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, 2013
Business Overview: América Móvil is a leading telecommunications provider operating primarily in Latin America and the United States. The company offers wireless, fixed-line, broadband, and PayTV services. As of September 30, 2013, the company reported 265.1 million wireless subscribers and 68.3 million fixed-line Revenue Generating Units (RGUs).
Key Financial Metrics
| Metric | 3Q 2013 | 3Q 2012 | Year-Over-Year Change |
|---|---|---|---|
| Total Revenues | 194.2 billion MXN | 192.8 billion MXN | +0.7% (+7.5% at constant exchange rates) |
| EBITDA | 63.3 billion MXN | 67.2 billion MXN | -5.8% (-0.5% at constant exchange rates) |
| EBITDA Margin | 32.6% | 34.8% | -220 bps |
| Net Income | 16.4 billion MXN | 30.5 billion MXN | -46.2% |
| Earnings Per Share (EPS) | 0.23 MXN | 0.40 MXN | -42.9% |
| Net Debt | 440.2 billion MXN | 372.2 billion MXN (Dec 2012) | +68.0 billion MXN increase |
| Net Debt / EBITDA (LTM) | 1.66x | N/A | N/A |
| Capital Expenditures | 78.7 billion MXN | N/A | N/A |
Material Changes vs. Prior Period
- Subscriber Growth: Added 3.1 million net wireless subscribers in the quarter, reaching 265.1 million total. Postpaid base grew 11.3% year-over-year to 41.5 million. Brazil led additions with 960,000 new subscribers.
- Revenue Mix: Mobile data and PayTV revenues grew dynamically at 22.4% and 21.7% respectively. Conversely, voice revenues declined on both mobile and fixed-line platforms.
- Profitability Decline: Net income dropped significantly (-46.2%) primarily due to a foreign exchange loss of 2.9 billion MXN (compared to a gain of 9.0 billion MXN in the prior year) and a loss contribution from the KPN affiliate.
- Regional Performance:
- South America: Service revenues rose 8.9%, the best performance in six quarters.
- Mexico: Service revenues declined 2.1% due to weak economic activity.
- Central America/Caribbean: Service revenues grew 4.9%.
- Debt Increase: Net debt increased by 68.0 billion MXN from December 2012 to fund capital expenditures, acquisitions, share buybacks (58.3 billion MXN), and dividends.
Guidance, Outlook, and Risks
- KPN Tender Offer: The company announced it would not complete its voluntary tender offer for KPN (Netherlands) because the KPN Foundation exercised its option to purchase 50% of the shares, making it impossible to meet the condition of acquiring 50% plus one share. This resulted in a loss contribution of 1.2 billion MXN to net income.
- Debt Issuance: In September 2013, the company issued hybrid notes (2.8 billion USD equivalent) and floating rate notes (750 million USD) to manage liquidity and funding needs.
- Economic Risks: Management cited the weak state of the Mexican economy, characterized by a shortfall in government expenditures and lack of liquidity, as a constraint on private sector spending and revenue growth in Mexico.
- Operational Risks: EBITDA margins in Brazil and Chile faced pressure from increased interconnection costs, site leasing costs, and higher customer acquisition costs for data-capable devices.
Key Facts for Investor Verification
- Foreign Exchange Impact: Verify the sensitivity of future earnings to currency fluctuations, as a 2.9 billion MXN FX loss significantly impacted Q3 net income compared to the prior year's gain.
- KPN Exposure: Confirm the ongoing financial impact of the KPN investment and the status of the equity method accounting given the failed tender offer.
- Mexico Economic Headwinds: Monitor the recovery of the Mexican economy and its effect on service revenue growth, which declined 2.1% in Q3.
- Debt Servicing: Review the company's ability to service increased debt levels (Net Debt/EBITDA of 1.66x) amidst ongoing capital expenditure requirements for network expansion.
- Margin Compression: Assess the sustainability of EBITDA margins (32.6%) given rising costs for customer acquisition and infrastructure leasing in key markets like Brazil and Chile.