América Movíl loses 1.3M U.S. customers, but Q1 profit surges

Smartphone girl
The FCC implemented new Lifeline requirements last year in an effort to reduce fraud and cut costs. América Movíl lost 458,000 U.S. customers in the fourth quarter of 2016 after the new rules were enforced.

Shares of América Movíl jumped this morning after the company posted a sevenfold increase in net profit in the first quarter despite losing prepaid customers in the U.S.

Carlos Slim’s massive telecom rang up a net profit of $1.91 billion, up from $253 million during the same period a year ago. Revenues came in at $13.9 billion, up 18.5% year over year, and EBITDA rose 15.8%.

As Reuters noted, América Movíl’s financials were boosted by the recent rally of the Mexican peso.

The company reported a 5.1% year-over-year increase in postpaid subscribers during the quarter, adding 632,000 customers. But it lost 1.4 million prepaid users, marking a 3.3% drop, primarily due to customers leaving its SafeLink Wireless brand, which provides services through the Lifeline program under the federally funded Universal Service Fund.

“We ended the quarter with 24.7 million subscribers (in the U.S.) after net disconnections of 1.3 million, most of them clients from our SafeLink brand that failed to certify they were still eligible for the program under U.S. federal rules,” the telecom said in its earnings release (PDF).

The FCC implemented new Lifeline requirements last year in an effort to reduce fraud and cut costs. América Movíl lost 458,000 U.S. customers in the fourth quarter of 2016 after the new rules were enforced.

America Movíl remains by far the largest MVNO in the U.S. through its various brands, including TracFone and Straight Talk, on every major wireless network in America. The carrier ended the first quarter with 24.7 million U.S. customers.

TracFone acquired Walmart Family Mobile from T-Mobile last year, giving the prepaid service provider a massive presence in the world’s largest retail chain. Walmart Family Mobile claimed 1.4 million customers at the time, according to Wave7 Research.

Shares of America Movíl were up roughly 1% in mid-day trading Wednesday following the company’s earnings release Tuesday afternoon.