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Rating Action:

Moody's assigns Baa1 to America Movil's proposed notes; stable outlook

18 Jul 2022

NOTE: On July 19 2022, the press release was corrected as follows: The following was added to the third sentence of the fourth paragraph of the Ratings Rationale section: “(funds from operations, minus capex and dividends), estimated by Moody’s including standard adjustments.” Revised release follows.

New York, July 18, 2022 -- Moody's Investors Service ("Moody's")  today assigned a Baa1 rating to America Movil, S.A.B. de C.V.'s ("America Movil") proposed $750 million in senior unsecured notes due 2032.

Proceeds will be used for general corporate purposes including debt repayment. The rating of the notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date and that these agreements are legally valid, binding and enforceable. The new notes will rank pari passu with all other unsecured and unsubordinated debt obligations of America Movil.

Assignments:

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

....Senior Unsecured Regular Bond/Debenture, Assigned Baa1

RATINGS RATIONALE

America Movil's Baa1 rating reflects its strong business model, 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 (FCF) and a multiregional revenue base, coupled with solid infrastructure, fully integrated operations and significant scale to support its competitive position. Also, the company's relatively conservative financial policies promote a sound financial profile including tight cost control, which has resulted in margin improvements since 2020, and a balanced shareholder distribution tied to the company's net leverage target of 1.5x (as reported). America Movil faces intense competition, which limits further margin improvements, risk from foreign-exchange fluctuations, and regulatory pressure in some of its large markets.

Proforma for the issuance of the notes, Moody's expects America Movil's adjusted leverage will remain unchanged at 2.6x for the last twelve months ended March 2022. Moody's expects America Movil's EBITDA margin to remain strong at around 38% because of recent M&A activity and tight cost control, with Moody's-adjusted leverage declining to 2.3x-2.4x in the next two years.

America Movil's Baa1 rating is one notch above the Government of Mexico's (Baa2 stable) rating, a situation that occurs only under exceptional circumstances, reflecting America Movil's credit fundamentals that are stronger than those of the sovereigns in which it operates, limited reliance on the local banking system for funding, and geographic diversification with a large proportion of cash flow and assets outside its domestic market.

America Movil has good liquidity. The company's liquidity is supported by its cash balance of MXN154,000 million as of June 2022. Throughout the year, the company will generate $1.5 billion in FCF(funds from operations, minus capex and dividends), estimated by Moody’s including standard adjustments. In addition, Sitios Latinoamerica SAB de CV (Baa3 stable)' spinoff will include a transfer of around $2.8 billion in debt which will reduce America Movil's debt. America Movil also has sizable committed revolving credit facilities (RCFs), including a $2.5 billion (MXN51,500 million) facility due in August 2024; one facility for the euro equivalent of $1.5 billion (MXN36,000 million) due in May 2026, which is fully available at America Movil's level; and another for €1 billion at Telekom Austria due in July 2024. The company also has around $6 billion in KPN and Verizon shares, which we do not incorporate in our liquidity or leverage assessments.

America Movil has a €1 billion commercial paper program, which, as of 30 June 2022, was fully undrawn, and a €250 million committed facility linked to this program.

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 stable outlook on America Movil's ratings is based on Moody's expectation that the company will be able to maintain its credit quality over the next 12-18 months. The stable outlook also reflects the current stable outlook on Mexico's ratings.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

The ratings of America Movil could be upgraded if the rating of Mexico is upgraded and, concurrently, the company is able to maintain its strong financial profile such that its adjusted gross debt/EBITDA remains below 2.5x and its adjusted EBITDA margin remains above 35% on a sustained basis.

The rating of America Movil could be downgraded if the company reports adjusted gross debt/EBITDA approaching 3x, adjusted EBITDA margin deteriorating toward 25%, adjusted retained cash flow/debt remaining below 25% and negative FCF on a sustained basis, without any prospects of a recovery.

Negative pressure could also arise if America Movil makes large debt-funded acquisitions or reinstates significant returns of capital to shareholders while its leverage increases. Significant market share reductions in key markets, negative regulatory shifts limiting profitability or a deterioration in the company's liquidity would also strain the rating. A downgrade of Mexico's sovereign rating would put negative pressure on America Movil's rating.

The principal methodology used in this rating was Telecommunications Service Providers published in January 2017 and available at https://ratings.moodys.com/api/rmc-documents/48906. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

America Movil, S.A.B. de C.V., headquartered in Mexico City, Mexico, is Latin America's leading telecom operator, with 306 million wireless lines and 74.6 million revenue-generating units as of June 2022. As of the same date, the company offered wireless, fixed and pay TV services to 23 countries in the Americas and seven European nations through a controlling stake of 51% in Telekom Austria AG (Telekom Austria, Baa1 stable). America Movil reported revenue of around $40.6 billion for the 12 months that ended June 2022. The company reported 1.0 million kilometers of fiber, 197,000 kilometers of submarine cable and five satellites as of December 2021.

America Movil has a wide footprint across the Americas, with Mexico and Brazil being the two largest markets in terms of EBITDA, accounting for more than half of its total EBITDA.

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 on https://ratings.moodys.com/rating-definitions.

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 issuer/deal page for the respective issuer on https://ratings.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 https://ratings.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://ratings.moodys.com/documents/PBC_1288235.

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 https://ratings.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Rosa Morales
Asst Vice President - Analyst
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

Marcos Schmidt
Associate Managing Director
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.
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