Telecommunications firm América Móvil SAB, the flagship company of Mexican billionaire Carlos Slim, said its price war over wireless service with competitors AT&T Inc. and Spain's Telefónica SA appears to have bottomed out.
"Prices in Mexico right now are some of the cheapest in the world," said Chief Executive Daniel Hajj Aboumrad in a conference call with analysts Wednesday. He said service prices were likely to remain stable in Mexico over the course of 2017. "Of course, we would love to raise prices, but it doesn't make sense. In broadband we are not increasing prices, and in wireless we are not increasing prices," he added.
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Over the past few years, América Móvil's Mexican wireless unit, Telcel, has been locked in a fierce price war primarily with AT&T, which entered the Mexican market in 2015 following a broad deregulation of the telecommunications industry that was championed by the government of President Enrique Peña Nieto.
Mr. Hajj said that over the last several years, the company has reduced prices for wireless packages by between 60% and 70%. Mexico's telecom regulator, the IFT, reported that wireless costs fell more than 42% between the beginning of 2014 and the third quarter of 2016.
The price war has been bruising for both companies. América Móvil's Mexico revenue registered little growth for more than a year until the fourth quarter of 2016, and AT&T has been steadily chipping away at the company's more than two-thirds market share in mobile phones in Mexico, despite being so far unable to generate a profit on its Mexico operations.
In the first quarter, AT&T added 633,000 new wireless subscribers, bringing its customer base in Mexico to 12.6 million, a 37% increase from the year before, while América Móvil's customer base remained unchanged.
"AT&T and Telefónica are good competitors," Mr. Hajj said Wednesday. He said that the company wasn't satisfied with the speed of its recovery in profits after last year's steep price reductions, but assured investors that new promotions were unlikely.
"I can't tell you we are right now where we want to be," he said. "Right now there's a lot of competition. Prices are very, very competitive. If you're going to see movement on the pricing, you're going to see more movement going up than going down."
Mr. Hajj's remarks come on the heels of a Tuesday earnings report in which América Móvil announced a first-quarter net profit of 35.9 billion Mexican pesos ($1.9 billion), driven largely by appreciation of the peso against the dollar and the euro and an economic pickup across Latin America.
Most of América Móvil's debt is denominated in euros and dollars. The company also buys handsets and other equipment using dollars, but sells phones and service plans to Mexican consumers paying in pesos.
The first-quarter results represented a more than sevenfold increase in profit compared with the year-earlier quarter and reversed a six-billion-peso loss in the fourth quarter. Revenue rose 18.5% to 264.2 billion pesos.
América Móvil's shares were up 1.2% to $15.13 in midday trading Wednesday on the New York Stock Exchange.
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(END) Dow Jones Newswires
April 26, 2017 13:30 ET (17:30 GMT)