TracFone's Telcel America to leverage América Móvil ties with cheap calling to Mexico
América Móvil's U.S. MVNO, TracFone Wireless, launched a new prepaid brand that aims to provide inexpensive calling to Mexico. The brand, Telcel America, offers unlimited data, texting and calling, as well as unlimited calling to Mexico, for $60 per month. "We expect Telcel America to be a significant new initiative for the company (América Móvil) and create a new headache for network based prepaid operators in the United States," wrote BTIG analyst Walter Piecyk.
TracFone's Telcel America sells the Samsung Galaxy Precedent Android smartphone.
Telcel America currently offers two feature phones from Google's (NASDAQ:GOOG) Motorola Mobility as well as the Samsung Galaxy Precedent Android smartphone, which goes for $79.99. The MVNO offers two service plans: a $45 per month prepaid plan with unlimited calling, texting and data, and a $60 per month plan that adds unlimited calling and texting to Mexico and other destinations.
Piecyk noted that Telcel America's plans are similar to TracFone's Straight Talk offering but include unlimited calling to Mexico. Piecyk said the plans leverage the position of América Móvil, which is owned by Mexican billionaire Carlos Slim and operates Mexico's biggest wireless carrier, Telcel.
"América Móvil's 70% market share in Mexico enables Telcel America to make this offer without eroding margins while its U.S. peers will charge extra for calls to Mexican mobile lines," wrote Piecyk.
A number of other wireless carriers have worked to target the market for international calling, particularly to Mexico. For example, MetroPCS (NYSE:PCS) in 2009 launched an unlimited calling service to Mexico for an extra $5 per month. Sprint Nextel's (NYSE:S) Boost Mobile announced a similar offer in 2011. Both offerings only cover landline numbers, however.
Telcel America joins a wide range of other brands offered through TracFone, including Straight Talk, Net10 and Simple Mobile. In the third quarter, TracFone, posted net subscriber gains in the quarter of 302,000, weaker than in the year-ago period. The figures brought TracFone's subscriber base to 21.6 million, making it by far the nation's largest MVNO.
It's unclear what network TracFone's Telcel America offering runs on; TracFone is an MVNO of all of the nation's major carriers. Piecyk said he believes AT&T Mobility (NYSE:T) carries most of TracFone's traffic, and he noted that AT&T has three seats on América Móvil's board.
"América Móvil's U.S. subsidiary generates over $4 billion of revenue annually, which we estimate will grow by more than 20% in 2012," Piecyk. "More impressively, we expect TracFone's EBITDA to grow by 80% in 2012, as subscriber growth is not saddled by high handset subsidies."
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