The markets are wrong about the hostile America Movil bid for KPN

Although somewhat obscured by the positive news coming from Spain over the weekend, Dutch outfit KPN has initiated its newest maneuver  to obstruct Mexican telco America Movil ( AMX , quote ) in its hostile bid to take a larger stake in KPN.

America Movil is one of Latin America's largest telecom providers

AMX owner Carlos Slim, the world’s richest man, has spoken out extensively on what he perceives to be a buying opportunity in undervalued European equities. But America Movil’s stated intention of increasing its holdings in KPN was panned by markets.

The day after America Movil informed markets of its intention to increase its stake in KPN, markets punished the Mexican company, sending the stock price down more than 5%.

Markets appear to be under the impression the  Latin America telco’s attempt to enter the fiercely competitive, largely developed European markets will inevitably be fruitless for America Movil.

However, it’s reasonable for investors to assume the markets are treating America Movil’s expansionary intentions in an overly harsh fashion. Essentially, no matter how poor the situation in Europe becomes, telecommunications firms are likely going to continue to profit, whatever hiccups happen along the way.

Attempting to scoop up shares of the Dutch telco while its price is artificially low because of macroeconomic concerns not entirely relevant to KPN’s fundamental story, should be a good long-term strategic move for America Movil.

If KPN were to succeed in rebuffing America Movil’s overtures, AMX shareholders are likely to be rewarded in the short-term. Presumably, AMX shares would rebound, as it’s unlikely the market has done an about-face on the prospect of the tie-up.

In other words, the outcome of the KPN-America Movil argument is a win-win for AMX investors. If America Movil eventually takes a stake in KPN, AMX investors get exposure to a solid European firm at a discount. If not, investors are still able to access one of Latin America’s most successful telecom providers.