Fitch Ratings-Monterrey — Fitch Ratings has assigned an international scale rating of ‘A’ and a national scale rating of ‘AAA(mex)’ to America Movil, S.A.B. de C.V.’s (America Movil) MXN 22.5 billion Senior Notes due 2022 million as well as the proposed additional issuance of the 2022 notes for up to MXN10 billion. Proceeds from the issuance are expected to be used for debt repayment and general corporate uses.
KEY RATING DRIVERS
America Movil’s ratings are supported by diversified fixed and wireless operations across Latin America, multiple service platforms, large scale, strong free cash flow, ample financial flexibility, and policy of having a sound financial and liquidity profile. The ratings incorporate the expectation that management will maintain a relatively conservative financial profile over the long term. A strong competitive environment underpinned by increasing regulation in Mexico and Colombia as well as declining prices in voice services temper the ratings.
The company’s foreign currency Issuer Default Rating (IDR) is rated above the ‘A-‘ country ceiling of Mexico, where it is domiciled. This is due to America Movil’s geographical diversification with 53% of EBITDA generated outside Mexico and more than 85% of EBITDA coming from investment grade countries. The ratings also reflect the company’s strong credit profile with a committed credit a facility, which mitigates transfer and convertibility risks.
America Movil’s credit quality is supported by its Mexican wireless and fixed units that account for approximately 34% of revenues and 47% of EBITDA for the 12 months ended March 31, 2013. The company’s diverse revenue stream, generated by wireless and wire line businesses outside Mexico, provides the company with cash flow and currency diversification. Fitch views that a geographically diversified portfolio of assets and services lowers business risk and cash flow volatility. For the 12 months ended March 31, 2013 79% of EBITDA was generated by Mexico, Brazil and Colombia (including Panama). For this period, consolidated wireless revenues accounted for approximately 56% of total revenues and the remainder by fixed services.
Increased Regulatory Pressure
The upcoming telecommunications law in Mexico, expected to become enforced during this year once the secondary laws are passed by congress, and pressures in Colombia are expected by Fitch to have a negative impact on America Movil’s results. However, Fitch believes that the company has flexibility to manage its capital structure and leverage levels due to its cash flow generation.
During 2012, AMX leverage increased after the investments in Royal KPN NV (KPN) and Telekom Austria (TKA). For the 12 months ended March 31, 2013 America Movil’s total debt to EBITDA was 1.6x, while net debt to EBITDA approximated 1.4x. Fitch expects America Movil to gradually reduce net debt to EBITDA to its historical level of close to 1.0x. At March 31, 2013 total debt amounted to MXN401 billion (USD32.5 billion) of which 97% is debt issued in the international and domestic capital markets. America Movil’s currency risk exposure strategy over the past few years is to have the net debt in Mexican Pesos after considering hedges.
Historically AMX has maintained a strong liquidity position. As of March 31, 2013 cash balances reached MXN37 billion and have unused committed credit facilities for USD4 billion on top of cash from operations (CFO) over the past 12 months of MXN187 billion. This favorably compares with maturities for the next three years of MXN71.6 billion. In addition, the company’s access to capital markets and extended maturity profile adds to financial flexibility.
Free cash flow is expected to remain strong over the medium term, underpinned by stable capital expenditures in the next few years of approximately USD10.0 billion. Fitch believes cash flow from operations should be used to maintain a conservative capital structure and to return excess cash flow to shareholder in the form of dividends or share buybacks.
A positive rating action is unlikely given the actual leverage levels which are high to historical levels. A negative rating action can be triggered if net leverage increases between 1.5×-2.0x on a sustained basis due to operational or strategic factors.
Fitch currently rates America Movil as follows:
–Local currency IDR ‘A';
–Foreign currency IDR ‘A';
–Senior notes issuances ‘A’.
–Mexican national scale rating ‘AAA(mex)';
–Certificados Burstiles issuances with ticker symbols AMX 10, AMX 10-2 and AMX 10U ‘AAA(mex)';
–30 Million UF-denominated Chilean Notes Program, including Series A and D issuances for a combined amount of UF9 million, ‘AA+(cl)’.
Sergio Rodriguez, CFA
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
John Culver, CFA
Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: email@example.com.
Additional information is available ‘www.fitchratings.com‘.
Applicable Criteria and Related Research:
–‘Rating Telecoms Companies’ (Aug. 09, 2012);
–‘Corporate Rating Methodology’ (Aug. 08, 2012);
–‘National Ratings Criteria’ (Jan. 19, 2011);
— Rating Non-Financial Corporates Above the Country
Ceiling’ (Jan. 25, 2013);
–‘Parent and Subsidiary Rating Linkage (Fitch’s Approach to Rating Entities Within a Corporate Group Structure)’ (Aug. 08, 2012).
Applicable Criteria and Related Research
Rating Telecom Companies
Corporate Rating Methodology
National Ratings Criteria
Rating Non-Financial Corporates Above the Country Ceiling
Parent and Subsidiary Rating Linkage