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As filed with the Securities and Exchange Commission on April 28, 2021

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

Annual Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

for the fiscal year ended December 31, 2020

Commission file number: 1-16269

AMÉRICA MÓVIL, S.A.B. DE C.V.

(exact name of registrant as specified in its charter)

America Mobile

(translation of registrant’s name into English)

United Mexican States

(jurisdiction of incorporation)

Lago Zurich 245, Plaza Carso / Edificio Telcel Colonia Ampliación Granada, Miguel Hidalgo 11529 Mexico City, Mexico

(address of principal executive offices)

Daniela Lecuona Torras

Lago Zurich 245, Plaza Carso / Edificio Telcel, Piso 16 Colonia Ampliación Granada, Miguel Hidalgo 11529 Mexico City,

Telephone: (5255) 2581-3700 / Facsimile: (5255) 2581-4422

E-mail: daniela.lecuona@americamovil.com

(name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

  

Trading symbol

  

Name of each exchange on which registered:

A Shares, without par value

  

AMOV

  

New York Stock Exchange

L Shares, without par value

  

AMX

  

New York Stock Exchange

3.125% Senior Notes Due 2022

  

AMX22

  

New York Stock Exchange

3.625% Senior Notes Due 2029

  

AMX29

  

New York Stock Exchange

2.875% Senior Notes Due 2030

  

AMX30

  

New York Stock Exchange

6.375% Notes Due 2035

  

AMX35

  

New York Stock Exchange

6.125% Notes Due 2037

  

AMX37

  

New York Stock Exchange

6.125% Senior Notes Due 2040

  

AMX40

  

New York Stock Exchange

4.375% Senior Notes Due 2042

  

AMX42

  

New York Stock Exchange

4.375% Senior Notes Due 2049

  

AMX49

  

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each of the registrant’s classes of capital or common stock as of December 31, 2020:

 

20,578 million

  

AA Shares

520 million

  

A Shares

45,764 million

  

L Shares

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

 Yes 

 

X     

 

  No  

 

      

   
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  

 Yes 

     

No

 

X     

         
   
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  

 Yes 

 

X     

 

No

 
         
         
   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

 Yes 

 

X     

 

No

 
         
         

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

   X         Large accelerated filer            Accelerated filer            Non-accelerated filer            Emerging growth company

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

             U.S. GAAP               X         International Financial Reporting Standards as issued by the International Accounting Standards Board                Other    

If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17             Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

 Yes 

 

      

 

  No  

 

X     


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(See Form 20-F Cross Reference Guide on page 89)

 

Selected Financial Data     6  
PART I: INFORMATION ON THE COMPANY     9  
About América Móvil     10  
Our Networks     17  
Our Competitors     18  
Acquisitions, Other Investements and Divestitures     19  
Marketing, Sales and Distribution, Customer Services     20  
PART II: OPERATING AND FINANCIAL REVIEW AND PROSPECTS     23  
Overview     24  
Results of Operations     26  
Liquidity and Capital Resources     32  
PART III: RISK FACTORS     37  
PART IV: SHARE OWNERSHIP AND TRADING     49  
Major Shareholders     50  
Related Party Transactions     51  
Dividends     51  
Trading Markets     52  
Bylaws     52  
Purchases of Equity Securities by the Issuer and Affiliated Purchasers     53  
Taxation of Shares and ADSs     54  
PART V: CORPORATE GOVERNANCE     59  
Management     60  
Corporate Governance     64  
Controls and Procedures     66  
Corporate Sustainability Report     68  
Code of Ethics     69  
PART VI: REGULATION     71  
PART VII: ADDITIONAL INFORMATION     87  
Employees     88  
Legal Proceedings     88  
Principal Accountant Fees and Services     89  
Additional Information     89  
Forward-Looking Statements     90  
Form 20-F Cross Reference Guide     91  
Signatures     93  
PART VIII: CONSOLIDATED FINANCIAL STATEMENTS  

 


 

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We present our consolidated financial statements in Mexican pesos. This annual report contains translations of various peso amounts into U.S. dollars at specified rates solely for your convenience. You should not construe these translations as representations that the peso amounts actually represent the U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, we have translated U.S. dollar amounts from pesos at the exchange rate of Ps.19.9487 to U.S.$1.00, which was the rate reported by Banco de México on December 30, 2020, as published in the Official Gazette of the Federation (Diario Oficial de la Federación, or “Official Gazette”).

 

We have not included earnings or dividends on a per American Depositary Share (“ADS”) basis. Each L Share ADS represents 20 L Shares and each A Share ADS represents 20 A Shares.

 

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     FOR THE YEAR ENDED DECEMBER 31,  
     2016      2017      2018      2019      2020      2020  
     (in millions of Mexican pesos, except share and per share amounts)      (in millions of
U.S. dollars,
except share
and per share
amounts)
 

STATEMENT OF COMPREHENSIVE INCOME DATA:

 

Operating revenues

  

 

Ps.

 

  

 

975,412

 

  

 

Ps.

 

  

 

1,021,634

 

  

 

Ps.

 

  

 

1,038,208

 

  

 

Ps.

 

  

 

1,007,348

 

  

 

Ps.

 

  

 

1,016,887

 

  

 

U.S.

 

  

 

50,975

 

Operating costs and expenses

     

 

865,802

 

     

 

921,490

 

     

 

898,651

 

     

 

852,507

 

     

 

851,532

 

     

 

42,686

 

Depreciation and amortization

     

 

148,526

 

     

 

160,175

 

     

 

155,713

 

     

 

158,915

 

     

 

164,244

 

     

 

8,233

 

Operating income

     

 

109,610

 

     

 

100,144

 

     

 

139,557

 

     

 

154,841

 

     

 

165,355

 

     

 

8,289

 

Net profit for the year

  

 

Ps.

 

  

 

12,079

 

  

 

Ps.

 

  

 

32,155

 

  

 

Ps.

 

  

 

54,517

 

  

 

Ps.

 

  

 

70,313

 

  

 

Ps.

 

  

 

51,027

 

  

 

U.S.

 

  

 

2,559

 

NET PROFIT ATTRIBUTABLE FOR THE YEAR TO:

 

Equity holders of the parent

  

 

Ps.

 

  

 

8,650

 

  

 

Ps.

 

  

 

29,326

 

  

 

Ps.

 

  

 

52,566

 

  

 

Ps.

 

  

 

67,731

 

  

 

Ps.

 

  

 

46,853

 

  

 

U.S.

 

  

 

2,349

 

Non-controlling interests

     

 

3,429

 

     

 

2,829

 

     

 

1,951

 

     

 

2,582

 

     

 

4,174

 

     

 

210

 

Net profit for the year

  

 

Ps.

 

  

 

12,079

 

  

 

Ps.

 

  

 

32,155

 

  

 

Ps.

 

  

 

54,517

 

  

 

Ps.

 

  

 

70,313

 

  

 

Ps.

 

  

 

51,027

 

  

 

U.S.

 

  

 

2,559

 

EARNINGS PER SHARE:

 

Basic

  

 

Ps.

 

  

 

0.13

 

  

 

Ps.

 

  

 

0.44

 

  

 

Ps.

 

  

 

0.79

 

  

 

Ps.

 

  

 

1.03

 

     

 

0.71

 

     

 

0.04

 

Diluted

  

 

Ps.

 

  

 

0.13

 

  

 

Ps.

 

  

 

0.44

 

  

 

Ps.

 

  

 

0.79

 

  

 

Ps.

 

  

 

1.03

 

     

 

0.71

 

     

 

0.04

 

Dividends declared per share (1)

  

 

Ps.

 

  

 

0.28

 

  

 

Ps.

 

  

 

0.30

 

  

 

Ps.

 

  

 

0.32

 

  

 

Ps.

 

  

 

0.35

 

  

 

Ps.

 

  

 

0.38

 

  

 

U.S.

 

  

 

0.02

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (MILLIONS):

 

Basic

     

 

65,693

 

     

 

65,909

 

     

 

66,055

 

     

 

66,016

 

     

 

66,265

 

     

 

-

 

Diluted

     

 

65,693

 

     

 

65,909

 

     

 

66,055

 

     

 

66,016

 

     

 

66,265

 

     

 

-

 

     AS OF DECEMBER 31,  
     2016      2017      2018      2019      2020      2020  
     (in millions of Mexican pesos, except share and per share amounts)      (in millions of
U.S. dollars,
except share
and per share
amounts)
 

BALANCE SHEET DATA:

 

Property, plant and equipment, net

  

 

Ps.

 

  

 

701,190

 

  

 

Ps.

 

  

 

676,343

 

  

 

Ps.

 

  

 

640,001

 

  

 

Ps.

 

  

 

639,343

 

  

 

Ps.

 

  

 

722,930

 

  

 

U.S.

 

  

 

36,239

 

Right of use assets

     

 

-

 

     

 

-

 

     

 

-

 

     

 

118,003

 

     

 

101,977

 

     

 

5,112

 

Total assets

     

 

1,515,042

 

     

 

1,486,212

 

     

 

1,429,223

 

     

 

1,531,934

 

     

 

1,625,048

 

     

 

81,463

 

Short-term debt and current portion of long-term debt

     

 

82,607

 

     

 

51,746

 

     

 

96,230

 

     

 

129,172

 

     

 

148,083

 

     

 

7,423

 

Short-term lease debt

                       

 

25,895

 

     

 

25,068

 

     

 

1,257

 

Long-term debt

     

 

625,194

 

     

 

646,139

 

     

 

542,692

 

     

 

495,082

 

     

 

480,300

 

     

 

24,077

 

Long-term lease debt

                       

 

94,702

 

     

 

84,259

 

     

 

4,224

 

Capital stock

     

 

96,338

 

     

 

96,339

 

     

 

96,338

 

     

 

96,338

 

     

 

96,342

 

     

 

4,829

 

Total equity

     

 

271,024

 

     

 

260,634

 

     

 

245,872

 

     

 

226,907

 

  

 

Ps.

 

  

 

315,118

 

  

 

U.S.

 

  

 

15,797

 

NUMBER OF OUTSTANDING SHARES (MILLIONS):

 

AA Shares

     

 

20,635

 

     

 

20,602

 

     

 

20,602

 

     

 

20,602

 

     

 

20,578

 

     

 

-

 

A Shares

     

 

592

 

     

 

567

 

     

 

546

 

     

 

531

 

     

 

520

 

     

 

-

 

L Shares

     

 

44,571

 

     

 

44,901

 

     

 

44,887

 

     

 

44,872

 

     

 

45,764

 

     

 

-

 

  (1)

Figures for each year provided represent the annual dividend declared at the general shareholders’ meeting that year. For information on dividends paid per share translated into U.S. dollars, see “Share Ownership and Trading—Dividends” under Part IV of this annual report.

 

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HISTORY AND CORPORATE INFORMATION

 

América Móvil, S.A.B. de C.V. (“América Móvil,” “we” or the “Company”) is a Sociedad Anónima Bursátil de Capital Variable organized under the laws of Mexico.

We were established in September 2000 when Teléfonos de México, S.A.B. de C.V. (“Telmex”), a fixed-line Mexican telecommunications operator privatized in 1990, spun off to us its wireless operations in Mexico and other countries. We have made significant acquisitions throughout Latin America, the United States, the Caribbean and Europe, and we have also expanded our businesses organically.

Our principal executive offices are located at Lago Zurich 245, Plaza Carso / Edificio Telcel, Colonia Ampliación Granada, Miguel Hidalgo, 11529, Mexico City, Mexico. Our telephone number at this location is (5255) 2581-3700.

    

 

 

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BUSINESS OVERVIEW

We provide telecommunications services in 25 countries. We are a leading telecommunications services provider in Latin America, ranking first in wireless, fixed-line, broadband and Pay TV services based on the number of revenue generating units (“RGUs”).

Our largest operations are in Mexico and Brazil, which together account for over half of our total RGUs and where we have the largest market share based on RGUs. We also have operations in 16 other countries in the Americas and seven countries in Central and Eastern Europe as of December 31, 2020. For a list of our principal subsidiaries, see Note 2 a(ii) to our audited consolidated financial statements and “Additional Information—Exhibit 8.1” under Part VII of this annual report.

We intend to build on our position as leaders in integrated telecommunications services in Latin America and the Caribbean, and to grow in other parts of the world by continuing to expand our subscriber base through the development of our existing businesses and strategic acquisitions when opportunities arise. We have developed world-class integrated telecommunications platforms to offer our customers new services and enhanced communications solutions with higher data speed transmissions at lower prices. We continue investing in our networks to increase coverage and implement new technologies to optimize our network capabilities. See “Operating and Financial Review and Prospects—Overview” under Part II of this annual report for a discussion on the seasonality of our business.

    

 

 

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KEY PERFORMANCE INDICATORS

We have identified RGUs as a key performance indicator (“KPI”) that helps measure the performance of our operations. The table below includes the number of our wireless subscribers and our fixed RGUs, which together make up the total RGUs, in the countries where we operate. Wireless subscribers consist of the number of prepaid and postpaid subscribers to our wireless services. Fixed RGUs consist of fixed voice, fixed data and Pay TV units (which include customers of our Pay TV services and, separately, of certain other digital services). The figures below reflect total wireless subscribers and fixed RGUs of all our consolidated subsidiaries, without adjustments to reflect our equity interest, in the following reportable segments:

 

  Mexico Wireless;
  Mexico Fixed;
  Brazil;
  Colombia;
  Southern Cone (Argentina, Chile, Paraguay and Uruguay);
  Andean Region (Ecuador and Peru);
  Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama);
  the Caribbean (the Dominican Republic and Puerto Rico);
  the United States; and
  Europe (Austria, Belarus, Bulgaria, Croatia, Macedonia, Serbia and Slovenia).

 

    

 

AS OF DECEMBER 31,

 
    

 

2018

    

 

2019

    

 

2020

 
           

(in thousands)

        

WIRELESS SUBSCRIBERS

 

     

Mexico Wireless

  

 

75,448

 

  

 

76,918

 

  

 

77,789

 

Brazil

  

 

56,416

 

  

 

54,488

 

  

 

63,140

 

Colombia

  

 

29,681

 

  

 

31,104

 

  

 

33,009

 

Southern Cone

  

 

30,971

 

  

 

31,507

 

  

 

30,669

 

Andean Region

  

 

20,344

 

  

 

20,104

 

  

 

18,877

 

Central America

  

 

14,364

 

  

 

15,488

 

  

 

15,044

 

Caribbean

  

 

5,887

 

  

 

6,244

 

  

 

6,422

 

United States

  

 

21,688

 

  

 

20,876

 

  

 

20,682

 

Europe

  

 

21,029

 

  

 

21,296

 

  

 

21,864

 

Total Wireless Subscribers

  

 

275,828

 

  

 

278,025

 

  

 

287,497

 

FIXED RGUS:

        

Mexico Fixed

  

 

22,337

 

  

 

21,992

 

  

 

21,925

 

Brazil

  

 

35,285

 

  

 

34,048

 

  

 

32,648

 

Colombia

  

 

7,171

 

  

 

7,613

 

  

 

8,318

 

Southern Cone

  

 

2,199

 

  

 

2,514

 

  

 

2,836

 

Andean Region

  

 

1,856

 

  

 

2,049

 

  

 

2,158

 

Central America

  

 

6,465

 

  

 

4,409

 

  

 

4,247

 

Caribbean

  

 

2,546

 

  

 

2,528

 

  

 

2,558

 

Europe

  

 

6,203

 

  

 

6,143

 

  

 

6,050

 

Total Fixed RGUs

  

 

84,062

 

  

 

81,296

 

  

 

80,740

 

Total RGUs

  

 

359,890

 

  

 

359,323

 

  

 

368,237

 

PRINCIPAL BRANDS

We operate in all of our geographic segments under the Claro brand name, except in Mexico, the United States and Europe, where we principally do business under the brand names listed below.

 

 

  COUNTRY

  

 

PRINCIPAL

BRANDS

  

 

SERVICES AND

PRODUCTS

  Mexico

  

Telcel

  

Wireless voice

  

Wireless data

  

  

Telmex Infinitum

  

Fixed voice

  

Fixed data

  United States(1)

  

TracFone

  

Wireless voice

  

Wireless data

  

Straight Talk

  

Wireless voice

  

Wireless data

  Europe

  

A1

  

Wireless voice

     

Wireless data

     

Fixed voice

     

Fixed data

     

Pay TV

(1) We entered into an agreement to sell our United States operations to Verizon Communications Inc. as described under “Acquisitions, Other Investments and Divestitures.” We expect the closing to occur during 2021.

SERVICES AND PRODUCTS

We offer a wide range of services and products that vary by market, including wireless voice, wireless data and value-added services, fixed voice, fixed data, broadband and IT services, Pay TV and over-the-top (“OTT”) services.

Wireless Operations

In 2020, our wireless voice and data operations generated revenues of Ps.561.5 billion, representing 55.5% of our consolidated revenues. As of December 31, 2020, our wireless operations represented approximately 78.1% of our total RGUs.

VOICE AND DATA. Our wireless subsidiaries provide voice communication services across the countries in which they operate. We offer international roaming services to our wireless subscribers through a network of cellular service providers with which our wireless subsidiaries have entered into international roaming agreements around the world, and who provide GSM, 3G and 4G-LTE roaming services.

The voice and data plans are either “postpaid,” where the customer is billed monthly for the previous month, or “prepaid,” where the customer pays in advance for a specified volume of use over a specified period. Postpaid plans increased as a percentage of the wireless base from 32.0% in December 2019 to 34.0% as of December 31, 2020, while prepaid plans represented 66.0% as of December 31, 2020.

 

 

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Our wireless voice services are offered under a variety of plans to meet the needs of different market segments. In addition, we often bundle wireless data communications services together with wireless voice services. Our wireless subsidiaries had approximately 287 million wireless voice and data subscribers as of December 31, 2020.

Prepaid customers typically generate lower levels of usage and are often unwilling or financially ineligible to purchase postpaid plans. Our prepaid plans have been instrumental to increase wireless penetration in Latin America and Eastern Europe to levels similar to those of developed markets. Additionally, prepaid plans entail little to no risk of non-payment, as well as lower customer acquisition costs and billing expenses, compared to the average postpaid plan.

In general, our average rates per minute of wireless voice are very competitive for both prepaid and postpaid plans. On average, rates per minute of wireless voice used in 2020 decreased by approximately 27.1% at constant exchange rates relative to 2019. In addition, the plans we offer our retail customers include selective discounts and promotions that reduce the rates our customers pay.

VALUE-ADDED SERVICES. As part of our wireless data business, our subsidiaries offer value-added services that include Internet access, messaging and other wireless entertainment and corporate services through GSM/EDGE, 3G and 4G LTE networks.

Internet services include roaming capability and wireless Internet connectivity for feature phones, smartphones, tablets and laptops, including data transmission, e-mail services, instant messaging, content streaming and interactive applications. For example, in Mexico, our website for our wireless services (www.telcel.com) through Radiomóvil Dipsa, S.A. de C.V (“Telcel”), offers a wide range of services and content such as video, music, games and other applications, which our subscribers can access from mobile devices. In addition, we offer other wireless services, including wireless security services, mobile payment solutions, machine-to-machine services, mobile banking, virtual private network (“VPN”) services, video calls and personal communications services (“PCS”).

Fixed Operations

In 2020, our fixed voice, data, broadband and IT solutions had revenues of Ps.284.6 billion, representing 28.1% of our consolidated revenues. As of December 31, 2020, our fixed operations represented approximately 21.9% of our total RGUs, compared to 22.6% as of December 31, 2019.

VOICE. Our fixed voice services include local, domestic and international long-distance, under a variety of plans to meet the needs of different market segments, specifically tailored to our residential and corporate clients.

DATA. We offer data services, including data centers, data administration and hosting services to our residential and corporate clients under a variety of plans.

BROADBAND. We provide residential broadband access through hybrid fiber-coaxial (“HFC”) or fiber-optic cable. These services are typically bundled with voice services and are competitively priced as a function of the desired or available speed. As a complement to these services, we offer a number of products such as home networking and smart home services.

IT SOLUTIONS. Our subsidiaries provide a number of different IT solutions for small businesses and large corporations. We also provide specific solutions to the industrial, financial, government and tourism sectors, among others.

PAY TV. We offer Pay TV through cable and satellite TV subscriptions to both retail and corporate customers under a variety of plans. As of December 31, 2020, we had approximately 20.1 million Pay TV RGUs, a decrease of approximately 796 thousand Pay TV RGUs from the prior year.

EQUIPMENT, ACCESSORIES AND COMPUTER SALES. Equipment, accessories and computer sales primarily include the sale of handsets, accessories and other equipment.

OTHER SERVICES. Other services include other businesses such as telephone directories, call center services, wireless security services, advertising, media and software development services.

OTT SERVICES. We sell video, audio and other media content that is delivered through the internet directly from the content provider to the viewer or end user. Our most important service is ClaroVideo, an on-demand internet streaming video provider with more than 18,500 content titles sold across all the Latin American and Caribbean markets in which we operate. We offer bundled packages of ClaroVideo, which may include:

Subscription video on demand, providing unlimited access to a catalogue of over 18,500 titles for a fixed monthly subscription fee;

 

 

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Transactional video on demand and electronic sell-through, offering the option to rent or buy new content releases; and

Add-on services such as subscription and other OTT services through a platform payment system, including access to FOX, HBO, Noggin and Paramount+, among others.

We also offer an advertised and unlimited music streaming and downloading service in 16 countries in Latin America and Europe through ClaroMúsica, with access to approximately 50 million titles across all music genres.

Services and Products by Country

The following table is a summary of our principal services rendered and products produced as of December 31, 2020 in the countries in which we operate.

 

 

                                                                                                                                                                                                                       
    

WIRELESS VOICE, DATA AND

VALUE ADDED  SERVICES(1) 

  

FIXED VOICE, BROADBAND,

DATA AND IT SERVICES(2) 

  

 

PAY TV

  

 

OTT SERVICES(3)   

Argentina

  

🌑

  

🌑

  

🌑

  

🌑   

Austria

  

🌑

  

🌑

  

🌑

  

🌑   

Belarus

  

🌑

  

🌑

  

🌑

  

🌑   

Brazil

  

🌑

  

🌑

  

🌑

  

🌑   

Bulgaria

  

🌑

  

🌑

  

🌑

  

🌑   

Chile

  

🌑

  

🌑

  

🌑

  

🌑   

Colombia

  

🌑

  

🌑

  

🌑

  

🌑   

Costa Rica

  

🌑

  

🌑

  

🌑

  

🌑   

Croatia

  

🌑

  

🌑

  

🌑

  

🌑   

Dominican Republic

  

🌑

  

🌑

  

🌑

  

🌑   

Ecuador

  

🌑

  

🌑

  

🌑

  

🌑   

El Salvador

  

🌑

  

🌑

  

🌑

  

🌑   

Guatemala

  

🌑

  

🌑

  

🌑

  

🌑   

Honduras

  

🌑

  

🌑

  

🌑

  

🌑   

Macedonia

  

🌑

  

🌑

  

🌑

  

🌑   

Mexico

  

🌑

  

🌑

       🌑 (4)
 

Nicaragua

  

🌑

  

🌑

  

🌑

  

🌑   

Panama

  

🌑

  

🌑

  

🌑

  

🌑   

Paraguay

  

🌑

  

🌑

  

🌑

  

🌑   

Peru

  

🌑

  

🌑

  

🌑

  

🌑   

Puerto Rico

  

🌑

  

🌑

  

🌑

  

🌑   

Serbia

  

🌑

        

🌑   

Slovenia

  

🌑

  

🌑

  

🌑

  

🌑   

Uruguay

  

🌑

        

🌑   

United States (5)

  

🌑

        

 

  (1) 

Includes voice communication and international roaming services, interconnection and termination services, SMS, MMS, e-mail, mobile browsing, entertainment and gaming applications.

