Latin America Mergers & Acquisitions: Grupo Carso Holds a Lot of Sway

America Móvil continues to add to its already-extensive holdings in Latin America.  This year alone, Grupo Carso’s mobile arm has already purchased TIM Peru, Smartcom PCS in Chile, and Porthable in Paraguay, and will likely announce further expansion before the end of the year, most likely in Venezuela.  Pyramid Research expects this trend to continue, although in the coming years it will play second stage to the consolidation of regional fixed operators.

The recent acquisitions will undoubtedly increase competition with Telefônica Móviles.  The two operators now compete directly in eleven Latin American countries and all of the region’s major economies, except for Venezuela.  Other exceptions are Paraguay and Honduras where Telefônica Móviles is not present, and Venezuela and Panama where America Móvil is absent.  Bolivia and Costa Rica are the only two Latin American markets not affected by either panregional player. 

Acquisition-driven expansion is not without its pitfalls, as proven time and again in the telecommunications sector.  America Móvil will likely have to adjust its traditional focus on subscriber growth as its margins fall, at least in more mature markets like Chile.  As it seeks cost-cutting venues, the operator will likely be forced to capitalize on marketing synergies and launch a single, unified brand similar to Movistar.  This will allow the operator to present a single face to regional clients and compete on equal footing with its main pan-regional opponent.

Now that fewer options are available for mobile consolidation in Latin America, the majority of the space available for Grupo Carso’s expansion is in the fixed sector.  Likely fixed targets include ENTEL in Chile and Telecom in Argentina. Such moves will undoubtedly stir political resistance and come under heavy regulatory scrutiny, especially in markets where Carso already has a presence.  Telmex’s deal to buy Telecom Colombia, currently on hold due to resistance from the country’s mediator, is a sign of things to come.  Additionally, Carso may be forced by regulators to choose between different operations.  Should it choose to buy Telecom in Argentina, for example, it will likely be forced to give up ownership of CTI or to spin Telecom Personal out. 

America Móvil’s expansion bodes well for GSM vendors who have traditionally had close ties with the company, such as Siemens, Ericsson, and Alcatel.  Pyramid Research forecasts that America Móvil will invest US$500m on its 2005 acquisitions, and a total of US$1.26bn for all operations in 2005.  Over the long term, however, America Móvil will be able to extract increasingly better deals from its vendors due to its surging scale.

To read further analysis of America Móvil’s acquisitions and long-term market impact, purchase the latest issue of the  Americas Market Perspective in the  online store.