Business Context and Reporting Period
This Form 6-K filing, dated September 22, 2022, contains an Information Statement regarding the spin-off of Sitios Latinoamérica, S.A.B. de C.V. (Sitios) from América Móvil, S.A.B. de C.V. (AMX). The transaction involves the distribution of Sitios shares to AMX shareholders via a corporate split-up (escisión). Sitios will operate as an independent public company focused on building, installing, maintaining, and commercializing passive telecommunications infrastructure (towers and support structures) across 14 Latin American countries. The distribution is scheduled for September 29, 2022, with one Sitios share issued for every 20 AMX shares held.
Key Financial Metrics (Pro Forma)
The filing provides unaudited pro forma financial statements for Sitios, reflecting the company as if the spin-off had occurred on January 1, 2021. All figures are in millions of Mexican Pesos (MXN) unless otherwise noted.
Balance Sheet Highlights (As of June 30, 2022)
| Item | Amount (MXN Millions) |
|---|---|
| Total Assets | 93,416 |
| Property and Equipment, Net | 63,469 |
| Right-of-Use Assets | 14,333 |
| Total Liabilities | 93,251 |
| Long-term Debt | 42,275 |
| Short-term Debt | 16,624 |
| Stockholders' Equity | 165 |
Income Statement Highlights (Six Months Ended June 30, 2022)
| Item | Amount (MXN Millions) |
|---|---|
| Total Operating Income | 6,317 |
| Operating Costs and Expenses | 4,319 |
| Operating Income | 1,998 |
| Net Interest Expense | (1,605) |
| Net Gain for the Period | 773 |
| EBITDAaL (Non-GAAP) | 2,916 |
Note: EBITDAaL is defined as Earnings Before Interest, Taxes, Depreciation, and Amortization, less income received from leases of real estate where the Passive Infrastructure is located.
Material Changes and Comparisons
- Revenue Growth: Operating income for the six months ended June 30, 2022, increased by 7.8% to MXN 6,317 million compared to MXN 5,860 million in the same period of 2021, primarily driven by annual inflation adjustments.
- Profitability: Operating income decreased slightly by 1.3% to MXN 1,998 million (from MXN 1,972 million in 2021) due to higher operating costs offsetting revenue gains. However, net gain improved significantly to MXN 773 million from a net loss of MXN 35 million in the prior year period.
- Cost Structure: Operating costs rose 11.1% to MXN 4,319 million, largely due to increased maintenance costs and depreciation of rights-of-use assets.
- Debt Profile: Sitios assumes significant debt obligations, including a US$450 million loan and a MXN 20.56 billion loan, with covenants limiting dividend distributions for the first three years of the term.
Guidance, Outlook, and Risks
Management Commentary and Outlook: Management expects Sitios to become a leading infrastructure platform in Latin America with a portfolio of approximately 29,090 towers. The company anticipates generating an approximate potential EBITDAaL of MXN 2,916 million with a margin of 79.0% over site lease revenues based on pro forma estimates as of December 30, 2022. Sitios plans to build approximately 900 new sites by the end of 2022.
Key Risks and Contingencies:
- Tax Uncertainty: While the spin-off is not taxable for Mexican federal income tax purposes, the U.S. federal income tax consequences are subject to significant uncertainty and are expected to be taxable for U.S. holders.
- Customer Concentration: Sitios is heavily dependent on AMX as its principal customer. A termination of this relationship or a decision by AMX to develop its own infrastructure could materially affect revenues.
- Real Estate Rights: Sitios does not own the land for most of its towers; it relies on long-term leases. Failure to renew these leases or disputes with landlords could disrupt operations.
- PFIC Status: Sitios may be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, which could subject U.S. holders to adverse tax consequences.
- Liquidity: There is currently no public market for Sitios shares, and liquidity may be limited upon listing on the Mexican Stock Exchange.
Important Facts for Investor Verification
- Distribution Ratio: Verify the entitlement of one Sitios Series B-1 share for every 20 AMX shares held as of the record date.
- ADS Procedures: ADS holders must make a valid "Share Delivery Election" by November 7, 2022, to receive Sitios shares directly; otherwise, the Depositary will sell the shares and distribute cash proceeds.
- Debt Covenants: Confirm the impact of debt covenants that restrict dividend distributions for the first three years of the loan term.
- Tax Treatment: Consult tax advisors regarding the specific U.S. and Mexican tax implications of the spin-off, particularly the potential for the transaction to be treated as a taxable dividend.
- Pro Forma Nature: Recognize that the financial data presented is pro forma and illustrative, not a guarantee of future results as an independent entity.