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, 2010
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, offering wireless, fixed-line, broadband, and PayTV services. The consolidated financial statements include results from Telmex and Telmex Internacional starting July 1, 2010, under IFRS standards.

Key Financial Metrics

Capital Expenditures: 50.0 billion MXN for the first nine months of 2010.
Shareholder Distributions: 22.3 billion MXN in buy-backs and dividends during the period.

Material Changes vs. Prior Period

• Subscriber Growth: Total accesses reached 266.8 million (+11.5% YoY). Wireless subscribers grew 11.6% to 216.8 million, with 5.5 million net additions in the quarter (+37.6% vs prior year). Fixed-line accesses increased 10.9% to 50 million.
• Revenue Drivers: Wireless service revenues rose 9.1%, driven by a 27.1% increase in wireless data revenues, which now account for 22.0% of wireless service revenues. Fixed-line revenues remained flat as broadband and video growth offset declines in fixed voice.
• Profitability: EBITDA expanded 6.0%, while Operating Profit grew 3.9%. The slower growth in Operating Profit was due to a 10.3% increase in depreciation and amortization charges, resulting from revised useful lives for telecom equipment.
• Debt Reduction: Combined net debt decreased significantly from 217.5 billion pesos in December 2009 to 184.2 billion pesos in September 2010, despite shareholder distributions and a 29.4 billion peso investment in Telmex Internacional stock.
• Acquisitions: Embratel (Brazilian subsidiary) increased its equity interest in Net Serviços to 77.3% (later 79.3%) following a tender offer.

Guidance, Outlook, and Risks

• Integration Strategy: Management is focused on integrating wireless and wireline networks, IT, and commercial offerings, particularly in South America. A common "Claro" brand is being rolled out across operations (e.g., Argentina, Chile, Peru).
• Investment Focus: Continued investment in new-generation broadband networks for both fixed and mobile platforms to expand coverage and penetration.
• Debt Management: The company is amortizing early debts with maturities through 2013, expecting the average life of debt to reach 9.4 years by year-end.
• Risks and Contingencies:
  • Currency Exposure: Significant operations in multiple currencies expose the company to exchange rate fluctuations. Comprehensive financing costs increased 200.9% YoY due to interest expenses and currency moves.
  • Regulatory: Spectrum auctions and regulatory changes in various jurisdictions (e.g., Mexico's 1.7 GHz band concession).
  • Competition: Intense competition in prepaid and postpaid segments across Latin America.

Key Facts for Investor Verification

• Consolidation Impact: Verify the comparability of historical figures, as the consolidation of Telmex and Telmex Internacional began July 1, 2010, affecting year-over-year comparisons.
• Debt Composition: Review the breakdown of debt by currency (MXN, USD, others) and maturity profile to assess refinancing risks.
• EBITDA Margin Trends: Monitor the impact of increased depreciation charges on Operating Profit margins versus EBITDA margins.
• Regional Performance: Assess the contribution of high-growth markets (e.g., Chile, Peru, Brazil) versus mature markets (e.g., Mexico) to overall revenue and EBITDA growth.
• Share Count: Note the significant increase in shares outstanding (24.0% YoY) due to the Telmex acquisition, which impacts EPS calculations.