America Movil SAB de CV, the flagship company of Mexican tycoon Carlos Slim, suffered its biggest share price loss in more than four years after the phone company reported disappointing earnings, hit by weak revenue and higher costs.
The firm owned by Slim, the world's richest man, has been struggling against stronger competition in Brazil and other Latin American countries, while in Mexico regulators have reduced the fees America Movil charges rivals to connect to its network.
On Wednesday, America Movil shares fell as much as 9.9 per cent to 14.27 pesos in morning trading, their biggest one-day drop since October, 2008, prompting Slim's bank Inbursa to buy up shares in the company, helping to prop up the stock price.
The company late on Tuesday reported a fourth-quarter profit of 14.962 billion pesos, far below analysts' expectations of 24.13 billion pesos.
"They were terrible results," said Gerardo Roman, head of stock trading at Actinver brokerage in Mexico. "The market was very inflated, and this is a reality check."
Currency weakness in markets outside of Mexico also hit the results of America Movil, whose shares on Wednesday were trading at their lowest price since August, 2011.
The share drop follows a challenging 12 months for America Movil, which failed to keep up with a buoyant stock market in Mexico last year and is sitting on large paper losses from expensive acquisitions in Europe.
Shares in America Movil finished 2012 down 5.8 per cent on the previous year's close, compared with a nearly 18-per-cent gain in the IPC, Mexico's leading stock index.
Slim's family lost about 26 billion pesos ($2.05-billion) on paper since Tuesday's close, based on Securities and Exchange Commission filings that detail the family trust's holdings of America Movil shares.
Traders in Mexico said Inbursa, which is the financial arm of Slim's companies, was buying up America Movil shares after the slump and a person close to its operations said the bank had bought around 40 million shares on Wednesday.
Inbursa has a mandate to buy up stock of America Movil, which has a share buyback program in operation.
America Movil said mobile voice revenue fell 1.7 per cent from the year-earlier quarter, which the company attributed to an economic slowdown.
Regulation that cut the amount America Movil can charge rivals to connect to its Telcel mobile network, which has 70-per-cent market share in Mexico, also trimmed the company's revenue locally and led to a wider drop in phone fees.
Mexico's Central Bank said phone prices dropped about 20 per cent in both November and December last year. However, in January, they bounced back by about a fifth.
Like other phone companies, America Movil is subsidizing smartphones to transfer customers to more lucrative data plans. Income is also under pressure because of lower interconnection fees.
Fending off questions from analysts about the firm's costs, chief executive officer Daniel Hajj said the company is fighting to keep subsidies for smartphones down, but it has to keep up with competitors' prices for the Internet-enabled equipment.
It also must invest in infrastructure to maintain competitive network services, he said, adding that America Movil expects to spend $10-billion this year on investments.
Analysts also questioned the company on its plans for dealing with more regulation from a new Mexican government.
Hajj said the company does not yet have details of the expected reform to the telecoms law in Mexico.
"I hope it will make and create more investment," Hajj said, adding that the company would like to see competitors also investing to improve services in Mexico.
America Movil has increasingly expanded into new services and looked outside Mexico for new revenue.
Last year the company went on a spending spree, building up stakes in two European phone companies, spending billions of dollars in the process.
It accumulated a 26-per-cent holding in Telekom Austria and a nearly 28-per-cent stake in Dutch company KPN , but the purchases have cost Slim dear to date.
Telekom Austria's share price has fallen more than a third since Slim upped his stake in Telekom Austria in June. KPN's shares are worth less than half the price the Mexican paid to increase his hold on the Dutch firm a month earlier.
Earlier this month, KPN laid out plans for a £4-billion rights issue to bolster its finances, and America Movil's chief financial officer Carlos Garcia Moreno said the company would make a statement on KPN's capital raise next week.
This year, America Movil said it was buying an advertising company in Mexico, a unit of CIE.
Hajj told analysts on the call that this unit will greatly help the company reduce advertising costs this year.
In spite of the poor results, Hajj was upbeat in general about 2013. "I think we are on track; we're growing," Hajj said. "That's going to give us better revenue in the future."