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, 2009 (and Year-to-Date)
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, operating primarily through subsidiaries such as Telcel (Mexico), Claro (various LatAm countries), and Tracfone (USA). The company reported signs of incipient economic recovery in several regions, with data services driving revenue growth despite a weak macroeconomic environment.
Key Financial Metrics
| Metric (MXN Millions) | 3Q 2009 | 3Q 2008 | YoY Change | Jan-Sep 2009 | Jan-Sep 2008 | YoY Change |
|---|---|---|---|---|---|---|
| Total Revenues | 99,762 | 85,335 | +16.9% | 287,613 | 251,241 | +14.5% |
| EBITDA | 40,397 | 34,865 | +15.9% | 118,057 | 103,494 | +14.1% |
| EBITDA Margin | 40.5% | 40.9% | -0.4 pts | 41.0% | 41.2% | -0.2 pts |
| Net Income | 18,681 | 12,404 | +50.6% | 57,539 | 43,839 | +31.2% |
| EPS (MXN) | 0.57 | 0.36 | +57.3% | 1.75 | 1.27 | +37.8% |
| Comprehensive Financing Costs | 653 | 3,729 | -82.5% | 1,328 | 6,742 | -80.3% |
Liquidity and Debt:
- Net debt decreased by 32.6 billion pesos between December 2008 and September 2009, totaling 88.8 billion pesos.
- Total debt (USD equivalent) stood at $7.802 billion as of September 2009, down from $10.599 billion in December 2008.
- Capital expenditures for the nine months totaled 25.5 billion pesos.
- Shareholder distributions (buybacks and dividends) totaled 27.5 billion pesos for the period.
Material Changes vs. Prior Period
- Revenue Growth: Driven primarily by a 19.5% increase in service revenues, with data revenues growing at a median rate of 58.1% across operations. Equipment revenues remained flat.
- Profitability Surge: Net income increased 50.6% year-over-year, significantly outpacing revenue growth due to a sharp reduction in financing costs (down 82.5%) and foreign exchange gains.
- Subscriber Expansion: Added 4.0 million subscribers in 3Q09, bringing the total wireless base to 194.3 million. Brazil led with 1.8 million net additions, followed by Tracfone (USA) with 712,000.
- Debt Reduction: Aggressive deleveraging occurred, with net debt falling by 32.6 billion pesos in nine months.
- Currency Impact: The depreciation of the Mexican peso against the US dollar and other LatAm currencies contributed to reported revenue increases in peso terms.
Guidance, Outlook, Risks, and Unusual Items
Management Commentary & Outlook:
- Management highlighted the success of 3G network investments, which now cover 70% of the population in LatAm regions, driving data usage.
- Postpaid subscriber growth continues to outpace prepaid growth in major markets, indicating a shift toward higher-value customers.
- Tracfone in the US is launching "Straight Talk" nationwide in Wal-Mart stores, expected to drive further growth.
Risks and Contingencies:
- Regulatory/Tax Risk (Mexico): The Mexican Chamber of Deputies approved a bill proposing a new 3% excise tax on telecom services. Senate ratification is required by year-end for it to take effect.
- Regulatory Risk (Ecuador): Number portability was implemented in October 2009, potentially increasing churn risk.
- Regulatory Risk (Puerto Rico): New taxes in Puerto Rico contributed to a 13.8% decline in EBITDA for the Caribbean region.
- Market Conditions: While South America showed signs of recovery, subscriber growth in most countries remained subdued compared to the prior year, with the exception of Brazil and the US.
Unusual Items:
- Financing costs were significantly lower due to foreign exchange gains, which offset half of the net interest expenses.
- Colombia and Panama revenues were impacted by a steep decline in equipment revenues (-39.3%) and the absence of extraordinary revenues from an interconnection dispute resolution in the prior year.
Investor Verification Checklist
- Regulatory Tax Impact: Verify the final status of the proposed 3% excise tax in Mexico and its potential impact on future margins.
- Currency Sensitivity: Assess the extent to which reported peso revenue growth is driven by currency depreciation versus organic volume growth.
- Debt Structure: Review the maturity profile of the $750 million 10-year bond issued in October 2009 and the overall debt reduction strategy.
- Churn Rates: Monitor churn trends in Ecuador following the implementation of number portability and in the Caribbean due to new taxes.
- Data Revenue Sustainability: Confirm if the 58.1% median growth in data revenues is sustainable as 3G saturation increases.