America Movil (AMX), the largest telecom carrier in Latin America reported first quarter earnings per ADR of 97 cents, well below the Zacks Consensus Estimate of $1.05 but 15 cents or 18.3% above the year-ago quarter driven by strong wireless subscriber growth and Pay TV expansion in Latin America. Net profit grew 12.1% year over year to MXN$23.5 billion ($1.9 billion).

Total revenue was approximately MXN$156.2 billion ($12.9 billion), up 6.3% year over year and slightly ahead of the Zacks Consensus Estimate of $12.8 billion. The revenue 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$143.0 billion ($11.8 billion), up 6.2% year over year with. Within this wireless service revenue segment, data revenue  soared 35.3% year over year. Pay TV revenue jumped 66.0% year over year on increased subscriber.

Equipment revenue was MXN$13.2 billion ($1.1 billion), up 8.2% year over year on growing demand for smartphones.

Total costs and expenses in the reported quarter were up 11.3% year over year at around MXN$94.1 billion ($7.8 billion). On a year over year basis, cost of service, cost of equipment, selling, general and administrative expense, and other costs increased 12.1%, 8.0%, 12.2% and 21.2%, respectively. 

Despite strong subscriber growth, quarterly EBITDA declined 0.4% year over year to MXN$62.1 billion ($5.1 billion) due to a 10.3 % reduction in Telmex EBITDA, offsetting the 8.8% growth in the EBITDA of other operations.

EBITDA margin plunged 260 basis points to 39.8% from 42.4% in the year-ago quarter. Similarly, quarterly EBIT dropped 4.9% to approximately MXN$38.8 billion ($3.2 billion) from the last quarter. EBIT margin fell 290 basis points to 24.8% from 27.7% in the year-ago quarter.

Subscriber Statistics

America Movil’s total subscriber base reached 284 million, up 12.3% year over year. Within this total subscriber base, wireless subscribers and fixed-line subscribers were 231 million and 53 million, respectively, with both figures increasing 12.1% and 12.8% year over year.

Among fixed-line subscribers, fixed voice subscriber was 28.7 million, fixed-broadband subscriber was 13.6 million and PayTV subscriber was 10.8 million.

Results by Key Markets

Revenue from Mexico, America Movil’s home turf, inched up 1.7% year over year to MXN$61.8 billion ($5.1 billion). Mexican ARPU (average revenue per user) declined 2.7% to MXN$160 ($13.2) and the churn rate dipped 10 basis points year over year to 3.1%.

Revenue from the Brazilian operation climbed 5.7% year over year to BRL5.5 billion ($3.3 billion). ARPU fell 10.4% from the year-ago quarter to BRL18 ($10.8), while the churn rate increased 60 basis points year over year to 3.3%.

America Movil’s U.S. operation (Tracfone) posted a 43.3% year-over-year revenue growth in the quarter to $868 million. ARPU increased 27.8% year over year to $14, while the churn rate increased 50 basis points to 4.1%.


At the end of first quarter 2011, America Movil had around MXN$93.2 billion ($7.7 billion) of cash and cash equivalents compared to MXN$114.1 billion ($9.2 billion) in the year ended December 31, 2010.

During the reported quarter, total debt was around MXN$25.4 billion ($2.1 billion) compared with MXN$26.0 ($2.2 billion) billion at year-end 2010.

Our Analysis

America Movil continues to dominate the Mexican wireless market by expanding data and Pay TV services. Additionally, increased penetration of 3G wireless services in Latin America, the expected launch of 4G services along with growing demand for smartphones 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 rate, subsidies on handsets, reduced mobile termination rates (MTRs) 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 supported by a Zacks #3 Rank (Hold).

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