  (2) 

Includes local calls, national and international long distance.

  (3) 

Includes ClaroVideo and ClaroMúsica.

  (4) 

Services provided by non-concessionaire subsidiaries.

  (5) 

We entered into an agreement to sell our United States operations to Verizon Communications Inc. as described under “Acquisitions, Other Investments and Divestitures.” We expect the closing to occur during 2021.

 

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Our networks are one of our main competitive advantages. Today, we own and operate one of the largest integrated platforms based on our covered population across 17 countries in Latin America and are expanding our network in Europe.

INFRASTRUCTURE

For the year ended December 31, 2020, our capital expenditures totaled Ps.129.6 billion, which allowed us to increase our network, to expand our capacity and to upgrade our systems to operate with the latest technologies. With fully convergent platforms, we are able to deliver high-quality voice, video and data products.

As of December 31, 2020, the main components of our infrastructure were comprised of:

 

  Cell sites : 100,122 sites with 2G, 3G and 4G technologies across Latin America and Europe. Tower space for our cell sites is a combination of towers we own and tower spaces leased from third parties. Additionally, we have been expanding our coverage and improving quality and speed with a number of street cells and indoor solutions. Our Board of Directors has approved a plan to spin off our towers and related passive infrastructure in Latin America into an independent Company. See “Acquisitions, Other Investments and Divestitures.”

 

  Fiber-optic network: More than 1,081 thousand km. Our network passed approximately 81 million homes.

 

  Submarine cable system: Capacity of more than 189 thousand km in submarine cable, including the AM-1 submarine cable that extends 17,500 km and connects the United States to Central and South America with 11 landing points and provides international connectivity to all of our subsidiaries in these geographic areas.

 

  Satellites: Six. Star One S.A. (“Star One”) has the most extensive satellite system in Latin America, with a fleet that covers the United States, Mexico, Central America and South America. We use these satellites to supply capacity for DTH services for Claro TV throughout Brazil and in other DTH Operations, as well as cellular backhaul, video broadcast and corporate data networks. In 2015 and 2016, we launched the Star One D1 and the Star One C4 to replace two limited capacity satellites.

 

  Data centers: 31. We use our data centers to manage a number of cloud solutions, such as Infrastructure as a Service (“IAAS”), Software as a Service (“SAAS”), security solutions and unified communications.

In the United States, we do not own any wireless telecommunications facilities or hold any wireless spectrum licenses. Instead, we purchase airtime through agreements with wireless service providers and resell airtime to customers. Through these agreements, we have a nationwide “virtual” network, covering almost all areas in which wireless services are available.

TECHNOLOGY

Our primary wireless networks use GSM/EDGE, 3G and 4G LTE technologies, which we offer in most of the countries where we operate. We aim to increase the speed of transmission of our data services and have been expanding our 3G and 4G LTE coverage. We have begun our 5G rollout in some countries.

We transmit wireless calls and data through radio frequencies that we use under spectrum licenses. Spectrum is a limited resource, and, as a result, we may face spectrum and capacity constraints on our wireless network. We continue to invest significant capital in expanding our network capacity and reach and to address spectrum and capacity constraints on a market-by-market basis.

The table below presents a summary of the population covered by our network, by country, as of December 31, 2020.

 

GENERATION TECHNOLOGY*

              
    

GSM

  

UMTS

  

LTE

    

(% of covered population)

Argentina

  

 

99

%   

  

 

99

%     

  

 

98

%   

Austria

  

 

100

  

 

97

  

 

98

Belarus

  

 

100

  

 

100

  

 

-

 

Brazil

  

 

94

  

 

95

  

 

87

Bulgaria

  

 

100

  

 

100

  

 

99

Chile

  

 

97

  

 

97

  

 

98

Colombia

  

 

91

  

 

80

  

 

72

Costa Rica

  

 

85

  

 

79

  

 

75

Croatia

  

 

99

  

 

99

  

 

99

Dominican Republic

  

 

100

  

 

99

  

 

97

Ecuador

  

 

96

  

 

80

  

 

76

El Salvador

  

 

91

  

 

81

  

 

66

Guatemala

  

 

89

  

 

88

  

 

82

Honduras

  

 

89

  

 

82

  

 

58

Macedonia

  

 

100

  

 

100

  

 

99

Mexico

  

 

94

  

 

95

  

 

91

Nicaragua

  

 

76

  

 

72

  

 

55

Panama

  

 

82

  

 

88

  

 

82

Paraguay

  

 

76

  

 

74

  

 

70

Peru

  

 

88

  

 

84

  

 

83

Puerto Rico

  

 

82

  

 

97

  

 

98

Serbia

  

 

99

  

 

98

  

 

98

Slovenia

  

 

100

  

 

100

  

 

99

Uruguay

  

 

96

  

 

91

  

 

82

*

As of December 31, 2020, our 5G network covered the following percentages of popula- tion in the places indicated: 22.7% in Austria, 16.4% in Brazil and 10% in Puerto Rico.

 

 

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We operate in an intensely competitive industry. Competitive factors within our industry include pricing, brand recognition, service and product offerings, customer experience, network coverage and quality, development and deployment of technologies, availability of additional spectrum licenses and regulatory developments.

Our principal competitors differ, depending on the geographical market and the types of service we offer. We compete against other providers, of wireless, broadband and Pay TV that operate on a multi-national level, such as AT&T Inc., Teléfonica and Millicom, as well as various providers that operate on a nationwide level, such as Telecom Argentina in Argentina and Telecom Italia in Brazil. Competition remains intense as a result of saturation in the fixed and wireless market, increased network investment by our competitors, the development and deployment of new technologies, the introduction of new products and services, new market entrants, the availability of additional spectrum, both licensed and unlicensed, and regulatory changes.

The effects of competition on our subsidiaries depend, in part, on the size, service offerings, financial strength and business strategies of their competitors, regulatory developments and the general economic and business climate in the countries in which they operate, including demand growth, interest rates, inflation and exchange rates. The effects could include loss of market share and pressure to reduce rates. See “Regulation” under Part VI and “Risk Factors” under Part III of this annual report.

 

 

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Geographic diversification has been a key to our financial success, as it has provided for greater stability in our cash flow and profitability and has contributed to our strong credit ratings. In recent years, we have been evaluating the expansion of our operations to regions outside of Latin America. We believe that Europe and other areas beyond Latin America present opportunities for investment in the telecommunications sector that could benefit us and our shareholders over the long term.

We continue to seek ways to optimize our portfolio, including by finding investment opportunities in telecommunications and related companies worldwide, including in markets where we are already present, and we often have several possible acquisitions under consideration. We may pursue opportunities in Latin America or in other areas in the world. Some of the assets that we acquire may require significant funding for capital expenditures. We can give no assurance as to the extent, timing or cost of such investments. We also periodically evaluate opportunities for dispositions, in particular for businesses and in geographies that we no longer consider strategic. Recent developments related to acquisitions, other investments and divestitures include:

 

  On September 13, 2020, we entered into an agreement to sell our wholly-owned subsidiary TracFone Wireless, Inc. to Verizon Communications Inc. The consideration for the transaction will include U.S.$3,125 million in cash and U.S.$3,125 million in Verizon common stock (determined based on the pre-closing trading price of Verizon common stock, but subject to a collar on the number of shares, whereby the number of shares constituting the stock consideration will be no less than 47,124,445 and no greater than 57,596,545), subject to customary adjustments, at closing. The agreement also includes up to an additional $650 million in future cash consideration related to the achievement of certain performance measures and other commercial arrangements. The closing of the transaction is subject to customary conditions, including obtaining regulatory approval. Approvals from the Federal Communications Commission and California Public Utilities Commission are still pending. We expect the closing to occur during the second half of 2021.

 

  In September 2020, we terminated our January 24, 2019 agreement to purchase 99.3% of Telefónica Móviles El Salvador, S.A. de C.V. after careful consideration of the conditions to obtaining regulatory approval.
  In December 2020, our Brazilian subsidiary, Claro S.A. (“Claro”), together with two other offerors, won a competitive bid to acquire the mobile business owned by Oi Group in Brazil. Pursuant to the transaction, Claro will pay R$3.6 billion for 32% of Oi Group’s mobile business and approximately 4.7 thousand mobile access sites (representing 32% of Oi Group’s mobile business access sites). Claro also committed to enter into long term agreements with Oi Group for the supply of data transmission capacity. The closing of the transaction is subject to customary conditions, including obtaining regulatory approval, and we expect the closing to occur during 2021.

 

  In February 2021, our Board of Directors approved a plan to spin off our telecommunications towers and other related passive infrastructure in Latin America. This operation will maximize the infrastructure’s value, as the resulting entities will be independent from the Company, with their own management and personnel, exclusively focused on developing, building and sharing telecommunications towers for wireless services. We expect to enter into lease agreements with the new entities under which we will continue using the tower space to provide wireless services. The execution of the reorganization plan will comply with applicable requirements under the laws of each applicable jurisdiction, and will be subject to obtaining required regulatory approvals. See note 25 to our audited consolidated financial statements.

For additional information on our acquisitions and investments, see note 12 to our audited consolidated financial statements included in this annual report.

 

 

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MARKETING

We advertise our services and products through different channels with consistent and distinct branding and targeted marketing. We advertise via print, radio, television, digital media, sports event sponsorships and other outdoor advertising campaigns. In 2020, our efforts were mainly focused on promoting our 4.5G LTE services, leveraging the speed and quality of our networks and our fixed bundled offers, which compete on broadband speed and premium content.

We build on the strength of our well-recognized brand names to increase consumer awareness and customer loyalty. Building brand recognition is crucial for our business, and we have managed to position our brands as those of a premium carrier in most countries where we operate. According to the 2020 Brand Finance Telecom 150 report, Telcel is among the top ten strongest brands in the telecom sector which evaluates marketing investment, customer perception, staff satisfaction and corporate reputation. Also, Claro was named the most valuable brand in the Latin America region. BrandZ’s Top 50 Most Valuable Latin American Brands 2020 ranked Telcel among the top five brands in Latin America. In the same year, BrandZ also named Telcel and Claro as two of the highest-ranked telecom brands in Latin America. In addition, a year-end 2020 study by Austrian Brand Monitor found that A1, the brand name behind Telekom Austria, ranked number one in the Austrian telecommunications market for brand awareness, as well as for brand perception as a premium brand.

 

 

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SALES AND DISTRIBUTION

Our extensive sales and distribution channels help us attract new customers and develop new business opportunities. We primarily sell our services and products through a network of retailers and service centers for retail customers and a dedicated sales force for corporate customers, with more than 490,000 points of sale and more than 2,900 customer service centers. Our subsidiaries also sell their services and products online.

CUSTOMER SERVICE

We give priority to providing our customers with quality customer care and support. We focus our efforts on constantly improving our customers’ experience by leveraging our commercial offerings and our sales and distribution networks. Customers may make inquiries by calling a toll-free telephone number, accessing our subsidiaries’ web sites and social media accounts or visiting one of the customer sales and service centers located throughout the countries we serve.

 

 

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INTRODUCTION

Effects of the COVID-19 Pandemic

The unprecedented health crisis arising from the spread of the COVID-19 pandemic has resulted in a severe global economic downturn and has caused significant volatility, uncertainty, and disruption. We are closely monitoring the evolution of the COVID-19 pandemic in the countries where we operate to take preventive measures to ensure the continuity of operations and safeguard the health and safety of our personnel and customers. Based on the information available as of the date of this annual report, below is a summary of the main effects of the COVID-19 pandemic on our business and results of operations:

 

  During most of the year, practically all our region of operations was subject to lockdown and other measures implemented to control the spread of COVID-19. These restrictions disrupted commercial activities, resulted in the closure of shops and customer-care centers and imposed constraints on the mobility of our clients. They also disrupted our supply chain for handsets and other equipment. During the second quarter of the year, we disconnected five million wireless clients, including 4.6 million prepaid clients, that were unable to recharge their accounts, and we were unable to disconnect service for a significant amount of other customers as a result of governmental restrictions prohibiting disconnection due to non-payment during the pandemic. As a result, our uncollectible accounts increased temporarily before stabilizing again at pre-pandemic levels. The impact on prepaid revenues was stronger in countries where prepaid services are more prevalent, including Mexico and the Dominican Republic. The impact of COVID-19 was more limited on our fixed-line platform.

 

  During the second half of the year, the economy recovered throughout most of our regions of operations, with confidence levels increasing in November following the U.S. presidential election and, shortly thereafter, the announcements of the approval of COVID-19 vaccines. Latin American currencies, which had depreciated sharply against the U.S. dollar as the pandemic spread, strengthened notably, with the Mexican, Colombian and Chilean pesos appreciating versus the dollar during the fourth quarter. Other currencies also did well during the fourth quarter, including the euro and the Brazilian real.

Segments

We have operations in 25 countries, which are aggregated for financial reporting purposes into ten reportable segments. Our operations in Mexico are presented in two segments—Mexico Wireless and Mexico Fixed, which consist principally of Telcel and Telmex, respectively. Our headquarters operations are allocated to the Mexico Wireless segment. Financial information about our segments is presented in

Note 23 to our audited consolidated financial statements included in this annual report.

The factors that drive our financial performance differ in the various countries where we operate, including subscriber acquisition costs, the competitive landscape, the regulatory environment, economic factors and interconnection rates, among others. Accordingly, our results of operations in each period reflect a combination of these effects on our different segments.

Constant Currency Presentation

Our financial statements are presented in Mexican pesos, but our operations outside Mexico account for a significant portion of our revenues. Currency variations between the Mexican peso and the currencies of our non-Mexican subsidiaries, especially the Euro, U.S. dollar, Brazilian real, Colombian and Argentine peso, affect our results of operations as reported in Mexican pesos. In the following discussion regarding our operating results, we include a discussion of the change in the different components of our revenues between periods at constant exchange rates, i.e., using the same exchange rate to translate the local-currency results of our non-Mexican operations for both periods. We believe that this additional information helps investors better understand the performance of our non-Mexican operations and their contribution to our consolidated results.

Effects of Exchange Rates

Our results of operations are affected by changes in currency exchange rates. In 2020 compared to 2019, the Mexican peso was weaker against some of our operating currencies, including the U.S. Dollar and the Euro.

Since most of our debt is issued by América Móvil out of Mexico, to the extent that our functional currency, the Mexican peso, appreciates or depreciates against the currencies in which our indebtedness is denominated, we may incur foreign exchange gains or losses that are recorded as other comprehensive income in our consolidated statements of financial position.

Changes in exchange rates also affect the fair value of derivative financial instruments that we use to manage our currency-risk exposure, which are generally not accounted for as hedging instruments. In 2020, the Mexican peso weakened against the currencies in which most of our indebtedness is denominated, and we recorded net foreign exchange losses of Ps.65.4 billion and net fair value gains on derivatives of Ps.12.4 billion. In 2019, the Mexican peso strengthened against the currencies in which most of our indebtedness is denominated, and we recorded net foreign exchange gains of Ps.5.2 billion and net fair value gains on derivatives of Ps.4.4 billion. See Note 7 to our audited consolidated financial statements included in this annual report.

 

 

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EFFECTS OF REGULATION

We operate in a regulated industry. Our results of operations and financial condition have been, and will continue to be, affected by regulatory actions and changes. Significant regulatory developments are presented in more detail in “Regulation” under Part VI and “Risk Factors” under Part III of this annual report.

Comparison of Results of Operations Between 2019 and 2018

Discussions of year-over-year comparisons between 2019 and 2018 that are not included in this report can be found in under Part II, Operating and Financial Review and Prospects of our Form 20-F for the fiscal year ended December 31, 2019.

COMPOSITION OF OPERATING REVENUES

In 2020, our total operating revenues were Ps.1,017 billion.

Revenues from wireless and fixed voice services primarily include charges from monthly subscriptions, usage charges billed to customers and usage charges billed to other service providers for calls completed on our network. The primary drivers of revenues from monthly subscription charges are the number of total RGUs and the prices of our service packages. The primary driver of revenues from usage charges (airtime, international and long-distance calls and interconnection costs) is traffic, which is represented by the number of total RGUs and their average usage.

Revenues from wireless and fixed data services primarily include charges for data, cloud, internet and OTT services and the usage from our data centers. In addition, revenues from value-added services and IT solutions to corporate clients contribute to our results for wireless and fixed data services, respectively. Revenues from IT solutions to our corporate clients mainly consist of revenues from installing and leasing dedicated links and revenues from VPN services.

Pay TV revenues consist primarily of charges from subscription services, additional programming, including on-demand programming and advertising.

Equipment, accessories and computer sales revenues primarily include revenues from the sale of handsets, accessories and other equipment such as office equipment, household appliances and electronics. Most of our sales in handsets are driven by the number of new customers and contract renewals.

Other services primarily include revenues from other businesses, such as advertising and news companies, entertainment content distribution, telephone directories, call

center services, wireless security services, network infrastructure services and a software development company.

Seasonality of our Business

Our business is subject to a certain degree of seasonality, characterized by a higher number of new customers during the fourth quarter of each year. We believe this seasonality is mainly driven by the Christmas shopping season. Revenue also tends to decrease during the months of August and September, when family expenses shift towards school supplies in many of the countries in which we operate, mainly Mexico.

General Trends Affecting Operating Results

Our results of operations in 2020 reflected several continuing long-term trends, including:

 

  intense competition, with growing costs for marketing and subscriber acquisition and retention, as well as declining customer prices;

 

  developments in the telecommunications regulatory environment;

 

  growing demand for data services over fixed and wireless networks, as well as for smartphones and devices with data service capabilities;

 

  declining demand for voice services; and

 

  growing operating costs reflecting, among other things, higher costs for Pay TV, customer care services and managing larger and more complex networks.

These trends are broadly characteristic of our businesses in all regions in recent years, and they have affected comparable telecommunications providers as well. Our performance in recent years has also been affected by ongoing regulatory changes in Mexico.

 

 

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CONSOLIDATED RESULTS OF OPERATIONS FOR 2020 AND 2019

Operating Revenues

Total operating revenues for 2020 increased by 0.9%, or Ps.9.5 billion, over 2019. At constant exchange rates, total operating revenues for 2020 decreased by 0.4% over 2019. This decrease principally reflects a decrease in equipment sales and handset financing revenues as well as a decrease in Pay TV services revenues.

SERVICE REVENUES. Revenues services for 2020 increased by 2.8%, or Ps.23.5 billion, over 2019. At constant exchange rates, revenues services for 2020 increased by 1.7% over 2019. This increase principally reflects increases in revenues from our mobile services (both prepaid and postpaid), fixed broadband and corporate networks, which were partially offset by a decrease in revenues from our Pay TV services in Brazil.

SALES OF EQUIPMENT, ACCESSORIES AND COMPUTERS. Sales of equipment, accessories and computer sales revenues for 2020 decreased by 8.1%, or Ps.14.0 billion, over 2019. At constant exchange rates, revenues from sales of equipment, accessories and computer sales for 2020 decreased by 10.7% over 2019. This decrease principally reflects lower sales of smartphones, data-enabled devices and accessories.

Operating Costs and Expenses

COST OF SALES. Cost of sales was Ps.167.5 for 2020, a decrease of 4.0% from Ps.174.5 billion in 2019. At constant exchange rates, cost of sales for 2020 decreased by 8.0% over 2019. This decrease principally reflects lower sales of higher-end smartphones and handset financing plans.

COST OF SERVICES. Cost of services was Ps.302.9 for 2020, an increase of 1.9% from 297.2 billion in 2019. At constant exchange rates, cost of services for 2020 decreased by 0.1% over 2019. We were able to maintain low cost of services in significant part because of the success of our cost savings program.

COMMERCIAL, ADMINISTRATIVE AND GENERAL EXPENSES.Commercial, administrative and general expenses for 2020 decreased by 1.8%, or Ps.3.9 billion, over 2019. As a percentage of operating revenues, commercial, administrative and general expenses were 20.9% for 2020, as compared to 21.4% for 2019. At constant exchange rates, commercial, administrative and general expenses for 2020 decreased by 2.7% over 2019. This decrease principally reflects the success of our corporate cost savings program and better allocation of marketing, advertising, and sales resources, and an increase in the proportion of online sales as compared to sales in physical stores due to COVID-19 restrictions.

OTHER EXPENSES.Other expenses for 2020 decreased by Ps.1.1 billion over 2019.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 2020 increased by 3.4%, or Ps.5.3 billion, over 2019. As a percentage of operating revenues, depreciation and amortization was 16.2% for 2020, as compared to 15.8% for 2019. At constant exchange rates, depreciation and amortization for 2020 increased by 2.1% over 2019. This increase principally reflects depreciation and amortization expenses of Nextel Telecomunicações Ltda. And its subsidiaries (“Nextel Brazil”) in 2020, which were not incurred in 2019 before our acquisition of Nextel Brazil.

Operating Income

Operating income for 2020 increased by 6.8%, or Ps.10.5 billion, over 2019. Operating margin (operating income as a percentage of operating revenues) was 16.3% for 2020, as compared to 15.4% for 2019.

Non-Operating Items

NET INTEREST EXPENSE. Net interest expense (interest expense less interest income) for 2020 increased by 6.2%, or Ps.2.0 billion, over 2019. This increase principally reflects an increase in interest expense on lease liabilities and a decrease in interest income in Brazil.

FOREIGN CURRENCY EXCHANGE LOSSES, NET. We recorded a net foreign currency exchange losses of Ps.65.4 billion for 2020, compared to our net foreign currency exchange gain of Ps.5.2 billion for 2019. The loss principally reflects the appreciation of some of the currencies in which our indebtedness is denominated, particularly the Euro and the Dollar.

VALUATION OF DERIVATIVES, INTEREST COST FROM LABOR OBLIGATIONS AND OTHER FINANCIAL ITEMS, NET. We recorded a net gain of Ps.1.3 billion for 2020 on the valuation of derivatives, interest cost from labor obligations and other financial items, net, compared to a net loss of Ps.7.1 billion for 2019. The change in 2020 principally reflects a gain on hedging instruments as a result of the appreciation of some of the currencies in which our indedebtedness is denominated. See Note 22 to our audited consolidated financial statements included in this annual report.

INCOME TAX. Our income tax expense for 2020 decreased by 67.9%, or Ps.34.7 billion, over 2019. This decrease principally reflects lower profit before income due to a foreign exchange loss in 2020.

Our effective corporate income tax rate as a percentage of profit before income tax was 24.3% for 2020, compared to 42.1% for 2019. This rate differed from the Mexican statutory rate of 30% and changed year over year principally as a

 

 

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result of the reversal of certain tax expenses in Brazil, which lowered our income tax expense and our effective corporate income tax for 2020.

Net Profit

We recorded a net profit of Ps.51.0 billion for 2020, a decrease of 27.4%, or Ps.19.3 billion, over 2019.

SEGMENT RESULTS OF OPERATIONS

We discuss below the operating results of each reportable segment. Notes 2. z) and 23 to our audited consolidated financial statements describe how we translate the financial statements of our non-Mexican subsidiaries. Exchange rate changes between the Mexican peso and the currencies in which our subsidiaries operate affect our reported results in Mexican pesos and the comparability of reported results between periods.

The following table sets forth the exchange rates used to translate the results of our significant non-Mexican operations, as expressed in Mexican pesos per foreign currency unit, and the change from the rate used in the prior period indicated. The U.S. dollar is our functional currency in several of the countries or territories in which we operate in addition to the United States, including Ecuador, Puerto Rico, Panama and El Salvador.

 

  MEXICAN PESOS PER FOREIGN CURRENCY

  UNIT (AVERAGE FOR THE PERIOD)

 

 

  

2019

  

2019/2020
% CHANGE

  

2020

  Brazilian real

  

4.8907

  

(14.4)

  

4.1850

  Colombian peso

  

0.0059

  

0.00

  

0.0058

  Argentine peso

  

0.4110

  

(25.3)

  

0.3070

  U.S. dollar

  

19.2641

  

11.5

  

21.4859

  Euro

  

21.5642

  

13.7

  

24.5080

The tables below set forth operating revenues and operating income for each of our segments for the years indicated.

