As filed with the Securities and Exchange Commission on April 26, 201829, 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FormFORM20-F

Annual Report Pursuant to Section 13 or 15(d)

of the Securities

Exchange Act of 1934

for the fiscal year ended December 31, 20172019

Commission file number:1-16269

AMÉRICA MÓVIL, S.A.BS.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, Delegación 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, Delegación Miguel Hidalgo

11529 Mexico City, Mexico

Telephone: (5255)2581-4449

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 symbolName of each exchange on which registered:
A Shares, without par valueAMOV  New York Stock Exchange
L Shares, without par value  New York Stock Exchange
5.000% Senior Notes Due 2019New York Stock Exchange
5.000% Senior Notes Due 2020AMX  New York Stock Exchange
3.125% Senior Notes Due 2022  AMX22New York Stock Exchange
3.625% Senior Notes Due 2029AMX29New York Stock Exchange
6.375% Notes Due 2035  AMX35New York Stock Exchange
6.125% Notes Due 2037AMX37  New York Stock Exchange
6.125% Senior Notes Due 2040  AMX40New York Stock Exchange
4.375% Senior Notes Due 2042AMX42New York Stock Exchange
4.375% Senior Notes Due 2049AMX49  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, 2017:2019:

 

20,602 million  AA Shares
567531 million  A Shares
44,90144,872 million  L Shares

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☒  Yes            ☐  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

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            ☐  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes            ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large accelerated filer    ☒  Acceleratedfiler    ☐  Non-accelerated filer    ☐  Emerging growth company    ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicateby check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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

 

U.S. GAAP    ☐  

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 Rule12b-2 of the Exchange Act).

☐  Yes            ☒  No

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TABLE OF CONTENTS         

 

 

(See Form20-F Cross Reference Guide on page 111)

(See Form20-F Cross Reference Guide on page 113)

Selected Financial Data

   2 
Selected Financial DataPART I: INFORMATION ON THE COMPANY   15 
Part I: Information on the Company5

About América Móvil

   6

Our Networks

   14

Our NetworksCompetitors

   1116

Acquisitions, Other Investments and Divestitures

   16
Our Competitors13

Marketing, Sales and Distribution, Customer Services

17
PART II: OPERATING AND FINANCIAL REVIEW AND PROSPECTS   1419

Overview

   20

Acquisitions, Other Investments and DivestituresResults of Operations

   1422 
Part II: Operating and Financial Review and Prospects17
Overview18
Results of Operations20

Liquidity and Capital Resources

   3436 

Critical Accounting Policies and Estimates

42
PART III: RISK FACTORS   45
38PART IV: SHARE OWNERSHIP AND TRADING   59

Part III: Risk FactorsMajor Shareholders

   4360

Related Party Transactions

   61

Part IV: Share Ownership and TradingDividends

   5562

Trading Markets

   62

Major ShareholdersBylaws

   5662 
Related Party Transactions57
Dividends57
Trading Markets58
Bylaws60
Depositary Shares63

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   6463 

Taxation of Shares and ADSs

64
PART V: CORPORATE GOVERNANCE   69

Management

70

Corporate Governance

79

Controls and Procedures

82

Code of Ethics

85

Corporate Sustainability Report

85
65PART VI: REGULATION   88

Regulation

89
Part V: Corporate GovernancePART VII: ADDITIONAL INFORMATION   71106

Employees

   107

ManagementLegal Proceedings

   72107 
Management Compensation80
Corporate Governance81
Controls and Procedures84
Code of Ethics86
Part VI: Regulation88
Regulation89
Part VII: Additional Information106
Employees107
Legal Proceedings107

Principal Accountant Fees and Services

   108

Additional Information

   109

Exchange RatesForward-Looking Statements

   108110 
Additional Information109
Forward-Looking Statements110
Glossary111

Form20-F Cross Reference Guide

   113111

Signatures

   114
Signatures115

PartPART VIII: Consolidated Financial StatementsCONSOLIDATED FINANCIAL STATEMENTS

118

  



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SELECTED FINANCIAL DATA

 



         SELECTED FINANCIAL DATA

We prepared our audited consolidated financial statements included in this annual report in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The selected financial information should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements.

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.19.7867Ps.18.8452 to U.S.$1.00, which was the rate reported by Banco de México on December 28, 2017,30, 2019, 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.

 

 

 

 

 


1


  AS OF AND FOR THE YEAR ENDED DECEMBER 31,(1) 
  2013  2014  2015   2016   2017  2017 
   

(in millions of Mexican pesos, except share and per share amounts)

 

  (in millions of
U.S. dollars,
except share
and per share
amounts)		 
INCOME STATEMENT DATA: 
Operating revenues  Ps.   786,101   Ps.    848,580   Ps.    893,738    Ps.   975,412    Ps.   1,021,634  U.S.$   51,632 
Operating costs and expenses      631,843        692,026        752,325        865,802        921,490       46,570 
Depreciation and amortization      101,535        114,994        125,715        148,526        160,175       8,095 
Operating income   154,258     156,554     141,413     109,610     100,143    5,062 
Net profit for the year  Ps.   74,974   Ps.    47,498   Ps.    36,961    Ps.   12,079    Ps.   32,155  U.S.$   1,627 
NET PROFIT ATTRIBUTABLE FOR THE YEAR TO: 
Equity holders of the parent  Ps.   74,625   Ps.    46,146   Ps.    35,055    Ps.   8,650    Ps.   29,326  U.S.$   1,482 
Non-controlling interests   349     1,352     1,906     3,429     2,829    145 
Net profit for the year  Ps.   74,974   Ps.    47,498   Ps.    36,961    Ps.   12,079    Ps.   32,155  U.S.$   1,627 
EARNINGS PER SHARE: 
Basic  Ps.   1.02   Ps.    0.67   Ps.    0.52    Ps.   0.13    Ps.   0.44  U.S.$   0.02 
Diluted  Ps.   1.02   Ps.    0.67   Ps.    0.52    Ps.   0.13    Ps.   0.44  U.S.$   0.02 
Dividends declared per share(2)  Ps.   0.22   Ps.    0.24   Ps.    0.26    Ps.   0.28    Ps.   0.30  U.S.$   0.02 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (MILLIONS): 
Basic      72,866        69,254        66,869        65,693        65,909         
Diluted      72,866        69,254        66,869        65,693        65,909         
BALANCE SHEET DATA: 

