Oi (OIBR +9.6%) says it has hired i-bank BTG Pactual to help it explore options for buying Telecom Italia's (TI +4.3%) TIM Participacoes (TSU +6.2%) Brazilian mobile/wireline unit. Shares of all 3 companies are rallying, as are those of Portugal Telecom (PT +6%) and Telefonica's Brazilian unit (VIV +2.4%).
Given Oi's debt load (almost $20B) and potential antitrust concerns, many think a bid for TIM (would lower the number of Brazilian mobile carriers to 3) can only work if Oi partners with other carriers to acquire and break up TIM. America Movil (AMX +0.7%), which owns rival carrier Claro, is viewed as a potential partner.
Oi's disclosure comes as a bidding war between TI and Telefonica (TEF +0.8%) for Vivendi-owned (OTCPK:VIVHY) Brazilian wireline carrier GVT heats up. Reuters reports TI will make a €7B ($9.2B) bid for GVT that would give Vivendi a 15%-20% stake in TI; the WSJ reports Telefonica's board is meeting today to consider upping its €6.7B ($8.8B) GVT bid.
Telefonica (TEF -3.1%) and Brazilian subsidiary Vivo (VIV -7.5%) are off sharply following news Telefonica has bid $9B to acquire Brazilian wireline carrier GVT from Vivendi (OTCPK:VIVHY +1.9%), with plans to merge it with Vivo's mobile and wireline ops.
America Movil (AMX -2.5%), which had 68.8M Brazilian mobile subs and 34.5M wireline revenue-generating units at the end of Q2, is also off. As are Telecom Italia (TI -6%) and Brazilian unit TIM Participacoes (TSU -9.7%), and Oi (OIBR -6.7%) and merger partner Portugal Telecom (PT -5.1%).
Vivendi says it will study Telefonica's bid, but insists for now that "none of its subsidiaries are for sale." The conglomerate agreed to sell French carrier SFR in April.
A Vivo/GVT pairing could be a tougher rival for America Movil and Oi/PT, and would likely lead to a sale of Telefonica's stake in TI (as sought by Brazilian regulators). As it is, Telefonica has announced plans to cut its TI stake (currently at 14.8%) through a convertible debt offering.
There's speculation Vivendi could take Telefonica's remaining TI stake as part of its payment for GVT, but Nomura has its doubts. "It's hard to see why, from a Vivendi shareholder's perspective, they would want to have a minority position in Telecom Italia."
America Mobil (AMX +1.9%) had Q2 revenue of 202.6B pesos ($15.7B), +4% Y/Y and beating a consensus of 198.7B pesos. EBITDA rose 2.4% to 66.6B pesos ($5.1B), beating a 65.8B consensus, and net income rose 32% to 18.8B pesos ($1.45B).
Access lines +3% Y/Y to 338.7M - 266.9M mobile, 31.6M landlines, 20M broadband, 20.3M pay-TV. Mobile subs +1.8% Y/Y but -2% Q/Q, wireline revenue-generating units (RGUs) +7.5% Y/Y and +1.7% Q/Q.
Mexican mobile subs fell 2.8% Q/Q to 71.3M ahead of AMX's planned asset sales, and Brazilian subs were nearly flat at 68.8M. Mexican wireline RGUs -0.2% Q/Q to 22.3M, Brazilian RGUs +2.7% to 34.5M.
AMX ended June with $7.2B in cash/securities, $6.3B in affiliate investments, and $38.9B in debt.
"We struggle to see how a break-up can produce a more valuable outcome than what we have been projecting," says Morgan Stanley. With America Movil (AMX -2.1%) having risen 15% since announcing it will shed Mexican assets to bring its local mobile/wireline share below 50% (and thus appease regulators), MS is downgrading the carrier to Underweight.
MS is worried the asset sales, which also involve AMX (gets ~2/3 of its free cash flow from Mexico) putting its towers in the hands of a separate company, will "reduce AMX’s scale advantages and may also alter the market structure in a way that would likely produce lower prices, higher costs and investment."
It also thinks investors are too bullish on the ROI for AMX's Mexican pay-TV effort, given the performance of its Brazilian project and the investments of Mexican cable providers.
America Movil (NYSE:AMX) is increasing its ownership in Telekom Austria (OTCMKTS:TKAGY) from 27% to 50.8%. The $1B buyout marks America Movil's first successful move into the European market after it failed to acquire Dutch carrier KPN last year.
The company is also looking to particularly expand its operating base outside of Mexico after new legislation passed last week requiring the telecom giant to cut its Mexican market share below 50%.
The Street is giving a thumbs-up to America Movil's (AMX +7.6%) plans to appease regulators by selling Mexican assets to a new independent carrier, and putting its mobile towers in the hands of a separate company.
AMX says the moves will cut its Mexican market share below 50%, as sought by regulators. The company currently has ~70% of Mexico's mobile and fixed phone lines.
