Business Context and Reporting Period
Company: América Móvil, S.A.B. de C.V.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Second Quarter 2018 (Ended June 30, 2018)
Announcement Date: July 17, 2018
América Móvil is a leading telecommunications provider operating primarily in Latin America and the United States, with significant holdings in Europe (Telekom Austria Group). The company reported financial and operating results for Q2 2018, highlighting strong postpaid subscriber growth in key markets like Brazil and Mexico, offset by significant foreign exchange losses impacting net income.
Key Financial Metrics
| Metric | Q2 2018 | Q2 2017 | YoY Change |
|---|---|---|---|
| Total Revenues (MXN) | 257.3 Billion | 249.4 Billion | +3.2% |
| Service Revenues (MXN) | 218.9 Billion | 215.9 Billion | +1.4% |
| EBITDA (MXN) | 72.0 Billion | 69.9 Billion | +3.0% |
| EBITDA Margin | 28.0% | 28.0% | 0.0 pp |
| Operating Profit (EBIT) (MXN) | 32.6 Billion | 31.2 Billion | +4.8% |
| Net Income (MXN) | -0.2 Billion (Loss) | 14.3 Billion | -101.7% |
| Net Debt (MXN) | 617.6 Billion | 628.7 Billion (Dec '17) | -11.1 Billion |
| Capital Expenditures (6M 2018) | 57.1 Billion | N/A | N/A |
Material Changes vs. Prior Period
- Subscriber Growth: The company added 1.1 million net postpaid subscribers, double the prior year's figure. Key contributions came from Brazil (537k), Mexico (184k), and Colombia (103k). Total wireless lines ended at 279 million (-0.4% YoY) due to prepaid disconnections, particularly in the U.S. (Safelink) and Brazil.
- Revenue Performance: Total revenues grew 3.2% in MXN terms. Service revenues rose 1.4% (2.0% at constant exchange rates). Mobile service revenue growth was notable in Brazil (+11.9%) and Mexico (+8.7%).
- Profitability Impact: While Operating Profit increased 4.8%, the company reported a net loss of 236 million pesos. This was primarily driven by comprehensive financing costs of 32.2 billion pesos, largely due to foreign exchange losses from the depreciation of the Mexican peso against the U.S. dollar.
- Debt Reduction: Net debt decreased by 11.1 billion pesos compared to December 2017, aided by operating cash flow covering capital expenditures and pension contributions.
Outlook, Risks, and Management Commentary
- Management Commentary: Management highlighted the acceleration of mobile service revenue growth in Brazil and Mexico. In the U.S., TracFone's revenue growth turned positive. Fixed-broadband accesses grew 5.0% YoY. EBITDA in Mexico jumped 14.9%, its best annual increase in nearly eleven years.
- Foreign Exchange Risk: The filing emphasizes the significant impact of currency fluctuations. The dollar appreciated 10.1% vs. the Mexican peso and 14.7% vs. the Brazilian real during the quarter, resulting in substantial foreign exchange losses that erased operating profits.
- Regulatory and Competitive Risks:
- Chile: The Supreme Court ordered operators to dispose of excess spectrum holdings acquired in the 700MHz auction and suspended the use of the 3.5MHz band due to inefficient utilization. The company is analyzing legal actions.
- Peru: Intense competition and a 44% cut in interconnection rates led to a 12.7% decline in ARPU and a 15.4% drop in EBITDA.
- Central America: A one-time charge related to an interconnection dispute in Guatemala impacted EBITDA.
- Telekom Austria: Moody's upgraded the subsidiary's rating to Baa1 with a stable outlook, citing strong cash flow and conservative financial strategy.
Investor Verification Checklist
- FX Sensitivity: Verify the magnitude of foreign exchange exposure and the effectiveness of hedging strategies given the significant impact on net income.
- Peru Competitive Landscape: Assess the sustainability of revenue and margin compression in Peru due to interconnection rate cuts and unlimited voice/data plans.
- Chile Regulatory Resolution: Monitor the outcome of legal challenges regarding spectrum disposal and usage restrictions in Chile.
- U.S. Lifeline Program: Track the continued impact of regulatory changes on the Safelink brand and subscriber churn in the United States.
- Debt Structure: Review the classification and repayment schedule of hybrid bonds (e.g., Telekom Austria) and their impact on net debt calculations.