Although somewhat obscured by the positive news coming from
Spain over the weekend, Dutch outfit KPN
has initiated its newest maneuver
to obstruct Mexican telco America Movil (
AMX
,
quote
) in its hostile bid to take a larger stake in KPN.
[caption id="attachment_59361" align="alignright" width="300"
caption="America Movil is one of Latin America's largest telecom
providers"]
[/caption]
AMX owner Carlos Slim, the world's richest man, has spoken out
extensively on what he perceives to be a buying opportunity in
undervalued European equities. But America Movil's stated intention
of increasing its holdings in KPN was panned by markets.
The day after America Movil informed markets of its intention to
increase its stake in KPN, markets punished the Mexican company,
sending the stock price down more than 5%.
Markets appear to be under the impression the Latin
America telco's attempt to enter the fiercely competitive, largely
developed European markets will inevitably be fruitless for America
Movil.
However, it's reasonable for investors to assume the markets are
treating America Movil's expansionary intentions in an overly harsh
fashion. Essentially, no matter how poor the situation in Europe
becomes, telecommunications firms are likely going to continue to
profit, whatever hiccups happen along the way.
Attempting to scoop up shares of the Dutch telco while its price
is artificially low because of macroeconomic concerns not entirely
relevant to KPN's fundamental story, should be a good
long-term strategic move for America Movil.
If KPN were to succeed in rebuffing America Movil's overtures,
AMX shareholders are likely to be rewarded in the short-term.
Presumably, AMX shares would rebound, as it's unlikely the market
has done an about-face on the prospect of the tie-up.
In other words, the outcome of the KPN-America Movil argument is
a win-win for AMX investors. If America Movil eventually takes a
stake in KPN, AMX investors get exposure to a solid European
firm at a discount. If not, investors are still able to access one
of Latin America's
most successful telecom providers.
