20-F: América Móvil Reports Financial Results for 2024, Consolidates Chilean Operations

América Móvil's 20-F filing reveals a 6.5% increase in operating revenues for 2024, driven by mobile services and the consolidation of Claro Chile, SpA.

Summary

• América Móvil's 20-F filing reports a 6.5% increase in operating revenues, reaching Ps. 869.2 billion in 2024.
• At constant exchange rates, operating revenues increased by 2.9%, primarily due to mobile service revenues.
• Net profit for the year from continuing operations decreased by 65.8% to Ps. 27.6 billion.
• The company consolidated Claro Chile, SpA into its operations on October 31, 2024, holding a 94.9% interest as of December 31, 2024.
• Capital expenditures totaled Ps. 130.8 billion in 2024, with a budget of approximately U.S.$7.9 billion for 2025.
• The company repurchased Ps. 22.7 billion of its own shares in 2024 and plans to continue repurchases.
• As of December 31, 2024, net debt totaled Ps. 484.2 billion.
• The company faces intense competition, regulatory challenges, and economic instability.
• Management identified material weaknesses in internal control over financial reporting related to ITGCs and revenue processes.
• The company is implementing measures to remediate these weaknesses.

Sentiment

Score: 5

Explanation: The document presents mixed signals, with revenue growth offset by a significant decline in net profit and identified material weaknesses in internal controls. The outlook is uncertain due to competitive and regulatory pressures.

Positives

• Operating revenues increased by 6.5% in 2024.
• The company is expanding its 5G coverage in Mexico and Brazil.
• The company is actively repurchasing its own shares.
• The company is paying regular dividends to its shareholders.
• The company is building world-class integrated telecommunications platforms to offer its customers new services and enhanced communications solutions with higher data speed transmissions at lower prices.

Negatives

• Net profit for the year from continuing operations decreased by 65.8%.
• The company recorded a net foreign currency exchange loss of Ps.70.7 billion.
• The company faces intense competition, regulatory challenges, and economic instability.
• Management identified material weaknesses in internal control over financial reporting related to ITGCs and revenue processes.
• The company's effective corporate income tax rate as a percentage of profit before income tax was 56.1% for 2024, compared to 29.9% for 2023.

Risks

• Intense competition in the telecommunications industry could adversely affect revenues and profitability.
• Governmental or regulatory actions could adversely affect operations.
• Failure to meet quality of service goals and standards could result in fines.
• Dominant carrier related regulations could limit the ability to pursue competitive strategies.
• Inability to acquire additional radio spectrum capacity could affect the ability to compete successfully.
• Concessions and licenses have fixed terms and may be revoked or terminated.
• Future acquisitions and related financing could have a material effect on the business.
• The company is subject to significant litigation and tax assessments.
• Failure to comply with anti-corruption, anti-bribery, and anti-money laundering laws could harm the reputation and subject the company to fines.
• A system failure could cause delays or interruptions of service.
• Severe weather, natural disasters, and other catastrophic events could adversely affect the business.
• Public health crises could materially adversely affect the business.
• Increases in labor and employee benefit costs may reduce profitability.
• Inflationary pressures on costs may impact network construction, financial condition and results of operations.
• Inability to retain or motivate key personnel, hire qualified personnel or maintain the corporate culture could harm the business.
• Cybersecurity incidents and other breaches of network or information technology security could have an adverse effect on the business and reputation.
• Failure to achieve proper data governance could lead to data mismanagement.
• An increase in the churn rate could negatively affect the business.
• Reliance on key suppliers to provide equipment needed to operate the business.
• The ability to pay dividends and repay debt depends on the subsidiaries ability to pay dividends and make other transfers.
• Failure to realize the benefits anticipated from acquisitions, divestments and significant investments.
• A downgrade of Mexico's credit rating could affect the company.
• Changing expectations from stakeholders with respect to environmental, social and governance practices may impose additional costs or expose the company to new or additional risks.
• Negative or inaccurate information on social media or elsewhere could adversely affect the reputation.
• Issues related to the development and use of AI could give rise to legal or regulatory action, damage the reputation or otherwise materially harm the business.
• Changes in the telecommunications industry could affect future financial performance.
• The intellectual property used by the company, its suppliers or service providers may infringe on intellectual property rights owned by others.
• Concerns about health risks relating to the use of wireless handsets and base stations may adversely affect the business.
• Developments in the telecommunications sector have resulted, and may result, in substantial writedowns of the carrying value of certain of the company's assets.
• Members of one family may be deemed to control the company and may exercise their control in a manner that may differ from the interest of other shareholders.
• The company has significant transactions with affiliates.
• The bylaws restrict transfers of shares in some circumstances.
• The protections afforded to minority shareholders in Mexico are different from those in the United States.
• Holders of ADSs are not entitled to attend shareholders meetings, and they may only vote through the depositary.
• The bylaws may only be enforced in Mexico.
• It may be difficult to enforce civil liabilities against the company or its directors, officers and controlling persons.
• You may not be entitled to participate in future preemptive rights offerings.
• Economic, political and social conditions in Latin America, the Caribbean and Europe may adversely affect the business.
• Adverse changes in global financial markets could limit the ability and the larger customers ability to access capital or increase the cost of capital needed to fund business operations.
• Changes in exchange rates could adversely affect the financial condition and results of operations.
• Developments in other countries may affect the market price of the securities and adversely affect the ability to raise additional financing.
• The company previously identified a material weakness in its internal control over financial reporting.

