Barclays initiates coverage of Latin American telecoms sector

Thursday, October 13, 2011

Investment bank Barclays Capital has initiated coverage of the Latin American telecoms and media sector with a 2-neutral view, the bank said in a release.

Revenue growth has reached single digits, but capex needs are still high due to the increase in network buildouts to offer broadband and data services, according to Barclays.

In general, companies are well capitalized with solid financials and positive free cash flow generation. Corporate governance has improved after the companies reduced the number of listed subsidiaries or classes of shares, minimizing the minority shareholder risk, especially in Brazil.

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Barclays Capital has assigned 1-Overweight ratings to Telefônica Brasil, América Móvil (NYSE: AMX), Brazilian mobile carrier TIM Participações and digital trunking operator NII Holdings (Nasdaq: NIHD).

Mexican cable operator Megacable and broadcast giant TV Azteca have received 2-Equal weight ratings, while compatriot broadcaster Televisa and telco Axtel have been assigned 3-Underweight ratings.

Broadband and data services are among the key trends to watch, according to the bank. Mobile services are expected to be the main source of revenue growth, while for fixed-line services growth will most likely be driven by upsales, as subscribers add pay TV or broadband.