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 ended June 30, 2012
Business Overview: América Móvil is a leading telecommunications provider in Latin America and the United States, offering wireless, fixed-line, broadband, and PayTV services. The company operates under brands such as Telcel, Telmex, and Claro.
Key Financial Metrics
| Metric | 2Q 2012 | 2Q 2011 | YoY Change |
|---|---|---|---|
| Total Revenues | 191.7 billion MXN | 175.5 billion MXN | +9.3% |
| EBITDA | 65.5 billion MXN | 63.5 billion MXN | +3.1% |
| EBITDA Margin | 34.1% | 36.2% | -2.1 pts |
| Operating Profit (EBIT) | 39.1 billion MXN | 39.5 billion MXN | -1.0% |
| Net Income | 13.3 billion MXN | 24.3 billion MXN | -45.5% |
| Earnings Per Share (MXN) | 0.17 | 0.31 | -44.3% |
| Net Debt (End of Period) | 361 billion MXN | 331.3 billion MXN (implied) | +29.7 billion MXN (H1) |
| Cash & Securities | 62.4 billion MXN | 64.5 billion MXN (Dec '11) | -3.3% |
Material Changes vs. Prior Period
- Subscriber Growth: Added 5.9 million wireless subscribers (including 1.1 million from Simple Mobile acquisition) and 1.7 million fixed-line RGUs. Total accesses reached 313.1 million (+7.8% YoY).
- Revenue Drivers: Wireless revenues rose 14.1% YoY, driven by mobile data (+32% at constant rates) and PayTV (+23%). Fixed-voice revenues declined 7.7% due to long-distance sales drops.
- Profitability Impact: Net income dropped significantly (-45.5%) primarily due to a foreign exchange loss of 16.1 billion MXN caused by the depreciation of several Latin American currencies against the Mexican peso. Comprehensive financing costs rose to 17.2 billion MXN.
- Cost Structure: Equipment costs increased 21.4% YoY, outpacing revenue growth, due to currency depreciation and increased smartphone subsidies for postpaid clients.
Guidance, Outlook, and Risks
- Strategic Acquisitions:
- Simple Mobile (USA): Acquired on June 19, 2012, adding 1.1 million subscribers.
- KPN (Netherlands): Increased ownership to 27.7% via tender offer and market purchases (approx. €3.0 billion cost).
- Telekom Austria: Acquired 5% stake with an agreement to acquire an additional 16% pending approvals (target ~23% total).
- Operational Outlook: Management highlighted strong postpaid growth in Mexico, Colombia, and Peru. LTE network rollout continues in Mexico. Integration of fixed and mobile assets in Colombia is underway.
- Risks and Contingencies:
- Currency Volatility: Significant foreign exchange losses impacted net income; continued depreciation of local currencies vs. the peso remains a risk.
- Regulatory Environment: Reductions in mobile termination rates (MTR) in Mexico and Brazil continue to pressure voice revenues. Regulatory sanctions were enforced against Claro in Brazil regarding customer complaints.
- Competition: Intensified competition in Brazil due to economic slowdown and spectrum auction costs.
Investor Verification Checklist
- Verify the impact of the 16.1 billion MXN foreign exchange loss on the true operating performance vs. reported net income.
- Confirm the regulatory approval status for the additional 16% stake acquisition in Telekom Austria.
- Monitor the integration progress and cost synergies from the Simple Mobile acquisition in the US market.
- Assess the sustainability of EBITDA margins given the rising equipment costs and smartphone subsidies.
- Review the specific regulatory risks in Brazil regarding the Anatel sanctions and their potential financial impact.