Property, plant and equipment, net

  Ps.   501,107   Ps.    588,106   Ps.    573,529    Ps.   701,190    Ps.   676,343  U.S.$   34,182 

Total assets

      1,025,592        1,278,357        1,296,487        1,515,042        1,486,212       75,112 

Short-term debt and current

portion of long-term debt

      25,841        57,806        119,590        82,607        51,746       2,615 

Long-term debt

      464,478        545,949        563,627        625,194        646,139       32,655 

Capital stock

      96,392        96,383        96,338        96,338        96,339       4,869 

Total equity

      210,301        234,639        160,854        271,024        260,634       13,171 
NUMBER OF OUTSTANDING SHARES (MILLIONS): 

AA Shares

      23,424        23,384        23,384        20,635        20,602         

A Shares

      681        649        625        592        567         

L Shares

      46,370        44,120        41,990        44,571        44,901         
Ratio of Earnings to Fixed Charges(3)   3.9     3.5     2.5     1.6     2.6    

(1) As of December 31, 2017, we owned 51.0% of the total outstanding shares of Telekom Austria AG (“Telekom Austria” or “TKA”). We began consolidating Telekom Austria from July 1, 2014. Prior to July 1, 2014, we accounted for Telekom Austria using the equity method, which affects the comparability of our results for 2013 through 2017.

(2) 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.

(3) Earnings, for this purpose, consist of profit before income tax, plus interest expense, interest implicit in operating leases and current period amortization of interest capitalized in prior periods, minus equity interest in net (loss) income of associates, during the year.

 

  

  

  


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FOR THE YEAR ENDED DECEMBER 31,

 

 

 
  

 

2015

  

 

2016

  

 

2017

  

 

2018

  

 

2019

  

 

2019

 
   

 

(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.        893,738  Ps.        975,412  Ps.1,021,634  Ps.1,038,208  Ps.1,007,348  U.S.$      53,454 
       
Operating costs and expenses  752,325   865,802           921,490           898,651           852,507   45,237 
       
Depreciation and amortization  125,715   148,526   160,175   155,713   158,915   8,433 
       
Operating income  141,413   109,610   100,144   139,557   154,841   8,217 
       
Net profit for the year Ps.36,961  Ps.12,079  Ps.32,155  Ps.54,517  Ps.70,313  U.S.$3,731 
 
NET PROFIT ATTRIBUTABLE FOR THE YEAR TO:

 

       
Equity holders of the parent Ps.35,055  Ps.8,650  Ps.29,326  Ps.52,566  Ps.67,731  U.S.$3,594 
       
Non-controlling interests  1,906   3,429   2,829   1,951   2,582   137 
       
Net profit for the year Ps.36,961  Ps.12,079  Ps.32,155  Ps.54,517  Ps.70,313  U.S.$3,731 
 
EARNINGS PER SHARE:

 

       
Basic Ps.0.52  Ps.0.13  Ps.0.44  Ps.0.79  Ps.1.03  U.S.$0.05 
       
Diluted Ps.0.52  Ps.0.13  Ps.0.44  Ps.0.79  Ps.1.03  U.S.$0.05 
       
Dividends declared per share(1) Ps.0.26  Ps.0.28  Ps.0.30  Ps.0.32  Ps.0.35  U.S.$0.02 
 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (MILLIONS):

 

       
Basic  66,869   65,693   65,909   66,055   66,016   

 

 

 

 

 

       
Diluted  66,869   65,693   65,909   66,055   66,016   

 

 

 

 

 

 
BALANCE SHEET DATA:

 

       
Property, plant and equipment, net Ps.573,529  Ps.701,190  Ps.676,343  Ps.640,001  Ps.639,343  U.S.$33,926 
       
Right of use assets  —   —   —   —   118,003   6,262 
       
Total assets  1,296,487   1,515,042   1,486,212   1,429,223   1,531,934   81,291 
       
Short-term debt and current portion of long-term debt  119,590   82,607   51,746   96,230   129,172   6,854 
       
Short-term lease debt  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  25,895   1,374 
       
Long-term debt  563,627   625,194   646,139   542,692   495,082   26,271 
       
Long-term lease debt  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  94,702   5,025 
       
Capital stock  96,338   96,338   96,339   96,338   96,338   5,112 
       
Total equity  160,854   271,024   260,634   245,872   226,907   12,042 
 
NUMBER OF OUTSTANDING SHARES (MILLIONS):

 

       
AA Shares  23,384   20,635   20,602   20,602   20,602   

 

 

 

 

 

       
A Shares  625   592   567   546   531   

 

 

 

 

 

       
L Shares  41,990   44,571   44,901   44,887   44,872  

 

 

 

 

 

(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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PART I INFORMATION ON THE COMPANY your Emotions

         ABOUT AMÉRICA MÓVILLOGO

About America Movil

 

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. In 2010, we acquired control of Telmex and Telmex Internacional, S.A.B. de C.V. (currently, (“Telmex Internacional, S.A. de C.V., or “Telmex Internacional”) in a series of public tender offers.

Our principal executive offices are located at Lago Zurich 245, Plaza Carso / Edificio Telcel, Colonia Ampliación Granada, Delegación Miguel Hidalgo, 11529, Mexico City, Mexico. Our telephone number at this location is (5255) 2581-4449.2581-3700.

BUSINESS OVERVIEW

We provide telecommunications services in 25 countries. We are thea 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 major wireless, fixed or Pay TV operations in 16 other countries in the Americas and seven countries in Central and Eastern Europe as of December 31, 2017.2019. For a list of our principal subsidiaries, see Notenote 2 a)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.

RECENT DEVELOPMENTS

COVID-19

The unprecedented health crisis arising from the spread of the Coronavirus will result in a severe global economic downturn that will impact most countries substantially, according to the forecasts of various international banks and multilateral institutions. There is no clarity as to its overall duration and magnitude or its impact in the countries where we operate. The financial resilience of our company, and its vast and critical infrastructure after a long period of heavy investment, are important assets in these times.

