Business Context and Reporting Period
Company: America Movil SAB de CV
Filing Type: Form 6-K
Reporting Period: First Quarter 2003 (Ended March 31, 2003)
Overview: America Movil reported strong organic growth and strategic expansion in Latin America and the U.S. The quarter included the consolidation of Celcaribe (Colombia) following its acquisition in February and the announcement of an agreement to acquire a 95% interest in BSE, S.A. (Brazil).
Key Financial Metrics
| Metric | 1Q 2003 | 1Q 2002 | YoY Change |
|---|---|---|---|
| Total Revenues | 17.2 billion Mex$ | 12.3 billion Mex$ | +40.2% |
| Service Revenues | 15.3 billion Mex$ | 10.9 billion Mex$ | +40.6% |
| EBITDA | 6.5 billion Mex$ | 4.1 billion Mex$ | +59.0% |
| EBITDA Margin | 37.6% | 33.2% | +4.4 pts |
| Operating Profit (EBIT) | 3.7 billion Mex$ | 2.5 billion Mex$ | +48.6% |
| Net Income | 3.0 billion Mex$ | 1.5 billion Mex$ | +93.2% |
| Earnings Per Share (Mex$) | 0.23 | 0.11 | +109.1% |
| Net Debt to EBITDA (LTM) | 1.44x | N/A | N/A |
| Total Debt | 45.1 billion Mex$ | N/A | -2.6 billion Mex$ (QoQ) |
Material Changes vs. Prior Period
- Subscriber Growth: Total subscriber base reached 33.2 million, an increase of 1.6 million in the quarter. This includes 237,000 subscribers from the Celcaribe acquisition. Proportionate subscribers grew 32.1% year-over-year.
- Revenue Drivers: Service revenues surged 8.5% sequentially and 40.6% annually. Equipment revenues declined 21.2% sequentially due to seasonality but rose 37.0% year-over-year.
- Profitability: Net income nearly doubled year-over-year despite higher depreciation and amortization charges (up 23.4% sequentially) resulting from asset revaluations in Colombia and Brazil.
- Debt Reduction: Gross debt decreased by 2.6 billion pesos in the quarter, even after incorporating Celcaribe's debt. The net debt-to-EBITDA ratio improved to 1.44 times.
- Tax Provision: A new reserve for taxes on service revenues in Mexico impacted operating profit; without this provision, operating profit would have increased 7.4% sequentially.
Guidance, Outlook, and Management Commentary
- Strategic Acquisitions:
- Colombia: Completed acquisition of Celcaribe (95% interest), achieving nationwide coverage.
- Brazil: Agreed to acquire 95% of BSE, S.A. (expected to close Q2 2003), expanding footprint to cover 82% of Brazil's population.
- Capital Allocation:
- Dividends: Increased from 0.044 pesos per share (2002) to 0.060 pesos per share (2003).
- Share Repurchase: Approved a new 5 billion peso share-repurchase program to commence after the current program is exhausted.
- Liquidity and Debt Profile: Improved debt maturity profile via a new 5-year syndicated loan in Mexico and a 7-year bond issue in Colombia. Short-term debt is projected to fall to 12.4% of total debt by end of April (down from 22.1% in December).
- Operational Highlights:
- Telcel (Mexico): Subscribers grew to 20.8 million; churn rate improved to 3.0%.
- Tracfone (U.S.): Best organic growth rate (244k net additions), reaching 2.2 million subscribers, though reporting an EBITDA loss of $6 million due to acquisition costs.
- Telecom Americas (Brazil): Reached 5.3 million subscribers with strong service revenue growth.
Investor Verification Checklist
- Acquisition Closing: Verify the closing timeline and regulatory conditions for the BSE, S.A. (Brazil) acquisition.
- Tax Impact: Assess the long-term impact of the new service revenue tax reserve in Mexico on future margins.
- Asset Revaluation: Confirm the sustainability of EBITDA growth given the one-time impact of asset revaluations in Colombia and Brazil on depreciation charges.
- Tracfone Economics: Monitor Tracfone's path to profitability as subscriber acquisition costs remain elevated relative to revenue growth.
- Debt Maturity: Review the specific terms of the new Mexican syndicated loan and Colombian bond issue to ensure alignment with cash flow projections.