AM-0 June 3, 2002 América Móvil Consolidates its Presence in Brazil.
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AM-2 Overview Overview América Móvil to consolidate its position as the leading wireless services provider in Latin America with the acquisition of BCI’s and SBCI’s interest in Telecom Americas, thereby becoming its single controlling shareholder. Equity subscribers of AMX will surpass 26.8 million, of which 25.0 million are located in Latin America and 4.2 million in Brazil. América Móvil will rank as the largest group in Brazil by equity subscribers and the sixth largest worldwide. Initial savings in interest costs likely to exceed US$ 100 million per year after partial refinancing of debt. Credit ratios to remain strong.
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Transcript of AM-0 June 3, 2002 América Móvil Consolidates its Presence in Brazil.
AM-2AM-2
OverviewOverview América Móvil to consolidate its position as the leading wireless
services provider in Latin America with the acquisition of BCI’s and SBCI’s interest in Telecom Americas, thereby becoming its single controlling shareholder.
Equity subscribers of AMX will surpass 26.8 million, of which 25.0 million are located in Latin America and 4.2 million in Brazil.
América Móvil will rank as the largest group in Brazil by equity subscribers and the sixth largest worldwide.
Initial savings in interest costs likely to exceed US$ 100 million per year after partial refinancing of debt.
Credit ratios to remain strong.
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0%1%2%3%4%5%6%7%8%9%
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Real GDP Growth
Inflation
12 months periodFiscal Result
% of GDP
Balance of Payments
Notwithstanding volatility due to elections, Brazil’s economic Notwithstanding volatility due to elections, Brazil’s economic fundamentals should bring about economic stabilityfundamentals should bring about economic stability
Current Account Deficit
Foreign Direct Investment
US$ bn
Primary Surplus
Fiscal Deficit
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Latin America’s Wireless
Subscribers by Country
Brazil’s Wireless vs Wireline PenetrationBrazil’s Wirelesss vs Fixed Lines
Latin America’s Wireless Penetration
as of December 2001
Brazil33%
Mexico25%
Colombia/ Guatemala/ Ecuador
11%
Other31%
0%
5%
10%
15%
20%
25%
30%
35%
Colombia Brazil Argentina Mexico Venezuela Chile
0
10
20
30
40
50
60
70
1997
1998
1999
2000
2001
2002
/f
2003
/f
2004
/f
2005
/f
2006
/f
Fixed Lines Wireless Subscribers
0%
5%
10%
15%
20%
25%
30%
35%
40%
1997
1998
1999
2000
2001
2002
/f
2003
/f
2004
/f
2005
/f
2006
/f
Source: Pyramid Research
Brazil’s wireless market, the largest in Latin America, has a low Brazil’s wireless market, the largest in Latin America, has a low penetration rate and a high potential for growthpenetration rate and a high potential for growth
Source: Pyramid Research
Millions
Wireless
Wireline
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Interior São PauloMarket Share: 35%
Penetration: 17%Telecom Americas’ Interest: 100.0%
Brasilia, South-West RegionMarket Share: 23%Penetration: 18%Telecom Americas’ Interest: 75.4% (1)
Rio de Janeiro, Espirito SantoMarket Share: 40%
Penetration: 28%Telecom Americas’ Interest: 100.0%
Rio Grande do SulMarket Share: 31%Penetration: 27%Telecom Americas’ Interest: 76.1% (1)
(1) Americel and Telet will reach 81% subject to approval by Anatel.(1) Americel and Telet will reach 81% subject to approval by Anatel.
AMX has established a sizable footprint in Brazil, in areas that AMX has established a sizable footprint in Brazil, in areas that comprise almost half of the country’s GDP and a third of its populationcomprise almost half of the country’s GDP and a third of its population
Interconnection rates received by ATL are the lowest in all of Brazil, followed by those of Tess. Telet is the fifth lowest among 20 operators.
4.5 million Consolidated Subscribers45% of GDP
35% of PopulationTDMA Technology in all Companies
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The partial integration of the Brazilian operations has resulted in The partial integration of the Brazilian operations has resulted in synergies and brought down costs...synergies and brought down costs...
Synergies of integration have resulted in lower costs.
Payroll costs reduced by 21% over 12 months.
Procurement arranged in a centralized fashion, with the Brazilian operations benefiting from the economies of scale generated by América Móvil.
Integration of various IT systems, with all companies being transported to the same systems platform as ATL.
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……and allowed CAPEX to be allocated on the basis of revenue and allowed CAPEX to be allocated on the basis of revenue and profit maximizationand profit maximization
Centralized engineering decisions with a view to maximizing revenues / minimizing CAPEX.
