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: Third Quarter 2019 (Ended September 30, 2019)
Announcement Date: October 15, 2019
Accounting Standard: Results reported under IFRS 16 (adopted January 1, 2019). Argentina results are presented under IAS 29 (inflation-adjusted accounting).
Key Financial Metrics
| Metric | 3Q 2019 | 3Q 2018 | YoY Change |
|---|---|---|---|
| Total Revenues (MXN Billions) | 248.4 | 247.9 | +0.2% |
| EBITDA (MXN Billions) | 78.8 | 71.9 | +9.5% |
| EBITDA Margin | 31.7% | 29.0% | +270 bps |
| Operating Profit (EBIT) (MXN Billions) | 38.1 | 35.5 | +7.3% |
| Net Income (MXN Billions) | 13.0 | 18.9 | -31.0% |
| Earnings Per Share (MXN) | 0.20 | 0.29 | -31.0% |
| Net Debt (MXN Billions) | 672.8 | N/A | N/A |
| Net Debt / EBITDA Ratio | 1.92x | N/A | N/A |
Note: Net Debt includes 112.4 billion pesos in capitalized lease obligations under IFRS 16.
Material Changes vs. Prior Period
- Subscriber Growth: Added 1.6 million postpaid subscribers (928k in Brazil, 215k in Mexico, 159k in Austria). Mobile postpaid grew 7.8% YoY; fixed-broadband grew 5.6% YoY. Prepaid subscribers declined 3.5% YoY.
- Revenue Performance: Total revenues were flat in MXN terms (+0.2%) due to currency depreciation (Colombian and Argentinean pesos). At constant exchange rates (ex-Argentina), service revenues grew 2.5%.
- Profitability: EBITDA grew 7.2% organically at constant exchange rates (ex-Argentina) after adjusting for extraordinary items in Brazil and Austria. Operating profit increased 7.3%.
- Net Income Decline: Net income fell 31.0% YoY primarily due to comprehensive financing costs of 12.4 billion pesos, driven by foreign exchange losses from the depreciation of the Colombian and Argentinean pesos against the USD.
- Capital Allocation: Cash flow and net financing covered 99.9 billion pesos in Capex, 11.8 billion pesos in shareholder distributions, 6.3 billion pesos in acquisitions (Telefonica Guatemala), and 17.1 billion pesos in pension amortization.
Outlook, Risks, and Management Commentary
- Market Drivers: Mobile postpaid and fixed-broadband remain the primary growth drivers. Brazil showed strong mobile service revenue growth (11.1% YoY) and ARPU increases. Mexico saw ARPU rise 6.5% to 152 pesos.
- Challenges:
- Argentina: Revenues declined 7.9% annually in constant peso terms due to disposable income contraction, particularly in the prepaid segment.
- Chile: Mobile service revenues fell 9.6% due to an 80% reduction in interconnection rates and disruptive competition.
- Peru: Service revenues declined 6.2% reflecting a 36% reduction in interconnection rates.
- Acquisitions: Completed acquisition of Telefonica Guatemala for 6.3 billion pesos.
- Accounting Impact: Implementation of IFRS 16 increased reported EBITDA and Net Debt but reduced Net Income due to higher depreciation and interest expenses on lease liabilities.
Investor Verification Checklist
- Currency Exposure: Verify the impact of continued depreciation of the Argentinean and Colombian pesos on future consolidated earnings and FX losses.
- Regulatory Risks: Monitor the long-term impact of interconnection rate reductions in Chile and Peru on mobile service revenues.
- Argentina Inflation: Review the sustainability of revenue growth in Argentina given the hyperinflationary environment and IAS 29 accounting adjustments.
- Debt Servicing: Assess the company's ability to maintain the 1.92x Net Debt/EBITDA ratio given the inclusion of lease liabilities under IFRS 16.
- Prepaid Segment: Analyze the trend of prepaid subscriber declines (-3.5% YoY) and its effect on overall revenue mix.