America Movil SAB, the biggest mobile-phone carrier in the Americas, fell the most in two months in Mexico after profit missed analysts’ estimates amid costs to recruit new subscribers and service debt.
Fourth-quarter earnings before interest, taxes, depreciation and amortization increased 3.9 percent to 64.5 billion pesos ($5.04 billion), trailing the 65.2 billion- peso average of six estimates compiled by Bloomberg. The Mexico City-based carrier’s Mexican and Brazilian units had lower profit margins as more customers signed up for long-term contracts that often come with discounted phones.
America Movil, controlled by billionaire Carlos Slim, is shifting its prepaid phone users to contract plans to increase customers’ loyalty and encourage them to add more services, such as Internet access. Contract subscribers rose 20.5 percent in 2011, compared with 7.4 percent growth for all wireless users.
“Contract clients are more expensive, but they’re much more stable and productive,” said Martin Lara, an analyst at Corp. Actinver SAB in Mexico City. “There are many incentives to add postpaid clients.” He recommends buying the shares.
The company’s shares slid 2.4 percent to 15.193 pesos at 1:51 p.m. in Mexico City, after falling as much as 2.6 percent for the biggest intraday decline since Dec. 8. They dropped 1.6 percent this year before today.
Fourth-quarter net income slid to 16.3 billion pesos from 25.5 billion pesos a year earlier, America Movil said yesterday in a statement. A weaker peso and higher interest expenses boosted financing costs fourfold to 11.1 billion pesos, hurting profit. Sales rose 12 percent to 182 billion pesos, beating the 173 billion-peso average of analyst estimates.
America Movil is paying more interest after borrowing to acquire fixed-line companies Telmex Internacional SAB and Telefonos de Mexico SAB in the past two years. Net debt rose 55 percent to 321 billion pesos from a year earlier. Cash flow should pay down that figure over time, Lara said.
The company changed its accounting for prepaid wireless subscribers to eliminate those who hadn’t added minutes to their account during “a determined period,” according to the filing. That eliminated 4.85 million clients from the company’s rolls. Even with that elimination, America Movil had a net gain of 304,000 mobile subscribers.
Using America Movil’s old methodology for subscriber figures, the company would have added about 8 million mobile- phone users, Alejandro Gallostra, an analyst at BBVA Bancomer SA in Mexico City, said in a research note. That was more than his estimate of 7.1 million additions and Lara’s 6.25 million estimate. America Movil Chief Executive Officer Daniel Hajj cited the 8 million figure today on a conference call.
America Movil ended the quarter with 242 million mobile- phone customers. For 2012, Hajj forecast subscriber additions of 14 million. Spending on network infrastructure this year will be as much as $9 billion, a drop from $9.7 billion in 2011.
In Mexico, the fourth-quarter profit margin before interest, taxes, depreciation and amortization dropped to 48 percent from 51.3 percent a year earlier. The earnings were hurt by a 2011 ruling by the nation’s Federal Telecommunications Commission to cut the fees that America Movil could charge competitors to connect calls.
In Brazil, America Movil’s second-largest market behind Mexico, the operating margin declined to 22.8 percent from 24.7 percent. Brazil had the biggest net gain in the quarter among the 18 countries where America Movil operates, adding 2.9 million new subscribers.
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