The government of Mexico has decided to reform its telecommunications sector, predominantly the wireline and wireless phone segments and cable and satellite TV segments. The Mexican telecommunications sector is highly monopolistic in nature with one or two companies controlling nearly the whole market. The new Mexican government, however, wants to increase competition by encouraging other operators giving them several level playing fields. This in turn will reduce the costs of telecom services.
Both the wireless and fixed line markets of Mexico are heavily controlled by the world’s richest person, Carlos Slim. The wireless wing, America Movil S.A.B. (AMX) commands about 70% market share, while the Spanish wireless operator Telefonica S.A. (TEF) controls nearly 22% of the Mexican market share. At present, America Movil has a Zacks Rank #3 (Hold) and Telefonica has a Zacks Rank #5 (Strong Buy).
In the wireline segment, Carlos Slim owned Telefonos de Mexico (Telmex), which at present controls 80% of total fixed line subscribers in Mexico. In mid-2010, Telefonos de Mexico acquired small sized Mexican wireline operators Carso Global Telecom and Telmex Internacional or Telint. The acquisitions were among the biggest consolidations in the Latin American fixed line telecom market.
On the other hand, the cable and satellite TV market is predominantly controlled by Grupo Televisa S.A. (TV), which controls 70% of the Mexican TV market. Additionally, TV Azteca, a unit of Grupo Salinas, commands nearly the remaining 30% of the TV market. Thus, Televisa and Azteca form a perfect duopolistic market structure in Mexico. Televisacurrently has a Zacks Rank #4 (Sell).
In last June, Televisa won conditional approval from the Mexican regulator CoFeCo (:CFC) to acquire 50% stake in Grupo Iusacell. The latter is a small wireless operator of Mexico, which controls around 5% market share. However, Iusacell is a unit of Grupo Salinas, which also controls TV Azteca. Televisa’s entry will increase wireless competition. Earlier, in 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. (NIHD) due to prolonged legal battles. NII Holdings currently has a Zacks Rank #3 (Hold).
In order to counter Televisa’s entry in the wireless market, Carlos Slim has decided to enter into the Mexican pay-TV market through its fixed line operator Telmex. However, Telmex pay-TV venture is yet to get regulatory approval.Read the Full Research Report on TEF
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