Mexican Wireless Strength Offsets Broadband Weakness in America Movil’s Q4

The Mexican wireless business was a key bright spot for America Movil AMX in an otherwise underwhelming fourth quarter. Total service revenue declined 1.4% year over year largely thanks to the strong Mexican peso versus the Colombian peso and the euro. Adjusted for currency movements, revenue would have increased about 6%. We are maintaining our fair value estimate at $21 per ADR and view the shares as fairly valued.

Mexican wireless service revenue increased 9.1% versus a year ago, in line with the pace of the past several quarters. Movil ended 2022 with nearly 3% more Mexican wireless customers than the prior year, likely shedding a small portion of its mid-60s market share. Most important, in our view, wireless pricing remains rational, with average revenue per customer up 6% year over year during the quarter. The much smaller Mexican fixed-line business was disappointing, with revenue declining 1.5% year over year. Broadband revenue increased 4% but the firm lost 96,000 net customers during the quarter, leaving its base slightly smaller than the year before. Competition from the cable companies and Total Play have offset Movil’s fiber expansion efforts. The firm claims 67% of its broadband customers are now on fiber, up from less than 50% a year ago. The EBITDA margin in Mexico expanded to 40% during the quarter from 39% the year before.

Brazilian wireless service revenue increased 22.7% in local currency thanks to the Oi asset acquisition and steady revenue growth. As with its peers, Movil has now removed inactive Oi accounts from its base, presenting a clearer picture of the market. Movil holds roughly 33% market share both overall and within the postpaid business. The Brazilian fixed-line business continues to struggle, with revenue down 3.5% versus a year ago. Movil added 26,000 net broadband customers during the quarter and its market share is stabilizing, but competition remains stiff. The EBITDA margin in Brazil was roughly flat at 41%.