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Mexico America Movil, Telmex 4Q Net Seen up on International Growth

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MEXICO CITY (Dow Jones) Mexico's leading telecommunications firms wireless carrier America Movil and fixed line company Telefonos de Mexico are expected to post higher fourth quarter net profit next week, led by growth in international markets.

America Movil is expected to report net profit of 14.05 billion pesos ($1.30 billion), or MXN0.40 a share, up from MXN10.84 billion, or MXN0.30 a share, in the fourth quarter of 2006, according to a Dow Jones Newswires survey of 11 analysts.

The analysts see revenue climbing to MXN83.35 billion, up from MXN65.36 billion for the year-ago period on the back of strong subscriber growth in its two largest markets, Mexico and Brazil.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, probably rose 35.2% to MXN33.00 billion, while Ebitda margin likely expanded to 39.8% from 37.3%, according to the survey.

America Movil operates in 16 countries in the Americas, and had 143.4 million wireless subscribers and 3.8 million fixed-line customers at the end of September.

"Because it should show the company closing 2007 once again with higher numbers, we think the fourth-quarter report will be received positively by the market," BBVA Bancomer analyst Rodrigo Ortega said in a note.

America Movil is scheduled to release its results Feb. 5 after market close.

As the company's profits have grown, America Movil has opted to return increasing amounts of cash to shareholders due to limited acquisition opportunities in Latin America and the Caribbean, where it has a presence in nearly every country except Bolivia, Venezuela and Panama.

Friday, America Movil shareholders approved a proposal to boost the firm's share buyback program by MXN15 billion, after spending MXN14.2 billion on dividends and share buybacks in the first nine months of 2007.

The company's modest investment needs and massive cash flow - Ebitda of MXN92.52 billion in the Jan-Sep period of 2007 - would appear to support the case for further distribution largesse for shareholders.

UBS Investment Research said in a report Jan. 31 that investors should buy America Movil shares based on its attractive distributions, with a 12-month forward cash back yield from dividends and buybacks of about 7%, and growth potential.

"We continue to see very robust growth out of America Movil through 2010, driven not only by penetration gains, but also by enhanced traffic patterns and data revenues," UBS analyst Carlos Sequeira said.

America Movil's local L shares, which are flat year-to-date compared to a 0.4% drop in Mexico's IPC stock index, rose 2.9% to close at MXN33.48 Friday.

Fixed-line company Telefonos de Mexico, or Telmex, is seen posting net profit of MXN8.98 billion, or MXN0.46 a share, up from MXN7.40 billion, or MXN0.37 a share, in the year-ago period, according to the median estimate in a Dow Jones Newswires survey of nine analysts.

Earnings per share likely benefited from the company's share buyback program last year.

Revenue is expected to have grown 10.2% to MXN49.30 billion, while Ebitda probably increased 17% to MXN20.67 billion.

"We expect a typical quarter with marginal growth in Ebitda given the stability of its Mexican operations and a solid performance by its international assets. We believe the results will be neutral for Telmex's share price in the short term," Vector Casa de Bolsa analyst Martin Lara said in a report.

Telmex's domestic sales have suffered from a voluntary rate freeze on its key local phone service since 2001 and competition from wireless phone companies, principally America Movil's Telcel unit.

Both America Movil and Telmex are controlled by billionaire Carlos Slim.

Telmex plans to spin off its fast-growing international telecommunications and yellow pages operations later this year into a new company, to be called Telmex Internacional SAB, that will be listed on the Mexican Stock Exchange and on a U.S. exchange.

Telmex Internacional will have operations in Colombia, Brazil, Argentina, Chile, Peru, Ecuador and the U.S., providing phone, data transmission, video, Internet access and yellow pages directory services to residential and business clients.

Telmex Internacional had pro-forma net profit of MXN4.68 billion on revenue of MXN46.62 billion in the first nine months of 2007.

Telmex is scheduled to release its results Feb. 7 after the market close.

In the last two months, Mexico's antitrust agency, the Federal Competition Commission, or CFC, has launched separate investigations into competition in the country's fixed-line, wireless and broadband internet markets.

Telcel had about 74% of the country's 64.6 million mobile users at the end of September, while Telmex controls more than 90% of Mexico's fixed-line infrastructure with about 18.2 million lines in service.

Telmex's local L shares, which are down nearly 1% year-to-date compared to a 0.4% decline in the IPC, rose 1.7% to close at MXN19.98 Friday.

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

(END) Dow Jones Newswires

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