The second-largest U.S. mobile service provider AT&T Inc. (T) and the Mexican telecom giant America Movil (AMX) entered into a contract to share each other networks.
The partnership allows both companies to expand and enhance their respective networks in key markets throughout the world, including growth regions like Latin America, Asia and the Middle East.
As per the terms of the agreement, AT&T will expand its presence in Latin America using America Movil networks in 15 countries. Initially, AT&T will offer virtual private network services to its multinational clients operating in Latin America and gradually expand its offering to a host of advanced Internet services.
On the other hand, America Movil will use AT&T's global network infrastructure to provide Internet services in the U.S. and rest of the world. Further, the two companies will be able to integrate the latest technologies into their networks.
AT&T is working on a number of strategies to tap opportunities in the wireless data market. The company is steadily broadening its global footprint to strengthen its competitive position against its major rival Verizon Communications (VZ). AT&T launched its 4G Long-Term Evolution wireless networks in the U.S. in September. Currently, the company covers nine markets and aims to reach 15 markets by the end of this year. In addition, AT&T is taking advantage of the rapidly evolving managed hosting and cloud services businesses. The company also seeks to enter into the hotel WiFi (wireless broadband) business.
Expansion is also part of America Movil’s growth story. The Mexican telecom heavyweight focuses on spreading in Latin America and overseas through several acquisitions and partnerships. This effort has strengthened its competitive position and would also boost its future profitability. Further, America Movil is gaining share from the increased penetration of 3G data services in Mexico. The company also looks to expedite revenue growth with the launch of its 4G mobile services in Mexico next year.
We are maintaining our long-term Neutral recommendation on both AT&T and America Movil with the Zacks #3 (Hold) Rank.
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