Latin American giant America Movil saw Q1 net profit take a tumble thanks to currency movements, while its service revenue growth was stalled by Mexican regulatory reform.
The fall of the Brazilian currency against the US dollar was the main factor behind a 42 per cent fall in net profit to MEP8.23 billion ($536 million).
America Movil owns Claro, the third largest operator in Brazil, the group’s most important market outside Mexico (in terms of wireless subscribers).
But it was Mexico which held back service revenue in the first quarter. It rose just 0.6 per cent to MEP194 billion but, thanks to flourishing equipment sales, consolidated revenue was up 3.1 per cent to MEP220 billion.
Mexico’s more stringent regulatory regime has included the elimination of termination rates, national roaming and long-distance charges, for both mobile and fixed networks.
Voice revenue plummeted following the new regime whereas data revenue appears unaffected, growing 9.7 per cent among mobile subscribers. Mobile data revenue now accounts for 53 per cent of all mobile service revenue in Mexico.
America Movil planned to sell parts of its network to circumvent the new regulations but, according to Reuters, many analysts suspect this is unlikely, partly because AT&T’s purchase of Mexico’s third and fourth largest operators has boosted competition anyway.
Plus telecoms regulator IFT said that it would not necessarily penalise America Movil for holding onto its market share of around 70 percent, so long as it did not abuse the market power it holds.