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: Third Quarter ended September 30, 2014
Key Context: Results include the pro-forma consolidation of Telekom Austria Group (effective July 1, 2014). The company operates across Latin America, the United States (TracFone), and Europe (Telekom Austria).
Key Financial Metrics
| Metric | 3Q 2014 | 3Q 2013 | YoY Change |
|---|---|---|---|
| Total Revenues (MXN) | 220.9 billion | 212.3 billion | +4.0% |
| Service Revenues (MXN) | 198.6 billion | 191.4 billion | +3.8% |
| EBITDA (MXN) | 69.2 billion | 68.9 billion | +0.4% |
| EBITDA Margin | 31.3% | 32.5% | -1.2 pts |
| Operating Profit (EBIT) (MXN) | 37.6 billion | 39.8 billion | -5.5% |
| Net Income (MXN) | 10.1 billion | 16.7 billion | -39.3% |
| EPS (MXN) | 0.15 | 0.23 | -37.0% |
| Net Debt (MXN) | 490.6 billion | 521.3 billion* | -30.7 billion reduction |
| Net Debt / EBITDA | 1.63x | N/A | N/A |
*Net debt calculated as prior period debt minus 30.7 billion reduction stated in text.
Material Changes vs. Prior Period
- Subscriber Growth: Total accesses reached 364.4 million (+1.8% pro-forma YoY). Wireless subscribers totaled 286.8 million. Postpaid subscribers grew 5.6% YoY, while PayTV and broadband accesses rose 12.2% and 8.5% respectively.
- Profitability Pressure: Net income declined 39.3% YoY, primarily driven by a 41.1% increase in income and deferred taxes and higher depreciation/amortization charges (+8.4%).
- Consolidation Impact: The inclusion of Telekom Austria (24.3 million accesses) significantly boosted reported revenue and subscriber counts. On a constant exchange rate basis, service revenues grew 4.7% and EBITDA grew 6.3%.
- Debt Reduction: Strong cash flow allowed the company to reduce net debt by 30.7 billion pesos, fund 34 billion pesos in shareholder distributions, and cover 82.0 billion pesos in capital expenditures.
Outlook, Risks, and Management Commentary
- Regulatory Risks (Mexico): Mobile voice revenues in Mexico declined 5.5% due to regulatory measures, including a zero interconnection rate for Telcel and the elimination of national roaming charges.
- Strategic Acquisitions: The tender offer for Telekom Austria expired with América Móvil holding a 59.70% stake. The company is consolidating results from July 1st.
- Spectrum & Infrastructure: Claro Brazil secured 20MHz of 700MHz spectrum nationwide for 4G-LTE deployment. The company continues to invest in 4G expansion in Peru and rural internet access in Ecuador.
- Operational Adjustments: In Central America and the Caribbean, the company disconnected 858,000 low-traffic prepaid subscribers to unify churn policies, resulting in a reported 14.2% drop in total wireless subscribers in that region, though postpaid growth remained positive.
- Forward-Looking Statements: Management notes that actual results may differ due to economic weakness in Europe and Latin America, currency realignments, and regulatory changes.
Investor Verification Checklist
- Pro-Forma Adjustments: Verify the specific impact of Telekom Austria consolidation on year-over-year comparisons, as the filing uses pro-forma data for 2013 to facilitate comparison.
- Tax Impact: Investigate the drivers behind the 41.1% increase in income and deferred taxes, which was the primary cause of the 39.3% drop in net income.
- Regulatory Exposure: Assess the long-term revenue impact of the zero interconnection rate and roaming charge eliminations in Mexico.
- Subscriber Quality: Review the rationale and financial impact of disconnecting 858,000 subscribers in Central America/Caribbean to improve churn metrics.
- Currency Sensitivity: Monitor exchange rate fluctuations, particularly in Argentina and Brazil, given the significant exposure to local currencies.