Mexican telecom behemoth America Movil SAB’s (AMX - Free Report) wireless wing Telcel recently entered into a wireless roaming agreement with AT&T Inc. (T - Free Report) for its Mexican users. Notably, Telcel is the undisputed leader in the Mexican wireless market with almost 68% of the market share. In 2015, the United States telecom giant AT&T entered the Mexican telecom industry after the acquisition of Grupo Iusacell and Nextel de Mexico.
This is not the first time that America Movil has entered into wireless network sharing agreement with other telecom operators. In 2016, Spanish telecom giant Telefonica SA (TEF - Free Report) , which commands around 20% market share in Mexico, also entered into a similar kind of agreement with Telcel.
In 2014, the government of Mexico introduced a few major reforms within its telecom sector. Per the Mexican telecom regulator, Federal Telecommunications Institute’s (IFT) reformed norms, the maximum hold of a company in any specific market has been restricted to 50%. In order to increase competition, Mexican cable MSO (multi service operator) Grupo Televisa S.A. (TV - Free Report) , has also received a go-ahead from the IFT to enter the wireless space. However, the company is yet to take any decision in this regard.
However, America Movil’s wireline and wireless divisions control, about 66% and 68%, respectively, of the Mexican telecom space. This has induced IFT to identify the company as a dominant player in the market. Additionally, to comply with the reforms, the IFT has banned America Movil from charging national roaming fees. Further, the company will have to share its infrastructure with other operators particularly in the local loop (last mileage) segment.
In 2014, America Movil filed an injunction against the regulator's decision to identify itself as a dominant operator and impose asymmetrical regulations on it. In December 2015, the company listed its wireless tower business – Telesites – which was spun off from the company, on the Mexican stock exchange. The spin-off of the wireless tower division was a strategic move to restrict the company’s market share to the 50% limit imposed by the IFT.
In December 2015, it secured approval from the IFT regarding the prices it can charge as interconnection fees. However, last week, in a landmark judgement, Mexico's Supreme Court delivered a verdict that America Movil should not be barred by law from charging its rivals interconnection fees as per the company’s discretion.
Price performance of America Movil
America Movil is one of the strongest performers in 2017. Year to date, the company’s shares have increased a significant 49.01%, well above the industry’s gain of a mere 3.16%. The stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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