America Movil SAB, the largest wireless carrier in the Americas by subscribers, fell after a weaker Mexican peso and increasing competition damped quarterly profit.
The shares slipped 0.2 percent to 17.99 pesos at the close in Mexico City after an intraday decline that was the largest since June 1. Mexico City-based America Movil reported a 46 percent drop in second-quarter net income after markets closed yesterday.
“We observe pressure on the profitability of the most important subsidiaries because of the economic slowdown, lower mobile interconnection rates and greater subsidies for the migration to smart phones,” Manuel Jimenez, a Banorte Ixe Casa de Bolsa analyst in Mexico City, wrote in a note to clients. He cut his rating to hold from buy.
America Movil, controlled by billionaire Carlos Slim, has faced pricing pressure in markets such as Brazil and the U.S. as well as in its home base of Mexico. Revenue on a per-subscriber basis rose more slowly than monthly usage in all three markets, according to the company.
“In Brazil, the economy has been slowing down a little bit and the competition has been very tough,” Chief Executive Officer Daniel Hajj said in a conference call today with investors and analysts.
The company also is issuing more debt in foreign currencies as it expands outside Latin America, agreeing to purchases this year in the U.S. and Europe. Mexican accounting rules require quarterly recording of gains or losses on liabilities in those currencies based on foreign-exchange fluctuations.
The peso fell 4.1 percent against the dollar in the three-month period ended June 30.
While the peso’s decline was expected to hurt earnings, a broader measure of profitability was “a little bit weak,” said Christopher King, an analyst with Stifel, Nicolaus & Co. in Baltimore, who has a hold rating on the stock.
Earnings before interest, taxes, depreciation and amortization were 65.5 billion pesos, compared with 63.5 billion pesos a year earlier. As a percentage of sales, Ebitda was 34.1 percent in the quarter, down from 36.2 percent a year earlier and down from 35.1 percent in the first quarter.
“They are continuing to see pricing pressures in markets like Brazil,” King said yesterday.
In Brazil, monthly wireless minutes per customer rose almost 16 percent while average revenue per user fell more than 15 percent. In the Mexican market, minutes per user jumped more than 21 percent and average per-user revenue climbed 6.4 percent. The increase in minutes per user in the U.S. was almost 11 percent, with average revenue per user up 7.2 percent.
Net income slid to 13.3 billion pesos ($990 million) from 24.3 billion pesos a year earlier, America Movil said in a statement yesterday. Sales rose 9.3 percent to 191.7 billion pesos, compared with the average analyst estimate of 189.1 billion pesos, according to data compiled by Bloomberg.
The company reported a foreign-exchange loss of 16.1 billion pesos, compared with a gain of 2.38 billion pesos a year earlier. America Movil sold $2 billion in dollar-denominated bonds and 1 billion euros ($1.23 billion) in bonds earlier this month.
It agreed in May to pay $118 million for U.S. wireless reseller Simple Mobile Inc. and is spending about $5 billion to acquire minority stakes in Telekom Austria AG and the Dutch carrier Royal KPN NV.
America Movil is investing $9.5 billion this year in its network in Latin America to attract more users from Telefonica SA with high-speed Internet access. The company added 5.9 million mobile-phone subscribers in the second quarter including 1.1 million from Simple Mobile, for a total of 251.8 million.
Subscriber additions included 1.4 million each in Mexico and Brazil. The company’s video subscribers through its satellite and cable-TV services in Central and South America increased 31 percent.