The Next Great Telecom Spinoff?

Back in the dark days of 2000, Mexican telecom giant Telmex (NYSE: TMX  ) was spinning off its wireless division into a separate entity. As many global telecom players were crumbling in the post-millennium contraction, America Movil (NYSE: AMX  ) went on to establish strong beachheads in many Latin American mobile markets.

Only a few years later, America Movil eclipsed the size of Telmex, and its shares have gone on to gain nearly 825%, compared to a nearly 125% rise in Telmex. America Movil also helped propel Carlos Slim into the upper echelon of the world's richest people. With that track record of unleashing billions in value, investors are now eagerly awaiting the next Telmex spinoff -- the international operations group that provides fixed-line telephony, cable TV, and Internet services across Latin America. The creation of the new company, to be named Telmex Internacional, has already been approved by shareholders, and the company expects the spinoff to occur in the coming months.

With the international operations growing much faster than the Mexican market, investors could once again see a great growth story emerge from a cash cow. The split will help keep the new unit clear of antitrust investigations by Mexico's regulatory bodies, which are probing Telmex's interconnection fees. With roughly 90% of the Mexican telephone market, Telmex could earn the same fate as AT&T (NYSE: T  ) during its monopoly rule.

Telecom spinoffs haven't universally gone well, though, and each is done for different reasons. Sprint Nextel's (NYSE: S  ) spinoff of Embarq (NYSE: EQ  ) in 2006 has so far been ho-hum for Embarq shareholders -- but it sure beats the lumps Sprint Nextel investors have taken. And now Motorola (NYSE: MOT  ) is looking to split out its handset division in a move to reclaim market share on industry-leader Nokia (NYSE: NOK  ) and assuage shareholder ire.

Telmex Internacional has a lot going for it. With operations in attractive telecom markets including Brazil, Chile, Argentina, Colombia, Peru, and Ecuador, there's more opportunity to capture a growing share of Latin America's booming communications sector. Keep a line open for this new offering -- it may be worth the wait.

Call up more Foolishness here:


Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 608198, ~/Articles/ArticleHandler.aspx, 9/30/2014 6:32:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement