AMX

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: Fourth Quarter and Full Year ended December 31, 2012
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, operating wireless, wireline, broadband, and PayTV services. As of December 31, 2012, the company reported 325.7 million total accesses, including 261.6 million wireless subscribers.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue: Reported revenues of MxP 198 billion in 4Q12, a 1.1% decline year-over-year in local currency terms due to foreign exchange depreciation (specifically the U.S. dollar and Brazilian real). At constant exchange rates, total revenues grew 5.8% and service revenues grew 5.2%.
• Profitability: Net income decreased 8.2% to MxP 15.0 billion in 4Q12. EBITDA margin contracted to 31.1% from 33.5% in the prior year, attributed to the growth of lower-margin PayTV and TracFone businesses, increased smartphone subsidies, and operational costs from network expansion.
• Subscriber Growth: Total accesses increased 8.7% year-over-year to 325.7 million. Wireless subscribers grew 8.2% to 261.6 million, with significant net adds in Brazil (1.8M), Mexico (1.2M), and the U.S. (753k). Fixed-line RGUs grew 10.8% to 64.1 million.
• Debt and Liquidity: Net debt increased to MxP 372.2 billion from MxP 332.1 billion, driven by borrowings to fund acquisitions (including KPN and Telekom Austria interests totaling MxP 84.9 billion). Cash and securities decreased 29.5% to MxP 45.5 billion.

Guidance, Outlook, and Management Commentary

• Strategic Initiatives: Management highlighted the launch of the "Global Peso" program to raise MxP 100 billion over five years, with the first tranche of MxP 15 billion successfully placed. The company is aggressively expanding 4G LTE networks in Mexico (covering 9 cities) and Brazil.
• Product Launches: Introduced "Claro Video," a subscription-based video-on-demand service, and "Telcel America" in the U.S. targeting the Hispanic community.
• Acquisitions: Announced an agreement to acquire 100% of Corporación de Medios Integrales (media and advertising business), expected to close in Q2 2013.
• Risks and Contingencies:
  • Foreign Exchange: Significant volatility in local currencies against the Mexican peso impacted reported revenues and resulted in a MxP 4.8 billion foreign exchange loss in the quarter.
  • Regulatory: In Colombia, the regulator issued a resolution requiring off-net call prices to equal on-net prices for Claro. In Argentina, mobile number portability was implemented in November.
  • Macro Environment: Management noted global economic headwinds, including recessionary trends in Europe and a slowdown in the U.S. economy.
• Unusual Items: The quarter included one-time disconnections of 1.5 million clients (primarily in Mexico and Argentina) to clean up the subscriber base. Additionally, a MxP 4.8 billion foreign exchange loss was recorded due to the appreciation of the euro against other currencies, affecting the valuation of European investments.

Investor Verification Checklist

• FX Impact: Verify the sensitivity of consolidated results to exchange rate fluctuations, particularly the Brazilian Real and U.S. Dollar against the Mexican Peso.
• Margin Compression: Assess the long-term impact of the shift toward lower-margin PayTV and TracFone businesses on overall EBITDA margins.
• Debt Servicing: Review the company's ability to service increased net debt (MxP 372.2B) amidst global economic slowdowns and rising interest rates.
• Regulatory Risks: Monitor the impact of the new pricing regulation in Colombia and potential regulatory changes in other key markets like Brazil and Argentina.
• Acquisition Integration: Evaluate the financial performance and integration progress of recent European investments (KPN, Telekom Austria) and the pending media acquisition.