Business Context and Reporting Period
Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 6-K (Report of a Foreign Private Issuer)
Reporting Period: Third Quarter 2020 (Ended September 30, 2020)
Announcement Date: October 20, 2020
América Móvil reported a rebound in commercial activity across most regions as confinement measures were lifted. The company operates in 25 countries, primarily in Latin America, with significant holdings in Mexico, Brazil, Colombia, and the United States (TracFone).
Key Financial Metrics (3Q20)
| Metric | Value (Mex$) | YoY Change |
|---|---|---|
| Total Revenues | 260.2 billion | +4.7% |
| Service Revenues | 216.1 billion | +5.4% |
| EBITDA | 86.5 billion | +10.1% |
| EBITDA Margin | 33.2% | +160 bps |
| Operating Profit (EBIT) | 45.1 billion | +18.4% |
| Net Income | 18.9 billion | +44.6% |
| Capital Expenditures | 91.0 billion | N/A |
| Net Debt (End of Period) | 726.0 billion | +7.2% (vs Dec 2019) |
| Net Debt / EBITDA | 1.88x | N/A |
Note: Net debt increased in peso terms primarily due to the depreciation of the Mexican peso against the U.S. dollar and Euro, despite a reduction of 47.0 billion pesos in net debt over the nine-month period.
Material Changes vs. Prior Period
- Subscriber Growth: Total wireless subscribers reached 281 million, with net additions of 3.2 million (1.8 million postpaid, 1.4 million prepaid). Fixed-broadband added 446,000 new accesses.
- Revenue Recovery: Service revenues grew 5.4% year-over-year. At constant exchange rates, service revenues increased 1.5%, accelerating from 0.8% in the prior quarter. Mobile service revenues grew 3.5% (constant currency), driven by a recovery in prepaid revenues (+2.5%) after a decline in Q2.
- Profitability: Operating profit jumped 18.4% to 45.1 billion pesos. Net income rose 45% to 18.9 billion pesos, despite financing costs increasing 82% year-over-year due to foreign exchange losses.
- Regional Performance:
- Colombia: The only operation with revenue growth on both mobile and fixed-line platforms.
- Brazil: Strong postpaid growth (+1.8 million subscribers) and mobile service revenue growth (+8.1%).
- Argentina: Revenues declined 9.6% in real terms due to inflation and price controls, though EBITDA margin remained stable at 41.6%.
- United States (TracFone): EBITDA surged 69.1% to $269 million, aided by reduced airtime costs.
Guidance, Outlook, and Material Events
- TracFone Sale: On September 14, 2020, América Móvil agreed to sell its 100% interest in TracFone Wireless to Verizon Communications for $6.25 billion (half cash, half stock), plus potential earn-outs. Closing is expected in 2021.
- Brazil Acquisition: Claro Brazil, along with Telefónica and TIM, submitted a binding offer of R$16.5 billion to acquire the mobile business of Oi Group.
- El Salvador Deal Termination: The agreement to purchase 99.3% of Telefónica Móviles El Salvador was terminated on September 3 due to regulatory conditions.
- Liquidity: The company established a €2.0 billion Euro Commercial Paper Program in August 2020.
- Outlook: Management noted a rebound in economic activity in most regions with reduced volatility compared to the prior two quarters, though the Brazilian real continued to deteriorate against the U.S. dollar.
- TracFone Transaction Status: Verify the closing timeline and regulatory approval status for the $6.25 billion sale to Verizon.
- Foreign Exchange Impact: Assess the sensitivity of consolidated results to the continued depreciation of the Mexican peso and Brazilian real.
- Argentina Inflation Accounting: Review the application of IAS 29 (hyperinflationary accounting) and its impact on reported revenue and EBITDA trends in Argentina.
- Debt Maturity Profile: Confirm the impact of the new Euro Commercial Paper program on the company's short-term liquidity and refinancing risks.
- Fixed-Line Churn: Monitor the trend of PayTV disconnections (243,000 in Q3) and fixed-line voice losses, which offset broadband growth in several markets.