Changes in the Mexican regulatory environment have begun taking its toll on the telecom giant, America Movil S.A.B (AMX - Analyst Report). The company has been reportedly planning to dispose off its assets to counter possible risks that stand in the way of its profits, owing to restrictive new laws thrust upon large telecom companies in the country. Further, America Movil is planning to split wireless towers from its existing business and is also seeking to renounce its rights to gain control on satellite-TV operator – Dish Mexico.
The decision will likely lead America Movil to divest some of its assets to a new independent company, which will lower its market share below 50% to blend in with current regulatory requirements. At the moment, the company boasts a large share of Mexico’s landline and mobile-phone subscribers, which makes it all the more vulnerable to the new telecom regulations. America Movil’s wireline division – Telmex – currently controls around 80% of the Mexican fixed-line business, whereas its wireless equivalent – Telcel – holds about 70% market share.
Other behemoths in Mexico also facing the brunt of regulators are Telefonica S.A. (TEF - Analyst Report), NII Holdings Inc. (NIHD - Analyst Report) and Grupo Televisa S.A.B. (TV - Analyst Report).
While America Movil remains in news for approaching IFT (Instituto Federal de Telecomunicaciones) with its new restructuring structure, the company is yet to come out with a concrete plan, according to the reports. Further, the company has not specified any details regarding the sale of its assets.
Under the new law, America Movil has 365 days to implement its restructuring plan and during this period, the company will remain subjected to prohibitions as a dominant carrier in Mexico.
According to market news, America Movil has lost around $17 billion in market value since the proposal of the new law by President Enrique Pena Nieto. We believe if the company fails to abide by the new regulations and no concrete restructuring takes place within the stipulated time, America Movil may experience further deterioration in market value going forward.
At present, America Movil has a Zacks Rank #3 (Hold).