America Movil net profit slumps in 1Q14 on higher finance costs

1 May 2014

Latin American telecoms giant America Movil (AM) has registered a significant decline in net profit in the first three months of 2014 as increased revenues failed to offset higher financial costs. In the quarter ended 31 March 2014 AM generated a total turnover of MXN195.44 billion (USD14.78 billion), representing a 1.3% year-on-year increase from MXN192.96 billion. Service revenues for the period under review stood at MXN175.88 billion, up from MXN174.52 billion in 1Q14, while equipment revenues rose by 6.1% against the year-ago period to MXN19.59 billion. AM was, however, keen to stress that the volatility of exchange rates ‘ended up understating the strength of the underlying revenue dynamism of [its] various operations’. As such, it claimed that at constant exchange rates service revenues posted their second best performance in five quarters, jumping to 6.4% from 5.4% in last three months of 2013.

EBITDA in the 1Q 2014 totalled MXN64.89 billion, up from MXN63.82 billion in the corresponding period a year earlier, though once again AM stressed the impact of foreign exchange movements on the financial indicator. As with revenues, the company claimed that currency volatility suggested a ‘more subdued improvement than is the case’, saying that at constant exchange rates EBITDA increased by 6.7% year-on-year. Operating profits of MXN38.72 billion (flat year-on-year) were, however, partly offset by a comprehensive financing cost of MXN8.35 billion that predominantly represented net interest payments on the company’s debt. By comparison, in 1Q13 AM had posted a MXN1.4 billion financing income, generated by sizable foreign exchange gains. In light of this, net income for the first three months of 2014 was down by 48.3% year-on-year, at MXN13.89 billion, compared to a net profit of MXN26.87 billion in 1Q13.

In operational terms, AM ended March 2014 with 342.9 million total accesses on its books, up by 4.5% against the same date a year earlier. Of the total, the bulk were wireless connections, which increased by 0.9% over a twelve-month period to stand at 272.20 million, compared to 269.88 million at end-March 2013. With the company highlighting growth in both post- and pre-paid subscribers – up 9.0% and 2.6%, respectively – it said that net additions for the first three months of 2014 totalled 2.3 million. Meanwhile, it noted that a number of disconnections had been made, almost entirely in the prepaid market, after a clean-up of 980,000 subscribers which it said were not meeting its traffic and consumption requirements; of those, 315,000 were in Mexico, 242,000 in Brazil, and 283,000 were in Argentina. In the fixed line arena, meanwhile, AM said it had 70.66 million fixed revenue generating units (RGUs) at the end of March 2014, up 8.2% y-o-y, having added some 1.2 million RGUs in the first quarter of this year. Of the additions, 571,000 were pay-TV units, while 492,000 were broadband accesses. Outside of its domestic territory, AM said it had connected 394,000 voice lines, more than half of which were in Brazil.

Mexico, America Movil (AM)