 

 

 

 

YEAR ENDED DECEMBER 31, 2020               

 
 

 

 

OPERATING REVENUES

   

OPERATING INCOME

 
 

 

 

(in millions of
Mexican pesos)

   

(as a% of to-
tal operating
revenues)

   

(in millions of
Mexican pesos)

   

(as a% of
total operat-
ing income)

 

Mexico Wireless

  Ps. 232,242       22.8%     Ps. 70,852         42.8%  

Mexico Fixed

 

 

91,589

 

 

 

9.0

 

 

 

11,204  

 

 

 

6.8

 

Brazil

 

 

168,073

 

 

 

16.5

 

 

 

25,204  

 

 

 

15.2

 

Colombia

 

 

77,635

 

 

 

7.6

 

 

 

15,112  

 

 

 

9.1

 

Southern Cone

 

 

56,705

 

 

 

5.6

 

 

 

1,877  

 

 

 

1.1

 

Andean Region

 

 

53,935

 

 

 

5.3

 

 

 

8,699  

 

 

 

5.3

 

Central America

    48,195       4.7       4,005         2.4  

United States

 

 

177,179

 

 

 

17.4

 

 

 

10,579  

 

 

 

6.4

 

Caribbean

 

 

38,624

 

 

 

3.8

 

 

 

6,701  

 

 

 

4.1

 

Europe

 

 

111,472

 

 

 

11.0

 

 

 

13,160  

 

 

 

8.0

 

Eliminations

 

Ps.

(38,762)

 

 

 

(3.7)

 

 

 

(2,038)  

 

 

 

(1.1)

 

Total

 

Ps.

 1,016,887

 

 

 

100%

 

 

Ps.

  165,355  

 

 

 

100%

 

 

 

 

 

YEAR ENDED DECEMBER 31, 2019               

 
 

 

 

OPERATING REVENUES

   

OPERATING INCOME

 
 

 

 

(in millions of
Mexican pesos)

   

(as a% of to-
tal operating
revenues)

   

(in millions of
Mexican pesos)

   

(as a% of
total operat-
ing income)

 

Mexico Wireless

  Ps. 237,840       23.6%     Ps. 67,694         43.7%  

Mexico Fixed

 

 

96,037

 

 

 

9.5

 

 

 

9,732  

 

 

 

6.3

 

Brazil

 

 

181,778

 

 

 

18.0

 

 

 

28,847  

 

 

 

18.6

 

Colombia

 

 

74,636

 

 

 

7.4

 

 

 

15,325  

 

 

 

9.9

 

Southern Cone

 

 

65,272

 

 

 

6.5

 

 

 

4,008  

 

 

 

2.6

 

Andean Region

 

 

55,533

 

 

 

5.5

 

 

 

8,023  

 

 

 

5.2

 

Central America

    46,734       4.6       5,712         3.7  

United States

 

 

155,864

 

 

 

15.5

 

 

 

2,968  

 

 

 

1.9

 

Caribbean

 

 

35,718

 

 

 

3.5

 

 

 

5,741  

 

 

 

3.7

 

Europe

 

 

98,420

 

 

 

9.8

 

 

 

8,688  

 

 

 

5.6

 

Eliminations

 

 

(40,484)

 

 

 

(3.9)

 

 

 

(1,897)  

 

 

 

(1.2)

 

Total

 

Ps.

 1,007,348

 

 

 

100%

 

 

Ps.

  154,841  

 

 

 

100%

 

 

 

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INTERPERIOD SEGMENT COMPARISONS

The following discussion addresses the financial performance of each of our reportable segments by comparing results for 2020 and 2019. In the year-to-year comparisons for each segment, we include percentage changes in operating revenues, percentage changes in operating income and operating margin (operating income as a percentage of operating revenues), in each case calculated based on the segment financial information presented in Note 23 to our audited consolidated financial statements, which is prepared in accordance with IFRS.

Each reportable segment includes all income, cost and expense eliminations that occurred between subsidiaries within the reportable segment. The Mexico Wireless segment also includes corporate income, costs and expenses.

Comparisons in the following discussion are calculated using figures in Mexican pesos. We also include percentage changes in adjusted segment operating revenues, adjusted segment operating income and adjusted operating margin (adjusted operating income as a percentage of adjusted operating revenues). The adjustments eliminate (i) certain intersegment transactions, (ii) for our non-Mexican segments, the effects of exchange rate changes and (iii) for the Mexican Wireless segment only, revenues and costs of group corporate activities and other businesses that are allocated to the Mexico Wireless segment.

Discussions of year-over-year comparisons between 2019 and 2018 that are not included in this report can be found under Part II, Operating and Financial Review and Prospects of our Form 20-F for the fiscal year ended December 31, 2019.

2020 COMPARED TO 2019

Mexico Wireless

The number of prepaid wireless subscribers for 2020 increased by 1.1% over 2019, and the number of postpaid wireless subscribers increased by 1.3%, resulting in an increase in the total number of wireless subscribers in Mexico of 1.1%, or 871 thousand, to approximately 77.8 million as of December 31, 2020.

Segment operating revenues for 2020 decreased by 2.4% over 2019. Adjusted segment operating revenues for 2020 decreased by 2.4% over 2019. This decrease in segment operating revenues principally reflects a decrease in equipment sales and handset financing plans.

Segment operating income for 2020 increased by 4.7% over 2019. Adjusted segment operating income for 2020 increased by 1.8% over 2019.

Segment operating margin was 30.5% in 2020, as compared to 28.5% in 2019. Adjusted segment operating margin for this segment was 36.7% in 2020, as compared to 35.1% in 2019. This increase in segment operating margin for 2020 principally reflects the success of our corporate cost savings program in operations and lower networks and maintenance costs, which we successfully continue to implement without affecting the quality of our services and coverage.

Mexico Fixed

The number of fixed voice RGUs in Mexico for 2020 decreased by 3.1% over 2019, and the number of broadband RGUs in Mexico increased by 3.3%, resulting in a decrease in total fixed RGUs in Mexico of 0.3% over 2019, or 67 thousand, to approximately 21.9 million as of December 31, 2020.

Segment operating revenues for 2020 decreased by 4.6% over 2019. Adjusted segment operating revenues for 2020 decreased by 7.4% over 2019. This decrease in segment operating revenues principally reflects a decrease in fixed voice revenues of 4.9% and corporate networks services by 0.6%, which was partially offset by higher revenues from broadband.

Segment operating income for 2020 increased by 15.1% over 2019. Adjusted segment operating income for 2020 decreased by 33.6% over 2019. This decrease principally reflects a decrease in services provided, increases in the contractual salary of our employees, higher information technology and customer service costs.

Segment operating margin was 12.2% in 2020, as compared to 10.1% in 2019. Adjusted segment operating margin was 1.8% in 2020, as compared to 2.5% in 2019. The decrease in segment operating margin for 2020 principally reflects reductions in equipment sales and lower revenues from voice services, partially offset by a decrease in segment depreciation expenses.

Brazil

The number of prepaid wireless subscribers for 2020 increased by 1.9% over 2019, and the number of postpaid wireless subscribers increased by 29.6%, resulting in an increase in the total number of wireless subscribers in Brazil of 15.9%, or 8.6 million, to approximately 63 million as of December 31, 2020. The increase in the number of postpaid wireless subscribers is due primarily to commercial efforts aimed at converting prepaid subscribers to postpaid subscribers and additional subscribers as a result of the Nextel Brazil’s acquisition. The number of fixed voice RGUs for 2020 decreased by 8.4% over 2019, the number of broadband RGUs increased by 2.8%, and the number of Pay TV RGUs decreased by 5.6%, resulting in a decrease in total fixed RGUs in Brazil of 4.1%, or 1.4 million, to approximately 32.6 million as of December 31, 2020.

 

 

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Segment operating revenues for 2020 decreased by 7.5% over 2019. Adjusted segment operating revenues for 2020 increased by 1.6% over 2019. This increase in segment operating revenues principally reflects higher mobile data and fixed data revenues in 2020 over 2019. The increase in mobile data revenues in 2020 principally reflects the increased usage of social networking platforms, cloud services and other content, and fixed data revenues increased principally due to an increase in broadband RGUs, which were, in each case, partially offset by a decrease in Pay TV revenues.

Segment operating income for 2020 decreased by 12.6% over 2019. Adjusted segment operating income for 2020 decreased by 0.5% over 2019.

Segment operating margin was 15.0% in 2020, as compared to 15.9% in 2019. Adjusted segment operating margin was 14.1% in 2020, as compared to 15.1% in 2019. This decrease in segment operating margin for 2020 principally reflects a higher amortization and depreciation expense as a result of changes to the useful life of certain assets in Brazil, partially offset by improved cost management as a result of our cost savings program.

Colombia

The number of prepaid wireless subscribers for 2020 increased by 6.3% over 2019, and the number of postpaid wireless subscribers increased by 5.6%, resulting in an increase in the total number of wireless subscribers in Colombia of 6.1%, or 1.9 million, to approximately 33.0 million as of December 31, 2020. The number of fixed voice RGUs for 2020 increased by 7.9% over 2019, the number of broadband RGUs increased by 14.3% and the number of Pay TV RGUs increased by 5.2%, resulting in an increase in total fixed RGUs in Colombia of 9.3%, or 705 thousand, to approximately 8.3 million as of December 31, 2020.

Segment operating revenues for 2020 increased by 4.0% over 2019. Adjusted segment operating revenues for 2020 increased by 5.1% over 2019. This increase in segment operating revenues principally reflects increases in fixed data revenues, mobile data revenues, both in prepaid and postpaid mobile data, and Pay TV revenues. The increase in segment operating revenues was partially offset by a decrease in long distance revenues.

Segment operating income for 2020 decreased by 1.4% over 2019. Adjusted segment operating income for 2020 increased by 1.4% over 2019.

Segment operating margin was 19.5% in 2020, as compared to 20.5% in 2019. Adjusted segment operating margin was 24.7% in 2020, as compared to 25.6% in 2019. This decrease

is due to an increase in amortization expenses caused by increased investments in spectrum and submarine cables.

Southern Cone - Argentina, Chile, Paraguay and Uruguay

The number of prepaid wireless subscribers for 2020 decreased by 5.1% over 2019, and the number of postpaid wireless subscribers increased by 1.6%, resulting in a decrease in the total number of wireless subscribers in our Southern Cone segment of 2.7%, or 838 thousand, to approximately 30.6 million as of December 31, 2020. The number of fixed voice RGUs for 2020 increased by 17.4% over 2019, the number of broadband RGUs increased by 29.8%, and the number of Pay TV RGUs decreased by 6.3%, resulting in an increase in total fixed RGUs in our Southern Cone segment of 12.8%, or 322 thousand, to approximately 2.8 million as of December 31, 2020.

Segment operating revenues for 2020 decreased by 13.1% over 2019. Adjusted segment operating revenues for 2020 decreased by 8.3% over 2019. This decrease principally reflects a decrease in adjusted operating revenues in Argentina, Paraguay and Uruguay. In Argentina, we experienced decrease in revenues from prepaid and postpaid wireless voice, corporate networks, and fixed voice, which were attributable to adverse economic conditions and which were partially offset by an increase in broadband. In Chile, we experienced a decline in wireless service revenues due to competitive pressures. For this segment, we analyze results in Argentina, Paraguay and Uruguay in terms of the Argentine peso, because Argentina accounts for the major portion of the operations in these three countries.

Segment operating income for 2020 decreased by 53.2% over 2019. Adjusted segment operating income for 2020 decreased by 16.8% over 2019.

Segment operating margin was 3.3% in 2020, as compared to 6.1% in 2019. Adjusted segment operating margin was 15.7% in 2020, which decreased in comparison to 18.5% in 2019. This decrease in the segment operating margin for 2020 principally reflects a decrease in revenues, as described above, coupled with an increase in costs and expenses, including as a result of inflation or exchange rates.

Andean Region - Ecuador and Peru

The number of prepaid wireless subscribers for 2020 decreased by 4.7% over 2019, and the number of postpaid wireless subscribers decreased by 8.9%, resulting in a decrease in the total number of wireless subscribers in our Andean Region segment of 6.1%, or 1.2 million, to approximately 18.9 million as of December 31, 2020. The number of fixed voice RGUs for 2020 decreased by 4.4% over 2019, the number of broadband RGUs increased by 21.9%

 

 

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and the number of Pay TV RGUs decreased by 13.6 %, resulting in an increase in total fixed RGUs in our Andean Region segment of 5.3%, or 109 thousand, to approximately 2.1 million as of December 31, 2020.

Segment operating revenues for 2020 decreased by 2.9% over 2019. Adjusted segment operating revenues for 2020 decreased by 9.8% over 2019. This decrease principally reflects a decrease in revenues in Ecuador, partially offset by an increase in Peru. The decrease in revenues in Ecuador reflects a decrease in revenues from prepaid and postpaid wireless and Pay TV services, partially offset by a slight increase in revenues from fixed voice services. In Peru, fixed service revenues increased, and they were partially offset by lower revenues on postpaid mobile services.

Segment operating income for 2020 increased by 8.4% over 2019. Adjusted segment operating income for 2020 decreased by 2.9% over 2019. This decrease principally reflects an operating income increase of 40.0% in Peru and a decrease of 21.0% in Ecuador.

Segment operating margin was 16.1% in 2020, as compared to 14.4% in 2019. Adjusted segment operating margin was 18.4% in 2020, as compared to 17.1% in 2019. This increase in the segment operating margin for 2020 principally reflects a recovery in Peru and reduced costs as a result of our cost savings program, partially offset by a decrease in operating income in Ecuador.

Central America—Guatemala, El Salvador, Honduras, Nicaragua, Panama and Costa Rica

The number of prepaid wireless subscribers for 2020 decreased by 1.5% over 2019, and the number of postpaid wireless subscribers decreased by 9.7%, resulting in a decrease in the total number of wireless subscribers in our Central America segment of 2.9%, or 444 thousand, to approximately 15 million as of December 31, 2020. The number of fixed voice RGUs for 2020 decreased by 8.0% over 2019, the number of broadband RGUs increased by 5.3%, and the number of Pay TV RGUs decreased by 5.1%, resulting in a decrease in total fixed RGUs in our Central America segment of 3.7%, or 162 thousand, to approximately 4.2 million as of December 31, 2020.

Segment operating revenues for 2020 increased by 3.1% over 2019. Adjusted segment operating revenues for 2020 decreased by 7.8% over 2019.

Segment operating income for 2020 decreased by 29.9% over 2019. Adjusted segment operating income for 2020 decreased by 32.7% over 2019.

Segment operating margin was 8.3% in 2020, as compared to 12.2% in 2019. Adjusted segment operating margin was 10.1% in 2020, as compared to 13.7% in 2019. This decrease in segment operating margin for 2020 principally reflects a decrease in income, particularly in Panama, partially offset by the cost savings program that continues to be implemented in the operating segment.

Caribbean - Dominican Republic & Puerto Rico

The number of prepaid wireless subscribers for 2020 increased by 3.3% over 2019, and the number of postpaid wireless subscribers increased by 1.8%, resulting in an increase in the total number of wireless subscribers in our Caribbean segment of 2.9%, or 178 thousand, to approximately 6.4 million as of December 31, 2020. The number of fixed voice RGUs for 2020 decreased by 2.5% over 2019, the number of broadband RGUs increased by 6.1% and the number of Pay TV RGUs increased by 2.4%, resulting in an increase in total fixed RGUs in our Caribbean segment of 1.2%, or 30 thousand, to approximately 2.5 million as of December 31, 2020.

Segment operating revenues for 2020 increased by 8.1% over 2019. Adjusted segment operating revenues for 2020 decreased by 3.3% over 2019. This decrease in segment operating revenues principally reflects exchange rate losses in the Dominican Republic, partially offset by an increase in operating revenues in Puerto Rico. We analyze segment results in U.S. dollars because it is the functional currency of our operations in Puerto Rico.

Segment operating income for 2020 increased by 16.7% over 2019. Adjusted segment operating income for 2020 increased by 2.8% over 2019. This increase principally reflects an increase of 29.7% in Puerto Rico and an increase of 6.2% in the Dominican Republic.

Segment operating margin was 17.3% in 2020, as compared to 16.1% in 2019. Adjusted segment operating margin was 14.9% in 2020, as compared to 14.1% in 2019. This increase in segment operating margin for 2020 principally reflects an increase in service revenues in Puerto Rico, all revenues in the Dominican Republic and the effects of the cost savings program, partially offset by the depreciation of the Dominican Peso.

United States

The number of prepaid wireless subscribers for 2020 decreased by 0.9% over 2019, or 194 thousand, to approximately 20.6 million total wireless subscribers in the United States as of December 31, 2020.

 

 

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Segment operating revenues for 2020 increased by 13.7% over 2019. Adjusted segment operating revenues for 2020 increased by 1.9% over 2019. This increase in segment operating revenues principally reflects higher mobile voice and data usage as the mix of clients continues to shift towards to our high-usage Tracfone brands.

Segment operating income for 2020 increased by 256.4% over 2019. Adjusted segment operating income for 2020 increased by 58.6% over 2019.

Segment operating margin was 6.0% in 2020, as compared to 1.9% in 2019. Adjusted segment operating margin was 11.0% in 2020, as compared to 7.1% in 2019. This increase in segment operating margin for 2020 principally reflects better controls over commercial, operational and administrative costs.

Europe

The number of prepaid wireless subscribers for 2020 decreased by 6.7% over 2019, and the number of postpaid wireless subscribers increased by 5.1%, resulting in an increase in the total number of wireless subscribers in our Europe segment of 2.7%, or 568 thousand, to approximately 21.9 million as of December 31, 2020. The number of fixed voice RGUs for 2020 decreased by 5.4% over 2019, the number of broadband RGUs increased by 0.4% and the number of Pay TV RGUs almost remained the same, resulting in a decrease in total fixed RGUs in our Europe segment of 1.5%, or 93 thousand, to approximately 6.0 million as of December 31, 2020.

Segment operating revenues for 2020 increased by 13.3% over 2019. Adjusted segment operating revenues for 2020 decreased by 0.3% over 2019. This decrease in segment operating revenues principally reflects a decrease in mobile voice, partially offset by an increase in fixed services.

Segment operating income for 2020 increased by 51.5% over 2019. Adjusted segment operating income for 2020 increased by 32.2% over 2019. Segment operating margin was 11.8% in 2020, as compared to 8.8% in 2019. Adjusted segment operating margin was 11.7% in 2020, as compared to 8.8% in 2019. This increase in segment operating margin for 2020 principally reflects our corporate cost savings program in all countries and improved performance in some countries.

 

 

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FUNDING REQUIREMENTS

We generate substantial cash flows from our operations. On a consolidated basis, our cash flows from operating activities were Ps.280.8 billion in 2020, compared to Ps.234.3 billion in 2019. Our cash and cash equivalents amounted to Ps.35.9 billion at December 31, 2020, compared to Ps.19.7 billion at December 31, 2019. We believe our working capital is sufficient for our present requirements, and we anticipate generating sufficient cash to satisfy our long-term liquidity needs. We use the cash that we generate from our operations and from borrowings principally for the following purposes:

 

  Capital expenditures - We make substantial capital expenditures to continue expanding and improving our networks in each country in which we operate. Our capital expenditures on plant, property and equipment and acquisition or renewal of licenses were Ps.129.6 billion in 2020, Ps.151.8 billion in 2019 and Ps.151.8 billion in 2018. The amount of capital expenditures can vary significantly from year to year, depending on acquisition opportunities, concession renewal schedules and the need for more spectrum. We have budgeted capital expenditures for 2021 of approximately U.S.$7.5 billion (Ps.152.1 billion), which will be primarily funded by our operating activities. That amount is subject to change as we continue to evaluate our capital expenditure needs and opportunities in light of the ongoing COVID-19 outbreak.

 

  Acquisitions - In December 2020, we entered into an agreement to acquire 32% of Oi Group’s Brazilian mobile business for R$3.6 billion. The completion of the acquisition is subject to certain customary conditions, including regulatory approval.

 

  Short-term debt and contractual obligations - We must pay interest on our indebtedness and repay principal when due. As of December 31, 2020, we had approximately Ps.247.6 billion in debt and contractual obligations due in 2021, including approximately Ps.148.1 billion of principal and amortization, Ps.25.1 billion in short-term lease debt, and Ps.74.4 billion in purchase obligations.

 

  Long-term debt and contractual obligations - As of December 31, 2020, we had approximately Ps.267.1 billion in debt and contractual obligations due between 2022 and 2024, including approximately Ps.169.4 billion of principal and amortization, Ps.58.1 billion in long-term lease debt,
   

and Ps.39.6 billion in purchase obligations. On the same date, we had approximately Ps.350.6 billion in debt and contractual obligations due between 2025 and 2026, including approximately Ps.310.9 billion of principal and amortization, Ps.26.1 billion in long-term lease debt, and Ps.13.6 billion in purchase obligations.

 

  Dividends - We pay regular dividends. We paid Ps.9.6 billion in dividends in 2020 and Ps.24.2 billion in 2019. Our shareholders approved on April [26], 2021 the payment of a Ps.0.40 ordinary dividend per share in two installments in 2021. See “Share Ownership and Trading—Dividends” under Part IV in this annual report.

 

  Share repurchases - We regularly repurchase our own shares. We spent Ps.5,241.3 million repurchasing our own shares in the open market in 2020 and Ps.429.8 million in 2019. Our shareholders have authorized additional amounts to repurchase, and as of March 31, 2021, we have spent Ps.4,538.8 million repurchasing our shares in the open market in 2021, but whether we will continue to do so will depend on our operating cash flow and on various other considerations, including market prices and our other capital requirements.

Other than the amounts described above, we had no other outstanding material purchase commitments as of December 31, 2020. We enter into a number of supply, advertising and other contracts in the ordinary course of business, but those contracts are not material to our liquidity. The obligations described above do not include accounts payable, pension liabilities, interest payments or payments under derivatives contracts. See notes 14, 15 and 17 to our audited consolidated financial statements included in this annual report.

BORROWINGS

In addition to cash flows generated from operations, we rely on a combination of borrowings from a range of different sources, including the international capital markets, capital markets in Mexico and other countries where we operate, international and local banks, equipment suppliers and export credit agencies. We seek to maintain access to diverse sources of funding. In managing our funding, we generally seek to keep our leverage, as measured by the ratio of net debt to EBITDA, at a level that is consistent with maintaining the ratings given to our debt by the principal credit rating agencies. Our total consolidated indebtedness as of December 31, 2020 was Ps.628.4 billion, of which Ps.148.1 billion was short-term debt (including the current portion of long-term debt), compared to Ps.624.3 billion as of December 31, 2019.

 

 

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Management defines net debt as total debt minus cash and cash equivalents, minus marketable securities (including Koninklijke KPN N.V. (“KPN”) shares) and other short-term investments. As of December 31, 2020, we had net debt of Ps.537.8 billion, compared to Ps.556.8 billion as of December 31, 2019. Without taking into account the effects of derivative financial instruments that we use to manage our interest rate and currency risk, approximately 87.5% of our indebtedness at December 31, 2020 was denominated in currencies other than Mexican pesos (approximately 33.9% of such non-Mexican peso debt in U.S. dollars and 66.1% in other currencies), and approximately 10.9% of our consolidated debt obligations bore interest at floating rates. After the effects of derivative transactions and excluding the debt of Telekom Austria, approximately 44.9% of our net debt as of December 31, 2020 was denominated in Mexican pesos.

The weighted average cost of all our third-party debt at December 31, 2020 (excluding commissions and reimbursement of certain lenders for Mexican taxes withheld) was approximately 3.72% per annum.

