America Movil Earnings: Slowing Growth in Mexico Isn’t a Major Concern

Slowing revenue growth, especially in Mexico, stood out in America Movil’s AMX third-quarter results, but we don’t believe investors have reason for concern. Our fair value estimate remains $21 per ADR, and the shares look attractive after selling off on the earnings release. Total service revenue declined 4.3% year over year but would have increased 3.8%, excluding the impact of the strong Mexican peso. On the same basis, service revenue increased about 6% and 5% during the first and second quarters, respectively.

Mexican service revenue increased 4.3%, the slowest pace since early 2021. Wireless net customer additions were relatively weak at 174,000 during the quarter, down from 444,000 a year ago, while growth in average revenue per wireless customer slowed to only 2.4% year over year. Management believes competition in the prepaid market was the primary reason for weakness this quarter. We’ll look at AT&T Mexico and Walmart Mexico’s results for signs of increased aggressiveness, but we suspect that the quarter saw normal shifts in promotional activity following a long stretch of solid pricing growth. On the fixed-line side, Movil added 20,000 net broadband customers, a sharp slowdown versus the first half of the year. The firm continues to migrate customers to its fiber network, but this market likely remains intensely competitive.

Brazil was a bright spot during the quarter, with service revenue up 5.2% in local currency. Wireless pricing discipline appears to have remained firm in the market, and we suspect Movil is the most aggressive of the three major carriers. We estimate Movil’s average revenue per wireless customer was up about 5% adjusted for the Oi acquisition, in line with local inflation, but the firm posted a big jump in net wireless customer additions. The firm also posted its best broadband net customer additions in three years, driving a return to fixed-line revenue growth for the first time in six years.