Earnings Call Transcript - AMX Q4 2025

Operator, Operator

Good morning. My name is Hillary, and I will be your conference operator today. I would like to welcome everyone to the América Móvil Fourth Quarter 2025 Conference Call. Thank you. I will now turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead.

Daniela Lecuona, Head of Investor Relations

Thank you so much. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter results. We have today on the line Mr. Daniel Hajj, CEO; Mr. Oscar Von Hauske, COO; and Mr. Carlos Garcia Moreno, CFO. Thank you for joining.

Daniel Hajj Aboumrad, CEO

Thank you, Daniela. Welcome, everybody, to América Móvil Fourth Quarter 2025 report. Carlos is going to make us a summary of the results. Carlos?

Carlos Jose Garcia Moreno Elizondo, CFO

Thank you, Daniel. Good morning, everyone. Well, the U.S. government shutdown in effect through the middle of the fourth quarter ended up rising uncertainty about the state of economic activity in the U.S. Not only did it have a direct impact on employment, but on account of the shutdown, several economic indicators generated by government agencies failed to be released at all. On December 10, less than a month after the shutdown ended and with still incomplete economic data, the Fed reduced the policy rate by 25 basis points in the absence of strong inflation pressures and the appearance of a softening economy. The dollar depreciated against practically all the currencies in our region of operations in the quarter, except for the Brazilian real and the Argentinian peso, but it declined 2.3% versus the Mexican peso, 3.7% versus the Colombian peso, and 5.7% versus the Chilean peso, remaining practically flat versus the euro in the quarter. Well, we added 2.5 million wireless subscribers in the quarter, 2.8 million postpaid net gains and 298,000 prepaid losses and ended up December with 331 million wireless subscribers. Our postpaid base was up 8.4% year-on-year. Brazil led the way in terms of postpaid net adds with 644,000 subscribers, followed by Colombia with 276,000, Peru with 148,000, and Mexico with 135,000 postpaid subscribers. Now in the prepaid segment, Mexico contributed 197,000 new subscribers; Argentina, 226,000; and Colombia 224,000, whereas in Brazil and Chile, we had prepaid losses of 381,000 and 315,000 subscribers, respectively. In the fixed line segment, we connected 524,000 broadband accesses, 84,000 in Mexico, 113,000 in Brazil, 57,000 in Argentina, and 49,000 in Colombia. PayTV posted a good performance, adding 77,000 units. We disconnected 79,000 landline voice lines. Our access lines exceeded 410 million at the end of December: 331 million were wireless subscribers, and 79 million were fixed line RGUs. The growth of our mobile postpaid base and our broadband accesses, which you can see in the chart, our most dynamic business lines have been accelerated over the last quarters with that of postpaid reaching an 8.4% year-on-year increase and broadband access expanding by 5.6%. So these are some of our highest access growth rates in years. Fourth quarter revenue rose 3.4% in Mexican peso terms from a year ago to MXN 245 billion. They were up 6.2% at constant exchange rates with service revenue expanding 5.3%. The difference between the rate of growth in nominal terms versus that at constant exchange rates mainly reflects the 9.6% appreciation relative to the year earlier quarter of the Mexican peso against the U.S. dollar. The apparent deceleration of service revenue growth, which extends to most revenue categories, stems from the incorporation of our Chilean operation from November 2024. EBITDA was up 4.2% in Mexican peso terms to MXN 95 billion, and it was up 6.9% at constant exchange rates in the year earlier quarter. As was the case over several quarters in 2022, 2024, EBITDA expanded more rapidly than revenue on greater operating leverage. Mobile service revenue growth remained strong at 6.2%, supported by postpaid revenue that was up 7.6%. Prepaid revenue growth maintained the pace in the prior quarter, which was the fastest in at least 5 quarters and with the exceptional developments here in Mexico. As you can see in the next chart, with Mexico accelerating from 2.8% to 3.8% on the back of a strong recovery of private consumption in the country. Fixed line service revenue was up 3.6% year-over-year with fixed broadband revenue increasing 6.4%. The non-Chilean operations were growing faster over the last couple of quarters, which you can see in the dotted green line. Mexico performed well with broadband revenue growth rising from 2% to really 4%. Our operating profit totaled MXN 49 billion. It was up 5.9% in nominal terms and 8.3% at constant exchange rates. While our comprehensive financing costs were roughly half those of the year earlier quarter, this resulted in a net profit of MXN 19 billion in the quarter, which was four times larger than that of a year before. It was equivalent to MXN 0.32 per share or $0.35 per ADR. Our operating cash flow for the year 2025 came in at MXN 213 billion after deducting from our EBITDA after leases MXN 16 billion increase in working capital and MXN 82 billion in interest payments and taxes. After CapEx in the amount of MXN 131 billion, we were left with a free cash flow of MXN 82 billion. The latter figure represents nearly a 40% year-on-year increase in our free cash flow. Shareholder distributions reached MXN 45 billion, including MXN 12 billion in share buybacks, even as we reduced our net debt in cash flow terms by MXN 20 billion. At the end of the year, our net debt to EBITDA after leases ratio stood at 1.52x and was on a downward trend. So with this, I will pass the floor back to Daniel Hajj, and we will begin the Q&A session. Thank you.

