America Movil's Earnings Dilemma: Can Postpaid Growth Offset Prepaid Attrition in a Slow-Growing Market?

In the maturing telecom sector, América Móvil's Q1 2025 earnings report reveals a stark dichotomy: robust postpaid growth contrasting with significant prepaid subscriber losses. While the company's revenue surged 14.1% year-on-year (Y-o-Y) to MXN232 billion, its EPS miss of $0.02 underscores the tension between margin preservation and subscriber attrition. For investors, the critical question is whether América Móvil's postpaid expansion can sustain long-term value creation in a market where economic headwinds and rising financing costs are reshaping the landscape.

The Prepaid Dilemma: Economic Headwinds Outpace Pricing Power

América Móvil's prepaid segment, once a pillar of its growth, lost 1 million subscribers in Q1 2025, driven by economic weakness in Mexico and Brazil. Mexico's private consumption decline, exacerbated by political uncertainty and high real interest rates, has eroded demand for low-margin prepaid services. Meanwhile, Brazil's inflationary pressures and currency volatility have further strained disposable incomes. These trends mirror broader industry challenges: as maturing markets see slower ARPU growth (2% Y-o-Y to $28), telcos must balance affordability for price-sensitive users with margin preservation.

The attrition in prepaid is not insurmountable. Markets like Argentina and Colombia, however, offer hope. Argentina added 230,000 prepaid subscribers, leveraging currency-stable pricing, while Colombia's 434,000 net additions reflect resilient demand for entry-level services. Yet, these gains are localized and unlikely to offset losses in core markets. For América Móvil, the shift from prepaid to postpaid is a necessary but costly transition, requiring targeted subsidies and digital inclusion initiatives to retain price-sensitive users without cannibalizing higher-margin segments.

Postpaid Momentum: A Lifeline in a Maturing Market

América Móvil's postpaid segment added 2.4 million subscribers in Q1 2025, with Brazil and Colombia leading the charge. This growth is critical: postpaid revenue grew 8.8% Y-o-Y, outpacing the 5.7% growth of the overall wireless segment. The inclusion of Chile's operations further diversified revenue streams, as higher-ARPU markets offset slower growth in Latin America.

The postpaid strategy aligns with global telecom trends. As ARPU stabilizes at $28, operators are prioritizing value-added services (e.g., AI-driven customer support, cloud storage) to differentiate offerings. América Móvil's 9.8% broadband growth and 8.7% PayTV revenue increase—particularly in Chile and Central America—highlight its ability to monetize fixed-line infrastructure. However, the challenge lies in scaling these services profitably. For instance, while AI Radio Access Networks (AI RAN) could enhance operational efficiency, their adoption remains nascent.

Debt Dynamics: Rising Costs and Currency Risk

América Móvil's recent issuance of high-yield senior notes (e.g., 10.300% Senior Notes due 2034) signals a strategic shift toward peso-denominated debt, aiming to hedge against currency fluctuations. With 30% of its outstanding bonds now in local currency, the company has reduced exposure to dollar volatility. However, the elevated coupon rates—particularly the 10.3% on the 2034 notes—could strain cash flow, especially as Mexico's central bank cuts rates to 10.25% amid slowing inflation.

The debt maturity schedule for 2025–2027 reveals a heavy reliance on high-cost instruments (see ). While the company's EBITDA of MXN54.8 billion (40% of total) provides a buffer, rising interest expenses may constrain capital for 5G upgrades or AI RAN investments. For investors, the key risk is whether América Móvil can maintain EBITDA margins above 38% (industry benchmark) while servicing its growing debt load.

Strategic Resilience: Navigating a 6G-Ready Future

América Móvil's long-term viability hinges on its ability to adapt to 6G and generative AI (gen AI) trends. While 5G monetization remains elusive, the company's focus on heterogeneous networks and energy-efficient infrastructure positions it to capitalize on 6G's customer-centric design. Additionally, partnerships with private equity (PE) firms—such as the $5 billion wireless backhaul transport sale by Rogers Communications—suggest América Móvil could unlock value through asset monetization.

Fixed Wireless Access (FWA) growth (20% CAGR projected for 2025–2026) offers another avenue. By leveraging its broadband infrastructure, América Móvil can expand into rural markets, where FWA's cost advantages over fiber are most pronounced. However, U.S. FWA growth is expected to slow, limiting the scalability of this strategy in its largest markets.

Investor Implications: Balancing Growth and Risk

América Móvil's stock, trading at a forward P/E of 12.5x (as of July 2025), reflects market skepticism about its ability to offset prepaid attrition with postpaid growth. While the company's 4.5% dividend yield and 13.3% EBITDA growth are attractive, investors must weigh these against rising debt servicing costs and macroeconomic risks in key markets.

For long-term investors, América Móvil's strategic shift to peso-denominated debt and postpaid expansion offers a compelling case. However, the company's success depends on:
1. Sustaining postpaid ARPU growth through value-added services.
2. Managing debt costs without compromising capital for 6G and AI RAN.
3. Diversifying revenue streams beyond traditional telecom (e.g., cloud, IoT).

In conclusion, América Móvil's earnings dilemma reflects the broader challenges of a maturing telecom sector. While postpaid growth provides a near-term buffer, the company's ability to navigate rising financing costs and economic volatility will determine its long-term investment viability. For now, a cautious bullish stance is warranted, with close monitoring of debt metrics and 6G readiness.