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: Third Quarter ended September 30, 2008 (and Year-to-Date)
Business Overview: América Móvil is a leading telecommunications operator in Latin America and the United States. As of September 30, 2008, the company reported a total wireless subscriber base of 172.6 million and 3.9 million landline subscribers. Key markets include Mexico, Brazil, Colombia, Argentina, and the United States (via Tracfone).

Key Financial Metrics

Liquidity and Debt:
- Net Debt (Sep 2008): 106.4 billion pesos (approx. $10.98 billion USD).
- Net Debt / EBITDA Ratio: 0.78x (based on last twelve months).
- Capital Expenditures (YTD): 45 billion pesos.
- Shareholder Distributions (YTD): 41 billion pesos (dividends and buybacks).
- Cash & Securities: 12.1 billion pesos.

Material Changes vs. Prior Period

• Subscriber Growth: Added 7.3 million net subscribers in 3Q08, an 18.3% increase over 3Q07. Brazil led with 2.6 million additions (a record for the quarter), followed by Mexico (1.5 million) and Colombia (1.2 million).
• Revenue Growth: Consolidated revenues rose 9.8% year-over-year to 85.3 billion pesos. Service revenues grew 10.4%, driven by value-added services in Brazil and Colombia.
• Profitability: Net income increased 31.6% to 12.4 billion pesos. Operating profit surged 25.2% due to reduced depreciation and amortization expenses (down to 11.9% of revenues from 15.7% a year prior) as older TDMA/CDMA networks were fully depreciated.
• Foreign Exchange: The company incurred foreign exchange losses due to currency depreciation against the USD, though these were largely offset by hedging strategies. Only ~20% of net debt remained exposed to FX fluctuations.

Outlook, Risks, and Management Commentary

• Strategic Initiatives: Completed nationwide coverage in Brazil; launched iPhone 3G sales in ten Latin American countries; expanded 3G/UMTS/HSDPA coverage to over 200 million people across 16 countries.
• Acquisitions: Acquired 100% interest in Estesa Holding Corp. (Nicaragua) in August 2008.
• Regulatory Risks: In Mexico, the Ministry of Communications and Transports issued a resolution regarding interconnection rates that Telcel is challenging in court. A final adverse ruling could significantly reduce interconnection rates for 2008-2011. Currently, the resolution is provisionally suspended.
• Market Dynamics: Mobile number portability was implemented in parts of Brazil in September 2008, with nationwide rollout expected by February 2009. In Mexico, portability impact remains minimal (0.10% of base), with Telcel being a net gainer.
• Guidance: The filing does not provide specific forward-looking financial guidance for future quarters, focusing instead on operational milestones and current performance.

Key Facts for Investor Verification

• Regulatory Outcome in Mexico: Monitor the legal proceedings regarding the interconnection rate dispute between Telcel and fixed-line operators, as a final ruling could materially impact future revenues.
• Subscriber Acquisition Costs (SAC): Verify the impact of aggressive subscriber growth (particularly in Brazil) on EBITDA margins, as management noted that core margins improved but reported margins were flat due to SAC.
• Currency Exposure: Assess the effectiveness of hedging strategies given the volatility of Latin American currencies against the USD, which impacts reported earnings and debt servicing.
• 3G Monetization: Track the conversion of 3G network expansion into data revenue growth, which is cited as a key driver in markets like Brazil, Colombia, and Argentina.
• Debt Maturity Profile: Review the debt schedule, noting that nearly 30% of debt comes due after 2017, with an average life of 9.2 years.