MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to the Japanese Yen Bonds issued by America Movil, S.A.B. de C.V. (America Movil):
--JPY6,900,000,000 1.23% First Series Japanese Yen Bonds due October
2014 'A';
--JPY5,100,000,000 1.53% Second Series Japanese Yen Bonds
due October 2016 'A'.
Proceeds from the bonds are expected to be used for general corporate uses and capital expenditures including network equipment improvement.
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. Increased regulatory risk in Mexico and declining prices in mobile voice services tempers the ratings. The FC IDR is rated above Mexico's country ceiling of 'A-', country where the company is domiciled, given the geographical diversification where 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 40% of revenues and 52% of EBITDA. 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 six months ended June 30, 2011 81% of EBITDA was generated by Mexico, Brazil and Colombia (including Panama). For this period wireless revenues accounted for 64% of total revenues and the remainder by fixed services.
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 June 30, 2011 America Movil's total debt to EBITDA was 1.1 times (x), while net debt to EBITDA approximated 0.8x. For this period total debt amounted to MXN304.1 billion (USD25.7 billion) of which 87% is debt issued in the capital markets and 13% 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 June 30, 2011 cash balances reached MXN87.5 billion and unused committed credit facilities are USD3.0 billion on top of cash from operations (CFO) over the past 12 months of MXN178 billion. This favorably compares with maturities for the next three years of MXN66.6 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 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:
An upgrade in the IDRs is limited at the time given the recent rating upgrade in June of this year. On the other hand, a negative rating action can occur if 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 Issuer Default Rating (IDR) at 'A';
--Foreign
currency IDR at 'A';
--Approximately US$15.7 billion in senior
notes 'A';
--Mexican national scale rating at 'AAA(mex)';
--Approximately
MXN 15 billion in Certificados Burstiles issuances with ticker symbols
AMX 10, AMX 10-2 y AMX 10U at 'AAA(mex)';
--30 Million
UF-denominated Chilean Notes Program, including Series A and D issuances
for a combined amount of UF9 million, at 'AA+(cl)'.
The Rating Outlook is Stable.
Additional information is available 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' (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 Country Ceiling
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=594985
Parent
and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.