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: Second Quarter ended June 30, 2017
Business Overview: América Móvil is a leading telecommunications provider operating primarily in Latin America, the United States, and Europe. The company provides wireless, fixed-line, broadband, and Pay TV services through brands including Telcel, Claro, and Tracfone.
Key Financial Metrics
| Metric | 2Q 2017 | 2Q 2016 | YoY Change |
|---|---|---|---|
| Total Revenues | MXN 249.4 billion | MXN 233.4 billion | +6.9% |
| Service Revenues | MXN 215.9 billion | MXN 199.8 billion | +8.1% |
| EBITDA | MXN 69.4 billion | MXN 61.0 billion | +13.7% |
| EBITDA Margin | 27.8% | 26.1% | +1.7 pp |
| Operating Profit (EBIT) | MXN 31.2 billion | MXN 25.8 billion | +21.0% |
| Net Income | MXN 14.3 billion | MXN 7.7 billion | +86.0% |
| Net Debt | MXN 550.8 billion | MXN 629.7 billion (Dec '16) | -12.5% (vs Dec '16) |
| Net Debt / EBITDA | 1.9x | N/A | N/A |
| Capital Expenditures (H1) | MXN 51.0 billion | N/A | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 6.9% year-over-year. At constant exchange rates, service revenues grew 4.2%, the best performance in ten quarters, driven by a 21.8% increase in mobile data revenues.
- Profitability Surge: Net income jumped 86% to MXN 14.3 billion, aided by a significant reduction in foreign exchange losses (down 84.2% YoY) and improved operating margins.
- Debt Reduction: The company reduced net debt by MXN 27.0 billion in cash flow terms during the quarter, bringing the total down to MXN 550.8 billion. This was driven by debt paydowns and the appreciation of the Mexican peso against other currencies.
- Subscriber Dynamics:
- Wireless: Total wireless subscribers declined 1.0% YoY to 280 million, primarily due to prepaid disconnections. However, the postpaid segment grew 5.1% YoY with 565,000 net additions.
- Fixed-Line: Broadband accesses increased 5.7% YoY, while Pay TV units declined 0.8% due to 278,000 disconnections.
Guidance, Outlook, and Material Events
- Management Commentary: Management highlighted that financial volatility in Latin America has subdued. The appreciation of the Mexican peso positively impacted reported figures, while the Brazilian real, Colombian peso, and Argentine peso depreciated against the dollar.
- Strategic Transactions:
- Advertising JV: Announced a joint venture with JCDecaux for out-of-home advertising in Mexico. JCDecaux will own 60%, and América Móvil 40%. Closing is expected later in 2017 pending regulatory approval.
- Spectrum Acquisition: Subsidiary Telcel acquired rights to use approximately 60 MHz of spectrum in the 2.5 GHz band in Mexico.
- Dividends: The 2016 dividend of MXN 0.30 per share was paid in two installments. The first partial payment of MXN 0.15 was made on July 17, 2017, totaling MXN 4.9 billion in cash and 325.3 million Series L shares.
- Risks: Currency fluctuations remain a key variable, with depreciation in key operating currencies (Brazil, Argentina, Colombia) offsetting the strength of the Mexican peso. Regulatory approvals for the JCDecaux transaction are pending.
Investor Verification Checklist
- Currency Impact: Verify the extent to which revenue and EBITDA growth is driven by the appreciation of the Mexican peso versus organic operational growth (constant currency metrics show lower growth rates).
- Pay TV Churn: Investigate the reasons behind the 278,000 Pay TV disconnections and the 0.8% annual decline in the subscriber base.
- Prepaid vs. Postpaid Mix: Monitor the shift in subscriber mix; while postpaid is growing, the overall wireless base is shrinking due to prepaid churn, which may impact long-term ARPU stability.
- Debt Servicing: Confirm the sustainability of the debt reduction trajectory given the high absolute level of net debt (MXN 550.8 billion) and interest expenses.
- Regulatory Approval: Track the status of the Mexican Federal Competition Commission's approval for the JCDecaux joint venture.