Latin Telecom Consolidation In Wake Of America Movil Buys

NEW YORK -(Dow Jones)- With America Movil's (AMX) three acquisitions in as many months, Latin America's wireless industry is down to the last stretch of consolidation.

The two market heavyweights, Mexico's America Movil and Spain's Telefonica SA (TEF), through its Telefonica Moviles (TEM) unit, have already carved up most of the region between them, so further acquisitions will be small in terms of subscriber base.

"The major parts of the consolidation are over and done with," Bear Stearns telecommunications analyst Rizwan Ali.

America Movil announced Wednesday the acquisition of the TIM Peru, a unit of Telecom Italia Mobile SpA (TI), after buying Chile's Smartcom last week and Hutchinson Paraguay three months ago. Though the acquisition cost of Hutchinson wasn't disclosed, America Movil paid nearly $1 billion total for both TIM and Smartcom.

America Movil surpassed Telefonica last year as the region's premier wireless operator, with some 71.3 million Latin American subscribers, including those coming with the latest acquisitions. Telefonica Moviles has some 50 million subscribers in the region.

America Movil can see "that less committed players drop out, improving conditions for those who stay," said UBS Investment Research in a note released Thursday. "Every new acquisition sends the message that AMX is staying, encouraging others to sell out."

Last year, Moviles bought BellSouth's Latin American mobile telephony operations for $5.85 billion and merged them with its own assets.

Earlier this year, Telecom Italia wanted to sell its wireless unit Digitel to Venezuela's C. A. Nacional de Telefonos de Venezuela (VNT), or CANTV, but Venezuelan regulators blocked the deal.

Beyond Venezuela's Digitel, the remaining potential acquisition targets in Latin America include Oi, the wireless subsidiary of fixed-line giant Tele Norte Leste Participacoes (TNE), or Telemar, and Telemig Celular Participacoes (TMB), both in Brazil, Ali said.

America Movil - which is controlled by billionaire Mexican Carlos Slim, who also owns Mexican fixed-line giant Telefonos de Mexico (TMX) - has already announced plans to seek out companies in Bolivia, Panama and Venezuela.

Competition between Telefonica and America Movil won't be a war of prices, Bear Stearns' Ali predicted.

Telefonica and America Movil already fought a price war in Mexico, which backfired on Telefonica, with America Movil keeping its upper hand in its native country, he pointed out. Instead of pricing, the two will fight in terms of offering new technology and focusing on marketing, he said.

There's room in Latin America for the wireless industry to grow, Ali added. In five years, wireless penetration in Latin America could reach an average of 60% of the population, he said.

Mexico's wireless penetration hovers around 40%, and penetration in Peru, which enjoys smaller per-capita income, is around 17%.

But the pace will slow down, Ali said.

"In the last three years, subscriber growth has been enormous," he added. "The market is closer to saturation."

According to a Merrill Lynch research note, America Movil's latest acquisition won't be an important driver of its stock, though. TIM Peru's subscribers account for less than 2% of America Movil's total subscriber base, "with little potential for impacting revenues," it said.

America Movil's New York-traded stock closed up 0.4% at $21.91.

-By Claudia Assis, Dow Jones Newswires; 201-938-4385; claudia.assis@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 12th August 2005