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: First Quarter 2004 (Ended March 31, 2004)
Business Overview: America Movil is the leading wireless operator in Latin America and the largest in the Americas by equity wireless subscribers. The company operates in Mexico, Brazil, Argentina, Colombia, Ecuador, Central America, and the United States (via Tracfone).
Key Financial Metrics
| Metric | 1Q 2004 | 1Q 2003 | YoY Change |
|---|---|---|---|
| Total Revenues (Mex$ millions) | 27,917 | 17,923 | +55.8% |
| EBITDA (Mex$ millions) | 9,810 | 6,741 | +45.5% |
| EBITDA Margin | 35.1% | 37.6% | -2.5 pts |
| Operating Profit (EBIT) (Mex$ millions) | 5,277 | 3,870 | +36.4% |
| Net Income (Mex$ millions) | 4,214 | 3,111 | +35.5% |
| Earnings Per Share (Mex$) | 0.33 | 0.24 | +37.5% |
| Net Debt (US$ millions) | 3,400 | 3,497 | -97 |
| Net Debt / EBITDA Ratio | <1.1x | N/A | N/A |
Liquidity & Cash Flow: The company generated strong free cash flow, reducing net debt by $97 million despite $260 million in share repurchases and $49 million in acquisitions. Cash and securities totaled 15.4 billion pesos as of March 2004.
Material Changes vs. Prior Period
- Subscriber Growth: Total wireless subscribers reached 46.7 million, adding 2.9 million in the quarter. Equity subscribers totaled 45.7 million.
- Mexico (Telcel): Added 1.13 million subscribers (Total: 24.6M). ARPU increased 7.5% to 185 pesos.
- Brazil: Added 436 thousand subscribers (Total: ~10M). Revenues nearly doubled YoY due to acquisitions (BCP, BSE) and green-field launches.
- USA (Tracfone): Added 395 thousand subscribers (Total: 3.3M). Turned an operating profit of $5 million vs. a $10 million loss in 1Q03.
- Central America: Highest growth rate (15.2% YoY), driven by Nicaragua (35.3% growth) and El Salvador (29.2% growth).
- Margin Compression: Consolidated EBITDA margin decreased to 35.1% from 37.6% in 1Q03. This was attributed to rapid subscriber acquisition costs and extraordinary expenses in Brazil related to network rollouts and re-branding.
- Debt Refinancing: Issued $1.6 billion in international debt and $350 million in bank loans to refinance obligations maturing in 2004 and 2005, extending the average debt life and reducing costs.
Guidance, Outlook, and Risks
- Dividends: The Board recommended doubling the dividend to 12 peso cents per share, representing a tripling of dividends over three years.
- Strategic Moves:
- Argentina: Sold 60% interest in broadband joint venture Techtel for $75 million to focus on the wireless market.
- Mexico: Plans to introduce "push-to-talk" services in Q4 2004 to compete more efficiently in specialized market segments.
- Risks & Contingencies:
- Brazil Costs: Extraordinary costs in Brazil (start-up of new regions, GSM rollout) are expected to decline gradually throughout the year.
- Forward-Looking Statements: Results depend on general economic conditions, industry trends, and successful execution of capital expenditure plans. No guarantee that expected trends will occur.
Investor Verification Checklist
- Brazil Turnaround: Verify the trajectory of EBITDA margin recovery in Brazil as extraordinary start-up costs decline.
- Debt Maturity Profile: Confirm the specific terms and interest rates of the new $2.35 billion debt issuance to ensure cost reduction claims are realized.
- Share Repurchase Impact: Assess the impact of the $260 million buyback on future liquidity and capital allocation priorities.
- Argentina Strategy: Monitor the performance of the remaining wireless operations in Argentina following the divestiture of the broadband joint venture.
- US Operations: Validate the sustainability of Tracfone's profitability given the decline in ARPU despite subscriber growth.