April 24, 2018 / 10:49 PM / 4 months ago

America Movil first-quarter profit dives on currency swings

MEXICO CITY (Reuters) - America Movil said on Tuesday its net profit fell nearly 50 percent in the first quarter due to currency swings, but there were signs Latin America’s largest wireless carrier was already reaping the rewards of an important Supreme Court decision in Mexico.

FILE PHOTO: The logo of America Movill is seen on the wall at the company's corporate offices in Mexico City, Mexico March 14, 2018. REUTERS/Carlos Jasso/File Photo

The telecommunications company, which is controlled by the family of Mexican billionaire Carlos Slim, posted a net profit of 18.087 billion pesos ($988 million), compared with 35.85 billion pesos in the same quarter a year earlier.

America Movil attributed a decline in sales to the peso’s appreciation against other currencies. A strong peso means revenue from other countries is worth less when translated into Mexican currency.

If not for foreign exchange fluctuations, revenue would have risen narrowly, the company said.

The company said growth in Mexico outpaced other markets, and that it had resumed charging competitors such as AT&T (T.N) and Telefonica (TEF.MC) to use its network in Mexico.

“The regulatory and competitive pressures have eased up a bit,” said Intercam analyst Alik Garcia.

Mexico’s 2013-14 telecommunications reform forced America Movil to let competitors use its network for free, which was a drag on the company’s profits.

After a protracted legal battle, Mexico’s Supreme Court opened the door for America Movil to resume charging competitors in August, and telecommunications regulators set the new interconnection fees in November, permitting the company to bill about a fourth of what its rivals can.

America Movil’s rivals, who competed to offer the best packages after reform, appear to be acting more conservatively in the new regulatory environment, Garcia said.

For the first quarter, the company’s earnings before interest, tax, depreciation and amortization (EBITDA) margin, a measure of profitability, was 28 percent, the best in 10 quarters.

While interconnection fees in Mexico helped, they were not the only factor, said GBM analyst Carlos de Legarreta.

The company’s average revenue per user for mobile rose 11.6 percent in Mexico and 10.7 percent in Brazil, its two most important markets.

“This means they are monetizing the demand for data that we are seeing across Latin America,” de Legarreta said.

Reporting by Julia Love; additional reporting by Noe Torres and Sheky Espejo, editing by G Crosse

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