AM announce plans to buy remaining Telmex stake

2 Aug 2011

Mexican billionaire Carlos Slim is looking to complete the restructuring of his telecoms empire, with reports that his Latin American telecoms unit America Movil (AM) has offered around USD6.5 billion to buy the 40.4% stake in Mexican fixed line incumbent Telefonos de Mexico (Telmex) that it does not already own. According to Bloomberg, AM will pay MXN10.5 (USD0.90) per share for the outstanding Telmex shares, and the move will arguably allow the combined company to benefit from cuts in administrative costs. Further, it is believed that the decision to take full control of Telmex will allow AM to integrate its telecom services in Mexico more closely, helping the company fend off increased competition from the likes of local broadcasting giant Grupo Televisa, which has already branched out into the fixed line voice and high speed internet sectors, and is preparing to launch commercial wireless voice services. Indeed, AM’s chief financial officer Carlos Garcia-Moreno noted in the wake of the announcement that AM could combine customer service operations and sell services together in joint stores after acquiring full control of Telmex. US-based AT&T, which holds an 8.5% stake in Telmex, has reportedly said it will accept America Movil’s offer for its shares; AT&T’s holdings are valued around USD1.37 billion based on the offer price per share from AM.

As noted in TeleGeography’s GlobalComms Database, a 29.4% stake in the Telmex was purchased by a consortium comprising SBC Communications of the US (since merged into AT&T), domestic conglomerate Grupo Carso (controlled by Carlos Slim) and France Telecom (FT) in 1990. The fixed line incumbent subsequently spun off its mobile assets to form stand-alone sister company AM in September 2000, and in 2007 it completed a similar process for its international fixed line and broadband operations, as well as its yellow pages directories business, with the creation of Telmex Internacional (Telint). January 2010 however saw the company announce a major organisational revamp, with the revelation that it planned to consolidate both of Slim’s other telecoms companies – Carso Global Telecom (CGT) and Telint – with a view to creating a regional telecoms giant offering fixed line, wireless and broadband services to more than 250 million subscribers. AM announced at that date that it would initially offer 2.0474 AM shares for every share held in CGT, which if accepted would give it an indirect 59.4% stake in Telmex and 60.7% in Telint. Subsequently, AM said it would then offer any remaining shareholders 0.373 AM shares, or MXN11.66 in cash, for each Telint share with a view to acquiring the remaining 39.3% in the fixed line group. Regulatory approval for the deal was forthcoming just one month later, and having received shareholder approval for the plans in March 2010, AM launched its offer. By June 2010 AM revealed that it was close to finalising the process to take control of Telint after enough minority shareholders in the group had accepted a cash and stock offer under which AM would pay out around MXN26.6 billion to those that agreed to the cash option for a 93% holding in Telint. In addition, AM also announced that investors in CGT had accepted a separate share-swap offer, and as a result revealed it would hold 99% of CGT stock when the offer was fully completed. Having initially obtained 99.4% of the stock of CGT and 32.9% of Telint’s through the tender offers, by 16 July 2010 AM’s participation in CGT had risen to 99.9%, meaning that it owned – directly or indirectly – approximately 94.6% of Telint’s outstanding shares and 59.4% of Telmex’s stock.

Mexico, America Movil (AM), Telefonos de Mexico (Telmex)