Morningstar | Revenue Growth Strong in America Movil's 2Q, but Still Negative for Year
America Movil reported significantly improved revenue growth of 3.1% in the second quarter. While this is above our full-year revenue growth projection of 2.3%, the first half result remains negative. This improvement provides hope that the worst is over and the growth we’ve anticipated this year and going forward can be achieved. Thus, we expect to maintain our $18 per ADR fair value estimate and narrow moat rating. We believe the shares are fairly valued.In Mexico, its largest market, the firm’s revenue grew 8% with wireless revenue increasing 13.9% as its subscriber base improved 1.8% and average revenue per user gained 7.3%. This revenue growth, added to cost controls, led to a 14.9% jump in EBITDA, the largest increase in 11 years. We are impressed by this growth as the Mexican market became more price-competitive after AT&T’s entrance. We believe this improvement is a sign that competition in the country has become more rational.
In Brazil, America Movil's next-largest market, revenue increased 0.9%. Wireless revenue grew a strong 10.5% as ARPU jumped 14.1%, but this was mostly offset by a 3.6% decline in the fixed-line business. While the firm's total wireless base declined 2.1% to 59 million, the more important postpaid base expanded 17% to 21.8 million. We expect the firm to continue to focus on the postpaid market. The fixed-line business continues to be hurt by Brazil's economic struggles. However, revenue increased slightly sequentially, which could mean the fixed-line business has hit bottom and will allow the strength in the wireless market to shine through.
Revenue in other regions was mixed, with some up and some down but generally improving. Importantly, data usage is increasing in almost all countries, helping to drive up ARPU. America Movil continues to control costs, and its EBITDA margin was 28.7%, slightly ahead of our full-year projection of 28%. We anticipate incremental margin expansion going forward.
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