOVIL-ADR (AMX): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
TELUS CORP (TU): Free Stock Analysis Report
TELEF BRASIL SA (VIV): Free Stock Analysis
To read this article on Zacks.com click here.