Mexican telecom giant, America Movil (AMX) reported it will invest $1 billion in 2011 toward telecommunication services in Argentina. The investments will be primarily dedicated toward developing cellular, broad brand and fourth generation (4G) mobile services.
Last month, the Mexican business tycoon and owner of America Movil, Carlos Slim, projected an estimated investment of $1.5 million in Argentina. Further, he also announced investment plans of $2 billion in Chile spread through four years to bolster international voice and data networking services.
America Movil currently dominates the Latin American telecom market with approximately 284 million subscribers including 231 wireless subscribers, 28.7 fixed line subscribers, 13.6 broad band and 10.8 PayTV clients.
America Movil continues to invest aggressively to expand its cellular network in this region and develop new generation broadband networks, both in fixed and mobile platforms.The company invested approximately $6.5 billion last year and expected to spend approximately $8.5 billion over the year for the expansion of data network. This data network is expected to boost data revenue through Alcatel-Lucent mobile backhaul solution that will deploy next-generation mobile services in Latin America. America Movil expects the Latin American wireless market to add over 150 million subscribers in the next four years.
In January 2011, America Movil acquired the license to operate in Costa Rica. With this America Movil became one of the first companies to invest in the significantly untapped wireless market in Costa Rica. America Movil has also expanded its presence outside Mexico and Latin America, with business acquisitions in the Caribbean and Central American markets such as Puerto Rico, Jamaica and Nicaragua.
However, a highly competitive telecom market with companies like Telefonica (TEF) and Grupo Televisa (TV) in Latin America, subsidies on handsets, reduced mobile termination rates and regulatory issues remain headwinds for the company. Additionally, a deteriorating fixed line subscriber base, with customers migrating to cellular services at an accelerated rate might limit the company's financials in the near term.
Thus, we currently maintain a long term Neutral recommendation on America Movil supported by a Zacks #3 Rank (Hold).
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