Earnings Report /

America Movil: AMX, Quarterly Report 1Q21: Improved profitability in almost every country

  • Broadband and postpaid services in Brazil maintained a strong momentum. Tight expense control boosted profitability

  • Mobile subscribers increased 3.9% y/y, with Claro Brazil accounting for slightly more than half of these additions

  • Focus will be on the value-generation initiatives advance. With an attractive valuation, it remains among our top picks

Valentin III Mendoza Balderas
Valentin III Mendoza Balderas

Senior Equity Research Analyst, Consumer & Telecoms

Juan Barbier
Juan Barbier

Equity Research Analyst

5 May 2021
Published byBanorte
  • Amx reported in line with expectations at the operating level, as broadband and postpaid services in Brazil maintained a strong momentum, and tight expense control boosted profitability

  • The focus will remain on the value-generation initiatives advance, while valuation continues to reflect these efforts and the positive outlook. Amx remains among our top picks

Fixed broadband, the most relevant source of revenue. Mobile postpaid in Brazil and fixed broadband stood out this quarter for maintaining their strong momentum. Mobile subscribers increased 3.9% y/y (+6.1 million q/q), with Claro Brazil accounting for slightly more than half of these additions. Meanwhile, fixed RGUs declined 0.9% y/y, due to disconnections in fixed voice and pay TV services, which were partially offset by an ~8% growth in fixed broadband ‒becoming the most relevant revenue line in the quarter‒. However, the sharp Brazilian real depreciation resulted in a 3.7% y/y contraction in consolidated ARPU, in pesos. That said, Service revenues declined 1.1% y/y, while equipment sales fell 0.7%, and consolidated revenues remained practically flat at MXN 248.186 billion (-0.8% y/y). Furthermore, strict cost and expense control led to attractive profitability gains in all countries, except Peru. As a result, EBITDA grew 5.2% year-over-year to MXN 81.656 billion, and EBITDA margin expanded 190 bps to 32.9%. Finally, Amx reported net income of MXN 1.81 billion, comparing very favorably with a MXN 29.381 billion loss in 1Q20, thanks to lower FX losses that compensated for a higher effective tax rate.

The focus will be on the conference call, awaiting progress on its value-generating initiatives, that could be a catalyst for the stock, which maintains an extremely attractive valuation.