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: First Quarter 2020 (Ended March 31, 2020)
Context: The quarter coincided with the onset of the global COVID-19 pandemic. While early Q1 results showed limited impact, operational trends shifted in mid-March as contingency measures and lockdowns were enforced across Latin America. The company reported strong consolidated results driven by mobile postpaid and fixed-broadband growth, though significant foreign exchange losses impacted net income.
Key Financial Metrics
| Metric | 1Q 2020 | 1Q 2019 | Change (YoY) |
|---|---|---|---|
| Total Revenues (Mex$) | 250.1 billion | 245.7 billion | +1.8% |
| Service Revenues (Constant FX) | 209.5 billion | 206.5 billion | +5.0% |
| EBITDA (Mex$) | 77.6 billion | 75.4 billion | +2.9% |
| EBITDA Margin | 31.0% | 30.7% | +30 bps |
| Operating Profit (EBIT) (Mex$) | 39.0 billion | 35.5 billion | +9.9% |
| Net Income (Mex$) | -29.4 billion | 19.6 billion | -250.3% |
| Net Debt (Mex$) | 817 billion | ~557 billion (Dec '19) | Increased |
| Net Debt / EBITDA (LTM) | 1.87x | N/A | N/A |
Note: Net debt increased primarily due to foreign exchange translation effects on hard currency debt. Cash flow from operations was up 24.6 billion pesos year-to-date.
Material Changes vs. Prior Period
- Subscriber Growth: Total wireless subscribers reached 283 million, incorporating 3.5 million from the Nextel acquisition in Brazil. Organic postpaid growth was 1.4 million (7.8% YoY), while prepaid declined 2.6% YoY.
- Revenue Drivers: Mobile postpaid revenue grew 13.6% and fixed-broadband revenue grew 7.8%. Prepaid service revenue expanded 3.9%.
- Net Loss: Despite a 9.9% increase in operating profit, the company reported a net loss of 29.4 billion pesos. This was driven by comprehensive financing costs of 79.6 billion pesos, primarily due to 93.3 billion pesos in foreign exchange losses from the devaluation of the Mexican peso and other Latin American currencies against the USD and Euro.
- Regional Performance:
- Mexico: Revenues up 8.8%; EBITDA up 11.9%.
- Brazil: Revenues up 3.2% (organic); EBITDA up 7.5% (proforma).
- Colombia: Revenues up 10.2%; EBITDA up 8.2%.
- Argentina: Revenues down 7.5% (constant peso); EBITDA down 15.0% due to bad debt provisions.
- USA (Tracfone): Revenues flat; EBITDA down 5.8% due to subsidies.
Guidance, Outlook, and Risks
- Pandemic Impact: Management states there is "no clarity" regarding the duration or magnitude of the pandemic's impact. While Q1 showed resilience, trends decelerated in March due to lockdowns. Fixed-broadband demand increased as a counter-trend to mobile store closures.
- Liquidity Strategy: The company has drawn on committed credit facilities to ensure debt service and preserve liquidity. It aims to protect cash flow by adjusting OpEx, CapEx, and working capital as needed.
- Dividends and Buybacks: Shareholders approved an ordinary dividend of MXP$0.38 per share (payable in two installments) and a share buyback program of MXP$6 billion for the period April 2020–April 2021.
- Risks: Significant exposure to foreign exchange fluctuations due to debt denominated in hard currencies (USD, EUR) versus revenue in local currencies. Increased bad debt provisions are expected in markets with severe economic contractions (e.g., Argentina, Peru).
Investor Verification Checklist
- Foreign Exchange Exposure: Verify the extent of hedging strategies against the 93 billion peso FX loss and the sustainability of net debt levels given currency volatility.
- Argentina Inflation Accounting: Confirm the impact of IAS29 (hyperinflationary accounting) on Argentina's reported figures and the consistency of comparisons.
- Bad Debt Provisions: Monitor future quarters for increased provisions in markets with strict lockdowns (Argentina, Peru, Ecuador) where collections have deteriorated.
- Nextel Integration: Assess the long-term organic growth contribution of the Nextel Brazil acquisition beyond the initial Q1 boost.
- CapEx Discipline: Track capital expenditure adjustments in response to the economic downturn and potential reduction in network investment.