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America Movil’s ( AMX - Analyst Report ) month-long pursuit to up its stake in Koninklijke KPN NV has finally ended on a positive note. The Mexican Telecom giant increased its stakes in KPN to the target of 27.7%. The company issued a tender offer to acquire the remaining 2.8% for EUR8 per share that expired on Wednesday. The offer was accepted by 39.66% of all outstanding shares, which was more than enough to raise the company’s interest beyond the target of 28%.
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 totaling €2.64 billion. However, Koninklijke KPN rejected this, citing the offer as under valued. To debar America Movil from raising further stakes, Koninklijke KPN was also planning a spin-off of its German mobile subsidiary E-Plus, allowing potential merger prospects with Telefonica S.A.’s ( TEF - Analyst Report ) German subsidiary O2.
According to reports, the merger of these two German units would have generated €4 billion in annual synergies, thus making it attractive for investors. Koninklijke KPN considered this prospective merger as a significant strategy that would divert shareholders’ attention from America Movil’s offer. The company believed that the merger of E Plus and O2 would have enhanced KPN’s share value, and make America Movil’s offer less attractive or push the offer price higher. However, KPN recently called off its spin off plans citing failure in reaching an agreement with O2 given the current economic backdrop.
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. which offers video-on-demand service on cable-TV channels in Latin America.
America Movil also entered into a partnership with AT&T ( T - Analyst Report ) 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, subjected to 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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