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: Second Quarter ended June 30, 2010 (and first half of 2010)
Business Overview: América Móvil is a leading telecommunications provider in the Americas, operating wireless, fixed-line, broadband, and television services. The period was marked by significant subscriber growth and the consolidation of Telmex and Telmex Internacional results beginning July 1, 2010.
Key Financial Metrics
| Metric | 2Q 2010 | 2Q 2009 | Y/Y Change |
|---|---|---|---|
| Total Revenues (MXN Billions) | 100.9 | 90.1 | +11.9% |
| Service Revenues (MXN Billions) | 93.2 | 84.1 | +10.9% |
| EBITDA (MXN Billions) | 42.0 | 38.4 | +9.4% |
| EBITDA Margin | 41.6% | 42.6% | -1.0 pp |
| Operating Profit (EBIT) (MXN Billions) | 28.9 | 27.3 | +5.8% |
| Net Income (MXN Billions) | 18.7 | 22.8 | -17.9% |
| Net Debt (MXN Billions) | 71.6 | 83.5 | -11.9 Billion |
| Capital Expenditures (MXN Billions) | 20.3 | N/A | N/A |
Note: Net Income decline is primarily attributed to the absence of extraordinary foreign exchange gains recorded in the prior year.
Material Changes vs. Prior Period
- Subscriber Growth: Added 4.9 million wireless subscribers in 2Q10 (30.7% increase vs. 2Q09), bringing the total wireless base to 211.3 million. Total accesses (wireless, fixed, broadband, TV) reached 259.3 million.
- Revenue Drivers: Data revenue grew 41.6% year-over-year, now representing 22% of service revenues. Service revenues rose 10.8% annually.
- Profitability: While EBITDA grew 9.4%, the margin contracted slightly to 41.6% due to aggressive subscriber acquisition. Operating profit grew 5.8%, but Net Income fell 17.9% due to a lack of the one-time FX gains seen in 2Q09.
- Balance Sheet: Net debt decreased by 11.9 billion pesos to 71.6 billion pesos, despite a 26.8 billion peso cash payment for Telmex Internacional shares. Cash and securities increased significantly to 154.7 billion pesos.
- Corporate Actions: Completed tender offers for Carso Global Telecom (CGT) and Telmex Internacional (TII), increasing outstanding shares from 32.1 billion to 40.5 billion.
Guidance, Outlook, and Risks
- Consolidation: Results for Telmex and Telmex Internacional will be consolidated using the global consolidation method starting July 1, 2010.
- Capital Markets: Successfully executed the largest bond issuance by a Latin American entity in European markets (Euro and Sterling), establishing a new funding base.
- Spectrum: Telcel (Mexico) secured additional 1.7/2.1GHz spectrum blocks, enabling expansion of data services.
- Operational Outlook: Management highlights continued demand for data services and postpaid growth. Wireless penetration in the region (excluding the U.S.) is estimated near 94%.
- Risks/Contingencies: The filing notes that Net Income volatility is influenced by foreign exchange fluctuations. High capital expenditures are required to support network expansion and subscriber growth.
Investor Verification Checklist
- FX Impact: Verify the specific foreign exchange gains/losses in 2Q09 vs. 2Q10 to understand the full context of the 17.9% Net Income decline.
- Consolidation Timing: Confirm the exact impact of the July 1st consolidation of Telmex and TII on future quarterly comparability.
- Debt Structure: Review the new Euro and Sterling bond issuances for maturity profiles and interest rate exposure.
- Share Count: Account for the 23.7% increase in outstanding shares (from 32.1B to 40.5B) when analyzing EPS trends.
- Regional Margins: Investigate the divergence in EBITDA margins, specifically the expansion in Peru (+9.5 pp) versus the contraction in Central America and the U.S. due to growth investments.