America Movil Q2 Preview: Incorporating Incremental medium-term FCF Upside; Maintain Buy

Research evidence excerpt

America Movil Q2 Preview: Incorporating Incremental medium-term FCF Upside; Maintain Buy

trends from Millicom’s consolidation of Telefónica’s assets, improving market

structure, strong 5G positioning and rationalization in fixed broadband

competition. Worth noting that the newly elected administration is likely

supportive of regulatory stability. Hence, we continue to expect healthy

postpaid growth and further margin expansion.

Argentina: We expect the aftermath of TEO/TMA remedies announced on Jun-

18 to remain a key debate. The requirement that 6mn TEO/TMA mobile clients

be sold to a third operator effectively excludes AMX from the process, and

leaves a question around who would be willing to enter the market now. Given

the lack of interested parties in the acquisition of TMA when it was first put up

for sale, we don’t rule out the assets could end up being absorbed by

incumbents, in a similar fashion to what occurred with Oi Mobile in Brazil.

Although a list of interested parties is expected by August by the Argentinean

Anti-Trust authority (ANC), timing and outcome remain uncertain, in practice.

We continue to see AMX as a beneficiary of market repair in the country and its

performance closely tied to Argentina's macro normalization.

Capital allocation: Capital allocation priorities are likely to remain unchanged: 1)

opportunistic M&As 2) deleveraging and 3) return excess capital to shareholders

through buybacks / dividends. Importantly, the soft level of buybacks observed in

June should be viewed in the context of the upcoming dividend payment (~MXN16bn

to be paid in July-15th), which temporarily reduced available cash and should not

be interpreted as a change in shareholder return outlook.

Old vs New Estimates