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

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America Movil SAB de CV (AMOV)

Q2 2011 Earnings Call

July 21, 2011 10:00 AM ET

Executives

Michel Morin – Morgan Stanley

Daniel Hajj Aboumrad – CEO

Carlos José García Moreno Elizondo – CFO

Oscar Von Hauske – COO, Wireline

Analysts

Ric Prentiss – Raymond James

Andrew Campbell – Credit Suisse

James Breen – William Blair

Christopher King – Stifel Nicolaus

Tomás Lajous – UBS

Sean Glickenhaus – HSBC

Gray Powell – Wells Fargo

Stanley Martinez – Legal & General

Mauricio Fernandes – Bank of America/Merrill Lynch

Martín Lara (ph)

Carlos Sequeira – BTG Pactua

Andrés Medina Mora – GBM

Walter Piecyk – BTIG

Presentation

Operator

Good morning. At this time, I would like to welcome everyone for the America Movil Second Quarter 2011 Conference Call. Now I’d like to turn the call over to Mr. Michel Morin. Mr. Morin, you may begin your conference.

Michel Morin

Thank you, Nateda. Good morning, everyone. On behalf of Morgan Stanley, I’d like to welcome everyone to America Movil’s second quarter results call. Today on the line with us, we have Daniel Hajj, the CEO; Carlos Garcia Moreno, CFO; Oscar Von Hauske, the Wireline COO; and Daniela Lecuona, Investor Relations Officer. So without further ado, let me turn it over to Daniel.

Daniel Hajj Aboumrad

Thank you, Michel. Thank you. Welcome everybody. Carlos is going to make the summary of the second quarter results.

Carlos José García Moreno Elizondo

Hello, good morning everyone. Thank you Michel for hosting the call. Well, we added in the second quarter – I mean, we added 5.1 million wireless subscribers. That was unfortunately half what we’ve done in quarter, we gained in the first half of the year. In June, we took over 6 million wireless hubs.

On the fixed line side, we increased by 1.4 million our revenue generating unit to 54 million with safety results growing 34% year-on-year. Altogether, we had 290 million accesses at the end of June, 12.1% more than a year before.

The growth of fixed line accesses has accelerated on the back of bundled offerings, double play and triple play that are becoming increasingly popular. Year-on-year, fixed line accesses increased nearly 14%.

Revenue grew 7.8% from the year earlier quarter to 150 million pesos. Mobile revenue expanded 9.4% to 101 billion pesos whereas fixed line revenues increased 5.2% to 58 billion pesos swept along by PayTV revenues that expanded 71% year-on-year. So, total revenues then accelerated from a bit more than 6% the prior year quarter to 7.8 percentage point this quarter.

Mobile revenues were driven by data revenues that increased 26.7%. Their overall expansion, already will select the impact of 71% effective reduction in mobile termination rates that took place in Mexico. From May 17th, all operators have terminated call – on the call center sales network, beyond the interconnection charges at the reduced termination rates by Cofetel, which are equivalent to $2.2 or 1.65 euros. In example, including Mexico and three European countries, this interconnection rate was the second lowest with 35% penetration rates substantially higher in euro.

Their sales net interconnection revenues came down by almost 4% at this point revenue from the prior year. Growth interconnection revenues came down by 50.2% in absolute terms and by 5.1% revenues. Several of our operations registered double-digit revenue growth in the second quarter. In Mexico, Central America and the Caribbean, revenue growth was more subdued, in Europe 2% because of the continued decline of fixed line voice revenues and the reduction in mobile and fixed line termination rates in Mexico.

In Brazil annual revenue growth accelerated from 5.7% in the first quarter to 8.8% in the second quarter. EBITDA totaled 62 billion pesos and was up 1.8% year-on-year, would be merging up our Mexican operations falling 3.4% percentage points, the loss of net interconnection revenues for Mexico and wide increase on wireless platform. Greater expenses for customer care, the procurement of content, subscriber growth basically subscriber acquisition cost.

Various operations particularly in South America posted better EBITDA margin than the prior year. 20% year-on-year and contributed 14% increase in net profit. Earnings per share were up 16% competitive terms and 34% per ADR. Our net debt rose 217 billion pesos in June from 207 in December to help fund 37 billion pesos in capital outlays and dividends. Capital expenditures made up 41 billion pesos of that amount, and share buyback nearly 30 billion pesos with 2 billion pesos going to the acquisition of minority interest in Net Serviços and Telint International. Net debt stood at 0.87 times, our EBITDA below 12 months.

So with this summary, Michel I would like to turn the floor back to you.

Michel Morin

Great, thanks Carlos. Nateda, can you please give the instructions for Q&A.

Question-and-Answer Session

Operator

(Operator Instructions)

Michel Morin

Now, while we pull for questions, Carlos if I can jump in and ask the first question. Regarding the termination rates in Mexico, the new rates went into effect on May 17. So I just want to confirm perhaps the state, the obvious but the impact on results that we saw this quarter was really only impacting in the second half of the quarter. So if we were to look at ARPU trends on a sequential basis, is it fair to say that we should anticipate a similar impact in the third quarter when the rates will be at the lower level for the entire quarter?

Carlos José García Moreno Elizondo

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