2nd UPDATE: America Movil Plans To Buy Out Remaining 40% Of Telmex

Mexican telecommunications heavyweight America Movil SAB (AMX, AMX.MX) said Monday it plans to make an offer for the 40% of fixed-line unit Telefonos de Mexico SAB (TMX, TELMEX.MX), or Telmex, which it doesn't already own, completing the consolidation begun last year of the telecomunications holdings of billionaire Carlos Slim.

America Movil, Latin America's largest wireless phone service provider with 236 million mobile subscribers in 18 countries, and 54 million fixed-line service subscriptions, said it will offer 10.50 pesos (90 cents) in cash for each of the Telmex shares it doesn't own. That values the offer at about MXN76 billion, or $6.5 billion. If the company obtains sufficient shares, it plans to delist Telmex from the different markets where it trades.

"With this transaction, America Movil, a competitive and strong publicly traded Mexican corporation, will be in a position to provide better conditions and more advanced telecommunication services to its customers in Mexico," Ameica Movil said.

The price represents an 11% premium over the average price of Telmex L shares for the past 30 trading days. America Movil L shares traded on the Mexican stock exchange fell 1.9% to MXN14.83, while Telmex L shares rose 7.7% to MXN10.22. Telmex stakeholder AT&T (T) said in a regulatory filing that it plans to tender its Telmex shares, for around $1.37 billion.

America Movil Chief Financial Officer Carlos Garcia Moreno said in a telephone interview that the company will use a combination of cash and available credit lines to pay for the offer, and that bank credits could later be refinanced in capital markets.

Buying out Telmex would complete the consolidation of Slim's telecommunications holdings. Last year, America Movil acquired Telmex Internacional and Telmex holding company Carso Global Telecom, which included just under 60% of Telmex, in around a $23 billion stock-and-cash deal.

Moreno said that generating synergies from joining mobile and fixed-line operations depends on the capacity to integrate the companies, something that has become clearer to America Movil with the integration over the past year of Telmex Internacional.

The proposed buyout, which includes Telmex's American depositary receipts, would also complete the absorption of Telmex by its mobile offspring, America Movil, which was spun off in 2001 at a time when few expected the mobile industry to leave fixed-line in the dust.

While America Movil saw a decade of robust growth through both organic expansion and acquisitions, Telmex sought to replace diminishing fixed-line phone revenue with value-added services such as broadband Internet and corporate services.

America Movil's Mexican mobile unit Telcel and Telmex both face increasing regulatory pressure in Mexico, where they have about 70% of the mobile subscribers and 78% of the fixed phone lines, respectively. Recently regulators slashed interconnection rates, and Telcel is contesting a $1 billion fine levied on charges that it used high mobile termination rates and its market weight to sideline competitors.

Telmex, meanwhile, has been refused government authorization to offer direct television service in Mexico to compete with cable companies that are offering phone, Internet and video. The government says Telmex hasn't met conditions set out in a 2006 agreement, while Telmex says it has complied.

-By Anthony Harrup, Dow Jones Newswires; (5255) 5980-5176; anthony.harrup@dowjones.com

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