America Móvil outlook revised to stable as Fitch affirms A- rating

Fitch Ratings has affirmed America Móvil's Long-Term Foreign and Local Currency Issuer Default Ratings at 'A-' but revised the outlook to stable from positive, reflecting expectations that net leverage will remain above 1.5x and CFO-capex to debt below 17.5% in the medium term. While America Móvil benefits from its position as Latin America's largest wireless service provider and geographic diversification, approximately 85% of its EBITDA comes from countries with sub-A- operating environments, limiting its ratings. Fitch projects revenue to grow at a compound annual growth rate of 4.5% from 2025 to 2027, with EBITDA margins averaging around 34.2%.

Analysis

Fitch Ratings has affirmed America Móvil's (AMXL) Long-Term Foreign and Local Currency Issuer Default Ratings at 'A-', while revising the outlook to stable from positive. This outlook revision reflects Fitch's expectation that AMXL's net leverage will remain above 1.5x and its cash flow from operations (CFO) less capital expenditures (capex) to debt ratio will stay below 17.5% in the medium term, metrics consistent with the 'A-' rating level. For the last twelve months ended March 31, 2025, America Móvil’s net debt to EBITDA ratio was 1.8x, and its CFO-capex to debt stood at 6.3%; Fitch anticipates these will improve, with net leverage trending towards 1.5x. Despite AMXL's strong market position as Latin America’s largest wireless service provider with significant geographic diversification, superior to U.S. peers like Verizon (VZ) and Comcast (CMCSA), its rating is constrained as approximately 85% of its EBITDA originates from countries with operating environments below 'A-'. Fitch projects AMXL's revenue to grow at a compound annual growth rate of 4.5% between 2025 and 2027, with EBITDA margins averaging around 34.2%. Cash flow from operations is forecast to average MXN218 billion annually during this period, which is expected to fully cover capital expenditures (projected capital intensity of 15.3%) and enable debt reduction alongside maintaining approximately MXN50 billion in shareholder returns. A rating downgrade could occur with sustained net debt/EBITDA above 2.5x or worsening operating environments, while an upgrade would require net debt/EBITDA between 1.0x-1.5x and (CFO-Capex)/Debt consistently at or above 20%.

Key Decisions for Investors

• Investors should recognize the outlook revision to stable from positive indicates a reduced probability of a near-term credit rating upgrade for America Móvil, with key leverage metrics expected to improve but likely remain within the existing 'A-' rating band.
• Monitor the company's progress towards achieving Fitch's projected 4.5% revenue CAGR, 34.2% EBITDA margins, and the targeted 1.5x net debt/EBITDA, as these factors are critical for sustaining creditworthiness and funding the anticipated MXN50 billion in annual shareholder returns.
• Carefully consider the inherent risk associated with the 85% of EBITDA generated from countries with operating environments below 'A-', a key factor limiting the company's credit rating, and be vigilant for any signs of increased regulatory pressures or deterioration in these markets.
• Note that while the company's fundamentals appear stable and Fitch projects continued cash generation, the article mentions an InvestingPro AI analysis did not identify AMX as a top undervalued stock, suggesting a need for thorough due diligence on valuation.