América Móvil: the clean-up that isn't finished

América Móvil reported its third quarter on 20 October, and the headline numbers were the kind that calm a market. Revenue rose 7.6% to 250.6 billion pesos, EBITDA rose 8.9% at a 40.8% margin, and net income rose 7% to 24.3 billion pesos.[1] Net debt fell by 34.3 billion pesos over nine months, taking leverage down to 1.21 times EBITDA after leases.[1]

Whether that counts as a beat depends on who you ask. Bloomberg reported that the company beat estimates.[3] Reuters, comparing against an LSEG survey, said revenue and profit came in below forecasts.[4] When the scorekeepers can’t agree, the scoreboard isn’t the story.

The registry is being priced as a spring clean. It is a deadline.

The line that matters

The story is a smaller number. Telcel, América Móvil’s Mexican mobile business, ended the quarter with 65.5 million prepaid lines, 4.4% fewer than a year earlier: roughly 3 million lines gone.[1][2] Contract customers kept growing, with 144,000 added in the quarter. But prepaid service revenue grew only 3.5%, against 8% for postpaid.[2]

The company points to a tougher comparison with a strong prior year, and it hasn’t put a number on how much of the loss comes from the registry.[2] Telcel’s own framing is that the registry clears out inactive lines and leaves the customers who actually use the network.[2]

The deadline hasn’t happened yet

Mexico’s telecom regulator, the CRT, requires every mobile line to be linked to its owner’s identity. Unregistered prepaid lines are being suspended on a rolling schedule by the line’s last digit, which began on 15 August and runs to 31 December.[2] As of 18 October, 96.3 million lines had been linked, 61.3% of active numbers. The regulator itself expects around 25 million lines could be cancelled.[2]

That leaves close to four in ten lines still to register, with ten weeks to go. Telcel is Mexico’s largest carrier. Some of those lines are dead SIM cards nobody will miss. Some belong to the cheapest, most occasional customers in the country, the ones a registration form is most likely to lose.

The tape

The stock has already noticed something. AMX closed at 21.12 pesos on 20 October, 11.7% below its June high of 23.92 and 7.5% lower than in late July.[5] It is still up 13.8% this year. Trading has thinned: about 37 million shares a day over the last 20 sessions, against roughly 50 million a day over the eleven months before.[5] These prices run to the day of the report, so they don’t yet show how the market digests it.

What to watch

• Prepaid lines in the fourth quarter. Suspensions run until 31 December, so the full effect lands in the next report, not this one.
• Prepaid revenue, not just lines. If revenue keeps growing while lines fall, the “inactive lines” explanation holds. If revenue follows the lines down, it doesn’t.
• Whether the company puts a number on it. So far it hasn’t.

The market is treating the registry as housekeeping. Housekeeping doesn’t usually come with a regulator’s estimate of 25 million cancellations attached.