Future Outlook

The company aims to build on its position as a leader in integrated telecommunication services in Latin America and the Caribbean, and to grow in other parts of the world by continuing to expand its subscriber base through the development of its existing businesses and strategic acquisitions when opportunities arise.

Management Comments

• Management has concluded that, because of the material weaknesses identified below related to: (i) ineffective information technology general controls (ITGCs) related to user access, change management and segregation of duties at our Colombia and Mexico Fixed segments, which impacted business process controls, including entity level controls, application controls, manual controls dependent on information derived from such systems and management review controls; (ii) lack of design and operating effectiveness of relevant controls associated with the prepaid and postpaid revenue processes at our Mexico Wireless segment, including application controls, manual controls dependent on information derived from systems and management review controls; and (iii) controls at our Colombia, Mexico Fixed and Mexico Wireless segments were not sufficiently designed nor operating effectively to assess the completeness and accuracy of information provided by the entity, our disclosure controls and procedures were not effective as of December 31, 2024.
• Management is committed to the continued improvement of the Companys internal control over financial reporting.

Industry Context

The announcement reflects trends in the telecommunications industry, including intense competition, growing demand for data services, and declining demand for traditional Pay TV services.

Comparison to Industry Standards

• The document mentions competitors such as AT&T Inc., Telfonica and Millicom, as well as various providers that operate on a nationwide level, such as Telecom Argentina in Argentina and Telecom Italia in Brazil.
• The document references the 2024 Brand Finance Telecom 150 report, where Claro and Telcel ranked among the top forty strongest brands in the telecom sector worldwide.
• The document references the Brand Finance Latin America report, where Claro and Telcel were named the most valuable telecom brands and ranked among the top ten most valuable brands in the Latin America region.
• The document references Kantar BrandZ, which named Telcel as one of the most valuable brands in Mexico.
• The document references a year-end 2024 study by Austrian Brand Monitor, which found that A1, the brand name behind Telekom Austria, ranked number one in the Austrian telecommunications market for brand preference.

Legal Proceedings

• Some subsidiaries are subject to significant litigation that, if determined adversely to the company's interests, may have a material adverse effect on the business.
• The company and some of its subsidiaries have been notified of tax assessments for significant amounts by the tax authorities of the countries in which they operate, especially in Brazil, Mexico and Colombia.

Related Party Transactions

• The company's subsidiaries purchase materials or services from a variety of companies that may be deemed for certain purposes to be under common control with the company, including Telesites, Sitios Latam, Grupo Carso, Grupo Financiero Inbursa and their respective subsidiaries.
• The company sells products in Mexico through the Sanborns and Sears Operadora store chains.
• Some of the company's subsidiaries also purchase network construction services and materials from subsidiaries of Grupo Carso.
• The company and Telesites have entered into an agreement providing for site usage fees, annual price escalations and fixed annual charges that permit the company to install a pre-determined amount of equipment at the Telesites towers and provide for incremental fee payments if capacity use is exceeded.
• The company's subsidiaries have entered into master service agreements and site agreements with Sitios Latam in each of the countries where Sitios Latam operates pursuant to which Sitios Latam will build, install, maintain and provide access to its towers and other support structures, as well as physical space for the location of towers and other non-electronic components.

Stakeholder Impact

• Shareholders may be impacted by the decline in net profit and the potential for future risks.
• Employees may be impacted by changes in labor costs and the need to comply with ethical guidelines.
• Customers may be impacted by the quality of service and the availability of new technologies.
• Suppliers may be impacted by the company's procurement policies and the need to comply with ethical standards.
• Creditors may be impacted by the company's ability to repay debt and maintain financial stability.

Next Steps

• Continue expanding and improving networks in each country of operation.
• Monitor and address spectrum and capacity constraints on a market-by-market basis.
• Continue to seek investment opportunities in telecommunications and related companies worldwide.
• Continue to implement measures designed to ensure that any control deficiencies are remediated, such that controls are designed, implemented, and operating effectively.

Key Dates

Keywords

América Móvil, financial results, 20-F filing, operating revenues, net profit, capital expenditures, share repurchase, dividends, net debt, 5G, RGUs, telecommunications, Mexico, Brazil, Chile, regulation, risk factors, internal control, cybersecurity, sustainability