NII Holdings (NIHD +4.9%) is following AMX higher. The arrival of a new Mexican carrier might open the door to a deal involving NII's struggling Mexican ops.
With regulatory pressure mounting, America Movil (AMX) plans to divest some Mexican assets into a new independent company. The company also plans to split its wireless towers from the rest of its Mexican business, and renounce its rights to acquire control of satellite TV provider Dish Mexico.
AMX notes its plans require the approval of regulators, and perhaps also shareholders.
The move comes as Mexico's lower house approves a fresh telecom reform bill that would impose stiff penalties on AMX if it kept its combined wireline/mobile market share remained above 50%. A bill passed last year created a new telecom regulator.
Carlos Slim is paying $5.6B to buy AT&T's (T +0.1%) 8.3% stake in America Movil (AMX +0.3%), according to SEC filings. With the stake worth $6.5B based on AMX's current market cap, Slim is getting a sizable discount in exchange for preventing AT&T from having to sell the shares through a public offering that could depress prices.
The deal makes good on a promise by AT&T to unload the stake, and thus eliminate a conflict of interest and potential regulatory hurdle as the company gets set to buy DirecTV.
DirecTV has 11.9M Latin American subs, and AT&T (with the help of DirecTV's spectrum) plans to use it to offer TV/broadband bundles in the region.
Carlos Slim plans to buy AT&T's (T +0.4%) 8.3% stake in America Movil (AMX +4.4%). After accounting for the spike in AMX shares that has followed the news, the stake is currently worth $6.4B.
The stake includes 24% of AMX's voting shares; its purchase further solidifies Slim's hold over the giant Latin American carrier as it continues expanding into Europe.
AT&T announced in May it would sell its AMX stake to keep regulators happy as it acquires DirecTV, whose Latin American reach is substantial and set to get bigger post-acquisition. The sale will also help Ma Bell pay for the DirecTV deal's $14.6B cash component.
Austrian antitrust regulators have approved a deal that will allow America Movil (AMX) and the Austrian government to pool their combined 55% stakes stakes in Telekom Austria (TKAGY), thereby triggering a takeover offer from Carlos Slim's company lasting until July 10.
AT&T (T) intends to sell its $6B, 8.4% holding in América Móvil (AMX) in order to avoid conflicts of interest from its proposed $48.5B acquisition of DirecTV (DTV) and "facilitate the regulatory approval process in Latin America."
AT&T's representatives on América Móvil's board are set to resign.
The deal will give AT&T a large presence in a region in which DirecTV has 18M customers, making it one of the largest pay-TV operators in Central and South America - along with América Móvil.
The Brazilian government plans to sell TV airwaves in the low-frequency 700-MHz. band (good for rural areas and in-building coverage) to mobile carriers. America Movil (AMX +2.2%), Telefonica Brasil (VIV -0.2%), Oi (OIBR +5.9%), and TIM Participacoes (TSU -2%) are expected to take part.
Analyst Luis Azevedo thinks total auction expenses could top 7B reais ($3B), after factoring costs related to moving broadcasters to other spectrum and reducing interference. Unlike past auctions, the spectrum sale doesn't come with coverage requirements.
Bidding is expected to start in August. The auction announcement comes with TIM's future still up in the air. Telefonica's efforts to up its stake in TIM parent Telecom Italia have fueled expectations TI will sell TIM. Regulators have suggested they'd prefer TIM be sold to an outside party, rather than acquired piecemeal by its rivals.
Mexico's Federal Telecommunications Institute (IFT) has ordered America Movil (AMX) and Grupo Televisa (TV) to share their infrastructure with rivals as part of an attempt to increase competition in the country's telecom and broadcasting markets respectively.
The IFT will also regulate Telefonica's prices, and it will force Televisa to publish its advertising prices and stop pressuring advertisers to purchase space on its billboards, cable TV and magazines.
In addition, IFT has called for bidders for two national broadcast-television networks.
The upside for America Movil is that once it has complied with the IFT's demands, the regulator may allow the company to start offering TV services.
America Movil (AMX +0.6%) has confirmed reports it's talking with Austrian government holding company OIAG to pool their stakes (26.8% and 28.4%, respectively) in Telekom Austria (TKAGY +1.9%) to form a syndicate. Such a deal would trigger an offer for outstanding Telekom Austria shares, thus paving the way for Carlos Slim's company to gain control of the Austrian carrier.
With AMX seeing minimal service revenue growth in its core Latin American markets, the company is increasingly turning its eyes toward Europe. AMX withdrew an offer for Dutch carrier KPN in October after talks broke down over price.
America Movil SAB de CV with its subsidiaries is engaged in providing telecommunications services. Its telecommunications services include mobile & fixed voice services, mobile & fixed data services, internet access & paid TV, and other related services.