America Movil, S.A.B. de C.V. (AMX)

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America Movil S.A. de C.V (AMX)
Q1 2006 Earnings Conference Call
May 3, 2006 10:00 a.m. EST

Executives

Andrew Campbell - Host from CSFB, Latin America Telecom & Media Analyst
Daniel Hajj Aboumrad - America Movil, CEO
Carlos Garcia Moreno Elizondo - America Movil, CFO

Analysts

Kevin O'Conner - Deutsche Bank
Rodrigo Ortigao - CBVA
Mauricio Fernandes - Merrill Lynch
Martin Mara - Santander
Patrick Grenham - Citigroup
Dan Kwiatkowski - Schroder
Rizwan Ali - Bear Stearns
Henry Cobbe - Thames River Capital (UK) Limited
Patrick O'Brien - Alex Brown Investment Management
James Breen - Thomas Weisel Partners
Allen Gillespie - Goldman Sachs
Michael Rogers - Conning Asset Management
Scott Shiffman - Lehman Brothers
Pedro Gonzalez - UBS
Daniel Guevara - Morgan Stanley
Sumit Desai - CFB
Charles Chichester - Cazenove & Company

Presentation

Operator

Good morning. My name is Nicole and I will be your conference operator today. At this time I would like to welcome everyone to the America Movil Conference Call, First Quarter 2006. (Operator Instructions) Thank you. Mr. Campbell you may begin your conference.

Andy Campbell

Yes, thank you. This is Andy Campbell, I am the Latin America Telecom and Media Analyst for Credit Suisse and it is our pleasure to be hosting America Movil's First Quarter 2006 Conference Call. We have on the line with us today from Mexico City, Daniel Hajj, CEO; Carlos Garcia Moreno Elizondo, CFO and Paulina Amieva; Head of Investor Relations.

At this point I would like to hand over to Daniel to get the call underway. Thanks Daniel.

Daniel Hajj Aboumrad

Thanks Andy. Thanks for hosting the call and good morning, everybody. As always, I am going to pass to Carlos. Carlos is going to make a small summary of the results of America Movil for this quarter.

Carlos Garcia Moreno Elizondo

Thank you Andy. Good morning, everyone. We had a good quarter, again this first quarter 2006. We ended up topping 100 million subscribers at the end of March. We ended up the month with about 100.6 million subscribers which was an important benchmark to the Company. This number came after net additions of 7.3m subscribers in the first quarter of the year. This made it the best first quarter that the Company has had. In fact, net additions in 2006 first quarter, were 40% higher than what we have seen a year ago.

The number for net additions was almost 50% higher than the median of the numbers that we have received from various analysts.

Business revenues were MXN33.3 billion, they were up 44.6% quarter-over-quarter and nearly 30% year-over-year. The service revenues, we think, were basically in line with consensus. Total revenues of MXN50.7 billion were up 26.4% year-over-year. They were slightly below consensus, 4.1% below consensus and it seems that it is essentially from lower equipment revenues than the analysts had expected. I think that this has to do with a reduction in the average price of handsets that the Company is selling and again we can deal with that in a little while.

In spite of the significant subscriber growth there was a considerable expansion in the EBITDA margins. EBITDA margins in fact went up 3.7 points relative to a year before and they finished at 36.4%, significantly higher than consensus; that is 3.3 points higher margin than the consensus estimate.

The total EBITDA of the Company was MXN18.4 billion, was up over 41% year-over-year and it means that it was 5.1% higher than the median number of the consensus.

So I think an important highlight here is that we managed to deliver nearly 50% more subscribers, subscriber additions than the consensus was expecting. In spite of this, we still managed to increase EBITDA to a number that was higher than the consensus estimate. As I said before, the EBITDA margin was considerably higher than what the market was expecting.

In non-operating numbers I think FX gains were important, the net effect almost MXN1 billion and we continued to generate a net profit that more than doubled since previous years. It was nearly MXN10 billion, MXN9.5 billion.

So the margin expansion that we have seen has translated into considerable increase in cash flow. In cash flow the Company has been very strong and that is why in this first quarter we managed to cover, with our own cash, all of our CapEx which was MXN6.5 billion. We managed to fund the share buyback and dividends which amounted to MXN2.3 billion. On top of that, we managed to have a reduction in our net debt position of MXN5.7 billion. This number includes FX gains.

A good quarter, still in terms of subscriber growth. Much better subscriber growth than expected. We had better than expected EBITDA numbers and very strong, very strong cash flow.

I think that one thing that is important to highlight also is that these numbers that we have shown do not really reflect any extraordinary issues, in any one of the operations. I think that this quarter is really very much exempt from any kind of extraordinary one-time items. So this is very much a result of the regular operation of the Company.

So I would say, Andy, that these are the main points that we wanted to highlight and I would like to pass it back on to you so that we can start the question-and-answer session.

Question-and-Answer Session

Andy Campbell

Okay. Thank you very much Carlos. I would just like to jump in for a little more detail, if we could, on the margin particularly in Mexico. You obviously saw very strong sequential increase. If you could just give a little bit of color in terms of a little bit more of what's driving that and what's your expectation going forward?

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