Mexico’s No. 2 fixed-line telephone company Axtel SAB on Tuesday raised its capital expenditure forecast for 2010 by about 10% to $220 million as the carrier signs up more clients than it originally expected at the beginning of the year.
"Most of the overrun in capex is related to customer premise equipment both in the mass market and the business segment," Chief Financial Officer Felipe Canales said during a conference call with analysts to discuss second-quarter results.
"We expect significant growth in our mass-market business as well as in our corporate business," said Canales, who sees 2011 capex at levels similar to this year.
The company expects to report negative free cash flow of about $15 million and earnings before interest, taxes, depreciation and amortization, or Ebitda, a measure of cash flow, of around $290 million this year, he said.
Axtel reported a 10% year-on-year increase in lines in service to nearly 1.01 million at the end of June. Broadband accounts rose 81% to 223,000.
Investor relations director Adrian de los Santos said the company is aiming for 120,000 net broadband account additions this year.
Axtel competes with former state telephone monopoly Telefonos de Mexico SAB, or Telmex, which had 15.7 million fixed phone lines in service and 6.95 million broadband accounts at the end of June. Telmex is a subsidiary of Latin America’s biggest wireless carrier, America Movil, which is controlled by Mexican billionaire Carlos Slim.
Axtel faces an increasingly difficult operating environment in the years ahead due to its lack of pay TV and wireless services. Mexico’s largest cable companies already sell telephone, broadband and pay-TV service packages. America Movil has been offering mobile broadband since early 2008 and two other mobile operators have said they plan to launch similar services if they obtain enough wireless spectrum at two government auctions.
Axtel has pushed back its plans to enter the pay-TV market to the second quarter of 2011, from early this year, Canales said.
"We are studying different [pay TV] alternatives," he said."The upfront investment in this project isn’t significant. It’s about $10 million to $12 million."
Axtel’s CPO shares were trading 1% higher at 7.97 pesos ($0.63) around 2:05 p.m. EDT. The shares are down nearly 33% so far this year, compared to a 2% rise in Mexico’s benchmark IPC stock index.
Axtel reported Monday a net loss of MXN220 million, compared to a net profit of MXN486 million in the second quarter of 2009 due to higher interest expenses and foreign exchange losses. Sales rose a scant 0.6% on the year to MXN2.76 billion, while Ebitda fell 8% to MXN920 million. The company’s total debt rose 12.5% to MXN10.55 billion.
"Although the 2Q10 results were better than those of the first quarter, the company continues to bleed cash. We reiterate our negative view and our underperform recommendation," BBVA Bancomer telecoms analyst Andres Coello said in a note Tuesday.