America Movil (AMX) reported results for third-quarter 2009 with earnings per ADS of 86 cents edging past the Zacks Consensus Estimates of 85 cents while increasing 22.6% from the year-ago earnings per ADS of 70 cents. Net profit surged 50.6% year over year to 18.7 billion pesos (US$1.4 billion) or 0.57 pesos per share. This healthy growth was fuelled by higher revenue and lower financing costs which fell 82.5% year over year due to gains stemming from favorable exchange rate swings.
Revenue & EBITDA Latin America’s largest wireless carrier continues to register a double-digit revenue growth as evident from the 16.9% year over year increase in consolidated revenue in the quarter to 99.8 billion pesos (US$7.5 billion), driven by 19.5% growth in service revenue. Revenue growth was supported by healthy business momentum across 3G wireless and broadband Internet businesses.
Consolidated EBITDA for the quarter was 40.4 billion pesos (US$3.1 billion), up 15.9% year-over-year, while EBITDA margin equated to 40.5%, stable year over year. Subscriber Trend Healthy earnings for the quarter was partially offset by a deceleration in subscriber growth, especially due to lackluster contribution from the core Mexican operation as overall economic conditions remain challenging.
The company registered 4 million new wireless subscriber additions in the quarter, reflecting a sharp decline from 7.3 million reported the year-ago quarter. Total wireless subscriber base increased to 194.3 million (up 12.6% year over year) with the Brazilian and US operations being the major contributors. Brazil continues to lead the growth with 1.8 million net additions followed by US with 712,000 and Mexico with 280,000 additions.
The economic recovery in Brazil boosted strong subscriber accretion in the quarter. Fixed-line customer base reached 3.8 million. Results by Key Markets Mexico, America Movil’s largest market, posted 5.2% year over year growth in revenues that reached 35.6 billion pesos (US$2.7 billion) driven by strong data revenue growth. Mexican ARPU (average revenue per user) declined marginally year over year while churn (customer switch) remained flat.
Revenue from the Brazilian operation, the other major market, increased 4.6% year over year while churn increased from the year-ago quarter. Brazilian ARPU fell 10.1% year over year. Revenue for the Argentina, Paraguay and Uruguay cluster increased 18.4% year over year while ARPU and churn both increased from the year ago quarter. The company’s US operation (Tracfone) posted 13.8% year over year revenue growth while churn increased from the prior year quarter.
Revenue increased year over year across Chile , Ecuador and Peru while declining in Columbia and Panama cluster. Opportunities & Challenges America Movil remains committed to improve service offerings to its customers as the company continues to invest aggressively to expand its GSM based cellular networks in Latin America.
Momentum is also building up for 3G services as increased penetration of 3G data services catapulted data revenue growth by 58% in the third quarter. The company’s 3G services now cover 70% of the population in its coverage markets in Latin America . Leveraging its 3G network, the company launched iPhone 3GS in July 2009 in six countries across Central and South America.
America Movil’s 3G network has already covered 16 major Mexican cities with 60% penetration of the population expected through 2009. America Movil’s prospects in wireless are also likely to be boosted by its low priced prepaid wireless services (“Straight Talk”) which is being sold through Wal-Mart (WMT) in the US.
The company’s Tracfone US subsidiary is currently offering a $45 monthly unlimited calling plan which is aggressively positioned against the plans offered by other major low-cost carriers such as MetroPCS (PCS), Leap Wireless (LEAP) and Sprint (S). Although America Movil has a commanding position in the Mexican wireless market, it is gradually losing market share due to stiff competition from the Spanish telecom giant Telefonica (TEF).
Additionally, America Movil remains significantly challenged by the intensely competitive Brazilian wireless market. While we remain encouraged by the company’s sustainable earnings power, consistent revenue growth and increased penetration of 3G data services, we are concerned about the competitive and regulatory issues across Latin America which may continue to constrict subscriber growth levels moving forward.
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