Despite persistent declines in mobile termination rates,
America Movil
(
AMX
) managed to exceed expectations in the first quarter of 2012. The
company reported earnings per ADR of 65 cents, surpassing the Zacks
Consensus Estimate of 47 cents and also improved 33% from 49 cents
in the year-ago quarter. Net profit increased 37.5% year over year
to MXN$32.6 billion (approximately $2.5 billion).
Total revenue was MXN$192.5 billion (approximately $14.8
billion), up 12.4% year over year and above the Zacks Consensus
Estimate of $13.3 billion. The top-line growth was mainly fueled by
an increase in wireless subscribers and higher revenues from
wireless data and Pay TV services.
Segment wise,
Services
revenue was MXN$177.1 billion (approximately $13.6 billion), up
12.1% year over year. Within this wireless service revenue segment,
mobile data revenue (which is the prime contributor of growth) grew
30.7% year over year. Pay TV revenue increased 25.4% year over year
on subscribers gained from the acquisition of Net Serviços.
Fixed-line data revenues also showed growth 8.5%.
Equipment
revenue was MXN$15.4 billion (approximately $1.2 billion), up 15.7%
year over year on the growing demand for smartphones.
Total costs and expenses in the reported quarter were up 15.9%
year over year to around MXN$125 billion (approximately $9.6
billion). On a year-over-year basis, cost of service, cost of
equipment and selling, general and administrative expense increased
18.1%, 24.9%, 9.5%, respectively.
Quarterly EBITDA increased 6.3% year over year to MXN$67.5
billion (approximately $5.2 billion). However, EBITDA margin
plunged 200 basis points (bps) to 35.1% from 37.1% in the year-ago
quarter due increased costs associated with infrastructural
development of wireless and wireline networks in Mexico and Brazil
along with the related cost of increasing post-paid and PayTV
subscriber base.
Quarterly EBIT dropped 4.9% sequentially to approximately
MXN$42.0 billion (approximately $3.2 billion) in the first quarter.
EBIT margin fell 160 bps to 21.8% from 23.4% in the year-ago
quarter.
Subscriber Statistics
America Movil's total subscriber base reached 306 million, up
7.7% year over year. Within this total customer base, wireless and
fixed-line subscribers were 246 million and 60 million,
respectively, with the figures increasing 6.5% and 12.5% year over
year.
Among fixed-line customers, 30 million were subscribed to fixed
voice (landlines), 16 million to fixed-broadband and 14 million to
PayTV.
Results by Key Markets
In the first quarter, revenue from Mexico, America Movil's home
turf, climbed 3.9% year over year to MXN$66.2 billion
(approximately $5.1 billion). ARPU (average revenue per user)
increased 4.7% to MXN$177 (approximately $13.6) and the churn rate
increased 60 bps year over year to 3.6%.
Revenue from the Brazilian operation climbed 9.6% year over year
to BRL7.7 billion (approximately $4.2 billion). ARPU fell 10.7%
from the year-ago quarter to BRL17 (approximately $9.2), while the
churn rate increased 40 bps year over year to 3.7%.
America Movil's U.S. operation (Tracfone) saw a 24.4%
year-over-year growth in revenue to reach $1.1 billion. ARPU
increased 13.2% year over year to $16, while the churn rate dropped
20 bps to 3.9%.
Liquidity
At the end of first quarter, America Movil had around MXN$60.3
billion of cash and cash equivalents compared to MXN$64.5 billion
as of December 31, 2011. Total debt was around $29.6 billion
compared with $28.3 billion at year-end 2011. Capital expenditures
were MXN$24.2 billion.
Our Analysis
Despite a setback by interconnection rate cuts, America Movil
managed to deliver growth in terms of revenue given its widespread
wireless market and expanding data and Pay TV services in Latin
America. The increased penetration of 3G wireless services in Latin
America, the expected launch of 4G services this year along with
the growing demand for smartphones also augur well for the
company's growth.
However, competitive pressure from Brazilian and Mexican rivals
like
Telefonica
(
TEF
) and
Grupo Televisa
(
TV
), declining fixed-line subscriber rates, subsidies on handsets and
regulatory issues might limit the company's financials in the near
term.
Thus, we currently maintain a long-term Neutral recommendation
on America Movil. For the short term (1-3 months), the stock has a
Zacks #4 Rank (Sell).
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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