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: Three months ended March 31, 2020 (First Quarter 2020)
Filing Date: May 4, 2020
América Móvil is a leading telecommunications provider in Latin America and Europe, operating in 25 countries. As of March 31, 2020, the company reported 282.6 million wireless subscribers and 81.4 million fixed Revenue Generating Units (RGUs). The reporting period coincided with the onset of the global COVID-19 pandemic, which introduced significant economic uncertainty.
Key Financial Metrics
| Metric | Q1 2020 (MXN) | Q1 2020 (USD) | Q1 2019 (MXN) |
|---|---|---|---|
| Total Operating Revenues | Ps. 250,102 million | $10,637 million | Ps. 245,656 million |
| Operating Income | Ps. 38,950 million | $1,657 million | Ps. 35,452 million |
| Operating Margin | 15.6% | - | 14.4% |
| Net Profit (Loss) | (Ps. 28,602 million) | ($1,217 million) | Ps. 20,317 million |
| Net Debt | Ps. 687.8 billion | - | Ps. 556.8 billion (Dec 2019) |
| Cash & Equivalents | Ps. 155.7 billion | - | Ps. 67.5 billion (Dec 2019) |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased 1.8% year-over-year (YoY) in reported pesos, driven by currency depreciation. At constant exchange rates, revenue grew 4.5%.
- Operating Performance: Operating income rose 9.9% YoY to Ps. 38.95 billion, with operating margin expanding to 15.6% from 14.4%.
- Net Loss: The company reported a net loss of Ps. 28.6 billion, a sharp reversal from a net profit of Ps. 20.3 billion in Q1 2019. This was primarily due to a foreign currency exchange loss of Ps. 93.3 billion (compared to a gain of Ps. 8.2 billion in Q1 2019) resulting from the Mexican peso's depreciation against the U.S. dollar and euro.
- Derivative Gains: A credit of Ps. 23.1 billion from the valuation of derivatives partially offset the exchange loss, driven by the peso's depreciation and lower U.S. interest rates.
- Subscriber Trends: Total wireless subscribers grew 1.8% YoY. Brazil saw a 4.1% increase in wireless subscribers, while the U.S. segment declined 4.1%.
Guidance, Outlook, and Risks
- COVID-19 Impact: Management states the pandemic will result in a severe global economic downturn. The duration, magnitude, and specific impact on operations remain highly uncertain. Fixed voice revenues in Ecuador, Peru, and the Caribbean were slightly affected.
- Liquidity Strategy: To ensure liquidity and flexibility amidst uncertainty, the company drew the full amount of two revolving syndicated credit facilities (U.S.$2.5 billion and the euro equivalent of U.S.$2.0 billion).
- Capital Allocation: Capital expenditures for the quarter were approximately Ps. 26.8 billion, primarily funded by operating activities. Share repurchases continued but were minimal (Ps. 121.3 million), with future activity dependent on cash flow and market conditions.
- Forward-Looking Statements: The filing includes standard disclaimers regarding risks related to regulation, competition, inflation, exchange rates, and the ongoing pandemic.
Investor Verification Checklist
- Currency Exposure: Verify the extent of debt denominated in U.S. dollars and euros versus the Mexican peso, as exchange rate volatility significantly impacted net income.
- Derivative Hedging: Review the specific terms and fair value of derivative instruments used to hedge foreign exchange and interest rate risks.
- Segment Performance: Analyze the divergence between reported and constant-currency results, particularly in high-growth markets like Brazil and Mexico Wireless versus volatile markets like Southern Cone (Argentina).
- Debt Maturity Profile: Assess the schedule of long-term debt maturities, noting Ps. 119.8 billion due in 2021 and Ps. 123.9 billion in 2022.
- Cost Savings Effectiveness: Monitor the sustainability of the cost savings program cited as a driver for margin expansion across multiple segments.