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, 2007 (and Year-to-Date)
Business Overview: América Móvil is a leading Latin American wireless telecommunications provider. As of September 30, 2007, the company reported a total wireless subscriber base of 143.4 million, with an additional 3.8 million fixed lines in Central America and the Caribbean, totaling 147.2 million lines.
Key Financial Metrics
| Metric (3Q 2007) | Value (Constant Mex$) | YoY Change |
|---|---|---|
| Total Revenues | 77.8 billion | +29.8% |
| Service Revenues | 67.2 billion | +33.3% |
| EBITDA | 31.9 billion | +44.6% |
| EBITDA Margin | 41.0% | +4.2 pts |
| Operating Profit (EBIT) | 19.7 billion | +29.9% |
| Net Income | 11.1 billion | -2.0% |
| Net Debt | 69.9 billion | +0.8 billion (vs. start of year) |
| Cash & Securities | 27.4 billion | -38.4% (vs. Dec 2006) |
Year-to-Date (Jan-Sep 2007): Revenues totaled 223.0 billion pesos (+29.1% YoY), EBITDA reached 92.5 billion pesos (+46.9% YoY), and Net Income was 42.1 billion pesos (+26.4% YoY).
Material Changes vs. Prior Period
- Subscriber Growth: Added 6.2 million net subscribers in 3Q07, bringing the total base to 143.4 million (+25.9% YoY). Brazil and Mexico were the primary growth drivers with 1.7 million and 1.4 million additions, respectively. Peru exhibited the fastest growth rate at 71.4% YoY.
- Margin Expansion: Consolidated EBITDA margin improved to 41.0% from 36.8% in 3Q06. Significant margin improvements were noted in Brazil, Colombia, and the Argentina-Paraguay-Uruguay region (up 11-12 percentage points).
- Depreciation Impact: Operating profit growth was moderated by an acceleration in depreciation charges related to the phasing out of TDMA equipment in certain countries. Depreciation and amortization expenses rose 77.2% YoY.
- Chile Restructuring: Chile reported a net reduction of 132,000 subscribers due to a "cleansing" of the subscriber base, resulting in negative EBITDA for the quarter (-8.8 billion Chilean pesos).
- Acquisitions: The company agreed to acquire 100% of Oceanic Digital Jamaica (pending regulatory approval) and completed the acquisition of its Puerto Rican subsidiary.
Guidance, Outlook, and Risks
- Outlook: Management expects continued growth driven by strong subscriber and usage trends in Latin America. The company is advancing the rollout of UMTS (3G) services to enable wireless broadband and new value-added services.
- Dividend: The Board recommended an extraordinary dividend of 1 peso per share, subject to shareholder approval, with a proposed payment date of November 6, 2007.
- Capital Allocation: Cash flow from operations funded 56.5 billion pesos in outlays, including the Puerto Rico acquisition (24.4 billion), share buybacks, dividends (14.2 billion), and capital expenditures (17.9 billion).
- Risks & Contingencies:
- Regulatory: Completion of the Jamaica acquisition is subject to regulatory approvals.
- Technology Transition: Costs associated with dismantling TDMA equipment and transitioning to GSM/3G networks.
- Market Dynamics: Price reductions per minute to encourage usage may pressure ARPU, though volume growth is offsetting this in most regions.
Investor Verification Checklist
- Chile Performance: Verify the long-term impact of the subscriber base cleansing and negative EBITDA in Chile on future profitability.
- TDMA Depreciation: Assess the duration and total cost of the accelerated depreciation charges related to TDMA phase-outs.
- Net Debt Stability: Confirm that net debt remains stable despite significant capital expenditures and acquisitions, given the reliance on operating cash flow.
- 3G Rollout Costs: Monitor capital expenditure requirements for the UMTS (3G) rollout across Latin American subsidiaries.
- Regulatory Approvals: Track the status of regulatory approvals for the Oceanic Digital Jamaica acquisition.