Movil plans US$35bn of investments

America Movil will opportunistically tap the debt markets this year to fund potential acquisitions as well as for refinancing, according to the company’s chief financial officer.

But the telecoms outfit, part of Carlos Slim’s empire, will fund most of its ambitious four-year US$35bn investment plan through cash sitting on its balance sheet, Carlos Garcia Moreno told IFR.

The firm is planning investments of US$9bn in 2012 and, according to Garcia Moreno, similar amounts are planned for each of the next few years. In 2011, the company invested US$9.7bn, up 50% year-on-year.  

“We will be making huge investments to integrate our mobile and fixed networks and we are setting up platforms to replace all the copper cables with fibre-optic cables so that data can be transferred at higher speeds,” he said.

Garcia Moreno expects this to be completed within the next four years across America Movil’s Latin America franchise. He said the company had enough cash on its balance sheet to fund this level of capex.

The firm will use the debt markets for other purposes instead, such as acquisitions. In 2011, most of the company’s new debt of about US$11bn funded the purchases of Mexican fixed-line company Telmex and Brazil’s Net Servicos.

America Movil will not make further acquisitions in Latin America, where it is the biggest mobile-phone carrier. However, it is always on the lookout for acquisitions elsewhere.

“We are not in a rush; we are being shown everything out there. There are lots of things on offer and we are open to possibilities.”

Opportunistic financing

The company has debt of about US$2bn maturing this year. While this could be paid down, Garcia Moreno said it made sense to refinance it in the debt market. Most of the due debt is from the companies that were consolidated on to the America Movil balance sheet. A portion is bank debt, with some also being bank debt due in the local markets, he pointed out.

The company may also do further liability management. In 2011, America Movil completed a US$370m debt swap.

“If rates look attractive, we may also issue debt to do some liability management and pre-pay some debt. This year, we will definitely look to be more opportunistic,” said Garcia Moreno. “Rates are attractive for both short-term and long-term debt and we are looking, in particular, at longer-dated paper.”

For 2011, total debt was US$27bn and net debt US$22bn. America Movil’s net debt to Ebitda ratio was around 1.0 times and was expected to remain about the same for the foreseeable future, said Garcia Moreno.

Garcia Moreno does not consider the syndicated loans market particularly attractive. Last year, the company closed a US$4bn equivalent facility.

“If rates look attractive, we may also issue debt to do some liability management and pre-pay some debt. This year, we will definitely look to be more opportunistic”

“There are cycles when the bank market is more attractive than the debt market. However, at the moment, it is the other way round and the bank market will be at a disadvantage for some time,” he said.

Renminbi, yen, pesos

The telecoms firm will continue to issue bonds in a variety of markets. This year it has already lived up to its reputation for opening new frontiers, being the first issuer from Latin America to do an offshore renminbi deal.

America Movil issued the equivalent of US$160m on February 1. The deal was priced at 3.5%, at the tight end of the 3.5%–3.6% official guidance. 

Despite the interest in other currencies, the US dollar bond market continues to be the most important of the capital markets for America Movil, according to Garcia Moreno.

America Movil can also access the local Latin American capital markets, which it did not do in 2011. The company had previously issued bonds in Chile, Colombia and Peru.

“Local currencies in Latin America were way oversold at the end of last year and I think they are correcting now and are not yet overbought,” said the CFO. “We are big believers in the local markets in Latin America,” he added.

Last year, America Movil priced the first corporate yen deal from a Latin American issuer in more than 10 years, without a guarantee from the Japan Bank for International Cooperation. It also re-opened the Swiss franc market, as well as issuing in dollars and euros.