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, 2004
Business Overview: America Movil is a leading telecommunications provider in Latin America and the U.S., operating primarily through subsidiaries such as Telcel (Mexico), CTI (Argentina), Claro (Brazil), and Tracfone (U.S.). The company focuses on wireless and fixed-line services, with a strategic emphasis on GSM network expansion and organic subscriber growth.
Key Financial Metrics
Revenue: Total revenues for 2004 reached 134.7 billion pesos (constant), representing a 49.1% year-over-year increase. Fourth-quarter revenues were 39.8 billion pesos, up 43.3% from the prior year and 15.9% sequentially.
Profitability:
- EBITDA: 42.1 billion pesos for the full year (25.7% increase), with a margin of 31.2% (down from 37.0% in 2003 due to acquisition costs).
- Operating Profit (EBIT): 23.5 billion pesos, up 24.4% year-over-year.
- Net Income: 16.5 billion pesos for the year, a 4.4% increase over 2003. Fourth-quarter net income was 1.6 billion pesos.
- Earnings Per Share (EPS): 1.35 pesos for the year; 0.13 pesos for Q4.
- Earnings Per ADR: $2.39 for the year; $0.24 for Q4.
Cash Flow and Capital Allocation:
- Operating Cash Flow: Sufficient to cover capital expenditures of 22.4 billion pesos and equity acquisitions of 6.1 billion pesos.
- Shareholder Returns: 13.6 billion pesos spent on share buybacks and dividends. 2004 was the largest year for buybacks to date (12.2 billion pesos).
Debt and Liquidity:
- Net Debt: 42.4 billion pesos (constant), remaining almost unchanged from 2003. This represents 1.0 times EBITDA.
- Financing: Issued $500 million in senior notes due 2015 at 5.75% interest in November 2004.
- Liquidity: Cash and securities totaled 19.1 billion pesos as of December 2004.
Material Changes vs. Prior Period
Subscriber Growth: The fourth quarter of 2004 was the best ever for net subscriber additions, with 7.0 million new wireless subscribers. Full-year additions totaled 17.3 million, nearly 1.5 times the 2003 total. Unlike 2003, where 4.2 million additions were via acquisition, 2004 growth was substantially organic. Total wireless subscribers reached 61.1 million (39.3% annual growth).
Regional Performance:
- Mexico (Telcel): Added 5.4 million subscribers; revenues up 28.3%; EBITDA margin improved to 43.2%.
- Brazil (Claro): Added 4.1 million subscribers; revenues up 76%; EBITDA margin compressed to 0.3% due to high acquisition costs.
- Argentina (CTI): Subscriber base tripled to 3.6 million; revenues doubled; EBITDA margin fell to 0.4% due to aggressive growth investments.
- Colombia (Comcel): Added 2.1 million subscribers; revenues up 38%; EBITDA margin declined to 26.7%.
- United States (Tracfone): Added 1.4 million subscribers (48.9% growth); revenues up 43.9%.
Margin Compression: Consolidated EBITDA margins declined from 37.0% in 2003 to 31.2% in 2004. This was primarily driven by an 87.2% increase in subscriber acquisition costs associated with the acceleration of organic growth.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted that 2004 was a year of record organic growth. Despite margin compression from acquisition costs, the company met its EBITDA and operating profit targets. The company continues to expand its GSM platform across Latin America, offering unified voice and data services.
Strategic Initiatives:
- Increased stake in El Salvador's CTE to 95.2%.
- Commenced operations in Uruguay via CTI.
- Expanded roaming agreements and data-based products.
Risks and Contingencies:
- Forward-Looking Statements: The filing includes standard disclaimers that future results may differ due to economic conditions, industry competition, and regulatory changes.
- Seasonality: Significant subscriber growth in the fourth quarter typically leads to temporary margin compression due to high acquisition costs.
- Regulatory: Ongoing negotiations regarding fixed-mobile interconnection fees in Ecuador.
Investor Verification Checklist
- Organic Growth Quality: Verify the sustainability of the 17.3 million organic subscriber additions and the associated churn rates across key markets (Mexico, Brazil, Argentina).
- Margin Recovery: Monitor whether EBITDA margins can recover in 2005 as subscriber acquisition costs normalize following the aggressive 2004 expansion.
- Debt Servicing: Confirm the impact of the new $500 million senior notes issuance on future interest coverage ratios.
- Regional Volatility: Assess the financial impact of currency fluctuations in Argentina and Brazil on consolidated results, given the significant revenue exposure in these markets.
- Deferred Taxes: Review the 3.2 billion peso deferred tax allowance recorded in Q4 and its implications for future cash flows.