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America Movil's Telmex Granted Extended Concession by IFT
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In a favourable turn of events, Telmex, the fixed-line telephone subsidiary of the Mexican telecom giant America Movil SAB (AMX - Free Report) has been granted extended validity for its concession by Mexican telecom regulator, Federal Telecommunications Institute (IFT). Recently, the regulatory body agreed to extend the validity of Telmex’s concession to build, install, maintain, operate and exploit a public telephone network for another 30 years starting from Mar 11, 2026.
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 as the company’s wireline division Telmex and wireless division Telcel controls 66% of the Mexican market, respectively. Per the IFT’s reformed norms, the maximum hold of a company in the market has been restricted to 50%.
As part of these reforms, the IFT banned America Movil from charging national roaming fees. Further, the company will now have to share its infrastructure with other operators particularly in the local loop (last mileage) segment. Additionally, interconnection fees levied by the company were also put under close scrutiny.
Meanwhile, the Mexican telecom market has become intensely competitive. Beside incumbent firm Telefonica SA (TEF - Free Report) , U.S. telecom behemoth AT&T Inc. (T - Free Report) has entered into the fray. Further, the IFT granted permission to cable TV and media giant Grupo Televisa SA (TV - Free Report) to start wireless operation. However, the company is yet to take any decision in this regard.
Price Performance of America Movil
Share of America Movil is one of the weak performers in 2016. Year to date, the stock lost 8.96%, much lesser than the Zacks categorised non-US wireless industry which lost 5.57% in the same time frame.
Nevertheless, America Movil’s prepaid mobile business is the U.S. is performing well. Moreover, the company has entered into an agreement with Telefonica to offer nationwide mobile roaming service to the latter. Also, Mexico’s telecom sector has witnessed has witnessed strong growth in 2016. Continuation of this momentum will help America Movil to expand its top-line growth. We believe these positive factors are the primary reasons for the stock to carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In order to avoid the stringent regulatory measures, America Movil has taken several initiatives in the last couple of years. In Dec 2015, the company spun-off the wireless tower division Telesites and is likely to divest some non-core wireless as well as fixed-line assets in the future. In Nov. 2015, America Movil received approval from the IFT regarding the prices it can charge as interconnection fees. The company’s decision to reduce its fixed-line-to-mobile call rates in phased manner reflects its compliance with the regulations.
Moreover, in Sep 2016, Telmex decided to gradually lower its rates for calls from land lines to mobile phones by about half by 2018. Telmex reduced its call rates by 30% on Aug 1, 2016, which will be followed by an additional 15% reduction on Jan 1, 2017 and another 15% cut on Jan 1, 2018. Ultimately, the pre-tax call rate from landline to mobile phones will come down to MXN 0.342 per minute in 2018 from MXN 0.6763 per minute in Sep 2016.
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America Movil's Telmex Granted Extended Concession by IFT
In a favourable turn of events, Telmex, the fixed-line telephone subsidiary of the Mexican telecom giant America Movil SAB (AMX - Free Report) has been granted extended validity for its concession by Mexican telecom regulator, Federal Telecommunications Institute (IFT). Recently, the regulatory body agreed to extend the validity of Telmex’s concession to build, install, maintain, operate and exploit a public telephone network for another 30 years starting from Mar 11, 2026.
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 as the company’s wireline division Telmex and wireless division Telcel controls 66% of the Mexican market, respectively. Per the IFT’s reformed norms, the maximum hold of a company in the market has been restricted to 50%.
As part of these reforms, the IFT banned America Movil from charging national roaming fees. Further, the company will now have to share its infrastructure with other operators particularly in the local loop (last mileage) segment. Additionally, interconnection fees levied by the company were also put under close scrutiny.
Meanwhile, the Mexican telecom market has become intensely competitive. Beside incumbent firm Telefonica SA (TEF - Free Report) , U.S. telecom behemoth AT&T Inc. (T - Free Report) has entered into the fray. Further, the IFT granted permission to cable TV and media giant Grupo Televisa SA (TV - Free Report) to start wireless operation. However, the company is yet to take any decision in this regard.
Price Performance of America Movil
Share of America Movil is one of the weak performers in 2016. Year to date, the stock lost 8.96%, much lesser than the Zacks categorised non-US wireless industry which lost 5.57% in the same time frame.
Nevertheless, America Movil’s prepaid mobile business is the U.S. is performing well. Moreover, the company has entered into an agreement with Telefonica to offer nationwide mobile roaming service to the latter. Also, Mexico’s telecom sector has witnessed has witnessed strong growth in 2016. Continuation of this momentum will help America Movil to expand its top-line growth. We believe these positive factors are the primary reasons for the stock to carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In order to avoid the stringent regulatory measures, America Movil has taken several initiatives in the last couple of years. In Dec 2015, the company spun-off the wireless tower division Telesites and is likely to divest some non-core wireless as well as fixed-line assets in the future. In Nov. 2015, America Movil received approval from the IFT regarding the prices it can charge as interconnection fees. The company’s decision to reduce its fixed-line-to-mobile call rates in phased manner reflects its compliance with the regulations.
Moreover, in Sep 2016, Telmex decided to gradually lower its rates for calls from land lines to mobile phones by about half by 2018. Telmex reduced its call rates by 30% on Aug 1, 2016, which will be followed by an additional 15% reduction on Jan 1, 2017 and another 15% cut on Jan 1, 2018. Ultimately, the pre-tax call rate from landline to mobile phones will come down to MXN 0.342 per minute in 2018 from MXN 0.6763 per minute in Sep 2016.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>