EM LATAM CREDIT: America Movil: Q3 Results

(AMXLMM; Baa1/A-/A-)

• Solid earnings from Latin America’s largest telecom company with EBITDA up 5% YoY, free cash flow of MXN53bn (USD2.9bn) and net debt down 7% leading to a reported net debt/EBITDA of 1.55x.

• The company’s home market of Mexico lagged in wireless subscriber and fixed line growth as well as overall EBITDA growth of 1.4% YoY.

• Brazil outperformed with EBITDA up 6.9% YoY as mobile service revenue grew 8%, helped by an 8.5% increase in postpaid subscribers.
• Other notable increases were registered in Central America with an EBITDA increase of 17% YoY, Peru up 9% and Argentina up 12%.

• America Movil has signed a non-binding agreement to consider buying part of Telefonica Chile as part of a joint bid with Entel of Chile. We hope to hear more details on the conference call later today.

• We view Telefonica of Spain as a motivated seller who has divested most of its Latin America operations ex Brazil so we imagine the transaction price will be attractive and will merge well with America Movil’s existing Chile operations.

• AMXLMM 35s were last quoted T+84bp, 10bp tighter since June 30th and 18bp tighter YTD.