America Movil Moves to Purchase the Remaining 40% of Telmex
Last year, America Movil acquired a 60 percent stake in Telmex, as part of an effort to create a more powerful wireline/wireless carrier to deal with a growing base of competitors.
Under its current plan that was filed on the Mexican stock exchange, America Movil will pay 90 cents a share for Telmex. Of course, the deal has to gain regulatory approval and the company has not indicated a closing date.
If America Movil is successful, the full acquisition of Telmex, which has seen voice service declines as subscribers jump to savvy cable competitors, would be able to more effectively compete against cable competitors such as Grupo Televisa SA (TLEVICPO), which is already offering triple play (voice, video and data) service with plans to offer wireless services soon.
Video service, however, continues to be one of Telmex's missing competitive links. In May, Mexico's Communications and Transport Ministry rejected Telmex's video service proposal because it did not satisfy necessary regulatory requirements, including interconnection services to its competitors.
Financial analysts believe that it if the Telmex deal is approved, it will take time for it to pay off.
"I think it's negative news for America Movil, which already owned 59 percent of Telmex ... America Movil would absorb the whole loss that Telmex carries," said Valeria Romo, analyst from brokerage Monex in a Reuters article. "In the long term, being the full owner of Telmex will mean it can exploit 4G technology."
At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.