Investors flocked back to America Movil (AMX) yesterday following its decision to offload subscribers and infrastructure to meet the requirements of Mexico’s new telecoms regulation.
In the meantime some additional details about America Movil’s…
Investors flocked back to America Movil (AMX) yesterday following its decision to offload subscribers and infrastructure to meet the requirements of Mexico’s new telecoms regulation.
In the meantime some additional details about America Movil’s disposal plans emerged.
The incumbent’s stock rose 10% on Wednesday after it took the pre-emptive step to slim itself down, rather than face interference from the authorities.
AMX will need to divest around 20 million mobile customers and four million fixed-line subscribers. Analysts initially predicted that AMX would simply dispose of its less desirable customers in rural areas, but an AMX spokesman was later quoted as saying this would not happen as those customers are not attractive to potential purchasers.
The spokesman also said that AMX was seeking a single buyer and that it wanted to sell the assets quickly to avoid punitive measures from the regulator.
Earlier this week AMX said the purchaser had to be able “to participate in this capital intensive sector, to overcome the obstacle of the insufficient investment made by our Mexican competitors”.
AMX also has to decide how it will offload infrastructure. It plans to monetise its mobile operator Telcel’s tower portfolio and related passive infrastructure, but has not said whether this will take the form of a spin-off or a straight sell-off.
Stefan Zehle, the CEO of Coleago Consulting, explained that because AMX will be divesting customers it had little choice but to sell network assets – something the telco has been previously reluctant to do. Otherwise it would have fewer subscribers and the same network costs after it sheds users, which would harm profitability.
“If they can hive off some passive, and perhaps even active, infrastructure into a separate netco, and then invite other operators to use this network alongside their own subscribers, then the negative effect on profitability would be reduced,” Zehle told TelecomFinance.
AMX currently has a 70% share of Mexico’s mobile market and 80% of the fixed-line market. Following the election of President Enrique Pena Nieto in 2012, who brought with him a reformist agenda, AMX’s share price has dropped almost 20%.
However, AMX’s announcement this week saw its stock jump from US$20.74 to US$22.83. Today the shares opened at US$22.50, giving the company a market capitalisation of roughly US$78bn.
Although the telco began its operations in Mexico it has expanded to other countries across the Americas. In its Q1 results AMX’s Mexican operations accounted for Ps68bn of its total Ps195bn quarterly revenues.
Following a sale of the assets, AMX’s owner Carlos Slim will turn his attentions to other Latin American countries such as Brazil, Peru and Colombia. In an interview with Bloomberg, Slim said he plans to invest more into energy, infrastructure and real estate, as well as telecoms, and take advantage of low interest rates.