It has become increasingly evident that telecommunication services are critical for companies, families and individuals alike. At América Móvil we have been fully committed to ensuring the continuity of our top-quality services, while prioritizing the health and well-being of our customers and employees. We have adapted our processes and commercial plans to accommodate the needs of our subscribers, and we have actively supported all government measures related to our industry.

The impact of the pandemic on our financial performance through the first quarter of 2020 was limited. We entered this COVID-19 crisis with a solid balance sheet after a long period of deleveraging and remain committed to maintaining a low leverage ratio. We have drawn our committed credit facilities to ensure that we can continue to service our debt and preserve optimal liquidity for the foreseeable future. As for our cash flow and profitability, we aim to protect them by adjusting our operating expenditures, capital expenditures and working capital as needed.

The nature of the crisis, the public health measures to contain it, and the economic impact are all developing rapidly, and they vary among the different jurisdictions where we operate. The effects on our business and our financial performance remain highly uncertain.

Credit Facility Draw

On March 25, 2020, we drew the full amount of our U.S.$2.5 billion Dollar facility and our U.S.$2.0 billion Euro facility. We elected to draw on the facilities to assure liquidity and maximize flexibility in light of the current uncertainty surrounding the impact of COVID-19. See “Liquidity and Capital Resources—Borrowings” under Part II of this annual report.

Tender Offer of Exchangeable Bonds

On April 9, 2020, América Móvil announced a tender offer to purchase in cash its Zero Coupon Exchangeable Bonds due on May 28, 2020. The tender offer finalized on April 17, 2020 and resulted with the Company purchasing€1,318,200,000 of the principal amount of the Exchangeable Bond. Aggregate principal amount of€1,607,300,000 of the Exchangeable Bonds remains outstanding.

 

 


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About América Móvil MEXICO TELCEL TELMEX Licensed Population 127 Wireless Subscribers 76,918 Revenue Generating Units (RGUs) 21,992 Wireless Penetration 98% Wireless and fixed operations UNITED STATES TRACFONE Licensed Population 338 Wireless Subscribers 20,876 Revenue Generating Units (RGUs) - Wireless Penetration 132% Wireless operation ECUADOR CLARO Licensed Population 17 Wireless Subscribers 8,493 Revenue Generating Units (RGUs) 446 Wireless Penetration 92% Wireless and fixed operations PERU CLARO Licensed Population 33 Wireless Subscribers 11,611 Revenue Generating Units (RGUs) 1,603 Wireless Penetration 118% Wireless and fixed operations CHILE CLARO Licensed Population 19 Wireless Subscribers 6,873 Revenue Generating Units (RGUs) 1,400 Wireless Penetration 151% Wireless and fixed operation

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The following map illustrates the geographic diversity of our operations and certain key performance indicators (KPIs) as of December 31, 2019. AUSTRIA & EASTERN EUROPE A1 Licensed Population 41 Wireless Subscribers 21,296 Revenue Generating Units (RGUs) 6,143 Wireless Penetration 139% Austria, Belarus, Bulgaria, Croatia, Serbia, Slovenia and Macedonia / Wireless operation Austria, Belarus, Bulgaria, Croatia, Slovenia and Macedonia / Fixed operations CENTRAL AMERICA & CARIBBEAN CLARO Licensed Population 64 Wireless Subscribers 21,733 Revenue Generating Units (RGUs) 9,623 Wireless Penetration 102% Wireless and fixed operations COLOMBIA CLARO Licensed Population 51 Wireless Subscribers 31,104 Revenue Generating Units (RGUs) 7,613 Wireless Penetration 122% Wireless and fixed operations BRAZIL CLARO Licensed Population 211 Wireless Subscribers 54,488 Revenue Generating Units (RGUs) 34,048 Wireless Penetration 106% Wireless and fixed operations ARGENTINA, PARAGUAY & URUGUAY CLARO Licensed Population 56 Wireless Subscribers 24,634 Revenue Generating Units (RGUs) 1,114 Wireless Penetration 126% Argentina, Paraguay y Uruguay / Wireless operation Argentina and Paraguay / Fixed operations Licensed Population in millions Wireless Subscribers and Revenue Generating Units in thousands

         ABOUT AMÉRICA MÓVIL

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About America Movil

 

KEY PERFORMANCE INDICATORS

We have identified certain KPIs that help measure the performance of our operations. The table of our KPIs 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 WirelessWireless;

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,

 

 

 
   AS OF DECEMBER 31,   2017   2018   2019 
   2015    2016    2017  
  (in thousands)  (in thousands) 
WIRELESS SUBSCRIBERS:             
  
Mexico Wireless   73,697    72,953    73,855   73,855   75,448   76,918 
  
Brazil   65,978    60,171    59,022   59,022   56,416   54,488 
  
Colombia   28,973    28,954    29,353   29,353   29,681   31,104 
  
Southern Cone   29,186    30,377    31,076   31,076   30,971   31,507 
  
Andean Region   20,743    20,801    20,352   20,352   20,344   20,104 
  
Central America   15,317    15,085    15,927   15,927   14,364   15,488 
  
Caribbean   5,261    5,453    5,637   5,637   5,887   6,244 
  
United States   25,668    26,070    23,132   23,132   21,688   20,876 
  
Europe   20,711    20,708    20,658   20,658   21,029   21,296 
  
Total Wireless Subscribers   285,534    280,572    279,012   279,012   275,828   278,025 

FIXED RGUs:

      
  
FIXED RGUS:       
  
Mexico Fixed   21,735    22,178    21,851   21,851   22,337   21,992 
  
Brazil   36,627    36,716    35,904   35,904   35,285   34,048 
  
Colombia   5,801    6,304    6,753   6,753   7,171   7,613 
  
Southern Cone   1,819    1,942    2,023   2,023   2,199   2,514 
  
Andean Region   1,727    1,820    1,765   1,765   1,856   2,049 
  
Central America   4,950    5,392    5,811   5,811   6,465   4,409 
  
Caribbean   2,511    2,663    2,700   2,700   2,546   2,528 
  
Europe   5,642    5,900    6,036   6,036   6,203   6,143 
  
Total Fixed RGUs   80,812    82,915    82,844   82,844   84,062   81,296 
  
Total RGUs   366,346    363,488    361,856   361,856   359,890   359,323 

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

   COUNTRY

 Principal Brands

PRINCIPAL

BRANDS

 Services and ProductsSERVICES AND PRODUCTS
Mexico Telcel 

Wireless voice

Wireless data

  

