MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A' rating to America Movil, S.A.B. de C.V.'s (America Movil) issuances as follows:
--US$350 million 3.125% senior notes reopening due 2022;
--US$400 million 4.375% senior notes reopening due 2042.
Proceeds from the issuance are expected to be used primarily for debt repayment. Considering the amount of the reopenings, the amount outstanding for the 2022 notes will be US$1.6 billion and for the 2042 notes US$1.15 billion.
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 maintaining 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 36% of revenues and 48% of EBITDA for the 12 months ended June 30, 2012. Recent rulings by Mexican authorities have had a negative impact 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 In addition, the MXN12 billion fine imposed by the Mexican antitrust authority was revoked recently.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 June 30, 2012, 79% 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.
Manageable KPN & TKA Investments:
America Movil recently announced investments in European telecom companies. Fitch believes this plan follows a strategy to explore operations in new geographies at reasonable prices. Total disbursements for these transactions should amount to approximately 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 to increase its presence in Europe. Fitch does not expect further investments in the short term, and the ratios of total debt to EBITDA of approximately 1.6x and net debt to EBITDA of 1.40x should be temporal 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 4.5% in dividend yield which was recently cut from 11% to increase financial flexibility. The pending acquisition of approximately 23% of Telekom Austria (TKA) has cleared some regulatory approvals. The company owns 6.7% and should buy the remaining 16% soon. 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 June 30, 2012, America Movil's total debt to EBITDA was 1.6x, while net debt to EBITDA approximated 1.4x. For this period total debt amounted to MXN424 billion (USD30 billion), of which 81% is debt issued in the capital markets and 19% 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 June 30, 2012, cash balances reached MXN62 billion and unused committed credit facilities are now USD4 billion on top of cash from operations (CFO) over the past 12 months of MXN215 billion. This favorably compares with maturities for the next three years of MXN38.7 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 million-USD9.5 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:
America Movil
--Local currency IDR at 'A';
--Foreign currency IDR at 'A';
--Senior notes issuances at 'A'.
--Mexican national scale rating at 'AAA(mex)';
--Certificados Bursatiles issuances with ticker symbols AMX 10, AMX 10-2 and 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)'.
Additional information is available 'www.fitchratings.com'.
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. 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:
Parent and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210
Rating Corporates Above the Rating Ceiling
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=668909
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
Rating Global Telecoms Companies - Sector Credit Factors
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=550205
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