América Móvil has decided sell some of its assets to comply with Mexico’s new anti-trust telecom rules that forbid companies from controlling more than 50% of the market.
On July 8, América Móvil issued a statement announcing that its board has analyzed several alternatives and recommendations, and resolved to reduce the company’s share in the Mexican telecommunications market to less than 50%, so the company would no longer be considered a “preponderant economic agent” under the new Mexican regulations. The company has decided to sell certain assets to “a new and solid carrier independent from América Móvil.”
The move comes after the Mexican senate approved the so-called “secondary laws” of the telecommunications competition bill on July 5, legislation which was aimed at reducing the power of broadcaster Grupo Televisa and Carlos Slim’s América Móvil.
Pyramid analyst Daniele Tricarico told RCR Wireless News that América Móvil’s announcement that it will sell off some assets, including mobile towers, is a significant victory for Mexico’s reform effort.
“These divestments will generate a domino effect further opening up [the market] to new investments and new players,” Tricarico said. “América Móvil will also have more cash to enter the pay-TV market. Nonetheless, being forced to sell, at market value, some of its telecoms assets, América Móvil will now want a share of the fast growing pay-TV market in exchange. Carlos Slim’s group will do all it can to reinforce its position in pay-TV, either indirectly by reconfirming, as it has already done, its partnership with Dish, or directly, asking to be finally allowed to enter the pay-TV market.”
Macquarie Capital’s analyst Kevin Smithen said that by placing Telcel’s Mexican towers into a separate subsidiary, América Móvil is trying to satisfy regulators’ desire for open mobile infrastructure in Mexico.
“At the same time, we feel a sale/leaseback of [América Móvil’s] estimated 40,000 Mexican, Brazilian and other towers could raise $10 billion for share repurchases, or mergers and acquisitions,” Smithen said.
Smithen also noted that the separation of América Móvil’s towers and other assets is the last roadblock for América Móvil, and the company could sign master lease agreements with SBA Communications and American Tower across Latin America.
“[América Móvil] has the biggest capital expenditure budget in the region with the highest credit and is aggressively rolling out LTE,” Smithen said. “Both [SBA] and American Tower are significantly under-indexed to [América Móvil] in all markets and could see more rapid lease-up activity once MLAs are signed.”
Looking forward, Tricarico said that “with foreign ownership restrictions lifted, we see at least one multinational player making a major move in Mexico, potentially through an established vehicle such as Axtel, Maxcom or Alestra. Telefónica, which has long struggled in the Mexican market, can now add fixed assets to its portfolio, increasing its standing relative to the market leader, América Móvil. We believe that in the second half of 2014, or more likely next year, we will see new entrants and new investments, investments that will pay off in the form of higher growth rates in 2015-2018.”
América Móvil currently controls about 80% of Mexico’s landline phone market, and through Telcel, 70% of the wireless market. Because of this high market share, the Mexican government considered América Móvil to be a dominant player in the Mexican telecom landscape.
More news from the Latin American region:
- NII Holdings, which operates under the brand Nextel in Latin America, announced that Salvador Alvarez will join the company as president of its Mexican unit as of July 14, and John McMahon, currently the interim president, will be leaving Nextel Mexico and NII on July 31. A former CEO of Maxcom, Alvarez has the challenge to continue Nextel Mexico’s operational turnaround.
- Alcatel-Lucent won a 100G deal in Colombia. UNE EPM Telecomunicaciones launched the country’s first 100 gigabit-per-second network to meet increasing demand for ultra-broadband access from both mobile and fixed-line customers in urban areas.
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