Telmex

Infinitum

 

Fixed voice

Fixed data

United States 

TracFone

Straight Talk

 Wireless voice Wireless data
  Straight TalkWireless data
Europe A1(1) 

Wireless vocie

Wireless data

Fixed voice

Fixed data

Pay TV

Wireless data
Fixed voice
Fixed data
Pay TV

 

(1)In 2017, The harmonization of the brands within A1 Telekom Austria announcedGroup that was resolved in 2017 continued in 2019 with the successful brand launch in Belarus and North Macedonia, and will be completed in 2020 with the rebranding of all its regional operating companies as A1.in Serbia.

 

SERVICES AND PRODUCTS

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

Wireless Operations

In 2017,2019, our wireless voice and data operations generated revenues of Ps.530.3Ps.523.0 billion, representing 51.9% of our consolidated revenues. As of December 31, 2017,2019, our wireless operations represented approximately 77.1%77.4% 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 and4G-LTE roaming services.

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 279 million wireless voice and data subscribers as of December 31, 2017.

 

 


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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 its compositionas a percentage of the wireless base from 23.7%27.5% in December 20162018 to 25.3%32.0% as of December 31, 2017,2019, while prepaid plans represented 74.7%68.0%.

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 278 million wireless voice and data subscribers as of December 31, 2019.

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 ofnon-payment,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. The rates in 20172019 decreased an average of 16.6%11.05%, at constant exchange rates relative to 2016.2018. In addition, the plans we offer our retail customers include selective discounts and promotions that reduce the reference 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.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 Service (“PCS”).

Fixed Operations

In 2017,2019, our fixed voice, data, broadband and IT solutions had revenues of Ps.229.1Ps.292.2 billion, representing 22.4%29.0% of our consolidated revenues. As of December 31, 2017,2019, our fixed operations represented approximately 22.9%22.6% of our total RGUs, compared to 22.8%23.4% as of December 31, 2016.2018.

Voice

Our fixed voice services include local, domestic and international long-distance and public telephone services, 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.

 

 


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ABOUT AMERICA MOVIL

 

         ABOUT AMÉRICA MÓVIL

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, 2017,2019, we had approximately 21.620.9 million Pay TV RGUs, a decrease of approximately 567603 thousand Pay TV RGUs from the prior year.

In 2017, we acquired the rights to broadcast the Summer and Winter Olympic Games from 2018 through 2024 in all countries in Latin America, except for Brazil, on our Pay TV and digital platforms. Our largest Pay TV market is in Brazil, where we are the leading provider of Pay TV services throughdirect-to-home (“DTH”) technology and cable TV. We offer these services through individual subscription plans as well as in bundled packages of services, along with broadband, fixed voice and wireless services. In addition to our Brazilian operations, our Colombian operations are now offering quadruple-play services, combining Pay TV, broadband, fixed-line and wireless services.

Equipment, Accessories and Computer Sales

Equipment, accessories and computer sales revenues primarily include revenues from the sale of handsets, accessories and other equipment.

Other Services

Other services include revenues from 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, anon-demand internet streaming video provider with more than 25,000 content titles sold across all the Latin American and Caribbean markets in which we operate. We offer bundled packages of ClaroVideo, with other services. Additionally, we offer customerswhich may include:

Subscription video on demand, providing unlimited access to ClaroVideoa catalogue of over 15,000 titles for a fixed monthly subscription fee.fee;

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, 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, 20172019 in the countries in which we operate.

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Wireless
Voice, DataWIRELESS VOICE,

and ValueDATA AND VALUE
ADDED SERVICES(1)

Added

Services(1)

 

 

Fixed Voice,FIXED VOICE,
BROADBAND, DATA
AND IT SERVICES(2)

Broadband,

Data and IT

Services(2)

 PayPAY TV 

OTT SERVICES(3)

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 ✓  

  

 

 

(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 bynon-concessionaire subsidiaries.

 

 


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OUR NETWORKS

 

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 in the process of expanding our network in Europe.

InfrastructureINFRASTRUCTURE

For the year ended December 31, 2017,2019, our capital expenditures totaled Ps.136.7Ps.151.8 billion, which allowed us to increase our network, to expand theirour capacity and to upgrade our systems to operate with the latest technologies. With fully convergent platforms, we are able to widely deliver high-qualityhigh- quality voice, video and data products. See Note 10 to our audited consolidated financial statements for a description of our property, plant and equipment.

As of December 31, 2017,2019, the main components of our infrastructure were comprised of:

 

Cell sitesBase stations:: 163,033 bases stations 256,514 sites with 2G, 3G and 4G technologies (of which approximately 65%68% are equipped with 3G and 4G capabilities). across Latin America and Europe. Additionally, we have been expanding our coverage and improving quality and speed with a number of street cells and indoor solutions.

 

Fiber-optic network:network: More than 815923 thousand km. Our network passed approximately 7079 million homes as of December 31, 2017.homes.

 

Submarine cable system:system: Capacity of more than 168189 thousand km in submarine cable, including theAMX-1AM-1 submarine cable that extends 17,500 km and connects the United States to Central and South America throughout 12with 11 landing points and provides international connectivity to all of our subsidiaries in these geographic areas.

 

Satellites: Nine.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.

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: 21.centers: 30. 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.


11


TechnologyTECHNOLOGY

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 also aim to roll out our 4.5 LTE coverage in most of our operations by the end of 2018.

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 amarket-by-market basis. In 2017, we spent Ps.11.3 billion on the acquisition of spectrum licenses, mainly in Mexico and Uruguay.

The table below presents a summary of the population covered by our network, by country, as of December 31, 2017.2019.

