America Movil (AMX), the largest telecom carrier in Latin America, has reported fourth-quarter earnings per ADR of 30 cents. The results missed the Zacks Consensus Estimate of 50 cents and were slightly below 31 cents earned in the year-ago quarter.
Total revenue was MXN$198.0 billion ($15.1 billion), down 1.1% year over year but above the Zacks Consensus Estimate of $14.9 billion. The decline was primarily due to unfavorable exchange rate fluctuations. Excluding this impact, total revenue was up 5.8% year over year.
Total revenue for the year increased 6.0% year over year to MXN$775.1 billion ($60.0 billion).
Segment wise, Services revenues were MXN$176.8 billion ($13.7 billion), down 2.1% year over year on currency fluctuations. However, excluding the impact, service revenues grew 5.2% driven by mobile data services and PayTV. Within this wireless service revenues segment, data revenues rose 33.3% while Mobile voice revenues dipped 1.7%. Pay TV revenues increased 20% year over year on subscriber growth. Fixed-line voice revenues declined 7.2% year over year.
Equipment revenue was MXN$21.2 billion ($1.6 billion), up 8.2% year over year on the growing demand for smartphones.
Total costs and expenses in the reported quarter were up 2.4% year over year at MXN$136.4 billion ($10.5 billion). On a year-over-year basis, other costs, cost of equipment and selling, general and administrative expenses increased 47.6%, 5.6% and 2.8%, respectively. However, the cost of service declined 0.6% year over year.
Total cost for 2012 increased 9.0% year over year to MXN$514.2 billion ($39.1 billion) based on 16.2%, 13.4%, 8.3% and 5.4% rise in cost of equipment, other costs, cost of service and , selling, general and administrative expenses, respectively.
Quarterly EBITDA fell 8.0% year over year to MXN$61.7 billion ($4.8 billion). EBITDA margin dropped 240 basis points year over year to 31.1% due to increased costs associated with the infrastructural development of wireless and wireline networks in Mexico and Brazil along with the related costs of increasing post-paid and PayTV subscriber bases.
For 2012, EBITDA increased 0.4% year over year to MXN$260.9 billion ($19.9 billion) but EBITDA margin dropped 180 basis points to 33.7%.
America Movil’s total subscriber base reached 326 million in December 2012, up 8.7% year over year. Within this, wireless and fixed-line subscribers were 262 million and 64 million, respectively, increasing 8.2% and 10.8% year over year.
Results by Key Markets
Quarterly revenues from Mexico, America Movil’s home turf, climbed 0.5% year over year to MXN$70 billion ($5.4 billion). Mexican ARPU (average revenue per user) increased 2.6% and the churn rate declined 2.0% year over year.
Revenues from the Brazilian operation climbed 3.3% year over year to BRL7.9 billion ($3.8 billion) in the fourth quarter. Brazilian ARPU and churn rate fell 12.3% and 0.3%, respectively.
America Movil’s U.S. operation (Tracfone) saw a 30.8% year-over-year growth in fourth quarter revenues to reach $1.4 billion. U.S. ARPU increased 14.9% year over year, while the churn rate dropped 0.2% year over year.
At the end of 2012, America Movil had around MXN$45.5 billion ($3.5 billion) of cash and cash equivalents compared with MXN$64.5 billion ($5.2 billion) as of December 31, 2011. Total long-term debt was around MXN$404.1 billion ($30.8 billion) compared with MXN$368.0 billion ($29.7 billion) at year-end 2011.
Cellcom Israel Ltd. (CEL), which has a Zacks Rank #1 (Strong Buy) is another stock in this sector worth considering.
We believe that continued demand in wireless data and PayTV services and a growing subscriber base, in particular post-paid users, bode well for the company’s profitability. The company launched 4G services in Mexico in 2012, providing market share gains and a competitive advantage.
Despite being the undisputed market leader in the Latin American telecom market, America Movil remains highly exposed to competitive threats from Brazilian and Mexican rivals like Telefonica (TEF) and Grupo Televisa (TV). Additionally, regulatory issues across the company’s major markets, reduced MTRs and subsidies over handsets could be detrimental to its future growth.
America Movil has a Zacks Rank #3 (Hold).
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