20-F/A: América Móvil Reports Financial Results, Highlights Strategic Divestitures and Investments

América Móvil's financial report for 2023 details strategic moves including divestitures, joint ventures, and investments, impacting its financial structure and operational focus.

Summary

• América Móvil's 20-F/A filing provides an overview of the company's financial performance and strategic activities for the fiscal year ended December 31, 2023.
• The company completed the spin-off of telecommunications towers to Sitios Latam and the sale of towers in the Dominican Republic and Peru, impacting asset consolidation.
• A joint venture, ClaroVTR, was formed in Chile, leading to the reclassification of Claro Chile's operations as discontinued for prior periods.
• In September 2023, an impairment of Ps.4.7 billion was recorded for ClaroVTR, with an additional Ps.12.2 billion impairment on convertible notes by the end of the year.
• The company's capital expenditures totaled Ps.156.3 billion in 2023, aimed at network expansion and technological upgrades.
• América Móvil acquired additional voting rights in Telekom Austria AG, increasing its overall ownership to 58.4%.
• The company's total operating revenues for 2023 were Ps.816.0 billion, a decrease of 3.4% compared to 2022, but increased by 5.1% at constant exchange rates.
• Net profit for the year from continuing operations was Ps.80.8 billion, a decrease of 8.4% compared to 2022.
• The company's net debt as of December 31, 2023, was Ps.385.4 billion.
• Shareholders approved a cash dividend of Ps.0.48 per share, payable in two installments in 2024.
• A material weakness in internal control over financial reporting was identified in the Colombian subsidiary, but management believes the consolidated financial statements are fairly presented.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights strategic initiatives and investments, it also acknowledges challenges such as declining revenues and profits, and a material weakness in internal control. The sentiment is neutral overall.

Positives

• The company is expanding its network in Europe.
• The company is a leader in integrated telecommunication services in Latin America and the Caribbean.
• The company has developed world-class integrated telecommunications platforms to offer its customers new services and enhanced communications solutions with higher data speed transmissions at lower prices.
• The company continues investing in its networks to increase coverage and implement new technologies to optimize its network capabilities.
• Postpaid plans increased as a percentage of the wireless base from 38.0% in December 2022 to 39.3% as of December 31, 2023.
• The company's average rates per minute of wireless voice used in 2023 increased by approximately 9.8% at constant exchange rates relative to 2022.

Negatives

• Operating revenues decreased by 3.4% to Ps.816.0 billion.
• Net profit decreased by 8.4% to Ps.80.8 billion.
• The company recorded a net loss of Ps.26.8 billion for 2023 on the valuation of derivatives, interest cost from labor obligations and other financial items, net.
• The company identified a material weakness in internal control over financial reporting in the Colombian subsidiary.

Risks

• Intense competition in the telecommunications industry could 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 and upgrade networks could affect the quality of wireless services.
• Concessions and licenses for fixed terms may be revoked or terminated.
• Future acquisitions and related financing could have a material effect on the business.
• Significant litigation, if determined adversely, may have a material adverse effect on the business.
• The company is contesting significant tax assessments.
• Failure to comply with anti-corruption, anti-bribery and anti-money laundering laws and economic and trade sanctions could harm the reputation.
• A system failure could cause delays or interruptions of service.
• Financial condition and results of operations may be adversely affected by severe weather, natural or man-made disasters and other catastrophic events.
• Public health crises could materially adversely affect the business, financial condition and results of operations.
• Increases in labor and employee benefit costs may reduce profitability.
• Inflationary pressures on costs may impact network construction, financial condition and results of operations.
• The company could be harmed if it is unable to retain or motivate key personnel, hire qualified personnel or maintain its corporate culture.
• 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.
• If the churn rate increases, the business could be negatively affected.
• The company relies on key suppliers to provide equipment that it needs to operate its business.
• The ability to pay dividends and repay debt depends on the subsidiaries ability to pay dividends and make other transfers to the company.
• The company may fail to realize the benefits anticipated from acquisitions, divestments and significant investments it makes from time to time.
• A downgrade of Mexicos credit rating could affect the company.
• Changing expectations from stakeholders with respect to the company's environmental, social and governance practices may impose additional costs on it or expose it to new or additional risks.
• Negative or inaccurate information on social media or elsewhere could adversely affect the company's reputation.
• The management identified a material weakness in the company's internal control over financial reporting.
• Changes in the telecommunications industry could affect the company's 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 company's 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 company's 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 company's 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 company's business.
• Adverse changes in global financial markets could limit the company's ability and its 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 company's financial condition and results of operations.
• Developments in other countries may affect the market price of the company's securities and adversely affect its ability to raise additional financing.

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.

Industry Context

The announcement reflects ongoing trends in the telecommunications industry, including consolidation, competition, and the need for network investment to support new technologies like 5G.

Comparison to Industry Standards

• The document does not contain enough information to make a detailed comparison to industry standards.
• However, the document does mention some competitors such as AT&T Inc., Telfonica and Millicom.
• The document does not contain enough information to make a detailed comparison to industry standards.

Legal Proceedings

• The company is party to a number of proceedings regarding its compliance with administrative rules and regulations and concession standards.
• The company is contesting significant tax assessments in Brazil, Mexico and Colombia.

Related Party Transactions

• The company has commercial relationships with Sitios Latam through master service agreements for passive infrastructure sharing.
• The company has transactions with Telesites, Grupo Carso, and Grupo Financiero Inbursa, which may be deemed related party transactions.

Stakeholder Impact

• Shareholders will receive a dividend of Ps.0.48 per share.
• Customers may benefit from network expansion and technological upgrades.
• Employees may be affected by changes in labor costs and employee benefits.
• Suppliers may be affected by changes in procurement policies and relationships.

Next Steps

• The company will continue investing in its networks to increase coverage and implement new technologies to optimize its network capabilities.
• The company has budgeted capital expenditures for 2024 of approximately U.S.$7.0 billion (Ps.124.4 billion), which will be primarily funded by its operating activities.
• The company will continue to seek ways to optimize its portfolio, including by finding investment opportunities in telecommunications and related companies worldwide, including in markets where it is already present.
• The company will continue to evaluate opportunities for dispositions, in particular for businesses and in geographies that it no longer considers strategic.
• The company will continue to make changes to remediate the control deficiencies giving rise to the material weakness disclosed in this annual report through remediation actions.

Key Dates

Keywords

telecommunications, financial results, Sitios Latam, ClaroVTR, 5G, debt, dividends, impairment, internal control, spectrum, Mexico