GENERATION TECHNOLOGY

 

     GSM      UMTS      LTE 

 

    (% of covered population) 
Argentina     98      91      82 
Austria     100      93      92 
Belarus     100      99      — 
Brazil     93      91      76 
Bulgaria     100      100      90 
Chile     99      97      89 
Colombia     92      76      53 
Costa Rica     71      79      31 
Croatia     99      99      92 
Dominican Republic     100      99      90 
Ecuador     96      74      51 
El Salvador     72      72      17 
Guatemala     89      66      18 
Honduras     86      74      49 
Macedonia     100      100      99 
Mexico     90      88      77 
Nicaragua     85      79      46 
Panama     84      84      58 
Paraguay     76      72      36 
Peru     87      79      69 
Puerto Rico     77      81      69 
Serbia     99      100      95 
Slovenia     100      99      99 
Uruguay     96      91      70 
 

 


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GENERATION TECHNOLOGY

 

    

 

GSM

 

    

 

UMTS

 

    

 

LTE

 

 

    

(% of covered population)

 
    

Argentina

    

 

98

% 

    

 

91

% 

    

 

92

% 

    

Austria

    

 

100

% 

    

 

97

% 

    

 

99

% 

    

Belarus

    

 

99

% 

    

 

99

% 

    

 

-

 

    

Brazil

    

 

94

% 

    

 

95

% 

    

 

86

% 

    

Bulgaria

    

 

100

% 

    

 

100

% 

    

 

99

% 

    

Chile

    

 

98

% 

    

 

97

% 

    

 

96

% 

    

Colombia

    

 

91

% 

    

 

80

% 

    

 

71

% 

    

Costa Rica

    

 

87

% 

    

 

81

% 

    

 

70

% 

    

Croatia

    

 

99

% 

    

 

99

% 

    

 

99

% 

    

Dominican Republic

    

 

100

% 

    

 

99

% 

    

 

95

% 

    

Ecuador

    

 

96

% 

    

 

79

% 

    

 

69

% 

    

El Salvador

    

 

91

% 

    

 

85

% 

    

 

65

% 

    

Guatemala

    

 

89

% 

    

 

85

% 

    

 

71

% 

    

Honduras

    

 

86

% 

    

 

81

% 

    

 

58

% 

    

Macedonia

    

 

100

% 

    

 

100

% 

    

 

100

% 

    

Mexico

    

 

93

% 

    

 

94

% 

    

 

90

% 

    

Nicaragua

    

 

85

% 

    

 

80

% 

    

 

49

% 

    

Panama

    

 

84

% 

    

 

84

% 

    

 

70

% 

    

Paraguay

    

 

76

% 

    

 

74

% 

    

 

68

% 

    

Peru

    

 

87

% 

    

 

81

% 

    

 

75

% 

    

Puerto Rico

    

 

80

% 

    

 

97

% 

    

 

89

% 

    

Serbia

    

 

99

% 

    

 

98

% 

    

 

98

% 

    

Slovenia

    

 

100

% 

    

 

100

% 

    

 

99

% 

    

Uruguay

    

 

96

% 

    

 

91

% 

    

 

80

% 

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LOGO

OUR COMPETITORS

 

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. or, Teléfonica and Millicom, as well as various providers that operate on a nationwide level, such as Telecom Argentina and Teléfonica.Telecom Italia. 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.

 

 


LOGO

ACQUISITIONS, OTHER INVESTMENTS AND DIVESTITURES

 

13Geographic 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.

We continue to make incremental acquisitions in areas that we consider accretive to our existing operations. The following are recent significant acquisitions:

 

On December 18, 2019, we completed the acquisition of 100% of Nextel Telecomunicações Ltda. and its

subsidiaries (“Nextel Brazil”) from NII Holdings, Inc. and certain of its affiliates (“NII”) and AI Brazil Holdings B.V. Nextel Brazil provides nationwide mobile telecommunications services. With this transaction, we consolidate our operations as one of the leading telecommunication service providers in Brazil, strengthening our mobile network capacity, spectrum portfolio, subscriber base, coverage and quality, particularly in the cities of São Paulo and Rio de Janeiro, the main markets in Brazil. The adjusted amount paid for the business acquisition was U.S.$948.5 million on a cash-free and debt- free basis.

On January 24, 2019, we completed the acquisition of 100% of Telefónica Móviles Guatemala, S.A (“Telefónica Guatemala”) from Telefónica S.A. and certain of its affiliates. We paid U.S.$333 million, net of acquired cash, for Telefónica Guatemala.

On January 24, 2019, we entered into an agreement to acquire 99.3% of Telefónica Móviles Salvador, S.A. de C.V. (“Telefónica El Salvador”) for U.S.$315 million. The completion of the acquisition of Telefónica El Salvador is subject to certain customary closing conditions, including regulatory approval.

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

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MARKETING, SALES AND DISTRIBUTION,

CUSTOMER SERVICES

 

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 2017,2019, our efforts were mainly focused on promoting our 4G4.5G LTE services, leveraging on the speedsspeed and quality of our networks and our fixed bundled offers, which compete on broadband speedsspeed and premium content.

We build uponon 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. For example, Claro isand Telcel are the most valuable telecom brandbrands in the Latin America region, according to the Telecoms 300 20182019 report by Brand Finance. BrandZ’s Top 50 Most Valuable Latin American Brands 20172019 list ranked Telcel asamong the second-most valuable national brandtop five brands in Mexico.Latin America. In the same year, BrandZ also named Telcel and Telmex as the highest recognized telecom brandsbrand in Mexico, and Telcel and Claro as two of the top four highest-ranked telecom brands in Latin America. In addition, a 2017year-end 2019 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.

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 420,000490,000 points of sale and almost 2,900 customer service centers. Our subsidiaries also sell their services and products online.

CUSTOMER SERVICES

We give priority to providing our customers with quality customer care and support, with approximately 57,400113,000 employees dedicated to customer service. 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.

 

 


17

ACQUISITIONS, OTHER INVESTMENTS AND
DIVESTITURES

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 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 can give no assurance as to the extent, timing or cost of such investments. 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 continue to make incremental acquisitions in areas that we consider accretive to our existing operations. For additional information on our acquisitions and investments, see Note 12 to our audited consolidated financial statements.


