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America Movil Debt Ratings Affirmed Following Cancellation of KPN Bid

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Moody's Investors Service has confirmed America Movil's debt ratings, following the company's withdrawal of its offer to buy KPN.

"Although the potential for further acquisitions remains, following the withdrawal of its KPN tender offer, we believe America Movil will continue to pursue its growth strategy, which may include opportunistic M&A, in a prudent manner and in accordance with its leverage target of not exceeding Net Debt to EBITDA above 1.5 times," said Soummo Mukherjee - Moody's Senior Credit Officer .

America Movil's A2 rating is supported by the company's status as Mexico's largest telecom operator with market shares of approximately 70% on wireless and wireline subscriber bases; its # 1 position as a regional mobile telecom service provider in Latin America; its # 8 position in Moody's global rated telecom universe in terms of revenues; its strong operating cash flow of over USD13 billion in LTM; and its relatively conservative financial policies. At the same time, the ratings also factor the increasing competitive and regulatory uncertainties in some of its key markets, such as Mexico, Colombia and Brazil, as well as the risks associated with its growth strategy involving expansion in new markets, such as Europe, that may pose increased operating challenges.

The stable outlook on America Movil's ratings is based on our expectation that the company will be able to maintain its credit quality by posting positive revenue growth and sustaining its margins at current levels, despite increasing competitive challenges across Latin America.

An upgrade of America Movil's ratings is not envisioned at this point, mainly due to our expectations that margins and free cash flow will remain pressured at least for the next couple of years. Any future upgrade consideration will be dependent on the company continuing to improve its operating margins and free cash flow generation, maintaining a conservative financial policy and putting in place an appropriate backstop credit facility for its CP programs. An upgrade would likely have to be coupled by an overall improvement in the sovereign ratings of the major countries of operation for America Movil.

The ratings could be negatively impacted if the company's operations or financial performance is adversely affected due to intensifying competition; if a change in regulation impacts the company's operations; or if America Movil makes large debt-funded acquisitions or significant returns of capital to shareholders such that adjusted gross debt to EBITDA is likely to exceed 2.0 times for an extended period of time. A material deterioration in the company's liquidity would also put pressure on the ratings.

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