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UPDATE 2-Mexico's America Movil profit down on higher debt costs

(Adds revenue and subscriber growth details, analyst's comment)

MEXICO CITY, April 29 (Reuters) - America Movil, Latin America's biggest phone company, said on Tuesday that higher debt costs had pushed its first-quarter profit down by almost half as its service revenue and subscriber base showed sluggish growth.

The company, controlled by billionaire businessman Carlos Slim, said profit in the January-March period fell by 48.3 percent to 13.887 billion pesos (US$1.06 billion) from 26.87 billion pesos a year earlier.

America Movil said in a statement it had a total financing cost of 8.3 billion pesos, mostly related to interest payments on debt. In the year-earlier period, the company had a financing gain of 1.4 billion pesos.

Overall revenue rose 1.28 percent to 195.44 billion pesos, while service revenue, which makes up around 90 percent of total revenue, increased 0.8 percent.

The company added 2.3 million wireless subscribers during the quarter, but said it had disconnected 980,000 clients across Latin America that were not meeting its traffic and consumption requirements.

Analysts, on average, had expected profit to fall to 21.31 billion pesos on revenue of 195.342 billion pesos, according to a Reuters survey of five analysts.

"For me, it doesn't seem to be a very positive report, it seems very much in line with what we were expecting, a neutral report with modest growth," said Julio Zetina from brokerage Vector Casa de Bolsa.

America Movil is facing tough new rules in its core fixed line and mobile phone markets in Mexico, where the government is trying to increase competition.

America Movil's core profit, or earnings before interest, tax, depreciation and amortization (EBITDA), in Mexico fell 0.8 percent. Last year almost half of America Movil's EBITDA came from Mexico.

Core profit rose in Brazil, Chile and other countries in South America, helping America Movil to a first-quarter 1.7 percent increase in EBITDA from a year ago.

The company said it lost 315,000 prepaid subscribers in Mexico in the quarter and gained 153,000 postpaid subscribers, finishing with 73.3 million wireless subscribers. It added 107,000 broadband customers but lost 247,000 fixed lines.

The company is scheduled to hold a conference call on Wednesday at 1400 GMT to discuss results.

Shares in America Movil closed up 1.62 percent at 13.21 pesos. The shares are down 13.2 percent since the end of December.

($1 = 13.06 pesos at end March)

(Additional reporting by Elinor Comlay; Editing by Diane Craft)