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| [September 30, 2005] |
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Fitch Rates America Movil's MXP5 Billion Senior Notes 'BBB'
MONTERREY, Mexico --(Business Wire)-- Sept. 30, 2005 -- Fitch Ratings has assigned a 'BBB' rating to America Movil, S.A. de C.V.'s (America Movil) MXP5.0 billion (approximately US$460 million) 9% senior unsecured notes due 2015. Proceeds from the debt issuance will be used primarily to refinance debt and for general corporate uses. Fitch has also affirmed the existing unsecured debt ratings of America Movil, which include a foreign currency rating of 'BBB' with a Stable Rating Outlook, and a local currency rating of 'BBB+' with a Positive Rating Outlook.
The ratings of America Movil continue to reflect the company's strong market position in the Mexican wireless segment, its diversified and growing portfolio of wireless assets throughout Latin America, and its sound financial and liquidity position. The ratings also incorporate prospects for historical and expected share repurchases. America Movil benefits from strong cash flow generation from Telcel, its Mexican wireless unit, which accounted for 50% of consolidated revenues and 74% of EBITDA for the first six months of 2005. Telcel is the largest wireless provider in Mexico, with a market share above 75%. Demand for wireless services in Mexico is still growing at a fast pace; Telcel grew its subscriber base by 26% over the past 12 months to 32.3 million clients. The 'BBB' rating of the notes incorporates transfer and convertibility risks associated to the settlement of the notes, as they are issued in Mexican pesos but paid in U.S. dollars at market exchange rates; the new issuance will not add foreign exchange risk to the company's financial risk profile.
America Movil also has an increasingly diverse revenue stream generated by a growing wireless business outside Mexico, which accounted for 50% of consolidated revenues and 26% of EBITDA during the first half of 2005. America Movil, which operates in 10 Latin-American countries outside Mexico, is well positioned to benefit from the wireless growth opportunities present in Latin America. America Movil's subscriber growth in each of these countries was above 38% over the past 12 months. As a result of this, EBITDA margins have been volatile due to strong growth and resulting subscriber acquisition costs. The company's international operations provide the company with important cash flow and currency diversification. The company's non-Mexican subsidiaries are estimated to generate sufficient cash flow to meet America Movil's consolidated interest expense by 2 times (x) to 3x, which demonstrates the benefits of a geographically diversified portfolio of assets.
Leverage levels are expected to remain stable with debt/EBITDA at 1.3x as of June 30, 2005. America Movil continues to generate free cash flow even with an increased annual capital expenditure plan for 2005 of approximately US$3.0 billion to meet strong subscriber growth. Total debt was US$5.5 billion at June 30, 2005. Refinancing risk is low as 85% of debt is long-term, and the company maintains high cash balances, currently around US$2.0 billion. In addition, America Movil has ample access to the capital markets. During 2005, the company has met its refinancing needs through the issuance of US$1 billion senior notes due 2035 during February 2005, and during 2004, through the issuance of US $500 million in senior notes due 2015 during October 2004, as well as the issuance of US$500 million in senior notes due 2009, US$800 million senior notes due 2014, and US$650 million medium-term bank notes and bank loans during April 2004.
America Movil's financial profile is likely to continue to gradually strengthen over the medium term because debt levels are expected to remain relatively stable, while EBITDA generation is expected to continue to grow due to organic growth in its existing operations. As a result, financial leverage, as measured by debt/EBITDA, should gradually decrease closer to 1.0x over the medium term compared with 1.5x-2.0x over the past two years. Over the same period, interest coverage measured by EBITDA/interest expense should improve to approximately 12.0x, compared with 7.0x-9.0x over the past two years. Nevertheless, further increases in shareholder payouts in the form of dividends and share buybacks could moderate these expected improvements. America Movil paid out $108 million in dividends and spent US$1.1 billion in share buybacks during 2004, still moderate compared with the company's size and profitability.
America Movil is the largest provider of wireless services in Mexico and Latin America. In total, America Movil is composed of subsidiaries in 11 countries in the Americas with 73.8 million wireless subscribers. The company's investments outside Mexico are located in Brazil, Colombia, Ecuador, Argentina, Guatemala, Nicaragua, Honduras, El Salvador, Uruguay, and the U.S. The company recently completed the acquisitions of operators in Paraguay, Chile, and Peru, expanding its presence in Latin America.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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