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What Are the Wireless Growth Opportunities for AT&T in Mexico?

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Growth opportunity for AT&T in Mexico

In the last part of the series, we learned about the significant planned expansion of AT&T’s (T) 4G LTE (or long-term evolution) network in Mexico. We also learned about the network performance of AT&T among peers in this wireless market. The telecom company is the third largest wireless player, by subscriber, in this market. At the end of 1Q16, AT&T had ~9.2 million wireless subscribers in this market. Meanwhile, Telefonica (TEF) Mexico and América Móvil (AMX) had ~25.7 million and ~73.5 million wireless customers in this market, respectively.

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AT&T has a strong growth opportunity in Mexico’s wireless market. As you can see in the above chart and as per a report by eMarketer, smartphone users in Mexico are anticipated to grow at an average annual growth rate of ~10.5% during the 2015–2020 period. The YoY increase in the metric in 2016 is expected at a significant ~17.3%.

AT&T’s domestic smartphone penetration

Users of smartphones such as Apple’s (AAPL) iPhones and Google’s (GOOGL) (GOOG) Android phones are of particular importance to wireless operations of carriers such as AT&T, T-Mobile (TMUS), Sprint (S), and Verizon (VZ). These users tend to consume more data.

The high smartphone penetration in the saturated US wireless market limits the growth opportunities for wireless players in this space. Note that in the case of AT&T, the smartphone penetration in the postpaid phone component in the domestic operations was ~88.3% at the end of 1Q16.

For diversified exposure to AT&T, you can consider investing in the iShares MSCI USA Minimum Volatility ETF (USMV). The telecom company made up ~1.5% of the ETF at the end of May 2016.

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