AMERICA MOVIL BUYS PERU'S SECOND LARGEST MOBILE

UNCLAS LIMA 003534

SIPDIS

DEPT FOR WHA/AND, WHA/EPSC, EB/CIP
COMMERCE FOR 4331/MAC/WH/MCAMERON
USTR FOR KENNETH SCHAGRIN, JONATHAN MCHALE
FCC INTERNATIONAL BUREAU FOR ETALAGA

SENSITIVE

E.O. 12958: N/A
TAGS: ECPS ECON ETRD EINV PE
SUBJECT: AMERICA MOVIL BUYS PERU'S SECOND LARGEST MOBILE
OPERATOR

REF: LIMA 2025


1. (SBU) Summary. America Movil, one of the largest mobile
telecommunications providers in South America, expanded its
infant operations in Peru on August 11 with the $503 million
purchase of TIM Peru. Although TIM, Peru's second largest
mobile provider with 31 percent of the market, recently
completed an aggressive campaign to attract new customers,
Telecom Italia decided to reduce its footprint in Peru.
With the acquisition, America Movil becomes Peru's second
largest mobile operator. GOP officials believe that the
competition between America Movil and Telefonica will drive
down costs and stimulate competitiveness in the market. End
Summary.

And Then There were Three
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2. (U) America Movil, a Mexican company owned by Carlos
Slim that entered the Peruvian telecommunications market in
March with the $21.1 million purchase of the fourth band
(reftel),expanded operations by acquiring TIM Peru's
operations. America Movil paid Telecom Italia, the owner of
TIM Peru, $503 million on August 11. TIM is the second-
largest mobile company in Peru, with approximately 31
percent of the market and more than 1.5 million subscribers.
According to Telecom Italia officials, the company was
looking to reduce its operations in South America. With the
TIM Peru sale, Telecom Italia earned a $135 million profit.


3. (U) According to Vice Minister of Communications Juan
Pacheco, America Movil's acquisition of TIM should improve
competitiveness in the telecommunications sector. America
Movil, he asserted, has successful operations in many Latin
American countries and should be able to compete with
Telefonica MoviStar, Peru's largest mobile operator with 65
percent of the market. Pacheco also indicated that Peru's
mobile market is underdeveloped, with only 14 percent of
Peruvians with mobile connectivity. The market, therefore,
should attract several new mobile operators over the next
few years. The Ministry of Transportation and
Communications (MTC) expects telecommunications companies to
invest approximately $300 million in 2005 to expand and
improve services.

Comment
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4. (SBU) Peru's telecommunications industry, particularly
the mobile sector, is underdeveloped. While America Movil's
purchase of TIM reduces the number of mobile providers in
the market, it should spark improved competition with
Telefonica, perhaps culminating in lower prices for
consumers.

STRUBLE