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: Second Quarter ended June 30, 2008 (Announced July 21, 2008)
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, operating primarily through subsidiaries such as Telcel (Mexico), Claro (various Latin American countries), and Tracfone (USA). The company provides wireless and wireline services.

Key Financial Metrics

Operational Highlights:

• Subscribers: Added 6.1 million net wireless subscribers in 2Q08, reaching a total of 165.3 million (up 20.4% YoY).
• Total Lines: 169.2 million (including 3.9 million fixed lines in Central America/Caribbean).
• Key Growth Markets: Brazil (1.9M adds), Mexico (1.3M adds), Colombia (1.1M adds).
• Traffic: Minutes of Use (MOU) increased significantly, notably in Mexico (+39% YoY).

Material Changes vs. Prior Period

• Revenue Growth: Driven by strong subscriber additions and service revenue growth, particularly in Mexico (+4.4% QoQ) and South American operations (Colombia, Ecuador, Peru averaging +6% QoQ).
• Profitability: Net income grew 25.3% YoY, outpacing revenue growth due to foreign exchange gains and improved operating leverage in key markets.
• Debt Reduction: Net debt decreased by 5.3 billion pesos to 84.9 billion pesos (from 92.7 billion in Dec 2007), despite funding 26.7 billion pesos in capital expenditures and 13.9 billion pesos in share buybacks.
• Foreign Exchange: The Mexican peso appreciated against most Latin American currencies and the US dollar, generating foreign exchange gains that offset interest expenses, resulting in a net financing income for the quarter.

Guidance, Outlook, and Risks

Management Commentary & Outlook:

• Strategic Initiatives: Successfully launched iPhone 3G in Mexico (July 11) with strong initial sales; agreement reached with Apple for Latin America rollout. Mobile number portability implemented in Mexico (July 12).
• 3G Expansion: Continued deployment of UMTS/HSDPA networks in Brazil, Ecuador, Argentina, and the Caribbean. 3G services now cover significant portions of populations in these regions.
• Market Position: Became the largest carrier by subscribers in Argentina. Maintained leadership in Brazil with 26.3% share of net market additions.

Risks and Contingencies:

• Regulatory: The Mexican Federal Competition Commission (COFECE) preliminary findings suggest all mobile carriers in Mexico have substantial power in the mobile termination market, which could lead to regulatory scrutiny.
• Competition: Intense competition in Latin America has led to significant reductions in airtime prices (average revenue per minute down 18.7% YoY), though this has driven traffic elasticity.
• Chile Performance: Chile operations reported negative EBITDA in 2Q07 and remained low-margin in 2Q08 (3.8% margin) due to strict cost controls and market conditions, though EBITDA improved significantly from the prior year.

Investor Verification Checklist

• Subscriber Quality: Verify the sustainability of high growth rates in Brazil and Peru, where rapid subscriber acquisition has pressured ARPU.
• Regulatory Impact in Mexico: Monitor the final outcome of the COFECE investigation regarding mobile termination rates and potential price caps.
• Foreign Exchange Sensitivity: Assess the impact of peso appreciation on consolidated results, as FX gains significantly boosted net income in 2Q08.
• Chile Turnaround: Review the timeline for Chile operations to achieve sustainable profitability given the low EBITDA margins.
• Capital Allocation: Confirm the balance between aggressive capital expenditure (spectrum purchases, 3G rollout) and debt reduction/share buybacks.