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Meanwhile, the price performance of America Movil was impressive over the past three months. The stock gained 11.9%, outshining the Zacks categorized Wireless Non-US industry’s gain of 5.2% over the same time frame.
We believe the company’s continuous participation in spectrum auctions to deploy 4G LTE services and expand its 3G footprint as well as its dominance in the Mexican market were behind the rank upgrade.
What’s Driving America Movil?
America Movil continues to participate in spectrum auctions to deploy 4G LTE services and expand its 3G footprint. Moreover, Telmex, the fixed-line telephone subsidiary of America Movil, has decided to gradually lower its rates by about half for calls from land lines to mobile phones by 2018. The company’s decision to reduce its fixed-line-to-mobile call rates in a phased manner reflects its efforts to comply with regulations.
Increased penetration of 3G data services in Mexico continues to drive data revenues. The company’s iPhone offering has enabled America Movil to counter competition in a more effective manner while boosting customer adoption of 3G services, thereby stimulating ARPU (average revenue per user) growth. The company launched fourth-generation (4G) mobile services in 11 cities across Mexico. Furthermore, the company has introduced LTE services in Brazil where it currently covers 18 cities. We expect the company to perform well in Brazil and Mexico as it continues to focus on winning more contract subscribers, which in turn will minimize churn.
America Movil’s agreement with its closest rival Telefonica SA (TEF) to offer nationwide mobile roaming services looks good. Notably, America Movil currently commands more than 66% of Mexico’s wireless market while Telefonica comes second with over 20% share.
In Jan 2017, America Movil announced that it will launch of a Mexican language TV channel in the U.S. named Nuestra Vision, later this year. Its two major rivals will be Univision Inc., controlled by Mexican media and cable TV giant Grupo Televisa SA (TV - Free Report) and Telemundo, controlled by Comcast Corp. (CMCSA - Free Report) , the largest cable multi service operator and media conglomerate in the U.S.
Some Downturns
The company’s aggressive promotional strategy which includes discounts and subsidized offers continues to hurt its margins. Also, America Movil’s Brazilian operation, Claro, faces competitive threat from Vivo – which is owned by Telefonica Brazil SA (VIV - Free Report) . Meanwhile, U.S. telecom behemoth AT&T Inc.’s (T - Free Report) entry into the Mexican telecom industry with the acquisition of Gurpo Iusacell and Nextel de Mexico was a major setback for America Movil.
America Movil is also focused on shifting its base from Mexico to Brazil through the purchase of Oi S.A. in the wake of declining profits. America Movil’s cash and liquidity position also seem to be major concerns.
Another major setback was the recent imposition of antitrust rules against the company by the Mexican telecom regulatory authority – the Federal Telecommunications Institute (IFT). The IFT wants America Movil to detach a large part of its fixed-line infrastructure. Notably, America Movil has both wireline (Telmex) and Wireless (Telcel) operations.
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Here's Why You Should Buy America Movil (AMX) Despite Risks
On Apr 6, Mexican telecom giant America Movil SAB (AMX - Free Report) was upgraded by a notch to a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, the price performance of America Movil was impressive over the past three months. The stock gained 11.9%, outshining the Zacks categorized Wireless Non-US industry’s gain of 5.2% over the same time frame.
We believe the company’s continuous participation in spectrum auctions to deploy 4G LTE services and expand its 3G footprint as well as its dominance in the Mexican market were behind the rank upgrade.
What’s Driving America Movil?
America Movil continues to participate in spectrum auctions to deploy 4G LTE services and expand its 3G footprint. Moreover, Telmex, the fixed-line telephone subsidiary of America Movil, has decided to gradually lower its rates by about half for calls from land lines to mobile phones by 2018. The company’s decision to reduce its fixed-line-to-mobile call rates in a phased manner reflects its efforts to comply with regulations.
Increased penetration of 3G data services in Mexico continues to drive data revenues. The company’s iPhone offering has enabled America Movil to counter competition in a more effective manner while boosting customer adoption of 3G services, thereby stimulating ARPU (average revenue per user) growth. The company launched fourth-generation (4G) mobile services in 11 cities across Mexico. Furthermore, the company has introduced LTE services in Brazil where it currently covers 18 cities. We expect the company to perform well in Brazil and Mexico as it continues to focus on winning more contract subscribers, which in turn will minimize churn.
America Movil’s agreement with its closest rival Telefonica SA (TEF) to offer nationwide mobile roaming services looks good. Notably, America Movil currently commands more than 66% of Mexico’s wireless market while Telefonica comes second with over 20% share.
In Jan 2017, America Movil announced that it will launch of a Mexican language TV channel in the U.S. named Nuestra Vision, later this year. Its two major rivals will be Univision Inc., controlled by Mexican media and cable TV giant Grupo Televisa SA (TV - Free Report) and Telemundo, controlled by Comcast Corp. (CMCSA - Free Report) , the largest cable multi service operator and media conglomerate in the U.S.
Some Downturns
The company’s aggressive promotional strategy which includes discounts and subsidized offers continues to hurt its margins. Also, America Movil’s Brazilian operation, Claro, faces competitive threat from Vivo – which is owned by Telefonica Brazil SA (VIV - Free Report) . Meanwhile, U.S. telecom behemoth AT&T Inc.’s (T - Free Report) entry into the Mexican telecom industry with the acquisition of Gurpo Iusacell and Nextel de Mexico was a major setback for America Movil.
America Movil is also focused on shifting its base from Mexico to Brazil through the purchase of Oi S.A. in the wake of declining profits. America Movil’s cash and liquidity position also seem to be major concerns.
Another major setback was the recent imposition of antitrust rules against the company by the Mexican telecom regulatory authority – the Federal Telecommunications Institute (IFT). The IFT wants America Movil to detach a large part of its fixed-line infrastructure. Notably, America Movil has both wireline (Telmex) and Wireless (Telcel) operations.
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 >>