Published by Minyanville
Mexican wireless giant America Movil (AMX) is about to acquire 100% of Digicel’s operations in Honduras and El Salvador. As part of the transaction the company will sell its Jamaican services to Digicel, which is based on the Caribbean island.
Owned by Carlos "world's richest man" Slim, America Movil is Latin America’s largest cellphone provider, with 225 million customers, far eclipsing AT&T’s (T) 95.5 million and Verizon’s (VZ) 94.1m. Last week the 71-year-old Slim topped Forbes’ Rich List with a fortune of $74 billion, shading Bill Gates’s $56 billion and Warren Buffet’s $50 billion.
Slim’s fortune highlights the huge disparity of wealth that exists in Mexico. Nearly 40% of Mexicans earn less than $10 a day, with that figure rising to $15 for 60% of the population.
Interconnection rates between Slim’s cellphone companies and rivals have long been the source of bitter disputes, with rival broadcasters recently refusing to run his adverts. Mexico's telecommunications regulator Cofetel however, ruled on Wednesday that the rate for connecting calls between Slim’s Telcel and fixed-phone-line company Alestra must be no more than $0.03 per minute. This more than halves the previous rate and rival providers welcomed the precedent.
“The resolution is relevant because it establishes a precedent leading to the creation of public policies for the application of interconnection fees that promote competition between operators,” read a statement from Mexican wireless provider Nextel.
America Movil announced plans for a two-for-one stock split and a dividend of $0.03 a share, returning cash to shareholders after a $23 billion acquisition last year. The company’s share repurchase fund is also set to increase from $2.9 billion to $4.18 billion.
Mexico’s industrial production expanded in January at the fastest pace since September 2010, up 6.6% from the same period in 2010, and exceeding the market consensus of 5.5%. The figure was also up 1.43% on December 2010, the strongest reading since October 2009.
Analysts suggest that growth in construction and utilities is especially encouraging. Mexico’s economy normally moves in tandem with America’s, however growth in these two sectors demonstrates a “meaningful pickup in domestic economic activities,” according to Nomura. But Mexico's growth may be stunted in the coming months because of Middle East uncertainties, according to the New York-based research organization.
“We would like to caution that if the uncertainties in the Middle East continue and gasoline prices in the US remain elevated for an extended period of time, US growth risks will be increasingly skewed towards the downside. Should this scenario materialize, strains on Mexican growth will start to surface in the next couple of months,” said Benito Berber and George Lei. As well as receiving light waves from Japan’s tsunami, Mexico felt the earthquake in its economy as the peso weakened—earlier this week the exchange rate breached the 12-pesos-to-the-dollar barrier.
Effects on US markets will filter down to Mexico. Japan takes less than 5% of US exports according to Deutsche Bank, and imports from Japan will be sourced elsewhere. This should benefit Mexico which already sees around 80% of its exports heading north of the border. "I think a temporary window could open for exports," said Arturo Vieyra, director of economic research at Banamex, cautioning that "It's difficult to estimate at the moment."
With drug violence still plaguing Mexico, US tourism officials have issued many warnings to citizens advising them against travel to the country. This advice was taken up by three ferry lines which scrapped Mexico from their cruise trip rosters earlier this year.
"While drug cartel violence is most severe in northern Mexico,” said Steven McCraw, director of the Texan Department of Public Safety, “it is prominent in other parts of the country as well. Various crime problems also exist in many popular resort areas, such as Acapulco and Cancun, and crimes against US citizens often go unpunished." Regardless, thousands of American students will still be heading south to Mexico for the traditional spring break holiday. A bus company in Texas said that ticket sales had doubled over this time last year while Funjet Vacations saw a 15% increase in those heading to Mexico this month compared to March 2010. Most are heading to the crystal waters of Cancun, as yet untouched by drug violence, unlike rival beach resort Acapulco.