Business Context and Reporting Period
This Form 6-K filing by América Móvil, S.A. de C.V. reports unaudited consolidated results for the nine-month period ended September 30, 2004, and the third quarter ended September 30, 2004. The financial data is presented in constant Mexican pesos with purchasing power as of September 30, 2004, adjusted for inflation. The company operates primarily in wireless telecommunications across Mexico, Brazil, Argentina, Colombia, Ecuador, and the United States, with fixed-line operations in Central America.
Key Financial Metrics
| Metric (Nine Months Ended Sept 30, 2004) | Value (Millions of Constant Pesos) |
|---|---|
| Operating Revenues | 93,265 |
| Operating Income | 18,082 |
| Net Income | 14,613 |
| Operating Margin | 19.4% |
| Total Indebtedness | 53,969 |
| Short-Term Debt | 6,793 (12.6% of total) |
| Cash and Cash Equivalents | 12,063 |
| Total Assets | 175,655 |
| Capital Expenditures (Accrued) | 14,900 |
| Dividends and Share Repurchases | 10,500 |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased 51.6% to Ps. 93,265 million, driven by subscriber growth and acquisitions. Service revenues rose 45.3%, while equipment revenues surged 96.5%.
- Profitability: Net income increased 45.7% to Ps. 14,613 million. However, the operating margin declined to 19.4% from 21.6% in the prior year.
- Subscriber Base: Total wireless subscribers reached 54.1 million as of September 30, 2004, up from 50.3 million in June 2004. Argentina showed the highest relative growth (86%), while Mexico remained the largest contributor in absolute terms but had the slowest relative growth (14.4%).
- Cost Structure: Operating costs and expenses rose 55.9%. Depreciation and amortization increased 29.9% due to new GSM network rollouts in Brazil and Argentina.
- Balance Sheet: Total assets grew 13.3% year-over-year. Short-term debt decreased 45.7% compared to December 31, 2003, while long-term debt increased 22.7%.
Outlook, Risks, and Management Commentary
- Margin Pressure: Management attributed the decline in operating margin to increased subscriber acquisition costs in Argentina, Colombia, and particularly Brazil, alongside higher-than-anticipated start-up costs for new regions in Brazil (Bahia-Sergipe and Paraná-Santa Catarina).
- Geographic Performance: While most markets reported positive operating income, Brazil and Argentina did not, primarily due to significant depreciation and amortization expenses associated with network expansion.
- Cash Utilization: The company utilized approximately Ps. 10.5 billion for dividends and share repurchases during the first nine months of 2004, with Ps. 3.1 billion spent in the third quarter alone.
- Comparability Note: The filing explicitly states that current period data is not directly comparable to the 2003 audited annual report due to differences in the constant peso adjustment dates (inflation adjustment).
Investor Verification Checklist
- Verify the impact of inflation adjustments on the comparability of 2004 results versus 2003 audited statements.
- Monitor the timeline for profitability in Brazil and Argentina given the heavy depreciation from new network rollouts.
- Assess the sustainability of the 51.6% revenue growth rate as the company matures in key markets like Mexico.
- Review the composition of the Ps. 14.9 billion in accrued capital expenditures to understand future cash outflow requirements.
- Confirm the specific regulatory or competitive risks in Brazil that led to higher-than-anticipated start-up costs.