America Movil Sees More Purchases After Brazil Deal
Updated: Wednesday, June 5, 2002 07:30 PM ET
MEXICO CITY -(Dow Jones)- Latin America's largest wireless telephony company said Wednesday it expects to make more purchases in the region after swallowing up its partners' stakes in a Brazilian venture.
"We believe there will be time to prepare adequately for new acquisitions, and in the meantime digest this new acquisition," America Movil SA's (AMX, news, msgs) chief financial officer, Carlos Garcia Moreno, told analysts during a conference call.
America Movil said Monday it will pay $366 million for partner Bell Canada International's (BCICF, news, msgs) stake in four Brazilian operators and absorb SBC Communication Inc.'s (SBC, news, msgs) share in the venture. The move gives the Mexico-based mobile company 93% of Telecom Americas, as the Brazil operation is known.
"It is the case that there will be other opportunities presented in the region. We expect that this will be the case for some time still (as) it is not likely in the next six months that the market will significantly turn in Latin America," Garcia Moreno said.
The global telecom downturn hasn't spared Latin America, where America Movil is one of the few companies viewed to have the financial flexibility and resources to bottom fish. The company chairman, billionaire Carlos Slim, is famous for his bargain-hunting skills.
The company said it picked up BCI's 39.1% stake in Telecom Americas for about $700 per subscriber, well below the $1,700-per-user price tag other acquisitions in the region have fetched in recent months.
America Movil has an investment grade credit rating, and therefore more financing options than many Latin American operators. It also has a strong revenue base in Mexico, where the company serves around 80% of cell phone users. Altogether, the company has 26.8 million subscribers, making it the world's sixth-largest wireless outfit.
This profile has led America Movil's name to pop up in countries like Ecuador, Argentina and Peru as a potential acquirer of communications concerns.
Among perceived targets is BellSouth's Brazilian unit BCP, which defaulted on a $375 million syndicated loan in March.
"It is clear, I think, to everyone that BCP could provide a good fit for the type of footprint that we currently have," Carlos Moreno said. "The question is to what extent can this company solve their current issues and be eventually in the market for a partner."
The company isn't promising a buying spree, as it needs to work down the $2 billion in debt it's assuming for the Brazil units. And ratings agencies are already on the lookout for any missteps.
Moody's Investors Service put America Movil's credit ratings on review for a possible downgrade Monday.
America Movil expects increased competition in the Brazilian market, which is crowded with multinationals like Portugal Telecom SA (PT, news, msgs), Telefonica SA (TEF, news, msgs), BellSouth Corp (BLS, news, msgs) and Telecom Italia SpA (TI, news, msgs), to knock a few percentage points off its market share there.
Currently the carrier has 4.5 million clients in Brazil, or about 16% of the developing world's biggest wireless market. Competition should get even fiercer after mid-2003, when Brazil's telecom law will allow companies in the sector to merge.
Carlos Moreira, chief operating officer of Telecom Americas, said he believes the restriction could be lifted sooner, as several government officials told him last week they feel the sector is too crowded.
For now America Movil has begun combining functions such as billing systems at its four Brazil carriers in order to lower costs. The unit's top priority, Moreira said, is improving coverage at Tess, an operator in wealthy Sao Paulo state. -By Amy Guthrie, Dow Jones Newswires; (5255) 5080-3453; amy.guthrie@ dowjones.com (This story was originally published by Dow Jones Newswires) Copyright (c) 2002 Dow Jones & Company, Inc.
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