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America Movil Profit Drops as Mexico Drags on Mobile Growth

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America Mobil CEO Daniel Hajj
Chief Executive Officer Daniel Hajj is pushing to expand America Movil’s base of long-term subscribers by selling smartphones at a discount through two-year contracts, aiming to keep customers from switching to competitors such as Telefonica SA, Grupo Iusacell SA and Tim Participacoes SA. Photographer: Gustavo Graf/Bloomberg

Oct. 25 (Bloomberg) -- America Movil SAB, controlled by billionaire Carlos Slim, said third-quarter profit fell as Mexico’s tepid economy overshadowed a recovery in South America.

Leaving out currency fluctuations and items such as interest, earnings declined 0.5 percent from a year earlier, America Movil said yesterday in a statement. Slim’s company added 3.1 million mobile-phone users, compared with the 4.3 million average estimate of five analysts polled by Bloomberg.

Mexican wireless customers reached 72.5 million, up 4.8 percent from a year earlier. That was a slowdown from 5.6 percent growth in the second quarter. Chief Executive Officer Daniel Hajj is pushing to expand America Movil’s base of long-term subscribers by selling smartphones at a discount through two-year contracts, aiming to keep customers from switching to competitors such as Telefonica SA, Grupo Iusacell SA and Tim Participacoes SA.

Including currency changes, earnings before interest, tax, depreciation and amortization fell 5.8 percent to 63.3 billion pesos ($4.9 billion), hurt by the decline of South American currencies such as the Brazilian real, since America Movil records its results from those countries in Mexican pesos.

America Movil rose 0.6 percent to 13.66 pesos at the close in Mexico City. The shares have fallen 8.3 percent this year.

Service revenue in Mexico fell 2.1 percent from a year earlier, compared with an 8.9 percent gain in South America -- the best in six quarters. Economists estimate Mexico expanded 0.9 percent in the third quarter, compared with 2.5 percent for Brazil, according to data compiled by Bloomberg.

Chile Disconnections

Subscriber gains were also hurt by the disconnection of 335,000 wireless customers in Chile that weren’t using their phones enough, America Movil said. U.S. unit TracFone added only 5,000 customers after the company disconnected some users following changes to some phone plans.

America Movil added 1.4 million subscriptions for landline services including phone, Internet and television, in line with the average analyst estimate.

The company sought to expand beyond Latin America this year through a failed $9.7 billion offer for Dutch telephone company Royal KPN NV.

Third-quarter sales rose 0.7 percent to 194 billion pesos, compared with the average estimate of 194.3 billion pesos. Net income was 16.4 billion pesos, or 23 centavos a share, compared with 30.5 billion pesos, or 40 centavos, a year earlier.

America Movil’s financial stake of about 30 percent in KPN lowered net income by 1.2 billion pesos, the company said. A foreign-exchange loss of 2.9 billion pesos also reduced net income, compared with a gain of 9 billion pesos a year earlier.

To contact the reporter on this story: Patricia Laya in Mexico City at playa2@bloomberg.net

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

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