AmericaMovil ( AMX ) reported second-quarter 2014 earnings per ADR of 42 cents, missing the Zacks Consensus Estimate of 46 cents. However, the results improved 34.4% from 31 cents earned in the year-ago quarter.
Total revenue of MXN$202.6 billion ($15.6 billion) in the second quarter improved 4.0% year over year and exceeded the Zacks Consensus Estimate of $15 billion.
Segment wise, Services revenues were MXN$180.6 billion ($13.9 billion), up 3.6% year over year. Equipment revenues were MXN$22 billion ($1.7 billion), up 7.4% year over year on growing demand for smartphones and tablets.
Total costs and expenses in the reported quarter increased 4.6% year over year to MXN$136.0 billion ($10.5 billion). Quarterly EBITDA grew 2.4% year over year to MXN$66.6 billion ($5.1 billion). EBITDA margin dropped 50 basis points (bps) year over year to 32.9%.
America Movil's total subscriber base reached 338.7 million in June 2014, up 3.0% year over year. The total number comprised wireless and fixed-line subscribers of 267 million and 72 million, representing year-over-year growth of 1.8% and 7.5%, respectively. PayTV subscribers climbed 13.7% year over year to 20.3 million.
Results by Prime Regional Segments
Quarterly revenues from Mexico, America Movil's home ground, grew 0.2% year over year to MXN$69.7 billion ($5.4 billion). Mexican ARPU (average revenue per user) decreased 1.1% year over year to MXN$169.00 ($13.01) and the churn rate deteriorated 120 bps year over year to 4.8%.
Revenues from the Brazilian operation climbed 8.5% year over year to BRL 8.8 billion ($3.9 billion). Brazilian ARPU remained flat year over year at BRL 16.00 ($6.70) while churn rate improved 10 bps year over year to 3.4%.
America Movil's U.S. operations (Tracfone) witnessed 14.8% year-over-year growth in revenues to $1.7 billion. ARPU increased 7.2% year over year to $21.00, while the churn rate improved 20 bps year over year to 3.8%.
At the end of the second quarter, America Movil had around MXN$94.1 billion ($3.8 billion) as of Jun 30, 2014. Total long-term debt was around MXN$412.3 billion ($36.4 billion) and capital expenditure totaled MXN$45.6 billion ($10.2 billion).
We believe America Movil has a strong grip over the Latin American wireless market thanks to consistent subscriber growth. Increased penetration of 4G mobile services and a competitive pricing policy are expected to boost the company's growth in the future. Further, America Movil is concentrating on expanding the Pay-TV platform, which remains one of its highest revenue contributors. America Movil's various collaborations will likely enhance its network within Latin America as well as in offshore key markets such as Asia and the Middle East. Nevertheless, we prefer to stay on the sidelines considering unstable economic conditions, regulatory issues, high spending associated with promotional activity and stiff competition from carriers like Telefonica Brasil, S.A. ( VIV ), Grupo Televisa ( TV ) and NII Holdings Inc. ( NIHD ).
America Movil has a Zacks Rank #3 (Hold).
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