April 19, 2013 3:16 am

Smartphone spending hits América Móvil

América Móvil, Latin America’s largest telecoms operator, reported a 17 per cent fall in first-quarter profits as it spent more on smartphones to attract customers to sign up for long-term contracts.

The company controlled by Carlos Slim, the world’s richest individual, according to Forbes, said on Thursday that net profit for the first three months was 26.9bn pesos ($2.2bn) or 36 Mexican centavos per share – 17.4 per cent lower than the same quarter of 2012.

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Revenue during the period was 193bn pesos, about the same as that of the corresponding quarter in 2012, and roughly in line with analysts’ expectations. The company said that without exchange-rate factors, revenue would have been 6.1 per cent higher than the same quarter last year.

In a statement, América Móvil said it added 1.4m wireless subscribers between January and the end of March after disconnecting 2.7m in Colombia following a change in its reporting policy. About 1.1m of those gains were in Brazil, and about 850,000 in Mexico, its home market.

The company, which now has 262.9m mobile subscribers, operates in 18 countries throughout the Americas. It also has 17.2m pay TV subscribers, the largest number of any provider in Latin America.

América Móvil said earnings before interest, taxes, depreciation and amortisation (ebitda), were 63.8bn pesos during the quarter, slightly below analysts’ forecasts.

Factoring in foreign-exchange movements, the figure was 6.8 per cent below that of the same quarter of 2012.

The results come at a time of potentially big changes for Mr Slim, who is now 73. The billionaire tycoon has long been criticised at home for allegedly charging high prices and stifling competition – a point the company contests vehemently.

In particular, Mexico’s senate is debating a legislative proposal this month submitted by the new administration of centrist President Enrique Peña Nieto that could radically alter the telecoms and broadcasting landscape.

Among other things, the bill seeks to reduce the power of dominant companies through a series of measures ranging from asymmetric interconnection fees so as to favour smaller companies, to forcing players with more than 50 per cent of the market to divest assets.

Mexico accounts for about 35 per cent of the company’s total annual sales.

That legislation, which the lower house of congress has already approved but which is having a much slower passage in the senate, has been the main contributor to a 17 per cent fall in the company’s share price since the start of the year.

América Móvil has stepped up an aggressive share buy-back policy in recent months, spending more than US$1.5bn so far this year alone – though this did little to halt the fall since the government announced its telecoms reform bill.

Some members of congress expect the senate to approve the bill, albeit with some changes, as soon as the end of next week.

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