Mexican billionaire Carlos Slim will buy AT&T's (NYSE: T) stake in América Móvil for $5.6 billion, further tightening his grip on the Mexican telecommunications giant. AT&T had been expected to sell its holding in América Móvil as a way to ease regulatory passage of its proposed $49 billion deal for DirecTV (NASDAQ: DTV).
Slim's holding company, Inmobiliaria Carso, informed America Movil's board late last week it would buy AT&T's 8.3 percent stake, which includes 24 percent of the company's voting shares, according to a filing made with the Mexican stock exchange.
As part of the deal, AT&T will get $4.57 billion when the deal closes and another $1 billion within 60 days of the closing. In June 2013, AT&T sold 7.5 percent of its stake in América Móvil, netting the company about $564 million and returning AT&T's total stake in the company to its historic level of around 9 percent.
America Movil owns TracFone Wireless, the largest U.S. MVNO with more than 25 million customers.
As the New York Times notes, the move means Slim will retain control of América Móvil without adding debt to its balance sheet, and will keep more of América Móvil's shares off the open market, which could reduce their value.
That AT&T sold the stake is not at all surprising. Indeed, when it announced its bid for DirecTV in May, AT&T said it would divest its interest in América Móvil "to facilitate the regulatory approval process in Latin America." AT&T's designees to América Móvil's board resigned in May to avoid even the appearance of any conflict of interest.
AT&T has noted that DirecTV's Latin American business is the leading pay TV provider in the region and has more than 18 million subscribers, including all Sky Mexico customers.
AT&T first invested in what became América Móvil nearly a quarter-century ago, one of its longest-standing investments. "Carlos and I have spoken and he is a very dear friend, but now he's going to be a competitor," AT&T CEO Randall Stephenson said on a conference call in May. "And we recognize that, and off we go."
América Móvil said in a statement it "recognizes the great value that the partnership with AT&T had for both companies for more than 20 years."
Meanwhile, in other financial news for AT&T, the company said it reached an agreement to sell as much as $2 billion in receivables to a group of banks led by Citigroup. Under the deal, AT&T sold $1.6 billion in future installment payments for devices in exchange for about $800 million in cash, and the additional balance will to be collected over time, according to a filing AT&T made. The transaction is part of how AT&T is handling the financial details of its Next handset upgrade plan, which allows users to pay off the cost of their smartphones in monthly payments.
"The move is a first for a US wireless carrier as both T-Mobile and Sprint previously implemented agreements to factor service receivables, not equipment," Jefferies analysts wrote in a research note. "The announcement should come as no surprise as management has stated their interest in such an arrangement, particularly given the receivable build-up from rising Next adoption and attractive rates offered by the banks."
For more:
- see this Bloomberg article
- see this Reuters article
- see this NYT article
Related Articles:
América Móvil's offer for Telekom Austria shares becomes mandatory
TracFone notches weaker organic subscriber growth in Q1, absent Page Plus deal
AT&T, DirecTV officials make merger pitch in back-to-back congressional hearings
AT&T promises FCC cheaper cable, more rural broadband, net neutrality compliance
AT&T: DirecTV buy will save it 20% on programming costs
AT&T to purchase DirecTV in $49B deal