MEXICO CITY -(Dow Jones)- Mexican wireless phone company America Movil SA (AMX) said Friday it plans to make capital expenditures of $2 billion this year, similar to what it invested in 2004.
In a conference call with analysts, company officials said that $500 million of that would be for Brazil, where the company has foregone profits to bolster its presence in the market.
America Movil reported late Thursday that it added a record 7 million wireless subscribers in the fourth quarter to end the year with 61.1 million. In Brazil, the company added 1.7 million to 13.7 million subscribers.
Chief Financial Officer Carlos Garcia said he was satisfied with the performance in Brazil, even though the unexpected jump in the number of customers led to negative earnings before interest, taxes, depreciation and amortization, or EBITDA, in the fourth quarter. Subscriber growth is particularly costly for wireless operators, who subsidize the cost of mobile phones for new users.
Garcia said EBITDA margins for Brazil, which were flat last year, should increase this year, but the 10% target will be pressured by the planned start-up of service in Minas Gerais, where the company is building its own infrastructure and hopes to start service in June or July.
By 2006 or 2007, America Movil would expect to raise its Brazilian operating margins to the mid- to high 20s, Garcia added.
America Movil's fourth-quarter client expansion was so far above estimates that for the most part, analysts focused on the growth aspect of the report and the higher sales, rather than on their cost.
"Brazil was (again) the only market that we would call disappointing in terms of the combination of growth and margin. That is, subscriber growth was just four percentage points above expectations, while margins were 10 percentage points short," UBS Investment Research said in a report.
BBVA Securities said the unusually high subscriber growth "may keep some investors interested in the phenomenal LatAm wireless growth story," while the high cost "may well stop any potential upward revision of estimates and target price."
Around 1710 GMT, America Movil L shares trading on the Mexican Stock Exchange were up 1.4% to 29.20 pesos ($1=MXN11.2643). Its ADRs were up 1.6% to $51.92.
-By Anthony Harrup, Dow Jones Newswires; (5255) 5080-3450, anthony.harrup@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 28th January 2005
Posted to: www.cellular-news.com/story/11845.php