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Ecuador Moves to Terminate America Movil License

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MEXICO CITY (Dow Jones) Mexico's America Movil, Latin America's largest mobile operator, said Friday that the Ecuadorian government has started administrative proceedings to terminate its operating license in that country.

In a filing with the Mexican Stock Exchange, America Movil said that its Conecel unit has 30 days to demonstrate compliance with the terms and conditions of the license.

The government's move is related to "alleged violations of certain service requirements in the license," said America Movil, adding it may pursue dispute-resolution procedures established in its license and under Ecuadorian law.

Conecel, which operates under the Porta Celular brand, had service problems on Sept. 25 that left some customers without service for around six hours, while the total outages were for more than 19 hours across the country, according to the country's telecommunications regulator.

President Rafael Correa has stepped up pressure in recent months on the country's two privately owned mobile operators - controlled by America Movil and Spain's Telefonica - as it prepares to discuss renewing concessions that expire next year.

The government wants to increase the taxes and royalties it receives from Conecel and Telefonica's Otecel unit in exchange for the operating licenses.

Conecel has 6.6 million subscribers, and Otecel has about 2.6 million clients.

For the third quarter, Conecel reported revenue of $213 million and earnings before interest, taxes, depreciation and amortization of $89 million.

Mexico's Ixe brokerage put Conecel's value at $3.65 billion, or 3.5% of America Movil's market capitalization.

"In the event that the (Ecuadorean) authorities aren't content and the concession is lost, we believe the financial impact on America Movil would be limited given (Conecel's) low percentage of contribution to Ebitda," the brokerage said.

Ixe has a buy rating on America Movil's shares with a MXN47.00 year-end 2008 price target.

America Movil, which operates in 16 countries, reported 77.82 billion pesos ($7.15 billion) in third-quarter revenues and 143.4 million wireless subscribers at the end of September.

America Movil's L shares traded on the Mexican Stock Exchange fell 0.2% to close at MXN32.07 Friday.

-By Ken Parks, Dow Jones Newswires; 52-55-5080-3453; ken.parks@dowjones.com

­(END) Dow Jones Newswires

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Tags: telefonica  america movil  rafael correa  taxes  porta  Ecuador