Our major categories of indebtedness at December 31, 2020 are summarized in the table below. See also Note 14 to our audited consolidated financial statements included in this annual report.

 

  DEBT     

 

 
  (millions of Mexican pesos)     

 

 
  SENIOR NOTES     

 

 

  DENOMINATED IN U.S. DOLLARS

  

  América Móvil 3.125% Senior Notes due 2022

     31,918  

  América Móvil 3.625% Senior Notes due 2029

     19,949  

  América Móvil 2.875% Senior Notes due 2030

     19,949  

  América Móvil 6.375% Senior Notes due 2035

     19,576  

  América Móvil 6.125% Senior Notes due 2037

     7,365  

  América Móvil 6.125% Senior Notes due 2040

     39,897  

  América Móvil 4.375% Senior Notes due 2042

     22,941  

  América Móvil 4.375% Senior Notes due 2049

     24,936  

  Total

     186,531  

  DENOMINATED IN MEXICAN PESOS

  

  América Móvil 6.450% Senior Notes due 2022

     22,500  

  América Móvil 7.125% Senior Notes due 2024

     11,000  

  América Móvil 0.000% Domestic Senior Notes due 2025

     4,911  

  América Móvil 8.460% Senior Notes due 2036

     7,872  

  Telmex 8.360% Domestic Senior Notes due 2037

     5,000  

  Total

     51,283  

  DENOMINATED IN EURO

  

  América Móvil 3.000% Senior Notes due 2021

     24,369  

  TKA 3.125% Senior Notes due 2021

     18,277  

  TKA 4.000% Senior Notes due 2022

     18,277  

  América Móvil 4.750% Senior Notes due 2022

     18,277  
  TKA 3.500% Senior Notes due 2023      7,311  
  América Móvil 3.259% Senior Notes due 2023      18,277  
  América Móvil 1.500% Senior Notes due 2024      20,714  
  TKA 1.500% Senior Notes due 2026      18,277  
  América Móvil 0.750% Senior Notes due 2027      24,369  
  América Móvil 2.125% Senior Notes due 2028      15,840  

América Móvil B.V. -0.230% to -0.310% Commercial Paper due 2021

     40,941  

  Total

     224,929  

  DENOMINATED IN POUND STERLING

  

  América Móvil 5.000% Senior Notes due 2026

     13,635  

  América Móvil 5.750% Senior Notes due 2030

     17,726  

  América Móvil 4.948% Senior Notes due 2033

     8,181  

  América Móvil 4.375% Senior Notes due 2041

     20,452  

  Total

     59,994  

  DENOMINATED IN JAPANESE YEN

  

  América Móvil 2.950% Senior Notes due 2039

     2,512  

  Total

     2,512  

  DENOMINATED IN CHILEAN PESOS

  

  América Móvil 3.961% Senior Notes due 2035

     4,078  

  Total

     4,078  

  DENOMINATED IN BRAZILIAN REAIS

  

  Claro Brasil 104.000% of CDI Domestic Senior Notes due 2021

     4,222  

  Claro Brasil 104.250% of CDI Domestic Senior Notes due 2021

     5,816  

  Claro Brasil CDI + 0.600% Domestic Senior Notes due 2021

     1,382  

  Claro Brasil CDI + 0.960% Domestic Senior Notes due 2022

     9,597  

  Claro Brasil 106.000% of CDI Domestic Senior Notes due 2022

     7,677  

  Claro Brasil 106.500% of CDI Domestic Senior Notes due 2022

     3,839  

  Total

     32,533  

  HYBRID NOTES

  

  DENOMINATED IN EURO

  

  América Móvil NC10 (Series B) Capital Securities due 2073

     13,403  

  Total

     13,403  

  BANK DEBT AND OTHER

  

  DENOMINATED IN MEXICAN PESOS

     27,100  

  DENOMINATED IN CHILEAN PESOS

     8,926  

  DENOMINATED IN PERUVIAN SOLES

     17,094  

  Total

     53,120  

  Total Debt

     628,383  

  Less short-term debt and current portion of long-term debt

     148,083  

  Total Long-term Debt

     480,300  

  EQUITY

  

  Capital stock

     96,342  

  Total retained earnings

     314,718  

  Other comprehensive income (loss) items

     (151,669)  

  Non-controlling interest

     74,235  

  Total Equity

     333,626  

  Total Capitalization (total long-term debt plus equity)

     813,926  
 

 

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Additional information about certain categories of our indebtedness is provided below:

Mexican peso-denominated international notes. Our 8.46% senior notes due 2036 are denominated in Mexican pesos, but all amounts in respect of the notes are payable in U.S. dollars, unless a holder of notes elects to receive payment in Mexican pesos in accordance with specified procedures.

Mexican peso-denominated domestic notes. Our domestic senior notes (certificados bursátiles) sold in the Mexican capital markets have varying maturities, ranging from 2025 through 2037, and bear interest at fixed rates.

Global peso notes program. The global peso notes program was established in November 2012. Since its establishment, we have issued peso-denominated notes that can be distributed and traded on a seamless basis in Mexico and internationally. The notes are registered with the SEC in the United States and with the CNBV in Mexico.

International notes. We have outstanding debt securities in the international markets denominated in U.S. dollars, pounds sterling and euros. We have also issued debt securities in the local market in Japan. On March 31, 2021, we redeemed in full our 3.000% senior notes due 2021 with an aggregate principal outstanding amount of EUR 1 billion.

Hybrid notes. We have outstanding one series of Capital Securities maturing in 2073, denominated in euros totaling 550 million. The Capital Securities are subject to redemption at our option at varying dates beginning in 2023. Our hybrid notes are deeply subordinated, and when they were issued, the principal rating agencies stated that they would treat half of the principal amount as indebtedness for purposes of evaluating our leverage (an analysis referred to as 50% equity credit). Standard & Poor’s now treats 100% of the principal amount under the hybrid notes as indebtedness.

Bank loans. At December 31, 2020, we had approximately Ps.53.1 billion outstanding under a number of bank facilities bearing interest at fixed and variable rates. We also have two revolving syndicated credit facilities—one for U.S.$2.5 billion expiring in August 2024 and one for the Euro equivalent of U.S.$2.0 billion expiring in May 2021. We are currently negotiating with the lenders under the Euro credit facility for a 5-year extension and a reduction to the Euro equivalent of U.S.$1.5 billion. As long as the facilities are committed, a commitment fee is paid. As of December 31, 2020, these credit facilities were not drawn. Both facilities include covenants that limit our ability to incur secured debt, to effect a merger in which the surviving entity would not be América Móvil or to sell substantially all of our assets. In addition, both facilities require us to maintain a consolidated ratio of debt to EBITDA not greater than 4.0 to 1.0 and a consolidated ratio of

EBITDA to interest expense not less than 2.5 to 1.0. As of the date of this annual report, we are in compliance with these covenants. Telekom Austria has an undrawn revolving syndicated credit facility for 1.0 billion (the “TKA Facility”) expiring in July 2026. The TKA Facility includes covenants that limit Telekom Austria’s ability to incur secured debt, effect certain mergers or sell substantially all of its assets and our ability to transfer control over, or reduce our share ownership in, Telekom Austria. For more information, see Note 14 to our audited consolidated financial statements included in this annual report.

Options involving TKA shares. The Company has entered into the sale of a cash-settled put option related to TKA shares that will expire in August 2023. See Note 7 to our audited consolidated financial statements included in this annual report.

Bonds exchangeable for KPN shares. On March 2, 2021, our wholly-owned Dutch subsidiary, América Móvil B.V., issued approximately EUR 2.1 billion principal amount of senior unsecured bonds. The bonds will mature in 3 years, will not bear interest and were issued at an issue price of 104.75% of their principal amount. The Bonds will be exchangeable into ordinary shares of KPN and the initial exchange price is EUR 3.1185.

Euro-denominated commercial paper program. At December 31, 2020, debt under our euro-denominated commercial paper program aggregated to Ps.$40.9 billion.

As of December 31, 2020, we had, on an unconsolidated basis, unsecured and unsubordinated indebtedness of approximately Ps.455.6 billion (U.S.$22.8 billion), excluding guarantees of subsidiaries’ indebtedness. As of December 31, 2020, our subsidiaries had indebtedness (excluding guarantees of indebtedness of us and our other subsidiaries) of approximately Ps.172.7 billion (U.S.$8.7 billion), and a substantial portion of our subsidiaries’ indebtedness is owed by Telekom Austria.

As of December 31, 2020, we had no off-balance sheet arrangements that require disclosure under applicable SEC regulations.

 

 

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GUARANTOR FINANCIAL INFORMATION

In March 2020, the SEC amended Rule 3-10 of Regulation S-X and adopted Rule 13-01 to simplify disclosure requirements related to certain registered securities, which we have adopted effective immediately. Some of the public securities issued by América Móvil in international and Mexican capital markets are guaranteed by Telcel, a wholly-owned subsidiary. As of December 31, 2020, the aggregate principal amount of debt guaranteed by Telcel was Ps.122,215 million. The guarantees provide that, in case of the failure of the Company to punctually make payment of any principal, premium, interest, additional amounts or any other amounts that may become payable by the Company in respect of the notes, Telcel agrees to immediately pay the amount that is due and required to be paid.

The following table presents summarized unconsolidated financial information for the Company and Telcel after eliminating transactions and balances between them.

 

 

 

    

 

  DECEMBER 31, 2020  
 

 

   PARENT      GUARANTOR  

Current Assets

   Ps.     45,320,066      Ps.     45,909,283  

Total Assets

  

 

    80,095,274     

 

    145,711,133  

Current Liabilities

  

 

    93,871,633     

 

    41,939,310  

Total Liabilities

  

 

    504,150,282     

 

    75,949,203  

Total revenues

   Ps.     72,124,718      Ps.     132,393,542  

Operating Income

  

 

    18,559,695     

 

    3,304,582  

Net profit for the year

  

 

    (37,332,145)     

 

    50,569,556  

RISK MANAGEMENT

We regularly assess our interest rate and currency exchange exposures in order to determine how to manage the risk associated with these exposures. We have indebtedness denominated in currencies other than the currency of our operating environments, and we have expenses for operations and for capital expenditures in a variety of currencies. We use derivatives to adjust the resulting exchange rate and interest rate exposures. We do not use derivatives to hedge the exchange rate exposures that arise from having operations in different countries.

Our practices vary from time to time depending on our judgment of the level of risk, expectations as to exchange or interest rate movements and the costs of using derivative financial instruments. We may stop using derivative financial instruments or modify our practices at any time.

As of December 31, 2020, we had derivatives positions with an aggregate net fair value asset of Ps.6.7 billion, which are described in Note 7 to our audited consolidated financial statements. For additional information, see Note 2 v) to our audited consolidated financial statements included in this annual report.

 

 

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RISKS RELATING TO OUR OPERATIONS

Competition in the telecommunications industry is intense and could adversely affect the revenues and profitability of our operations

Our businesses face substantial competition. We expect that competition will intensify in the future as a result of the entry of new competitors, the development of new technologies, products and services and convergence. We also expect consolidation in the telecommunications industry, as companies respond to the need for cost reduction and additional spectrum. This trend may result in larger competitors with greater financial, technical, promotional and other resources to compete with our businesses.

Among other things, our competitors could:

 

  provide higher handset subsidies;

 

  offer higher commissions to retailers;

 

  provide free airtime or other services (such as internet access);

 

  offer services at lower costs through double, triple and quadruple play packages or other pricing strategies;

 

  expand their networks faster; or

 

  develop and deploy improved technologies faster, such as 5G LTE technology.

Competition can lead us to increase advertising and promotional spending and to reduce prices for services and handsets. These developments may lead to lower operating margins, greater choices for customers and increasing movement of customers among competitors, which may make it difficult for us to retain or add new customers. The cost of adding new customers may also continue to increase, reducing profitability even if customer growth continues.

Our ability to compete successfully will depend on our coverage, the quality of our network and service, our rates, customer service, effective marketing, our success in selling double, triple and quadruple play packages and our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including new services and technologies, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by competitors.

If we are unable to respond to competition and compensate for declining prices by adding new customers, increasing usage and offering new services, our revenues and profitability could decline.

 

Governmental or regulatory actions could adversely affect our operations

Our operations are subject to extensive government regulation and can be adversely affected by changes in law, regulation or regulatory policy. The licensing, construction, operation, sale, resale and interconnection arrangements of telecommunications systems in Latin America and elsewhere are regulated to varying degrees by government or regulatory authorities. Any of these authorities having jurisdiction over our businesses could adopt or change regulations or take other actions that could adversely affect our operations. In particular, the regulation of prices that operators may charge for their services and environmental matters, including renewable energy and climate change regulation, could have a material adverse effect by reducing our profit margins. See “Regulation” under Part VI for a discussion on the functional separation of Telmex and Telnor wholesale services, “Legal Proceedings” under Part VI and Note 17 to our audited consolidated financial statements included in this annual report.

In addition, changes in political administrations could lead to new regulation and the adoption of policies that could adversely affect our operations, including those concerning competition and taxation of communications services. For example, since 2013, Mexico has implemented reforms to the telecommunications sector that aim to promote more competition and investment by imposing asymmetric regulation upon economic agents deemed “preponderant or dominant.” The asymmetric regulations that are applicable to us, which have adversely affected the results of our Mexican operations, may be reviewed every two years. We are unable to anticipate the effect of an amendment on existing asymmetric regulations, or the imposition of new ones, on our results or operations in Mexico. In other countries, we could also face policies such as preferences for local over foreign ownership of communications licenses and assets or for government over private ownership, which could make it more cumbersome or impossible for us to continue to develop our businesses. Restrictions such as those described above could result in lower revenues and require capital investments, all of which could materially adversely affect our businesses and results of operations.

Our failure to meet or maintain quality of service goals and standards could result in fines and other adverse consequences

The terms of the concessions under which our subsidiaries operate require them to meet certain service quality goals, including, for example, minimum call completion rates, maximum busy circuits rates, operator availability and responsiveness to repair requests. Failure to meet service quality obligations in the past has resulted in the imposition

 

 

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of material fines by regulatory entities. We are also subject to and may be subject to additional claims by customers, including class actions, seeking remedies for service problems. Our ability to comply with these obligations in the future may be affected by factors beyond our control and, accordingly, we cannot assure that we will be able to comply with them.

Dominant carrier related regulations could adversely affect our business by limiting our ability to pursue competitive and profitable strategies

Our regulators are authorized to impose specific requirements as to rates (including termination rates), quality of service, access to active or passive infrastructure and information, among other matters, on operators that are determined to have substantial market power in a specific market. We cannot predict what steps regulatory authorities might take in response to determinations regarding substantial market power in the countries in which we operate. However, adverse determinations against our subsidiaries could result in material restrictions on our operations. We may also face additional regulatory restrictions and scrutiny as a result of our provision of combined services.

If dominant carrier regulations are imposed on our business in the future, they could likely reduce our flexibility to adopt competitive market policies and impose specific tariff requirements or other special regulations on us, such as additional requirements regarding disclosure of information or quality of service. Any such new regulation could have a material adverse effect on our operations.

We must continue to acquire additional radio spectrum capacity and upgrade our networks in order to expand our customer base and maintain the quality of our wireless services

Licensed radio spectrum is essential to our growth and the quality of our wireless services and for the operation and deployment of our networks, including new generation networks such as 5G LTE technology, to offer improved data and value-added services. We obtain most of our radio spectrum through auctions conducted by governments of the countries in which we operate. Participation in spectrum auctions in most of these countries requires prior government authorization, and we may be subject to caps on our ability to acquire additional spectrum. Our inability to acquire additional radio spectrum capacity could affect our ability to compete successfully because it could result in, among other things, a decrease in the quality of our network and service and in our ability to meet the demands of our customers.

In the event we are unable to acquire additional radio spectrum capacity, we can increase the density of our network by building more cell and switch sites, but such measures are costly and may be subject to local restrictions and regulatory approvals, and they would not meet our needs as effectively.

We have concessions and licenses for fixed terms, and the government may revoke or terminate them as well as reacquire the assets under our concession under various circumstances, some of which are beyond our control

Our concessions and licenses have specified terms, ranging typically from five to 20 years, and are generally subject to renewal upon payment of a fee, but renewal is not assured. The loss of, or failure to renew, any one concession could have a material adverse effect on our business and results of operations. Our ability to renew concessions and the terms of renewal are subject to a number of factors beyond our control, including the prevalent regulatory and political environment at the time of renewal. Fees are typically established at the time of renewal. As a condition for renewal, we may be required to agree to new and stricter terms and service requirements. In some of the jurisdictions where we operate and under certain circumstances, mainly in connection with fixed services, we may be required to transfer certain assets covered by some of our concessions to the government pursuant to valuation methodologies that vary in each jurisdiction. It is uncertain whether reversion would ever be applied in many of the jurisdictions where we operate and how reversion provisions would be interpreted in practice. For further information, see “Regulation” under Part VI of this annual report and Note 17 to our audited consolidated financial statements included in this annual report.

In addition, the regulatory authorities in the jurisdictions in which we operate can revoke our concessions under certain circumstances. In Mexico, for example, the Federal Law on Telecommunications and Broadcasting gives the government the right to temporarily seize our concessions or to take over the management of our networks, facilities and personnel in cases of failures to meet obligations under our concession agreements, imminent danger to national security, internal peace or the national economy, natural disasters and public unrest. See “Regulation” under Part VI of this annual report.

 

 

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We continue to look for acquisition opportunities, and any future acquisitions and related financing could have a material effect on our business, results of operations and financial condition

We continue to look for investment opportunities in telecommunications and related companies worldwide, including in markets where we are already present, and we often have several possible acquisitions under consideration. Any future acquisitions, and related financing and acquired indebtedness, could have a material effect on our business, results of operations and financial condition, but we cannot provide assurances that we will complete any of them. In addition, we may incur significant costs and expenses as we integrate these companies in our systems, controls and networks.

We are subject to significant litigation

Some of our subsidiaries are subject to significant litigation that, if determined adversely to our interests, may have a material adverse effect on our business, results of operations, financial condition or prospects. Our significant litigation is described in “Regulation” under Part VI and in Note 17 to our audited consolidated financial statements included in this annual report.

We are contesting significant tax assessments

We and some of our subsidiaries have been notified of tax assessments for significant amounts by the tax authorities of the countries in which we operate, especially in Brazil, Mexico and Ecuador. The tax assessments relate to, among other things, alleged improper deductions and underpayments. We are contesting these tax assessments in several administrative and legal proceedings, and our challenges are at various stages. If determined adversely to us, these proceedings may have a material adverse effect on our business, results of operations, financial condition or prospects. In addition, in some jurisdictions, challenges to tax assessments require the posting of a bond or security for the contested amount, which may reduce our flexibility in operating our business. Our significant tax assessments are described in Note 17 to our audited consolidated financial statements included in this annual report.

Failure to comply with anti-corruption, anti-bribery and anti-money laundering laws could harm our reputation, subject us to substantial fines and adversely affect our business

We operate in multiple jurisdictions and are subject to complex regulatory frameworks with increased enforcement activities worldwide. Our governance and compliance

processes may not prevent future breaches of legal, accounting or governance standards and regulations. We may be subject to breaches of our code of ethics, anti-corruption policies and business conduct protocols and to instances of fraudulent behavior, corrupt practices and dishonesty by our employees, contractors or other agents. Our failure to comply with applicable laws and other regulatory requirements could harm our reputation, subject us to substantial fines, sanctions or penalties and adversely affect our business and ability to access financial markets.

A system failure could cause delays or interruptions of service, which could have an adverse effect on our operations

We need to continue to provide our subscribers with a reliable service over our network. Some of the risks to our network and infrastructure include the following:

 

  physical damage to access lines and fixed networks;
  power surges or outages;
  natural disasters;
  climate change;
  malicious actions, such as theft or misuse of customer data;
  limitations on the use of our radio bases;
  software defects;
  human error; and
  other disruptions beyond our control, including as a result of civil unrest in the regions where we operate.

In Brazil, for example, our satellite operations may be affected if we experience a delay in launching new satellites to replace those currently in use when they reach the end of their operational lives. Such delay may occur because of, among other reasons, construction delays, unavailability of launch vehicles and/or launch failures. In addition, our operations have been disrupted by natural disturbances such as hurricanes and earthquakes.

We have instituted measures to reduce these risks. However, there is no assurance that any measures we implement will be effective in preventing system failures under all circumstances. System failures may cause interruptions in services or reduced capacity for our customers, either of which may have an adverse effect on our operations due to, for example, increased expenses, potential legal liability, loss of existing and potential subscribers, reduced user traffic, decreased revenues and reputational harm.

 

 

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Our financial condition and results of operations may be adversely affected by the occurrence of severe weather, natural or man-made disasters and other catastrophic events, including war, terrorism and other acts of violence, and disease

Our operations can be disrupted by unforeseen events, including war, terrorism, and other international, regional, or local instability or conflicts (including labor issues), embargos, public health issues (including tainted food, food-borne illnesses, food tampering, tampering with or failure of water supply or widespread or pandemic illness such as coronavirus (“COVID-19”), Ebola, the avian or H1N1 flu, MERS), and natural disasters such as earthquakes, tsunamis, hurricanes, or other adverse weather and climate conditions in the countries in which we operate. These events could disrupt or prevent our ability to perform functions and otherwise impede our ability to continue business operations in a continuous manner, which in turn may materially and adversely impact our business and operating results.

The COVID-19 pandemic has had a material impact on the global economy and our business

The COVID-19 pandemic has had, and continues to have, a material impact on businesses around the world and the economic environments in which they operate. Governments in jurisdictions where we operate have taken aggressive measures to slow the spread of COVID-19, including quarantines and lock-downs, restrictions on travel, and closing of businesses and public and private institutions. In addition, governments have imposed a wide variety of consumer protection measures that limit how certain businesses, including telecommunications companies, can operate their businesses and interact with their customers. The virus continues to spread globally and cause significant social and market disruption.

There are a number of consequences of the pandemic and its impact on global economies that could have a material adverse effect on our business.

 

  In 2020, the economic slowdown had an adverse impact on our customers’ ability to pay for our services.

 

  We have been required to change or restrict many of our operations, including customer support, servicing and repairs, network maintenance, retail operations and investment projects. We have also experienced supply chain disruptions for handsets and other equipment. This could have an impact on our costs.
  We have implemented policies, including work-from-home policies and social distancing policies, that could limit the efficiency and effectiveness of our operations and our reporting and internal controls.

The extent of the impact of the COVID-19 on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic, and the availability and effectiveness of vaccines, all of which are highly uncertain and cannot be predicted. If the COVID-19 pandemic continues to spread, the impact on our operations, our clients, our suppliers and financial markets could materially adversely affect our financial condition or results of operations. See “Operating And Financial Review And Prospects—Effects of the COVID-19 Pandemic.”

Increases in labor and employee benefit costs may reduce our profitability, increase our funding requirements and could have an adverse impact on our operations

Many of our employees are members of labor unions with which we conduct collective negotiations on wages, benefits and working conditions. We use actuarial methodologies and assumptions such as discount rate, salary increase and mortality, among others, for the determination and valuation of our employee benefits, including retirement benefits. We evaluate from time to time, with the support of specialists, our actuarial methodologies and assumptions, as well as the valuation of the assets related to these benefits.

Our labor costs and the costs of maintaining employee benefits could be affected by several factors, including legislative and regulatory changes, work stoppages, subsequent negotiations, increases in healthcare costs, minimum wages, decreases in investment returns on the assets held in funds to support the payment of certain employee benefits and changes in the discount rate and mortality assumptions. An increase in labor and employee benefit costs could reduce our profitability, increase our funding requirements and have an adverse impact on our operations.

 

 

 

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We rely on highly skilled personnel throughout all levels of our business. Our business could be harmed if we are unable to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture.

