America Movil Earnings: The Strong Mexican Peso Balances Slowing Growth, Colombian Weakness

We are maintaining our America Movil AMX fair value estimate at $21 per ADR despite the ongoing appreciation in the Mexican peso versus the U.S. dollar. With inflation in Mexico falling, wireless price increases are moderating faster than we’d forecast coming into the year. Mexico also accounts for less than half of Movil’s total revenue and other Latin American currencies aren’t as strong as the Mexican peso. In addition, the firm’s Colombian business continued to struggle during the second quarter. We believe the shares are fairly valued.

Total service revenue for the first quarter declined 4.2% year over year, but would have increased about 5% excluding currency movements as the Mexican peso has also strengthened against most Latin American currencies.

The Mexican business (nearly 45% of consolidated service revenue) continues to perform well, adding 261,000 net wireless customers and 140,000 net broadband subscriptions. Movil’s Mexican broadband business has posted strong results in 2023 as its fiber network steadily expands and rivals have cut network investment. Wireless revenue per customer increased 4% versus a year ago, the slowest pace in more than two years, leaving this metric roughly flat over the past three quarters. With strong fixed-line growth, total Mexican service revenue increased 6.1% year over year, about the same pace generated over the past year.

Movil’s Colombian revenue increased 3% year over year in local currency but declined about 20% when translated into Mexican pesos. Wireless customer growth has slowed sharply (356,000 net additions versus 612,000 a year ago), but pricing is more concerning. Average revenue per customer has declined steadily for nearly three years and is now about 30% lower than a decade ago while the Colombian peso has lost more than half its value versus the U.S. dollar and 40% versus the Mexican peso. The Colombian wireless market desperately needs consolidation to reduce competitive intensity.