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: Second Quarter ended June 30, 2009 (Results announced July 21, 2009)
Business Overview: América Móvil is a leading telecommunications provider in the Americas, operating primarily through subsidiaries such as Telcel (Mexico), Claro (Latin America), and Tracfone (USA). The company reported a total subscriber base of 190.3 million wireless clients and 3.8 million landlines as of June 30, 2009.

Key Financial Metrics

Cash Flow & Capital Allocation: The company generated sufficient cash flow to fund capital expenditures of 18.6 billion MXN and share buybacks of 10.4 billion MXN during the first half of 2009.

Material Changes vs. Prior Period

• Subscriber Growth: Added 3.7 million subscribers in 2Q09, bringing the semester total to 7.6 million. Total wireless base grew 15.1% year-over-year to 190.3 million.
• Revenue Mix: Service revenues rose 15.9% driven by strong data growth, while equipment revenues fell 17.3% due to slower subscriber growth and lower handset prices.
• Profitability: Net income surged 27.5% to 22.5 billion MXN, aided by a net financial income of 2.4 billion MXN (primarily from foreign exchange gains due to the appreciation of the Mexican peso).
• Debt Reduction: Net debt decreased significantly by 25.9 billion MXN from the December 2008 level, reducing leverage to 0.65 times EBITDA.
• Regional Performance: Brazil led net additions (899k), followed by Tracfone (730k) and Mexico (548k). Chile and Central America saw declines in EBITDA due to regulatory changes (mobile termination rates) and currency impacts.

Guidance, Outlook, and Risks

Management Commentary:

• Market Position: The company maintains a strong financial position with low leverage and adequate liquidity. Wireless penetration in the region (excluding the U.S.) is estimated at 89%.
• Strategy: Continued heavy investment in technology to offer data communication solutions. Focus on improving postpaid market share in Mexico (currently 47%) and expanding coverage in rural areas.
• Pricing: Average price per minute of voice in Latin America remains the lowest in the OECD block (excluding the U.S.), driven by aggressive commercial promotions.

Dividends and Buybacks:

• Approved a dividend of 30 Mexican cents per share (15.4% increase vs. 2008), payable July 24, 2009.
• Shareholders authorized an increase of 20 billion MXN to the share repurchase program.

Risks and Contingencies:

• Regulatory: Reductions in mobile termination rates (e.g., in Chile) negatively impacted interconnection revenues and EBITDA margins in specific markets.
• Competition: Industry-wide deceleration in subscriber growth has led to falling acquisition costs but also increased price competition.
• Currency: Significant exposure to foreign exchange fluctuations, though recent peso appreciation provided a financial gain in 2Q09.

Investor Verification Checklist

• Subscriber Quality: Verify the sustainability of subscriber growth in Brazil and the U.S. (Tracfone) given the high acquisition costs and declining ARPUs in some regions.
• Regulatory Impact: Assess the long-term impact of declining mobile termination rates on EBITDA margins in Chile and other regulated markets.
• Currency Sensitivity: Monitor the effect of the Mexican peso's strength on consolidated financial results, as a reversal could impact net income.
• Postpaid Transition: Track progress in increasing the postpaid market share in Mexico, which currently lags behind the prepaid segment.
• Debt Maturity: Confirm the average life of debt (stated as 9.5 years) and the schedule for upcoming maturities to ensure liquidity remains adequate.