TracFone loses 58,000 customers while parent América Móvil faces regulatory challenges in Mexico

TracFone Wireless, the largest MVNO in the U.S., lost 58,000 net customers as its users fled its voice-only plans, leaving the company with 25.7 million total customers at the end of 2015. And parent company América Móvil posted a profit of $835 million in the latest quarter as regulatory sanctions in its home market of Mexico began to take a toll on its bottom line.

Latin America's biggest carrier reported quarterly EBITDA of $3.4 billion, down more than 5 percent year-over-year and slightly less than analysts' estimates compiled by Bloomberg. América Móvil's fourth-quarter revenue in the U.S. was $1.8 billion, flat compared to the prior year, and equipment revenues were down more than 7 percent due to lower handset prices.

The company said it saw "solid growth" in its brands Straight Talk, SafeLink and Total Wireless, however, which include data services. ARPU among América Móvil's U.S. users held steady at $20, and the company said its EBITDA in America rose 7.5 percent to $77 million due to reduced costs.

"Well, the competition in the U.S. is tough," América Móvil CEO Daniel Hajj said during the company's quarterly conference call, according to a Seeking Alpha transcript of the event. "Still we think 2016 for TracFone is going to be very competitive. But I'm sure that we... have good plans to compete in the market."

Indeed, TracFone's slip in the U.S. comes as tier-one operators are cementing their leads in the U.S. prepaid market thanks to important acquisitions. AT&T's Cricket Wireless and T-Mobile's MetroPCS continue to gain traction, while Sprint has been working to refresh its Boost and Virgin brands.

Mexico, which is América Móvil's largest market, introduced laws almost two years ago to increase competition and lessen the dominance of América Móvil, which is controlled by billionaire Carlos Slim. AT&T, which has moved aggressively into Mexico during the past year, recently said those laws have done little to loosen the carrier's grip on the market, however.

But those new regulations may soon have an impact, according to a research note from Barclays.

"Cost volatility seems to add another layer of uncertainty to the already cloudy outlook on América Móvil's EBITDA trajectory (largely due to asymmetric regulations put in place to increase competition)," Barclays analysts noted. "While we don't have any reason to believe further measures are likely to be imposed at this junction, the impact of heightened competition may only ramp up from here."

For more:
- see this América Móvil earnings announcement (PDF)

Special Report: Wireless in the fourth quarter of 2015

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