In-Line 1Q From America Movil


America Movil posted an in-line first-quarter earnings result and made a subtle improvement from its dismal fourth quarter. Group revenue held steady (up only 0.2% year over year) at MXN 193 billion, or $15.8 billion, thanks to a 6.9% increase in the mobile subscriber base and a 9.5% jump in fixed-line revenue-generating units. The subscriber gains helped offset currency headwinds, which curtailed growth in the international segments. On average, the peso appreciated 2.8% versus the dollar, 16.2% versus the Brazilian real, 18.8% versus the Argentine peso, and 2.3% versus the Colombian peso.

When we strip out those currency swings, the revenue growth was a much more inspiring 6.1% year over year. Service revenue rose 4.6%, but mobile data and pay television were the big movers, growing 25.6% and 19.8%, respectively. It also helped that the pace of the fixed-line voice decline is easing (down just 5.9% year over year, a 130-basis-point improvement sequentially) thanks to the fact that more than half of the net RGU additions last quarter outside Mexico (where the firm can’t offer pay TV) were sold triple-play packages.

In Mexico, analysts were disappointed to see the average revenue per user fall 6.3% year over year, although there were some one-offs that contributed to the weakness. Unlike in 2012, Easter vacations took place in the first quarter. Also, there was one day fewer in February because of the leap year effect. That said, prices per minute fell 21% to MXN 0.36 ($0.03), which ranks among the lowest in the world.

Given the currency headwinds, one-offs, and weakness in periphery assets such as Colombia and the United States, the fact the firm managed to expand its EBITDA margin by 200 basis points sequentially, to 33.1%, is somewhat impressive. We believe the bar was set so low last quarter that these small signs of stabilization should comfort investors and the shares are likely to hold steady in the near term. The spotlight now shifts toward the telecom reform bill that is in the Mexican congress and threatens the firm’s share in its home market.


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