New York, May 04, 2020 -- Moody's Investors Service, ("Moody's") today assigned an A3 rating
to America Movil, S.A.B. de C.V.'s
("America Movil") new USD1.0 billion senior unsecured notes due
2030. The notes will rank equally in right of payment with all
other unsecured and unsubordinated debt obligations of America Movil.
Proceeds from the issuance of the new notes will be used for general corporate
purposes including repayment of outstanding indebtedness. The outlook
on the ratings is negative.
..Issuer: America Movil, S.A.B.
....USD1.0 billion Senior Unsecured
Regular Bond/Debenture due 2030, Assigned A3
America Movil's A3 ratings reflects its strong business model, which
is supported by the company's large scale among telecom operators globally,
and its extensive presence in Latin America, complemented by its
leading market shares. The company benefits from positive free
cash flow generation and a multiregional revenue base, coupled with
solid infrastructure, fully integrated operations and significant
scale to support its competitive position. In addition, the
company's relatively conservative financial policies promote a healthy
financial profile. At the same time, America Movil faces
intense competition, which limits its margin improvements;
risk from foreign-exchange fluctuations; and regulatory shifts
in some of its large markets.
The rapid and widening spread of the coronavirus outbreak, a deteriorating
global economic outlook and asset price declines are creating a severe
and extensive credit shock across many sectors, regions and markets.
Although the telecom industry is not directly exposed to the impact of
the coronavirus outbreak in the way other sectors are, with telecommunications
considered essential services during lockdowns, it will not be immune
to the contraction in global GDP. Moody's expects America
Movil's credit metrics to be impacted in 2020 by a weaker operating environment,
with sharp GDP contractions in several of its largest markets.
Nevertheless, the company has levers that it can pull to limit these
negative effects and preserve cash, which include cost cutting and
a reduction in capital spending. We expect the group to maintain
an adequate liquidity buffer and its metrics to recover in 2021-22.
Since October 2011, America Movil has been issuing senior unsecured
bonds without the guarantee from Radiomovil Dipsa, S.A.
de C.V. (brand name "Telcel"), a Mexican mobile operator
and America Movil's largest subsidiary. Although the new notes
are structurally subordinated to the guaranteed notes, Moody's has
not notched down the rating of the unguaranteed notes due to the overall
strength of America Movil and the expectation that going forward all debt
issued by the group will no longer carry a guarantee. In addition,
we expect that the company will not materially increase the current level
of debt at its subsidiaries, which would further subordinate the
debt at the holding company.
The negative outlook on America Movil's rating reflects the negative
outlook on the rating of the Government of Mexico (Baa1 negative),
with a weaker sovereign having the potential to create a rating drag on
companies operating within its borders.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upgrade of America Movil's rating could be considered if Mexico's
sovereign rating is upgraded and, concurrently, the company
improves its financial profile as follows: its adjusted gross debt/EBITDA
is sustained below 2.0x, adjusted EBITDA margin recovers
toward 35% and adjusted retained cash flow/debt is maintained above
35%. An upgrade could also be considered if, over
time, America Movil geographically diversifies its business further,
substantially reducing its exposure to Mexico and other lower-rated
countries, which include Brazil (Ba2 stable), representing
about 20% of its EBITDA, while reaching and maintaining the
A downgrade of Mexico's sovereign rating would very likely result
in a downgrade of America Movil's rating. A rating downgrade
could also result if America Movil reports the following credit metrics:
(1) adjusted gross debt/EBITDA sustained above 2.5x; (2) adjusted
EBITDA margin deteriorating toward 25%, without any prospects
of recovery; (3) adjusted retained cash flow/debt maintained below
20%; (4) sustained negative FCF. The rating could also
be downgraded if America Movil makes large debt-funded acquisitions
or reinstates significant returns of capital to shareholders while its
leverage rises. Significant market share reductions in key markets,
negative regulatory shifts affecting profitability or a deterioration
in the company's liquidity would also strain the ratings.
America Movil, headquartered in Mexico City, Mexico,
is Latin America's leading telecom operator, with 278 million wireless
lines and 84 million revenue-generating units as of December 2019.
The company offers wireless, fixed and pay TV services to 18 countries
in the Americas and various European nations through a controlling stake
of 51% in Telekom Austria AG (Telekom Austria, Baa1 stable).
In 2019, America Movil reported revenue of around $53 billion.
The principal methodology used in this rating was Telecommunications Service
Providers published in January 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1055812.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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Senior Vice President
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653
Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
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Moody's Investors Service, Inc.
250 Greenwich Street
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