Business Context and Reporting Period
Company: America Movil S.A. de C.V.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter ended September 30, 2006 (and nine months ended September 30, 2006)
Business Overview: America Movil is a leading Latin American telecommunications provider operating wireless and fixed-line services across Mexico, Brazil, Argentina, Colombia, Chile, Central America, and the United States (via Tracfone). The company reported a total subscriber base of 113.9 million wireless lines and 116 million total lines (including fixed) as of September 30, 2006.
Key Financial Metrics
| Metric (Millions of Constant Mex$) | 3Q 2006 | 3Q 2005 | YoY Change | Jan-Sep 2006 | Jan-Sep 2005 |
|---|---|---|---|---|---|
| Total Revenues | 57,977 | 47,241 | +22.7% | 166,303 | 132,671 |
| EBITDA | 21,337 | 15,196 | +40.4% | 60,651 | 40,812 |
| EBITDA Margin | 36.8% | 32.2% | +4.6 pts | 36.5% | 30.8% |
| Operating Profit (EBIT) | 14,690 | 9,775 | +50.3% | 41,276 | 25,182 |
| Net Income | 10,969 | 4,590 | +139.0% | 32,073 | 17,593 |
| Earnings Per Share (Mex$) | 0.31 | 0.13 | +142.0% | 0.89 | 0.48 |
Liquidity and Debt:
- Net Debt: Reduced to 38.5 billion pesos (down 18.5 billion pesos from December 2005).
- Cash & Securities: 43.7 billion pesos (up 234.3% from Dec 2005).
- Capital Allocation: Capital expenses, share buybacks, and dividends totaled 31.8 billion pesos through September.
Material Changes vs. Prior Period
- Subscriber Growth: Added 6.2 million net wireless subscribers in 3Q06, bringing the total to 113.9 million. Nine-month net additions reached 20.6 million.
- Key Markets: Mexico (+1.6M), Brazil (+1.2M), Argentina (+0.95M), and Colombia (+0.79M) led growth.
- US Operations: Tracfone added 215,000 subscribers in the quarter, reaching 7.2 million total.
- Profitability Expansion: Net income surged 139% year-over-year, driven by strong service revenue growth (up 24.4% YoY) and improved EBITDA margins across most regions.
- Colombia: EBITDA margin jumped 20.9 percentage points YoY to 38.9% due to a shift to less aggressive commercial policies.
- Brazil: EBITDA turned positive (272 million reais) compared to a loss in 3Q05, aided by regulatory changes to a full bill basis.
- Balance Sheet Strength: Significant deleveraging occurred, with net debt falling from 57.0 billion pesos to 38.5 billion pesos, supported by robust operating cash flow.
Guidance, Outlook, and Risks
Management Commentary & Events:
- Brand Integration: Central American subsidiaries (Guatemala, El Salvador, Nicaragua, Honduras) adopted the "Claro" brand in September. Chile launched GSM services under the Claro brand in July.
- Regulatory Changes: An agreement was reached in Mexico regarding a new National and International Calling-Party-Pays scheme effective November 4, 2006.
- Operational Strategy: In Colombia, the company intentionally slowed subscriber growth to improve profitability and margins, resulting in a 70.2% market penetration rate.
Risks and Contingencies:
- Forward-Looking Statements: The filing contains standard disclaimers regarding risks such as economic conditions, industry competition, and regulatory changes that could cause actual results to differ from expectations.
- Weather Impact: Central America's EBITDA margin was affected by extraordinary maintenance costs linked to severe tropical storms.
- Regulatory Uncertainty: Changes in interconnection regimes (e.g., Brazil's shift to full billing) and new calling-party-pays rules in Mexico introduce operational and financial variables.
Investor Verification Checklist
- Subscriber Quality: Verify the sustainability of subscriber growth in high-penetration markets like Colombia (70.2%) where growth has slowed intentionally.
- Regulatory Impact: Assess the financial impact of the new Calling-Party-Pays scheme in Mexico effective November 2006.
- Debt Structure: Review the composition of the $7.46 billion total debt (approx. 5.25 billion USD-denominated) and exposure to currency fluctuations.
- Margin Sustainability: Confirm if the significant EBITDA margin expansion in Colombia and Brazil can be maintained as competition evolves.
- US Operations: Monitor Tracfone's EBITDA margin compression (down to 11.4% in 3Q06) amidst aggressive subscriber acquisition.