AMX

Business Context and Reporting Period

Company: América Móvil, S.A.B. de C.V. (Ticker: AMX)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter 2022 (ended December 31, 2022)
Filing Date: February 16, 2023

América Móvil reported financial and operating results for Q4 2022. The company operates across Latin America and Europe, with significant exposure to currency fluctuations. The reporting period includes the deconsolidation of Claro Chile following a joint venture with Liberty Latin America and the treatment of TracFone and Claro Panama as discontinued operations.

Key Financial Metrics

Note: Total Net Income decline is primarily due to the deconsolidation of Claro Chile and discontinued operations. Adjusted EBITDA at constant exchange rates increased 5.0% YoY.

Material Changes vs. Prior Period

• Currency Impact: The appreciation of the Mexican peso against major operating currencies (USD, COP, CLP, EUR) negatively impacted reported revenue and EBITDA in MXN terms. At constant exchange rates, service revenue grew 6.0% and Adjusted EBITDA grew 5.0%.
• Subscriber Growth: The company added 3.3 million organic wireless subscribers (1.5M postpaid, 1.8M prepaid). Key contributors included Brazil, Austria, and Colombia for postpaid, and Mexico for prepaid.
• Portfolio Clean-up: In Brazil, 4.1 million subscribers (acquired from Oi) were removed from the base as they were not generating traffic.
• Fixed-Line Performance: Added 110,000 broadband accesses and 97,000 Pay TV clients, offset by a loss of 234,000 voice access lines.
• Discontinued Operations: Significant impact on year-over-year Net Income due to the deconsolidation of Claro Chile and the sale of TracFone and Claro Panama.

Guidance, Outlook, and Risks

• Management Commentary: Management highlighted strong organic growth in mobile service revenue (9.8% at constant FX), driven by postpaid acceleration. Eastern Europe led service revenue growth at 9.6% (constant FX), followed by Brazil (9.0%) and Mexico (5.7%).
• Capital Allocation: Cash flow and net borrowings covered capital expenditures of 159.8 billion MXN, shareholder distributions of 50.2 billion MXN, and labor obligations of 24.4 billion MXN.
• Strategic Events:
  • Telekom Austria: S&P upgraded credit rating to A-.
  • Debt Issuance: Issued 24 billion MXN in sustainable bonds in the Mexican market.
  • Governance: Shareholders approved the conversion of share series into a single series with full voting rights.
  • Labor: Telmex reached an agreement with its union to reduce retirement benefits for new hires and convert pension liabilities into shares.
• Risks:
  • Argentina: Hyperinflationary accounting (IAS 29) applies; revenue and EBITDA declined in constant peso terms due to inflation acceleration.
  • Colombia: Intense competition and currency devaluation pressured ARPUs and EBITDA.
  • Interest Rates: Volatility in long-term interest rates and currency exchange rates remain key risks.

Investor Verification Checklist

• Constant Currency Adjustments: Verify the specific FX rates used to calculate the 6.0% service revenue growth and 5.0% Adjusted EBITDA growth, as nominal MXN figures show declines.
• Discontinued Operations Impact: Confirm the exact financial impact of the Claro Chile deconsolidation on Net Income and future comparability.
• Brazil Subscriber Quality: Review the criteria for the "clean-up" of 4.1 million Oi subscribers to ensure future revenue recognition is not impacted by similar adjustments.
• Argentina Inflation: Assess the sustainability of revenue growth in Argentina given the reported 14.3% decline in constant peso terms and high inflation environment.
• Debt Structure: Analyze the composition of the 388.5 billion MXN net debt, specifically the maturity profile and currency denomination, given the company's exposure to FX volatility.