Business Context and Reporting Period
Company: América Móvil, S.A.B. de C.V. (AMX)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six months ended June 30, 2015
Submission Date: September 29, 2015
Business Overview: AMX provides telecommunications services (mobile/fixed voice, data, internet, paid TV) across 25 countries in Latin America, the U.S., and the Caribbean. The company operates through segments including Mexico (Telcel and Telmex), Brazil, Southern Cone, Andean, Central America, U.S., Caribbean, and Europe.
Key Financial Metrics
All figures in thousands of Mexican Pesos (Ps.) unless otherwise noted.
| Metric | Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 |
|---|---|---|
| Operating Revenues | 440,035,222 | 398,073,655 |
| Operating Income | 74,059,640 | 78,971,817 |
| Net Profit (Period) | 22,941,337 | 32,906,093 |
| Net Profit Attributable to Parent | 22,275,505 | 32,719,647 |
| Earnings Per Share (Basic/Diluted) | Ps. 0.33 | Ps. 0.47 |
| Operating Cash Flow | 72,989,457 | 102,434,325 |
| Total Debt | 662,660,897 | 603,754,987 |
| Cash and Cash Equivalents | 118,609,986 | 94,126,626 |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased by approximately 10.5% (Ps. 41.9 billion) compared to the prior year, driven primarily by growth in mobile data services (up 28.2%) and fixed data services (up 14.7%).
- Profit Decline: Net profit attributable to equity holders of the parent decreased by 31.9% (Ps. 10.4 billion). This decline was significantly impacted by a foreign currency exchange loss of Ps. 30.8 billion in 2015, compared to a gain of Ps. 3.2 billion in 2014.
- Investment Strategy Shift: The carrying value of investments in associated companies (primarily KPN) decreased by Ps. 46.1 billion. The company reclassified Ps. 39.5 billion of KPN shares as "available for sale" to facilitate a divestiture strategy via exchangeable bonds.
- Debt Expansion: Total debt increased by Ps. 58.9 billion to Ps. 662.7 billion, reflecting new borrowings and currency translation effects. The weighted average cost of borrowed funds decreased slightly to 4.2% from 4.7%.
- Shareholder Returns: The company paid dividends totaling Ps. 38.1 billion and repurchased shares for Ps. 22.1 billion during the period.
Guidance, Outlook, and Risks
- Divestiture of KPN Stake: AMX is actively reducing its stake in Koninklijke KPN N.V. (KPN). In May 2015, it issued €3.0 billion in exchangeable bonds. In September 2015 (subsequent event), it issued an additional €750 million in exchangeable bonds. The remaining stake in KPN was approximately 1.54% as of the reporting date.
- Capital Allocation: Shareholders approved an increase in funds available for share repurchases by Ps. 35 billion. The company continues to prioritize debt reduction and shareholder returns.
- Foreign Exchange Risk: The company faces significant volatility due to operations in multiple currencies. The Ps. 30.8 billion foreign currency loss in the first half of 2015 highlights this risk.
- Regulatory and Contingencies: No material changes in legal contingencies were reported since the 2014 Form 20-F. The company remains in compliance with financial covenants, including a debt-to-EBITDA ratio not exceeding 4:1.
- Accounting Standards: The company is assessing the impact of new standards including IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers), effective 2018.
Investor Verification Checklist
- FX Impact: Verify the sensitivity of future earnings to Mexican Peso fluctuations, given the Ps. 30.8 billion loss in H1 2015.
- KPN Divestiture Progress: Monitor the execution of the exchangeable bond strategy and the timeline for fully exiting the KPN investment.
- Debt Maturity Profile: Review the schedule of debt maturities, noting Ps. 46.9 billion due in 2016 and Ps. 43.1 billion in 2017.
- Segment Performance: Analyze the divergence between revenue growth and operating income, specifically in the Brazil segment which reported a net loss of Ps. 7.2 billion.
- Cash Flow Sustainability: Assess the ability to maintain high dividend payouts and share buybacks while funding capital expenditures (Ps. 51.1 billion in H1 2015) and debt service.