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Fitch: America Movil & Telmex's Ratings Unaffected by Verizon Announcement.

CHICAGO -- Fitch Ratings does not anticipate any material change in America Movil, S.A. de C.V.'s (America Movil) and Telefonos de Mexico, S.A. de C.V.'s (Telmex) ratings following the announcement to acquire from Verizon Communications Inc. (Verizon) certain international assets. America Movil's and Telmex's ratings are listed below.

America Movil

-- Foreign currency rating 'BBB+', Outlook Stable;

-- Local currency rating 'BBB+', Outlook Positive.


-- Foreign currency rating 'BBB+', Outlook Stable;

-- Local currency rating 'A-', Outlook Stable.

America Movil is expected to finance the acquisitions with cash, without incurring in additional debt (other than assuming the US$752 million of existing debt at Telecomunicaciones de Puerto Rico (TELPRI)). At year-end 2005, America Movil had approximately US$1.2 billion in cash, and free cash flow is expected to approximate US$2.6 billion in 2006 before acquisitions, dividends and share buybacks. Fitch will monitor the progress of the closing of the transaction for timing and any material changes to the terms of the transactions. The transactions will add geographic and currency diversification to America Movil. The company announced that it has entered into agreements with Verizon Communications Inc. to acquire 100% of Verizon Dominicana C. por A. for US$2.062 billion, a 52% interest in TELPRI, rated 'BBB+' by Fitch, for US$939 million and jointly with Telmex a 28.51% interest in Compania Anonima Nacional Telefonos de Venezuela (CANTV) for US$676.6 million. Verizon Dominicana transaction is expected to close within a month while TELPRI and CANTV transactions are expected to close up to the first quarter of 2007 and year-end 2006, respectively. Each transaction has been structured as a separate transaction and is not contingent on the close of the others. Regulatory approval will be needed in each jurisdiction. Other shareholders in TELPRI have the right to receive the same price per share as Verizon, and following the close of the sale of CANTV, the joint venture will be required to offer to purchase the remaining shares of CANTV at the same price paid to Verizon.

Fitch maintains America Movil's foreign currency rating of 'BBB+' with a Stable Rating Outlook, and a local currency rating of 'BBB+' with a Positive Rating Outlook. Fitch rates approximately US$3.1 billion in debt. The Positive Outlook for the local currency rating, reflects the expectation that total debt to EBITDA should approximate to 1 times (x) time by year-end 2006 and EBITDA to interest expense should remain above 12x. Fitch views that the achievement and support of these protection measures will place the local currency rating more in line with the 'A-' rating category.

The ratings of America Movil are supported by the company's strong market position in the Mexican wireless segment, its diverse and growing portfolio of wireless assets throughout Latin America, and its sound financial and liquidity position. The ratings also incorporate the expectation of additional share repurchases as well as increasing dividend payments. America Movil's credit ratings are underpinned by Telcel, its Mexican wireless unit. Telcel business fundamentals are supported by strong demand growth and stable EBITDA margins, which result in strong cash flow generation. Telcel accounted for 50% of consolidated revenues and 74% of EBITDA for year-end 2005. Telcel is the largest wireless provider in Mexico, with an estimated market share of 77%. Demand for wireless services in Mexico is still growing at a fast pace; Telcel grew its subscriber base by 24% in 2005 to 35.9 million wireless lines.

Telmex participation in the jointly acquisition of 28.51% of CANTV does not have a material effect to its credit quality. Fitch maintains a foreign currency rating of 'BBB+' and a local currency rating of 'A-', both with a Stable Outlook. Telmex's ratings are supported by the company's position as the leading provider of fixed line telecommunications services in Mexico, high profitability margins and a strong financial profile. The company's Mexican operations are expected to continue contributing most of its revenues and EBITDA on a consolidated basis. Telmex holds an estimated 95% market share in the Mexican local service segment and leading market positions in long-distance and data and Internet services. Telmex's incumbent market position, economies of scale and extensive operational experience should enable the company to withstand potential competitive risks. The company's integrated telecommunications business produces a significant level of cash flow from its local service business, which reduces cash flow volatility and business risk. Regulatory and legal risks are moderate and are incorporated into the ratings.

America Movil is the largest provider of wireless services in Mexico and Latin America. Prior to the acquisitions, America Movil is composed of subsidiaries in 14 countries in the Americas with 93.3 million wireless subscribers. The company's investments outside Mexico are located in Brazil, Colombia, Ecuador, Argentina, Guatemala, Nicaragua, Honduras, El Salvador, Uruguay, and the United States. The company recently completed the acquisitions of operators in Paraguay, Chile and Peru, expanding its presence in Latin America.

Telmex is the largest fixed-line telecommunications operator in Mexico, providing nationwide local service, public telephony, domestic and international long-distance, data transmission, Internet access, and directory services. The company had 18.4 million lines in service in Mexico at Dec. 31, 2005. In addition the company has expanded operations outside Mexico through a series of acquisitions in five other countries including Brazil, Argentina, Chile, Colombia and Peru.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Apr 3, 2006
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