AmericaMovil (AMX - Analyst Report), one of the leading telecom carriers in South America, has recently gained a 15-year license to market its cable television in Costa Rica. The multi-year agreement also has a renewal option for another ten years, depending on the company’s profitability from the new business. We expect the contract to not only support revenue generation but also expand Pay TV services of the company.
Winning the license in Costa Rica provides a breath of fresh air to the company, which has been fighting an uphill battle with the regulators for a cable TV license in Mexico. The company remains the biggest telecom operator in the Mexican market. However, it failed to tap one of the most lucrative cable businesses in the Mexican market, mostly captured by Grupo Televisa SAB (TV - Analyst Report).
Moving to the Costa Rican market, America Movil currently operates its wireless business in this country though its subsidiary Claro. Given the new agreement, the company would finally make its foray in to the cable TV business in the country, currently dominated by DIRECTV and Televisa under the brand name Sky, followed by Dish Network Corp. (DISH - Analyst Report).
We believe the new business would boost the company’s competitive position in the Latin American Pay TV market. Besides winning new contracts, the company is also focusing on its acquisition strategy in order to tap more opportunities. In Jan 2012, the company collaborated with Claxson Interactive Group to acquire DLA Inc. that adds video-on-demand service on cable-TV channels in Latin America. It also acquired Pay-TV firm Net Servicos, the largest multi-service cable company in Latin America.
The company’s recent actions to improve its entertainment business include the proposed takeover of the media-and-advertising unit of Mexican live-entertainment company Corporacion Interamericana de Entretenimiento SAB for MXN$1.67 billion ($131 million). The acquisition is expected to be completed by the second half of 2013, pending necessary approvals.
Currently, America Movil carries a Zacks Rank #3 (Hold).