América Móvil swings to profit on post-paid customers

América Móvil swung to profit in the last quarter of 2018 as it focused on more profitable, higher spending subscribers across the region while pursuing its deleveraging strategy, company executives said during a call with analysts.

América Móvil, Latin America's leading telecommunications player, is not projecting higher capex as 5G standards approach deployment. Rather, the company has been investing heavily in its networks across the region in preparation for 5G, CEO Daniel Hajj said.

"A lot of the things in which we are investing in today are pre-5G. Fiber to the node, more fiber in the backbone, photonics, more towers, we have been investing in all of these things since 2017," Hajj said. "We do not see a disruptive capex in 2020 with the introduction of 5G, I think capex is going to be more or less the same," he added.

América Móvil has an US$8bn yearly long-term capex and 2018 investments reached 152bn pesos (US$7.9bn).

EXPANSION

After announcing in January that it would buy Telefónica's Guatemala and El Salvador operations for US$648mn, the company closed the distance with its main regional competitor Millicom in Central America. Hajj said during the call that those operations will provide the company with the opportunity to increase the availability of 4G services in those countries, as it will get it more spectrum and infrastructure.

"This is very important in terms of spectrum, subscribers and infrastructure, because a lot of this (new) infrastructure we are going to consolidate and use in the rest of Central America," he said.

Telefónica is reportedly also in the process of selling the rest of its Central American operations, namely in Costa Rica, Nicaragua and Panama. Carlos García-Moreno, América Móvil's CFO, said during the call, without providing specifics, that any potential new acquisitions will focus on expanding its existing footprint.

"We are not looking into anything that is major or transformational," he said. The acquisition will probably help the company stem the loss of subscribers in Central America. Last year, it lost 9.8% of its regional customers and ended the year with 14.3mn subscribers.

POST-PAID CUSTOMERS

The company ended 2018 with 1.5mn new higher-spending post-paid customers, 1.2mn of them in Brazil, and added around 200,000 in Mexico. "Our post-paid base increased 7.2% year-on-year," the company said in its results release.

In Brazil, the company saw a 0.5% increase in revenue, to 35.6bn reais, as wireless service revenues jumped 9.5% to 12.1bn reais. Post-paid customers increased by 15.6% to 23.5mn as prepaid fell 14.9% to 32.9mn. Average revenue per user (ARPU) jumped 10.3% to 17 reais at the end of the year.

In Mexico, revenues also jumped by 6.6% for the full year driven by a 12% increase in wireless service revenues, as the company added 5.8% more post-paid subscribers. Prepaid also picked up, at 1.4% growth. Mexican ARPU reached 150 pesos, a 5.7% increase year on year.

The company reported a 9.5bn-peso (US$495mn) profit in Q4, as opposed to a loss of 10.6bn pesos in 4Q17. Annual profits jumped 8.4% to 45.7bn pesos. América Móvil also reduced its net debt by nearly 10% during the year to 568bn pesos or 1.88 times Ebitda, as it looks to keep deleveraging.

In the near future, the company will bundle Netflix into its offerings, besides its own OTT service Claro Video. In Mexico, the only market where the company still can't legally offer pay TV services, Hajj said that they had already requested a license, but did not indicate when it could come through.