AMX America Movil SAB de CV

Mexican Telecom giant America Movil (AMX) has raised its capital interest to 7.9% in a Dutch telecommunications company, Koninklijke KPN NV. Previously, America Movil owned a 4.8% stake in Koninklijke KPN. The company bought 8,000,000 ordinary shares off exchange and now holds a total of 112,532,225 ordinary shares in Koninklijke KPN.

In May, America Movil offered to increase its minority stake in Koninklijke KPN NV (a Dutch telecommunications company) to 28% at €8.0 per share, for an offer totalling €2.64 billion. However, Koninklijke KPN rejected this, citing the offer as under valued. Meanwhile, Koninklijke KPN is looking forward to a spin-off of its German mobile subsidiary E-Plus allowing potential merger prospects with Telefonica S.A.’s (TEF) German subsidiary O2.

According to market reports, the merger of these two German units will generate €4 billion in annual synergies making it attractive for investors. Koninklijke KPN considers this prospective merger as a significant strategy that would divert shareholders’ attention from America Movil’s offer.

The company believes that the merger of E Plus and O2 will also enhance KPN’s share value, and make America Movil’s offer less attractive or push the offer price higher. Currently, shareholders interest in selling stakes to America Movil outside the regular market trading lies in a significant threat that would shift the majority of the decision making power at KPN to Movil.

Acquisition plays a key role in driving growth at America Movil. Last year, the company acquired Pay-TV firm Net Servicos, the largest multi-service cable company in Latin America. In January, the company collaborated with Claxson Interactive Group to acquire DLA Inc. that adds video-on-demand service on cable-TV channels in Latin America.

America Movil also entered into a partnership with AT&T (T) in November last year, to expand its reach in emerging markets in Asia and the Middle East. America Movil will use AT&T's global network infrastructure to provide Internet services worldwide. In exchange, the company will offer virtual private network services to AT&T’s multinational clients operating in Latin America.

Going forward, America Movil’s Tracfone plans to acquire Simple Mobile, upon regulatory approval. Recently, America Movil also acquired a 4.1% stake in Austria’s biggest telecom company Telekom Austria.

We expect the company to continue focusing on its acquisition strategies in order to stay afloat in a highly competitive telecom market and tap the opportunities in wireless services and pay-TV business.

We currently maintain a long-term Neutral recommendation on America Movil. For the short term (1-3 months), the stock has a Zacks #3 Rank (Hold).

 
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