14




LOGOLOGO

The Network for

LOGOLOGO

PART II OPERATING AND FINANCIAL REVIEW AND PROSPECTS your Business

         OVERVIEWLOGO

Overview

 

INTRODUCTION

COVID-19

The unprecedented health crisis arising from the spread of the Coronavirus will result in a severe global economic downturn that will impact most countries substantially, according to the forecasts of various international banks and multilateral institutions. There is no clarity as to its overall duration and magnitude or its impact in the countries where we operate.

The nature of the crisis, the public health measures to contain it, and the economic impact are all developing rapidly, and they vary among the different jurisdictions where we operate. The effects on our business and our financial performance remain highly uncertain.

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’headquarters operations are allocated to the Mexico Wireless segment. Financial information about our segments is presented in Note 22note 23 to our audited consolidated financial statements.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 ournon-Mexicannon- Mexican subsidiaries, especially the Euro, U.S. dollar, Brazilian real, Colombian peso 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 ournon-Mexicannon- Mexican operations for both periods. We believe that this additional information helps investors better understand the performance of ournon-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. As discussed above, currency variations between the Mexican peso and the currencies of ournon-Mexican subsidiaries, especially the Euro, U.S. dollar, Brazilian real and the Colombian and Argentine

pesos, affect our results of operations as reported in Mexican pesos. In 2017,2019 compared to 2018, the Mexican peso was generally weakerstronger against our other operating currencies than in 2016, which tended to increase the reported amounts in Mexican pesos attributable to ournon- Mexican operations.

In addition, we recognize foreign exchange gains and losses attributable to changes in the valuesome of our operating currencies, particularlyincluding the Brazilian Real, the Argentine Peso, 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, and Brazilian real,appreciates or depreciates against the currencies in which our indebtedness and accounts payable areis denominated, especially the U.S. dollar, the pound sterling and the Euro. Appreciation of our operating currencies generally results inwe may incur foreign exchange gains while depreciationor losses that are recorded as other comprehensive income in our consolidated statements of these currencies generally results in foreign exchange losses. 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 2017,2019, 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. In 2018, the Mexican peso and the Brazilian real weakened against the currencies in which most of our indebtedness is denominated. We recorded net foreign exchange losses of Ps.13.8 billion, partially offset by net fair value gains on derivatives of Ps.8.2 billion. In 2016, the Mexican peso weakened against the currencies of our indebtedness,denominated, and we recorded net foreign exchange losses of Ps.40.4 billion. We also recordedPs.7.3 billion and net fair value losses on derivatives of Ps.9.6 billion, primarily driven by the effect of a weakened pound sterling and other currencies on certain derivative positions we use to offset exchange risk on our indebtedness.Ps.4.7 billion. See Notenote 7 to our audited consolidated financial statements included in this annual report.

Recent Changes in Accounting Standards

We have adopted IFRS 16 on leasing as of January 1, 2019 using the modified retrospective method. The implementation of IFRS 16 had a significant impact on our consolidated statements of financial position by requiring that we recognizeright-of-use assets and lease liabilities. In our consolidated statements of comprehensive income, the new standard increases interest expense and depreciation and reduces other operating costs, without a significant impact on net income. Our financial statements as of the year ended December 31, 2018 have not been restated, and the reclassifications and adjustments arising from the adoption of IFRS 16 may affect the comparability of our financial statements for the year ended December 31, 2019. For more information, see note 2 a) i) to our audited consolidated financial statements included in this annual report.

We have adopted IFRIC 23 in 2019. IFRIC 23 is an interpretation by the International Accounting Standards Board that addresses the accounting for income taxes when tax

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treatments involve uncertainty that affects the application of IAS 12. The interpretation does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Company determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The interpretation did not have an impact on our consolidated financial statements.

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. In recent periods, for example, regulators have imposed or sought to impose decreases in, or the elimination of, interconnection rates. We have offset lower interconnection revenues by attracting new customers with lower prices and new data services to increase traffic, but this may change. Significant regulatory developments are presented in more detail in “Regulation” under Part VI and “Risk Factors” under Part III of this annual report.


18


COMPOSITION OF OPERATING REVENUES

In 2017,2019, our total operating revenues consisted of: mobile voice revenues (21.7% of totalwere Ps.1,007 billion.

operating  revenues), fixed voice revenues (8.8%), mobile data revenues (30.2%), fixed data

revenues (13.6%),  Pay TV revenues (8.5%), equipment, accessories and computer sales

revenues (14.0%) and other related services (3.1%).


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, includingon-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. The pricing of handsets is not geared primarily towards making a profit from handset sales, because for some plans, the handset subsidy is considered an acquisition cost.

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 20172019 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;

 

changesdevelopments 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 as well asand managing larger and more complex networks; and

overall macroeconomic conditions and foreign exchange volatility in the countries in which we operate.networks.

These trends are broadly characteristic of our businesses in all regions in recent years, and they have affected comparable telecommunications providers as well.

Other Our performance in recent trends affecting our performance included:

theyears has also been affected by ongoing effects of Mexico’s regulatory measures; and

the impact of the depreciation of the Mexican pesochanges in 2017 against the U.S. dollar, the Euro, the Brazilian real and the Colombian peso.
Mexico.

 

 


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RESULTS OF OPERATIONS

 

CONSOLIDATED RESULTS OF OPERATIONS FOR 20172019 AND 20162018

Operating Revenues

Total operating revenues for 2017 increased2019 decreased by 4.7%3.0%, or Ps.46.2Ps.30.8 billion, over 2016.2018. At constant exchange rates, total operating revenues for 20172019 increased by 2.0%2.3% over 2016.2018. This increase principally reflects increases in revenues from our mobile, data, fixed datacorporate networks, broadband and sales of equipment, which were partially offset by a decrease in revenues from Pay TV operations,services and long distance.

REVENUES SERVICES.Revenues services for 2019 decreased by 3.4%, or Ps.29.2 billion, over 2018. At constant exchange rates, revenues services for 2019 increased by 2.1% over 2018. This increase principally reflects increases in revenues from our mobile services (prepaid and postpaid), fixed broadband and corporate networks, which were partially offset by a decrease in revenues from our mobile voice and fixed voice operations.

