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: Third Quarter ended September 30, 2011 (Q3 2011)
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, operating wireless, wireline, broadband, and PayTV services under brands such as Telcel, Claro, and TracFone.
Key Financial Metrics (Q3 2011)
| Metric | Q3 2011 | Q3 2010 | Variance |
|---|---|---|---|
| Total Revenues | MxP 167.3 Billion | MxP 155.0 Billion | +7.9% |
| EBITDA | MxP 63.9 Billion | MxP 63.3 Billion | +1.0% |
| EBITDA Margin | 38.2% | 40.8% | -260 bps |
| Operating Profit (EBIT) | MxP 39.3 Billion | MxP 40.6 Billion | -3.3% |
| Net Income | MxP 18.7 Billion | MxP 23.7 Billion | -21.2% |
| Earnings Per Share (MxP) | 0.24 | 0.29 | -18.2% |
| Net Debt | MxP 247 Billion | MxP 207 Billion (implied) | +MxP 40 Billion |
| Cash & Securities | MxP 126.7 Billion | MxP 114.1 Billion | +11.0% |
Material Changes vs. Prior Period
- Subscriber Growth: Total accesses reached 298 million (+11.7% YoY). Wireless subscribers grew 11.4% to 241.5 million, with 5.5 million net adds in Q3. Postpaid subscribers grew 22% YoY, outpacing prepaid growth.
- Revenue Drivers: Revenue growth was driven by mobile and fixed data services and PayTV. PayTV revenues climbed 58% YoY. All operations registered revenue increases.
- Profitability Pressure: EBITDA margin declined to 38.2% due to higher costs for network expansion (fiber, backhaul) in Mexico and Brazil, increased maintenance, and content procurement for PayTV.
- Net Income Decline: Net profit fell 21% primarily due to significant foreign exchange losses (MxP 22.2 billion in Q3) resulting from the depreciation of local currencies against the U.S. dollar, against which a portion of the company's debt is denominated.
- Capital Allocation: The company distributed MxP 56 billion to shareholders via dividends and buybacks in the first nine months of 2011.
Outlook, Risks, and Unusual Items
- Foreign Exchange Risk: The filing highlights significant exposure to currency fluctuations. Approximately 12.5% of revenues are dollar-based, but debt exposure to hard currencies generated substantial losses when local currencies depreciated.
- Regulatory & M&A:
- Telmex Tender Offer: A tender offer for Teléfonos de México (Telmex) shares was announced at MxP 10.50 per share, expiring November 11, 2011.
- Digicel Swap: The acquisition of Digicel operations in Honduras and El Salvador (in exchange for Jamaica operations) faces regulatory conditions in El Salvador, delaying closing.
- DLA Acquisition: Agreement reached to acquire 100% of DLA, Inc. (digital entertainment distribution), expected to close before year-end.
- Debt Issuances: In September and October, the company issued approximately USD 5.1 billion equivalent in bonds across various currencies (USD, EUR, GBP, CHF, JPY) to manage liquidity and debt maturity profiles.
- Operational Costs: Management noted that high costs associated with construction supervision and PayTV content in Brazil are expected to diminish over time.
Investor Verification Checklist
- FX Exposure Impact: Verify the sensitivity of future earnings to further depreciation of Latin American currencies against the USD, given the MxP 22 billion loss in Q3.
- EBITDA Margin Trajectory: Monitor whether network expansion costs in Brazil and Mexico stabilize, allowing margins to recover from the 38.2% level.
- Telmex Tender Offer Outcome: Confirm the acceptance rate and final closing of the Telmex tender offer to assess potential consolidation benefits.
- Regulatory Approvals: Track the status of the Digicel swap in El Salvador and the DLA acquisition closing.
- Postpaid Conversion: Validate the sustainability of the 22% postpaid growth rate, which is a key driver for ARPU and margin improvement.