MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to America Movil, S.A.B. de C.V.'s (America Movil) USD1.25 billion 3.125% senior notes due 2022 and USD750 million 4.375% senior notes due 2042. Proceeds from the issuance are expected to be used mostly for debt repayment.
America Movil and its subsidiaries' 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 and 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. The difference is based on America Movil's geographical diversification with 52% of EBITDA generated outside Mexico and approximately 85% of EBITDA coming from investment grade countries. The ratings also reflect the company's strong credit profile with committed credit facilities, which mitigates transfer and convertibility risks.
America Movil's credit quality is underpinned by its Mexican wireless and fixed units that account for approximately 35% of revenues and 48% of EBITDA for the 12 months ended March 31, 2012. Recent rulings by Mexican authorities have had a negative result on America Movil for both fixed and wireless businesses. However, these negative outcomes should not be material to credit quality on a consolidated basis. In addition, the MXN12 billion fine imposed by the Mexican antitrust authority was revoked recently.
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 believes a geographically diversified portfolio of assets and services lowers business risk and cash flow volatility. For the 12 months ended March 31, 2012 80% of EBITDA was generated by Mexico, Brazil and Colombia (including Panama). For this period wireless revenues accounted for approximately 64% of total revenues and the remainder by fixed services.
Manageable KPN & TKA Investments:
America Movil recently announced that it will invest in European telecom companies. Fitch believes this plan follows an approach to explore operations in new geographies at reasonable prices. Total disbursements for these transactions should amount approximately to USD4.9 billion (EUR3.95 billion). These investments are expected to help America Movil assess whether in the long term they should or should not continue increasing its presence in Europe. Fitch does not expect further investments in the short term, and the ratio of total debt to EBITDA of approximately 1.5x should be temporarily before trending towards historical levels over the medium term.
On June 27, 2012 America Movil announced the acquisition of a 27.7% stake in Royal KPN NV (KPN) through a tender offer. The acquisition should be manageable, given America Movil's financial profile and cash flow generation. America Movil paid approximately EUR3 billion for a 27.7% stake and should receive close to 11% in dividend yield. The pending acquisition of approximately 23% of Telekom Austria (TKA) is still subject to regulatory approvals. The company owns 6.7% and should buy the remaining 16% once it gets approval. TKA paid EUR334 million in dividends during FY2011.
Fitch's long-term expectation of leverage for America Movil incorporates that net debt to EBITDA will be at 1.0x. For the 12 months ended March 31, 2012 America Movil's total debt to EBITDA was 1.5x, while net debt to EBITDA approximated 1.2x. For this period total debt amounted to MXN378 billion (USD29.5 billion) of which 89% is debt issued in the capital markets and 11% is bank debt. America Movil's currency risk exposure strategy over the past few years is to have the net debt in Mexican Pesos after considering hedges.
The company's liquidity position is strong. As of March 31, 2012 cash balances reached MXN60 billion and unused committed credit facilities were USD4 billion on top of cash from operations (CFO) over the past 12 months of MXN185 billion. This favorably compares with maturities for the next three years of MXN81.5 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 USD9.0-9.5 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 limited at the time given the rating level and last upgrade in June of 2011. In contrast, a negative rating action can occur if net leverage increases 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 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)'.
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. 30, 2012;
--'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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