America Movil Plans To Launch 4G Services After Mexico Spectrum Auction

America Movil SAB (AMX, AMOV, AMX.MX), Latin America's No. 1 wireless carrier by subscribers, said Friday it plans to eventually launch fourth-generation mobile services in Mexico after it aggressively bid for additional wireless spectrum in a government-sponsored auction earlier this month.

"We don't know exactly when, but we are reviewing when it would be good for [Mexico unit] Telcel to start putting in that infrastructure. It would be an alternative to increase the data side of our business, which is growing a lot," Chief Executive Daniel Hajj said during a conference call to discuss the company's second-quarter financial results.

Fourth-generation, or 4G, wireless networks are expected to provide broadband Internet access and streaming multimedia services at considerably faster speeds than is currently possible with the 3G networks in use today.

Last week, America Movil submitted the highest bids for 21 blocks of 10MHz in the 1710MHz-2170MHz frequency band, offering to pay 3.79 billion pesos ($297 million). The bidding rounds closed Monday night and telecommunications regulator Cofetel has 30 days to announce the final winners.

America Movil's talk about 4G comes at a time when two of its three competitors in Mexico haven't even launched 3G networks yet due to spectrum constraints.

However, competition in Mexico's wireless industry, where America Movil has about a 70% market share with just over 61 million subscribers, is set to increase following two wireless spectrum auctions.

America Movil's arch rival in Latin America, Spain's Telefonica SA (TEF, TEF.MC), bid MXN4.13 billion to obtain the spectrum it needs to launch a nationwide 3G network, while a consortium of media giant Grupo Televisa SA (TV, TLEVISA.MX) and the Mexican arm of wireless carrier NII Holdings (NIHD) was the sole bidder for a nationwide license in the 1710MHz-2170MHz band.

"We have a lot of competition in Mexico. If there is going to be a new entrant in the market, well, we need to provide a better service, better quality, more coverage and a lot of data capacity," Hajj said when asked how the company is preparing for more competition in its biggest market.

America Movil, which had 211.3 million wireless subscribers in 17 countries in the Americas at the end of June, spent billions of dollars in 2007 and 2008 to deploy 3G networks in nearly all of its markets in Latin America to provide wireless broadband.

The company is betting that demand for data services will boom in coming years as the falling cost of wireless access devices such as netbooks and smartphones put them within reach of lower-income Latin American consumers, many of whom may not have a fixed phone line or a home computer.

Data services accounted for 22% of the company's MXN88.77 billion in service revenue during the second quarter, up from 17.6% a year earlier.

America Movil will make a bigger push to offer data plans to its postpaid subscriber base, Hajj said. "In prepaid, there are going to be a lot of people who are going to use their phones to use data," he added.

America Movil said Thursday that its net profit fell 17.9% year-on-year to MXN18.73 billion in the second quarter due to the absence of big foreign-exchange gains it reported a year earlier. Total sales rose 11.9% to MXN100.9 billion as the company added 4.9 million new subscribers in the quarter.

The company's local L shares were trading 1% lower at MXN32.27 around midday Friday. The shares are up about 4.8% so far this year, compared with a 1.4% gain in Mexico's benchmark IPC equity index.

Investors' hopes that management would offer more details on their expectations of synergies following last month's tender offers for controlling stakes in South American fixed-line phone company Telmex Internacional SAB (TII, TELINT.MX) and holding company Carso Global Telecom SAB (CGTVY, TELECOM.MX) were dashed as Hajj and Chief Financial Officer Carlos Garcia Moreno made only vague comments about the benefits of combining operations in Brazil.

America Movil now owns 94.6% of Telmex Internacional and 59.4% of Mexico's biggest fixed-line company, Telefonos de Mexico SAB (TMX, TFONY, TELMEX.MX). The three companies are controlled by Mexican billionaire Carlos Slim.

America Movil will start consolidating the financial results of Telmex Internacional and Telmex in the third quarter.

"The 2Q10 showed a strong old America Movil ex-Brazil. But our buy rating is on the new America Movil, where we still expect four to five years of double-digit growth," UBS telecom analyst Tomas Lajous said in a note Friday.

BBVA Bancomer telecom analyst Andres Coello described America Movil's shares as a "bull trap," and reiterated his underperform rating on the stock.

"Following the spectrum auction, Mexico will experience a sharp rise in competition, while the consolidation of Telmex and Telmex Internacional starting in 3Q will erode the growth profile of the conglomerate," wrote Coello, who recommended that investors take advantage of any positive reaction in the shares to increase short positions on America Movil against the IPC index.

-By Ken Parks, Dow Jones Newswires; 52-55-5980-5177; ken.parks@dowjones.com

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