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: Fourth Quarter ended December 31, 2011
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, operating wireless, fixed-line, broadband, and PayTV services. The company reported 300 million total accesses as of December 2011, comprising 242 million wireless subscribers and 58 million revenue-generating units (RGUs).
Key Financial Metrics
| Metric | 4Q 2011 | 4Q 2010 | YoY Change |
|---|---|---|---|
| Total Revenues | MXN 182.0 Billion | MXN 162.0 Billion | +12.3% |
| EBITDA | MXN 64.5 Billion | MXN 62.2 Billion | +3.9% |
| EBITDA Margin | 35.5% | 38.4% | -2.9 pp |
| Operating Profit (EBIT) | MXN 38.3 Billion | MXN 33.3 Billion | +15.1% |
| Net Income | MXN 16.3 Billion | MXN 25.5 Billion | -36.2% |
| Earnings Per Share (MXN) | 0.21 | 0.32 | -33.5% |
| Net Debt | MXN 321 Billion | MXN 207 Billion | +55.1% |
| Capital Expenditures (Capex) | MXN 121 Billion | Filing text does not provide clear 4Q10 value | N/A |
Material Changes vs. Prior Period
- Subscriber Methodology Change: Beginning in October 2011, the company adopted a conservative methodology for booking active subscribers in Mexico, Colombia, and Ecuador. Lines without air-time recharge during the churn period were excluded. This resulted in reported net additions of only 304,000 for the quarter, masking underlying gross additions of 9.1 million in Mexico alone.
- Revenue Growth: Wireless revenues grew 15.4% YoY, driven by mobile data services which rose 27% at constant exchange rates. Fixed broadband and PayTV revenues also showed strong growth (15% and 48% respectively).
- Net Income Decline: Despite revenue and operating profit growth, Net Income fell 36.2%. This was primarily due to a 311% increase in comprehensive financing costs (MXN 11.1 billion) driven by higher net debt and foreign exchange losses (MXN 6.7 billion) resulting from the depreciation of the Mexican peso.
- Debt Increase: Net debt rose significantly to fund the acquisition of Telmex stock (reaching 95.17% ownership), Telmex Internacional, Net Serviços, StarOne, and share buybacks.
Outlook, Risks, and Management Commentary
- Strategic Focus: Management emphasized a shift toward the postpaid segment, which grew 20.5% in 2011 to 34.7 million subscribers. The company is also expanding 3G/HSPA+ networks to boost data ARPU.
- Regulatory Risks: In Mexico, a 25% reduction in mobile termination rates (MTRs) over 2011-2014 was agreed upon, impacting voice revenues. In Peru, fixed-to-mobile rates were reduced significantly starting December 2011.
- Acquisitions and Expansions: The company completed the acquisition of Digicel Honduras and launched operations in Costa Rica. It also sold its Jamaica operation.
- Financial Risks: The filing highlights exposure to foreign exchange volatility, particularly the depreciation of the Mexican peso against the US dollar, which negatively impacted reported earnings and increased financing costs.
- Capital Allocation: The company distributed MXN 71 billion in the quarter, including MXN 17 billion in dividends and significant amounts in stock repurchases and acquisitions.
Investor Verification Checklist
- Subscriber Quality: Verify the impact of the new churn methodology on the reported subscriber base in Mexico, Colombia, and Ecuador versus actual revenue-generating activity.
- Debt Servicing: Assess the sustainability of the increased net debt (MXN 321 billion) and the impact of rising interest rates on future cash flows.
- Currency Exposure: Monitor the Mexican peso exchange rate, as foreign exchange losses significantly eroded net income in 4Q11.
- Regulatory Impact: Track the long-term revenue impact of reduced mobile termination rates in Mexico and Peru.
- Postpaid Migration: Confirm the continued growth of the postpaid base and its effect on Average Revenue Per User (ARPU) stability.