Analyst Note
| Michael Hodel, CFA |America Movil posted solid third-quarter results as demand for prepaid wireless services bounced back across Latin America and currencies generally held stable during the period. Total reported revenue increased 4.7% year over year, or 1.5% on a constant-currency basis, to MXN 260 billion. When translated into U.S. dollars at average exchange rates, revenue declined 8% year over year to $11.8 billion, a big improvement from the 18% decline last quarter, reflecting business growth and a modest recovery in the value of the Mexican peso during the quarter. Profitability has also improved nicely, with the operating margin increasing 2 percentage points year over to 17% during the quarter. The firm now expects capital spending will total only $6 billion in 2020, down from expectations of $8.5 billion coming into the year. Currency weakness has likely pulled this number lower, affecting the labor costs needed to put equipment into service, but management also indicated that equipment prices are falling and that it has been able to delay nonessential projects. Free cash flow has improved sharply as a result, which the firm has primarily used to repay debt.