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America Movil (AMX - Analyst Report) reported third-quarter 2013 earnings per ADR of 35 cents, missing the Zacks Consensus Estimate of 49 cents. The results deteriorated 41.7% from 61 cents earned in the year-ago quarter.

Total revenue of MXN$194.2 billion ($15.1 billion) improved 0.7% year over year and was slightly above the Zacks Consensus Estimate of $14.8 billion.

Segment wise, Services revenues were MXN$174.5 billion ($13.5 billion), down 0.9% year over year due to currency fluctuations. Equipment revenues were MXN$19.7 billion ($1.5 billion), up 17.7% year over year on growing demand for smartphones and tablets.

Total costs and expenses in the reported quarter increased 4.2% year over year to MXN$130.9 billion ($10.1 billion). Quarterly EBITDA dropped 5.8% year over year to MXN$63.3 billion ($4.9 billion). EBITDA margin dropped 220 basis points year over year to 32.6%.

Subscriber Statistics

America Movil’s total subscriber base reached 333 million in Sep 2013, up 4.6% year over year. Of the total, wireless and fixed-line subscribers were 265 million and 68 million, representing year-over-year growth of 3.6% and 8.6%, respectively.

Results by Prime Regional Segments

Quarterly revenues from Mexico, America Movil’s home ground, dipped 0.3% year over year to MXN$68.181 billion ($5.3 billion). Mexican ARPU (average revenue per user) decreased 6.4% and the churn rate deteriorated 10 basis points year over year.

Revenues from the Brazilian operation climbed 10.3% year over year to BRL8.4 billion ($3.7 billion). Brazilian ARPU fell 3.9  %, while churn rate improved 30 basis points year over year.

America Movil’s U.S. operation (Tracfone) saw 17.2% year-over-year growth in revenues to $1.5 billion. ARPU increased 10.7% year over year, while the churn rate deteriorated 20 basis points year over year.

Liquidity

At the end of the third quarter, America Movil had around MXN$72.2 billion ($5.7 billion) of cash and cash equivalents compared with MXN$45.5 billion ($3.6 billion) as of Dec 31, 2012. Total long-term debt was around MXN$468.9 billion ($37 billion) compared with MXN$404.0 billion ($31.9 billion) at the end of 2012. The company’s capital expenditure netted MXN$78.7 billion ($6.2 billion).

Our Analysis

We believe America Movil has a strong grip over the Latin American wireless market thanks to consistent subscriber growth. Increased penetration of 4G mobile services and a competitive pricing policy are expected to boost the company’s growth prospects. Further, America Movil is concentrating on expanding the PayTV platform, which remains one of its highest revenue contributors. America Movil’s various collaborations will likely enhance its network within Latin America as well as in offshore key markets such as Asia and the Middle East. Nevertheless, we prefer to stay on the sidelines considering unstable economic conditions, regulatory issues, high spending associated with promotional activity and stiff competition from carriers like Telefonica Brasil, S.A. (VIV - Analyst Report), Grupo Televisa (TV - Analyst Report) and NII Holdings Inc. (NIHD - Analyst Report).

America Movil has a Zacks Rank #3 (Hold).

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