(Adds analyst comments, background on European investments, regulation))
MEXICO CITY, Feb 11 (Reuters) - America Movil, Latin America's biggest phone company controlled by billionaire businessman Carlos Slim, on Tuesday reported a better-than-expected quarterly profit, helped by a drop in taxes and a slight pick-up in revenue.
The company, facing increased regulation and competition in most of Latin America, has been looking to bolster its financial position by investing outside of the region and also by moving customers from cheap pre-paid contracts to more lucrative mobile data plans.
Transferring customers is a slow process, however, and America Movil said revenue from services increased just 0.8 percent from the year-ago period.
Most of the company's 3 percent revenue gain came from equipment sales and that helped drive a slight pickup in core profit, or earnings before interest, taxes, depreciation and amortization, to 63.5 billion pesos, also beating analysts' expectations.
"This report was as expected," said Julio Zetina, analyst at Vector Casa de Bolsa in Mexico City. "It's nothing spectacular ... but there are not any surprises, negative or positive."
Before taxes, the company reported hefty charges related to foreign currency volatility in the quarter, but a sharply lower tax bill helped America Movil to a fourth-quarter profit of 17.2 billion pesos ($1.31 billion), up from 14.9 billion pesos a year earlier.
It was not immediately clear why the company's tax bill was more than 70 percent lower than the year-ago period. Company executives will hold a conference call for analysts at 1500 GMT on Wednesday.
Vector's Zetina said the drop in taxes may be related to a year-end adjustment after the company had put more money away for taxes earlier in 2013.
Analysts on average had expected a profit of 16.86 billion pesos, according to a Reuters survey.
Increased competition has been dampening the rate at which America Movil adds new subscribers, but it ended December with an estimated 270 million mobile phone customers across Latin America and the Caribbean, up 3.2 percent from a year earlier.
At the same time, as competition has increased, regulators in the region are increasing penalties and seeking to curb America Movil's market share in countries where it dominates competitors.
Mexico's telecoms regulator, the Federal Telecommunications Institute (IFT), notified Slim's company in December that it had begun an investigation to determine whether America Movil is dominant, allowing the regulator to apply harsher penalties to the company.
The fine print of the country's sweeping telecom reform legislation passed last year is still being worked out, but any successful attempt to trim Slim's market share will have an impact on the company's results.
Mexico accounts for almost half of America Movil's core profit.
In Ecuador, the telecom regulator on Sunday fined America Movil's local subsidiary $138.4 million, equivalent to 10 percent of its business in 2012, for anti-competitive practices.
Slim's company, seeking to diversify away from Latin America as regulation has increased, acquired stakes in Dutch telecom KPN as well as Telekom Austria in 2012.
Daniel Hajj, America Movil's Chief Executive and Slim's son-in-law, said in November that the company likes Telekom Austria's Eastern European operations and plans to be a long-term investor in the company.
The Mexican company is KPN's top shareholder, but the future of America Movil's almost 30 percent stake in KPN is less clear after a takeover attempt last year was thwarted by a KPN foundation that has the power to block acquisitions.
KPN is also facing stiff competition and a difficult economic environment. Last week the company said its mobile revenues and core profit fell from the same quarter a year earlier.
Shares in America Movil closed up 2.51 percent at 14.32 pesos ahead of the results.