AMX

Business Context and Reporting Period

Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 6-K (Report of a Foreign Private Issuer)
Reporting Period: First Quarter 2021 (Ended March 31, 2021)
Announcement Date: April 27, 2021

América Móvil reported financial and operating results for Q1 2021. The company operates across Latin America, the United States, and Europe, with major subsidiaries including Telcel (Mexico), Claro (various Latin American countries), and Tracfone (USA). The reporting period was influenced by renewed COVID-19 waves in Latin America and economic recovery in the United States.

Key Financial Metrics

Note: Net Income swung from a loss of 28.9 billion pesos in Q1 2020 to a profit of 1.8 billion pesos in Q1 2021, primarily due to a 55% reduction in comprehensive financing costs.

Material Changes vs. Prior Period

• Subscriber Growth: Added 6.0 million wireless subscribers (3.3 million postpaid, 2.8 million prepaid), a 33% increase in additions compared to Q1 2020. Brazil, Mexico, and Colombia were the primary contributors. Fixed-line broadband accesses increased by 246,000.
• Revenue Dynamics: While nominal revenues were nearly flat (-0.8%), service revenues grew 1.2% at constant exchange rates. Mobile service revenues rose 1.7%, and fixed-line service revenues turned positive (0.1%) for the first time in eight quarters.
• Profitability: EBITDA margin expanded to 32.9% driven by strict cost controls. Operating profit increased 5.7%.
• Debt Reduction: Net debt decreased by 20.2 billion pesos in the quarter, with cash flow covering capex, buybacks, and debt reduction.
• Foreign Exchange Impact: The sharp depreciation of the Brazilian real (-20.4% vs. Mexican peso) negatively impacted consolidated nominal peso revenues despite local currency growth.

Guidance, Outlook, and Management Commentary

• Operational Outlook: Management highlighted the recovery of fixed-line services and the continued expansion of mobile service revenues. Fixed-broadband services became the most important revenue line, maintaining nearly 8% annual growth.
• Strategic Initiatives:
  • Launched "Claro Pay" digital wallet in Brazil.
  • Introduced "Claro Box TV" streaming service in Brazil.
  • Secured 400MHz of 26GHz spectrum for 5G services in Chile.
  • Launched IPTV platform in Peru.
• Capital Allocation: Shareholders approved a dividend of MXP$0.40 per share (in two installments) and an additional MXP$25 billion allocation to the share buyback fund. The company also approved the cancellation of treasury shares.
• Risks and Contingencies:
  • Argentina: Results are presented under IAS 29 (inflationary accounting). Real revenues declined 8.8% year-on-year due to the economic situation, though EBITDA margin improved to 39.6%.
  • Ecuador: Revenues declined 17.4% due to the country's economic crisis and the pandemic, though EBITDA margin improved to 43.2% via cost reductions.
  • Supply Chain: Equipment revenues in Mexico declined 11.7% partly due to global chip shortages.

Investor Verification Checklist

• Argentina Inflation Accounting: Verify the impact of IAS 29 adoption on reported revenues and EBITDA, as real-term revenues declined despite margin improvements.
• Foreign Exchange Sensitivity: Assess the exposure to the Brazilian real and Argentine peso, which significantly impacted consolidated peso results despite operational growth.
• Debt Structure: Review the composition of the 627 billion pesos net debt, including the recent issuance of 2.1 billion euros in exchangeable bonds linked to KPN shares.
• Fixed-Line Recovery: Confirm the sustainability of the fixed-line revenue growth (first positive quarter in eight quarters) across key markets like Colombia and Peru.
• Share Buyback Execution: Monitor the execution of the newly approved 25 billion peso buyback fund and the cancellation of treasury shares.