America Movil SAB (AMXL) and DirecTV, Brazil’s biggest pay-television providers, may be required to show regulators their investment plans and goals to improve quality in a government plan under consideration.
Anatel, as the nation’s telecommunications regulator is known, expects to meet with satellite and cable-TV carriers next week to discuss ways to reduce user complaints, which have surged in the past year, said Joao Rezende, the agency’s president. Anatel aims to improve service quality and the attention customers receive through call centers, he said.
The plan is part of a government push to more closely monitor telecommunications services as they become widely adopted. Anatel instituted an 11-day ban on the sale of some mobile-phone subscriptions in July to address network failures and customer complaints.
“This is an alert for a growing industry,” Rezende said yesterday in a telephone interview from Brasilia. “Many of these new subscribers are from lower classes and are just arriving to this pay-TV market, a whole new world for them.”
Under stable economic conditions, Brazilian pay-TV subscriptions will more than double to 35 million subscribers by 2018, Rezende said. The nation had 14.8 million pay-TV clients at the end of July, a gain of 31 percent from a year earlier, according to Anatel data.
America Movil, based in Mexico City, held about 55 percent of Brazil’s pay-TV market at the end of last year through its Net Servicos and Embratel units, according to Anatel. El Segundo, California-based DirecTV (DTV)’s Sky service had about 30 percent of the market.
America Movil rose 0.4 percent to 16.50 pesos at the close in Mexico City trading. DirecTV gained 0.4 percent to $53.64 in New York.
Darris Gringeri, a spokesman with DirecTV, and an America Movil official didn’t return phone and e-mail messages seeking comment.
Telefonica Brasil SA (VIVT4), a unit of Madrid-based Telefonica SA (TEF) and Brazil’s biggest wireless company, has fallen 7 percent in Sao Paulo trading since July 13, when a government official said Anatel would ban the sale of some wireless subscriptions, indicating the government was scrutinizing the industry more closely.
No. 2 carrier Tim Participacoes SA (TIMP3), a division of Telecom Italia SpA (TIT), is down 17.5 percent in that span. America Movil, controlled by billionaire Carlos Slim, has declined 7 percent. Rio de Janeiro-based Oi SA (OIBR4), partially controlled by Portugal Telecom SGPS SA (PTC), has fallen 12 percent.
Telecommunications equities in Latin America remain “unloved staples” that provide opportunities for investors, and their valuations in Brazil already reflect some of the country’s inherent regulatory risks, said Adam Kutas, manager of Fidelity Investments’ Latin America fund, without identifying specific companies.
“In this environment where there is a lot more investor uncertainty given some of the policy responses in other sectors, people have been kind of gun shy and selling quite aggressively,” Kutas, who manages about $2.59 billion in the fund, said in a telephone interview on Aug. 31.
Telecommunications stocks in Latin America made up 15.6 percent of the fund’s total holdings as of Sept. 17, compared with 8.4 percent in the MSCI Emerging Markets Latin America benchmark index, according to a Bloomberg estimate based on a July 31 regulatory filing and subsequent price changes.
The fund has provided a return of 5.3 percent over the past three years, the period during which Kutas has managed the fund, compared with 4.6 percent in the benchmark index, and better than 73 percent of its peers, according to data compiled by Bloomberg.
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