America Movil SAB AMX, the undisputed leader of the Mexican telecom market, has announced that its wireless tower business, which was recently spun off from the company, will be listed on the Mexican stock exchange on Dec 21, 2015. Mexico's National Banking and Securities Commission has authorized the listing of Telesites (the name of the spun-off entity) shares.
Telesites has a portfolio of about 10,800 wireless towers and provides extensive network coverage in Mexico. In Oct 2015, Mexico’s telecom regulatory authority — Federal Telecommunications Institute (IFT) — granted institutional waiver to Telesites to begin operations. Telesites shares will be included in Mexico's benchmark IPC stock index.
In 2014, the government of Mexico introduced major reforms within its telecommunications sector. The IFT identified America Movil as the dominant player in this market. The company’s wireline division, Telmex, currently controls around 80% of the Mexican market, whereas its wireless division, Telcel, holds about a 70% market share. Notably, per the reformed norms, the IFT restricted the maximum hold of a company in the market to 50%.
The IFT has also banned America Movil from charging national roaming fees. Further, the company will have to share its infrastructure with other operators particularly in the local loop (last mileage) segment. Interconnection fees to be levied by the company had also been under close scrutiny. Only last week, America Movil won an approval from the IFT regarding the prices it can charge as its interconnection fees.
The spin-off of the wireless tower division was thus a strategic move taken by America Movil to restrict its market share within the 50% limit imposed by the IFT. The company may also divest some non-core wireless and fixed-line assets in the future in order to comply with the regulatory norms. Telesites will primarily compete with American Tower Corp. AMT which currently operates over 8,000 mobile towers in Mexico.
In Sep 2015, Bloomberg had reported that Spain-based telecom operator Telefonica S.A. TEF is in talks with Telesites to rent the latter’s wireless towers. Telefonica already boasts a strong presence in the Mexican wireless industry commanding a nearly 20% market share.
Earlier this year, U.S. telecom behemoth AT&T Inc. T forayed into the Mexican wireless market following its acquisition of Grupo Iusacell and Nextel Mexico. As per Bloomberg report, AT&T is also reportedly working on a separate deal to rent wireless towers from Telesites.
Mexico is the largest economy in the Latin American region with a growing middle class population that is eager to spend more on high-speed wireless networks for optimal use of smartphones and tablets. Also the wireless penetration rate is relatively lower in the country compared to the U.S. We, therefore, expect increased competition in this market going forward.
America Movil currently carries a Zacks Rank #3 (Hold).
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