America Movil Falls to 7-Year Low as Mexico Woes Continue

  • Carrier’s Mexico margins narrow amid stiff competition
  • Service revenue increases as key currencies rise against peso

America Movil SAB, the Latin American wireless carrier controlled by billionaire Carlos Slim, sank to a seven-year low after reporting disappointing profit with its Mexican unit under siege from competitors and regulators.

Earnings before interest, taxes, depreciation and amortization fell 11 percent from a year earlier to 61 billion pesos ($3.23 billion), the Mexico City-based company said Thursday in a statement. Analysts had projected 64.5 billion pesos on average. The shares dropped 2.4 percent to 10.78 pesos, the lowest closing price since April 2009.

Prices for wireless services continued to drop in Mexico, where America Movil faces antitrust rules and is trying to match aggressive pricing offers by competitors AT&T Inc. and Telefonica SA. Its profit margin in Mexico narrowed to 33 percent from 41.4 percent a year earlier. The carrier said sales in Brazil were little changed, partly weighed down by weaker economic conditions.

Since a telecommunications overhaul signed into law three years ago in Mexico, an independent oversight agency has been formed, American phone giant AT&T entered the market and the process for consumers to switch between phone providers became easier and faster. The government is due later this year to review whether the laws backed by President Enrique Pena Nieto have met goals to increase competition, though regulatory officials have hinted they’re not planning to relent on Slim’s company.

The drop in America Movil shares put another dent in the fortune of Slim, the onetime richest person in the world who’s now in eighth place on the Bloomberg Billionaires Index with a fortune of $49.5 billion.

  • Sales grew 6.1 percent from a year earlier to 233.4 billion pesos, compared with the average 227.9 billion peso projection of analysts.
  • Service revenue grew 3.2 percent, buoyed by the appreciation of several currencies against the peso.
  • Net income fell 45 percent to 7.7 billion pesos, hurt by lower revenue in Mexico.
  • Disconnections in Brazil totaled 1.1 million, while in Mexico they came to 575,000.

Profit in America Movil’s European business rose 0.7 percent to 329 million euros ($368 million) on lower costs, including a reduction in restructuring expenses. The company said this week it’s selling a 7.8 percent stake in Telekom Austria AG following an agreement with the Austrian government aimed at increasing the stock’s free float. America Movil will retain 52 percent of the Vienna-based carrier.

At the same time, Citigroup Inc. on Thursday sold a 374 million-euro ($415 million) bond exchangeable into 51.9 million Telekom Austria shares, which is equivalent to a 7.8 percent stake. The bond, due in 2023, has an exchange price of 7.213 euros per Telekom Austria share, a 40 percent premium. Neither America Movil nor Citi made a reference to the others’ transaction in their statements, and the companies declined to comment.

America Movil last year used exchangeable bonds as a vehicle to sell another of its European telecom holdings, selling bonds exchangeable into shares of Royal KPN NV to cut its stake in the Dutch operator in May and September 2015.

Slim’s company said this week it will wait until Aug. 2 to hold a conference call with analysts to discuss its financial results because of scheduling conflicts.

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