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America Movil (AMX) Plans Stepped-up Investment in Mexico

America Movil SABAMX has decided to invest $6 billion over the next three years in the Mexican telecom market. Of the total, half will be spent on its wireless services alone. This undisputed leader of the Mexican telecom market stated that this massive expenditure will be aimed at countering growing competition in Mexico, especially in the wireless segment.

In 2014, the government of Mexico had introduced reforms within its telecommunications sector, intensifying competition. America Movil currently controls an enviable market share of nearly 68%. However, the country's telecom regulator, the Federal Telecommunications Institute (IFT), seeks to restrict the maximum hold of a company in the market to 50%. Another existing operator - Telefonica S.A. TEF - holds nearly 20% share in the market.

As part of these reforms, the IFT has banned America Movil from charging national roaming fees. Further, the company will have to share its infrastructure with other operators particularly in the local loop (last mileage) segment. Finally, in Nov 2015, the company received the IFT's approval regarding prices that it can charge as interconnection fees.

Also, in November, America Movil spun-off its wireless tower division in a strategic move to restrict its market share within the 50% limit imposed by the IFT. The company may also divest some non-core wireless and fixed-line assets in the future in order to comply with the regulatory norms.

In 2015, U.S. telecom behemoth AT&T Inc. T forayed into the Mexican telecom industry with the acquisition of Grupo Iusacell and Nextel de Mexico for a total consideration of approximately $4.4 billion.

Since its entry, AT&T has been gradually expanding its 4G LTE wireless networks in Mexico. Currently, this service is available across 12 Mexican cities. It covered 40 million people by the end of 2015 and will be available to 75 million by the end of 2016. Furthermore, AT&T aims to provide 4G LTE mobile Internet service to 100 million Mexican customers by the end of 2018. Management has decided to invest $3 billion toward the expansion of high-speed mobile Internet network in the country.

In addition, Mexican cable MSO (multi service operator) Grupo Televisa S.A. TV has also received a go-ahead from the IFT to enter the wireless space. However, the company is yet to take any decision in this regard.

Mexico is the largest economy in the Latin American region with a growing middle class population that is eager to spend more on high-speed wireless networks for more optimal use of smartphones and tablets. Also the wireless penetration rate is relatively lower in the country compared to the U.S. Therefore, undertaking a lager investment project to enhance its telecom network may bode well for America Movil in the long term.

America Movil currently has a Zacks Rank #5 (Strong Sell).

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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 Nasdaq, Inc.


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

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