Business Context and Reporting Period
Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter 2019 (Ended March 31, 2019)
Announcement Date: April 29, 2019
Accounting Standard: The company implemented IFRS 16 (Leases) effective January 1, 2019. Financial results are presented under this new standard, with comparative data provided in appendices under the previous IAS 17 standard.
Key Financial Metrics
| Metric | 1Q 2019 (IFRS 16) | 1Q 2018 (IAS 17) | YoY Change |
|---|---|---|---|
| Total Revenues | MXN 245.7 Billion | MXN 253.5 Billion | -3.1% (MXN terms) +2.5% (Constant FX) |
| EBITDA | MXN 75.0 Billion | MXN 72.0 Billion | +4.2% (Reported) -5.6% (Comparable IAS 17) |
| EBITDA Margin | 30.6% | 28.4% | +220 bps |
| Operating Profit (EBIT) | MXN 35.4 Billion | MXN 30.6 Billion | +15.7% |
| Net Income | MXN 19.4 Billion | MXN 18.8 Billion | +3.6% |
| Earnings Per Share (MXN) | MXN 0.29 | MXN 0.28 | +3.6% |
| Capital Expenditures | MXN 28.0 Billion | N/A | N/A |
| Net Debt | MXN 703 Billion | N/A | Includes MXN 116B capitalized leases |
Note: Under the prior IAS 17 methodology, EBITDA would have been MXN 68.0 Billion (27.7% margin) and Net Debt would have been MXN 586.5 Billion.
Material Changes vs. Prior Period
- Subscriber Growth: Total wireless subscribers reached 277.4 million. The company added 1.5 million postpaid subscribers (972k in Brazil, 201k in Mexico, 159k from Guatemala acquisition) but lost 1.1 million prepaid subscribers, primarily in Brazil.
- Revenue Drivers: Fixed-broadband revenue growth accelerated to 9.9% and mobile postpaid revenue increased 6.8%. Conversely, Pay-TV revenues declined 3.0%.
- Acquisition Impact: The acquisition of Telefónica's operations in Guatemala (completed Feb 2019) contributed 159k postpaid subscribers and MXN 6.3 Billion in cash outflow.
- Accounting Impact: The shift to IFRS 16 capitalized lease liabilities, increasing reported EBITDA by MXN 7.1 Billion and Net Debt by MXN 116 Billion compared to the prior methodology.
- Regional Performance:
- Brazil: Strong postpaid growth (+15.1%) offset by prepaid declines (-15.0%). ARPU rose 11.0%.
- Argentina: Revenues surged 43.3% (local currency) driven by inflation and ARPU growth of 40.2%.
- Chile: Service revenues declined 3.2% due to an 80% reduction in mobile termination rates.
- USA: EBITDA fell 18.9% to $123 million, with a margin of 6.2%.
Guidance, Outlook, and Risks
- Dividends & Buybacks: Shareholders approved an ordinary cash dividend of MXN 0.35 per share (payable in two installments) and allocated MXN 3 Billion for a share buyback program.
- Debt Issuance: Issued US$2.25 Billion in bonds (US$1.0B at 3.625% due 2029; US$1.25B at 4.375% due 2049).
- Pending Acquisition: Entered an agreement to acquire 100% of Nextel Brazil for $905 million (cash-free/debt-free), subject to regulatory approvals (ANATEL, CADE) and shareholder approval.
- Risks & Contingencies:
- Regulatory: Risks associated with mobile termination rate cuts (impacted Chile and Peru) and regulatory fines (Mexico).
- Competition: Aggressive commercial practices in Peru and Chile affecting ARPU and subscriber retention.
- FX Exposure: Depreciation of operating currencies (Real, Chilean Peso, Colombian Peso) against the Mexican Peso negatively impacted reported revenue in MXN terms.
Investor Verification Checklist
- IFRS 16 Adjustments: Verify the impact of lease capitalization on Net Debt and EBITDA by reviewing Appendix 1 and 2 for IAS 17 comparable figures.
- Brazil Postpaid Quality: Confirm the sustainability of the 972k postpaid additions in Brazil amidst significant prepaid churn.
- Nextel Brazil Deal: Monitor regulatory approval status for the $905 million Nextel Brazil acquisition.
- Argentina Inflation: Assess the real growth in Argentina by adjusting the 43.3% revenue increase against local inflation rates.
- Chile Termination Rates: Evaluate the long-term revenue impact of the 80% mobile termination rate reduction in Chile.