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Second-largest U.S. telecom carrier, AT&T Inc. (T - Analyst Report) has offloaded 7% of its stake in the largest Mexican operator America Movil S.A.B de C.V. (AMX - Analyst Report), raising about $564 million.  

AT&T has sold 540 million shares in America Movil, bringing its overall holdings in the Latin American carrier to a historic level of 9%. However, post the stake reduction, AT&T will remain the second-largest shareholder behind billionaire owner Carlos Slim Helu.

Dallas-based AT&T has announced that the stake sale is part of the company’s effort to rebalance its asset level and use the cash for general corporate purposes. The U.S. telecom behemoth has sold various land and tower assets in the past one year and is expected to sell some of its other none-core assets over the next couple of years. Nevertheless, the company will continue to have two members on the board of America Movil.

The stake sale was executed between May 7 and Jun 4, 2013.In this period, America Movil’s share price plummeted nearly 9.2%. AT&T’s share price fell 4.9% within the same time frame.

America Movil has been struggling in the Mexican market because of the regulatory reforms that aims to bring more uniformity and transparency in the sector and curb concentration of power that lies with predominant players. This has impacted the company’s results as America Movil reported an annualized decline of 13.6% in the bottom line in its recently concluded quarter.

Following the weak results and the unfavourable regulatory reforms, America Movil experienced a significant decline in its share price that diminished its market value by billions of dollars. Since then, the company has aggressively followed a share repurchase policy to mend the loss and has reduced its share outstanding by 3.7%.

At the end of the first quarter, AT&T had $3.9 billion in cash and cash equivalents. We believe that the cash generated from the divestment will not only improve its liquidity position but will also allow it to hedge some of the risks that America Movil is currently facing.

AT&T currently carries a Zacks Rank #3 (Hold). Among other stocks, Telus Corp. (TU - Analyst Report) and Telefonica Brazil S.A. (VIV - Analyst Report) carry a Zacks Rank #2 (Buy) and is worth considering.

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