MOBILE VOICE — Mobile voice revenues for 2017 decreased by 8.5%, or Ps.20.6 billion, over 2016. At constant exchange rates, mobile voice revenues for 2017 decreased by 10.8% over 2016. This decrease principally reflects reduced interconnection rates and traffic in international and domestic long-distance calls, which was driven by higher data usage due to the growing use of social networking platforms.

FIXED VOICE — Fixed voice revenues for 2017 decreased by 5.7%, or Ps.5.4 billion, over 2016. At constant exchange rates, fixed voice revenues for 2017 decreased by 9.1% over 2016. This decrease principally reflects reduced interconnection rates and traffic in international and domestic long distance calls, which was driven by the growing use of wireless technology and broadband voice services, such as WiFi calling.

MOBILE DATA — Mobile data revenues for 2017 increased by 20.1%, or Ps.51.6 billion, over 2016. At constant exchange rates, mobile data revenues for 2017 increased by 18.8% over 2016. This increase principally reflects the increased use of mobile data services, such as media and content downloading, web browsing, content streaming andmachine-to-machine services, which was driven in part by the growing use of social networking apps and content downloading on tablets and notebooks.

FIXED DATA — Fixed data revenues for 2017 increased by 10.3%, or Ps.13.0 billion, over 2016. At constant exchange rates, fixed data revenues for 2017 increased by 5.9% over 2016. This increase principally reflects the growth in

residential broadband services and corporate data services, such as cloud, dedicated links and data center services.

PAY TV —Pay TV revenues for 2017 increased by 11.0%, or Ps.8.6 billion, over 2016. At constant exchange rates, Pay TV revenues for 2017 increased by 2.3% over 2016. This increase principally reflects growthservices in the subscriber base and higher revenues driven by the cross-marketing of bundled packages and new TV channel packages, particularly in Colombia, Central America and the Caribbean.Brazil.

SALES OF EQUIPMENT, ACCESSORIES AND COMPUTER SALES — Equipment,COMPUTERS.

Sales of equipment, accessories and computer sales revenues for 20172019 decreased by 0.2%0.9%, or Ps.0.3Ps.1.5 billion, over 2016.2018. At constant exchange rates, revenues from sales of equipment, accessories and computer sales for 2017 decreased2019 increased by 0.7%3.6% over 2016.2018. This decreaseincrease principally reflects lowerhigher sales ofhigher-end smartphones, other data-enabled devices and tablets, which were partially offset by higher sales oflower-end smartphones due to subsidies provided to our postpaid subscribers and handset financing plans.

OTHER SERVICES — Revenues from other services for 2017 decreased by 2.1%, or Ps.0.7 billion, over 2016. At constant exchange rates, revenues from other services for 2017 decreased by 5.0% over 2016. This decrease principally reflects lower revenues from advertising and media services, online content, wireless security services, telephone directories and call center services.accessories.

Operating Costs and Expenses

COST OF SALES AND SERVICES —SALES.Cost of sales and serviceswas Ps.174.5 billion for 2017 increased by 2.3%, or Ps.11.32019, a decrease of 3.0% from Ps.180.0 billion over 2016, representing 48.6% of operating revenues for 2017, as compared to 49.7% of operating revenues for 2016.in 2018. At constant exchange rates, cost of sales and services for 2017 decreased2019 increased by 0.2%0.8% over 2016.

Cost of sales was Ps.170.2 billion for 2017, a decrease of 1.4% from Ps.172.5 billion in 2016.2018. This decreaseincrease principally reflects higher sales oflower-endhigher-end smartphones which were driven by subsidies provided to our postpaid subscribers and an increase in handset financing plans, and improvements in the inventory management of our handsets.plans.

COST OF SERVICES.Cost of services was Ps.326.2Ps.297.1 billion for 2017, an increase2019, a decrease of 4.4%9.6% from Ps.312.6Ps.328.8 billion in 2016.2018. At constant exchange rates, cost of services for 2019 decreased by 5.5% over 2018. This increasedecrease principally reflects an increasethe adoption of IFRS 16 and the implementation of our corporate cost savings program in costs related to network operations, including energy and leasing tower sites, third-party technical and IT services, as well as TV content acquisition.all the countries in which we operate.


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COMMERCIAL, ADMINISTRATIVE AND GENERAL EXPENSESEXPENSES.— Commercial, administrative and general expenses for 2017 increased2019 decreased by 5.5%4.9%, or Ps.12.5Ps.11.1 billion, over 2016.2018. As a percentage of operating revenues, commercial, administrative and general expenses were 23.6%21.4% for 2017,2019, as compared to 23.4%21.9% for 2016.2018. At constant exchange rates, commercial, administrative and general expenses for 20172019 increased by 2.2%0.9% over 2016.2018. This increase principally reflects an increaseunusual expense items in costs related to customer services, allowance for doubtful accounts, systems developmentMexico, Austria and local taxes.

Telcel and Telmex, like other Mexican companies, are required by law to pay their employees, in addition to their agreed compensation and benefits, profit sharing in an aggregate amount equal to 10.0% of each entity’s taxable income. Our subsidiaries in Ecuador and Peru are also required to pay employee profit sharing at rates of 15.0% and 10.0% of taxable income, respectively. We account for these profit sharing contributions under commercial, administrative and general expenses.Brazil.

OTHER EXPENSES —EXPENSES.Other expenses for 2017 increased2019 decreased by Ps.20.2Ps.1.0 billion over 2016,2018, principally reflecting unusual expense items in 2018 resulting from the paymentsale of an arbitration award grantedfixed assets in Colombia. For further information on this arbitration proceeding, see Notes 1 and 16 to our audited consolidated financial statements included in this annual report.Puerto Rico.

DEPRECIATION AND AMORTIZATION —AMORTIZATION.Depreciation and amortization for 20172019 increased by 7.8%2.1%, or Ps.11.6Ps.3.2 billion, over 2016.2018. As a percentage of operating revenues, depreciation and amortization was 15.7%15.8% for 2017,2019, as compared to 15.2%15.0% for 2016.2018. At constant exchange rates, depreciation and amortization for 20172019 increased by 3.4%7.3% over 2016. This increase2018. Not taking into account the effects of IFRS 16, depreciation and amortization decreased by 8.3% in 2019 at constant exchange rates, principally reflects investmentsas a result of changes in our networks and the accelerationuseful lives of amortizing the costs of various brands of Telekom Austria.assets in Brazil.

