America Movil Surges as Profit Tops Estimates on Smartphones

America Movil SAB (AMXL), the Latin American wireless company controlled by billionaire Carlos Slim, jumped the most in more than a year after higher smartphone use propelled earnings above analysts’ estimates.

The shares rose 4.4 percent to 13.79 pesos, the biggest gain since May 2012. They have slid 7.4 percent this year, compared with the 6 percent decline in the benchmark IPC index.

America Movil is offering more discounts on smartphones and calling plans to keep competitors from switching to Grupo Iusacell SA in Mexico, Tim Participacoes SA (TIMP3) in Brazil and Telefonica SA (TEF) in both countries. Slim’s company had 262 million subscribers at the end of the second quarter.

“AMX delivered on a strong quarter in Mexico, Brazil and Colombia against what we believe were market expectations for a miss,” Kevin Smithen, an analyst at Macquarie Group Ltd. in New York, said today in a research note, referring to the company by its ticker symbol. “AMX remains our favorite North American carrier idea with an excellent risk/reward profile.”

Second-quarter profit fell 2.1 percent to 65 billion pesos ($5.15 billion), leaving out items such as interest and taxes, topping the 62.6 billion-peso average of 12 analysts’ estimates compiled by Bloomberg. Sales rose 1.6 percent to 194.8 billion pesos, Mexico City-based America Movil said yesterday in a statement. Analysts had estimated sales of 190.8 billion pesos.

Subscriber Disconnections

While the carrier’s customer total was up 4.1 percent from a year earlier, it reflected the net loss of 867,000 customers from the first quarter as America Movil shut off more accounts than it signed up. The company disconnected millions of clients after adopting stricter rules on how long a phone line can go unused and still count as a subscription.

The accounting change wiped out 15 percent, or 1.9 million, of America Movil’s customers in Peru alone. The company erased 307,000 customers from its rolls in Ecuador, 192,000 in the U.S. and 100,000 in Chile.

In Mexico, America Movil added 745,000 customers. Growth slowed in Brazil, with 164,000 subscriber additions.

Wireless data services such as Internet access were up 17 percent in Mexico, America Movil’s largest market. Voice use expanded there, too, with the average customer talking for 277 minutes a month, up 4.1 percent from a year ago.

That wasn’t enough to keep the average Mexican customer bill from falling 2.5 percent to 170 pesos. In Brazil, America Movil’s second-largest market, revenue per customer also fell even with an increase in voice traffic.

Net income was 14.2 billion pesos, or 19 centavos a share, up from 13.2 billion pesos, or 17 centavos, a year earlier.

Leaving out interest, taxes, depreciation and amortization, the second-quarter profit margin shrank to 33.4 percent from 34.6 percent a year earlier.

Pay-TV subscriptions grew 18 percent from a year earlier to 17.8 million, and landline Internet connections climbed 13 percent to 18.2 million.

(America Movil held a conference call today to discuss the results. For details, click here.)

To contact the reporter on this story: Crayton Harrison in New York at tharrison5@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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