America Movil plans $35bn investment, only opportunistic debt in 2012

Feb 15 (IFR) - America Movil has ambitious investment plans over the next few years and the cash on its balance sheet to fund them. Most of the financing the company is set to do in 2012 will be opportunistic, Carlos Garcia Moreno, America Movil's CFO told IFR in an interview today.

America Movil, the Mexican telecommunications giant, is planning US$9bn of investment in 2012, and Garcia Moreno said similar amounts are planned in each of the next few years. In 2011 the company invested US$9.7bn, which was 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 huge investments to integrate our mobile and fixed networks and we are setting up platforms to replace all the copper cables with fiber optic cables so that data can be transferred at higher speeds," he added.

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

As a result, any financing America Movil does this year will be for acquisitions or refinancing, but the company does not have a predetermined amount of debt that it is looking to take on, Garcia Moreno said.

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 Latin America, the company is already the biggest mobile-phone carrier in the region, but the telecoms giant is always on the lookout for acquisitions elsewhere, according to the CFO.

"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," he said. "We would not want to be premises-based in the US. We already have Tracfone, which we are happy with," he added.

Opportunistic financing

The company has around US$2bn in debt maturing this year. While this could be paid down Garcia Moreno said it makes 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 bank debt 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 pre-pay 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. America Movil's net debt to Ebitda ratio is around 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 America Movil 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.

Renminbi, yen, pesos

The telecoms giant will continue to look 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 priced at 3.50%, at the tight end of the 3.50%-3.60% yield that was the official guidance.

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

America Movil could also access the local Latin American capital markets, which it did not do in 2011. The company 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," he added.

Last year America Movil priced the first corporate yen deal not backed by a JBIC from a Latin American issuer in more than 10 years. It also re-opened the Swiss franc market, and issued in dollars and euros. In 2012, America Movil will look to also return regularly to markets it has accessed. This year it will look to set up a shelf in Yen though the size or timing has not yet been determined.

Win, win

Garcia Moreno is also confident that investors will be interested in buying 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."

"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," he added.

Garcia Moreno also said he is not fazed by the court order in Mexico that the competition watchdog Cofeco investigate claims of collusion between Spain's Telefonica and America Movil. The investigation is to examine the presence of Isidro Faine on the boards of both Telefonica and financial group Inbursa, which like America Movil is owned by billionaire Carlos Slim.

"There are many people around the world that are on different boards and to infer that this means there is any relationship between the companies is a far stretch, I do not see this investigation by Cofeco as being a problem at all." Barclays research analysts agreed yesterday.

"In our view, this argument is a stretch, given the significant overlaps among board members across several companies in Mexico," the equity research team wrote in a note published Tuesday. "In addition, there is no evidence at this point showing collusion behavior between America Movil and Telefonica in Mexico."