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, 2005 (Jan-Sep 2005 YTD)
Business Overview: Leading wireless telecommunications provider in the Americas, operating in Mexico, Brazil, Colombia, Argentina, Central America, and the U.S. (Tracfone). The period included the consolidation of new acquisitions in Paraguay, Chile, and Peru.
Key Financial Metrics
| Metric (Millions of Constant Mex$) | 3Q 2005 | 3Q 2004 | Jan-Sep 2005 | Jan-Sep 2004 |
|---|---|---|---|---|
| Total Revenues | 45,503 | 34,971 | 127,716 | 96,632 |
| EBITDA | 14,636 | 11,328 | 39,287 | 32,514 |
| EBITDA Margin | 32.2% | 32.4% | 30.8% | 33.6% |
| Operating Profit (EBIT) | 9,415 | 6,749 | 24,241 | 18,735 |
| Net Income | 4,422 | 7,476 | 16,936 | 15,140 |
| EPS (Mex$) | 0.12 | 0.20 | 0.47 | 0.41 |
| Net Debt | 47,400 | n/a | n/a | n/a |
Note: Net Debt of 47.4 billion pesos as of September 30, 2005. EPS figures adjusted for a 3:1 stock split on July 18, 2005.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 30.1% year-over-year (YoY) in 3Q05 and 32.2% for the nine-month period. Service revenues grew 29.2% YoY in the quarter.
- Profitability: EBITDA rose 29.2% YoY in 3Q05. Operating profit surged 39.5% YoY. However, Net Income declined 40.8% YoY in the quarter due to higher financing costs and foreign exchange losses, though it grew 11.9% on a nine-month basis.
- Subscriber Base: Total wireless subscribers reached 83.6 million (up 54.7% YoY). Organic growth in the first nine months (19 million) exceeded total net additions for all of 2004 (17.2 million).
- Debt: Net debt increased by approximately 10 billion pesos in the quarter, primarily driven by acquisitions in Paraguay, Chile, and Peru totaling 10.5 billion pesos.
Guidance, Outlook, and Management Commentary
- Acquisitions: Completed acquisitions of operations in Paraguay (Hutchison Whampoa), Chile (Smartcom from Endesa), and Peru (TIM Peru). Chile and Peru operations were consolidated starting in September.
- Operational Strategy: Management highlighted a seasonal slowdown in subscriber additions in Q3, which reduced subscriber acquisition costs and improved EBITDA margins. Data-based revenues in Mexico grew 55% YoY.
- Capital Allocation: Share buybacks and dividends totaled 2.7 billion pesos in Q3 and 6.1 billion pesos YTD. Capital expenditures were 7.8 billion pesos in Q3 and 25.4 billion pesos YTD.
- Financing: Issued a 5 billion peso global bond on September 29 with a 9% coupon and 10-year tenor, the first peso bond issued by a Mexican corporate outside Mexico.
- Risks: Forward-looking statements are subject to risks including general economic conditions, industry competition, and regulatory changes. Actual results may differ materially from expectations.
Investor Verification Checklist
- Acquisition Integration: Verify the financial impact and integration progress of the Chile, Peru, and Paraguay acquisitions consolidated in Q3.
- Net Income Volatility: Investigate the drivers behind the 40.8% YoY decline in Q3 Net Income despite strong EBITDA growth (specifically financing costs and FX losses).
- Debt Levels: Monitor the trajectory of net debt following the 10 billion peso increase and the new 5 billion peso bond issuance.
- Regional Performance: Assess the sustainability of high growth rates in Colombia and Brazil versus the profitability challenges noted in Brazil (negative EBITDA margin in Q3).
- Regulatory Environment: Review the impact of the spectrum license renewal in Mexico (Region 9) on future cost structures.