America
Movil
(
AMX
), the largest telecom carrier in Latin America has reported fourth
quarter earnings per ADR of 31 cents, far below the Zacks Consensus
Estimate of 49 cents and down 39.5% from 51 cents in the year-ago
quarter.
Earnings for the quarter were primarily affected by lower
interconnection charges and unfavorable currency translation. Net
profit plunged 36.2% year over year to MXN$16.3 billion ($1.2
billion). EPADR for FY11 declined 2.2% year over year to $1.74 and
Net profit dropped 9.6% y-o-y to MXN$82.6 billion ($6.7
billion)
Total revenue was approximately MXN$181.9 billion ($13.5
billion), up 12.3% year over year and above the Zacks Consensus
Estimate of $12.5 billion. The top-line growth was mainly fueled by
an increase in wireless subscribers and higher revenues from
wireless data and Pay TV services.
Total revenue for the year increased 8.7% year over year to
MXN$665.2 billion ($53.7 billion).
Segment wise,
Services
revenue was MXN$162.3 billion ($12.0 billion), up 12.6% year over
year. Within this wireless service revenue segment, data revenue
(which is the prime contributor of growth) rose 27% year over year.
Pay TV revenue increased 48% year over year on subscriber
growth.
Equipment
revenue was MXN$19.6 billion ($1.4 billion), up 19.6% year over
year on the growing demand for smartphones.
Total costs and expenses in the reported quarter were up 17.6%
year over year at around MXN$117.4 billion ($8.7 billion). On a
year-over-year basis, cost of service, cost of equipment, selling,
general and administrative expense, and other costs increased
19.7%, 15.1%, 14.6% and 18.2%, respectively.
Total cost for fiscal 2011 increased 13.5% year over year to
MXN$412.5 billion ($33.3 billion) on 14.2%, 11.1% and 14.9%
increases in cost of service, cost of equipment, selling, general
and administrative expense, and other costs, respectively.
Quarterly EBITDA grew 3.9% year over year to MXN$64.5 billion
($4.8 billion). However, EBITDA margin dropped to 35.5% from 38.4%
in the year-ago quarter due to increased costs associated with the
infrastructural development of wireless and wireline networks in
Mexico and Brazil along with the related costs of increasing
post-paid and PayTV subscriber bases.
EBIT increased 15.1% year over year to MXN$38.3 billion ($2.8
billion) in the fourth quarter. EBIT margin improved to 21.5% from
20.5% in the year-ago quarter.
For fiscal 2011, EBITDA increased to MXN$252.6 billion ($20.4
billion) but EBITDA margin dropped to 38.0% from 40.6% a year ago.
EBIT was up 0.8% year over year at MXN$154.6 billion but EBIT
margin deteriorated to 23.1% from 25.1%.
Subscriber Statistics
America Movil's total subscriber base reached 299.6 million in
December 2011, up 8.3% year over year. Within this total customer
base, wireless and fixed-line subscribers were 241.8 million and 58
million, respectively, with both figures increasing 7.4% and 12.3%
year over year given increase in wireless data revenues and
broadband access.
Among the fixed-line customers, 29.4 million were subscribed to
fixed voice, 15.1 million to fixed-broadband and 13.5 million to
PayTV.
Results by Key Markets
Quarterly revenue from Mexico, America Movil's home turf,
climbed 3.4% year over year to MXN$68.4 billion ($5.5 billion).
Mexican ARPU (average revenue per user) declined 4.2% to MXN$158
($12.8) given declines in voice revenues and interconnection
charges. Churn rate increased 5.6% year over year.
Revenue from the Brazilian operation climbed 6.3% year over year
to BRL5.9 billion ($3.3 billion) in the fourth quarter. Brazilian
ARPU fell 10.9% from the year-ago quarter to BRL17 ($10.7), while
the churn rate increased 90 bps year over year to 4.1%.
America Movil's U.S. operation (Tracfone) saw a 30.9%
year-over-year growth in fourth quarter revenue to reach $1.0
million. U.S. ARPU increased 14.6% year over year to $16, while the
churn rate remained flat year over year at 4.1%.
Liquidity
At the end of the fourth quarter, America Movil had around
MXN$83.4 billion ($6.7 billion) of cash and cash equivalents
compared to MXN$114.1 billion ($9.2 billion) as of December 31,
2010. During the reported quarter, total debt was around MXN$32
billion ($2.6 billion) compared with MXN$207 billion at year-end
2010.
Our Analysis
We believe that continued demand in wireless data and PayTV
services and a growing subscriber base, in particular post-paid
users, bode well for the company's profitability in 2011 and
beyond. The company aims to launch 4G services in key markets by
the end of 2012, providing market share gains and a competitive
advantage.
Further, the company remains focused on expanding its footprint
through key business acquisitions. 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
) in the Mexican and Brazilian markets in particular. Additionally,
regulatory issues across the company's major markets, reduced MTRs
and subsidies over handsets could be detrimental to its future
growth.
Thus, we currently maintain a long-term Neutral recommendation
on America Movil supported by a Zacks #3 Rank (Hold).
AMER MOVIL-ADR (
AMX
): Free Stock Analysis Report
TELEFONICA S.A. (
TEF
): Free Stock Analysis Report
GRUPO TELEVISA (
TV
): Free Stock Analysis Report
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