The market for highly skilled workers and leaders in our industry is extremely competitive. We believe that our future success depends in substantial part on our ability to recruit, hire, motivate, develop, and retain talented personnel for all areas of our organization, including our CEO and the other members of our senior leadership team. Our inability to retain these employees or to replace them with qualified and capable successors could hinder our strategic planning and execution. If key employees depart, our business could be negatively impacted. We may incur significant costs in identifying, hiring and replacing departing employees and may lose significant expertise and talent. As a result, we may not be able to meet our business plan and our revenue growth and profitability may be materially adversely affected.

Cybersecurity incidents and other breaches of network or information technology security could have an adverse effect on our business and our reputation

Cybersecurity incidents, and other tactics designed to gain access to and exploit sensitive information by breaching critical systems of large companies, are evolving and have been increasing in both sophistication and occurrence in recent years. While we employ a number of measures to prevent, detect and mitigate such incidents, there is no guarantee that we will be able to adequately anticipate or prevent one. Cybercrime, including attempts to overload our servers with denial-of-service attacks, theft, social engineering, phishing, ransomware or similar disruptions from unauthorized access or attempted unauthorized access to our systems could result in the destruction, misuse or release of personal information or other sensitive data. However, it is difficult to detect or prevent evolving forms of cybersecurity incidents, and our systems, and those of our third-party service providers and of our customers, are vulnerable to cybersecurity incidents.

In the event that our systems are breached or damaged for any reason, we may suffer loss or unavailability of data and interruptions to our business operations. If such an event occurs, the unauthorized disclosure, loss or unavailability of data and the disruption to our fixed-line or wireless networks may have a material adverse effect on our business and results of operations. The costs associated with a cybersecurity incident could include increased expenditures on information and cybersecurity measures, damage to our reputation, loss of existing customers and business partners

and lead to financial losses from remedial actions and potential liability, including possible litigation and sanctions. Any of these occurrences may result in a material adverse effect on our results of operations and financial condition.

Failure to achieve proper data governance could lead to data mismanagement

We process large amounts of personally identifiable information of customers and employees and are subject to various compliance, security, privacy, data quality and regulatory requirements. Failure to achieve proper data governance could lead to data mismanagement which in turn could result in data loss, regulatory investigations or sanctions, and cybersecurity risk. We are subject to data privacy regulations in the countries where we operate. Complying with such regulations may expose us to increased costs and limit our ability to transfer data between certain jurisdictions, which may adversely affect our operations.

If our churn rate increases, our business could be negatively affected

The cost of acquiring a new subscriber is much higher than the cost of maintaining an existing subscriber. Accordingly, subscriber deactivations, or “churn,” could have a material negative impact on our operating income, even if we are able to obtain one new subscriber for each lost subscriber. A substantial majority of our subscribers are prepaid, and we do not have long-term contracts with them. Our average churn rate on a consolidated basis was 3.8% for the year ended December 31, 2020 and 4.1% for the year ended December 31, 2019. If we experience an increase in our churn rate, our ability to achieve revenue growth could be materially impacted. In addition, a decline in general economic conditions could lead to an increase in churn, particularly among our prepaid subscribers.

We rely on key suppliers to provide equipment that we need to operate our business

We rely upon various key suppliers to provide us with handsets, network equipment or services, which we need to expand and operate our business. Our key suppliers include Huawei, Ericsson and Alcatel. If these suppliers fail to provide equipment or service to us on a timely basis, we could experience disruptions, which could have an adverse effect on our revenues and results of operations. In addition, we might be unable to satisfy requirements under our concessions.

Government or regulatory actions with respect to certain suppliers may impact us. For example, the government of the United States and Canada, among others, are currently conducting a regulatory review of certain international suppliers of network equipment and technologies to evaluate

 

 

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potential risks. We are currently unable to predict the outcome of such reviews, including any possible restrictions placed on our key suppliers, and as a result we cannot determine their potential impact on our business.

Our ability to pay dividends and repay debt depends on our subsidiaries’ ability to pay dividends and make other transfers to us

We are a holding company with no significant assets, other than the shares of our subsidiaries and our holdings of cash and cash equivalents. Our ability to pay dividends and repay debt depends on the continued transfer to us of dividends and other income from our subsidiaries. The ability of our subsidiaries to pay dividends and make other transfers to us may be limited by various regulatory, contractual and legal constraints that affect them.

We may fail to realize the benefits anticipated from acquisitions, divestments and significant investments we make from time to time

The business growth opportunities, revenue benefits, cost savings and other benefits we anticipated to result from our acquisitions, divestments and significant investments may not be achieved as expected, or may be delayed. Our divestments may also adversely affect our prospects. For example, we may be unable to fully implement our business plans and strategies for the combined businesses due to regulatory limitations, and we may face regulatory restrictions in our provision of combined services in some of the countries in which we operate. To the extent that we incur higher integration costs or achieve lower revenue benefits or fewer cost savings than expected, or if we are required to recognize impairments of acquired assets, investments or goodwill, our results of operations and financial condition may suffer.

A downgrade of Mexico’s credit rating could affect us

Credit rating agencies regularly evaluate Mexico and its sovereign rating based on various factors including macroeconomic trends, tax and budgetary conditions and indebtedness metrics. If Mexico’s sovereign credit rating is downgraded by credit rating agencies, the rating of our securities may also be downgraded, which could negatively affect our financing costs and the market price of our securities.

Changing expectations from stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks

Influential investors and other stakeholders are increasingly focused on the environmental, social and governance (“ESG”) practices of companies across all industries. If we do not adapt to or comply with evolving expectations, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage, and our business, financial condition or stock price could be materially and adversely affected. If we do not meet our stakeholders’ expectations or we are not effective in addressing ESG matters or achieve relevant sustainability goals, trust in our brand may suffer and our business or our ability to access capital could be harmed.

RISKS RELATING TO THE TELECOMMUNICATIONS INDUSTRY GENERALLY

Changes in the telecommunications industry could affect our future financial performance

The telecommunications industry continues to experience significant changes as new technologies are developed that offer subscribers an array of choices for their communications needs. These changes include, among others, regulatory changes, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products, evolving renewable energy and clean technologies, and changes in end-user needs and preferences. There is uncertainty as to the pace and extent of growth in subscriber demand, and as to the extent to which prices for airtime, broadband access, Pay TV and fixed-line rental may continue to decline. Our ability to compete in the delivery of high-quality internet and broadband services is particularly important, given the increasing contribution of revenues from data services to our overall growth. If we are unable to meet future advances in competing technologies on a timely basis or at an acceptable cost, we could lose subscribers to our competitors. In general, the development of new services in our industry requires us to anticipate and respond to the varied and continually changing demands of our subscribers. It also requires significant capital expenditure, including investment in the continual maintenance and upgrading of our networks, in order to expand coverage, increase our capacity to absorb higher bandwidth usage and adapt to new technologies. We may not be able to accurately predict technological trends or the success of new services in the market. In addition, there could be legal or regulatory restraints to our introduction of new

 

 

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services. If these services fail to gain acceptance in the marketplace, or if costs associated with implementation and completion of the introduction of these services materially increase, our ability to retain and attract subscribers could be adversely affected. This is true across many of the services we provide, including wireless and cable technology.

The intellectual property used by us, our suppliers or service providers may infringe on intellectual property rights owned by others

Some of our products and services use intellectual property that we own or license from others. We also provide content we receive from content producers and distributors, such as ringtones, text games, video games, video, including TV programs and movies, wallpapers or screensavers, and we outsource services to service providers, including billing and customer care functions, that incorporate or utilize intellectual property. We and some of our suppliers, content distributors and service providers have received, and may receive in the future, assertions and claims from third parties that the content, products or software utilized by us or our suppliers, content producers and distributors and service providers infringe on the patents or other intellectual property rights of these third parties. These claims could require us or an infringing supplier, content distributor or service provider to cease engaging in certain activities, including selling, offering and providing the relevant products and services. Such claims and assertions also could subject us to costly litigation and significant liabilities for damages or royalty payments, or require us to cease certain activities or prevent us from selling certain products or services.

Concerns about health risks relating to the use of wireless handsets and base stations may adversely affect our business

Portable communications devices have been alleged to pose health risks, including cancer, due to radio frequency emissions. Lawsuits have been filed in the United States against certain participants in the wireless industry alleging various adverse health consequences as a result of wireless phone usage, and our subsidiaries may be subject to similar litigation in the future. Government authorities could increase regulation on electromagnetic emissions of mobile handsets and base stations, which could have an adverse effect on our business, financial condition and results of operations. Research and studies are ongoing, and there can be no assurance that further research and studies will not demonstrate a link between radio frequency emissions and health concerns. Any negative findings in these studies could adversely affect the use of wireless technology and, as a result, our future financial performance.

Developments in the telecommunications sector have resulted, and may result, in substantial write-downs of the carrying value of certain of our assets

Where the circumstances require, we review the carrying value of each of our assets, subsidiaries and investments in associates to assess whether those carrying values can be supported by the future discounted cash flows expected to be derived from such assets. Whenever we consider that due to changes in the economic, regulatory, business or political environment, our goodwill, investments in associates, intangible assets or fixed assets may be impaired, we consider the necessity of performing certain valuation tests, which may result in impairment charges. The recognition of impairments of tangible, intangible and financial assets could adversely affect our results of operations.

RISKS RELATING TO OUR CONTROLLING SHAREHOLDERS, CAPITAL STRUCTURE AND TRANSACTIONS WITH AFFILIATES

Members of one family may be deemed to control us and may exercise their control in a manner that may differ from the interest of other shareholders

Based on reports of beneficial ownership of our shares filed with the SEC, Carlos Slim Helú, together with his sons, daughters and grandchildren (together, the “Slim Family”) may be deemed to control us. The Slim Family may be able to elect a majority of the members of our Board of Directors and to determine the outcome of other actions requiring a vote of our shareholders. The interests of the Slim Family may diverge from the interests of our other investors.

We have significant transactions with affiliates

We engage in various transactions with Telesites, S.A.B. de C.V. (“Telesites”) and certain subsidiaries of Grupo Carso, S.A.B. de C.V. (“Grupo Carso”) and Grupo Financiero Inbursa, S.A.B. de C.V. (“Grupo Financiero Inbursa”), all which may be deemed for certain purposes to be under common control with América Móvil.

These transactions occur in the ordinary course of business. Transactions with affiliates may create the potential for conflicts of interest.

We also make investments together with related parties, sell investments to related parties and buy investments from related parties. For more information about our transactions with affiliates, see “Related Party Transactions” under Part IV of this annual report.

 

 

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Our bylaws restrict transfers of shares in some circumstances

Our bylaws provide that any acquisition or transfer of 10.0% or more of our capital stock by any person or group of persons acting together requires the approval of our Board of Directors. You may not acquire or transfer more than 10.0% of our capital stock without the approval of our Board of Directors.

The protections afforded to minority shareholders in Mexico are different from those in the United States

Under Mexican law, the protections afforded to minority shareholders are different from those in the United States. In particular, the law concerning fiduciary duties of directors is not as fully developed as in other jurisdictions, the procedure for class actions is different, and there are different procedural requirements for bringing shareholder lawsuits. As a result, in practice it may be more difficult for minority shareholders of América Móvil to seek remedies against us or our directors or controlling shareholders than it would be for shareholders of a company incorporated in another jurisdiction, such as Delaware.

Holders of L Shares and L Share ADSs have limited voting rights

Our bylaws provide that holders of L Shares are not permitted to vote, except on such limited matters as, among others, the transformation or merger of América Móvil or the cancellation of registration of the L Shares with the Mexican Securities Registry (Registro Nacional de Valores, or “RNV”) maintained by the CNBV or any stock exchange on which they are listed. If you hold L Shares or L Share ADSs, you will not be able to vote on most matters, including the declaration of dividends, which are subject to a shareholder vote in accordance with our bylaws.

Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary

Under our bylaws, a shareholder is required to deposit its shares with a custodian in order to attend a shareholders’ meeting. A holder of ADSs will not be able to meet this requirement and, accordingly, is not entitled to attend shareholders’ meetings. A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with procedures provided for in the deposit agreements, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.

Our bylaws may only be enforced in Mexico

Our bylaws provide that legal actions relating to the execution, interpretation or performance of the bylaws may be brought only in Mexican courts. As a result, it may be difficult for non-Mexican shareholders to enforce their shareholder rights pursuant to the bylaws.

It may be difficult to enforce civil liabilities against us or our directors, officers and controlling persons

América Móvil is organized under the laws of Mexico, with its principal place of business in Mexico City, and most of our directors, officers and controlling persons reside outside the United States. In addition, all or a substantial portion of our assets and their assets are located outside of the United States. As a result, it may be difficult for investors to effect service of process within the United States on such persons or to enforce judgments against them, including in any action based on civil liabilities under U.S. federal securities laws. There is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to judgments of U.S. courts, of liabilities based solely on U.S. federal securities laws.

You may not be entitled to participate in future preemptive rights offerings

Under Mexican law, if we issue new shares for cash as part of certain capital increases, we must grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in América Móvil. Rights to purchase shares in these circumstances are known as preemptive rights. Our shareholders do not have preemptive rights in certain circumstances such as mergers, convertible debentures, public offers and placement of repurchased shares. We may not be legally permitted to allow holders of ADSs or holders of L Shares or A Shares in the United States to exercise any preemptive rights in any future capital increase unless we file a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) with respect to that future issuance of shares. At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC and any other factors that we consider important to determine whether we will file such a registration statement.

We cannot assure you that we will file a registration statement with the SEC to allow holders of ADSs or U.S. holders of L Shares or A Shares to participate in a preemptive rights offering. As a result, the equity interest of such holders in América Móvil may be diluted proportionately. In addition, under current Mexican law, it is not practicable for the depositary to sell preemptive rights and distribute the proceeds from such sales to ADS holders.

 

 

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RISKS RELATING TO DEVELOPMENTS IN MEXICO AND OTHER COUNTRIES

Economic, political and social conditions in Latin America, the United States, the Caribbean and Europe may adversely affect our business

Our financial performance may be significantly affected by general economic, political and social conditions in the markets where we operate. Many countries in Latin America and the Caribbean, including Mexico, Brazil and Argentina, have undergone significant economic, political and social crises in the past, and these events may occur again in the future. We cannot predict whether changes in political administrations will result in changes in governmental policy and whether such changes will affect our business. Factors related to economic, political and social conditions that could affect our performance include:

 

  significant governmental influence over local economies;
  substantial fluctuations in economic growth;
  high levels of inflation, including hyperinflation;
  changes in currency values;
  exchange controls or restrictions on expatriation of earnings;
  high domestic interest rates;
  price controls;
  changes in governmental economic, tax, labor or other policies;
  imposition of trade barriers;
  changes in law or regulation; and
  overall political, social and economic instability and civil unrest.

Adverse economic, political and social conditions in Latin America, the United States, the Caribbean or in Europe may inhibit demand for telecommunication services and create uncertainty regarding our operating environment or may affect our ability to renew our licenses and concessions, to maintain or increase our market share or profitability and may have an adverse impact on future acquisitions, which could have a material adverse effect on our company. In addition, the perception of risk in the countries in which we operate may have a negative effect on the trading price of our shares and ADSs and may restrict our access to international financial markets.

In various countries where we operate, for example, elections took place during 2018, which could lead to economic, political and social changes over which we have no control. Our business may also be especially affected by conditions in Mexico and Brazil, two of our largest markets. Mexican elections in July 2018 resulted in a new president and in a new Congress with a majority of members in both houses

representing a different political party from the parties that have been in power in the past. We cannot predict what changes in policy the Mexican administration may adopt, or their impact on our operations. Additionally, in Mexico, economic conditions are strongly impacted by those of the United States. There is continuing uncertainty regarding U.S. policies with respect to matters of importance to Mexico and its economy, particularly with respect to trade and migration.

Possible replacement of the LIBOR benchmark interest rate may have an impact on our business

On July 27, 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phase out LIBOR as a benchmark by the end of 2021. The discontinuation date for submission and publication of rates for certain tenors of USD LIBOR (1-month, 3-month, 6-month and 12-month) has been extended by the ICE Benchmark Administration (the administrator of LIBOR) until June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. Potential changes, or uncertainty related to such potential changes may adversely affect the market for loans with LIBOR-indexed interest rates. When LIBOR ceases to exist, we may need to amend the credit and loan agreements with our lenders that utilize LIBOR as a factor in determining the interest rate based on a new standard that is established, if any. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have an adverse effect on our business, results of operations and financial condition.

Changes in exchange rates could adversely affect our financial condition and results of operations

We are affected by fluctuations in the value of the currencies in which we conduct operations compared to the currencies in which our indebtedness is denominated. Such changes result in exchange losses or gains on our net indebtedness and accounts payable. In 2020, we reported net foreign exchange losses of Ps.65.4 billion.

In addition, currency fluctuations between the Mexican peso and the currencies of our non-Mexican subsidiaries affect our results as reported in Mexican pesos. Currency fluctuations are expected to continue to affect our financial income and expense.

 

 

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Major depreciation of the currencies in which we conduct operations could cause governments to impose exchange controls that would limit our ability to transfer funds between us and our subsidiaries

Major depreciation of the currencies in which we conduct operations may result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert such currencies into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our indebtedness. The government of Argentina has adopted exchange controls and restrictions on the movement of capital and has taken other measures in response to capital flight and the significant depreciation of the Argentine peso. In addition, although the Mexican government does not currently restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer other currencies out of Mexico, it could institute restrictive exchange rate policies in the future. Similarly, the Brazilian government may impose temporary restrictions on the conversion of Brazilian reais into foreign currencies and on the remittance to foreign investors of proceeds from investments in Brazil whenever there is a serious imbalance in Brazil’s balance of payments or a reason to foresee a serious imbalance.

Developments in other countries may affect the market price of our securities and adversely affect our ability to raise additional financing

The market value of securities of Mexican companies is, to varying degrees, affected by economic and market conditions in other countries, including the United States, the European Union (the “EU”) and emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers. Crises in the United States, the EU and emerging market countries may diminish investor interest in securities of Mexican issuers. This could materially and adversely affect the market price of our securities, and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all.

 

 

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The following table sets forth our capital structure as of March 31, 2021.

 

  SERIES    NUMBER OF
SHARES
(MILLIONS)
    

PERCENT OF
COMBINED

CAPITAL

    A SHARES AND
AA SHARES
(1)
 

  L Shares

     45,448        68.3          – 

  (no par value)

  AA Shares

     20,578        30.9     97.6

  (no par value)

  A Shares

     515        0.8     2.4

  (no par value)

  Total(2)

     66,541        100     100
  (1)

The AA Shares and A Shares of América Móvil, together, are entitled to elect a majority of our directors. Holders of L Shares are entitled to limited voting rights under our bylaws. See “Bylaws—Voting Rights” under this Part IV.

  (2)

Figures in the table may not recalculate exactly due to rounding.

According to reports of beneficial ownership of our shares filed with the SEC, the Slim Family may be deemed to control us through their interests in a Mexican trust that holds AA Shares and L Shares for their benefit (the “Family Trust”), their interest in Inversora Carso, S.A. de C.V., including its subsidiary Control Empresarial de Capitales, S.A. de C.V. and their direct ownership of our shares. See “Management—Directors” and “Management—Executive Committee” under Part V and “Related Party Transactions” under this Part IV of this annual report.

The following table identifies owners of more than 5.0% of any series of our shares as of March 31, 2021. Except as described in the table below and the accompanying notes, we are not aware of any holder of more than 5.0% of any series of our shares. Figures below do not include L Shares that would be held by each shareholder upon conversion of AA Shares or A Shares, as provided for under our bylaws. See “Management—Share Ownership of Directors and Senior Management” under Part V of this annual report.

 

  SHAREHOLDER

     SHARES
OWNED
(MILLIONS)
     PERCENT OF
CLASS
(1)
 

  AA SHARES:

  

 

 

 

  

 

 

 

  

 

 

 

  Family Trust(2)

                                         10,894                52.9%        

  Inversora Carso(3)

  

 

 

 

     4,381                  21.3%        

  Carlos Slim Helú

  

 

 

 

     1,879                  9.1%          

  L SHARES:

  

 

 

 

  

 

 

 

  

 

 

 

  Inversora Carso(3)

  

 

 

 

     6,020                  13.2%        

  Family Trust(2)

  

 

 

 

     5,998                  13.2%        

  Carlos Slim Helú

  

 

 

 

     3,072                  6.8%          

  BlackRock, Inc.(4)

  

 

 

 

     2,466                  5.4%          
  (1)

Percentage figures are based on the number of shares outstanding as of March 31, 2021.

  (2)

The Family Trust is a Mexican trust that holds AA Shares and L Shares for the benefit of members of the Slim Family. In addition to shares held by the Family Trust, members of the Slim Family, including Carlos Slim Helú, directly own an aggregate of 3,558 million AA Shares and 9,570 million L Shares representing 17.3% and 21.1%, respectively, of each series. According to beneficial reports filed with the SEC, none of these members of the Slim Family, other than Carlos Slim Helú, individually directly own more than 5.0% of any class of our shares.

  (3)

Includes shares owned by subsidiaries of Inversora Carso. Based on beneficial ownership reports filed with the SEC, Inversora Carso is a Mexican sociedad anón- ima de capital variable and may be deemed to be controlled by the Slim Family.

  (4)

Based on beneficial ownership reports filed with the SEC.

As of March 31, 2021, 15.7% of the outstanding L Shares were represented by L Share ADSs, each representing the right to receive 20 L Shares, and 99.98% of the L Share ADSs were held by 6,532 registered holders with addresses in the United States. As of such date, 37.2% of the A Shares were held in the form of A Share ADSs, each representing the right to receive 20 A Shares, and 99.9% of the A Share ADSs were held by 3,215 registered holders with addresses in the United States. Each A Share may be exchanged at the option of the holder for one L Share.

We have no information concerning the number of holdings or holders with registered addresses in the United States that hold:

 

  AA Shares;

 

  A Shares not represented by ADSs; or

 

  L Shares not represented by ADSs.
 

 

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Our subsidiaries purchase materials or services from a variety of companies that may be deemed for certain purposes to be under common control with us, including Telesites, Grupo Carso and Grupo Financiero Inbursa and their respective subsidiaries.

These services include insurance and banking services provided by Grupo Financiero Inbursa and its subsidiaries. In addition, we sell products in Mexico through the Sanborns and Sears Operadora México, S.A. de C.V. store chains. Some of our subsidiaries also purchase network construction services and materials from subsidiaries of Grupo Carso. Our subsidiaries purchase these materials and services on terms

no less favorable than they could obtain from unaffiliated parties, and would have access to other sources if our related parties ceased to provide them on competitive terms.

We and Telesites have entered into an agreement providing for site usage fees, annual price escalations and fixed annual charges that permit us to install a pre-determined amount of equipment at the Telesite towers and provide for incremental fee payments if capacity use is exceeded. The principal economic terms of the agreement conform to the reference terms published by Telesites and approved by IFT.

Note 6 to our audited consolidated financial statements included in this annual report provides additional information about our related party transactions.

 

 

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We regularly pay cash dividends on our shares. The table below sets forth the nominal amount of dividends paid per share on each date indicated, in Mexican pesos and translated into U.S. dollars at the exchange rate reported by Banco de México, as published in the Official Gazette, for each of the respective payment dates.

 

  PAYMENT DATE    PESOS PER SHARE        DOLLARS PER SHARE  

  November 9, 2020

     Ps.        0.19        U.S.$          0.0092  

  July 20, 2020

     Ps.        0.19        U.S.$          0.0085  

  November 11, 2019

     Ps.        0.17        U.S.$          0.0090  

  July 15, 2019

     Ps.        0.18        U.S.$          0.0095  

  November 12, 2018

     Ps.        0.16        U.S.$          0.0080  

  July 16, 2018

     Ps.        0.16        U.S.$          0.0085  

  November 13, 2017

     Ps.        0.15        U.S.$          0.0079  

  July 17, 2017

     Ps.        0.15        U.S.$          0.0085  

  November 14, 2016

     Ps.        0.14        U.S.$          0.0068  

  July 15, 2016

     Ps.        0.14        U.S.$          0.0076  

On April 26, 2021 our shareholders approved a cash dividend of Ps.0.40 per share, of which Ps.0.20 per share is payable on July 19, 2021 and Ps.0.20 is payable on November 8, 2021.

