América Móvil, S.A.B. de C.V. — FY 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed April 29, 2022. This is an annual report, not a standalone Q4 filing. Financial statements are prepared under IFRS in Mexican pesos. Unless noted otherwise, figures below are in billions of pesos (Ps.). TracFone is presented as discontinued operations for all periods, so continuing-operation revenue and results exclude it.
Business context
América Móvil provides wireless, fixed-line, broadband, Pay TV and related services in 24 countries. Mexico and Brazil are its largest markets. At year-end it reported 286.5 million wireless subscribers and 80.5 million fixed RGUs, for 367.0 million total RGUs; total RGUs increased from 347.6 million in 2020. Wireless subscribers grew while fixed RGUs were broadly flat to slightly lower.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 | Change / context |
|---|---|---|---|
| Operating revenue, continuing operations | Ps. 855.5 | Ps. 839.7 | +1.9% reported; +7.8% at constant exchange rates |
| Service revenue | Ps. 714.2 | Ps. 708.5 | +0.8% reported; +6.8% at constant exchange rates |
| Equipment sales | Ps. 141.3 | Ps. 131.2 | +7.7% reported; +12.8% at constant exchange rates |
| Operating income | Ps. 166.1 | Ps. 145.5 | +14.2%; operating margin 19.4%, versus 17.3% |
| Continuing-operations net profit | Ps. 74.6 | Ps. 34.0 | +119.2% |
| Net profit from discontinued operations | Ps. 121.7 | Ps. 17.0 | 2021 includes TracFone disposal gain |
| Total net profit | Ps. 196.3 | Ps. 51.0 | Includes continuing and discontinued operations |
| Cash provided by operating activities | Ps. 258.2 | Ps. 280.8 | Down Ps. 22.6 |
| Capital expenditures | Ps. 158.1 | Ps. 129.6 | Higher as investment recovered from pandemic-related constraints |
Operating costs and expenses declined 0.9% in reported pesos but rose 4.9% at constant exchange rates. Management attributed constant-currency cost pressure to network maintenance and infrastructure, leased sites, electricity, inflation and certain one-off items, including a write-off of uncollectible accounts. Commercial, administrative and general expenses were 21.1% of revenue, compared with 22.9% in 2020.
Year-end cash and cash equivalents were Ps. 38.7, compared with Ps. 35.9 a year earlier. Total assets were Ps. 1,689.6 and total equity Ps. 454.0. Total debt was Ps. 564.0, down from Ps. 628.4; short-term debt and current maturities were Ps. 145.2 and long-term debt Ps. 418.8. Management-reported net debt was Ps. 400.8, versus Ps. 537.8 in 2020; its definition deducts cash and specified investments, including Verizon shares in 2021. Lease liabilities were separately reported at Ps. 98.7. The weighted average cost of third-party debt was approximately 3.78%; 84.8% of debt was denominated in currencies other than pesos before derivatives, and 13.5% bore floating rates.
Management said working capital was sufficient for present requirements and expected operating cash generation to meet long-term liquidity needs. It reported undrawn revolving credit facilities at year-end and compliance with financial covenants. Debt and contractual obligations due in 2022 were approximately Ps. 180.6, including principal and amortization, lease debt and purchase obligations.
Material changes and notable items
- TracFone sale: Completed November 23, 2021. América Móvil received US$3.6257 billion in cash and 57,596,544 Verizon shares, valued at about US$2.968 billion at closing. The reported discontinued-operations result includes a Ps. 106.5 billion disposal gain. Verizon asserted post-closing claims that could require payments. Additional consideration of up to US$650 million is described as contingent/deferred; the filing says the earn-out was not recognized because realization was not considered virtually certain.
- Foreign exchange and derivatives: The company recorded a Ps. 17.0 billion net foreign-exchange loss in 2021, compared with Ps. 65.4 billion in 2020. Derivative valuation, labor-obligation interest and other financial items were a net loss of Ps. 14.3 billion, versus a net gain of Ps. 1.3 billion.
- Portfolio actions: Shareholders approved a spin-off of certain Latin American towers and passive infrastructure outside Mexico, subject to conditions and approvals. The company also agreed to sell Claro Panama for US$200 million, subject to closing conditions, and announced a proposed 50:50 joint venture combining Claro Chile and VTR, subject to regulatory approval. The Oi mobile-business acquisition in Brazil closed on April 20, 2022, after the reporting date.
- Capital returns: The 2021 dividend declared was Ps. 0.40 per share; Ps. 27.8 billion was paid during the year. Share repurchases were Ps. 36.8 billion, versus Ps. 5.2 billion in 2020. Shareholders approved a Ps. 0.44-per-share dividend for 2022.
Outlook, commentary and risks
- Management budgeted 2022 capital expenditures of approximately US$8.7 billion, or Ps. 180.8 billion, primarily funded from operating activities. It expected investment to return to pre-pandemic levels. Telcel launched 5G in 18 Mexican cities in February 2022, with a stated target of 120 cities by year-end.
- Management cited ongoing growth in data demand and continued focus on cost control, but also intense competition, price pressure, declining voice demand, inflation and foreign-exchange volatility. It expected handset and other input-supply pressures and cost inflation to continue into 2022.
- COVID-19 measures in 2021 disrupted shops, customer-care centers, mobility and handset supply. The duration and financial effects of the pandemic remained uncertain.
- Material exposures include extensive asymmetric telecom regulation in Mexico, spectrum availability and license renewals, litigation and significant tax assessments, currency and interest-rate risk, cybersecurity and service outages, and economic and political conditions across operating countries. The company disclosed significant contested tax assessments, especially in Brazil, Mexico and Colombia; outcomes and potential losses are uncertain.
- The audited IFRS financial statements received an unqualified audit opinion. Management and the auditor reported effective internal control over financial reporting as of year-end.
Investor verification points
- Separate recurring continuing-operations performance from TracFone’s disposal gain and other discontinued-operation results when assessing 2021 earnings.
- Confirm the composition and realization of TracFone proceeds, Verizon shares, contingent/deferred consideration, and any post-closing claims or indemnities.
- Review the definition of net debt, the treatment of investments and leases, foreign-currency exposures, and the 2022 maturity and refinancing schedule.
- Track the 2022 capex plan and its funding, along with execution and returns from 5G investment and network expansion.
- Monitor conditions and approvals for the tower spin-off, Panama sale and Chile joint venture, and the integration and economics of the Oi transaction.
- Review the status, provisions and possible cash or collateral requirements for material tax, regulatory and legal proceedings.
- Compare constant-currency operating trends with reported-peso results, given exchange-rate effects and Argentina’s hyperinflation accounting.