Business Context and Reporting Period
Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2012
Accounting Standards: International Financial Reporting Standards (IFRS)
Reporting Currency: Mexican Pesos (MXN)
América Móvil is the largest provider of wireless communications services in Latin America, operating in 18 countries. The company provides mobile and fixed voice services, data services, internet access, and Pay TV. Key brands include Telcel and Telmex in Mexico, and Claro in most other markets. A significant development in 2012 was the consolidation of Net Serviços (Brazil), which was previously accounted for using the equity method.
Key Financial Metrics (2012)
| Metric | 2012 (MXN Millions) | 2012 (USD Millions) |
|---|---|---|
| Operating Revenues | 775,070 | 59,574 |
| Operating Income | 157,310 | 12,091 |
| Net Profit | 92,140 | 7,082 |
| Net Profit Attributable to Parent | 91,441 | 7,028 |
| Operating Margin | 20.3% | - |
| Effective Tax Rate | 33.5% | - |
| Total Assets | 1,003,898 | 77,163 |
| Total Debt | 417,670 | 32,104 |
| Cash and Cash Equivalents | 45,487 | 3,496 |
| Capital Expenditures | 130,900 | 10,061 |
Material Changes vs. Prior Period (2011)
- Revenue Growth: Operating revenues increased by 12.3% to Ps.775.1 billion. At constant exchange rates and excluding the Net Serviços consolidation, revenue grew by 6.3%. Growth was driven by Pay TV (due to Net consolidation), mobile data, and wireless voice services, partially offset by declines in fixed voice revenues.
- Profitability: Operating income increased by 1.6% to Ps.157.3 billion. However, the operating margin declined from 22.4% in 2011 to 20.3% in 2012. This compression was due to higher subscriber acquisition costs, network maintenance expenses, and the growth of lower-margin businesses like Pay TV and TracFone.
- Net Income: Net profit increased by 4.5% to Ps.92.1 billion, primarily driven by lower financing costs resulting from foreign exchange gains (Ps.7.4 billion gain in 2012 vs. Ps.22.4 billion loss in 2011).
- Segment Performance:
- Mexico Wireless: Revenues up 8.3%; Operating income up 8.0%.
- Mexico Fixed: Revenues down 5.5%; Operating income down 29.4% due to higher broadband maintenance costs and pension obligations.
- Brazil: Revenues up 18.1% (including Net consolidation); Operating income up 22.0%.
- United States: Revenues up 33.7%; Operating income up 106.6% due to cost reductions on airtime purchases.
Guidance, Outlook, and Risks
- Capital Expenditures: The company budgeted capital expenditures for 2013 at approximately U.S.$9.99 billion (Ps.129.9 billion).
- Dividends: Shareholders approved a dividend of Ps.0.22 per share for 2013, payable in two installments.
- Regulatory Risks (Mexico): A new telecommunications bill passed by the Mexican Congress in 2013 is expected to establish an independent Federal Telecommunications Institute. The bill may impose asymmetric regulations on "preponderant" economic actors (likely Telcel and Telmex), including structural separation and unbundling of network elements. The long-term impact is uncertain but could be material.
- Regulatory Risks (Brazil): Mobile termination rates are subject to reduction mandates by Anatel, which could negatively impact revenues. The company is also facing significant tax assessments and litigation regarding ICMS and PIS/COFINS taxes.
- Investments: The company acquired significant stakes in KPN (Netherlands) and Telekom Austria (Austria) in 2012. While the fair value of these investments was below carrying value at year-end, no impairment was recognized based on value-in-use calculations.
- Foreign Exchange: The company remains exposed to currency fluctuations, particularly the Mexican peso against the U.S. dollar, which impacts debt servicing costs and reported results.
Key Facts for Investor Verification
- Net Serviços Consolidation: Verify the impact of consolidating Net Serviços (Brazil) on 2012 comparability, as it significantly boosted Pay TV revenues and subscriber counts.
- Regulatory Impact in Mexico: Monitor the implementation of the new Mexican telecommunications law and the designation of "preponderant" actors, which could lead to structural changes or revenue reductions for Telcel and Telmex.
- Investment Valuation: Review the carrying value vs. fair value of the KPN and Telekom Austria investments, as market prices were significantly below book value at year-end, relying on value-in-use models to avoid impairment charges.
- Tax Contingencies: Assess the magnitude of tax assessments in Brazil (ICMS, PIS/COFINS) and Mexico, which represent significant contingent liabilities.
- Debt Structure: Note that approximately 81% of indebtedness is denominated in currencies other than the Mexican peso (primarily USD), creating exposure to exchange rate movements.