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America Movil Sees 3G Launch 1Q 08, Eyes Spectrum Auctions

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MEXICO CITY (Dow Jones) Mexico's America Movil, Latin America's largest mobile operator, said Friday that it's on track to commercially launch advanced third generation services in several markets early next year.

"We are starting to run the networks. In some places we are testing. We don't have any delay on that, but really to launch and make the advertising and do everything I think we prefer to wait until the first quarter of next year," Chief Executive Daniel Hajj said in a conference call with analysts to discuss third-quarter results.

In the second-quarter conference call with analysts in April, Hajj said the company planned to deploy UMTS networks in 30 to 40 cities in Latin America this year.

Hajj said the company plans to bid for third-generation spectrum in the 1900MHz and 1.7GHz-2.1GHz bands that Mexico's telecommunications regulator Cofetel is expected to auction in the first half of 2008.

In 2005, America Movil and rival Telefonica were forced by the country's antitrust agency to relinquish some of the spectrum they had won in the 1900 MHz band when they ran afoul of spectrum caps.

"I think we are going to be able to participate," said Hajj, adding America Movil will also bid for spectrum in the 1900MHz and 2.1GHz bands that Brazil plans to sell in December.

"For America Movil, it's very important to have enough spectrum, so we are going to participate in Brazil or any country that auctions more spectrum," he said.

Asked about the company's capital expenditure program, Hajj said about $3 billion will be spent this year for UMTS, expanding its network in Brazil, and changing its CDMA network in Puerto Rico to GSM, and a similar amount in 2008.

America Movil reported Thursday a 2% year-on-year drop in third-quarter net profit due to a one-off charge related to the phasing out of obsolete equipment and a higher tax bill.

Net profit of 11.11 billion pesos ($1.03 billion), or MXN0.32 a share, was well short of the median forecast of MXN15.25 billion, or MXN0.43 a share, in a survey of 11 analysts by Dow Jones Newswires.

Depreciation and amortization costs soared 77.2% to MXN12.17 billion largely due to a charge of about MXN3.6 billion related to the dismantling of TDMA equipment in Brazil and Colombia.

Chief Financial Officer Carlos Garcia Moreno said the company will take further equipment-related depreciation charges over the next two or three quarters, with some tax benefits.

"I think this will be the highest amount in a given quarter. I think the amounts will likely be coming down going forward," Garcia Moreno said.

The one-off items aside, analysts were generally impressed with the company's operating results.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, increased 44.6% to MXN31.91 billion, just above the consensus estimate of MXN31.76 billion, while the Ebitda margin expanded to 41% from 36.8% a year ago.

America Movil also added 6.2 million subscribers in the quarter, led by Brazil with 1.7 million and Mexico with 1.4 million, bringing its total wireless subscriber base to 143.4 million at the end of September.

Ebitda margins and minutes of use also showed big gains in Mexico and Brazil, the company's top markets, with the latter benefiting from America Movil's decision to lower prices to encourage greater mobile phone usage.

"What we have been seeing is that customers that receive calls make more calls," Hajj said.

UBS Investment Research hiked its price target on the company's American Depositary Receipts to $89 from $85 and reiterated its buy rating on the stock Friday.

"We believe the results should allay concerns on Mexico, and underline that America Movil is still a growth," UBS said.

Since its spin-off from Mexican fixed-line phone company Telefonos de Mexico in 2001, America Movil has expanded to 16 countries through a series of acquisitions.

Shareholders have benefited from the company's profitable growth through hefty share buybacks and dividends.

America Movil plans to pay a cash dividend of about $3.25 billion in November, after paying a dividend of about $650 million in July and spending $380 million in share buybacks during the first half.

At around 12:10 p.m. EDT, America Movil's L shares, which are up about 48% year-to-date compared to 21.3% for Mexico's IPC stock index, were down 2.8% at MXN36.10 Friday. Its ADRs were off 2.9% at $66.93.

-By Ken Parks, Dow Jones Newswires, 52-55-5080-3453, ken.parks@dowjones.com

(END) Dow Jones Newswires

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