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Here's Why Investors Should Hold America Movil Amid Risks

On Aug 14, Mexican telecom behemoth, America Movil SAB AMX was upgraded to Zacks Rank #3 (Hold).

The price performance of the company has been encouraging for the last six months. While the stock price increased 37.8%, the industry gained 7.3% over the same time period.

In fact, America Movil has been systematically enriching its spectrum portfolio for the last couple of years. Evidently, it acquired 60 MHz of wireless spectrum (airwave) in the 2.5 GHz band from Grupo MVS, recently. In May, Mexican telecom regulator, Federal Telecommunications Institute (IFT), approved this deal. However, the financial terms are yet to be disclosed. Going forward, we believe this buyout will enhance the company’s high-speed data service.

According to a recent report by the Competitive Intelligence Unit, America Movil’s wireless division, Telcel, is dominating mobile number porting in the Mexican region.

Meanwhile, the company’s continuous participation in spectrum auctions for the deployment of 4G LTE services and expansion of 3G footprints looks impressive. Also, it launched fourth-generation (4G) mobile services in 11 cities across Mexico.

Furthermore, America Movil introduced LTE services in Brazil where it currently covers 18 cities.

However, this telecom behemoth’s aggressive promotional strategy that includes discounts and subsidized offers continues to hurt its margins. Moreover, the company’s Brazilian operation, Claro, faces competitive threat from Vivo, owned by Telefonica Brazil SA VIV. In addition, U.S. telecom giant AT&T Inc.’s T entry into the Mexican telecom industry with the acquisition of Gurpo Iusacell and Nextel de Mexico, was a major setback for the company.

Stock to Consider        

Investors interested in broader Computer and Technology space may consider BlackBerry Limited BBRY sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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