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, 2007
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States. As of December 31, 2007, the company reported a total of 157.3 million lines, comprising 153.4 million wireless subscribers and 3.9 million fixed lines. The company operates in Mexico, Brazil, Argentina, Colombia, Chile, Peru, Ecuador, Central America, the Caribbean, and the U.S. (via Tracfone).
Key Financial Metrics
| Metric (Millions of Constant Mex$) | 4Q 2007 | 4Q 2006 | Full Year 2007 | Full Year 2006 |
|---|---|---|---|---|
| Total Revenues | 85,209 | 67,708 | 311,580 | 243,005 |
| EBITDA | 32,846 | 25,594 | 126,772 | 89,525 |
| EBITDA Margin | 38.5% | 37.8% | 40.7% | 36.8% |
| Operating Profit (EBIT) | 21,341 | 17,869 | 85,953 | 61,377 |
| Net Income | 15,860 | 10,614 | 58,588 | 44,422 |
| Earnings Per Share (Mex$) | 0.45 | 0.30 | 1.67 | 1.23 |
Liquidity and Debt:
- Net Debt at year-end: 92.7 billion pesos (increased by 22.6 billion pesos during the year).
- Net Debt to EBITDA ratio: 0.73 times (slightly lower than end of 2006).
- Total Debt (USD): $9.64 billion (Dec 2007) vs $10.21 billion (Dec 2006).
- Cash & Securities: 12,022 million pesos (Dec 2007) vs 45,102 million pesos (Dec 2006).
Material Changes vs. Prior Period
- Revenue Growth: Full-year revenues increased 28.2% year-over-year, driven by a 31.4% increase in service revenues. Fourth-quarter revenues rose 25.8% year-over-year.
- Profitability Expansion: EBITDA grew 41.6% annually to 127 billion pesos. The EBITDA margin improved by nearly four percentage points to 40.7%. Net profit increased 31.9% to 58.6 billion pesos.
- Subscriber Growth: The company added 28.6 million net subscribers in 2007, exceeding initial estimates by 6 million. Total wireless subscribers reached 153.4 million, a 23% increase from the prior year.
- Regional Performance:
- Brazil: Recorded its best quarter ever with 2.2 million net additions (31.5% YoY growth). EBITDA margin expanded by 12.3 percentage points to 25.0%.
- Mexico: Reached 50 million subscribers. Service revenue growth outpaced subscriber growth, with Minutes of Use (MOU) jumping 35.2% YoY.
- Argentina, Paraguay, Uruguay: Combined subscriber base grew 34.4%. EBITDA margin improved by 8.1 percentage points to 27.4%.
- Colombia: EBITDA margin jumped 13.8 percentage points to 48.8%.
- Chile: Reported an EBITDA loss for the year (-10.0% margin) due to write-offs of uncollected receivables, contrasting with a positive margin in 2006.
Guidance, Outlook, and Risks
- 3G Rollout: The company is actively introducing 3G services (UMTS/HSDPA) across Latin America. By year-end 2008, coverage is expected to include main cities. In Brazil, additional spectrum was acquired for 1.4 billion reais to support expansion.
- Capital Allocation: Total outlays for share buybacks, dividends, capital expenditures, and acquisitions totaled 114.8 billion pesos in 2007, mostly funded by cash flow. The share buyback program was authorized to increase by 15 billion pesos in February 2008.
- Acquisitions: Completed the acquisition of Oceanic Digital Jamaica Limited and Puerto Rican operations for a total of approximately 26 billion pesos.
- Risks and Contingencies:
- Ecuador License: The Ecuadorian Ministry of Communications cancelled a process that could have led to license revocation following a technical failure in September 2007. However, the license expires in August 2008 and has not yet been renewed by the government.
- Chile Receivables: Significant write-offs of uncollected receivables impacted Chile's profitability in 2007.
- Price Pressure: Service revenue growth occurred despite significant price declines in several markets, relying on traffic increases to offset lower ARPU.
Investor Verification Checklist
- Chile Profitability: Verify the sustainability of Chile's operations given the shift from positive EBITDA in 2006 to a loss in 2007 due to receivable write-offs.
- Ecuador Regulatory Status: Confirm the renewal status of the Ecuadorian operating license, which expires in August 2008.
- Cash Flow vs. Debt: Monitor the trend of net debt, which increased by 22.6 billion pesos in 2007 despite strong cash generation, to ensure leverage remains manageable.
- 3G Investment Returns: Assess the capital expenditure required for the 3G rollout and its impact on future depreciation and amortization charges.
- ARPU Trends: Review the impact of price reductions on Average Revenue Per User (ARPU) in key markets like Mexico and Peru, where ARPU declined despite traffic growth.