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: Three months ended March 31, 2012 (Q1 2012)
Filing Date: June 28, 2012
This report provides unaudited financial results for Q1 2012 and recent developments through June 2012. Comparability with Q1 2011 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 (Brazilian Pay TV) starting January 1, 2012.
Key Financial Metrics
| Metric | Q1 2012 (MXN) | Q1 2012 (USD) | Q1 2011 (MXN) |
|---|---|---|---|
| Total Operating Revenues | Ps. 192,498 million | $15,034 million | Ps. 156,232 million |
| Operating Income | Ps. 42,018 million | $3,282 million | Ps. 38,751 million |
| Net Profit | Ps. 32,840 million | $2,565 million | Ps. 25,190 million |
| Operating Margin | 21.8% | - | 24.8% |
| Effective Tax Rate | 31.4% | - | 32.7% |
| Total Assets | Ps. 923,657 million | $72,139 million | Ps. 945,617 million (Dec 31, 2011) |
| Total Debt | Ps. 378,400 million | - | Ps. 384,700 million (Dec 31, 2011 est.) |
| Net Debt | Ps. 318,100 million | - | Ps. 321,500 million (Dec 31, 2011) |
| Cash & Equivalents | Ps. 60,300 million | - | Ps. 59,100 million (Dec 31, 2011) |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased 23.2% year-over-year. At constant exchange rates and excluding consolidation/presentation changes, organic growth was 8.9%.
- Segment Performance:
- Mobile Data: Increased 35.1% (30.7% at constant rates) driven by value-added services and device usage.
- Paid Television: Increased 307.5% primarily due to the consolidation of Net Serviços in Brazil.
- Mobile Voice: Increased 9.3% (4.9% at constant rates) due to traffic growth, offset by lower interconnection rates.
- Fixed Voice: Decreased 3.7% due to lower long-distance traffic and interconnection rates.
- Cost Structure: Cost of sales and services rose 28.5%, increasing as a percentage of revenue from 41.6% to 43.4%. Commercial expenses rose 40.1% largely due to the reclassification of distributor commissions as expenses.
- Non-Operating Items: Net exchange gain was Ps. 19.3 billion (vs. Ps. 4.4 billion in Q1 2011) due to the depreciation of the U.S. dollar against the Mexican peso and other currencies. Net interest expense increased 39.6% due to higher net debt levels.
Guidance, Outlook, and Recent Developments
Recent Developments (Post-Q1 2012):
- Regulatory: On May 2, 2012, the Mexican Federal Antitrust Commission (Cofeco) revoked a Ps. 11.99 billion fine previously imposed on subsidiary Telcel for alleged monopolistic practices, subject to certain undertakings.
- Investment in KPN: Commenced a tender offer for Koninklijke KPN N.V. (Netherlands). As of June 27, 2012, América Móvil held 24.9% of KPN shares. The total investment cost is expected to be approximately €3.07 billion (Ps. 53.3 billion).
- Investment in Telekom Austria: Agreed to acquire approximately 21% of Telekom Austria AG. Initial 5% acquired; right to acquire additional 16% pending approvals. Estimated total price is €875 million (Ps. 15.0 billion).
- Acquisition of Simple Mobile: Subsidiary Tracfone Wireless acquired 100% of Simple Mobile Inc. (U.S. MVNO) for approximately $118 million.
- Capital Allocation: In Q1 2012, the company spent Ps. 24.2 billion on capital expenditures, Ps. 25.3 million on dividends, and Ps. 6.9 billion on share repurchases. In Q2 2012, the company borrowed approximately $1.6 billion and €1.2 billion to finance investments.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers regarding economic conditions, exchange rates, regulatory developments, and competition. Specific risks include the challenge by other operators regarding the revocation of the Telcel fine.
Investor Verification Checklist
- Organic Growth Rate: Verify the 8.9% organic revenue growth figure by excluding the impact of Net Serviços consolidation and the accounting change regarding distributor commissions.
- Margin Compression: Analyze the drivers behind the operating margin decline from 24.8% to 21.8%, specifically the impact of higher subscriber acquisition costs and content charges.
- Debt Maturity Profile: Review the long-term debt maturity schedule, noting that Ps. 182.9 billion is due in 2018 and thereafter, while Ps. 15.9 billion is due in 2013.
- European Expansion Costs: Confirm the final closing costs and regulatory approvals for the KPN and Telekom Austria investments, which represent significant capital outlays.
- Currency Exposure: Assess the impact of the U.S. dollar depreciation on future earnings, given that 46% of total indebtedness is denominated in U.S. dollars.