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America Movil's Tower Spin-off Gets Institutional Waiver

Mexico's telecom regulatory authority - Federal Telecommunications Institute (IFT) - has decided that the wireless tower operator Telesites, which was recently spun off from America Movil SABAMX , will not require institutional approval to begin operations.

Local daily Reforma reported this piece of news quoting the IFT commissioner Maria Elena Estavillo. Telesites has a portfolio of about 10,800 wireless towers and provides extensive network coverage in Mexico. Telesites will be enlisted on the Mexican stock exchange.

In 2014, the government of Mexico reformed its telecommunications sector. The IFT identified America Movil as the dominant player in this market. The company's wireline division, Telmex, currently controls around 80% of the Mexican market, whereas its wireless division, Telcel, holds about a 70% market share. Notably, per the reformed norms, the IFT restricted the maximum hold of a company in the market to 50%.

The IFT also 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. Interconnection fees levied by the company will also be closely monitored.

The spin-off of the wireless tower division was therefore a strategic move taken by America Movil 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. Telesites will primarily compete with American Tower Corp. AMT which currently operates over 8,000 mobile towers in Mexico.

Last month, Bloomberg reported that Spain-based telecom operator Telefonica S.A. TEF is in talks with Telesites to rent the latter's wireless towers. Telefonica already boasts a strong presence in the Mexican wireless industry commanding a nearly 20% market share.

Earlier this year, U.S. telecom behemoth AT&T Inc. T took the plunge in the Mexican wireless market follwoing its acquisition of Grupo Iusacell and Nextel Mexico. According to Bloomberg, AT&T is also reportedly working on a separate deal to rent wireless towers from Telesites.

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 mobile networks for optimal use of smartphones and tablets.

Also, the wireless penetration rate is still relatively low in the country. The government presently estimates that the country needs around 80,000 radio base-stations, which is more than four-fold its current availability. This indicates massive growth potential for the tower operators.

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AMER TOWER CORP (AMT): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

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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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