Business Context and Reporting Period
Company: America Movil S.A. de C.V.
Filing Type: Form 6-K
Reporting Period: Third Quarter 2003 (ended September 30, 2003)
Announcement Date: October 21, 2003
America Movil reported strong operational growth driven by subscriber additions across its Latin American and U.S. operations. The period was marked by significant strategic acquisitions in Brazil, El Salvador, and Argentina, alongside the full consolidation of its Ecuadorian subsidiary, Conecel.
Key Financial Metrics
| Metric | Q3 2003 | YTD 2003 | YoY Change (Q3) |
|---|---|---|---|
| Revenues | 21.3 billion MXN | 58.5 billion MXN | +33.0% |
| EBITDA | 8.2 billion MXN | 22.4 billion MXN | +36.8% |
| EBITDA Margin | 38.4% | 38.3% | N/A |
| Operating Profit | 4.7 billion MXN | 12.7 billion MXN | +49.3% |
| Net Income | 1.9 billion MXN | 9.6 billion MXN | +740% (7.4x) |
| Total Debt | 49.0 billion MXN | N/A | +5.7 billion MXN (QoQ) |
| Net Debt | 30.6 billion MXN | N/A | Unchanged (QoQ) |
| Net Debt/EBITDA (LTM) | 1.0x | N/A | Decreased |
Material Changes vs. Prior Period
- Subscriber Growth: Wireless subscribers reached 37.6 million, adding 1.8 million net subscribers in Q3. Fixed lines totaled 890,000. Telcel (Mexico) added 818,000 subscribers, reaching 22.1 million.
- Revenue Expansion: Consolidated revenues grew 33% year-over-year, driven by organic growth and the inclusion of Brazilian subsidiary BSE since May 2003.
- Profitability Surge: Net income increased 7.4 times compared to Q3 2002. Operating profits rose 49.3% annually.
- Debt Structure: Total debt increased by 5.7 billion pesos due to funding arrangements for pending acquisitions. However, net debt remained stable at 30.6 billion pesos as payments were not yet executed in the quarter.
- Regional Performance:
- Brazil: Telecom Americas added 386,000 subscribers; revenues up 62.2% YoY. Reported an operating loss of 52 million reais due to brand launch costs and green-field deployment.
- Colombia: Comcel revenues up 33.2% YoY; operating profit up 68.1% YoY.
- Ecuador: Conecel revenues appeared down 20.3% QoQ due to a one-time interconnection revenue in Q2; excluding this, organic growth was 12.2%.
- U.S.: Tracfone surpassed 2.5 million subscribers; revenues up 46.2% YoY.
Guidance, Outlook, and Risks
- Acquisitions:
- BCP (Brazil): Agreed to acquire for $625 million; expected to close in Q4. Adds 1.7 million subscribers.
- CTE (El Salvador): Agreed to acquire 51% for $417 million; expected to close before end of October.
- CTI (Argentina): Acquired 64% economic interest and 80% voting interest; adds 1.2 million subscribers.
- Conecel (Ecuador): Acquired remaining minority interest in July, now 100% owned.
- Financial Impact of Acquisitions: Once pending acquisition payments are made, net debt is projected to rise to approximately 43.3 billion pesos.
- Unusual Items:
- Recorded an extraordinary deferred tax charge of 861 million pesos in Q3.
- Foreign exchange results differed significantly from the prior quarter due to the appreciation of the Brazilian real in the previous period.
- Accounting Changes: Telecom Americas adopted "bill-and-keep" accounting for interconnection revenues effective July 2003, rendering current period data not directly comparable to prior periods.
- Risks: Transactions are subject to regulatory approvals. Brazil operations face short-term operating losses due to network deployment and brand launch costs.
Investor Verification Checklist
- Confirm the closing dates and regulatory approvals for the BCP, CTE, and CTI acquisitions.
- Verify the impact of the "bill-and-keep" accounting change on Brazil's reported revenue and EBITDA comparability.
- Monitor the execution of the $1.042 billion in acquisition payments and the resulting increase in net debt to ~43.3 billion pesos.
- Assess the sustainability of Telcel's ARPU growth (3.4% prepaid, 2.1% postpaid) in the face of competitive pressures.
- Review the timeline for Telecom Americas to return to operating profitability following heavy investment in green-field regions.