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America Movil (AMX) to Face Tough Antitrust Rules in Mexico
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Mexican telecom behemoth America Movil SAB (AMX - Free Report) recently declared that the Mexican telecom regulatory authority – popularly known as the Federal Telecommunications Institute (IFT) – has stepped up antitrust rules against the company. The IFT wants America Movil to separate out a large part of its fixed-line infrastructure. Notably, America Movil has both wireline (Telmex) and Wireless (Telcel) operations.
In 2014, the government of Mexico introduced major reforms within telecommunications sector. The IFT identified America Movil as a dominant player in this market. Both Telmex and Telcel control nearly 70% of the Mexican market. As per the IFT’s reformed norms, the maximum hold of a company in the market has been restricted to 50%. Recently, the IFT has evaluated the stringent measures that were imposed on the company on Mar 2014.
As part of these reforms, the IFT has banned America Movil from charging national roaming fees. Further, the company will now have to share infrastructure with other operators particularly in the local loop (last mileage) segment. Interconnection fees charged by the company are under close scrutiny as well.
In a bid to avoid stringent regulatory measures, America Movil has taken several steps over the last couple of years. In Dec 2015, the company spun-off the wireless tower division Telesites and is likely to divest some non-core wireless and fixed-line assets in the future. In Nov 2015, America Movil received approval from the IFT regarding the prices it can charge as interconnection fees.
In Jul 2016, Telmex decided to gradually lower rates for calls from land lines to mobile phones by about half by 2018. The pre-tax call rate from landline to mobile phones will come down to MXN 0.342 ($0.0185) per minute in 2018 from the current rate of MXN 0.6763 per minute. The company’s decision to reduce fixed-line-to-mobile call rates in phased manner bears testimony of its compliance with regulations.
Meanwhile, the Mexican telecom market has become intensely competitive. Beside incumbent firm Telefonica SA (TEF - Free Report) , U.S. telecom behemoth AT&T Inc. (T - Free Report) has entered into the fray. Further, the IFT granted permission to cable TV and media giant Grupo Televisa SA (TV - Free Report) to start wireless operation. However, the company is yet to take any decision in this regard.
According to Reuters report, the IFT recently ordered America Movil to create an independent entity from fixed-line unit Telmex to offer competitors access to infrastructure. Nevertheless, the company has criticized the latest IFT resolution and may legally challenge the decision.
Price Performance of America Movil
In the last six months, the stock price of America Movil gained a considerable 16.12% in contrast to the Zacks categorised Non-US wireless industry’s decrease of 6.41% in the same time frame. America Movil’s prepaid mobile business is the U.S. is performing well. Further, Mexico’s telecom sector has witnessed strong growth in 2016. Continuation of this momentum will help the company to expand top-line growth.
Nevertheless, America Movil, which has been ruling the Mexican market for quite some time now, has been witnessing a decline in profit margin in the region. Stringent regulatory measures and intensifying competition are the primary factors behind the underperformance. We believe these are primary reasons behind the stock to carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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America Movil (AMX) to Face Tough Antitrust Rules in Mexico
Mexican telecom behemoth America Movil SAB (AMX - Free Report) recently declared that the Mexican telecom regulatory authority – popularly known as the Federal Telecommunications Institute (IFT) – has stepped up antitrust rules against the company. The IFT wants America Movil to separate out a large part of its fixed-line infrastructure. Notably, America Movil has both wireline (Telmex) and Wireless (Telcel) operations.
In 2014, the government of Mexico introduced major reforms within telecommunications sector. The IFT identified America Movil as a dominant player in this market. Both Telmex and Telcel control nearly 70% of the Mexican market. As per the IFT’s reformed norms, the maximum hold of a company in the market has been restricted to 50%. Recently, the IFT has evaluated the stringent measures that were imposed on the company on Mar 2014.
As part of these reforms, the IFT has banned America Movil from charging national roaming fees. Further, the company will now have to share infrastructure with other operators particularly in the local loop (last mileage) segment. Interconnection fees charged by the company are under close scrutiny as well.
In a bid to avoid stringent regulatory measures, America Movil has taken several steps over the last couple of years. In Dec 2015, the company spun-off the wireless tower division Telesites and is likely to divest some non-core wireless and fixed-line assets in the future. In Nov 2015, America Movil received approval from the IFT regarding the prices it can charge as interconnection fees.
In Jul 2016, Telmex decided to gradually lower rates for calls from land lines to mobile phones by about half by 2018. The pre-tax call rate from landline to mobile phones will come down to MXN 0.342 ($0.0185) per minute in 2018 from the current rate of MXN 0.6763 per minute. The company’s decision to reduce fixed-line-to-mobile call rates in phased manner bears testimony of its compliance with regulations.
Meanwhile, the Mexican telecom market has become intensely competitive. Beside incumbent firm Telefonica SA (TEF - Free Report) , U.S. telecom behemoth AT&T Inc. (T - Free Report) has entered into the fray. Further, the IFT granted permission to cable TV and media giant Grupo Televisa SA (TV - Free Report) to start wireless operation. However, the company is yet to take any decision in this regard.
According to Reuters report, the IFT recently ordered America Movil to create an independent entity from fixed-line unit Telmex to offer competitors access to infrastructure. Nevertheless, the company has criticized the latest IFT resolution and may legally challenge the decision.
Price Performance of America Movil
In the last six months, the stock price of America Movil gained a considerable 16.12% in contrast to the Zacks categorised Non-US wireless industry’s decrease of 6.41% in the same time frame. America Movil’s prepaid mobile business is the U.S. is performing well. Further, Mexico’s telecom sector has witnessed strong growth in 2016. Continuation of this momentum will help the company to expand top-line growth.
Nevertheless, America Movil, which has been ruling the Mexican market for quite some time now, has been witnessing a decline in profit margin in the region. Stringent regulatory measures and intensifying competition are the primary factors behind the underperformance. We believe these are primary reasons behind the stock to carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>