Daniel Hajj Aboumrad, CEO

Thank you, Carlos. We can start with the Q&A session.

Operator, Operator

Your first question comes from Marcelo Santos at JPMorgan.

Marcelo Santos, Analyst

I wanted to inquire about the CapEx outlook for 2026 and coming years. Could you please provide us with an updated view?

Daniel Hajj Aboumrad, CEO

What we have been doing is that we are not finalizing the CapEx for this year yet. However, our target is to be around 14% to 15% of revenues. That translates to approximately $6.8 billion to $7 billion. That is what we aim to achieve. We are looking to maintain that range, although we have not finalized all the countries involved.

Marcelo Santos, Analyst

Okay. As a follow-up, going forward, is it reasonable to assume a similar percentage of revenues for the coming years? I know you have not finalized, but just conceptually, does it make sense?

Daniel Hajj Aboumrad, CEO

Yes, this is what we think. The next 3 years, let's say, 2, 3 years, yes, we can assume that we can have between 14% to 15%, MXN 7 billion, MXN 6.8 billion, MXN 7.1 billion, depending on spectrum, depending on a lot of things that are coming, but that's more or less what we're thinking.

Operator, Operator

Your next question comes from Rogério Araújo.

Rogério Araújo, Analyst

I have one on, there is a line called pretax nonoperating expenses. It came at MXN 7.9 billion this quarter. This is well above the quarterly average of MXN 700 million in the past couple of years. So could you please remind what anchors exactly in this line? What did impact it this quarter? And also what to expect going forward?

Daniel Hajj Aboumrad, CEO

In which line you said?

Carlos Jose Garcia Moreno Elizondo, CFO

In nonoperating expenses...

Rogério Araújo, Analyst

It's within financial results, it's called other pretax nonoperating expenses.

Daniel Hajj Aboumrad, CEO

The other financial expenses. We don't have it right now, but if you can talk to Daniela, we can give you the detail on what was the difference between the 4.9% to 7.8% this quarter.

Rogério Araújo, Analyst

Okay. No worries. I will. Can I follow up with another question as there was no answer on this one?

Daniel Hajj Aboumrad, CEO

Yes, please.

Rogério Araújo, Analyst

Okay. Could you comment on Telefonica's announced sale of its operations in Chile, why América Móvil and Entel ended up stepping out of the deal and any early expectation of the expected competitive environment in the country with Millicom and French buying these assets? If you could also comment on potential consolidation movements across Latin America as well, if there is anything active, and expectations for consolidation in the near future? Anything you can share would be great.

Daniel Hajj Aboumrad, CEO

We were initially considering partnering with Entel to bid for Telefonica, but after reviewing the situation, we chose not to proceed with that collaboration. I'm uncertain whether Entel has decided to go solo in this endeavor. Millicom, which expressed interest, ultimately won the bid. We have a lot to accomplish within our company in Chile. We're seeing revenue growth and increasing market share, and we are making all the necessary investments and synergies. We believe we will remain a strong competitor in Chile. The change in the competitive landscape doesn't significantly impact us, as Millicom is a new player entering the market. Our focus remains on the consolidation of the Chilean market, both in wireless and fixed services. However, our decision to step back was influenced by various factors, including regulatory complexities, company structure, and Telefonica's valuation. It was a challenging deal, which led us to maintain our current position. Chile's market is undoubtedly tough, but we are making the investments required to compete effectively. We remain hopeful for future market consolidation in Chile.

Operator, Operator

Your next question comes from Gustavo Farias from UBS.

Gustavo Farias, Analyst

I'd like to hear some thoughts on capital allocation. So given the strong growth in free cash flow, and we also saw a slowdown in share buybacks lately. So how are you thinking about capital allocation going forward?

