Business Context and Reporting Period
Company: AMÉRICA MÓVIL, S.A. DE C.V. (America Móvil)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six-month period ended June 30, 2004 (Unaudited)
Accounting Basis: Mexican GAAP, presented in constant pesos with purchasing power as of June 30, 2004. The filing incorporates by reference Amendment No. 1 to Registration Statements on Form F-4 filed September 23, 2004.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2004 (Constant Pesos) | Six Months Ended June 30, 2003 (Constant Pesos) | USD Equivalent (2004) |
|---|---|---|---|
| Operating Revenues | P. 58,488,867 | P. 38,481,326 | $5,125 million |
| Operating Income | P. 11,368,636 | P. 8,177,286 | $996 million |
| Net Income | P. 7,270,265 | P. 7,854,939 | $637 million |
| Net Income Per Share | P. 0.57 | P. 0.61 | $0.05 |
| Total Assets | P. 164,941,176 | P. 152,393,200 | $14,455 million |
| Total Debt | P. 51,165,983 | P. 50,106,781 | $4,484 million |
| Cash & Short-term Investments | P. 9,036,439 | P. 9,436,685 | $792 million |
| Operating Cash Flow | P. 21,029,861 | P. 16,482,047 | $1,842 million |
Note: USD amounts are convenience translations at an exchange rate of Ps. 11.41 to US$1.00.
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased 52% year-over-year to P. 58.5 billion, driven primarily by the consolidation of new acquisitions and organic growth in international segments.
- Profitability: While operating income rose 39% to P. 11.4 billion, Net Income decreased 7.5% to P. 7.3 billion. This decline is attributed to higher financing costs and minority interest allocations, despite a significant net exchange gain of P. 1.44 billion (compared to a loss of P. 1.13 billion in 2003).
- Balance Sheet: Total assets grew 8.2% to P. 164.9 billion. Long-term debt increased to P. 45.4 billion, while short-term debt decreased significantly to P. 5.7 billion due to refinancing activities.
- Segment Performance: Mexico remained the primary revenue generator (P. 32.3 billion), followed by Brazil (P. 8.7 billion) and Colombia (P. 3.7 billion). Argentina reported an operating loss of P. 2.6 billion.
Guidance, Outlook, and Significant Events
- Acquisitions:
- ENITEL (Nicaragua): Acquired a 49% interest in January 2004 and agreed to purchase an additional 50.03% controlling interest in June 2004 for US$128.0 million (closed August 2004).
- Megatel (Honduras): Agreed to acquire 100% of the operator in June 2004 for US$81.7 million (closed July 2004).
- Uruguay: Acquired a 1900 MHz frequency license for US$14.2 million in May 2004.
- CTI (Colombia): Increased equity interest to 100% in July 2004 for US$17.1 million.
- Divestitures: Sold 60% interest in Techtel LMDS and Telstar to Telmex in April 2004 for US$75 million, recognizing a gain of P. 17.7 million recorded as additional paid-in capital.
- Debt Refinancing: Issued US$1.3 billion in senior notes (fixed and floating rate) and secured a US$350 million loan to refinance obligations maturing in 2004-2005, extending the average life of debt and reducing overall cost.
- Share Repurchases: Purchased approximately 345 million shares (Series L and A) during the six-month period for P. 6.78 billion.
- Accounting Changes: Early adoption of Mexican Bulletin B-7 regarding business combinations (purchase method, non-amortization of goodwill for new acquisitions). Evaluation of EITF 00-21 indicates a potential net income reduction of P. 342 million under U.S. GAAP.
Investor Verification Checklist
- Acquisition Integration: Verify the financial impact and integration progress of ENITEL, Megatel, and the Uruguay license acquisition.
- Argentina Exposure: Review the specific drivers of the P. 2.6 billion operating loss in the Argentina segment and its impact on consolidated margins.
- Debt Covenants: Confirm continued compliance with financial covenants (Debt/EBITDA < 3.5x; EBITDA/Interest > 2.5x), particularly given the increased debt load from acquisitions.
- GAAP Reconciliation: Analyze the reconciliation between Mexican GAAP and U.S. GAAP, specifically the impact of inflation accounting (Bulletin B-10) and the non-amortization of goodwill adjustments.
- Foreign Exchange Risk: Assess the sensitivity of results to exchange rate fluctuations, given significant foreign currency denominated debt and assets.