Lo and behold, less than a month after writing 'Profit From Investing Alongside The World's Richest Man: Carlos Slim', the Mexican business magnate struts his stuff again. This morning America Movil (AMX) (AMOV), Latin America's largest mobile-phone carrier, finally announced its intention to enter Europe in a big way. The world's richest man is offering €2.6 billion euro, $3.4 billion, to increase Movil's current 4.8% holding in Royal KPN NV (KKPNY.PK) to a 28% stake in Holland's largest carrier, making this his biggest investment outside Latin America.
Slim is obviously taking advantage of the Southern European debt crisis to find bargains within the EU area, fulfilling on its promise to expand beyond his Latin American empire. Today's offer in KPN follows attempts in the past decade to enter other European countries like Spain and Italy, and recent considerations to enter Eastern Europe through acquisitions in countries like Poland for example. It's interesting to note that in the Netherlands, holders of a 30% stake in a public company become obliged to make an offer for all of the outstanding shares.
Before today, KPN's stock had dropped 30% since the start of 2012, one of the worst performers amongst European carriers, as the company clearly struggles to maintain profits while investing in its Dutch broadband network and countering increased competition. The current €8 offer is about 25% more than yesterday's closing price.
America Movil plans to pay for the stake in cash, which shouldn't be a problem given Movil's MXN 60.3 billion pesos ($4.6 billion) in cash at the end of Q1-2012. Approval from the Autoriteit Financiele Markten [AFM], the Dutch securities regulator, is expected shortly and the offer is expected to be carried out by the beginning of June.
In addition to KPN's Dutch assets, which are quite substantial, other company assets include wireless carriers in Germany and Belgium, along with some other interests across Europe. KPN recently started reviewing the future of its Belgian mobile-phone unit BASE, which the market is estimating to fetch about €1.8 billion if sold.
KPN is among Europe's cheapest Telcos, and was trading at a P/E of 5.3 times at yesterday's close, less than half the regional industry average. When we look at the company's enterprise value - enterprise value is measured by subtracting cash from market capitalization plus debt - compared to earnings before interest, tax, depreciation and amortization [EBITDA], KPN's ratio of 4.3 compares with an industry average of more than 20.
When we look at liquidity, we see KPN's ratio of net debt to EBITDA is approximately 2.5, smaller than Telefonica (TEF) and Portugal Telecom (PT), but larger than Deutsche Telekom (DTEGY.PK) and France Telecom (FTE). KKPNY.PK offers a very attractive dividend of €0,90 for the year 2012, which boiled down to a dividend yield of approximately 14% based on yesterday's close. But you can rest assured KPN's share price will not hover around those levels for much longer.
Coming back to America Movil, as mentioned last month, the company now operates in 18 countries across the Americas; United States, Mexico, Jamaica, the Dominican Republic, El Salvador, Panama, Guatemala, Honduras, Nicaragua, Peru, Argentina, Uruguay, Chile, Paraguay, Puerto Rico, Comcel Colombia in Colombia, and Porta in Ecuador. In Brazil it operates the trademark Claro. And many will have become familiar with Movil's subsidiaries Telmex and Claro during the last 18 months through Slim's sponsorship of Sergio Perez and the Sauber Formula One Team.
America Movil is now a Fortune 500 company and finished 2011 with more than 300 million accesses, of which 242 million were wireless subscribers, 7.4% more than a year before, and 58 million Revenue Generating Unit's [RGU], an increase of 12.3% YoY. The company's HQ is located in Mexico City, and its Mexican subsidiary Telcel is the largest mobile operator in Mexico with a market share in excess of 70%.
Movil is in the process of combining its Brazilian divisions to offer packages of TV, wireless service, home-phone and internet to lure customers from its biggest competitor Telefonica. Together, Telefonica and America Movil dominate the Latin American landscape. AMX spent $2.7 billion last year to boost its stake in Net Servicos de Comunicacao SA (NETC), Brazil's biggest cable-TV carrier, to over 90%.
Movil announced 1.5 weeks ago that the company's profits climbed 38% in Q1-2012 as more Brazilians signed up for satellite and cable television services. America Movil also added 4.2 million mobile-phone subscribers since the beginning of the year. Net income climbed to MXN 32.6 billion ($2.5 billion) from MXN 23.7 billion pesos a year earlier. Movil, symbol AMX on NYSE and AMOV on NASDAQ, now has a P/E of 12.8, a P/B of 5, a P/S of 2.3, and a current dividend yield of 0.93%, after a rise in share price of $4 from $24 to a little over $ 28 since the initial article.
A settlement last week with Mexico's antitrust regulator is creating further optimism that America Movil can continue to grow in its biggest market, as Movil has now agreed to cut fees to competitors as the government dropped a $1 billion fine for perceived anticompetitive practices. The steady rise of America Movil's share price has further boosted Carlos Slim's net worth to $76.2 billion and only reinforces the believe that many lessons can be learned from investing alongside the world's richest man.
And the bottom line profits for us market participants aren't too shabby either.