Daniel Hajj Aboumrad, CEO

We have seen strong growth in free cash flow, approximately 40%. Our target for debt-to-EBITDA is around 1.3 to 1.5 times, and we are slightly above that at the moment. It's essential for us to work towards this leverage target, which means we will be using our excess cash flow to pay down debt. In terms of M&A, while we previously had Telefonica in Chile, we still have a presence with Desktop in Brazil. We are not actively pursuing M&A opportunities outside our region, but we anticipate market consolidation in our area. We aim to be in a strong position to potentially consolidate smaller companies or fiber operators. The competitive landscape in Latin America is evolving, with new entrants and smaller companies exiting, which presents various opportunities in the next couple of years. We want to remain healthy and meet our targets, which involves using our cash flow for debt reduction as well as returning value to shareholders through buybacks and dividends. Overall, our focus will be on reducing debt and exploring opportunities within our region.

Carlos Jose Garcia Moreno Elizondo, CFO

Sorry, just to follow up on what Daniel has said, it's important to note that we, at the end of the quarter, we're still at a bit marginally higher than the 1.5x net debt-to-EBITDA ratio that we have as our upper limit, even though we paid down debt by MXN 20 billion, okay, a bit more than $1 billion throughout the year. So we did devote some small amount of cash to a reduction of debt to remain within the limits that we have told the market, guided the market for the last 5 years. I mean these are not new limits.

Gustavo Farias, Analyst

Yes. Very clear. Just a quick follow-up, if I may. So considering what you just said and considering that the consolidation in Chile is now out of the table. Is it fair to assume that any, let's say, cash flow that would be directed to M&A in Chile is now redirected towards deleveraging?

Daniel Hajj Aboumrad, CEO

Towards what?

Daniela Lecuona, Head of Investor Relations

Is it fair to assume that any cash flow that would be directed to M&A in Chile is now redirected towards deleveraging?

Daniel Hajj Aboumrad, CEO

Well, as we mentioned, if there are no opportunities in mergers and acquisitions, we will focus on leveraging. If an opportunity arises, we will pursue it. Currently, we do not have any specific deals in mind, but we are exploring various smaller opportunities in Latin America. If none materialize, we will concentrate on leveraging and aim to stay at the lower end of our targeted range to prepare for future opportunities. That's our current plan.

Operator, Operator

Our next question comes from Cesar Medina at Morgan Stanley. Well, as we mentioned, if we don't have anything else in mergers and acquisitions, we will proceed with leverage. If an opportunity arises, we will act on it. Currently, we are exploring various small opportunities in Latin America. If those do not materialize, we will focus on leveraging and aim to be at the lower end of our target to stay prepared for potential opportunities. That summarizes our position.

Cesar Medina, Analyst

How should we think of the impact of FX on your overall results? And I'm asking because the Mexican peso strength is very visible and you're exposed to different currencies and your CapEx and debt also has sort of hard currency exposure. In net, how should we think of the impact on the cash flow?

Carlos Jose Garcia Moreno Elizondo, CFO

I believe this company operates with various exchange rates that affect our revenue, and we also encounter different rates regarding our debt. When we discussed the leverage ratio earlier, it tends to fluctuate depending on whether we measure it in dollars or pesos. This is also true for our net debt, which varies in the same way due to our exposure to multiple currencies. Managing this complexity can be challenging, which is why we emphasize our performance at constant exchange rates in our reports to eliminate the noise caused by these fluctuations. Overall, we have a clear approach to managing the company financially and our currency exposure is primarily limited to three or four currencies. Regarding operating cash flows, we do not generally hedge them as they are determined by market conditions. Therefore, we need to carefully balance our intentions regarding distributions and share buybacks with the necessity to manage our leverage ratio by reducing debt. This balancing act can be difficult to predict because it is influenced by exchange rate movements, which can sometimes appear as noise, but are indeed a reality we must consider. When evaluating our net debt to EBITDA for rating agencies or in public reports, consistency in our approach is key as we navigate between share buybacks, capital expenditures, and our net leverage.

Daniel Hajj Aboumrad, CEO

Exactly what Carlos is saying is a balance, a balance between the capital allocation. It will be reducing our leverage, returning to the shareholders via buybacks or dividends, and being healthy to be prepared if there's something in our regions that will come as an opportunity. So these 3 things we're going to balance through all of this year to be okay. So that's mainly what we're talking about in the capital allocation.

Operator, Operator

Your next question comes from Alejandro Azar from GBM.

Alejandro Azar Wabi, Analyst

This is just on the consolidation that we are seeing all over Latin America, Colombia, Chile, Brazil, there's even rumors on fixed players in Mexico being interested in AT&T. So my question is, how do you see the regulatory environment for AMX as it seems that we are moving to a tighter market with 2, 3 players. Do you think we should see in 5 years, 10 years, less regulatory or less asymmetric regulation where AMX currently has one?

