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: Year ended December 31, 2009 (filed March 22, 2010)
Accounting Standards: Mexican Financial Reporting Standards (Mexican FRS). The company plans to transition to International Financial Reporting Standards (IFRS) by 2012.
Operations: Leading telecommunications provider operating in 18 countries across Latin America and the United States. Mexico remains the largest single market (36.0% of revenues), followed by Brazil (20.9%).

Key Financial Metrics (Year Ended Dec 31, 2009)

Material Changes vs. Prior Period

• Revenue Growth: Operating revenues increased 14.2% year-over-year, driven by a 17.1% increase in service revenues. This was supported by subscriber growth (10.0% increase to 204.8 million) and favorable exchange rate variations (appreciation of Brazilian real and Colombian peso).
• Profitability: Net income rose 29.3% to Ps. 76.9 billion. This was driven by an 8.7 billion peso increase in operating income and a significant reduction in comprehensive financing costs (down from Ps. 13.9 billion in 2008 to Ps. 3.0 billion in 2009) due to lower net debt and foreign exchange gains.
• Subscriber Trends: Organic growth continued across all segments. Brazil added 5.7 million subscribers, the U.S. added 3.2 million, and Mexico added 2.8 million. However, Average Revenue Per User (ARPU) faced pressure in many markets due to competition and the shift toward data services.
• Cost Structure: Depreciation and amortization increased 27.1% to Ps. 53.1 billion, largely due to a Ps. 4.5 billion charge in Brazil for shortening the useful life of certain GSM assets.

Guidance, Outlook, and Risks

Management Commentary and Outlook

• Capital Expenditures: Budgeted for 2010 is approximately U.S.$ 3.5 billion (Ps. 45.8 billion), focused on network expansion and 3G technology upgrades.
• Dividends: Shareholders approved a dividend of Ps. 0.32 per share for 2010. The company also repurchased Ps. 24.7 billion of its own shares in 2009.
• Strategic Moves: On January 13, 2010, the company announced proposed offers to acquire Telmex Internacional and Carso Global Telecom (CGT) to pursue synergies. Completion is subject to regulatory approvals.

Risks and Contingencies

• Regulatory Actions:
  • Mexico: The Federal Competition Commission (Cofeco) confirmed a finding of "substantial market power" for Telcel in February 2010. Telcel has appealed this decision. Future regulations could impact tariffs and service quality.
  • Colombia: Regulators determined Comcel holds a dominant position, imposing restrictions on "off-net" call pricing effective December 2009.
• Taxation: A new 3% tax on telecommunications services in Mexico became effective January 1, 2010. Telcel has filed legal proceedings against this tax.
• Market Risks: Exposure to currency fluctuations (particularly U.S. dollar vs. local currencies) and interest rate changes on floating-rate debt. A hypothetical 10% depreciation of operating currencies against the U.S. dollar would result in a Ps. 4.1 billion foreign exchange loss.

Investor Verification Checklist

• Regulatory Status: Monitor the outcome of the Cofeco appeal in Mexico and the impact of new pricing regulations in Colombia on future ARPU.
• Acquisition Progress: Verify the status of regulatory approvals for the proposed acquisition of Telmex Internacional and CGT.
• Debt Profile: Review the composition of debt (51.4% in U.S. dollars) and the effectiveness of hedging strategies against currency volatility.
• Capital Allocation: Track actual 2010 capital expenditures against the U.S.$ 3.5 billion budget and the execution of share repurchase programs.
• Accounting Transition: Note the planned transition from Mexican FRS to IFRS by 2012, which may affect comparability of future financial statements.