Mexico's America Movil Sees $4 Billion Capex in 2008 - CEO

MEXICO CITY -(Dow Jones)- Latin America's largest mobile operator, America Movil, expects to spend about $4 billion in capital expenditures this year as it deploys third-generation wireless networks across Latin America, a top company executive said Wednesday.

"We feel comfortable with between 20 million and 21 million (new) subscribers this year and capex is going to be around $4 billion in 2008," said Daniel Hajj, the company's chief executive, during a conference call with analysts to discuss fourth-quarter results.

Hajj said he expects capex to total about $12 billion between 2008 and 2010.

America Movil reported net profit of 58.59 billion pesos ($5.42 billion) last year, a 31.9% increase from 2006.

Revenue grew 28.2% to MXN311.58 billion, and earnings before interest, taxes, depreciation and amortization, or Ebitda, surged 41.6% to MXN126.77 billion.

America Movil reported 28.6 million net subscriber additions last year, bringing its total wireless subscriber base to 153.4 million in 16 countries at the end of December.

In its No.1 market, Mexico, America Movil added over 6.8 million subscribers last year to reach 50 million.

America Movil faces growing regulatory pressures in its home market, where it has about three out of every four mobile users.

The country's anti-trust agency has started a probe of competition in the mobile industry, while new rules allowing consumers to keep their phone number when they change service provider are scheduled to take effect by July.

"We feel very comfortable because our quality is very good, our coverage is very good, and prices are excellent," Hajj said in reference to number portability rules.

Analysts were generally pleased with the company's results, especially stronger-than-expected subscriber and earnings growth in the fourth quarter.

BBVA Bancomer reiterated its outperform rating and year-end price target of MXN43.50 on the company's shares.

"Our positive view is based on ongoing growth in the volume of business and subscribers, and a rapid transition to solid cash flow generation," Bancomer analyst Rodrigo Ortega said in a report.

America Movil's local L shares, which were down 6.5% at year to date at the close of trading Tuesday, were recently up 3% at MXN32.23 Wednesday afternoon.

With no acquisitions on the horizon this year, Hajj said the company plans to continue returning excess cash to shareholders through share buybacks and dividends.

Last year, America Movil spent MXN54.2 billion on share buybacks and dividends. Earlier this month, shareholders approved a proposal to boost the company's share buyback fund by MXN15 billion.

"Chances are we are going to be more aggressive in terms of share buybacks at the beginning of the year," said Carlos Garcia Moreno, the company's chief financial officer.

Hajj declined, however, to commit the company to a specific dividend payout rate.

"I think we still have opportunities in the future. We don't want to commit to a certain dividend," he said. "We want to have the flexibility to do in the next two or three years...an acquisition that would be interesting for us."

America Movil Plans 3G Expansion in 2008

America Movil launched third-generation, or 3G, wireless services like broadband in Brazil, Argentina and Chile during the fourth quarter, and plans to launch 3G next week in Mexico with an initial rollout in 13 cities.

Hajj said this year's capex program includes about 1.4 billion Brazilian reals ($795 million) for 3G spectrum in Brazil that the company won in an auction last year, as well as the expansion of 3G networks in several countries.

"We want to have 3G deployed in the most important cities in March or April," he said.

America Movil is betting that its wealthier contract clients will spend more for 3G, which should help stabilize the company's average revenue per user, or ARPU, as it continues to add poorer postpaid users that tend to generate less traffic.

"We think 3G is going to help us maintain the ARPUs in all of Latin America," Hajj said. "We feel that people are going to spend more money on data."

The chief executive sees room for further subscriber growth even in saturated markets as clients start using more than one phone, especially with 3G services that require a special handset or broadband PC card for laptop computers.

Wireless penetration has risen sharply in America Movil's largest markets in recent years, reaching about 100% in Argentina, 90% in Chile and around 65% in Mexico.

"I think at the end of two or three years all of them, depending on their economies, are going to be in the same ranges. Argentina came earlier, but I think Brazil, Mexico and Colombia are going to be there soon, and the other ones are coming along fast," Hajj said.

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

(END) Dow Jones Newswires

Posted to the site on 6th February 2008