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Rating Action:

Moody's assigns A3 rating to America Movil's new USD1.0 billion notes

04 May 2020

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.

Assignments:

..Issuer: America Movil, S.A.B. de C.V.

....USD1.0 billion Senior Unsecured Regular Bond/Debenture due 2030, Assigned A3

RATINGS RATIONALE

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 above-mentioned metrics.

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.

REGULATORY DISCLOSURES

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.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Marie Fischer-Sabatie
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
Mexico
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
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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