In May, AT&T announced that it would be selling its $5.9 billion stake in América Móvil. While the move officially ended a partnership dating back 24 years, it was necessary for AT&T to appease regulators as they try to move forward with the acquisition of DirecTV.
A little less than a month later, Carlos Slim's holding company, Inmobiliaria Carso, announced it would acquire the 8.27% stake, which includes 23.8% of the company's voting shares. AMX is up 5.08% today (a more than two-month high) after the news broke, which was welcome news to long investors after such a difficult year.
Zacks also issued an updated research report on AMX today, saying they "expect growth to accelerate further with America Movil's entry into the lucrative video service market of Mexico," but the AT&T-DirecTV merger remains worrisome as DTV poses a very real threat to AMX's market position in Latin America. Because of that, they are sticking to their "neutral" rating.
And let's not forget all the regulatory changes that went down recently in Mexico. Shares have dropped 15% this year due to speculation on how those changes would affect AMX's profits. The new law approved last year would impose tougher penalties on dominant companies like AMX, and also blocks AMX from offering TV service for at least two more years.
Now that we know the initial impact, a committee has been created to study the company's options. Are there new businesses they could enter? How can they defend themselves from the sudden rush of competition? There is one portion of the new regulations AMX has challenged, and that's the order for it to share network infrastructure with rivals and to reduce the fees it charges them.
Moving forward, it will be critical for Carlos Slim and the newly-appointed committee to make meaningful changes to adapt to these changes. If not, it wouldn't surprise me if that aforementioned "neutral" rating to be replaced with a "sell" before the end of the year.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.