One step ahead

IFR LatAm Special Report 2012
8 min read
Natalie Feary

With a reputation for ambitious and aggressive funding and investment plans America Movil is set for another year of setting precedents.

Barely a month into this year America Movil became the first Latin American issuer to do an offshore renminbi deal, managing to price the deal at the tight end of the guidance. Last year alone it accessed the dollar, euro, yen and Swiss franc market. Investors have been impressed by the strength of the company, its ambitious investment plans and ability to access new markets.

“America Movil is a trailblazer for what the corporate market will look like in the future,” said one portfolio manager, for a fund with US$38bn under management in EM-related investments.“They represent what a mature issuer looks like in terms of great management.”

“When they first started experimenting with different currencies people questioned them, but now they’re wondering where they’re going to go next,” added another investor.

The telecoms giant is planning to continue to access new markets throughout 2012, and return to some of the LatAm capital markets, Carlos Garcia Moreno, America Movil’s CFO told IFR.

Bankers bemoan the funding team’s aggressive style. The company last year closed a US$4bn equivalent syndicated loan, achieving the tightest priced loan in the region. To get the desired pricing Garcia Moreno effectively conducted a reverse Dutch auction, taking in only banks that already had approval from credit committees and which offered the lowest pricing. Despite the complaints from bankers, 17 banks piled into the deal in a testament to the fact that the firm has the power to set the agenda. Investors are more than impressed by the company’s management style..

“Garcia Moreno didn’t get the reputation he has by having a nice smile, he earned it by having foresight,” said an emerging market specialist portfolio manager. “He and [Carlos] Slim and the management team have the ability to match liabilities with revenue streams. When you have that kind of insurmountable penetration around Latin America, you can experiment,” he added.

“Garcia Moreno didn’t get the reputation he has by having a nice smile, he earned it by having foresight”

Garcia Moreno knows the company is popular among investors, and is confident they will continue to buy America Movil’s paper. “I think investors in places like Europe and Japan see they are concentrating too much risk in one region. The argument for diversifying more is very strong,” said the CFO. “America Movil is a solid credit and provides exposure to the whole of Latin America. It is a win-win situation – for investors it brings geographical diversity and for America Movil it allows for the expansion of its investor base.”

New frontiers

America Movil will continue to look to issue bonds in a variety of markets. Despite the interest in other currencies, the dollar bond market continues to be the most important of the capital markets for America Movil, says Garcia Moreno. The company could also access the local LatAm capital markets, which it did not do in 2011. It has 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.”

Last year America Movil priced the first corporate yen deal not backed by a JBIC from a LatAm issuer in more than 10 years. It also reopened the Swiss franc market, and issued in dollars and euros. This year it will look to set up a shelf in yen though the size or timing has not yet been determined.

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

The company may also do further liability management. In 2011 America Movil completed a US$370m swap. “If rates look attractive we may also issue debt to do some liability management and prepay some debt, this year we will definitely look to be more opportunistic,” said the CFO. “Rates are attractive for both short-term and long-term debt and we are looking in particular at longer dated paper,” he added.

For 2011 total debt was US$27bn, and net debt was US$22bn. the firm’s net debt-to-Ebitda ratio is about 1.0 times and is expected to remain about the same for the foreseeable future, said Garcia Moreno. He does not consider the syndicated loans market particularly attractive in 2012. Last year the company closed a US$4bn equivalent facility.

“There are cycles when the bank market is more attractive than the debt market, but at the moment it is the other way round and the bank market will be at a disadvantage for some time,” he said. However, the company could look to the loans markets to do bridges to fund acquisitions and then do a take-out in the bond market.


The company is planning US$9bn of investment this year, and Garcia Moreno said similar amounts were planned in each of the next few years. In 2011 the company invested US$9.7bn, a 50% increase on the year before. Total capital expenditure plans over the next four years will be around US$35bn.

“We expect the growth in data services being provided through wireless networks to be huge, so we will need to build data highways to prepare for this growth,” said Garcia Moreno. “We will be making big 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.”

Garcia Moreno expects this to be completed within the next four years across America Movil’s LatAm franchise. He added that the company had enough cash on its balance sheet to fund this level of capex. As a result, any financing the company did this year would be for acquisitions or refinancing, but the company did not have a predetermined amount of debt it was looking to take on. In 2011 most of the company’s new debt, which was around US$11bn, was for the purchase of Mexico’s fixed line company, Telmex and for Net Servicos in Brazil.

America Movil will not make further acquisitions in LatAm – the company is already the biggest mobile phone carrier in the region, but it is always on the lookout for acquisitions elsewhere, he said. “We are not in a rush, we are being shown everything that is out there, there are lots of things on offer and we are open to possibilities. We would not want to be premises-based in the US. We already have Tracfone, which we are happy with,” he added.

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One step ahead
Carlos Garcia, America Movil's chief financial officer