Rationalization of CAPEX by reallocating equipment between companies.
All treasury and financing decisions are centralized.
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América Móvil’s entry into Brazil was initiated two years ago...América Móvil’s entry into Brazil was initiated two years ago...
On March 2000, Telmex purchased a 25% interest in ATL. This investment is passed on to América Móvil at the time of its spin-off from Telmex.
Telecom Americas is established on December 1st, 2000, with América Móvil, Bell Canada International (BCI) and SBC International (SBCI) as its shareholders.
América Móvil and SBCI each contributed its 25% stake in ATL to Telecom Americas.
BCI contributed its16% stakes in Americel and Telet.
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……and will result in América Móvil becoming the largest group in and will result in América Móvil becoming the largest group in Brazil by equity subscribersBrazil by equity subscribers
In April 2001, Telecom Americas acquired from Telia and Algar a 100% economic interest in Tess.
In March 2001, Telecom Americas agreed to acquire the interests in Americel and Telet held by TIW, Opportunity and various pension funds, which together represented a 65% interest in each of the companies.
In May 2001, América Móvil acquired directly from Williams Communications a 41% interest in ATL.
In February 2002, América Móvil contributed its direct 41% interest in ATL, together with US$ 80 million to Telecom Americas in exchange for the latter’s interest in Colombian wireless company Comcel.
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América Móvil’s interest in Telecom Americas will increase to América Móvil’s interest in Telecom Americas will increase to 93%, which will result in AMX consolidating Telecom Americas93%, which will result in AMX consolidating Telecom Americas
América Móvil to pay US$ 366 million for 39.1% of Telecom Americas and to exercise its call option (which does not involve any cash payment) on SBCI’s 11.1% interest in Telecom Americas, bringing its stake to 93%.
América Móvil will initially refinance approximately US$ 300 million of short term debt of Telecom Americas.
Consolidated debt of América Móvil and Telecom Americas to end the year at approximately US$ 4.2 billion.
Debt / EBITDA and EBITDA / Interest payments ratios will remain within investment grade range.
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América Móvil will capitalize on the growth opportunities América Móvil will capitalize on the growth opportunities presented by its Brazilian operationspresented by its Brazilian operations
2005E2001
Net Revenues (millions US$) 1,285778
EBITDA (millions US$) 489168
EBITDA Margin (% of Net Revenues) 38%22%
Cumulative CAPEX 2002 - 2005(millions US$)
880
Subscribers (millions) 7.34.3
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Several financial benefits will be immediately obtained from the Several financial benefits will be immediately obtained from the consolidation of Telecom Americasconsolidation of Telecom Americas
Brazilian operations to be free cash flow positive in 2003.
Initial interest - cost savings of US$ 100 million per year.
Substantial tax benefits in Brazil.
Lower execution and financing risk.
Compound annual EBITDA growth rate of 31% in 2001 - 2005.
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4.2
3.6
2.6
1.8
1.2
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
América Móvil TEM PT TIM Bell South
América Móvil will consolidate its position as the main wireless América Móvil will consolidate its position as the main wireless player by equity subscribers in Brazilplayer by equity subscribers in Brazil
Brazilian Equity Subscribers as of March, 2002Millions
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The Brazilian subscribers will account for 16% of América The Brazilian subscribers will account for 16% of América Móvil’s total subscriber baseMóvil’s total subscriber base
Country Total Equity
Mexico
Brazil
Colombia
U.S.A.
Ecuador
Guatemala
17,898
4,503
2,089
1,893
546
460
17,898
4,188(1)
1,997(2)
1,851
440(3)
434
(000’s)
Guatemala2%
Ecuador2%
Brazil16%
U.S.A.7%
Mexico65%
Colombia8%
U.S.A.
As of March, 2002
América Móvil’s Wireless Subscribers
(1) Considering AMX’s stake of 93%
(2) Considering AMX’s stake of 96%
(3) Considering AMX stake of 81%
Total 27,389 26,808
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SummarySummary
Increasing presence in a strategic market
Significant savings derived from consolidation
Consolidation of América Móvil’s growth profile
Low wireless penetration in a country with over 140 million inhabitants.
Significant growth potential.
Savings derived from operational synergies.
Lower cost of funding which saves US$ 100 million per year in interests.
Improves América Móvil’s earnings potential.
Consolidates América Móvil as the largest cellular player in Latin America.
Improved operations and capital structure of TA will strenghten AMX’s position as the leading wireless company in Latin America
