Monday, January 11, 2010
Emerging Market Wireless Carriers (TurkCell and America Movil)
Disclosure: I own shares of TKC
It has been a long time coming and a rough ride but it looks like Turkecell(TKC) finally has some wind behind its sails as 2010 kicks off. Turkcell has done well on two fronts. Business Week reported a few months ago that the company has weathered a price war against Vodaphone and Avea, and has emerged with a half million new post-paid (monthly billing) customers. What is impressive is that the company has moved 25% of its existing customers to post-paid contracts. Secondly, Q3 earnings show the company sporting 47% gross margins compared to 54% a year ago amidst this price war. The company continues to be profitable and is growing its business in mobile 3G within Turkey
Moving onto America Movil (AMX), the company's 3rd quarter reported strong numbers demonstrating a 15.9% increase in operating profit compared to the same period a year ago. Financing costs were down 80% from a year ago. During the quarter the company added 4 million new subscribers of which a fourth were signed on for post paid contracts. The company continues to invest in 3G and which now covers 70% of their operating region within Latin America. This should set up the stage for future data revenue growth, but I need to dig in a little more to get a baseline understanding of their investment plans over the long haul. I currently do not own America Movil in the portfolio and I'm debating whether I should carry two wireless carriers in the portfolio. I haven't had much time to dig into America Movil's operations, but look to do so over the course of this month. With more troubles on the US domestic front I'm looking to hedge against USD weakness which provides a good sub-story for my continued analysis of America Movil.
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