Business Context and Reporting Period
Company: America Movil S.A. de C.V.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter ended September 30, 2004 (and Year-to-Date)
Business Overview: America Movil is a leading telecommunications provider in Latin America and the U.S., operating primarily through subsidiaries such as Telcel (Mexico), Claro (Brazil), CTI (Argentina), and Tracfone (U.S.). The company reported accelerated subscriber growth across most regions, driven by aggressive expansion in Argentina, Brazil, and Central America.
Key Financial Metrics
Revenue: Total revenues for Q3 2004 were 33.8 billion Mexican pesos (MXN), an increase of 8.7% sequentially and 50.9% year-over-year (YoY). Year-to-date (Jan-Sep) revenues totaled 93.3 billion MXN, up 51.6% YoY.
Profitability:
- EBITDA: Q3 EBITDA was 10.9 billion MXN (32.4% margin), up 27.2% YoY. YTD EBITDA was 31.4 billion MXN (33.6% margin).
- Operating Profit (EBIT): Q3 operating profit reached 6.5 billion MXN (19.3% margin), up 31.0% YoY. YTD operating profit was 18.1 billion MXN.
- Net Income: Q3 net income was 7.2 billion MXN, a 253.1% increase YoY. YTD net income totaled 14.6 billion MXN.
- Earnings Per Share (EPS): Q3 EPS was 0.58 MXN (approx. $1.02 USD per ADR).
Cash Flow and Capital Allocation:
- Capital Expenditures: 5.5 billion MXN in Q3; 14.9 billion MXN YTD.
- Shareholder Returns: 3.1 billion MXN spent on share buybacks and dividends in Q3; 10.5 billion MXN YTD.
Debt and Liquidity:
- Net Debt: 39.0 billion MXN at September 30, 2004 (slightly down from 39.2 billion MXN at year-end 2003).
- Cash & Securities: 14.96 billion MXN.
- Current Ratio: Current assets of 42.5 billion MXN vs. current liabilities of 45.1 billion MXN.
Material Changes vs. Prior Period
Subscriber Growth: The wireless subscriber base reached 54.1 million (total lines: 55.9 million). Net additions in Q3 were 3.7 million, up from 3.5 million in Q2.
- Argentina (CTI): Most dynamic growth with 557k net additions (27.6% sequential growth), doubling the subscriber base since acquisition.
- Brazil (Claro): Added 871k subscribers; base reached 12.0 million.
- Mexico (Telcel): Added 1.2 million subscribers; base reached 26.8 million. Growth rate slowed relative to smaller markets due to high base saturation.
Margin Compression in High-Growth Markets: While consolidated EBITDA margin was 32.4%, margins declined in Argentina and Colombia due to high subscriber acquisition costs associated with rapid growth. Conversely, margins improved in Mexico and Brazil.
Foreign Exchange Impact: A comprehensive financing income of 1.7 billion MXN was generated in Q3, primarily due to the appreciation of the Brazilian real and Colombian peso against the U.S. dollar, resulting in 1.5 billion MXN in foreign exchange gains.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted that subscriber growth has accelerated across most subsidiaries. In Mexico, subscriber growth surpassed traffic growth for the first time in nine quarters. The company continues to invest heavily in network expansion, particularly the GSM network in Brazil.
Recent Acquisitions:
- Nicaragua: Completed acquisition of 50.03% interest in Enitel in August, bringing total ownership to 99.03%. Results consolidated from August.
- Honduras: Megatel results consolidated from July.
Risks and Contingencies:
- Forward-Looking Statements: The filing includes standard disclaimers that future results depend on economic conditions, industry trends, and regulatory factors.
- Margin Pressure: Aggressive subscriber acquisition strategies in Argentina and Colombia have temporarily depressed EBITDA margins in those specific markets.
- Foreign Exchange: Results are sensitive to currency fluctuations, particularly the Brazilian real and Colombian peso.
Investor Verification Checklist
- Argentina Profitability: Verify the sustainability of CTI's growth given the Q3 EBITDA loss of 14 million Argentinean pesos and negative operating profit.
- Margin Trends: Monitor if EBITDA margins in Colombia and Argentina recover as subscriber acquisition costs stabilize.
- Debt Levels: Confirm the stability of the 39.0 billion MXN net debt position amidst continued capital expenditure requirements.
- Foreign Exchange Sensitivity: Assess the impact of currency volatility on consolidated earnings, given the significant FX gains in Q3.
- Integration of Acquisitions: Track the financial contribution of newly consolidated entities (Enitel in Nicaragua, Megatel in Honduras) in subsequent quarters.