Six Latin American Telecom Stocks To Consider

The telecommunication market Latin America is set for excellent growth. With many countries in the region experiencing strong economic growth the penetration rate of mobile phones is especially set to go higher as the new middle class seek the modern necessities of life. In addition, new technology upgrades and the evolution of smartphones will drive growth in the coming years.

In an FT interview on June 12th, Carlos Slim, the telecom tycoon of Mexico said:

“Whether one should invest more in developed or emerging markets is a sterile debate,” he said. “What counts more is whether there are growth opportunities, not so much in the number of customers as in the applications they use.”

Mr Slim, who described Apple’s iPad and other tablet computers as “fantastic”, has until now focused primarily on the low end of the market, pioneering the high volume use of pay-as-you-go mobile phones.

But he said the best opportunities lay in the combination of the increasing purchasing power of Latin American families and ever-cheaper technology, such as smartphones, tablets, applications and content. He said he believed tablet use would become widespread “as volumes rose and prices fell”.

Carlos’ firm Telmex(TMX) serves 275 million customers in Mexico. America Movil controls 60% of the mobile market in Mexico. Spain’s Telefonica(TEF) is the largest competitor to America Movil (AMX).

An article in the Economist Intelligence Unit last month discussed the growth of smartphones Latin America. From the article:

The narrowing gap between smartphones and feature phones helped drive growth in Latin America’s mobile phone market in the first quarter of 2011, according to a press release from consultancy IDC.

IDC said smartphone shipments in the region were aided by carriers working to move customers to 3G networks, as well as the launch of new Android and Windows Phone devices in the market.

According to the consultancy, vendors in the region shipped more touchscreen and Qwerty models. Additionally, IDC said average selling prices declined due to aggressive Chinese vendor expansion.

AMX, Telefonica, Telecom Italia(TI) respectively controls about 30% of the Brazilian mobile market with the rest split between smaller players.

Five Latin American telecom stocks with more than 5% dividend yields are listed below for consideration:

1.Company:Telefonos De Mexico SAB De CV (TMX)
Current Dividend Yield: 5.74%
Sector: Telecom
Country: Mexico

2.Company:Telecom Argentina Sociedad Anonima (TEO)
Current Dividend Yield: 8.89%
Sector: Telecom
Country: Argentina

3.Company: Telecomunicacoes de Sao Paulo SA Telesp (VIV)
Current Dividend Yield: 12.67%
Sector: Telecom
Country: Brazil

4.Company: Tele Norte Leste Participacoes SA (TNE)
Current Dividend Yield: 14.53%
Sector: Telecom
Country: Brazil

5.Company: Telefonos De Mexico SAB De CV (TFONY)
Current Dividend Yield: 5.79%
Sector: Telecom
Country: Mexico

Nasdaq-traded NII Holdings, Inc (NIHD) offers wireless communication services under the Nextel brand in Mexico, Brazil, Argentina, Peru and Chile. NIHD does not pay a dividend but the total revenue last year was nearly $6.0 billion and the 5-year earnings growth is 13.50%.

Disclosure: No Positions

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