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

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

Q3 2012 Earnings Call

October 26, 2012 10:00 AM ET

Executives

Daniel Hajj – CEO

Carlos García Moreno – CFO

Óscar Von Hauske – COO

Carlos Robles – CFO, Telmex Internacional

Analysts

Vera Rossi – Barclays

Alejandro Gallostra – BBVA

Michel Morin – Morgan Stanley

Walter Piecyk – BTIG

Alex Garcia – Citibank

Andy Campbell – Credit Suisse

Maurício Fernandes – Merrill Lynch

Fernando Ramos – GBM Global

Stanley Martinez – Legal & General Investment Management

Dan Kwiatkowski – UBS

Gregorio Tomassi – Itaú

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 América Móvil Earnings Conference Call. My name is Jocennia and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

Joining us this morning is Daniel Hajj, Chief Executive Officer; Carlos García Moreno, Chief Financial Officer; Óscar Von Hauske, Chief Operating Officer; Carlos Robles, Telmex Chief Financial Officer.

And now I would like to turn the conference over to your host for today, Mr. Daniel Hajj. Please proceed, sir.

Daniel Hajj

Good morning, everybody. Thank you for being in the third quarter financial and operating results. And Carlos García Moreno is going to make a summary of the results.

Carlos García Moreno

Hello. Good morning, everyone. The measures announced in the third quarter by the European Central Bank contributed to a relative stabilization of financial markets and laid the ground for the sustained appreciation of the Mexican peso from its lows in mid-June.

In South America, economic growth appeared to recover somewhat in July but promptly drifted lower in the remainder of the quarter as a result of the slowdown in China. In spite of the relatively soft economic environment, we were able to increase by 5.6 million our accesses, 4.1 in mobile, 1.6 million in fixed to finish September with 319 million.

Fixed-line RGUs growth, 11.3% from the prior year and mobile access 6%.

As of September, we had 256 million wireless subscribers, 30 million landlines, 17 million broadband accesses and 16 million PayTV units. The latter are growing at a 26% annual pace, while broadband accesses are expanding at a rate of nearly 15%.

RGUs of our Brazilian operations climbed 24% to 26 million after adding 1.2 million RGUs in the quarter. Brazil is followed by Mexico and Colombia in terms of RGUs with 22.7 million and 3.9 million, respectively.

Mexico accounted for approximately one-fourth of our net subscriber additions with 1.1 million, to finish the quarter with 69 million. In Central America, we gained 658,000 subs, in Colombia 587,000 subs and in Brazil 481,000.

Our postpaid base expanded rapidly in most countries, growing 41% in Peru, 30% in Guatemala and 17% in Mexico relative to a year earlier quarter. Postpaid net adds totaled 972,000 subs.

Our consolidated third quarter revenues were up 4.5% in Mexican peso terms, approximately half the rate posted in the prior quarter because of the appreciation of the peso.

At constant exchange rates, our service revenues increased 6.1% practically as fast as they did the prior quarter. They were led by mobile data revenues that increased 35%. They have accelerated in fact. And by PayTV revenues that grows 21%.

Fixed line voice revenue were down 7.2% less than the 7.7% decline of the previous quarter while mobile voice revenues remained somewhat higher than a year before. Voice revenues reflect the impact of the reduction of termination rates and long-distance rates in Brazil, and the contract by Telmex to its clients before benefit of the reduction in mobile termination rates enacted in Mexico last year.

EBITDA came in at MXN66 billon and was 0.6% higher than the year before in peso terms. EBITDA margin improved slightly sequentially to 34.4%, reflecting an underlying improvement in EBITDA growth at constant exchange rates. At constant exchange rates, EBITDA increased by 2%.

The appreciation of the Mexican peso vis-à-vis the dollar and a lot of currencies resulted in a foreign exchange gain of MXN9 billion in the quarter in contrast to the MXN16 billion loss registered prior quarter. This again translated into a comprehensive financing income of the MXN2.4 billion in the quarter. Through September we had a net foreign exchange gain of MXN12 billion.

The change in the foreign exchange results explains most of the increase in our net profit, which grow to MXN31 billion, more than doubling those of the previous quarter and surpassing by 67% those of the year earlier quarter. Our net debt stood at MXN363 billion at the end of June, almost unchanged from the prior quarter and was equivalent to 1.4 times EBITDA.

Our capital expenditures in the first nine months of the year totaled MXN82 billion and our acquisitions of equity interests, including those in KPN and Telekom Austria, MXN79 billion, while share buybacks and dividends payments amounted to MXN22 billion.

These outlays added up to MXN183 billion and were for the most part covered by our funds from operations. We obtained MXN56 billion in the financial market to cover the difference. Again, this is in the year to September. In the third quarter, we began to account for our investment in KPN under the equity method.

So with this, I would like to pass it back to the operator, so that we can begin the question-and-answer session. Thank you.

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