AMX

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, 2012
Announcement Date: October 25, 2012

América Móvil is a leading telecommunications provider operating primarily in Latin America and the United States. The company reported financial and operating results for the third quarter of 2012, highlighting growth in wireless subscribers, fixed-line revenue generating units (RGUs), and service revenues driven by mobile data and PayTV.

Key Financial Metrics

Operational Highlights:

• Total Accesses: 318.7 million (up 7.0% year-over-year).
• Wireless Subscribers: 255.9 million (up 6.0% year-over-year; +4.1 million net adds in Q3).
• Fixed RGUs: 62.8 million (up 11.3% year-over-year).
• Capital Expenditures (YTD): 81.7 billion MXN.

Material Changes vs. Prior Period

Revenue Growth: Total revenues increased 4.5% in peso terms. At constant exchange rates, service revenues grew 6.1%, driven by mobile data (+35.3%) and PayTV (+21.0%). Fixed-line voice revenues declined 7.2%, though the decline slowed compared to the prior quarter.

Profitability Surge: Net income more than doubled compared to the prior quarter and rose 67% year-over-year. This sharp increase was primarily driven by a foreign exchange gain of 9.0 billion pesos in the quarter, contrasting with a 16.1 billion peso loss in the prior quarter. Operating profit (EBIT) remained nearly flat at 40.8 billion pesos.

Subscriber Dynamics:

• Postpaid Growth: Nearly one million new postpaid clients were added in Q3. Postpaid growth was particularly strong in Mexico (+11.0% net adds vs prior year) and Peru (+75.7%).
• Regional Variance: Brazil wireless revenues fell 5.6% due to economic slowdown and rate reductions, while the U.S. operation (Tracfone) saw revenues jump 28.6% following the integration of Simple Mobile.

Guidance, Outlook, and Material Events

Management Commentary: Management noted that the appreciation of the Mexican peso impacted reported revenue growth rates but highlighted strong organic growth in data and PayTV segments. The company emphasized that most capital outlays were financed through funds from operations.

Material Events and Contingencies:

• Debt Issuance: Issued $5.2 billion in bonds across U.S. and European markets (July) and a 250 million Swiss franc bond (August) to finance acquisitions of stakes in KPN and Telekom Austria.
• Acquisitions: Acquired an additional ~16% stake in Telekom Austria (total holding ~22.76%). Acquired interests in two Mexican soccer teams.
• Telmex Delisting: Initiated the process to cancel the registration of Telmex shares, including a tender offer at 10.2250 MXN per share.
• Transaction Termination: Terminated the agreement to acquire 100% of Digicel's operation in El Salvador.
• Equity Method: Began including KPN's results via the equity method in the third quarter.

Risks: The filing notes exposure to foreign exchange fluctuations, which significantly impacted net income. Additionally, competitive pressures and regulatory changes (e.g., termination rate reductions in Mexico) continue to affect voice revenue streams.

Investor Verification Checklist

• FX Impact: Verify the sustainability of net income growth given the heavy reliance on a 9.0 billion peso foreign exchange gain in Q3.
• Brazil Performance: Monitor the trend in Brazil's wireless revenues, which declined 5.6% year-over-year, and the impact of PayTV content costs on margins.
• Debt Levels: Confirm the net debt position of 363.3 billion MXN (1.4x EBITDA) and the impact of recent bond issuances on future interest expenses.
• Postpaid Mix: Assess the long-term profitability implications of the aggressive postpaid subscriber growth strategy, particularly in Mexico and Peru.
• Regulatory Environment: Track the progress of the Telmex delisting and tender offer, as well as ongoing regulatory impacts on termination rates in key markets.