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: Six months ended June 30, 2012 (Unaudited)
Filing Date: July 30, 2012
This report provides an operating and financial review for the first half of 2012. Results are presented in accordance with IFRS. Comparability with the prior period is affected by two primary factors: (1) a change in presentation where distributor commissions are now recorded as expenses rather than deductions from revenue, and (2) the full consolidation of Net Serviços (a Brazilian Pay TV provider) starting January 1, 2012, whereas it was previously accounted for using the equity method.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2012 (MXN) | Six Months Ended June 30, 2011 (MXN) | 2012 USD Equivalent (Approx.) |
|---|---|---|---|
| Total Operating Revenues | Ps. 384,236,778,000 | Ps. 315,934,675,000 | $28,119 million |
| Operating Income | Ps. 81,134,837,000 | Ps. 76,913,037,000 | $5,936 million |
| Net Profit | Ps. 46,188,822,000 | Ps. 50,751,378,000 | $3,378 million |
| Operating Margin | 21.1% | 24.3% | - |
| Total Assets | Ps. 991,645,397,000 | Ps. 945,616,861,000 (Dec 31, 2011) | $72,568 million |
| Total Debt | Ps. 424,100,000,000 | - | - |
| Net Debt | Ps. 361,700,000,000 | Ps. 321,500,000,000 (Dec 31, 2011) | - |
| Cash and Equivalents | Ps. 62,400,000,000 | Ps. 59,100,000,000 (Dec 31, 2011) | - |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased 21.6% year-over-year. At constant exchange rates and excluding the Net Serviços consolidation and accounting changes, organic revenue growth was 7.7%.
- Segment Performance:
- Mobile Data: Increased 39.3% (33.1% at constant rates) driven by value-added services and data usage.
- Paid Television: Increased 279.0% (24.6% at constant rates) primarily due to the consolidation of Net Serviços and subscriber growth in Brazil and other Latin American markets.
- Mobile Voice: Increased 7.1% (2.6% at constant rates) due to traffic growth, offset by lower interconnection rates.
- Fixed Voice: Decreased 6.1% due to reduced long-distance traffic and lower interconnection rates.
- Profitability: While operating income rose 5.5%, net profit decreased 9.0% to Ps. 46.2 billion. This decline was driven by a 41.7% increase in net interest expense and a reduction in net exchange gains compared to 2011.
- Cost Structure: Cost of sales and services rose 26.2%, and commercial/administrative expenses rose 38.5%. The latter increase was significantly impacted by the reclassification of distributor commissions from revenue deductions to expenses.
Guidance, Outlook, and Risks
Management Commentary: Management notes that results for the first six months are not necessarily indicative of full-year results. The company expects to repay approximately $1.6 billion and €1.2 billion under existing revolving credit facilities in the second half of 2012.
Capital Allocation: During the period, the company utilized Ps. 53.2 billion for capital expenditures, paid Ps. 93.7 million in dividends, and repurchased shares (795 million Series L and 3.5 million Series A) for Ps. 12.7 billion.
Risks and Contingencies:
- Currency Exposure: Results are sensitive to exchange rate fluctuations, particularly between the Mexican peso, U.S. dollar, and Brazilian real. Approximately 49% of total indebtedness is denominated in U.S. dollars.
- Regulatory and Competitive: Risks include government policies, inflation, regulatory developments, and competition in telecommunications markets across Mexico, Brazil, and other operating countries.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from projections due to economic, political, and technological factors.
Investor Verification Checklist
- Accounting Changes: Verify the impact of reclassifying distributor commissions as expenses rather than revenue deductions on margin analysis.
- Consolidation Impact: Assess the specific contribution of Net Serviços to the 279% surge in Paid Television revenue and overall consolidated results.
- Debt Maturity Profile: Review the debt maturity schedule, noting Ps. 14.5 billion due in 2013 and Ps. 57.0 billion due in 2014, against available liquidity.
- Interest Rate Sensitivity: Evaluate exposure given that 26% of total indebtedness bears variable interest rates.
- Organic Growth: Distinguish between reported growth (21.6%) and organic growth at constant exchange rates (7.7%) to gauge underlying business performance.