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: Fourth Quarter and Full Year ended December 31, 2010
Business Overview: América Móvil is a leading telecommunications provider in the Americas, operating wireless, fixed-line, broadband, and PayTV services. As of December 31, 2010, the company reported 276.5 million total accesses, comprising 225 million wireless subscribers and 51.5 million fixed revenue-generating units (RGUs).

Key Financial Metrics

Note: Net Income for 4Q 2010 reflects extraordinary non-cash charges of 3.9 billion pesos. Full year Net Income decreased slightly year-over-year despite revenue growth, impacted by financing costs and minority interest adjustments.

Material Changes vs. Prior Period

• Subscriber Growth: Wireless subscribers grew 12.0% year-over-year to 225 million. The company added 8.2 million subscribers in 4Q 2010, a 23.4% increase over the prior year quarter. Postpaid net additions (1.9 million) doubled compared to 4Q 2009.
• Revenue Growth: Total revenues increased 6.0% in the quarter and 7.6% for the full year. Wireless service revenues grew 12.8% for the year, driven by a 40.4% surge in data revenue.
• Profitability: EBITDA grew 4.8% in the quarter and 6.3% for the year. However, EBITDA margins compressed slightly due to accelerated subscriber acquisition costs and higher depreciation charges related to technological upgrades.
• Balance Sheet: Net debt decreased by 10.4 billion pesos during 2010 despite significant capital expenditures (81.9 billion pesos) and M&A activity. Short-term debt dropped significantly to 9.0 billion pesos.
• Acquisitions: The company spent 66 billion pesos on acquisitions, including stock of TelmexInternacional, Net Serviços, and Carso Global Telecom. It also obtained a license to operate in Costa Rica.

Guidance, Outlook, and Risks

• Regulatory Environment: Mobile Termination Rates (MTR) in Mexico are scheduled to decline, falling to 95 peso cents in 2011 and reaching 69 peso cents by 2014. A new per-second billing scheme will further reduce effective rates by 13% in 2011.
• Depreciation Outlook: Depreciation charges rose significantly in 4Q 2010 (16.5% of revenues) due to the phase-out of older technologies. Management expects these charges to trend back toward 12% of revenues in 2011.
• Expansion: Operations in Costa Rica are expected to begin in 2011 following the acquisition of a 15-year spectrum license. The company continues to expand coverage in Peru and increase homes passed.
• Financial Strategy: The company utilized operating cash flow to fund capital expenditures, acquisitions, share buybacks (18.2 billion pesos), and dividends (17.2 billion pesos). A tender offer for Telmex dollar-denominated bonds was announced in January 2011.
• Risks: Continued price declines in voice services (median decline of 13.8% in the quarter) and foreign exchange fluctuations (Mexican peso appreciation) impact reported growth figures.

Investor Verification Checklist

• Quality of Earnings: Verify the impact of the 3.9 billion pesos in extraordinary non-cash charges on 4Q 2010 Net Income and the 5.0 billion pesos deferred tax credit in Brazil.
• Depreciation Sustainability: Confirm if the elevated depreciation rates (16.5% of revenue in 4Q) are temporary as management projects a return to ~12% in 2011.
• Regulatory Impact: Assess the long-term revenue impact of the mandated Mobile Termination Rate (MTR) reductions in Mexico through 2014.
• Debt Structure: Review the details of the bond tender offer for Telmex dollar-denominated bonds and the resulting debt maturity profile.
• Acquisition Integration: Monitor the integration progress and financial contribution of recent acquisitions, specifically Net Serviços in Brazil and the new Costa Rica operations.