America Movil (AMX) reported its third quarter earnings per ADS of 90 cents missing the Zacks Consensus Estimate by 4 cents while increasing 7.4% from the year-ago earnings per ADS of 84 cents. Net profit climbed 8.8% year over year to approximately MXN23.4 billion ($1.83 billion).

Quarterly, total revenue was approximately MXN153.5 billion ($12 billion), up 5.3% year over year and was inched past the Zacks Consensus Estimate of $11.8 billion. Services revenue was MXN83.5 billion ($6.53 billion), up 9.1% year over year.

Within this segment, Data revenue (which is the prime contributor of growth) soared 27.1% year over year. Equipment revenue was MXN11.8 billion, up 5.5% year over year. The rise in revenue was mainly fueled by increase in subscriber and data revenue growth.

Total costs and expenses in the reported quarter were around MXN90.5 billion ($7.1 billion), up 4.7% year over year. Compared with the prior-year quarter, cost of service, cost of equipment, selling, general and administrative expense and other cost increased a respective 2.9%, 5.8%, 4.4% and 142.7%. 

Quarterly EBITDA was approximately MXN63 billion ($4.9 billion), up 6.0% year over year. However, EBITDA margin in the third quarter was 41.1% compared with 40.8% in the year-ago quarter. Quarterly EBIT was approximately MXN41 billion ($3.1 billion), up 3.9% year over year. However, EBIT margin in the third quarter was 26.7% compared with 27.1% in the year-ago quarter.

Subscriber Statistics

After the integration of Telmex and Telmex Internacional with America Movil, the total subscriber base of the consolidated entity was 266.8 million, up 11.5% from third quarter 2009. Within this total, Wireless subscriber was 216.8 million and fixed-line subscriber was 50 million.

Among fixed-line subscribers, fixed voice subscriber was 28.1 million, fixed-broadband subscriber was 12.5 million and PayTV subscriber was 9.4 million. At the end of the reported quarter, total post-paid wireless subscriber was 31.2 million, up 14.4% year over year.

During the third quarter, America Movil added 5.5 million subscribers, up 37.6% year over year. Major geographic regions of subscriber addition were Brazil (net addition of 1.9 million subscribers), Mexico (net addition of over 1.1 million), Argentina (net addition of 295,000) and the U.S. (net addition of 745,000).

Results by Key Markets

Revenue from Mexico, America Movil’s home turf, increased 2.7% year over year to MXN62 billion ($4.8 billion) in the quarter driven by strong data revenue, which grew by 25.5%. Mexican ARPU (average revenue per user) grew marginally by 20 basis points to MXN 164 ($12.8) while churn rate increased slightly by 10 basis points to 3.1%.

Revenue from the Brazilian operation increased 2% year over year to BRL5.2 billion ($3 billion). While ARPU fell 9.4% from the year-ago quarter, churn in Brazil increased by 20 basis points from the year-ago quarter. Revenue from the Argentina, Paraguay and Uruguay cluster increased 16.3% year over year to ARS2.5 billion ($0.6 billion).

The quarter’s ARPU increased 9.1% to ARS36 ($9.1) from the year-ago quarter while churn declined by 20 basis points as compared to same quarter previous year. America Movil’s US operation (Tracfone) posted 75.1% year-over-year revenue growth in the quarter to $0.7 billion. ARPU increased 33.6% to $13 from the year-ago quarter while churn rate increased slightly by 30 basis points to 4.4%.

Liquidity

At the end of the third quarter, America Movil had around MXN178.4 billion ($13.9 billion) of cash & cash equivalents on its balance sheet, up 198.5% from the end of fiscal 2009. At the end of the same quarter, total debt was around MXN341.3 billion ($26.7 billion), up 47% from the end of fiscal 2009.

Our Take

America Movil continues to dominate the Mexican wireless market with roughly 74% share facilitated by its well-known brand, extensive distribution network and nationwide coverage.The company remains committed to improving its service offerings to its customers as it continues to invest aggressively to expand its GSM based cellular networks in Latin America.

Further, America Movil is planning to launch its 4G services, which will keep it ahead of its close rivals who have not yet launched 3G services due to spectrum constrains. However, investment risks associated with domestic and emerging markets, regulatory issues and intensifying competition may limit the company’s upside stock potential.

The company currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.

 
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