Business Context and Reporting Period
Company: America Movil S.A. de C.V.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter ended March 31, 2006
Business Overview: America Movil is a leading Latin American telecommunications provider operating in Mexico, Brazil, Colombia, Argentina, Chile, Central America, Peru, Ecuador, Uruguay, Paraguay, and the United States (via Tracfone). The company reported record subscriber growth for the quarter, with a total wireless subscriber base exceeding 100 million.
Key Financial Metrics
| Metric | 1Q 2006 | 1Q 2005 | YoY Change |
|---|---|---|---|
| Total Revenues (Constant Mex$) | 50.7 billion | 40.1 billion | +26.4% |
| Service Revenues (Constant Mex$) | 43.3 billion | 33.6 billion | +29.0% |
| EBITDA (Constant Mex$) | 18.3 billion | 13.0 billion | +40.7% |
| EBITDA Margin | 36.2% | 32.5% | +370 bps |
| Operating Profit (EBIT) (Constant Mex$) | 12.4 billion | 8.2 billion | +50.9% |
| Net Income (Constant Mex$) | 9.9 billion | 4.6 billion | +114.1% |
| Earnings Per Share (EPS) (Mex$) | 0.28 | 0.13 | +115.4% |
| Earnings Per ADR (US$) | 0.52 | 0.23 | +126.1% |
| Net Debt (Mex$) | 51.4 billion | 57.1 billion (approx) | -5.7 billion reduction |
| Capital Expenditures (Mex$) | 6.5 billion | N/A | N/A |
Material Changes vs. Prior Period
- Subscriber Growth: Net additions of 7.3 million in 1Q06, a 39% increase over 1Q05. The total subscriber base reached 100.6 million. Colombia led with 2.1 million additions, followed by Mexico (1.7 million), Brazil (787k), and the U.S. (767k).
- Profitability Expansion: Net income more than doubled year-over-year. EBITDA margins improved by nearly 4 percentage points to 36.2%, driven by cost controls and declining subscriber acquisition costs relative to revenue growth.
- Balance Sheet Strength: Net debt decreased by 5.7 billion pesos due to strong cash generation and foreign exchange gains. Cash and securities increased by 83.7% sequentially to 23.7 billion pesos.
- Regional Performance:
- Mexico: EBITDA margin hit a record 50.3% despite a 3.6% decline in real ARPU.
- Colombia: EBITDA doubled year-over-year; subscriber base grew 126%.
- Argentina/Paraguay/Uruguay: EBITDA increased 250% year-over-year.
- United States (Tracfone): EBITDA was breakeven in 1Q06 compared to a profit in 1Q05, due to aggressive subscriber acquisition costs, though net additions were up 68%.
Guidance, Outlook, and Material Events
- Dividends: The Annual Shareholders' Assembly approved a dividend of 0.10 pesos per share, payable in July 2006.
- Financing Activities:
- Closed a US$2 billion five-year syndicated loan in April 2006 (interest rate: Libor + 0.25%).
- Colombian subsidiary Comcel issued a 10-year note equivalent to US$200 million in February 2006.
- Acquisitions: Reached an agreement to acquire Verizon's interests in Verizon Dominicana (100%), Telecomunicaciones de Puerto Rico (52%), and CANTV (28.51%) for a total of approximately US$3.68 billion.
- Spectrum: Chilean subsidiary Smartcom acquired 25 MHz of 800 MHz spectrum for its new GSM network rollout.
- Outlook: Management expects subscriber growth to continue, though relative growth rates may decelerate from 2005 highs. Falling tariffs and handset subsidies are expected to drive wireless penetration. Foreign exchange gains (Brazilian real appreciation, Mexican peso depreciation) contributed to financial results but are subject to market volatility.
Investor Verification Checklist
- Subscriber Quality: Verify the sustainability of ARPU trends, which declined in real terms in Mexico, Brazil, Colombia, and the U.S., despite volume growth.
- Debt Structure: Confirm the impact of the new US$2 billion syndicated loan on future interest coverage ratios and liquidity.
- Acquisition Integration: Assess the financial impact and regulatory approval status of the US$3.68 billion Verizon stake acquisition.
- Foreign Exchange Exposure: Monitor the sensitivity of consolidated results to currency fluctuations, particularly the Brazilian real and Mexican peso, which significantly impacted Q1 results.
- U.S. Segment Profitability: Review the timeline for Tracfone to return to profitability given the breakeven EBITDA in 1Q06 amidst high growth.