America Movil Falls the Most in Eight Years on Earnings Miss

Updated on
  • Latin America's largest wireless carrier sinks 11% in Mexico
  • `Overdue downward revision' expected, Itau analyst says

America Movil SAB plunged the most in eight years after billionaire Carlos Slim’s phone company posted first-quarter profit that missed analysts’ estimates, showing increasing vulnerability to economic and competitive conditions across the region.

The shares sank 11 percent to 12.11 pesos in Mexico City, wiping $3.4 billion from Slim’s fortune and knocking him back into fifth place on the Bloomberg Billionaires Index, with estimated wealth of $55.2 billion. Slim, 76, is the biggest holder of America Movil stock. The carrier’s drop was the biggest one-day decline since 2008 and the steepest drop on Mexico’s benchmark IPC Index Thursday.

Earnings before interest, taxes, depreciation and amortization fell 9.6 percent to 61.7 billion pesos ($3.57 billion), the Mexico City-based company said Wednesday in a statement. Analysts projected 67 billion pesos, the average of estimates compiled by Bloomberg.

Profit margins in Mexico continued to shrink, narrowing to 35.7 percent from 41.7 percent a year earlier, as Latin America’s largest wireless carrier faces an antitrust crackdown in its home market and struggles to compete against aggressive promotions from AT&T Inc. and Telefonica SA. Sales fell 0.7 percent in Brazil, America Movil’s second-largest market, as the company cut off 908,000 prepaid customers.

Over the past two years, Mexico eliminated long-distance charges and cut the fees America Movil charged to connect other operators’ calls to its network. That has lowered the company’s profitability in the region to the lowest ever. In Colombia, measures that forbid fixed-term contracts have hurt sales and increased the rate at which customers cancel their services in that country.

Itau BBA analyst Gregorio Tomassi said the quarterly results will probably trigger an “overdue downward revision of estimates by the market.” America Movil’s current valuation “may be not fully discounted for the bleak outlook” in many of the carrier’s markets, including Mexico and Brazil. Tomassi has an underperform rating on the stock, the equivalent of a sell.

Citigroup Inc. analyst Lucio Aldworth downgraded America Movil to sell, saying the results point to pressures amid increased competition. Analysts at Scotia Capital, JPMorgan and BofA/Merrill also lowered their recommendations on the carrier Thursday.

  • Sales rose 1.4 percent to 223 billion pesos from a year earlier, compared with the average 223.1 billion-peso projection of analysts.
  • The latest regulatory measures in Colombia, including the unbundling of services, cut Ebitda in Colombia by 13 percent to 979 billion Colombian pesos ($330 million).