09/12/07


América Móvil/Telmex x Telefonica: Who'll win this battle?

 

América Móvil and Telmex, Carlos Slim (mexican business man) companies, has been battling telecom market leadership in Latin America.

 

 

América Móvil/Telmex group exceeds Telefonica in cell phone quantity and fixed telephones in Latin America. This leadership is because of its operations in Mexico where the group has 46.1 million cell phones and 18.2 million fixed telephones.

 

Telefonica exceeds América Móvil and Telmex in South Americal. Telefonica is leader in cellulars market share in Brazil, Argentina, Venezuela, Chile and Peru. América Móvil only leads in Colombia and Ecuador.

 

In fixed telephone Telefonica acquired, in the privatization process in the 1990, operators in Brazil, Argentina, Chile, Peru and Colombia. Telmex, started to operate late in South America, and venture with Embratel.

 

In Brazil Telefonica exceeds América Móvil (Claro) in cell phone' quantity and Telmex (Embratel) in fixed telephones.

 

América Móvil/Telmex x Telefonica in Brazil (Jan-Jun/07)

 

Thousands
Telefonica
América Móvil/
Telmex
Cell Phones
30.2*
26.3
Fixed
12.0
2.2
Net Revenue
(Thousands US$)
4,904 *
4,430

* Don't consider 4.8 million cell phones of Telemig/Amaz celular

** net revenue consolidatged in Telefonica. Just considers 50% of Vivo's revenue.

 

 

In world, Telefonica exceeds América Móvil/Telmex in cell phones, fixed phones and revenue, although having lesser market cap.

 

 

Telefonica has a growth strategy. With the acquisition of the group O2 in 2006 and participation in Telecom Italia in 2007 Telefonica is ready to become one of the "european" operators which must dominate the region. Europe is starting an european consolidation process of the privatized national operators of each country.

 

In Latin America the main priority of Telefonica is to acquire the participation of Portugal Telecom in Vivo. Its situation can be complicated in Brazil and Argentina in case of regulators impose restrictions to the entrance of Telefonica in Telecom Italia. The worse situation to Telefonica would be these actives being acquired by mérica Móvil/Telmex.

 

América Móvil/Telmex the growth strategy per acquisitions is reaching the limit. Except some acquisitions that América Móvil has been doing in Caribbean, don't have big operators to be acquired in Latin America. Now on the growth of the group in Latin America will be organic, whoch explains Claro's aggressive strategy in Brazil and CTI in Argentina. América Móvil also pretends to be the first on 3G implantation in the region starting the operation in selected cities in 2007.

 

An expansion of the group out of Latin America can be difficult. Working in the United State's market would be a competition with AT&T which has around 23% of the groups vote capital. Already invested in Europe trying to acquire Telecom Italia resulted in a big reaction of italian authorities.

 

Although international presence of 58.9% revenue of América Móvil/Telmex still comes from Mexico where it has 74% cell phones and 91% fixed telephones.

 

Total revenue of the group: Revenue Participation

%
Latin America
País de origem
Brazil
América Móvil/Telmex
100%
58,9%
20,8%
Telefonica
34,6%
36,6%
13,3%

 

Telefonica has 36.6% of its revenue from Spain where has 46% cellulars and 87% fixed telephones.

 

 

You could ask:

  • Why América Móvil/Telefonica has market cap exceeding telefonica? Would you buy shares from whom?
  • Who'll win leadership battle in Latin America telecom market?
  • How the entrance of these companies in the Pay TV market change this situation? And what about the new technologies 3G, wimax and VOIP?

 

 

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