America Movil Reports a Mixed Bag - Analyst Blog

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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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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 , Stocks

Referenced Stocks: AMX , TEF , TV

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