America Movil Dominates Mobile Number Portability In Mexico

According to a recent report by the Competitive Intelligence Unit, Mexican telecom behemoth America Movil SAB’s (NYSE:AMX) wireless division, Telcel, is dominating mobile number porting in the region.

Telcel has posted a positive mobile number portability of around 14.6 million lines since the systems introduction in Jul 2008. In contrast, U.S. telecom behemoth, AT&T Inc. (NYSE:T) has posted a negative porting of 8 million lines, while Movistrar, the wireless division of Telefonica SA (NYSE:T) lost 6.4 million porting lines. Both AT&T and Telefonica currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mobile number portability is a service that allows mobile phone users to change telecom carrier while keeping the same phone number. The lack of number portability between wireless carriers has kept many consumers in Mexico from changing mobile phone service providers.

In 2014, the government of Mexico introduced major reforms within its telecommunications sector where the IFT identified America Movil as the dominant player. The company’s wireline division, Telmex, currently controls around 80% of the Mexican market, whereas its wireless division, Telcel, holds about 68%. Notably, per the reformed norms, the IFT restricted the maximum hold of a company in the market to 50%.

Meanwhile, the Mexican telecom market has become intensely competitive. Beside incumbent firm Telefonica, U.S. telecom behemoth AT&T entered the fray in 2015. Further, the IFT granted permission to cable TV and media giant Grupo Televisa SA (NYSE:T) to start wireless operation. However, the company is yet to take any decision in this regard.

Mexico is the largest economy in the Latin American region with a growing middle class population that is eager to spend more on high-speed wireless networks for optimal use of smartphones and tablets. Also the wireless penetration rate is relatively lower in the country compared with that in the U.S. We, therefore, expect increased competition in this market going forward.

Price performance of America Movil

America Movil is one of the strongest performers in 2017. Year to date, the stock price of the company gained a significant 29.59%, well above the Zacks categorised Non-US wireless industry that witnessed only 10.60% growth in the same time frame.

Nevertheless, the company has been witnessing a decline in profit margin in Mexico despite ruling the regional market for quite some time now. Stringent regulatory measures and intensifying competition are the primary factors behind the underperformance. We believe these are the primary reasons behind the stock carrying a Zacks Rank #4 (Sell).

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