America Movil: The Real Social Network
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
From looking at the current global mobile network operators, only London-based Vodafone (NASDAQ: VOD) – which also owns 45% of Verizon (NYSE: VZ) – appears to be in a position to challenge Mexico’s America Movil (NYSE AMX) for world domination.
However, Vodafone’s management has been less than inspiring in recent years when the economy and competitors began to play rough. In addition to finding themselves at the tip of the sword as one of the initial targets of wide-spread tax avoidance issues in the UK and Switzerland, their image in emerging markets also continues to deteriorate as a result of collaborating with authorities to cut off service in Egypt during the early stages of the Arab Spring (leaving the Muslim Brotherhood and the militarists with the only functioning communications networks).
America Movil has already had a successful trial run in dispatching Vodafone/Verizon, first in Mexico where the Verizon affiliate had gone broke several times, and then when America Movil took over from Verizon in Puerto Rico where it has had to overcome the non-transferability of the phones which Verizon had left them with. The reason the AT&T (NYSE: T) market share (37%) has only recently begun to lose out to America Movil in Puerto Rico has been the necessity among many Puerto Ricans for their phones to work both on the island and in the US. Now with a third of the market, America Movil seems poised to ride its momentum and use the Puerto Rican market as yet one more entry point into the US.
Already America Movil has been active in finding an angle to create initial niches in the US market with pay-as-you-go TracFone. Latin America, especially Mexico, is predominantly a pay-as-you-go market, which explains why America Movil entered the US market with a pay-as-you-go system it initially thought would be popular with Latinos. However, after applying its vast know-how to the US pay-as-you-go market, Spanish-speaking Latinos only account for 4.4% of TracFone users. America Movil has shown an increasing flair for experimentation by increasingly targeting the elderly, military personnel with only a limited and sporadic stateside presence, and other occasional users through campaigns on home shopping networks and other non-traditional phone boosters. The expansion of their Straight Talk joint venture with Walmart (NYSE: WMT) is also showing signs of success (as evidenced by Walmart extending and promoting the program), and is just one of many moves that is solidifying America Movil’s hold on passive users, first-time users, and the lower-priced portion of the market.
Interestingly, Indian titan Bharti Airtel has also recently inked a deal with Walmart in India which will likely be extended into areas of Africa where the two’s recent acquisitions can find common cause. However, America Movil has had a chance to develop deeper connections with Walmart in its core markets of North America, whereas the Indian Ocean Rim remains one of the most unstable business climates in the world (India in particular and Africa especially.)
Still, Bharti Airtel is also connected to possibly the only existing player with a shot at challenging America Movil’s rise. SingTel’s (NASDAQOTH:SGAPY) current CEO has shown a solid understanding of the market and is able to call upon resources that can make it the equal to Carlos Slim’s conglomerate. While both America Movil and SingTel have strong, experienced management teams, as well as the biggest market caps on their native exchanges, they are quite different in their business models and geographic scope.
America Movil is as non-governmental as they come and has been focusing on core competencies in telecommunications and crafting a unified brand (Claro) in Latin America. SingTel is government-linked (as Temasek Holdings owns over 50% of it – though there are worse governments than Singapore with which to be linked), and operates primarily through partners and owns a third of India’s Airtel and Indonesia’s Telkomsel. Especially with its Airtel activities in Africa it has found itself increasingly active in mobile payment and other activities (many of which are too early in their development to be classified as innovative or gimmicky). Through its minor stakes in various players, SingTel has almost double the subscribers as America Movil in far more diverse markets (as varied as Congo and Australia).
How America Movil and SingTel do as they create or enter more saturated phone markets may be one of the best guides to the future. Recently, America Movil has shown itself able to deliver results that only carriers in highly-competitive saturated markets have been able to achieve in Europe. The next few years will be telling ones.
[continued from America Movil: The Future King of the Telecommunications Hill]
[continued in America Movil Puts European Carriers to Shame]
Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Vodafone Group Plc (ADR) and Vodafone Group Plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!