Published On: Thu, Apr 28th, 2016

Carlos Slim’s America Movil starts to feel the heat in cell phone service

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America Movil officially announced on Wednesday April 27, first-quarter profit fell more than 40 percent from a year ago, as mobile competition from AT&T Inc intensified in Mexico and it started paying rent on cell towers after a sweeping regulatory overhaul.

The 2013 overhaul was aimed at curbing America Movil’s 70 percent market share in Mexico by forcing it to share cell towers and other equipment with rivals, and letting them connect calls to its network for free.

The company, which had long dominated Latin American telecommunications, was pressured to spin off its cell towers in 2015 into a new company, which it now pays rent to. AT&T, which had been America Movil’s partner for more than two decades, entered Mexico’s market on its own in late 2014 by buying up the No. 3 and No. 4 carriers.

America Movil, controlled by the family of billionaire Carlos Slim, said in a statement that the margin on its Mexico earnings before interest, tax, depreciation and amortization (EBIDTA) hit a new low of 35.7 percent in the first quarter. The margin has fallen every quarter since the reform.

Profit of 4.798 billion pesos ($278 million USD) was less than one-third of the 15.328 billion pesos expected by analysts in a Reuters I/B/E/S poll.

América Móvil Office Mexico City (Photo: Reuters)

America Movil profit drops as Mexico competition grows. (América Móvil Office Mexico City. Photo: Reuters)

In Mexico, revenue was hurt by America Movil’s new competitive plans, tower payments to Telesites, and a fall in the Mexican peso, which made dollar-denominated handsets more expensive, the company said.

But America Movil said was still winning new mobile subscribers at home, adding more than 1.4 million in the quarter.

AT&T said in its earnings release on Wednesday that it added 500,000 new subscribers in Mexico in the quarter.

America Movil is also grappling with a deepening economic recession in Brazil, its second-largest market. In the first quarter, it lost more than 6 million wireless subscribers there and overall revenue fell, the company said.

Overall revenue rose 1 percent to 222.985 billion pesos, in line with analysts’ expectations.

 

Source: http://www.reuters.com/

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