Slim Empire Breakup Seen Spurring Up to $20 Billion in Deals

Jul 10, 2014 11:25 am ET

(Updates with consumer lending data in 14th paragraph.)

July 10 (Bloomberg) -- Carlos Slim’s plan to break up his telecommunications empire will give a boost to Mexico’s financial firms by generating as much as $20 billion in deals, one of the billionaire’s bankers said.

Grupo Financiero Santander Mexico SAB Chief Executive Officer Marcos Martinez, 60, said the dismantling of America Movil SAB will fuel mergers and acquisitions, underwriting and advising work for financial institutions. He called Slim’s company “a very important client.”

“We’re excited,” Martinez said yesterday in an interview in the Mexico City headquarters of the nation’s fourth-largest bank by outstanding loans. “This announcement for America Movil is a huge opportunity for the banks, including us, because of the investment that they’re going to do.”

Slim, the world’s second-richest person, will divest America Movil assets, the company announced this week. The largest Latin American telecommunications company, with a market value of about $79 billion, America Movil is shrinking to appease regulators and avoid fines for having more than 50 percent market share in Mexican landlines and mobile phones.

Martinez said his firm, a unit of Spain’s biggest bank, will be among lenders pining to help America Movil make deals. Slim, 74, and his family hold a 57 percent stake in the firm, which has 272 million wireless subscribers in Latin America and 70 percent of Mexico’s mobile-phone market.

“There is an opportunity to advise them, to take to the market some of the assets that they are going to sell,” Martinez said. “It will be M&A opportunities.”

Facing Penalties

Slim’s flagship faces the toughest penalties under antitrust laws that Mexican President Enrique Pena Nieto could sign as soon this week. Pena Nieto took office in 2012 with promises to break monopolies in sectors including telecommunications.

Mexican lawmakers approved legislation yesterday that would force some companies including America Movil to share parts of their networks and eliminate fees charged to other operators to connect calls to their customers.

“The regulatory environment has become more efficient,” Martin Lara, a Mexico City-based analyst with Corp. Actinver SAB, said in a telephone interview. “Other companies will want to participate here, especially if Slim sells something. Because the competitive environment is more balanced now.”

America Movil didn’t specify which assets would be sold. The Mexico City-based company may receive about $8.6 billion from the sales and will need to divest about 21 million wireless users and 4 million landlines, Lara said in a note to clients.

Stock Climbs

Shares of Slim’s company surged 9.4 percent yesterday in Mexico City after the announcement, the most since April 2009. The firm trades at 12.1 times analyst estimates for next year’s estimated earnings, the least among the 10 biggest telecommunications companies in the Americas, which have an average of 19.3 times, according to data compiled by Bloomberg.

The divestment decision “should have a positive effect on the market” in Mexico, Manuel Jimenez, an analyst at Grupo Financiero Banorte SAB, said in a phone interview. “It should improve the environment of doing business in Mexico. If the country has an improved global perception and growth perspective, that would attract investment.”

For Santander, Mexico’s fourth-largest bank by overall lending, the announcement comes amid a push to boost the commercial business. Martinez said he expects Santander’s loan growth to outpace the Mexican financial system’s expansion over the next three years.

Santander is Mexico’s biggest bank by business lending after the local unit of Spanish rival Banco Bilbao Vizcaya Argentaria SA, according to regulator data. Corporate loans from Santander rose to 202.2 billion pesos ($15.5 billion) in April, from 177.8 billion pesos a year earlier.

The bank’s portfolio could grow by 16 percent or 17 percent annually in the next three years and borrowing from small- and medium-sized companies may increase 30 percent per year, he said.

Shares for Santander’s Mexico unit dropped 1.3 percent to 34.65 pesos per share at 10:22 a.m. in Mexico City. America Movil slipped 1.2 percent to 14.56 pesos.

A press official for America Movil didn’t respond to an e- mail message seeking comment.

--With assistance from Isabella Cota, Eric Martin and Patricia Laya in Mexico City.