America Movil's Second-Quarter Profit Down 16% on Flat Sales

By Anthony Harrup 

MEXICO CITY--Mexican telecommunications giant América Móvil saw its net profit fall in the second quarter on flat sales as the company faces increased competition and regulatory measures in Mexico that limited revenue growth.

The company controlled by billionaire Carlos Slim reported a net profit of 14.05 billion pesos ($902 million) in the April through June period, a 16% decline from the second quarter of 2014. Financial costs fell from a year before, but taxes were higher. The net profit was equivalent to 21 Mexican cents a share, or 27 U.S. cents per American depositary receipt.

Revenue in the quarter slipped 0.1% to 220 billion pesos, as gains in Central and South America and Europe were partly offset by lower sales in Mexico. Mexico revenue fell 2.4% from a year before, led by a continued decline in voice traffic that was partly compensated by growth in data services. The downward revenue trend in Mexico has begun to stabilize, the company said.

América Móvil disconnected 850,000 wireless subscribers during the second quarter, including 739,000 in Brazil, but added 559,000 in Mexico. It ended the quarter with 288.8 million wireless subscribers, and 78.9 subscriptions to fixed-line services, including phone, broadband and pay television.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, a measure of operating cash flow, fell 5% from a year before to 68.33 billion pesos in the second quarter.

América Móvil had been expected to report net profit of 9.9 billion pesos on revenue of 222.9 billion pesos, with Ebitda at 68.3 billion pesos, according to the median estimates of seven equities analysts consulted by The Wall Street Journal.

The Mexican business has been affected by regulations imposed on América Móvil in the past year as the country's dominant carrier, such as the elimination of roaming charges and the requirement that it complete incoming calls from rival networks free of charge.

As a result of the telecommunications overhaul, U.S. heavyweight AT&T Inc. bought wireless operators Grupo Iusacell and Nextel Mexico for $4.4 billion this year, and plans to invest $3 billion through 2018 to expand its services.

AT&T is joining its Mexican and U.S. networks in a "North American Mobile Service Area" of 400 million potential consumers, and has begun allowing its Mexican customers to use their plans for voice, data and messaging while in the U.S., as well as to call friends and family in the U.S. who are on the AT&T network.

T-Mobile US Inc. also said recently that it is dropping charges for calls and texts to and from Mexico and Canada.

América Móvil's local wireless unit Telcel responded Thursday with its own "Without Borders" plan, which for about $3 more a month allows its postpaid customers free calls to and from the U.S. and eliminates roaming charges when they travel north of the border.

"It will be the same as if you were in Mexico," América Móvil Chief Executive Daniel Hajj said at a news conference, adding that the company is working to extend the plan to Canada soon, and will have a similar deal for prepaid clients.

The executive noted that with AT&T and Spain's Telefónica SA as rivals, it is competing with some of the world's biggest phone companies. "We have invested more than $10 billion in the past five years, and we will invest $6 billion in the next three years," Mr. Hajj said. "This will force all the other operators in Mexico to invest."

Write to Anthony Harrup at [e-mail]

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