EUR 850.00 For Business Accounts Only

Morningstar | Movil relies on its material scale advantage to overcome competitive and regulatory pressure.

As the biggest wireless carrier in Latin America, we think America Movil will rely on its unmatched scale and solid assets to deliver profitable growth and overcome overall intense competition and regulatory uncertainty across the region. We believe the stock provides investors with an avenue to benefit from any economic growth in Latin America. Movil’s Mexican business (30% of sales and profits) boasts superb market strength that few carriers around the world possess, as Movil controls two thirds of the wireless market and 60% of the broadband market. Movil’s Telcel also earns far stronger margins and higher returns on invested capital in Mexico than Telefonica or AT&T, its two wireless peers.However, Movil’s dominance puts a target on its back for regulators, particularly in Mexico. Since the early 2010s, Mexican regulators have adopted an asymmetric regulation framework targeting Movil to level the playing field, with Colombia and Brazil following suit. This regulatory shift, coupled with AT&T’s foray into Mexico, dialed up price competition and hurt Movil's revenue per customer in 2016. While such competition noticeably abated in 2017, Movil’s revenue and margins have not fully recovered. Going forward, while we continue to be concerned with regulatory pressure in Mexico, we expect more manageable competition and robust demand for data services to further Movil’s recovery in Mexico. Starting with Mexico, Movil has grown into a telecom juggernaut with about 235 million wireless customers in Latin America, compared with runner-up Telefonica’s 185 million customers. Movil’s scale provides sufficient diversification and ensuring stability in cash flows that allows it to ride out economic, competitive, or regulatory headwinds. Movil is also more resilient to business shocks than smaller, single-market carriers.We anticipate that Movil will benefit from increasing adoption of high-speed Internet services in many Latin American countries, as the firm has strong fixed-line presences in countries like Mexico, Brazil, Colombia, Peru, and Chile. Aside from effective bundling, Movil can also use its fixed-line networks as backhaul to meet surging wireless data demand.