America Movil Tumbles as Mexican Margin Shrinks to Low

  • Ebitda declines 5.1%, falling short of analysts' estimates
  • Carrier disconnects 4.9 million prepaid users in Brazil

America Movil SAB, Latin America’s largest wireless carrier, led losses among Mexican stocks after regulatory sanctions took a toll on quarterly results, with profit margins in its home country dropping to a record low.

Earnings fell 5.1 percent to 63.9 billion pesos ($3.4 billion), leaving out interest, taxes, depreciation and amortization, the Mexico City-based company said Tuesday in a statement. Analysts projected 67.7 billion pesos, the average of estimates compiled by Bloomberg.

Shares fell 5.7 percent to 11.85 pesos at the close of trading in Mexico City, the biggest decline in almost three years and the steepest drop in the benchmark IPC index.

The profit margin for Mexico, the company’s biggest market, shrank to 36.7 percent from 42.6 percent a year earlier. The results mark the first time that the margin dropped below 40 percent, according to Itau BBA.

Billionaire Carlos Slim’s operator has faced increasing price pressures in Mexico, with new competitor AT&T Inc. luring customers with offers like no cross-border charges between the U.S. and Mexico. While America Movil boosted its Mexico subscriber base by 3.1 percent in the period, those price pressures kept it from propping up its margin. Regulatory measures introduced in the past two years, which eliminated long-distance charges and cut the fees America Movil charged to connect other operators’ calls to its network, also weighed on results. 

“No doubt” there is more competition in the market, Chief Executive Officer Daniel Hajj said on an earnings call Wednesday. “America Movil should not subsidize companies like AT&T and Telefonica that are strong international operators.”

  • Sales rose 0.6 percent from a year earlier to 230.6 billion pesos, compared with the average 228.1 billion-peso projection of analysts.
  • Revenue took a hit from the economic crisis in Brazil, where sales fell 1.2 percent to 9.21 billion reais.
  • The carrier disconnected 4.9 million prepaid users in Brazil, while it added 513,000 postpaid subscribers there.
  • Wireless subscriber base in Mexico climbed to 73.7 million users.
  • The operator is waiting for the “right time” to request a TV license, Hajj said.
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