Is America Movil Considering Divesting Telesites Stake?
As per a recent report by Reuters, Mexican telecom behemoth, America Movil SAB AMX is likely to sell its minority stake in the wireless tower company Telesites. Notably, on Dec 2015, Telesites was spun-off from America Movil. Telesites has a portfolio of about 10,800 wireless towers and provides extensive network coverage in Mexico.
In Oct 2015, Mexico’s telecom regulatory authority -- Federal Telecommunications Institute (IFT) -- granted institutional waiver to Telesites to begin operations. Telesites shares are listed in Mexico's benchmark IPC stock index.
In 2014, the government of Mexico introduced major reforms within its telecommunications sector where the IFT identified America Movil as the dominant player. The company’s wireline division, Telmex, currently controls around 80% of the Mexican market, whereas its wireless division, Telcel, holds about 68% market share. Notably, per the reformed norms, the IFT restricted the maximum hold of a company in the market to 50%.
The spin-off of the wireless tower division was thus a strategic move taken by America Movil to restrict its market share within the 50% limit. 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.
America Movil is not the first company to offload its stake in the wireless tower subsidiary. Spanish telecom giant, Telefonica SA TEF sold a 40% stake in its tower subsidiary Telxius, to private equity firm, KKR, for EUR 1.275 billion earlier this year. Importantly, Telefonica and AT&T Inc. T are the other two major wireless operators in Mexico beside America Movil.
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 wireless networks for optimal use of smartphones and tablets. Also the wireless penetration rate is relatively lower in the country compared to the U.S. We, therefore, expect increased competition in this market going forward.
Price Performance of America Movil
America Movil is one of the strongest performers in 2017. Year to date, the stock price of the company gained a significant 29.99%, well above the Zacks categorized Non-US wireless industry that witnessed only 1.87% growth in the same time frame. America Movil currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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