Mexico’s antitrust body CFC has given the green light to mobile giant América Móvil (NYSE: AMX) to take control of its sister companies, Mexican fixed line operator Telmex (NYSE: TMX) and regional operator Telmex Internacional (NYSE: TII) (Telint), CFC said on its website.
Following a meeting on Thursday (Feb 11), CFC said that as Telmex and América Móvil’s local unit Telcel are part of the same economic group, market competition would not be significantly affected.
Last month, América Móvil said it would offer to exchange 2.0474 of its shares for one share in Carso Global Telecom, which controls 59.4% of Telmex and 60.7% of Telint.
The company will also seek to exchange or buy 39.3% of Telint shares that are not in the hands of Carso, offering 0.373 of its own shares or 11.66 pesos for every Telint share. “The operation notified by Telmex and Telcel is a corporate restructuring that does not modify the structure of the market in which companies participate,” the CFC said.
Sergio Rodríguez, Mexico-based analyst with Fitch Ratings, told BNamericas that it is likely the CFC reached its decision because América Móvil is not aiming to buy all of Telmex’s shares, only those owned by Carso Global Telecom, while the remainder will stay with minority shareholders. The management of Telmex will also remain separate.
“This is different to what América Móvil has said it plans to do in Latin America to merge the operations. I think that since the company does not plan to do that in Mexico, Cofeco did not see a significant change in the way it was going to do business,” Rodríguez said. Currently, billionaire Carlos Slim controls Telcel with 64.9% of voting rights, and 71.5% of voting rights in the case of Telmex and Telint.
Once the transaction is completed, América Móvil would end up with 59.4% of Telmex shares and 60.7-100% of Telint’s shares. During the same meeting, CFC gave regulatory approval to Mexican broadcast giant Televisa to go ahead with a bid to acquire 30-40% of mobile operator Nextel.
Eduardo Pérez Motta, president of CFC, said “Both cases, which have caused a range of reactions from the public, were analyzed in the same way as all potential market concentration cases are, according to anti-trust laws. The full CFC board concluded that under the law, the Telmex, Telcel and Televisa-Nextel mergers would not affect the markets they represent, [nor] constitute a risk to competition or the well being of consumers.”
In a research note, BBVA Bancomer analyst Andrés Coello said that it still remains to be seen what the synergies will be between the companies. América Móvil now has to call the public share offering, and the company’s CEO Daniel Hajj said in a recent investors conference call that he expects the transaction to be closed in the second quarter.
AMX taking control of TII will of course depend on regulatory conditions in different countries, and it has been suggested that Colombia may present problems. That opinion is shared by Rodríguez. “In the other countries [other than Colombia], due to the type of market position they have, we do not envisage any problems for this type of merger. In Brazil, with the possible merger of [Telmex controlled fixed line operator] Embratel and [AMX’s] Claro, given the track record of [telecoms regulator] Anatel which approved Telemar’s acquisition of Brasil Telecom, I don’t see them having any problem,” Rodríguez said.