UPDATE 2-America Movil 3rd-quarter profit nearly halves

Thu Oct 24, 2013 6:40pm EDT

By Elinor Comlay

MEXICO CITY Oct 24 (Reuters) - Latin America's biggest phone company, America Movil, on Thursday reported a quarterly profit that fell by almost half, missing analysts' expectations, as customers made fewer phone calls and the company's financing costs soared.

The company, controlled by billionaire Carlos Slim, said profit in the July-September period dropped 46 percent to 16.384 billion pesos ($1.25 billion), from 30.45 billion pesos in the same period a year earlier.

Analysts on average expected a profit of 25.656 billion pesos, according to a Reuters survey.

The company, which took on more debt to fund ambitious acquisitions in the last year, had a financing cost in the quarter of 10.8 billion pesos, including a foreign exchange loss of 2.9 billion pesos.

The slowing economy in its core markets, particularly in Mexico, also hurt America Movil's bottom line.

America Movil said its core profit, or earnings before interest, taxes, depreciation and amortization, fell 5.8 percent to 63.3 billion pesos.

Almost half of the company's core profit comes from Mexico, where service revenues, or income from customers' phone calls, dropped 1.4 percent.

"It's a weak report ... but I think the market was already expecting that," said Julio Zetina, analyst at Vector Casa de Bolsa in Mexico City. "It's clear that the economy in Latin America is less dynamic in (the company's) biggest markets."

America Movil shares closed down 1.09 percent at 13.58 pesos before the company reported its quarterly results.

Total revenue rose 0.7 percent to 194.221 billion pesos, helped by gains from selling more expensive mobile phones, which offset a drop in revenue as customers made fewer calls.

EUROPEAN EXPANSION

America Movil, which earlier this month said it would abandon a plan to buy Dutch telecoms company KPN, has been seeking acquisitions outside of Latin America in the last two years to offset a squeeze on its revenue in Mexico.

The company's earnings that come from Mexico are under threat from a sweeping telecoms reform package that could force Slim to sell some of America Movil assets.

But the foreign acquisitions have led the company to increase its total debt load 23 percent to US$39.4 billion at the end of September, compared with $32 billion at the end of last year.

And with the KPN deal off the table at least in the short term, America Movil's strategy in Europe is unclear.

The company is likely to face questions from analysts on its conference call on Friday at 1400 GMT about the decision to pull back from KPN.