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: Second Quarter 2019 (Ended June 30, 2019)
Announcement Date: July 16, 2019
Accounting Standards: Results presented under IFRS 16 (effective Jan 1, 2019). Argentina results adjusted for hyperinflation (IAS 29) and excluded from constant exchange rate comparisons.

Key Financial Metrics

Cash Flow & Capital Allocation: Capital expenditures were 66.3 billion MXN. Acquisitions totaled 6.3 billion MXN (Telefonica Guatemala). Pension contributions were 12 billion MXN. Net debt increased 19.6 billion MXN in cash flow terms for the six months ended June.

Material Changes vs. Prior Period

• Currency Impact: Reported revenue decline of 2.7% was primarily due to the appreciation of the Mexican peso against operating currencies (e.g., +10.3% vs. Brazilian Real, +15.6% vs. Colombian Peso). At constant exchange rates (excluding Argentina), service revenue growth accelerated to 2.3% from 0.8% in Q1.
• Subscriber Growth: Added 1.6 million postpaid subscribers (driven by Brazil, Austria, and Mexico). Mobile postpaid base grew 7.2% YoY. Fixed-broadband accesses grew 6.0% YoY. Prepaid and PayTV segments declined.
• Profitability: Organic EBITDA growth at constant exchange rates accelerated to 3.5% YoY. Comprehensive financing costs dropped 63.2% YoY due to a foreign exchange profit of 2.2 billion MXN (vs. a 30.2 billion MXN loss in 2Q18).
• Regional Performance:
  • Mexico: Revenues +3.4%; EBITDA +4.7% (organic). Mobile service revenues +8.3%.
  • Brazil: Revenues +1.1%; EBITDA +4.7% (organic). Postpaid revenue growth +11.2%.
  • Colombia: Revenues +7.2%; EBITDA +8.4% (organic).
  • Chile: Revenues flat; EBITDA declined 23.8% (comparable basis) due to an 80% cut in mobile termination rates.
  • Argentina: Revenues declined 7.0% in constant peso terms due to purchasing power contraction.

Outlook, Risks, and Unusual Items

• Debt Refinancing: Issued a EUR 1.0 billion bond (8-year maturity, 0.750% coupon) on June 19 to refinance a bond maturing in October 2019. This was the lowest coupon achieved by a Latin American corporate issuer in the euro market.
• Acquisitions: Consolidated Telefonica Guatemala operations (closed Jan 2019). Plans to acquire Telefonica El Salvador pending regulatory approval.
• Regulatory Risks: Significant revenue pressure in Chile and Peru due to mandated reductions in mobile termination rates (MTRs). SIM card registration regulations in Austria led to prepaid subscriber declines.
• Macroeconomic Risks: Continued economic contraction in Argentina affecting consumption. Political and economic instability in Nicaragua led to subscriber disconnections and revenue declines.
• Accounting Changes: Implementation of IFRS 16 capitalized lease obligations, increasing reported debt and EBITDA compared to prior IAS 17 standards.

Investor Verification Checklist

• Constant Currency Growth: Verify organic service revenue growth of 2.3% and EBITDA growth of 3.5% excluding Argentina and FX effects.
• Argentina Hyperinflation: Review Appendix 4 for Argentina results adjusted for inflation (IAS 29) to understand true operational performance vs. nominal reporting.
• IFRS 16 Impact: Confirm the reconciliation of Net Debt and EBITDA between IAS 17 and IFRS 16 to assess leverage and profitability trends accurately.
• Chile & Peru MTRs: Assess the long-term revenue impact of the 80% (Chile) and 70% (Peru) mobile termination rate cuts implemented in January 2019.
• Debt Maturity: Verify the successful refinancing of the EUR 1.0 billion bond due October 2019 and the impact on future interest expenses.