The declaration, amount and payment of dividends by América Móvil is determined by majority vote of the holders of AA Shares and A Shares, generally on the recommendation of the Board of Directors, and depends on our results of operations, financial condition, cash requirements, future prospects and other factors considered relevant by the holders of AA Shares and A Shares.

Our bylaws provide that holders of AA Shares, A Shares and L Shares participate equally on a per-share basis in dividend payments and other distributions, subject to certain non-material preferential dividend rights of holders of L Shares.

 

 

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Our shares and ADSs are listed on the following markets:

 

  SECURITY    STOCK EXCHANGE    TICKER SYMBOL

  L Shares

   Mexican Stock Exchange—Mexico City    AMXL

  L Share ADSs

   New York Stock Exchange—New York    AMX

  A Shares

   Mexican Stock Exchange—Mexico City    AMXA

  A Share ADSs

   New York Stock Exchange—New York    AMOV

 

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We are a Sociedad Anónima Bursátil de Capital Variable organized under Mexican law. For a description of our AA Shares, A Shares and L Shares, and a brief summary of certain significant provisions in our current bylaws and Mexican law, see “Description of Securities Registered Under Section 12 of the Exchange Act,” filed as Exhibit 2.1 with this annual report. For a description of our Board of Directors, Executive and Audit and Corporate Practices Committees and External Auditor, see “Management” under Part V of this annual report.

 

 

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We periodically repurchase at our discretion our L Shares and A Shares on the open market pursuant to guidelines approved by our Board of Directors, using funds up to an amount authorized by our shareholders specifically for the repurchase of L Shares and A Shares. In our 2021 annual ordinary shareholders’ meeting, our shareholders authorized an allocation of Ps.25 billion to repurchase L Shares and A Shares from April 2021 to April 2022.

The following tables set out information concerning purchases of our L Shares by us and our affiliated purchasers in 2020. We did not repurchase our L Shares other than through the share repurchase program, and we did not repurchase any A Shares.

 

  PERIOD TOTAL NUMBER OF
SHARES  PURCHASED
(1)
AVERAGE PRICE
PER SHARE
TOTAL NUMBER OF SHARES
PURCHASED AS PART OF
PUBLICLY ANNOUNCED
PLANS OR PROGRAMS
APPROXIMATE MEXICAN PESO
VALUE OF SHARES THAT MAY
YET BE PURCHASED UNDER
THE PLANS OR PROGRAMS
(2)

January 2020

  5,650,000   Ps. 15.34   5,650,000   Ps. 2,664,468,912

February 2020

  2,200,000   16.06   2,200,000   2,629,333,277

March 2020

  -   -   -   2,629,333,277

April 2020

  11,000,000   13.64   11,000,000   5,930,090,256

May 2020

  19,975,000   14.99   19,975,000   5,632,443,872

June 2020

  22,000,000   15.26   22,000,000   5,298,718,225

July 2020

  22,500,000   14.64   22,500,000   4,971,126,848

August 2020

  21,000,000   14.14   21,000,000   4,675,982,377

September 2020

  32,000,000   13.49   32,000,000   4,246,872,865

October 2020

  43,000,000   13.60   43,000,000   3,665,445,685

November 2020

  80,000,000   14.40   80,000,000   2,519,753,255

December 2020

  106,282,651   14.48   106,282,651   989,494,709

Total L Shares

  365,607,651

 

 

 

  365,607,651

 

 

 

 

  (1)

This includes purchases by us and our affiliated purchasers in 2020.

  (2)

This is the approximate peso amount available at the end of the period for purchases of both L Shares and A Shares pursuant to our share repurchase program.

 

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The following summary contains a description of certain Mexican federal and U.S. federal income tax consequences of the acquisition, ownership and disposition of L Shares, A Shares, L Share ADSs or A Share ADSs, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, hold or sell shares or ADSs.

This discussion does not constitute, and should not be considered as, legal or tax advice to holders. The discussion is for general information purposes only and is based upon the federal tax laws of Mexico (including the Mexican Income Tax Law (Ley del Impuesto sobre la Renta) and the United States in effect on the date of this annual report, including the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion and the protocols thereto between the United States and Mexico currently in force (together, the “Tax Treaty”) and the agreement between the United States and Mexico concerning the exchange of information with respect to tax matters. The Tax Treaty is subject to change, and such changes may have retroactive effects. Holders of shares    or ADSs should consult their own tax advisors as to the Mexican, U.S. or other tax consequences of the purchase, ownership and disposition of shares or ADSs, including, in particular, the effect of any foreign, state or local tax laws.

MEXICAN TAX CONSIDERATIONS

The following is a general summary of the principal consequences under the Mexican Income Tax Law and the rules and regulations thereunder, as currently in effect, of an investment in shares or ADSs by a holder that is not a resident of Mexico and that will not hold shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a permanent establishment in Mexico (a “nonresident holder”).

For purposes of Mexican taxation, the definition of residence is highly technical and residence arises in several situations. Generally, an individual is a resident of Mexico if he or she has established his or her home or center of vital interests in Mexico, and a corporation is considered a resident if it has its place of effective management in Mexico. However, any determination of residence should take into account the particular situation of each person or legal entity.

If a legal entity or an individual is deemed to have a permanent establishment in Mexico for Mexican tax purposes, all income attributable to that permanent establishment will be subject to Mexican income taxes, in accordance with applicable tax laws.

This summary does not purport to be a comprehensive description of all the Mexican tax considerations that may be relevant to a decision to purchase, own or dispose of the shares. In particular, this summary (i) does not describe any tax consequences arising under the laws of any state, locality, municipality or taxing jurisdiction other than certain federal laws of Mexico and (ii) does not address all of the Mexican tax consequences that may be applicable to specific holders of the shares, including a holder:

 

  whose shares were not acquired through the Mexican Stock Exchange or other markets authorized by the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) or the Mexican Federal Tax Code;

 

  of shares or ADSs that control us;

 

  that holds 10.0% or more of our shares;

 

  that is part of a group of persons for purposes of Mexican law that controls us (or holds 10.0% or more of our shares); or

 

  that is a resident of Mexico or is a corporation resident in a tax haven (as defined by the Mexican Income Tax Law).

Tax Treaties

Provisions of the Tax Treaty that may affect the taxation of certain U.S. holders (as defined below) are summarized below.

The Mexican Income Tax Law has established procedural requirements for a nonresident holder to be entitled to benefits under any of the tax treaties to which Mexico is a party, including on dispositions and dividends. These procedural requirements include, among others, the obligation to (i) prove tax treaty residence, (ii) file tax calculations made by an authorized certified public accountant or an informational tax statement, as the case may be, and (iii) appoint representatives in Mexico for taxation purposes. Parties related to the issuer may be subject to additional procedural requirements.

Payment of Dividends

Dividends, either in cash or in kind, paid with respect to L Shares, A Shares, L Share ADSs or A Share ADSs will generally be subject to a 10.0% Mexican withholding tax (provided that no Mexican withholding tax will apply to distributions of net taxable profits generated before 2014).

 

 

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Taxation of Dispositions

The tax rate on income realized by a nonresident holder from a disposition of shares through the Mexican Stock Exchange is generally 10.0%, which is applied to the net gain realized on the disposition. This tax is payable through withholding made by intermediaries. However, such withholding does not apply to a nonresident holder who certifies that the holder is resident in a country with which Mexico has entered into an income tax treaty.

The sale or other transfer or disposition of shares not carried out through the Mexican Stock Exchange and not held in the form of ADSs will be subject to a 25% tax rate in Mexico, which is applicable to the gross proceeds realized from the sale. Alternatively, a nonresident holder may, subject to certain requirements, elect to pay taxes on the net gain realized from the sale of shares at a rate of 35%.

The sale or disposition of ADSs through securities exchanges or markets recognized under the Mexican federal tax code (which includes the NYSE) by nonresidents who are residents of a country with which Mexico has entered into an income tax treaty is not subject to income tax in Mexico under the current tax rules. The tax treatment of such transfer of ADSs by nonresidents who are also not residents of a country with which Mexico has entered into an income tax treaty is not clear under the current Mexican tax rules.

Pursuant to the Tax Treaty, gains realized by a U.S. resident that is eligible to receive benefits pursuant to the Tax Treaty from the sale or other disposition of shares or ADSs, even if the sale or disposition is not carried out under the circumstances described in the preceding paragraphs, will not be subject to Mexican income tax, provided that the gains are not attributable to a permanent establishment or a fixed base in Mexico, and further provided that such U.S. holder owned less than 25% of the shares representing our capital stock (including ADSs), directly or indirectly, during the 12-month period preceding such disposition. U.S. residents should consult their own tax advisors as to their possible eligibility under the Tax Treaty.

Gains and gross proceeds realized by other nonresident holders that are eligible to receive benefits pursuant to other income tax treaties to which Mexico is a party may be exempt from Mexican income tax, in whole or in part. Non-U.S. holders should consult their own tax advisors as to their possible eligibility under such treaties.

Other Mexican Taxes

A nonresident holder generally will not be liable for estate, inheritance or similar taxes with respect to its holdings of shares or ADSs; provided, however, that gratuitous transfers of shares or ADSs may, in certain circumstances, result in the imposition of a Mexican tax upon the recipient.

There are no Mexican stamp, issue registration or similar taxes payable by a nonresident holder with respect to shares or ADSs.

U.S. FEDERAL INCOME TAX

CONSIDERATIONS

The following is a summary of certain U.S. federal income tax consequences to U.S. holders (as defined below) of the acquisition, ownership and disposition of shares or ADSs. The summary does not purport to be a comprehensive description of all of the tax consequences of the acquisition, ownership or disposition of shares or ADSs. The summary applies only to U.S. holders that will hold their shares or ADSs as capital assets and does not apply to special classes of U.S. holders, such as dealers in securities or currencies, holders with a functional currency other than the U.S. dollar, holders of 10.0% or more of our shares measured by vote or value (whether held directly or through ADSs or both), tax-exempt organizations, banks, insurance companies or other financial institutions, holders liable for the alternative minimum tax, securities traders electing to account for their investment in their shares or ADSs on a mark-to-market basis, entities that are treated for U.S. federal income tax purposes as partnerships or other pass-through entities or equity holders therein and persons holding their shares or ADSs in a hedging transaction or as part of a straddle or conversion transaction.

For purposes of this discussion, a “U.S. holder” is a holder of shares or ADSs that is:

 

  a citizen or resident of the United States of America,

 

  a corporation (or other entity taxable as a corporation) organized under the laws of the United States of America or any state thereof or

 

  otherwise subject to U.S. federal income taxation on a net income basis with respect to the shares or ADSs.

Each U.S. holder should consult such holder’s own tax advisor concerning the overall tax consequences to it of the ownership or disposition of shares or ADSs that may arise under foreign, state and local laws.

Treatment of ADSs

In general, a U.S. holder of ADSs will be treated as the owner of the shares represented by those ADSs for U.S. federal income tax purposes. Deposits or withdrawals of shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. U.S. holders that withdraw any shares should consult their own tax advisors regarding the treatment of any foreign currency gain or loss on any pesos received in respect of such shares.

 

 

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Taxation of Distributions

In general, a U.S. holder will treat the gross amount of distributions we pay, without reduction for Mexican withholding tax, as dividend income for U.S. federal income tax purposes to the extent of our current and accumulated earnings and profits. Because we do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions paid to U.S. holders generally will be reported as dividends. In general, the gross amount of any dividends will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the U.S. holder, in the case of shares, or by the depositary, in the case of ADSs.

Dividends will be paid in pesos and will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date that they are received by the U.S. holder, in the case of shares, or by the depositary, in the case of ADSs (regardless of whether such pesos are in fact converted into U.S. dollars on such date). If such dividends are converted into U.S. dollars on the date of such receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the dividends. U.S. holders should consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received by a U.S. holder or depositary that are converted into U.S. dollars on a date subsequent to receipt. Dividends paid by us will not be eligible for the dividends-received deduction allowed to corporations under the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

The amount of Mexican tax withheld generally will give rise to a foreign tax credit or deduction for U.S. federal income tax purposes. Dividends generally will constitute “passive category income” for purposes of the foreign tax credit. The foreign tax credit rules are complex. U.S. holders should consult their own tax advisors with respect to the implications of those rules for their investments in our shares or ADSs.

Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual with respect to the shares or ADSs will be subject to taxation at reduced rates if the dividends are “qualified dividends.” Dividends paid on the shares or ADSs will be treated as qualified dividends if (i) (A) the shares or ADSs are readily tradable on an established securities market in the United States or (B) we are eligible for the benefits of a comprehensive tax treaty with the United States which the U.S. Treasury determines is satisfactory for purposes of this provision and which includes an exchange of information program, and (ii) we were not, in the year prior to the year in

which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The ADSs are listed on the NYSE, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. In addition, the U.S. Treasury has determined that the Tax Treaty meets the requirements for reduced rates of taxation, and we believe we are eligible for the benefits of the Tax Treaty. Based on our audited consolidated financial statements and relevant market data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to the 2019 and 2020 taxable years. In addition, based on our audited consolidated financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income and relevant market data, we do not anticipate becoming a PFIC for the 2021 taxable year. Holders of shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

Distributions of additional shares or ADSs to U.S. holders with respect to their shares or ADSs that are made as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.

Taxation of Dispositions

A U.S. holder generally will recognize capital gain or loss on the sale or other disposition of the shares or ADSs in an amount equal to the difference between the U.S. holder’s basis in such shares or ADSs (in U.S. dollars) and the amount realized on the disposition (in U.S. dollars, determined at the spot rate on the date of disposition if the amount realized is denominated in a foreign currency). Gain or loss recognized by a U.S. holder on such sale or other disposition generally will be long-term capital gain or loss if, at the time of disposition, the shares or ADSs have been held for more than one year. Long-term capital gain recognized by a U.S. holder that is an individual is taxable at reduced rates. The deductibility of a capital loss is subject to limitations.

Gain, if any, realized by a U.S. holder on the sale or other disposition of the shares or ADSs generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, if a Mexican withholding tax is imposed on the sale or disposition of the shares, a U.S. holder that does not receive significant foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such Mexican taxes. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, the shares or ADSs.

 

 

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Information Reporting and Backup Withholding

Dividends on, and proceeds from the sale or other disposition of, the shares or ADSs paid to a U.S. holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the holder:

 

  establishes that it is an exempt recipient, if required, or

 

  provides an accurate taxpayer identification number on a properly completed Internal Revenue Service Form W-9 and certifies that no loss of exemption from backup withholding has occurred.

The amount of any backup withholding from a payment to a holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the Internal Revenue Service.

U.S. Tax Consequences for Non-U.S. holders

DISTRIBUTIONS. A holder of shares or ADSs that is, with respect to the United States, a foreign corporation or a nonresident alien individual (a “non-U.S. holder”) will generally not be subject to U.S. federal income or withholding tax on dividends received on shares or ADSs, unless such income is effectively connected with the conduct by the holder of a U.S. trade or business.

DISPOSITIONS. A non-U.S. holder of shares or ADSs will not be subject to U.S. federal income or withholding tax on gain realized on the sale of shares or ADSs, unless:

 

  gain is effectively connected with the conduct by the holder of a U.S. trade or business or

 

  in the case of gain realized by an individual holder, the holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met.

INFORMATION REPORTING AND BACKUP WITHHOLDING. Although non-U.S. holders generally are exempt from backup withholding, a non-U.S. holder may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.

 

 

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DIRECTORS

Our Board of Directors has broad authority to manage our company. Our bylaws provide for the Board of Directors to consist of between five and 21 directors and allow for the election of an equal number of alternate directors. Directors need not be shareholders. A majority of our directors and a majority of the alternate directors must be Mexican citizens and elected by Mexican shareholders.

A majority of the holders of the AA Shares and A Shares voting together elect a majority of the directors and alternate directors, provided that any holder or group of holders of at least 10.0% of the total AA Shares and A Shares is entitled to name one director and one alternate director. Two directors and two alternate directors, if any, are elected by a majority vote of the holders of L Shares. Each alternate director may attend meetings of the Board of Directors and vote in the absence of the corresponding director. Directors and alternate directors are elected or reelected at each annual general meeting of shareholders and each annual ordinary special meeting of holders of L Shares. In accordance with the Mexican Securities Market Law (Ley del Mercado de Valores), the determination as to the independence of our directors is made by our shareholders, though the CNBV may challenge this determination. Pursuant to our bylaws and the Mexican Securities Market Law, at least 25.0% of our directors must be independent. In order to have a quorum for a meeting of the Board of Directors, a majority of those present must be Mexican nationals.

At the annual shareholders’ meetings held on April [26], 2021, the current members of the Board of Directors, the Executive Committee and the Audit and Corporate Practices Committee were reelected, and the Corporate Secretary and the Corporate Pro Secretary were reappointed, with 11 directors elected by the AA Shares and A Shares voting together and two directors elected by the L Shares. 54% of the members of the Board of Directors are independent and 8% are women.

Our bylaws provide that the members of the Board of Directors are elected for a term of one year. Pursuant to Mexican law, members of the Board continue in their positions after the expiration of their terms for up to an additional 30-day period if new members are not elected. Furthermore, in certain circumstances provided under the Mexican Securities Market Law, the Board of Directors may

elect temporary directors who then may be elected or replaced at the shareholders’ meetings.

The names and positions of the members of the Board reelected or elected for the first time at the 2021 annual general shareholders’ meeting, their year of birth, and information concerning their committee membership and principal business activities outside América Móvil are set forth below:

Directors elected by holders of Series AA and Series A Shares:

 

CARLOS SLIM DOMIT

Chairman of the Board and the Executive Committee

Born:

   1967

First elected:

   2011

Term expires:

   2022

Principal occupation:

   Chairman of the Board of América Móvil

Other directorships:

   Chairman of the Board of Grupo Carso and its affiliates

Business experience:

   Business administration; Chief Executive Officer of Sanborn Hermanos

 

PATRICK SLIM DOMIT

Vice Chairman and Member of the Executive Committee

Born:

   1969

First elected:

   2004

Term expires:

   2022

Principal occupation:

   Vice Chairman of our Board of Directors

Other directorships:

   Director of Grupo Carso and its affiliates

Business experience:

   Business administration; Chief Executive Officer of Grupo Carso and Vice President of Commercial Markets of Telmex

 

DANIEL HAJJ ABOUMRAD

Director and Member of the Executive Committee

Born:

   1966

First elected:

   2000

Term expires:

   2022

Principal occupation:

   Chief Executive Officer of América Móvil

Other directorships:

   Director of Grupo Carso and Telmex

Business experience:

   Business administration; Chief Executive Officer of Compañía Hulera Euzkadi
 

 

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LUIS ALEJANDRO SOBERÓN KURI

Director

Born:

   1960

First elected:

   2000

Term expires:

   2022

Principal occupation:

   Chief Executive Officer and Chairman of the Board of Serinem México (a subsidiary of Corporación Interamericana de Entretenimiento

Other directorships:

   Director of CIE; Director of Grupo Financiero Citibanamex

Business experience:

   Business administration; Various positions at CIE

 

FRANCISCO MEDINA CHÁVEZ

Director

Born:

   1956

First elected:

   2018

Term expires:

   2022

Principal occupation:

   Chief Executive Officer and Chairman of Grupo Fame, and Chairman of Grupo Altozano

Other directorships:

   Director of Banamex Citigroup México and Grupo Chedraui

Business experience:

   Real estate; Director of Aeromexico and Mitsui Mexico

 

ERNESTO VEGA VELASCO

Director, Chairman of the Audit and Corporate Practices Committee

Born:

   1937

First elected:

   2007

Term expires:

   2022

Principal occupation:

   Retired. Member of the board of directors and audit and corporate practices, planning and finance and evaluation and compensation committees of certain companies.

Other directorships:

   Director of Kuo and its affiliates, Inmuebles Carso and its affiliates, and Industrias Peñoles

Business experience:

   Accounting and business administration; Various positions in Desc Group, including Corporate Vice-President

 

RAFAEL MOISÉS KALACH MIZRAHI

Director and Member of the Audit and Corporate Practices Committee

Born:

   1946

First elected:

   2012

Term expires:

   2022

Principal occupation:

   Chairman and Chief Executive Officer of Grupo Kaltex

Other directorships:

   Director of Grupo Carso and its affiliates

Business experience:

   Accounting and business administration; Various positions in Grupo Kaltex

ANTONIO COSÍO PANDO

Director

Born:

   1968

First elected:

   2015

Term expires:

   2022

Principal occupation:

   Vice President of Grupo Hotelero las Brisas, Compañía Industrial Tepeji del Río, and Bodegas de Santo Tomás

Other directorships:

   Director of Grupo Carso and its affiliates, Corporación Actinver, and Grupo Aeromexico

Business experience:

   Engineer; Various positions in Grupo Brisas and Compañía Industrial Tepeji del Río, S.A. de C.V.

 

ARTURO ELÍAS AYUB

Director

Born:

   1966

First elected:

   2011

Term expires:

   2022

Principal occupation:

   Head of Strategic Alliances, Communications and Institutional Relations of Telmex; Chief Executive Officer of Fundación Telmex

Other directorships:

   Director of Grupo Carso and its affiliates, Dine and its affiliates, Grupo México Transportes and Grupo Gigante

Business experience:

   Business administration; Chief Executive Officer of Sociedad Comercial Cadena, President of Pastelería Francesa (El Globo) and President of Club Universidad Nacional, A.C.

 

OSCAR VON HAUSKE SOLÍS

Director

Born:

   1957

First elected:

   2011

Term expires:

   2022

Principal occupation:

   Chief Fixed-line Operations Officer of América Móvil

Other directorships:

   Member of Telekom Austria’s Supervisory Board

Business experience:

   Accounting and business administration; Chief Executive Officer of Telmex Internacional, Chief Systems and Telecommunications Operators Officer of Telmex and member of KPN’s supervisory board

 

VANESSA HAJJ SLIM

Director

Born:

   1997

First elected:

   2018

Term expires:

   2022
 

 

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Directors elected by holders of Series L Shares:

 

  PABLO ROBERTO GONZÁLEZ GUAJARDO
  Director and Member of the Audit and Corporate Practices Committee

  Born

   1967

  First elected:

   2007

  Term expires:

   2022

  Principal occupation:

   Chief Executive Officer of Kimberly Clark de México

  Other directorships:

   Director of Kimberly Clark de México, Grupo Sanborns and Grupo Lala

  Business experience:

   Law and business administration; Various positions in the Kimberly Clark Corporation and Kimberly Clark de México

 

  DAVID IBARRA MUÑOZ
  Director

  Born:

   1930

  First elected:

   2000

  Term expires:

   2022

  Principal occupation:

   Retired

  Other directorships:

   Director of Grupo Carso and its affiliates, and Grupo Mexicano de Desarrollo

  Business experience:

   Economist; Chief Executive Officer of Nacional Financiera, S.N.C., and served as minister of Finance and Public Credit of Mexico

Our 2021 annual ordinary general shareholders’ meeting determined that the following directors are independent: Messrs. Ernesto Vega Velasco, Pablo Roberto González Guajardo, David Ibarra Muñoz, Antonio Cosío Pando, Rafael Moisés Kalach Mizrahi, Luis Alejandro Soberón Kuri and Francisco Medina Chávez.

Alejandro Cantú Jiménez, our General Counsel, serves as Corporate Secretary and Rafael Robles Miaja as Corporate Pro-Secretary.

