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: Year ended December 31, 2015 (Unaudited Preliminary)
Filing Date: March 7, 2016
América Móvil is the leading telecommunications service provider in Latin America, operating in 25 countries or territories. Its largest operations are in Mexico and Brazil, with significant presence in the Americas and Central/Eastern Europe. As of December 31, 2015, the company reported 285.5 million wireless subscribers and 80.8 million fixed Revenue Generating Units (RGUs). The report includes preliminary unaudited financial data for 2015, noting that the independent audit is not yet complete.
Key Financial Metrics
| Metric | 2014 (Audited) | 2015 (Unaudited Preliminary) | Change |
|---|---|---|---|
| Total Operating Revenues | Ps. 848.3 billion | Ps. 894.2 billion | +5.4% |
| Operating Income | Ps. 156.6 billion | Ps. 141.5 billion | -9.6% |
| Operating Margin | 18.5% | 15.8% | -2.7 pts |
| Net Profit (Period) | Ps. 47.5 billion | Ps. 37.0 billion | -22.2% |
| Net Profit (Parent Equity) | Ps. 46.1 billion | Ps. 35.1 billion | -24.0% |
| Total Assets | Ps. 1,278.4 billion | Ps. 1,296.5 billion | +1.4% |
| Total Liabilities | Ps. 1,043.7 billion | Ps. 1,135.6 billion | +8.8% |
| Long-term Debt | Ps. 545.9 billion | Ps. 564.5 billion | +3.4% |
| Net Debt | Ps. 537.3 billion | Ps. 581.7 billion | +8.3% |
Note: Currency is Mexican Pesos (Ps.). U.S. dollar equivalents are provided in the source text for convenience (e.g., 2015 Net Profit ~$2.1 billion).
Material Changes vs. Prior Period
- Revenue Growth Drivers: Total revenues increased 5.4% (6.0% at constant exchange rates). Growth was driven by a 20.6% increase in wireless data services and a 7.5% increase in fixed data services. This was partially offset by declines in wireless voice (-4.7%) and fixed voice (-8.7%) revenues due to regulatory changes and traffic shifts.
- Profitability Decline: Operating income fell 9.6% and net profit dropped 22.2%. The decline in operating margin (from 18.5% to 15.8%) was attributed to higher subscriber acquisition costs, network maintenance, and the consolidation of Telekom Austria (which has lower margins).
- Foreign Exchange Impact: The company recorded a net foreign currency exchange loss of Ps. 79.0 billion in 2015, compared to Ps. 28.6 billion in 2014. This was primarily due to the appreciation of the U.S. dollar against the Mexican peso and other operating currencies.
- Segment Performance:
- Mexico Wireless: Revenues up 4.7%, but operating income down 3.7% due to regulatory changes (elimination of roaming/termination charges).
- Brazil: Revenues down 12.9% (up 1.8% at constant rates) due to currency effects; operating income down 14.1%.
- Central America: Significant improvement with operating income increasing 924.6% due to cost efficiencies and network expansion.
- Europe: Consolidation of Telekom Austria (from July 2014) impacted comparability.
Guidance, Outlook, and Recent Developments
- Recent Developments:
- Telesites Spin-Off: Completed in October 2015. Assets (Ps. 4.9 billion) and debt (Ps. 21.0 billion) were transferred, resulting in a net gain of Ps. 16.2 billion recognized in equity.
- Spectrum Auction: In February 2016, subsidiary Telcel was awarded 20 MHz in AWS-1 and 40 MHz in AWS-3 bands, paying Ps. 2.1 billion plus fees.
- Regulatory Actions: Telmex faced administrative proceedings by the Mexican IFT regarding television concessions and paid a fine of Ps. 698.5 million for alleged monopolistic practices in the dedicated-link leasing market.
- Liquidity and Capital:
- Capital expenditures in 2015 were approximately Ps. 151.6 billion, focused on 4G/LTE technology and network capacity.
- Dividends paid totaled Ps. 37.4 billion.
- Share repurchases totaled Ps. 34.4 billion (2,147 million Series L shares and 2.6 million Series A shares).
- Net debt increased to Ps. 581.7 billion. Approximately 87.4% of indebtedness is denominated in non-Mexican peso currencies.
- Risks and Contingencies:
- Forward-Looking Statements: The filing cautions that actual results may differ due to economic conditions, exchange rates, regulatory developments, and competition.
- Currency Risk: Significant exposure to exchange rate fluctuations, particularly the U.S. dollar, impacting debt servicing and reported earnings.
- Regulatory Risk: Ongoing proceedings with the IFT and antitrust commissions in Mexico.
Investor Verification Checklist
- Audit Status: Verify the final audited 2015 financial statements, as the current figures are preliminary and unaudited.
- Exchange Rate Sensitivity: Assess the impact of the Mexican peso's depreciation (Ps. 17.2065 in Dec 2015 to Ps. 18.1850 in Feb 2016) on future debt service and reported earnings.
- Regulatory Outcomes: Monitor the resolution of IFT proceedings against Telmex and the finalization of spectrum concession requirements for Telcel.
- Segment Margins: Review the sustainability of margin compression in key markets like Mexico and Brazil versus the recovery in Central America.
- Debt Maturity Profile: Confirm the company's ability to service Ps. 564.5 billion in long-term debt, noting that 87.4% is in foreign currencies.