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, 2009
Business Overview: América Móvil is the third-largest wireless operator globally by equity subscribers. As of December 31, 2009, the company surpassed the 200 million subscriber mark, closing the year with 201 million wireless clients. Operations span Mexico, Brazil, the United States (Tracfone), and various Latin American and Caribbean nations.
Key Financial Metrics
| Metric (Millions of MXN) | 4Q 2009 | 4Q 2008 | Full Year 2009 | Full Year 2008 |
|---|---|---|---|---|
| Total Revenues | 107,098 | 94,414 | 394,711 | 345,655 |
| Service Revenues | 92,364 | 80,456 | 349,138 | 298,150 |
| EBITDA | 40,824 | 34,924 | 158,881 | 138,418 |
| EBITDA Margin | 38.1% | 37.0% | 40.3% | 40.0% |
| Operating Profit (EBIT) | 23,150 | 23,571 | 105,799 | 96,651 |
| Net Income | 12,955 | 15,646 | 70,494 | 59,486 |
| EPS (MXN) | 0.40 | 0.47 | 2.15 | 1.74 |
| Net Debt (MXN) | 83,500 | 121,400 | 83,500 | 121,400 |
| Capital Expenditures | Filing text does not provide a clear value for 4Q only | Filing text does not provide a clear value for 4Q only | 45,400 | Filing text does not provide a clear value |
Liquidity and Capital Allocation: Net debt decreased by 37.9 billion pesos in 2009 to 83.5 billion pesos (0.5x EBITDA). The company returned 50.4 billion pesos to shareholders via dividends and share buybacks in 2009, including an extraordinary dividend of 15.8 billion pesos paid on December 10, 2009.
Material Changes vs. Prior Period
- Subscriber Growth: Added 6.6 million net subscribers in 4Q 2009 and 18.2 million for the full year. Brazil led additions (2.1M in Q4), followed by Tracfone (US) and Mexico.
- Revenue Growth: 4Q revenues rose 13.4% year-over-year, driven by a 14.8% increase in service revenues. Data revenues surged 48.7% in the quarter and 53.8% for the full year.
- Profitability: While EBITDA grew 16.9% in Q4, Operating Profit (EBIT) declined 1.8% to 23.2 billion pesos due to accelerated depreciation of GSM networks in certain countries. Full-year Net Income increased 18.5% to 70.5 billion pesos.
- Cost Structure: Depreciation and amortization charges increased 55.7% in Q4 to 17.7 billion pesos. Management expects these charges to normalize to 12.5-13.0% of revenues going forward, compared to 16.5% in Q4.
Guidance, Outlook, and Risks
Strategic Transactions: On January 13, 2010, the Board authorized an offer to acquire 100% of Carso Global Telecom (CGT) and Telmex International (Telint). This transaction would consolidate Telmex and Telmex International into América Móvil. A Form F-4 registration statement is expected to be filed with the SEC.
Operational Outlook:
- Data Growth: Continued vigorous growth in data services is expected across all operations.
- Postpaid Shift: Postpaid subscriber growth is outpacing prepaid in most markets, particularly in Mexico, Chile, and the Dominican Republic.
- Depreciation: Future depreciation and amortization are projected to be closer to 12.5-13.0% of revenues.
Risks and Contingencies:
- Regulatory (Mexico): The Federal Competition Commission (CFC) ruled Telcel "dominant" in the end-user wireless market. Telcel intends to appeal, citing a competitive market environment. If upheld, this could lead to regulatory measures on rates and quality.
- Taxation (Caribbean): New taxes introduced in Puerto Rico in July 2009 negatively impacted EBITDA margins in the Caribbean region.
- Competition (Peru): Implementation of number portability in Peru may increase competitive pressure, though management expects to benefit from network coverage and 3G services.
Investor Verification Checklist
- Transaction Status: Verify the progress and shareholder acceptance of the proposed acquisition of Carso Global Telecom and Telmex International.
- Regulatory Appeal: Monitor the outcome of Telcel's appeal against the CFC "dominant" ruling in Mexico and potential impacts on pricing power.
- Depreciation Normalization: Confirm in future filings that depreciation charges return to the projected 12.5-13.0% of revenue range.
- US Operations: Review Tracfone's ability to convert rapid subscriber growth (driven by StraightTalk launch) into sustainable EBITDA, given the negative EBITDA in Q4 2009 due to acquisition costs.
- Foreign Exchange: Assess the impact of currency fluctuations (e.g., Brazilian Real, Argentine Peso) on consolidated financial results, given the multi-currency exposure.