) will offload its long-held interest in Mexican telecommunication
America Movil S.A.B. de CV
), to its majority shareholder Carlos Slim for around $5.6 billion.
The announcement pushed up America Movil's stock price by 5% on
Friday trade on NYSE. The deal also marks the end to the 24-year
long relationship between AT&T and America Movil.
AT&T presently holds 8.3% of market capitalization and 24%
voting rights of America Movil. However, AT&T is divesting its
stake to avoid conflict of interest with America Movil as the
former currently seeks to get hold of satellite television operator
) in a deal worth $48.5 billion.
Both DIRECTV and America Movil compete in the Latin American pay
TV market. Of late, DIRECTV has been expanding its operations in
Latin America and currently has 18 million customers. Post the
stake sale by AT&T, the long-time allies will compete in the
If AT&T receives the regulatory sanction to proceed with the
DIRECTV deal, the telecom behemoth will hold a 41% stake in SKY
Mexico, and will directly compete with America Movil as it plans to
foray into the Mexican Pay-TV market.
Dallas-based AT&T will sell 5.7 billion class AA shares
along with 73 million series L shares of America Movil to Carlos
Slim's holding company Inmobiliaria Carso. AT&T will
initially receive $4.57 billion for the stake and another $1
billion within 60 days of the deal closure. Notably, AT&T has
been reducing its stake in the Latin American operator since 2013
and has divested stocks worth over $1.5 billion.
Meanwhile, the transaction signifies that Carlos Slim, who owns
about half of America Movil, retains the control. Additionally, the
market value of the company remains stable which would have fallen
if the shares were sold to the public.
However, the deal does not come as a surprise as the U.S.
carrier had earlier announced its plans to fund the DIRECTV
acquisition by selling its stake in America Movil. The carrier
further plans to raise $2 billion by divesting its wireline
operations in Connecticut to
Frontier Communication Corp.
) by the end of 2014. We believe, apart from providing cash, the
transaction will reduce AT&T's debt burden considerably, which
is required to complete the DIRECTV transaction.
AT&T currently carries a Zacks Rank #3 (Hold).
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