AMX

Business Context and Reporting Period

Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 6-K (Report of a Foreign Private Issuer)
Reporting Period: Unaudited preliminary consolidated financial information for the year ended December 31, 2021, compared to the audited year ended December 31, 2020.
Business Overview: América Móvil is a leading telecommunications provider in Latin America and Europe, operating in 24 countries. As of December 31, 2021, the company reported 286.5 million wireless subscribers and 80.5 million fixed revenue generating units (RGUs). The filing supplements the 2020 Form 20-F and provides disclosures related to a potential debt offering and the spin-off of tower assets.

Key Financial Metrics

Note: All figures are in millions of Mexican pesos (Ps.) unless otherwise noted. U.S. dollar conversions use the rate of Ps.20.5835 to U.S.$1.00 as of December 31, 2021.

Material Changes vs. Prior Period

• Revenue Growth: Total operating revenues increased by 1.9% (Ps. 15.8 billion) year-over-year. At constant exchange rates, revenue grew by 7.8%, driven by one-off items (tower sales) and increased equipment sales, partially offset by a decline in Pay TV revenues.
• Profitability Surge: Net profit from continuing operations increased by 119.2% to Ps. 74.6 billion. This was primarily due to a significant reduction in net foreign currency exchange losses (Ps. 17.0 billion in 2021 vs. Ps. 65.4 billion in 2020) and improved operating margins.
• Discontinued Operations: The sale of TracFone to Verizon was completed in November 2021. Results are classified as discontinued operations, contributing Ps. 125.3 billion to net profit in 2021.
• Cost Management: Total operating costs and expenses decreased by 0.9% in reported pesos but increased by 4.9% at constant exchange rates due to inflationary pressures and network maintenance costs. Commercial, administrative, and general expenses decreased by 5.8%.
• Debt Reduction: Net debt decreased by approximately Ps. 137 billion (from Ps. 537.8 billion to Ps. 400.8 billion), aided by the cash proceeds from the TracFone sale.

Guidance, Outlook, and Recent Developments

• Sitios Spin-Off: Shareholders approved the spin-off of telecommunications towers and passive infrastructure outside of Mexico into a new entity, Sitios Latinoamérica, S.A.B. de C.V. This is intended to maximize infrastructure value. A credit facility of Ps. 20.6 billion was secured in March 2022 to refinance existing indebtedness related to this transaction.
• Strategic Transactions:
  • Chile: Agreed to form a 50-50 joint venture with Liberty Latin America (LLA) combining VTR and Claro Chile operations. Expected closing in H2 2022 with estimated run-rate synergies of over U.S.$180 million.
  • Panama: Agreed to sell 100% of Claro Panama to Cable & Wireless Panama for U.S.$200 million. Expected closing in H1 2022.
  • Brazil: Won a bid to acquire 32% of Oi Group's mobile business for R$3.6 billion. Closing expected in 2022.
• Capital Allocation: The company repurchased approximately 2,173 million Series L shares for Ps. 36.8 billion in 2021. Shareholders approved an increase in the buyback program fund by Ps. 26 billion in November 2021.
• Legal Contingency: In May 2021, an ICSID Tribunal ruled against América Móvil in an arbitration against Colombia regarding terminated concessions, ordering the company to pay approximately U.S.$2.2 million in costs.
• Outlook: Management expects capital expenditures to return to pre-pandemic levels in 2022. The company continues to monitor the impact of the COVID-19 pandemic, though supply chain disruptions for handsets have been mitigated.

Investor Verification Checklist

• TracFone Sale Adjustments: Verify the final settlement of the U.S.$500.7 million working capital adjustment and the potential U.S.$650 million earn-out payment from Verizon.
• Sitios Spin-Off Execution: Monitor the regulatory approvals and tax neutrality confirmations required to finalize the tower spin-off and the transfer of debt obligations to Sitios.
• Chile Joint Venture: Track the regulatory approval process for the VTR/Claro Chile merger and the realization of the projected U.S.$180 million in synergies.
• Currency Exposure: Assess the impact of exchange rate fluctuations, particularly the Mexican peso, Brazilian real, and Argentine peso, on future reported earnings given the company's significant non-Mexican operations.
• Regulatory Environment: Review ongoing regulatory developments in Mexico (IFT resolutions) and other operating jurisdictions that may affect pricing or infrastructure costs.