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: First Quarter 2007 (Ended March 31, 2007)
Announcement Date: April 25, 2007
América Móvil is a leading Latin American telecommunications provider. The reporting period highlights significant organic growth and the strategic acquisition of Telecomunicaciones de Puerto Rico (TPR), completed in March 2007. The company operates in Mexico, the United States (via Tracfone), and various Central and South American countries.
Key Financial Metrics
| Metric | 1Q 2007 | 1Q 2006 | YoY Change |
|---|---|---|---|
| Total Revenues | 67.7 billion MXN | 52.8 billion MXN | +28.1% |
| Service Revenues | 59.1 billion MXN | 45.1 billion MXN | +31.0% |
| EBITDA | 28.9 billion MXN | 19.1 billion MXN | +51.4% |
| EBITDA Margin | 42.7% | 36.2% | +6.5 pp |
| Operating Profit (EBIT) | 21.4 billion MXN | 12.9 billion MXN | +66.1% |
| Net Income | 15.8 billion MXN | 10.4 billion MXN | +52.5% |
| Earnings Per Share (MXN) | 0.45 | 0.29 | +56.4% |
| Earnings Per ADR (USD) | $0.81 | $0.54 | +50.5% |
| Capital Expenditures | 4.7 billion MXN | N/A | - |
| Net Debt | Increased 16.3 billion MXN | N/A | - |
| Net Debt / EBITDA (LTM Proforma) | 0.84x | N/A | - |
Material Changes vs. Prior Period
- Subscriber Growth: Total wireless subscriber base reached 131.2 million, adding 5.9 million organically and 564,000 via the Puerto Rico acquisition. South American operations now represent 52% of the total subscriber base.
- Margin Expansion: EBITDA margin improved significantly to 42.7%, driven by lower handset subsidies, cost efficiencies, and the scale of service revenues. International operations now account for 57% of total revenues.
- Acquisition Impact: The acquisition of Telecomunicaciones de Puerto Rico (TPR) for an enterprise value of 24.5 billion pesos increased net debt by 16.3 billion pesos. TPR results are consolidated starting in April 2007, though the balance sheet reflects the impact immediately.
- Regional Performance:
- Brazil: EBITDA more than doubled year-over-year (+147.2%) with margins climbing 14 percentage points.
- Colombia: EBITDA more than doubled (+129.3%) with margins expanding to 48.3%.
- Chile: Reached EBITDA breakeven (1.7% margin) after tripling net additions, though EBIT remained negative.
- United States (Tracfone): Achieved positive EBITDA ($68 million) and a 19.4% margin, compared to breakeven in the prior year.
Guidance, Outlook, and Risks
- Dividend Proposal: The Board proposed a cash dividend of $0.20 MXN per share, totaling approximately 7 billion pesos, pending shareholder approval for payment in July 2007.
- Regulatory Environment: In January 2007, Mexican interconnection rates were reduced by 10% to 1.34 MXN. Management notes that despite this, Telcel's prices remain competitive relative to OECD averages.
- Growth Outlook: Management highlights continued strong growth potential in Peru (32% penetration) and Argentina (high penetration but strong net additions). South American operations are driving a disproportionate share of EBITDA growth.
- Financial Strategy: Capital expenditures, dividends, and share buybacks were funded from cash flow, alongside partial funding of the TPR acquisition. The company maintains a low net debt-to-EBITDA ratio of 0.84x.
Investor Verification Checklist
- Verify the consolidation timeline and financial impact of the Telecomunicaciones de Puerto Rico (TPR) acquisition starting in April 2007.
- Monitor the impact of the 10% reduction in Mexican interconnection rates on Telcel's future margins.
- Confirm the approval of the proposed $0.20 MXN per share dividend at the General Ordinary Shareholders' Meeting.
- Assess the sustainability of margin improvements in Brazil and Colombia given the rapid subscriber growth and potential market saturation.
- Review the trajectory of Chile's operations to ensure EBITDA breakeven translates to sustained profitability.