Business Context and Reporting Period
Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter ended March 31, 2018
Announcement Date: April 24, 2018
América Móvil is a leading telecommunications provider in Latin America and the United States. The company reported strong subscriber growth in postpaid wireless segments, particularly in Brazil and Mexico, alongside the launch of 4.5G networks in several key markets. The quarter was significantly influenced by the appreciation of the Mexican peso against other currencies.
Key Financial Metrics
| Metric | 1Q 2018 | 1Q 2017 | YoY Change |
|---|---|---|---|
| Total Revenues (MXN) | 254.4 billion | 264.2 billion | -3.7% |
| Total Revenues (Constant FX) | +2.8% | ||
| EBITDA (MXN) | 71.2 billion | 71.8 billion | -0.8% |
| EBITDA Margin | 28.0% | 27.2% | +0.8 pts |
| Net Income (MXN) | 17.7 billion | 35.9 billion | -50.5% |
| Earnings Per Share (MXN) | 0.27 | 0.55 | -50.9% |
| Net Debt (MXN) | 614.1 billion | 614.5 billion (Dec '17) | Flat |
| Capital Expenditures (MXN) | 24.0 billion | N/A |
Material Changes vs. Prior Period
- Currency Impact: Reported revenue declined 3.7% in MXN terms due to the appreciation of the Mexican peso. At constant exchange rates, revenues actually increased 2.8%.
- Subscriber Growth: Added 1.4 million postpaid wireless subscribers (double the prior year), with 935k in Brazil and 181k in Mexico. Total postpaid base grew 7.4% YoY.
- Fixed Broadband: Gained 427k fixed-broadband clients, ending the quarter with 28.6 million accesses (+4.8% YoY).
- Profitability: EBITDA margin reached 28.0%, the highest in ten quarters. Net income dropped significantly year-over-year, primarily due to a reduction in foreign exchange gains compared to the prior year (which included a large FX gain in 1Q17).
- Regional Performance:
- Mexico: Top performer with service revenue growth accelerating to 6.3% and mobile revenues up 12.8%.
- Brazil: Postpaid base up 14.9%; mobile ARPU up 10.7%.
- Puerto Rico: EBITDA margin improved sequentially from -3.5% to 9.5% as operations normalize post-hurricane.
- USA (Tracfone): Subscriber base declined 8.0% YoY due to SafeLink disconnections, though ARPU rose 7.3%.
Guidance, Outlook, and Risks
- Technology Rollout: Launched 4.5G networks in Brazil, Mexico, Austria, and Dominican Republic, with plans to expand to other countries in 2018.
- Regulatory Risk (Mexico): The Instituto Federal de Telecomunicaciones (IFT) mandated the legal and functional separation of wholesale regulated fixed services by Telmex. The company has two years to implement this and has challenged the resolution, though the process has begun.
- Shareholder Returns: Shareholders approved a dividend of MXN$0.32 per share (payable in July and November) and a share buyback reserve of 3 billion pesos for the April 2018–April 2019 period.
- Accounting Contingency: Net debt figures were impacted by the repayment of 600 million euros in hybrid bonds by Telekom Austria. Accounting rules required this to be treated as new debt rather than equity reduction, increasing reported net debt by approximately 13.6 billion pesos.
Investor Verification Checklist
- Verify the impact of the Mexican peso appreciation on consolidated revenue and EBITDA figures versus constant currency performance.
- Confirm the timeline and financial implications of the IFT-mandated separation of Telmex wholesale services in Mexico.
- Review the sustainability of postpaid subscriber growth in Brazil and Mexico amidst competitive pressures.
- Assess the recovery trajectory of Puerto Rico operations and the remaining reliance on diesel power for base stations.
- Monitor the execution of the 3 billion peso share buyback program and dividend payments.