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, 2008
Business Overview: América Móvil is a leading Latin American telecommunications provider operating in Mexico, Brazil, Colombia, Argentina, Chile, Peru, Ecuador, Central America, the Caribbean, and the United States (via Tracfone). The company reported record subscriber growth in Q4 2008, adding 10.1 million wireless subscribers.
Key Financial Metrics
| Metric (Millions of MXN) | Q4 2008 | Q4 2007 | YoY Change | Full Year 2008 | Full Year 2007 | YoY Change |
|---|---|---|---|---|---|---|
| Total Revenues | 94,414 | 84,589 | 11.6% | 345,655 | 304,197 | 13.6% |
| Service Revenues | 80,456 | 70,128 | 14.7% | 298,150 | 259,965 | 14.7% |
| EBITDA | 34,947 | 32,574 | 7.3% | 138,441 | 123,821 | 11.8% |
| EBITDA Margin | 37.0% | 38.5% | -1.5 pts | 40.1% | 40.7% | -0.6 pts |
| Operating Profit (EBIT) | 23,571 | 21,155 | 11.4% | 96,651 | 83,908 | 15.2% |
| Net Income | 16,273 | 14,213 | 14.5% | 60,112 | 52,301 | 14.9% |
| EPS (MXN) | 0.49 | 0.41 | 19.8% | 1.76 | 1.49 | 18.4% |
| Capital Expenditures (Full Year) | 68.2 billion MXN | |||||
| Net Debt (End of Year) | 121.5 billion MXN (0.88x EBITDA) |
Material Changes vs. Prior Period
- Subscriber Growth: Q4 2008 saw 10.1 million net additions, the company's best quarter ever. Full-year 2008 additions totaled 29.3 million, ending the year with 182.7 million wireless subscribers and 186.6 million total lines.
- Revenue Drivers: Service revenues grew 14.7% YoY in Q4, driven by subscriber growth and data revenue expansion. Data revenue grew 37.0% YoY, more than double the service revenue growth rate.
- Margin Compression: EBITDA margin declined to 37.0% in Q4 from 38.5% in Q4 2007. Management attributed this primarily to the high cost of acquiring the record number of new subscribers.
- Financing Costs: Comprehensive financing costs increased 199.4% in Q4 to 7.2 billion MXN. This was driven by a 38.5% increase in net debt, higher short-term peso interest rates, and foreign exchange losses due to the devaluation of the Mexican peso against the U.S. dollar.
- Shareholder Returns: The company distributed nearly 52 billion MXN to shareholders via dividends and share buybacks in 2008.
Outlook, Risks, and Management Commentary
- Liquidity Position: Management expressed confidence in liquidity. Cash on hand covers approximately 85% of short-term debt. The company secured $1.8 billion in new financing facilities (mostly undrawn) to fund infrastructure imports in 2009.
- Debt Maturity: Debt maturity is well-staggered; only 5.7% of debt matures in 2010, while 33.4% matures beyond 2015.
- Regulatory Risk: On November 14, 2008, the Mexican Antitrust Commission issued preliminary findings deeming Telcel (América Móvil's Mexican subsidiary) dominant in the wireless market. Telcel is disputing these findings.
- Operational Strategy: Capital expenditures in 2008 exceeded the initial budget as the company accelerated investments intended for 2009 to expand data and voice capacity, particularly in Brazil, Panama, and Ecuador.
- Regional Performance:
- Brazil: Strongest growth driver with 3 million Q4 additions, though EBITDA margin compressed to 19.8% due to acquisition costs.
- Colombia: Net additions up 87% YoY in Q4.
- USA (Tracfone): Added 743k subscribers in Q4; EBITDA margin improved significantly to 6.3%.
Investor Verification Checklist
- Foreign Exchange Exposure: Verify the impact of the Mexican peso devaluation on future earnings, as un-hedged dollar debt contributed significantly to Q4 financing costs.
- Regulatory Outcome: Monitor the final ruling of the Mexican Antitrust Commission regarding Telcel's market dominance and potential fines or operational restrictions.
- Subscriber Acquisition Costs: Assess whether the aggressive subscriber growth strategy (particularly in Brazil and Colombia) will continue to pressure EBITDA margins in 2009.
- Debt Servicing: Confirm the company's ability to service its $10.66 billion total debt load given the rising interest rate environment in Mexico.
- Data Revenue Sustainability: Evaluate if the 37% growth in data revenue is sustainable as 3G penetration matures in key markets like Brazil and Argentina.