America Movil S.A.B. (AMX - Free Report) has been granted exclusive rights by the International Olympic Committee to telecast 2014 Winter Olympics in Russia and the 2016 Olympics in Brazil. The rights cover broadcast in Latin America except for Brazil. The financial terms of the deal were not disclosed. However, we assume the news remains a sigh of relief as it can catapult America Movil’s suffering market valuation due to proposed regulatory reforms in Mexico last week.
America Movil suffered a blow when the New Bill proposed by Mexican President, Enrique Pena Nieto, highlighted the implementation of the asymmetric regulations on top of several other reforms. Following this ruling, America Movil experienced a significant decline in its share price that swept of billions of dollars in the market valuation of the company.
However, we expect exclusive broadcast rights to remain accretive especially to the company’s PayTV business. The company’s efforts to expand its PayTV platform in order to offset the slump in Latin America wireless growth remain encouraging. America Movil took a major step in fostering its PayTV services by acquiring PayTV firm Net Servicos in Mar 2011. The transaction boosted its service revenues with the addition of PayTV service.
Despite facing severe regulatory challenges, we believe America Movil continues to dominate the Latin American telecom market. It remains focused on expanding its network capabilities as it aggressively invests in developing cellular networks in the geographical zone. America Movil also focuses on building new generation broadband networks, both in fixed and in the mobile platforms. This will require an investment of approximately $8 billion over the next three years, as it will require the expansion of data networks.
However, the company faces stiff competition from carriers like Telefonica S.A. (TEF - Free Report) , Grupo Televisa S.A. (TV - Free Report) and NII Holdings Inc. (NIHD - Free Report) in Latin America that can impede its growth prospects.
America Movil has a Zacks Rank #5, implying a Strong Sell rating.