América Móvil, S.A.B. de C.V. (NYSE:AMX) Q4 2023 Earnings Call Transcript February 14, 2024

América Móvil, S.A.B. de C.V. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Candace, and I will be your conference operator today. At this time, I would like to welcome everyone to the América Móvil Fourth Quarter 2023 Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference call over to Ms. Daniela Lecuona. Please go ahead.

Daniela Lecuona: Thank you. Good morning, everyone. Thank you for joining us today in our fourth quarter operating and financial review. We have on the line Mr. Daniel Hajj, CEO; Mr. Carlos Garcia Moreno, CFO; and Mr. Oscar von Hauske, COO.

Daniel Hajj Aboumrad: Good morning, everyone. Welcome to América Móvil's Fourth Quarter of 23 financial and operating report. Carlos Garcia Moreno is going to make out the summary of the results. Carlos?

Carlos Garcia Moreno: Thank you, Daniel. Good morning, everyone. Well, the fourth quarter of 2023 turned out to be an extremely volatile one, with interest rates surging in the first month of the quarter to record highs not seen in over 16 years. This was in continuing with the trend that began early in the third quarter as inflation pressures brought about new increases in reference rates by the Fed. The yield of ten-year Treasury notes, which had stood as low as 3.75% in mid-July, shot up to 5% in exactly three months. But then things turned: new inflation readings appeared to be softer and the Fed put out the message that no new action on reference rates was expected for at least the remainder of the year. A huge rally in interest rates followed, with the ten-year Treasury yield plummeting back to where it had been in mid-July.

We added 3.9 million wireless subscribers in the quarter, including 2.7 million postpaid clients. Brazil contributed with 1.8 million new contract clients, while 329,000 came from Austria, 124,000 from Argentina and 109,000 from Mexico. The prepaid platform registered net additions of 1.3 million clients in the period with Colombia gaining 456,000, Mexico 308,000, Argentina, 278,000 and Central America roughly the same amount, 269,000. On the fixed line segment, we obtained 386,000 broadband accesses. Mexico was the leader, adding 165,000 accesses, followed by Brazil with 60,000 and Argentina with 51,000. Looking at the base, the postpaid base was the most dynamic one, increasing 7% year-on-year, followed by fixed broadband accesses, which were up 4.1%.

Prepaid subscriber base rose 1.2%, while Pay TV accesses fell 1.8% year-on-year. At constant exchange rates, service revenue was up 3.7%, in line with the pace registered in the prior quarter. For as adjusted EBITDA reaccelerated to a 4.6% recurrent in the quarter. So we basically maintain the pace that we had on service revenue from the third quarter, and we managed to reaccelerate adjusted EBITDA to a 4.6%. Mobile service revenue expanded 4.2%, much in line with the prior quarter, and that's on the Fixed-line platform grew 3.0%, continuing the accelerated trend of sales throughout the year. This was the fifth consecutive quarter with positive growth on both platforms and ensure that for the full year 2023, revenue increased on the 2 platforms, mobile and fixed.

Mobile service revenue growth remained stable in Mexico at 4.5%, whereas in Brazil it slowed down from the prior quarter to 7.1%. In Central America, mobile service revenue growth accelerated to 10.7% that you can see in the chart. Revenue from corporate networks led the way on the fixed-line platform, expanding 8.1% from the year-earlier quarter, followed closely by broadband revenue that posted a 6.6% increase. PayTV revenue declined slightly, 1.1%, its smallest decline in over a year. Corporate networks revenue growth was strongest in Eastern Europe, again, you can see this on the chart, 30.2%; Colombia, 21.6%; Ecuador, 19.5%; and Mexico and Peru, with slightly more than 14% each. In Central America it accelerated to 6.6%, having posted every quarter over the last year faster growth rates than the preceding one.

Now importantly, Argentina has gone through a period of high inflation the last several years. Since 2019 it has been subject to the accounting guidelines applicable to hyper-inflationary countries, with all the accounting variables expressed in real terms at constant Argentine pesos. For consolidation purposes in our financial statements, with no other economy considered hyper inflationary within America model; those Argentine figures expressed in constant Argentine peso terms at the prevailing prices at the end of the period must be converted into Mexican pesos at the exchange rate observed at the end of the period, per IFRS rules. Given the magnitude of the Argentine peso depreciation, the application of the above-mentioned norm generates unusual effects.

In particular, as you can see on the slide as well, revenue actually decreases by 3.7 billion Pesos when Argentina is included in our results and EBITDA is also reduced by 1.4 billion pesos. We have completely unusual and counterintuitive situation whereby the inclusion of Argentina does not lead to adding a small amount or a smaller amount than what we had before, it actually leads to a net decline in revenues and EBITDA. Again, this is per the IFRS growth that we are subject to. Other than the above-mentioned unusual accounting effects, the inclusion of Argentina generates 8 billion pesos in foreign exchange losses and overall results in 8 billion pesos downward impact on net income to 16.8 billion pesos. So in the Argentina, we would have posted 28 billion pesos in net income, and siloed net income and with the use of Argentina go down.

So that's basically what we had. Cash flow-wise, our net debt increased by 21 billion pesos, and complemented our operating cash flow, and it helped us cover our capital expenditures in the amount of 156 billion pesos, shareholder distributions totaling 40 billion pesos, of which 14 billion pesos were share buybacks and 11.8 billion pesos in labor obligations. So that's the summary, and I would want to pass the floor back to Daniela.

Daniel Hajj Aboumrad: Yes. Thank you, Carlos, and I think we can start with the Q&A.

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