Patrick Slim Domit and Carlos Slim Domit are brothers. Daniel Hajj Aboumrad and Arturo Elías Ayub are brothers- in-law of Patrick Slim Domit and Carlos Slim Domit. Vanessa Hajj Slim is the daughter of Daniel Hajj Aboumrad.

EXECUTIVE COMMITTEE

Our bylaws provide that the Executive Committee may generally exercise the powers of the Board of Directors, with certain exceptions. In addition, the Board of Directors is required to consult the Executive Committee before deciding on certain matters set forth in the bylaws, and the Executive Committee must provide its views following a request from the Board of Directors, the Chief Executive Officer or the

Chairman of the Board of Directors. If the Executive Committee is unable to make a recommendation within ten calendar days, or if a majority of the Board of Directors or any other corporate body duly acting within its mandate determines in good faith that action cannot be deferred until the Executive Committee makes a recommendation, the Board of Directors is authorized to act without such recommendation. The Executive Committee may not delegate its powers to special delegates or attorneys-in-fact.

The Executive Committee is elected from among the directors and alternate directors by a majority vote of the holders of common shares (AA Shares and A Shares). The majority of its members must be Mexican citizens and elected by Mexican shareholders. The current members of the Executive Committee are Messrs. Carlos Slim Domit, Patrick Slim Domit and Daniel Hajj Aboumrad. See “Major Shareholders” under Part IV of this annual report.

AUDIT AND CORPORATE PRACTICES COMMITTEE

Our Audit and Corporate Practices Committee is comprised of independent members of the Board of Directors, as determined by our shareholders pursuant to the Mexican Securities Market Law and as defined under Rule 10A-3 under the Exchange. The Audit and Corporate Practices Committee consists of Messrs. Ernesto Vega Velasco (Chairman), Rafael Moisés Kalach Mizrahi and Pablo Roberto González Guajardo. The mandate of the Audit and Corporate Practices Committee is to assist our Board of Directors in overseeing our operations and establish and monitor procedures and controls in order to ensure that the financial information we distribute is useful, appropriate and reliable and accurately reflects our financial position. In particular, the Audit and Corporate Practices Committee is required to, among other things, (i) call shareholders’ meetings and recommend items to be included on the agenda, (ii) advise the Board of Directors on internal control procedures, related party transactions that are outside the ordinary course of our business, succession plans and compensation structures of our key executives, (iii) select and monitor our auditors, (iv) discuss with our auditors the procedures for the preparation of the annual financial statements and the accounting principles to the annual and the interim financial statements and (v) obtain from our auditors a report that includes a discussion of the critical accounting policies used by us, any alternative accounting treatments for material items that have been discussed by management with our auditors and any other written communications between our auditors and management.

 

 

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The Company is required to make public disclosure of any Board action that is inconsistent with the opinion of the Audit and Corporate Practices Committee. In addition, pursuant to our bylaws, the Audit and Corporate Practices Committee is in charge of our corporate governance functions under the Mexican securities laws and regulations and is required to submit an annual report to the Board of Directors with respect to our corporate and audit practices. The Audit and Corporate Practices Committee must request the opinions of our executive officers for purposes of preparing this annual report.

SENIOR MANAGEMENT

The names, responsibilities and prior business experience of our senior officers are as follows:

 

  DANIEL HAJJ ABOUMRAD
  Chief Executive Officer

  Appointed:

   2000

  Business

  experience:

  

Director of Telmex; Chief Executive Officer of Compañía Hulera Euzkadi, S.A. de C.V.

 

  CARLOS JOSÉ GARCÍA MORENO ELIZONDO
  Chief Financial Officer

  Appointed:

   2001

  Business

  experience:

  

General Director of Public Credit at the Ministry of Finance and Public Credit; Managing Director of UBS Warburg; Associate Director of Financing at Petróleos Mexicanos (Pemex); Member of Telekom Austria’s Supervisory Board; Member of KPN Supervisory Board

 

  ALEJANDRO CANTÚ JIMÉNEZ
  General Counsel

  Appointed:

   2001

  Business

  experience:

  

Member of Telekom Austria’s Supervisory Board; Attorney at Mijares, Angoitia, Cortés y Fuentes, S.C.

 

  OSCAR VON HAUSKE SOLÍS
  Chief Fixed-line Operations Officer

  Appointed:

   2010

  Business

  experience:

  

Chief Executive Officer of Telmex Internacional; Chief Systems and Telecommunications Officer of Telmex; Head of Finance at Grupo Condumex; Director of Telmex, Telmex Internacional, Empresa Brasileira de Telecomunicaçőes S.A. (“Embratel”), and Net Serviços de Comunicaçăo S.A. (“Net Serviços”); Member of Telekom Austria’s Supervisory Board

 

  ANGEL ALIJA GUERRERO
  Chief Wireless Operations Officer

  Appointed:

   2012

  Business

  experience:

  

Various positions in América Móvil

AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Ernesto Vega Velasco qualifies as an “audit committee financial expert,” and Mr. Vega Velasco is independent under the definition of independence applicable to us under the rules of the NYSE.

COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

The aggregate compensation paid to our directors (including compensation paid to members of our Audit and Corporate Practices Committee) and senior management in 2020 was approximately Ps.6.3 million and Ps.79.6 million, respectively. None of our directors is a party to any contract with us or any of our subsidiaries that provides for benefits upon termination of employment. We do not provide pension, retirement or similar benefits to our directors in their capacity as directors. Our executive officers are eligible for retirement and severance benefits required by Mexican law on the same terms as all other employees, and we do not separately set aside, accrue or determine the amount of our costs that is attributable to executive officers.

SHARE OWNERSHIP OF DIRECTORS AND SENIOR MANAGEMENT

Carlos Slim Domit, Chairman of our Board of Directors, holds 647 million (or 3.1%) of our AA Shares and 1,567 million (or 3.4%) of our L Shares directly. Patrick Slim Domit, Vice Chairman of our Board of Directors, holds 323 million (or 1.6%) of our AA Shares and 859 million (or 1.9%) of our L Shares directly. In addition, according to beneficial ownership reports filed with the SEC, Patrick Slim Domit and Carlos Slim Domit are beneficiaries of a trust that owns shares of the Company. See “Major Shareholders” under Part IV of this annual report. Except as described above, according to the information provided to us by our directors and members of senior management, none of our directors or executive officers is the beneficial owner of more than 1.0% of any class of our capital stock.

 

 

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Our corporate governance practices are governed by our bylaws, the Mexican Securities Market Law and the regulations issued by the CNBV. We also comply with the Mexican Code of Best Corporate Practices (Código de Mejores Prácticas Corporativas). On an annual basis, we file a report with the Mexican Banking and securities Commission and the Mexican Stock Exchange regarding our compliance with the Mexican Code of Best Corporate Practices.

The table below discloses the significant differences between our corporate governance practices and those required for U.S. companies under the NYSE listing standards.

 

  NYSE STANDARDS

 

OUR CORPORATE GOVERNANCE PRACTICES

  DIRECTOR INDEPENDENCE

Majority of board of directors must be independent. §303A.01. “Controlled companies” are exempt from this requirement. A controlled company is one in which more than 50.0% of the voting power is held by an individual, group or another company, rather than the public. §303A.00. As a controlled company, we would be exempt from this requirement if we were a U.S. issuer.

 

Pursuant to the Mexican Securities Market Law, our shareholders are required to appoint a board of directors of no more than 21 members, 25% of whom must be independent. Certain persons are per se non-independent, including insiders, control persons, major suppliers and any relatives of such persons. In accordance with the Mexican Securities Market Law, our shareholders’ meeting is required to make a determination as to the independence of our directors, though such determination may be challenged by the CNBV. There is no exemption from the independence requirement for controlled companies.

 

Currently, the majority of our Board of Directors is independent.

 

  EXECUTIVE SESSIONS

Non-management directors must meet at regularly scheduled executive sessions without management. Independent directors should meet alone in an executive session at least once a year. §303A.03.

  Our non-management directors have not held executive sessions without management in the past, and they are not required to do so.
 

  NOMINATING/CORPORATE GOVERNANCE COMMITTEE

Nominating/corporate governance committee composed entirely of independent directors is required. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.04.

 

“Controlled companies” are exempt from these requirements. §303A.00. As a controlled company, we would be exempt from this requirement if we were a U.S. issuer.

 

Mexican law requires us to have one or more committees that oversee certain corporate practices, including the appointment of directors and executives. Under the Mexican Securities Market Law, committees overseeing certain corporate practices must be composed of independent directors. However, in the case of controlled companies, such as ours, only a majority of the committee members must be independent.

 

Currently, we do not have a nominating committee, and we are not required to have one. Our Audit and Corporate Practices Committee, which is composed of independent directors, oversees our corporate practices, including the compensation and appointment of directors and executives.

 

  COMPENSATION COMMITTEE

Compensation committee composed entirely of independent directors is required, which must evaluate and approve executive officer compensation. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.02(a)(ii) and §303A.05. “Controlled companies” are exempt from this requirement. §303A.00.

  We currently do not have a compensation committee, and we are not required to have one. Our Audit and Corporate Practices Committee, which is comprised solely of independent directors, evaluates and approves the compensation of management (including our CEO) and directors.
 

  AUDIT COMMITTEE

Audit committee satisfying the independence and other requirements of Rule 10A-3 under the Ex- change Act and the additional requirements under the NYSE standards is required. §§303A.06 and 303A.07.

  We have an audit and corporate practices committee of three members. Each member of the Audit and Corporate Practices Committee is independent, as independence is defined under the Mexican Securities Market Law, and also meets the independence requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended. Our Audit and Corporate Practices Committee operates primarily pursuant to (1) a written charter adopted by our Board of Directors, which assigns to the Committee responsibility over those matters required by Rule 10A-3, (2) our bylaws and (3) Mexican law. For a more detailed description of the duties of our Audit and Corporate Practices Committee, see “Management” under Part V of this annual report.

 

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  NYSE STANDARDS

 

OUR CORPORATE GOVERNANCE PRACTICES

  EQUITY COMPENSATION PLANS

Equity compensation plans and all material revisions thereto require shareholder approval, subject to limited exemptions. §§303A.08 and 312.03.

  Shareholder approval is expressly required under Mexican law for the adoption or amendment of an equity compensation plan. Such plans must provide for similar treatment of executives in comparable positions.
 

  SHAREHOLDER APPROVAL FOR ISSUANCE OF SECURITIES

Issuances of securities (1) that will result in a change of control of the issuer, (2) that are to a related party or someone closely related to a related party, (3) that have voting power equal to at least 20.0% of the outstanding common stock voting power before such issuance or (4) that will increase the number of shares of common stock by at least 20.0% of the number of outstanding shares before such issuance requires shareholder approval. §§312.03(b)-(d).

  Mexican law requires us to obtain shareholder approval for any issuance of equity securities. Under certain circumstances, however, we may sell treasury stock subject to the approval of our Board of Directors.
 

  CODE OF BUSINESS CONDUCT AND ETHICS

Corporate governance guidelines and a code of business conduct and ethics are required, with disclosure of any waiver for directors or executive officers. The code must contain compliance standards and procedures that will facilitate the effective operation of the code. §303A.10.

  We have adopted a code of ethics, which applies to all of our directors and executive officers and other personnel. For more information, see “Corporate Governance—Code of Ethics” under Part V of this annual report.
 

  CONFLICTS OF INTEREST

Determination of how to review and oversee related party transactions is left to the listed company. The audit committee or comparable body, however, could be considered the forum for such review and oversight. §314.00. Certain issuances of common stock to a related party require shareholder approval. §312.03(b).

  In accordance with Mexican law, an independent audit committee must provide an opinion to the board of directors regarding any transaction with a related party that is outside of the ordinary course of business, which must be approved by the board of directors. Pursuant to the Mexican Securities Market Law, our Board of Directors may establish certain guidelines regarding related party transactions that do not require specific board approval.
 

  SOLICITATION OF PROXIES

Solicitation of proxies and provision of proxy materials is required for all meetings of shareholders. Copies of such proxy solicitations are to be provided to NYSE. §§402.01 and 402.04.

  We are not required to solicit proxies from our shareholders. In accordance with Mexican law and our bylaws, we inform shareholders of all meetings by public notice, which states the requirements for admission to the meeting. Under the deposit agreement relating to our ADSs, holders of our ADSs receive notices of shareholders’ meetings and, where applicable, instructions on how to instruct the depositary to vote at the meeting. Under the deposit agreement relating to our ADS, we may direct the voting of any ADS as to which no voting instructions are received by the depositary, except with respect to any matter where substantial opposition exists or that materially and adversely affects the rights of holders.

 

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A) DISCLOSURE CONTROLS AND PROCEDURES

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2020. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

B) MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and other personnel, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of the inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Mancera, S.C. (“Mancera”), a member practice of Ernst & Young Global Limited, an independent registered public accounting firm, our independent auditor, issued an attestation report on our internal control over financial reporting on April 28, 2021.

C) ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of América Móvil, S.A.B. de C.V.

Opinion on Internal Control Over Financial Reporting

We have audited América Móvil, S.A.B. de C.V. and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, América Móvil, S.A.B. de C.V. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for each of three years in the period ended December 31, 2020, and the related notes, and our report dated April 28, 2021 expressed an unqualified opinion thereon.

 

 

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Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company´ s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ MANCERA, S.C.

Mexico City, Mexico

April 28, 2021

D) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting during 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

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Our Corporate Sustainability Executive Committee defines and oversees the implementation of our overall strategy to improve our performance on sustainability matters.

By incorporating sustainability in our daily decision-making, we seek to foster greater efficiencies and operate with the highest sense of social responsibility and environmental care, strengthening our market leadership while contributing to economic, social, and cultural development in the communities where we operate.

Our corporate sustainability reports are available on our website at www.americamovil.com.

 

 

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Our Code of Ethics codifies the ethical principles that govern our business and promotes, among other things, honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations of the Code of Ethics and accountability for adherence to the Code of Ethics. Our Code of Ethics applies to all of our officers, senior management, directors and employees.

The full text of our Code of Ethics may be found on our website at www.americamovil.com.

 

 

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MEXICO

Legal Framework

The legal framework for the regulation of telecommunications and broadcasting services is based on constitutional amendments passed in June 2013, the Federal Law on Telecommunications and Broadcasting (Ley Federal de Telecomunicaciones y Radiodifusión) enacted in July 2014 as amended and the Federal Law on Economic Competition (Ley Federal de Competencia Económica) enacted in May 2014 as amended.

Under the framework, the IFT may determine whether there is a “preponderant economic agent” in the telecommunications sector, based on number of customers, traffic or network capacity. In 2014, the IFT determined that an “economic interest group” consisting of us and our Mexican operating subsidiaries (Telcel, Telmex and Telnor) as well as Grupo Carso and Grupo Financiero Inbursa, constitutes the “preponderant economic agent” in the telecommunications sector, based on a finding that we serve more than half of the customers in Mexico, as measured by the IFT on a national basis.

The IFT has authority to impose on any preponderant economic agent a special regulatory regime. The special regime is referred to as “asymmetric” regulation because it applies to one sector participant and not to the others. Pursuant to the IFT’s determination that we are part of a group constituting a preponderant economic agent, we are subject to extensive asymmetric regulations in the telecom sector, which impacts our Mexican fixed-line and wireless businesses. See “—Asymmetric Regulation of the Preponderant Economic Agent” and “—Functional Separation of Telmex and Telnor Wholesale Services” under this Part VI. This legal framework has had a substantial impact on our business and operations in Mexico.

Principal Regulatory Authorities

The IFT is an autonomous authority that regulates telecommunications and broadcasting. It is headed by seven commissioners appointed by the President, and ratified by the Senate, from among candidates nominated by an evaluation committee. The IFT has authority over the application of legislation specific to the telecommunications and broadcasting sectors, and also over competition legislation as it applies to those sectors. The Mexican Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) retains regulatory authority over a few specific public policy matters.

The Mexican government has certain powers in its relations with concessionaires, including the right to take over the management of an operator’s networks, facilities and personnel in cases of imminent danger to national security, public order or the national economy, natural disasters and public unrest, as well as to ensure continuity of public services.

Telecommunications operators are also subject to regulation by the Federal Consumer Bureau (Procuraduría Federal del Consumidor) under the Federal Consumer Protection Law (Ley Federal de Protección al Consumidor), which regulates publicity, quality of services and information required to be provided to consumers.

Asymmetric Regulation of the Preponderant Economic Agent

We are currently subject to extensive specific asymmetric measures based on the IFT’s determination that we, our Mexican operating subsidiaries (Telcel, Telmex and Telnor) and certain affiliates, constitute the preponderant economic agent in the telecommunications sector, and along with Telesites, Red Nacional Ultima Milla S.A.P.I. de C.V. and Red Ultima Milla Del Noroeste S.A.P.I. de C.V. are compelled to comply with such asymmetric regulation. Below is a summary of what we believe are the most important measures applicable to us.

 

  Interconnection Rates. The Federal Law on Telecommunications and Broadcasting provides that we are not permitted to charge other carriers for the termination services we provide in our networks. These provisions were declared unconstitutional by the Mexican Supreme Court (Suprema Corte de Justicia de la Nación) in August 2017 with respect to wireless services and in April 2018 with respect to fixed services. As a result, the IFT ruled that, as of January 1, 2018, in the case of Telcel, and as of January 1, 2019, in the case of Telmex, we are able to charge other carriers for terminating calls to our networks at asymmetric rates established by the IFT. We continue to pay such carriers for their interconnection services in accordance with the fixed and mobile rates set by the IFT.

 

  Sharing Of Wireless Infrastructure and Services. We must provide other carriers access to (i) passive infrastructure, including towers, sites, ducts and rights of way, (ii) elements of our network that allow other carriers and mobile virtual network operators (“MVNOs”) to use our network or resell those services we provide to our customers and (iii) domestic roaming services; in each case, pursuant to IFT pre-approved reference terms (ofertas públicas de referencia). If we cannot reach an agreement with other carriers or MVNOs, our rates may be determined by the IFT using a long-run average incremental costs methodology or, in the case of MVNOs, a “retail-minus” methodology.

For mobile services, the IFT has the right to verify, through a replicability test, that carriers using our regulated wholesale services can match our end user rates.

 

 

Sharing of Fixed Infrastructure and Services. We must provide other carriers access to (i) passive infrastructure, including towers, sites, telephone poles, ducts, manholes and rights of way, (ii) elements of our network that allow

 

 

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other carriers to use our network or resell those services we provide to our customers and (iii) our dedicated links (either local or long distance). Rates for this access are determined by the IFT using a long-run average incremental cost methodology.

For fixed services, the IFT has the right to verify, through a replicability test, that carriers using our regulated wholesale services can match our end user rates.

 

  Local Loop Unbundling. We must offer other carriers access to elements of our local loop network separately on terms and conditions (including rates) pre-approved by the IFT. The IFT has also ordered the legal and functional separation of the provision of wholesale regulated fixed services related to local loop unbundling, local dedicated links and shared access/use of passive infrastructure related with the local loop network. See “Functional Separation of Telmex and Telnor Wholesale Services” under this Part VI.

 

  Certain Obligations Relating to Retail Services. Rates for the provision of telecommunications services to our customers are subject to the IFT’s prior authorization.

We are also subject to certain obligations and restrictions relating to the sale of our services and products; one such obligation includes unlocking mobile devices for our customers and regulations on the sale end financing at mobile devices.

 

  Content. We are subject to specific limitations on acquisitions of exclusive transmission rights to “relevant” content (contenidos audiovisuales relevantes), as determined from time to time by the IFT, including the Mexican national team soccer matches, the opening and closing ceremonies and certain matches of the FIFA World Cup, the semifinal and final matches of the Liga MX soccer tournament and the Super Bowl.

 

  Reference Terms. Every year we must submit, for IFT’s approval, a proposal of the reference terms for all wholesale services that are subject to asymmetric regulation for the following year. Once approved, we must publish and offer the regulated wholesale services, in the terms approved by IFT.

IFT’s Biannual Review of Asymmetric Regulation

The IFT reviewed the measures in 2020 and determined, among other things, to modify and add new asymmetrical regulations for mobile and fixed services.

The measures are transitory and may be amended by the IFT, or terminated if the IFT determines effective competition conditions exist in the telecommunications sector or if we cease to be considered a preponderant economic agent. The IFT reviews the impact of the asymmetrical measures every

two years and may modify or eliminate measures or set forth new measures. In March 2017, the IFT issued a resolution that modified and added asymmetrical regulations for mobile and fixed services, including the legal and functional separation of Telmex and Telnor wholesale services, among other measures.

We have challenged the determination that we are a preponderant economic agent and the asymmetric regulations in court. These challenges were denied. We have also challenged further resolutions by IFT concerning the review of certain asymmetrical regulations. However, IFT’s determinations are not suspended while legal challenges against them are resolved.

Functional Separation of Telmex and Telnor Wholesale Services

In March 2018, we received notice of an IFT resolution directed to the Company setting forth the terms under which we are required to separate the provision of wholesale regulated fixed services by Telmex and Telnor (the “Separation Plan”). As of the date of this annual report, we have complied with all milestones of the Separation Plan including the following:

 

  New Companies. Telmex and Telnor established new subsidiaries, Red Nacional Ultima Mila and Red Ultima Mila Del Noroeste (the “New Companies”), to provide local wholesale services related to the elements of the access network, including local access dedicated links, as well as those services related to passive infrastructure associated with the access network, such as ducts, poles and rights of way. The main features of the New Companies are as follows:

 

    Price of Services. The prices and terms of the services provided by the New Companies are subject to IFT regulation, which could affect the viability and financial requirements of the New Companies.

 

    Corporate Governance. The New Companies have their own corporate governance, including: (i) a board of directors with at least seven members, of which a majority (including the Chairman) is independent; (ii) a Chief Executive Officer and senior officers appointed by the boards of directors, different and independent from those of our Mexican concessionaire subsidiaries; (iii) an independent external auditor; (iv) an Audit Committee chaired by an independent member of the board of directors; and (v) a Regulatory Compliance Committee entirely composed of independent members. The bylaws of the New Companies were approved by the IFT. Independence for these purposes is used as defined under Mexican Securities Market Law.
 

 

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    Personnel. Subject to the discussion under “Services Through Union Employees” below, the New Companies have personnel necessary to provide wholesale services required by the Separation Plan.

 

    Assets. The New Companies have the resources necessary to comply with their obligations and provide services.

 

    Systems and Procedures. The New Companies have their own procedures, operating and management systems that are independent from those of Telmex and Telnor.

 

    Branding. The New Companies have their own branding distinct from América Móvil’s concessionaire subsidiaries. The brands must be dissociated from those of Telmex and Telnor by March 2022.

 

    Principal Offices. The New Companies have their own principal offices distinct from those of América Móvil’s concessionaire subsidiaries.

 

    Services Through Union Employees. Certain employees that are members of a labor union provide services to the New Companies. These employees are functionally independent from Telmex and Telnor, and are under the operational control of the New Companies, however, their labor contracts remain with Telmex and Telnor.

 

  Wholesale Unit. Telmex and Telnor established a business unit to provide the remaining wholesale services to other concessionaires, including interconnection, co-location for interconnection, inter-city and international long-distance dedicated links, resale of telephone lines, broadband and bundles, as well as certain passive infrastructure services, including shared use of towers.

The implementation of the Separation Plan has been complex, and some features (including those related with the recent IFT revision of Asymmetrical Regulation resolutions) remain uncertain and may require further development. As a result, we are not yet able to identify all the possible consequences, but some of the consequences could have a material adverse impact on us.

We have challenged the resolution in the Mexican courts. However, legal challenges will not suspend the implementation of the Separation Plan and final determinations are pending.

