Moody's Assigns Ratings to America Movil's $5.2 Billion in Global Notes

Published on: 9th Aug 2012

­Moody's Investors Service has assigned A2 ratings to America Movil's unsecured senior notes, equivalent to approximately USD 5.2 billion. The notes are senior unsecured debt obligations of America Movil. Proceeds from the notes will be used for corporate purposes, including debt refinancing. The outlook on the ratings is stable.

America Movil's ratings are supported by the company's status as Mexico's largest telecom operator with market shares of approximately 70% on wireless and 80% on wireline subscriber bases; its # 1 position as regional mobile telecom service provider in Latin America; its # 10 position in the global telecom universe in terms of revenues; its strong operating cash flow of over USD 17 billion in LTM ended in June 2012; and solid credit metrics.

"America Movil continues to exhibit strong credit metrics: in the last twelve months ended in June 30, 2012, its posted strong annual operating cash flow of over USD 17 billion, equivalent to 48% of adjusted debt, and a moderate leverage of 1.7 times adjusted debt/EBITDA for its rating category", said Nymia Almeida, a Vice-President, Senior Analyst at Moody's.

Moody's also noted that recent acquisitions of stakes in KPN and Telekom Austria are credit negative because they increase uncertainty about America Movil's future M&A activity not only in these companies but also in Europe or elsewhere. The prospects for significant expansion outside of the core Latin American markets heightens the managerial and operational risk for the company.

These negatives are balanced by America Movil's solid franchise and liquidity position. The company held MXN 62.4 billion in cash as of June 30, 2012 and, during the last twelve months ended last June, it generated over MXN 62 billion in free cash flow, after dividend payments and capital expenditures.

The stable outlook on America Movil's ratings is based on Moody's expectation that the company will be able to maintain its credit quality by posting positive revenue growth and sustaining its margins, despite increasing competitive challenges across Latin America. The stable outlook also considers an expected reduction in leverage to closer to one time adjusted debt/EBITDA over the next 12 months.

An upgrade of America Movil's ratings is not envisioned at this point.

 

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