AMX

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 2012 (Ended March 31, 2012)
Announcement Date: April 26, 2012

América Móvil is a leading telecommunications provider operating across Latin America and the United States. The company reported strong growth in subscriber bases and revenues for Q1 2012, driven by mobile data expansion and PayTV growth. Notably, the company changed its financial presentation to report revenues in gross terms (excluding distributor commissions) and adjusted its EBITDA definition to align with IFRS operating profit standards.

Key Financial Metrics

Material Changes vs. Prior Period

• Subscriber Growth: Total accesses reached 306 million (+7.7% YoY). Wireless subscribers grew to 246 million (+6.5% YoY), with 4.2 million net adds in the quarter. Fixed-line RGUs totaled 60 million (+12.5% YoY).
• Revenue Drivers: Wireless revenues grew 15.8% and fixed-line revenues 7.1%. Mobile data services surged 31% at constant exchange rates, followed by PayTV at 25%.
• Profitability: Net income increased significantly (37.5%) largely due to a foreign exchange gain of 19.3 billion MXN resulting from currency appreciation against the U.S. dollar. This resulted in a comprehensive financing income of 5.8 billion MXN.
• Margin Compression: EBITDA margin declined to 35.1% from 37.1% due to higher service costs (postpaid growth, content charges, network maintenance) and the inclusion of lower-margin businesses like Tracfone (USA) and PayTV.
• Capital Allocation: The company spent 24.2 billion MXN on Capex, acquired 7.3 billion MXN of Telmex shares, and repurchased 6.9 billion MXN of its own stock, while still retiring 3.8 billion MXN of debt.

Guidance, Outlook, and Risks

• Strategic Shifts: The company is consolidating Net Serviços (Brazilian cable) and shifting to gross revenue reporting to improve comparability with peers. It is also focusing on multi-play services (bundling mobile, fixed, and TV).
• Regional Highlights:
  • Brazil: Became the largest fixed-line operation (25.2 million RGUs). PayTV and fixed-broadband are key growth drivers.
  • Mexico: Postpaid growth is strong (+17.3%), but fixed-line voice revenues declined due to reduced mobile termination rates.
  • USA (Tracfone): EBITDA more than doubled (+121.2%) with margin expansion to 12.9%.
  • Chile & Central America: EBITDA declined in Chile (-16.4%) and Central America (-17.2%) due to network expansion costs and start-up expenses (Costa Rica) or consolidation of acquired assets (Honduras).
• Risks & Contingencies:
  • Currency Volatility: Significant foreign exchange gains in Q1 2012 boosted net income; future currency fluctuations could materially impact results.
  • Regulatory Changes: Implementation of mobile number portability in various markets (Argentina, Chile) and reductions in interconnection rates (Mexico) impact revenue and churn dynamics.
  • Cost Pressures: Rising inflation-linked costs (Argentina) and mandatory employee profit sharing (Mexico, Peru, Ecuador) affect margins.

Investor Verification Checklist

• Accounting Changes: Verify the impact of the new gross revenue presentation and adjusted EBITDA definition on historical comparability.
• FX Sensitivity: Assess the sustainability of net income growth given the 19.3 billion MXN foreign exchange gain in Q1 2012.
• Margin Trends: Monitor EBITDA margin compression in key markets (Mexico, Brazil, Chile) driven by postpaid acquisition costs and network investments.
• Debt Profile: Confirm the composition of the 318 billion MXN net debt and the company's ability to service debt while funding Capex and buybacks.
• Brazil Integration: Evaluate the performance of the newly consolidated Net Serviços and the growth trajectory of the Brazilian fixed-line and PayTV segments.