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: Fourth Quarter 2019 (ended December 31, 2019)
Filing Date: February 13, 2020
Accounting Standard: IFRS 16 (implemented January 1, 2019)
América Móvil is a leading telecommunications provider operating across Latin America, the United States, and Europe. The company reported strong growth in mobile postpaid subscribers and fixed-broadband connections, offset by declines in prepaid and fixed-voice segments. A significant strategic event was the completion of the acquisition of Nextel Brazil in December 2019.
Key Financial Metrics
| Metric | 4Q 2019 | 4Q 2018 | YoY Change |
|---|---|---|---|
| Total Revenues (MXN Billion) | 263.2 | 263.3 | 0.0% |
| Service Revenues (MXN Billion) | 209.1 | 213.7 | -2.2% |
| EBITDA (MXN Billion) | 81.7 | 71.8 | 13.9% |
| EBITDA Margin | 31.1% | 27.3% | +380 bps |
| Operating Profit (EBIT) (MXN Billion) | 44.6 | 35.9 | 24.3% |
| Net Income (MXN Billion) | 21.2 | 13.0 | 63.4% |
| Earnings Per Share (MXN) | 0.32 | 0.20 | 60.0% |
| Net Debt (MXN Billion) | 677.0 | 684.2 | -1.1% |
| Net Debt / EBITDA (x) | 1.95 | N/A | - |
Note: Comparisons are impacted by the transition from IAS 17 to IFRS 16. At constant exchange rates (excluding Argentina), service revenues grew 3.2% and organic EBITDA grew 7.6%.
Material Changes vs. Prior Period
- Subscriber Growth: Added 1.9 million mobile postpaid subscribers in 4Q19 (1.2M in Brazil, 242k in Mexico, 101k in Colombia). Total wireless subscribers reached 278 million. Fixed-broadband clients increased by 181,000.
- Revenue Dynamics: Reported revenues were flat year-over-year in MXN terms due to the appreciation of the Mexican peso against operating currencies (Brazilian Real, Colombian Peso, Chilean Peso). However, organic service revenue growth accelerated to 3.2% at constant exchange rates.
- Profitability Surge: Net income increased 63.4% to 21.2 billion pesos, driven by operating leverage, cost reductions, and a significant reduction in foreign exchange losses (turning a 16.0 billion peso loss in 4Q18 into a 1.7 billion peso gain in 4Q19).
- Acquisition: Completed the acquisition of 100% of Nextel Brazil for 24.9 billion pesos, adding approximately 3.5 million subscribers and strengthening market position in São Paulo and Rio de Janeiro.
Outlook, Risks, and Contingencies
- Regulatory Risk (Mexico): On January 27, 2020, subsidiary Telnor was fined 1.3 billion pesos by the Mexican regulator (IFT) regarding passive infrastructure availability. The company disputes the fine as arbitrary and illegal and intends to exercise all legal remedies.
- Argentina Inflation: Financial results for Argentina are presented under IAS 29 (inflation-adjusted accounting) due to hyperinflation. Comparisons exclude Argentina to ensure consistency.
- 5G Deployment: Launched the first 5G network in Austria in January 2020 with a premium tariff portfolio.
- Capital Allocation: Shareholder distributions totaled 22.9 billion pesos (mostly dividends). Pension obligations were reduced by 20.2 billion pesos.
Investor Verification Checklist
- IFRS 16 Impact: Verify the reconciliation between IAS 17 and IFRS 16 figures to understand the true organic growth in EBITDA and Net Debt, as the accounting change significantly altered reported leverage and depreciation.
- Currency Exposure: Assess the sensitivity of future earnings to the Mexican peso's strength against the Brazilian Real and other Latin American currencies, which masked underlying revenue growth in the reported period.
- Nextel Brazil Integration: Monitor the integration progress and synergies from the Nextel Brazil acquisition, specifically regarding the 3.5 million added subscribers.
- Regulatory Proceedings: Track the outcome of the legal challenge against the 1.3 billion peso fine imposed by the IFT in Mexico.
- Argentina Operations: Review the specific inflation-adjusted performance of the Argentina subsidiary separately, as it is excluded from consolidated constant currency comparisons.