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AT&T Expands in Latin America

Zacks Equity Research

AT&T, Inc. (T) has been reportedly planning its expansion in Latin America markets through its collaboration with Leading Latin American telecom carrier – America Movil (AMX).

AT&T now expects to reach beyond key countries like Mexico and Brazil and establish its presence in countries like Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Peru and Uruguay. The company already entered into a network sharing agreement with America Movil in Nov 2012, which allows them to expand and enhance networks within Latin America and offshore key markets throughout the world, including growth regions like, Asia and the Middle East.

We believe AT&T’s strategic alliance with America Movil to grow in South America remains reflective of  Verizon Communications Inc.’s (VZ) intention to step into the Canadian Telecommunication market.

AT&T and Verizon have already achieved significant success in their home ground and are seeking new markets to grow beyond the mature and highly competitive telecom industry in the U.S. However, while AT&T banks on its collaboration with top players like America Movil, Verizon is looking forward to acquisitions, creating a significant threat for three big Canadian companies like TELUS Corporation (TU), BCE, Inc. (BCE) and Rogers Communications Inc. (RCI). Further, Verizon is also considering participation in spectrum auction by the Canadian government.

Coming back to AT&T, although nothing much has been disclosed by the company on its expansion policies or its deal terms with America Movil, it is anticipated that AT&T can also seek to establish itself in Europe through its tie up with the latter.

In Jun 2012, America Movil increased its minority stake in Koninklijke KPN NV (a Dutch telecom company) to 28% from 4.8% and assimilated a 22% stake in Telekom Austria AG, intensifying its foray into the European market. Given America Movil’s growing presence in Europe, we believe it is much likely for AT&T to join forces for invading the European telecom market.

AT&T has a Zacks Rank #3 (Hold).

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