Daniel Hajj Aboumrad, CEO

The only place where we have asymmetric regulation is in Mexico; in the other 20 countries we operate, there is no asymmetric regulation. Looking ahead to the next 3 to 4 years, I expect to see more consolidation in these markets, which I believe will be beneficial for the business. In the last 5 to 6 years, there were many companies investing in fiber and offering aggressive promotions, but I'm not seeing new companies entering the fiber market anymore. The existing competitors are recognizing that the business isn't as easy as it appears. Therefore, we aren't seeing new entrants in fiber. Current companies may either consolidate amongst themselves or with others. This will create a new landscape in Latin America that I think will be favorable for us and for those remaining in the market. Regarding the rumors about AT&T in Mexico, they are just that—rumors. AT&T is a strong competitor, and if they were to sell, their acquirers would also be strong competitors. Our focus should be on ensuring we have the best 5G network, quality customer care, and continuing to invest in systems, IT, and AI to maintain our competitive edge, regardless of whether AT&T stays or is sold. In Chile, we used to have Telefonica as a competitor, but that's no longer the case. It’s unfortunate we haven’t seen consolidation in that market, which would be beneficial; however, it seems to be stabilizing with four competitors in both mobile and fixed sectors. We'll have to see if future consolidation is possible in that market.

Carlos Jose Garcia Moreno Elizondo, CFO

Alejandro, as Daniel is saying, I mean, I do believe that you can see that there's very much of a wave of consolidation happening in the world. You look at Europe, there used to be many more players in each one of the countries, there's been a reduction. And this basically has to do with the dynamics of the industry. This industry requires scale to get the returns for the investment. And when you have a very fragmented market, there's no returns and no investment. And typically, players end up probably not in the best of shapes. So I think that this is an issue that is more and more taken into account by regulators and generally governments worldwide.

Operator, Operator

Your next question comes from Marcelo Santos at JPMorgan.

Marcelo Santos, Analyst

I just wanted to use this opportunity to ask about the Brazilian number portability. You mentioned in your release that Brazil is seeing sustained customer preference as evidenced by positive number portability trends, which indeed has been very strong and stronger than usual. My question is, is this portability that has been stronger mostly explained by NuCel, which you have the MVNO? Or is it mostly explained by your Claro operation in Brazil? Just wanted to see what's driving this strong portability, which we also see using the data.

Daniel Hajj Aboumrad, CEO

I think they are both, okay? There's no doubt that NuCel is helping us in number portability, and we're doing very good with them. But on the other side, we are doing strong, and we have been growing more on revenues than our competitors in Brazil. And I think that's good number portability plus new subscribers, we are doing okay. And the other thing that I'm seeing is that we are getting also very good ARPU subscribers. So we are not only in the prepaid or in the low end, we are getting also good high-end subscribers. So it's been good. That's what I can say. There is no doubt that NuCel is helping us, but it's not only NuCel. There's all the things that we have on the back of that, that we have been doing that. We have been always gaining number portability through the year. And in the fourth quarter, we got a strong boost because of NuCel. So it's been good, and we are a little bit more good, a little bit better than what we used to be. This is what I can tell you.

Alejandro Azar Wabi, Analyst

So just to clarify, the jump we saw in the fourth quarter, that would be attributed to sales. You were having very good portability across the year. That's Claro, but the change we saw in more recent months, that would be NuCel.

Daniel Hajj Aboumrad, CEO

Part of the increase could be attributed to NuCel, but it is not solely NuCel. Additionally, in the fourth quarter, many people are looking to change their handsets or take advantage of promotions, which adds to the dynamics.

Operator, Operator

Your next question comes from Emilio Fuentes at GBM.

Emilio Fuentes De Leon, Analyst

I'm wondering, given the stellar net adds you have had in broadband in Mexico, the recent quarters, how sustainable do you see this performance going forward, specifically as we reach a higher penetration for this service in the market?

Carlos Jose Garcia Moreno Elizondo, CFO

Yes. We see a good trend on net adds within the last 4 quarters in fixed broadband in Mexico. We have very good promotions in the market that the customers have received very well. The bundles with streaming increasing the speed. So we see the same trend through the year, right? So we see the bundles are working pretty good with the streaming video platforms, and the speeds that we've been delivering to the market are really good. We have 92% of the customers already with fiber. So we believe that we will retain the customers. We believe the trend will be more or less the same.

Operator, Operator

There are no further questions at this time. I will now turn the call back to Mr. Daniel Hajj for closing remarks.

Daniel Hajj Aboumrad, CEO

Well, to thank everyone for being on the call. And thank you, Carlos, Daniela, Oscar. Thank you very much.

Carlos Jose Garcia Moreno Elizondo, CFO

Thank you all.

Daniel Hajj Aboumrad, CEO

Bye-bye.