MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to America Movil, S.A.B. de C.V.'s (America Movil) CNY1 billion (approximately US$159 million) 3.50% senior notes due 2015. Proceeds from the issuance are expected to be used for general corporate uses.
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 the policy of having a sound financial and liquidity profile. The ratings incorporate Fitch's expectation that management will maintain a relatively conservative financial profile over the long term.
Increased regulatory risk in Mexico and declining prices in mobile voice services temper the ratings. Domiciled in Mexico, American Movil's foreign currency Issuer Default Rating (IDR) is higher than Mexico's country ceiling rating of 'A-' due to the company's geographical diversification; 48% of EBIDTA is generated outside Mexico and more than 80% of EBITDA comes from investment grade countries. In addition, a strong credit profile with committed credit facilities mitigates transfer and convertibility risks.
America Movil's credit quality is underpinned by its Mexican wireless and fixed units, which account for approximately 38% of revenues and 52% of EBITDA for the 12 months ended Sept. 30, 2011. Recent rulings by Mexican authorities have increase regulatory risk in Mexico for America Movil for both fixed and wireless businesses. However, Fitch believes that negative outcomes related to this should not be material to credit quality on a consolidated basis. In addition, any cash outflow due to fines imposed by the antitrust authority should be manageable given the company's diversification, strong cash flow generation and financial profile. Nevertheless, Fitch expects the company to defend itself from these rulings which can result in lower fines or delay of payments.
The company's diverse revenue stream, generated by wireless and wireline businesses outside Mexico and to a lesser extent fixed line businesses, provides the company with cash flow and currency diversification. Fitch believes a geographically diversified portfolio of assets and services lowers business risk and cash flow volatility. For the 12 months ended Sept. 30, 2011 80% of EBITDA was generated by Mexico, Brazil and Colombia (including Panama). For this period wireless revenues accounted for approximately 66% of total revenues and the remainder by fixed services.
Fitch's long-term expectation of leverage for America Movil is that net debt to EBITDA will be at 1.0x. For the 12 months ended Sept. 30, 2011 America Movil's total debt to EBITDA was 1.5 times (x), while net debt to EBITDA approximated 1.0x. For this period total debt amounted to MXN374 billion (USD27.8 billion) of which 86% is debt issued in the capital markets and 14% is bank debt. America Movil's currency risk exposure strategy is to have in Mexican Pesos the net debt after considering hedges.
The company's liquidity position is strong. As of Sept. 30, 2011 cash balances reached MXN126.6 billion and unused committed credit facilities are USD3 billion on top of cash from operations (CFO) over the past 12 months of MXN170 billion. This favorably compares with maturities for the next three years of MXN80.3 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 USD8.5 billion. Funds flow from operations (FFO) still has some room to grow driven by increased mobile penetration, higher adoption and usage of mobile data and growth in fixed operations outside Mexico. Free cash flow may be returned to shareholders absent any acquisitions. With respect to acquisitions, Fitch believes America Movil will follow a disciplined approach to its capital structure and the valuation of any potential acquisition.
Key Rating Drivers:
A positive rating action seems unlikely at this time given the recent upgrade in June 2011. However, a negative rating action could occur if net leverage were to increase between 1.5x-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 (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)'.
The Rating Outlook is Stable.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Rating Global Telecoms Companies', Sept. 16, 2010;
--'Corporate Rating Methodology', dated Aug. 12, 2011;
--'National Ratings Criteria', Jan. 19, 2011;
--'Rating Corporates Above the Country Ceiling', Jan. 5, 2011;
--'Parent and Subsidiary Rating Linkage (Fitch's Approach to Rating Entities Within a Corporate Group Structure)', Aug. 12, 2011.
Applicable Criteria and Related Research:
Rating Global Telecoms Companies - Sector Credit Factors
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=550205
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Rating Corporates Above the Rating Ceiling
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=668909
Parent and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210
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