IHS Global Insight Perspective | |
Significance | América Móvil plans to conclude the merger of its Brazilian unit Claro Brasil with fixed-line carrier Embratel in two months. |
Implications | The move is part of América Móvil's strategy to combine its operations with those of sister company Telmex Internacional to generate cost savings and commercial synergies. |
Outlook | The move has not yet being approved by local telecoms regulator Anatel, which is expected to green-light the operation. The merger is intended to reduce administrative and network costs by 20–30%. |
América Móvil is preparing to merge its Brazilian unit Claro Brasil with fixed-line carrier Embratel in the next two months. The move is part of América Móvil's global plan to combine its mobile units with fixed-line operations of sister company Telmex Internacional, both controlled by Mexican tycoon Carlos Slim. The current president of Embratel, José Formoso Martínez, is expected to take over the presidency of the new unit once is the merger is completed.
On 13 January 2010, in a statement to the Mexican Stock Exchange, América Móvil announced plans to exchange 2.0474 shares of its stock per share of Carso Global Telecom. The operation could give América Móvil a 60.7% share in Telmex Internacional and a 59.4% share in Telmex, Mexico's largest phone carrier. The operation, which has already being approved by Mexico's antitrust regulator, the Comisión Federal de Competencia, and América Móvil and Carso Global Telecom shareholders, is still awaiting approval from the Brazilian telecoms regulator, which is expected to approve (see Mexico: 15 February 20010: Mexican Antitrust Regulator Gives Green Light to América Móvil-Telmex Merger, Mexico: 18 March 2010: Shareholders Approve América Móvil-Telmex Merger, and Mexico: 23 March 2010: Carso Global Telecom's Shareholders Approve América Móvil Takeover).
Outlook and Implications
- Synergies: According to Slim, the move aims to reduce administrative and network costs by 20–30%. The consolidation will also be in line with the company's strategy of offering multiple-play packages of wireless, fixed-line, internet, and cable TV services. Embratel currently offers a full range of telecommunications services including voice, domestic and international long-distance services, data transmission, internet, and TV, while Claro is Brazil's second mobile phone carrier with a 25.5% share of the market.
- Competition Hardens: Incumbent operators are trying to secure their positions in the market as competition in the Brazilian telecoms sector intensifies with the entry of new players and the implementation of important regulatory changes (see Brazil: 18 May 2010: Brazilian Government to Award Three Broadband Licences Before Year-End and Brazil: 13 May 2010: Brazilian Government Approves New Rules for Cable TV Operators). The recent entry of French media group Vivendi in the fixed-line market with the acquisition of GVT has added extra pressure in the fixed-line segment, currently dominated by Oi and Telefónica's Telesp. After the acquisition, Vivendi announced plans to continue expanding its operations in the country and launch mobile and TV operations to commercialise multiple-play packages (see Brazil: 3 March 2010: Vivendi Confirms Pay-TV Launch in Brazil). Spanish operator Telefónica is also trying to secure its position in the market by combining the operations of its fixed-line unit Telesp with those of operator Vivo. This move is not likely to happen in the short term, however, as Vivo is controlled by a 50/50 joint venture between Telefónica and Portugal Telecom, which is currently not looking to sell (see Brazil: 11 May 2010: Telefónica Launches Attractive Offer for Portugal Telecom's Stake in Vivo).