America Movil Misses on Q1 Earnings, Revs Up - Analyst Blog

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America Movil S.A.B. de C.V. ( AMX ), the largest telecom carrier in Latin America has reported first quarter earnings per ADR of 30 cents. The results missed the Zacks Consensus Estimate of 41 cents and were way below 56 cents earned in the year-ago quarter.

Total revenue was MXN$195.4 billion ($14.9 billion), up 1.3% year over year and above the Zacks Consensus Estimate of $14.4 billion. At constant exchange total revenue was up 6.9% year over year.

Segment wise, Services revenues were MXN$175.9 billion ($13.4 billion), up 0.8% year over year, while excluding the impact of currency fluctuations, grew 5.2% on wireless voice and fixed data services growth.

Equipment revenues were MXN$19.6 billion ($1.49 billion), up 6.1% year over year on the growing demand for smartphones.

Total costs and expenses in the reported quarter increased 1.1% year over year at MXN$130.6 billion ($9.9 billion). On a year-over-year basis, other costs, cost of equipment, and selling, general and administrative expenses increased 5.9%, 6.4% and 1.3%, respectively. However, the cost of service declined 1.6% year over year.

Quarterly EBITDA increased 1.7% year over year to MXN$64.9 billion ($4.9 billion). EBITDA margin improved 10 basis points year over year to 33.2%

Subscriber Statistics

America Movil's total subscriber base reached 342.9 million at the end of Mar 2014, up 4.5% year over year. Within this, wireless and fixed-line subscribers were 272.2 million and 31.4 million, respectively, increasing 3.5% and 8.2% year over year. The company added 2.3 million wireless customers during the quarter including 1.4 million customers from the acquisition of Page Plus.

Results by Key Markets

Quarterly revenues from Mexico, America Movil's home turf, climbed 4.1% year over year to MXN$67.8 billion ($5.15 billion). Mexican ARPU (average revenue per user) increased 0.3% and the churn rate moved up 0.5% year over year.

Revenues from the Brazilian operation climbed 8.5% year over year to BRL8.6 billion ($3.6 billion) in the first quarter. Brazilian ARPU rate fell 0.9% while churn improved 0.1%.

America Movil's U.S. operation (Tracfone) saw 9.6% year-over-year growth in first quarter revenues to reach $1.66 billion. U.S. ARPU increased 3.5% year over year, while the churn rate increased 0.1% year over year.

Liquidity

At the end of the first quarter, America Movil had around MXN$40.7 billion ($3.1 billion) of cash and cash equivalents compared with MXN$48.2 billion ($3.7 billion) as of Dec 31, 2013. Total long-term debt was around MXN$431.8 billion ($32.8 billion) compared with MXN$464.5 billion ($35.3 billion) at year-end 2013. At the end of the quarter, net debt to EBITDA ratio came in at 1.6 times.

Our Analysis

We remain encouraged by the company's progress in the LTE (Long-Term Evolution) space with the launch of services in Mexico and Brazil. Further, growth in its post-paid subscriber base owing to expansion in LTE network will lead to market share expansion. Unprecedented adaptation of smartphones will also be accretive to revenue growth in the future.

However, we are concerned about the interconnection rate reductions in both Mexico and Brazil, which are putting pressure on its margins. Additionally, regulatory issues in key markets, aggressive promotional activities and depreciation of local currencies may affect the company's performance. Despite being the undisputed market leader in the Latin American telecom market, America Movil remains highly exposed to competitive threatsfrom Brazilian and Mexican rivals like Telefonica ( TEF ) and Grupo Televisa ( TV ).

America Movil has a Zacks Rank #3 (Hold).

Other Stock

Shenandoah Telecommunication Co. ( SHEN ), which has a Zacks Rank #1 (Strong Buy) is a stock worth considering in this sector.



AMER MOVIL-ADR (AMX): Free Stock Analysis Report

SHENANDOAH TELE (SHEN): Free Stock Analysis Report

TELEFONICA S.A. (TEF): Free Stock Analysis Report

GRUPO TELEVISA (TV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AMX , SHEN , TEF , TV

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