Mexican telecom giant America Movil (AMX) has launched a bid offer of MXN$10.50 per share to acquire the entire ownership of its fixed-line operation Telefonos de Mexico SAB (TMX), or Telmex.
Last week, America Movil declared its plan to launch the bid in mid-November. However, it now expects the expiry of the bid offer on November 11, 2011. The company disclosed its plans to acquire Telmex back in August.
This prompted one of the major stakeholders, AT&T Inc. (T) to sell its 8.5% stakes in the unit for $1.4 billion, representing a gain of approximately 1% to 3% per share on sale. Now, if America Movil manages to clinch the remaining 40% stake in Telmex, it will delist the unit from various markets where it presently trades.
Given the dwindling performance of Telmex due to the falling number of fixed line subscribers, America Movil intends to bring it under its wing and subsequently consolidate its wireless, fixed-line, and Internet services in Mexico. The strategy will not only uphold the declining assets in the fixed line business but also provide a competitive advantage over the likes of Grupo Televisa (TV).
Apart from the Mexican market, America Movil also targets the Brazil telecom market, which remains a core competitive area, next to Mexico. To consolidate its business in the Brazilian market, the company aims to purchase 20% stock of StarOne S.A (a satellite services provider in Brazil) by the third quarter of 2011.
The company already holds 80% of the stock through its Brazilian subsidiary Embratel. Additionally, the company has also acquired Pay TV firm Net Servicos, the largest multi-service cable company in Latin America.
Currently, we maintain a long-term Neutral recommendation on America Movil supported by a Zacks #3 Rank (Hold).
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
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