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America Movil to Buy CIE Unit

Zacks Equity Research

AmericaMovil (AMX) is all set to takeover the media-and-advertising unit of Mexican live-entertainment company Corporacion Interamericana de Entretenimiento SAB (CIE) for 1.67 billion pesos ($131 million). The acquisition is expected to be completed by the second half of 2013, subject to pending approvals.

CIE Entretenimiento, a part of CIE contributes 20% to CIE’s earnings. It mainly focuses on sponsorship of concerts and live performances, venue management, ticketing, souvenirs sales and artist management and representation. So, the fund to be accumulated through the sale of its CIE Entretenimiento unit will allow the company to reduce some debt apart from bolstering its working capital.

America Movil dominates nearly 70% of the Mexican market. At present, the company is specializing more on acquisition strategies. In order to gain more opportunities in wireless services and pay-TV business, the company bought Pay-TV firm Net Servicos, the largest multi-service cable company in Latin America.

In January 2012, the company collaborated with Claxson Interactive Group to acquire DLA Inc., which adds video-on-demand service on cable-TV channels in Latin America. Moreover, the company also entered into a partnership with AT&T Inc. (T) last year to provide Internet services worldwide.

Higher usage of smartphones and tablets is exerting huge pressure on the network. So, to counter such problems, America Movil launched fourth-generation (4G) mobile services in 9 cities in Mexico in November, last year and plans to add 26 more cities under LTE coverage by April 2013.

Despite the Mexican wireless market becoming more challenging, the company seems to be well ahead of other leading operators like Telefonica (TEF) and Grupo Televisa (TV), on the basis of its service quality and network strength.

Currently, America Movil carries a Zacks Rank #2 (Buy).

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