Substantial Market Power Investigations

In 2007, the Federal Antitrust Commission (Comisión Federal de Competencia Económica, or “Cofeco”) initiated two substantial market power investigations against Telcel and determined that Telcel had substantial market power in the mobile termination services market and in the nationwide

wireless voice and data services market. Telcel filed challenges against both decisions, and a final resolution of these challenges is still pending. If upheld, these decisions would allow the IFT to impose additional requirements as to rates, quality of service and information, among other matters. The Preponderance regime has regulated all of these matters.

In 2007, Cofeco initiated various investigations to evaluate whether Telmex and its subsidiary Telnor have substantial power in the markets for termination, origination, transit and wholesale dedicated-link circuits. Cofeco issued final resolutions concluding that Telmex and Telnor have substantial power in all four markets, which were challenged by Telmex and Telnor. The challenges related to each one of these markets have been denied, effectively upholding Cofeco’s findings. Consequently, the IFT may impose specific tariff requirements or other special regulations with respect to the matters for which the challenges were denied, such as additional requirements regarding disclosure of information or quality of service. The Preponderance regime has regulated all of these matters.

In the case of the market for wholesale dedicated-link leasing, the IFT’s predecessor, Cofetel, published an agreement in the Official Gazette, establishing requirements regarding tariffs, quality of service and information for dedicated-link circuits. Telmex and Telnor have filed petitions for relief against such resolutions, which are still pending. The regulation that could arise from these investigations has been already implemented by the IFT through the special regulatory regime for preponderant agents. However, given the uncertainty of the IFT’s actions, we are not able to identify all possible consequences and as a result an adverse resolution could have an impact on the Company’s future revenues in this market.

Concessions

Under the current legal framework, a carrier of public telecommunications networks, such as Telcel or Telmex, must operate under a concession. The IFT is an autonomous federal agency that grants new or extends existing concessions, which may only be granted to a Mexican citizen or corporation that has agreed to the concession terms and may not be transferred or assigned without the approval of the IFT. There are three types of concessions:

 

  NETWORK CONCESSIONS. Telcel, Telmex and its subsidiary Telnor hold network concessions, granted under the previous regulatory framework, to provide specified types of services. Their ability to migrate to the new regime of unified concessions and, consequently, to provide any and all telecommunications and broadcasting services, is subject to conditions, as described under “Migration of Concessions and Additional Services” below.
 

 

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  SPECTRUM CONCESSIONS. Telcel holds multiple concessions, granted under both the previous and current regulatory frameworks, to provide wireless services that utilize frequencies of radio-electric spectrum. These concessions have terms of 15 to 20 years and may be extended for an additional term of equal length.

 

  UNIFIED CONCESSION. Each of the New Companies holds a unified concession granted to provide only wholesale telecommunications services. These concessions were issued in March 2020 and have a term of 30 years and may be extended for an additional term of equal length.

Termination of Concessions

Mexican legislation provides that under certain circumstances, some assets of a concessionaire may be acquired by the federal government upon termination of these concessions.

There is no specific guidance or precedent for applying these provisions, so the scope of assets covered, the compensation to the concessionaire and the procedures to be followed would depend on the type of concession, the type of assets and the interpretation of applicable legislation by the competent authorities at the time.

Migration of Concessions and Additional Services

The new legislative framework established the unified concession (concesión única), which allows the holder to provide all types of telecommunications and broadcasting services, and a regime under which an existing concession can be migrated to the new unified concession at the end of its term or upon request by the concession holder. A unified concession has a term of up to 30 years, extendable for up to an equal term. Also, under this new framework a current concession may be modified to add services not previously contemplated therein.

However, as a result of our preponderant economic agent status, Telcel, Telmex and Telnor are subject to additional conditions for the migration to a unified concession or the addition of a service, such as Pay TV, to a current concession, including in certain cases (i) payment of any new concession fee to be determined by the IFT, (ii) compliance with current requirements under the network concession, the 2013 constitutional amendments, the 2014 legislation and any additional measures imposed by the IFT on the preponderant economic agent and (iii) such other requirements, terms and conditions as the IFT may establish in the concession itself. We expect the process of migration or additional services to be lengthy and complex. Consequently, Telcel, Telmex and Telnor may not be able to provide certain additional services, such as Pay TV and broadcasting, in the near term.

Telcel’s Concessions

Telcel operates under several different network and spectrum concessions covering particular frequencies and regions, holding an average of 280.96 MHz of capacity in Mexico’s nine regions in the 850 MHz, 1900 MHz,1.7/2.1 GHz, 2.5 GHz and 3.5 GHz bands. The following table summarizes Telcel’s concessions.

 

FREQUENCY

  COVERAGE
AREA
  INITIAL
DATE
  TERMINATION
DATE

Band A (1900 MHz)

  Nationwide   Sep. 1999   Oct. 2039

Band D (1900 MHz)

  Nationwide   Oct. 1998   Oct. 2038

Band B (850 MHz)

  Regions 1, 2, 3   Aug. 2011   Aug. 2026

Band B (850 MHz)

  Regions 4, 5   Aug. 2010   Aug. 2025

Band B (850 MHz)

  Regions 6, 7, 8   Oct. 2011   Oct. 2026

Band B (850 MHz)

  Region 9   Oct. 2015   Oct. 2030

Band F (1900 MHz)

  Nationwide   Apr. 2005   Apr. 2025(1)

Bands A and B

(1.7/2.1 GHz)

  Nationwide   Oct. 2010   Oct. 2030

Bands H, I and J

(1.7/2.1 GHz)

  Nationwide   May 2016   Oct. 2030

Band 7 (2.5 GHz)

 

88% of the

population

  Jul. 2017  

Sep. 2020(1)

– Nov. 2028

– Oct. 2040 –

May 2041

Band 3.5 GHz(2)

  Nationwide   Oct. 2020(3)  

Oct. 2038 and

2040

  (1)

A request for extension has already been filed with the IFT.

  (2)

On December 18, 2020, Telcel filed a formal request with the IFT to include mobile service in these concessions.

  (3)

The term of this concession is currently in force and was extended by IFT in favor of Telmex until 2040 and afterwards it was assigned by Telmex to Telcel as of March 11, 2020. Concessions acquired from Axtel were extended by the IFT until 2038.

On August 21, 2020, Claro TV, S.A. de C.V. filed before the IFT a notice of merger with Claro Sat, S.A. de C.V. Likewise, on December 18, 2020, Duono, S.A de C.V., filed before the IFT a notice of merger with Integración de Servicios Empresariales y Corporativos, S.A. de C.V. (ISEC). As result of both the Claro TV, S.A. de C.V. and Duono, S.A de C.V. mergers, these corporations will be the license holders.

Concession Fees

All of Telcel’s concessions granted or renewed on or after January 1, 2003 are required to pay annual fees for the use and exploitation of radio spectrum bands. The amounts payable are set forth by the annual Federal Fees Law (Ley Federal de Derechos) and vary depending on the relevant region and radio spectrum band.

Telmex’s Concessions

Telmex’s concession was granted in 1976 and is currently set to expire in 2026. In December 2016, the IFT granted Telmex a 30-year extension of this concession, which will become effective in 2026 and will be valid until 2056. The new terms of this concession will be issued in early 2023.

 

 

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Telmex’s subsidiary, Telnor, holds a separate concession, which covers one state and two municipalities in northwestern Mexico and will expire in 2026. The IFT also granted Telnor a 30-year extension of its concession, which will be effective in 2026 and will be valid until 2056. The material terms of Telnor’s concession are similar to those of Telmex’s concession.

In addition, Telmex currently holds concessions for the use of frequencies to provide point-to-point and point-to-multipoint transmission in 10.5, 15 and 23 GHz bands.

In 2018, Telmex was notified of a resolution issued by the IFT, through which the IFT imposed a fine of Ps.2.5 billion derived from an alleged breach in 2013 and 2014 of certain minimum quality of service goals for dedicated link services. Telmex has exercised all legal remedies challenging such resolution and a final resolution is pending.

Rates for Wireless Service

Wireless services concessionaires are generally free to establish the prices they charge customers for telecommunications services. Wireless rates are not subject to a price cap or any other form of price regulation. The interconnection rates concessionaires charge other operators are also generally established by agreement between the parties and, if the parties cannot agree, may be imposed by the IFT, subject to certain guidelines, cost models and criteria. The IFT publishes at the end of the year the rates they would impose in the event of a dispute, eliminating all incentives for a negotiation among the parties. The establishment of interconnection rates has resulted, and may in the future result, in disputes between carriers and with the IFT.

As a result of the preponderance determination, Telcel’s retail prices are subject to pre-approval by the IFT before they can take effect.

The IFT is also authorized to impose specific rate requirements on any carrier that is determined by the IFT to have substantial market power under the Federal Antitrust Law (Ley Federal de Competencia Económica) and the 2014 legislation. For more information on litigation related to the Federal Antitrust Law and the 2014 legislation, see “—Substantial Market Power Investigations” under this Part VI.

Rates for Fixed Service

Telmex’s concessions subject its rates for basic retail telephone services in any period, including installation, monthly rent, measured local-service and long-distance service, to a ceiling on the price of a “basket” of such services, weighted to reflect the volume of each service provided by Telmex during the preceding period. Telmex is required to file a survey with the IFT every four years with its projections of

units of operation for basic services, costs and prices. Telmex is free to determine the structure of its own rates, with the exception of domestic long-distance rates, which were eliminated in 2015 under the 2014 legislation, and of the residential fixed-line rates, which have a cap based on the long-run average incremental cost. As a result of the preponderance determination, Telmex’s retail prices are subject to pre-approval by the IFT before they can take effect.

The price ceiling varies directly with the Mexican National Consumer Price Index (Indice Nacional de Precios al Consumidor), allowing Telmex to raise nominal rates to keep pace with inflation (minus a productivity factor set for the telecommunications industry), subject to consultation with the IFT. Telmex has not raised its nominal rates for many years. Under Telmex’s concession, the price ceiling is also adjusted downward periodically to pass on the benefits of Telmex’s increased productivity to its customers. The IFT sets a periodic adjustment for every four-year period to permit Telmex to maintain an internal rate of return equal to its weighted average cost of capital.

In addition, basic retail telephone services, as well as broadband services and “calling party pays” charges, are subject to a separate price ceiling structure based on productivity indicators. In each case, Telmex is required to submit a survey on productivity indicators to the IFT every two years, including a total factor productivity. The IFT establishes the productivity factor that will apply over the next two years, and, based on this, the IFT will approve the customer prices before they can take effect.

Prices for Telmex’s wholesale services are established by the IFT based on the long-run average incremental cost model methodology.

BRAZIL

Legal Framework and Principal Regulatory Authorities

The Brazilian Telecommunications Law (Lei Geral das Telecomunicações Brasileiras) provides the framework for telecommunications regulation. The primary telecommunications regulator in Brazil is the Telecommunications Agency (Agência Nacional de Telecomunicações, or “Anatel”), which has the authority to grant concessions and licenses in connection with telecommunications services and the use of orbits, except broadcasting, and to adopt regulations that are legally binding on telecommunications services providers.

The Brazilian Congress has approved an updated legislation to modernize the current concession-based model to an authorization-based model. The updated law brings the possibility of allowing fixed-line concessionaires, such as

 

 

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Claro Brasil, to provide services under an authorization rather than a concession, as long as certain investment-related obligations are met. Under the new legislation, it is possible to extend the current concessions, as well as radio frequency licenses and orbital positions, for more than one period. The legislation also permits the possibility of a secondary market for trading cellphone frequencies. The legislation will be implemented by regulations promulgated by Anatel. We are currently evaluating the potential impact of this legislation on our operations.

Licenses

In 2014, we simplified our corporate structure, and our subsidiaries Embratel, Embratel Participações S.A. (“Embrapar”) and Net Serviços were merged into Claro Brasil, with all licenses previously granted to our subsidiaries transferred to Claro Brasil.

In 2018, subsidiary Star One merged into Claro Brasil. As a result, all Brazilian satellite operation rights previously granted to Star One were transferred under the same terms and conditions to Claro Brasil. The satellite operation rights (AMC-12) covering regions outside of Brazil were relinquished by Star One before the merger. In 2020, the satellite operation rights were transferred to Embratel Tysat Telecomunicações S.A. (“Claro TV”), after approval by Anatel.

In December 18, 2019, AMX announced the acquisition of 100% of the shares of Nextel Brazil and Sunbird Telecomunicações Ltda. (“Sundbird”), as well as its correspondent subsidiaries in Brazil. Nextel Brazil had authorizations to provide personal mobile services, specialized mobile services, multimedia communication services, paid fixed telephony services (national and international long-distance) and radiofrequency services in Brazil that were granted by Anatel. Sunbird had authorizations to provide specialized mobile services and radiofrequency services. Derived from the acquisition of Nextel Brazil and Sunbird by AMX, Anatel provided AMX with: (i) a term of 18 months to consolidate and cancel the overlapped authorizations granted in favor of Nextel Brazil and Sunbird; and (ii) a term of 2 months to adjust the radiofrequency thresholds. In 2020, the authorizations and radiofrequencies granted in favor of Nextel Brazil and Sunbird for specialized mobile services were waived. Also in 2020, Nextel’s PS licenses were transferred to Claro.

In 2019, the subsidiary Primesys was merged into Claro Brasil. As a result, service authorizations granted to Primesys were transferred under the same terms and conditions to Claro Brasil.

Our Brazilian subsidiaries hold licenses for the telecommunications services listed below and expect to continue acquiring spectrum if Anatel conducts additional

public auctions, although Claro Brazil, like all of its peer competitors, is subject to a cap on the additional spectrum it may acquire per frequency band.

 

SUBSIDIARY

  LICENSE   

TERMINATION

DATE

Claro Brasil

  Fixed Local Voice Services    Indefinite

 

 

Domestic and International

Long-Distance

   2025

 

 

  Voice Services    Indefinite

 

  Personal Communication Services    Indefinite

 

  Data Services    Indefinite

 

  Cable TV Services    Indefinite

 

  Mobile Maritime Services    Indefinite

 

  Global Mobile Satellite Services    Indefinite

Claro TV

  DTH TV Services    Indefinite

 

  Data Services    Indefinite

Americel S.A.

  Data Services    Indefinite

Telmex do Brasil

  Data Services    Indefinite

Nextel Brazil

  Personal Communication Services    Indefinite

 

 

Domestic and International

Long-Distance

   Indefinite

 

 

  Data Services    Indefinite

In addition, Claro TV has various orbital position authorizations for our satellite operations, which are set to expire between 2022 and 2033. Requests for extensions for 15 more years have been requested from Anatel. Claro TV also has radio frequency licenses to provide PCS, which are set to expire between 2022 and 2032. These grants were transferred from Claro Brasil to Claro TV in 2020, subsequent to Anatel’s approval.

Nextel Brazil has radio frequency licenses to provide PCS, which expire between 2026 and 2031.

Concessions

Claro Brasil holds two fixed-line concessions to provide domestic and international long-distance telephone services. The remaining telecommunications services provided by Claro Brasil are governed by a system of licenses instead of concession arrangements.

Concession Fees

Claro Brasil is required to pay a biennial fee equal to 2.0% of net revenues from wireless services, except for the final year of the 15 year term of its PCS authorizations, in which the fee equals 1.0% of net revenues from wireless services.

Claro Brasil is also required to pay a biennial fee during the term of its domestic and international long-distance concessions equal to 2.0% of the revenues from long- distance telephone services, net of taxes and social contributions, for the year preceding the payment.

 

 

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Termination of Concessions

Our domestic and international long-distance fixed-line concessions provide that certain of our assets deemed “indispensable” for the provision of these services will revert to the Brazilian state upon termination of these concessions. Compensation for those assets would be their depreciated cost. See Note 17 to our audited consolidated financial statements included in this annual report.

Regulation of Rates

Anatel regulates rates (tariffs and prices) for all telecommunications services, except for fixed-line broadband services, Pay TV and satellite capacity rates, which are not regulated. In general, PCS license holders and fixed local voice services license-holders are authorized to increase basic plan rates annually. Domestic long-distance concession-holders may adjust rates annually only for inflation, provided that they give Anatel and the public advanced notice of such adjustments. Claro Brasil may set international long-distance and mobile rates freely, provided that it gives Anatel and the public advance notice.

Regulation of Wholesale Market Competition

In November 2012, Anatel approved the General Competition Plan (Plano Geral de Metas da Competição, or “PGMC”), a comprehensive regulatory framework aimed at increasing competition in the telecommunications sector. The PGMC imposes asymmetric measures upon economic groups determined by Anatel to have significant market power in any of the five wholesale markets in the telecommunications sector, on the basis of several criteria, including having over 20.0% of market share in the applicable market.

In 2012, Claro Brasil and three of its primary competitors were determined to have significant market power in the mobile wireless termination and national roaming markets. As a result, Claro Brasil was required to reduce mobile termination rates to 75.0% of the 2013 rates by February 2014, and to 50.0% of the 2013 rates by February 2015. In July 2014, Anatel established termination rates for mobile services applicable to operators with significant market power through 2019, based on a cost model, and in December 2018, Anatel established termination rates for mobile services applicable to operators with significant market power from 2020 to 2023. These termination rates were revised by Anatel in February 2020. Claro Brasil is also required to publish its reference roaming prices for voice, data and SMS on an annual basis, among other measures. These prices must be related to the Anatel reference values and need to be approved by Anatel before they can take effect. The approval of new prices by Anatel took place in January 2021.

In 2018, Anatel approved Claro Brasil’s most recent wholesale reference offers with respect to national roaming, telecommunications duct infrastructure, long-distance leased lines, high capacity transport above 34 Mbps, wireless networks interconnection, fixed network interconnection, internet network interconnection and internet links, which are reviewed and approved by Anatel on an annual basis. Anatel also reviews its determination of which operators have significant market power on a quadrennial basis. Anatel began its first review of all telecom operators in 2014 and published the most recent list of operators with significant market power for each of the relevant markets in 2018. In addition to the review, in 2018 Anatel changed some of the asymmetric measures applicable under the PGMC and added two new wholesale markets covering high capacity transport and fixed network interconnection. Anatel has determined that Claro Brasil has significant market power in eight wholesale markets.

Network Usage Fees and Fixed-Line Interconnection Rates

In July 2014, Anatel approved a resolution establishing the reference terms for fees charged by operators in connection with the use of their mobile network and leased lines and set a price cap on fees charged for fixed network usage by operators deemed to have significant market power. Such fees, based on costs of allocation services (coubicación), have been applicable since February 2016.

In December 2018, Anatel published reference values for fees network that are applicable from 2020 to 2023.

Fixed-line operators determined by Anatel to have significant market power in the local fixed-line market may freely negotiate interconnection rates, subject to a price cap established by Anatel.

Other Obligations

Under applicable law and our concessions, Claro Brasil has an obligation to (i) comply with certain coverage obligations to ensure universal access to its fixed-line voice services, (ii) contribute to the funding of the country’s transition from analogue to digital TV (due to the acquisition of the 700 MHz frequency), (iii) meet quality-of-service targets and (iv) comply with applicable telecommunications services consumer rights.

CADE Anti-Competition Proceeding

On March 9 2021, the General Superintendence at the Administrative Council for Economic Defense (“CADE”) issued a non-binding opinion recommending fines against Claro Brasil, Oi Móvel S.A. (“Oi”) and Telefônica Brasil S.A. (“Telefônica”, together Claro Brasil and Oi, the “Defendants”). The potential fines relate to a complaint filed by British

 

 

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Telecom do Brasil (“BT”) against the Defendants alleging, among other things, that, in connection with a public bid, the Defendants (i) colluded to prevent competition between the leading players in the broadband internet services market in Brazil, which caused anti-competitive effects in the telecommunications sector and (ii) made it difficult for BT to participate in the bid through price discrimination tactics and by refusing to supply communication circuits (specifically, MPLS links) that were required for BT to participate in the bid. The case will be reviewed by CADE’s tribunal for a final ruling and CADE’s final decision may be challenged in judicial courts. We intend to challenge the final decision if it is not in our favor. The amount of monetary penalty recommended by the General Superintendence at CADE could be substantial, but we cannot reasonably estimate the range of possible loss related to the proceeding.

COLOMBIA

Legal Framework and Principal Regulatory Authorities

The Information and Communications Ministry (Ministerio de Tecnologías de la Información y las Comunicaciones, or “ICT Ministry”) and the Communications Regulatory Commission

(Comisión de Regulación de Comunicaciones, or “CRC”) are responsible for overseeing and regulating the telecommunications sector. The main audiovisual regulatory authorities in Colombia with respect to Pay TV services are the CRC, the ICT Ministry and the Industry and Commerce Superintendence (Superintendencia de Industria y Comercio, or “SIC”). Claro is also subject to supervision by other government entities responsible for enforcing other regulations, such as antitrust rules or those protecting consumer rights.

Concessions

Comunicación Celular S.A. (“Comcel”) is qualified to provide fixed and mobile services and was included in the registry of networks and services administered by the ICT Ministry. Such general authorization superseded all of Comcel’s former concession contracts, and, consequently, such former concessions were terminated.

As a result of the termination of Comcel’s former concessions, the ICT Ministry and Comcel began discussions with respect to the liquidation of the agreements governing those concessions. In light of the decision of the Colombian Constitutional Court (Corte Constitucional de Colombia) holding that certain laws limiting the reversion of assets of telecommunications providers did not apply to concessions granted prior to 1998 and, consequently, that reversion of assets under those earlier concessions would be governed by their contractual terms, the ICT Ministry obtained a domestic award ordering Comcel to revert assets under its earlier

concessions to the Colombian government. Comcel challenged such award and the Company filed an international arbitration claim against Colombia arising from Colombia’s measures.

Licenses and Permits

Comcel holds licenses to provide mobile services in the spectrum frequency bands shown in the table below.

 

FREQUENCY

   BANDWIDTH    TERMINATION DATE

850 MHz

   25 MHz    Mar. 2024

1900 MHz

   10 MHz    Dec. 2039

 

   5 MHz    Sept. 2021

 

   15 MHz    Apr. 2024

2.5 GHz

   30 MHz    Aug. 2023

 

   10 MHz    Feb. 2021(1)

 

   10 MHz    Mar. 2040

 

   10 MHz    Mar. 2040

 

   10 MHz    Mar. 2040

700 MHz

   20 MHz    May 2040
  (1)

Refers to a temporary license, which we renew on an annual basis.

In 2013, Telmex Colombia S.A. obtained permission to provide Pay TV services under any available technology, pursuant to the ICT Ministry’s unified licensing system. On May 31, 2019, Telmex Colombia, S.A. merged into Comcel. The permission to provide Pay TV services granted in favor of Telmex Colombia, S.A. was simultaneously transferred to Comcel without modifications in connection with the merger. On July 30, 2019, Comcel’s permission to provide Pay TV was incorporated under Comcel’s general power to provide Pay TV granted to it under Law 1978 of 2019.

In 2017, the ICT Ministry issued a decree approving a higher cap on spectrum acquisitions by operators in low and high frequency bands. This new cap allows Comcel to participate in future spectrum auctions. The ICT Ministry has released its plan to conduct spectrum auctions in the 700 MHz, 1900 MHz and 2.5 GHz bands. The final resolution containing the auctions’ terms and conditions was published by the ICT Ministry during the fourth quarter of 2019. The auction took place on December 20, 2019. A subsidiary of Novator Partners LLP, a London-based private equity firm (the “Novator Subsidiary”), participated in the auction as a new competitor in the market. The Novator Subsidiary was granted a 20MHz license to operate in the 700MHz frequency band and three blocks of 10MHz for the 2,500MHz frequency band. Colombia Telecomunicaciones (Movistar) and Colombia Movil (Tigo) also participated in the auction. Tigo was granted a 40MHz license to operate in the 700MHz frequency band. Colombia Telecomunicaciones was not granted any licenses in the auction.

 

 

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Subsequently, the Novator Subsidiary resigned and refused to exercise its rights under the license to operate one block of 10MHz for the 2,500MHz frequency band. As a consequence, on February 11, 2020, the ICT Ministry initiated an administr