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Latin America’s Mobile-Phone Market Leader Takes Strain

30 June 2008 - News - Editor

Despite past market performance by Latin America’s largest mobile-phone company, America Movil, which until recently showed more than a twenty percent increase in customers, analysts are predicting that the financial quarter ended 30 June 2008 is likely to reveal the company’s worst quarterly stock performance in the past six years. It would seem that, in part, this situation can be attributed to the slowing down of subscriber growth as well as the possible intervention of regulators with regard to mobile call costs.

Carlos Slim, who is ranked as the second wealthiest man in the world (after Warren Buffet and before Bill Gates), is the driving force behind Mexico City based America Movil, which in the past five years has bought mobile-phone companies across Latin America. With more than 150 million subscribers, America Movil dominates the Latin American mobile-phone market.

In 1990, Slim, together with a group of investors, bought the Mexican government controlled telecommunications companies Telmex and Telnor. Mexico reportedly accounts for up to one third of the 150 million America Movil subscribers, giving companies in Carlos Slim’s stable a huge slice of the telecommunications market in Mexico alone. In June 2008, the antitrust agency in Mexico identified three dominant telecommunication carriers, being America Movil, Grupo Iusacell SA and Telefonica. The initial antitrust investigation is likely to lead to regulations impelling these companies to reduce their call costs and fees that they charge competitive carriers for connecting calls.

In response to the general populations’ growing discontent with regard to rising food prices, some analysts are of the opinion that Latin American governments may enforce the reduction of mobile-phone costs in an effort to offset the cost of food and thereby appease the people. With an estimated 80 percent of Latin America’s population owning mobile-phones, lower costs will no doubt be of some benefit to the man in the street. Additionally Latin American governments can use legal channels to raise the revenue received from mobile-phone operators through increased taxes and higher license renewal fees, all of which will cut into profits and impact on share prices.

These issues are no doubt a matter of concern to America Movil’s shareholders. However, the company is optimistic that other services it offers, such as high-speed internet access, will compensate for the slower increase in new subscribers and the decrease in call prices. America Movil operates third generation (3G) networks in more than fourteen countries and is set to launch sales of Apple’s new iPhone next month. In a market that is not just about how many mobile-phones are in use, but is also focused on what services are available, it seems that America Movil is determined to keep moving with the fast-paced world of technology.

 


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