As revealed by the company itself, telecommunications giant America Movil (NYSE: AMX) was pitted against antitrust rules that the Comisión Federal de Telecomunicaciones (CoFeTel), Mexico’s telecommunications regulator, have brought up for the company as well as mandating it to make a division of its fixed-line unit.
Owned and controlled by billionaire Carlos Slim’s family, the company has been under tighter directives since 2014. This is due to the regulator’s efforts to create reforms in the sector that will encourage a healthier competition in the market.
The company revealed that it was ordered by the CoFeTel, also known by the name Federal Telecommunications Institute (IFT), to make a self-regulating body out of its fixed-line unit Telmex so as to open infrastructure access to competitors thus confirming reports last February that the mandate was being considered.
Coined as a “functional separation”, the upcoming division of the fixed-line would be in accordance with the outline presented to the IFT by Telemex which is still subject for approval. America Movil revealed this as they conversed with the people from the Mexican stock exchange.
Once descriptions of the resolution’s requirements were laid, the company pledged to analyze and dispute the said mandate.
"The modifications and additions to the measures... confirm the lack of legal certainty and regulatory predictability in the sector," said an America Movil representative.
Mexico’s CIDE University researcher, Alexander Elbittar, specializing in the areas of regulation and competition, that this move made by America Movil is not at all surprising as this would help keep the company’s options to undertake any legal action open.
The researcher also remarked that the resolution was indeed sound although Telemex’s take on how to undertake the separation still remains to be seen.
"This is a drastic measure but one that has had to be taken in markets that have featured very strong concentration (of market power) for many years," added Elbittar.
The decision by the IFT was made the previous week as they further strengthen their implementation of antitrust rules.
Domestic profit margins of American Movil have suffered losses that sent it from 45 percent to below 30 percent since the rules were established. Despite this, the company still has the lion’s share of the wireless market with almost 70 percent of the shares.
A spokesperson of the Federal Telecommunications Institute was requested for a statement regarding the matter but did not respond immediately.
America Movil stock is currently trading at 13.40, up 1.06 percent from its previous close of 13.26. As seen in the chart, the current stock price is nearing its upper band limit of 13.48, which indicates that it is approaching its buy point. The mid and lower bands are placed at 12.94 and 12.41 respectively.
Meanwhile using the 14-day Relative Strength Index indicator, America Movil shares are well above the mid-range, moving upward towards the overbought territory at 61.67.
The stock’s recent trading day low is at 13.11 while the high is situated at 13.47. Its 52-week low is now at 11.02 while the 52-week high is at 15.95. America Movil has a market capitalization of $43.64 billion with an average volume of 3.69 million. Its price to earnings ratio is situated as of the moment at 87.30 with earnings per share of 0.15 and a dividend yield of 2.00 percent.
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