AMX

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: Fourth Quarter and Full Year ended December 31, 2005
Business Overview: America Movil is a leading wireless operator in the Americas, operating in 13 Latin American countries and the United States. The company reported record organic growth in 2005, adding 32.2 million net subscribers to reach a total wireless base of 93.3 million.

Key Financial Metrics

Note: Financial figures are presented in constant Mexican Pesos (MxP) unless otherwise specified. Net Debt includes accrued interest.

Material Changes vs. Prior Period

• Subscriber Growth: Total wireless subscribers grew 52.7% year-over-year (YoY) to 93.3 million. The fourth quarter saw a record 9.7 million net additions, a 37.4% increase over 4Q04.
• Revenue Expansion: Full-year revenues increased 30.8% YoY. Fourth-quarter revenues rose 27.6% YoY and 13.4% sequentially.
• Profitability Surge: Net income jumped 85.4% YoY to MxP 31.6 billion. This was driven by a 38.8% increase in operating profit, foreign exchange gains, and one-time benefits from a corporate restructuring.
• EBITDA Margins: While the full-year EBITDA margin dipped slightly to 30.3% (from 31.2%) due to high subscriber acquisition costs, the 4Q05 margin improved significantly to 29.1% (from 25.5% in 4Q04).
• Debt Levels: Net debt increased by MxP 12.0 billion to MxP 55.8 billion to fund capital expenditures (MxP 38.7 billion), acquisitions (MxP 10.8 billion), and shareholder returns (MxP 19.4 billion).

Guidance, Outlook, and Management Commentary

• Corporate Restructuring: A significant reorganization was completed in Q4 2005 to improve control and oversight of subsidiaries across 13 countries. This resulted in one-time tax benefits and losses that impacted net income but not cash flow.
• Regional Performance:
  • Colombia: Led growth with 8.0 million net additions (136.9% YoY). EBITDA margin improved in Q4 despite high acquisition costs.
  • Mexico (Telcel): Added 7.1 million subscribers; EBITDA margin rose to 45.1% for the year.
  • Brazil: Reported an EBITDA loss for the year due to one-time adjustments (account receivable write-offs and launch costs in Minas Gerais). Excluding these, the loss would have been significantly smaller.
  • United States (Tracfone): Added 1.7 million subscribers. Q4 EBITDA turned negative (-9.2% margin) due to aggressive subscriber acquisition costs, though full-year EBITDA was positive ($80 million).
• Shareholder Returns: The company paid an extraordinary dividend of MxP 10.7 billion in December 2005 and engaged in share buybacks.
• Outlook Risks: The filing includes a standard legal disclaimer regarding forward-looking statements, noting that actual results may differ due to risks including competition, regulatory changes, and currency fluctuations.

Investor Verification Checklist

• Quality of Earnings: Verify the impact of the one-time corporate restructuring and tax provision reversals on the 85.4% net income increase.
• Brazil Adjustments: Review the specific nature of the "one-time adjustments" in Brazil that caused an EBITDA loss, and assess the sustainability of future margins in that market.
• Subscriber Acquisition Costs (SAC): Analyze the trend in SAC relative to revenue growth, particularly in high-growth markets like Colombia and the U.S., which pressured Q4 EBITDA margins.
• Debt Servicing: Confirm the company's ability to service the increased net debt (MxP 55.8 billion) given the mix of peso and dollar-denominated debt.
• Foreign Exchange Exposure: Assess the sensitivity of future earnings to currency fluctuations, as 2005 results benefited significantly from peso and real appreciation against the dollar.