Operating Income

Operating income for 2017 decreased2019 increased by 8.6%11.0%, or Ps.9.5Ps.15.2 billion, over 2016.2018. Operating margin (operating income as    a percentage of operating revenues) was 9.8%15.4% for 2017,2019, as compared to 11.2%13.4% for 2016. Excluding the effects of the approximately U.S.$1.0 billion arbitration payment in Colombia, operating income increased by 8.3%, or Ps.9.1 billion, over 2016.2018.

Non-Operating Items

NET INTEREST EXPENSE —EXPENSE.Net interest expense (interest expense less interest income) for 2017 decreased2019 increased by 7.7%49.7%,

or Ps.2.3Ps.10.5 billion, over 2016. This decrease principally reflects lower2018. Without the effects of IFRS 16, the impact would have been an increase of 12.1% in net interest expense due to the amortization of debt during this period.expense.

FOREIGN CURRENCY EXCHANGE LOSS, NET —GAIN, NET.We recorded a net foreign currency exchange lossgains of Ps.13.8Ps.5.2 billion for 2017,2019, compared to our net foreign currency exchange loss of Ps.40.4Ps.7.3 billion for 2016.2018. The loss in both periodsgain principally reflects the appreciationdepreciation of some of the currencies in which our indebtedness is denominated, particularly the U.S. dollar, the Euro and the pound sterling.dollar.

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VALUATION OF DERIVATIVES, INTEREST COST FROM LABOR OBLIGATIONS AND OTHER FINANCIAL ITEMS, NETNET. — We recorded a net loss of Ps.1.9Ps.7.1 billion for 20172019 on the valuation of derivatives, interest cost from labor obligations and other financial items, net, compared to a net loss of Ps.16.2Ps.10.2 billion for 2016.2018. The net losschange in 20172019 principally reflects the interest cost of labor obligations, which was partially offset by a gainderivatives gain. See note 22 to our audited consolidated financial statements included in valuation of derivatives.

EQUITY INTEREST IN NET INCOME OF ASSOCIATED COMPANIES — Our share of the net income of associated companies accounted for under the equity method was Ps.0.1 billion in 2017, as compared to Ps.0.2 billion for 2016.this annual report.

INCOME TAX —TAX.Our income tax expense for 20172019 increased by 118.8%9.8%, or Ps.13.5Ps.4.5 billion, over 2016.2018. This increase principally reflects the effect ofhigher profit before income due to a smaller foreign exchange loss than the one observedgain in 2016.2019 compared to 2018.

Our effective corporate income tax rate as a percentage of profit before income tax was 43.7%42.1% for 2017,2019, compared to 48.6%46.0% for 2016.2018. This rate differed from the Mexican statutory rate of 30% and changed year over year principally as a result of changes in permanent items such as the valuation of derivativeslocal tax inflation effects and other impacts ofnon-taxable items. We are evaluating the impact of the U.S. income tax reform on our U.S. operations, but we do not expect a material impact on our effective corporate income tax rate.

Net Profit

We recorded a net profit of Ps.32.2Ps.70.3 billion for 2017,2019, an increase of 166.2%29.0%, or Ps.20.1Ps.15.8 billion, over 2016.2018.


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         RESULTS OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS FOR 20162018 AND 20152017

Operating Revenues

Total operating revenues for 20162018 increased by 9.1%1.6%, or Ps.81.7Ps.16.6 billion, over 2015.2017. At constant exchange rates, total operating revenues for 20162018 increased by 2.1%3.5% over 2015.2017. This increase principally reflects increases in revenues from our mobile data,and fixed data services, and Pay TVequipment, accessories and computer sales operations, which were partially offset by a decrease in revenues from our mobile voice and fixed voice operations.

services.

MOBILE VOICE —REVENUES SERVICES.Mobile voice revenuesRevenues services for 20162018 decreased by 5.4%1.7%, or Ps.13.8Ps.14.8 billion, over 2015. At constant exchange rates, mobile voice revenues for 2016 decreased by 12.7% over 2015. This decrease principally reflects reductions in the price per minute for calls, traffic in international and domestic long-distance calls and the reduction of interconnection rates in other jurisdictions where we operate, particularly in Brazil, Colombia, Argentina and Europe.

FIXED VOICE —Fixed voice revenues for 2016 decreased by 0.2%, or Ps.0.2 billion, over 2015. At constant exchange rates, fixed voice revenues for 2016 decreased by 7.0% over 2015. This decrease principally reflects reduced traffic in long-distance calls, which was driven by the growing use of wireless technology and increased regulation affecting our fixed voice markets in Mexico, Colombia and Brazil.

MOBILE DATA —Mobile data revenues for 2016 increased by 13.3%, or Ps.30.2 billion, over 2015. At constant exchange rates, mobile data revenues for 2016 increased by 7.3% over 2015. This increase principally reflects increased use of mobile data services, such as media and content downloading, web browsing, content streaming andmachine-to-machine services, which was driven in part by the increased use of social networking apps and content downloading on tablets and notebooks.

FIXED DATA —Fixed data revenues for 2016 increased by 15.6%, or Ps.17.0 billion, over 2015. At constant exchange rates, fixed data revenues for 2016 increased by

7.4% over 2015. This increase principally reflects the growth in residential broadband services and corporate data services, such as cloud, dedicated links and data center services.

PAY TV —Pay TV revenues for 2016 increased by 18.5%, or Ps.12.2 billion, over 2015. At constant exchange rates, Pay TV revenues for 2016 increased by 5.6% over 2015. This increase principally reflects growth in the subscriber base and higher revenues driven by the cross-marketing of bundled packages and new TV channel packages, particularly in Brazil, Colombia, Peru, Central America and the Caribbean.

EQUIPMENT, ACCESSORIES AND COMPUTER SALES — Equipment, accessories and computer sales revenues for 2016 increased by 23.8%, or Ps.27.6 billion, over 2015.2017. At constant exchange rates, revenues from equipment, accessories and computer salesservices for 20162018 increased by 20.4%0.5% over 2015. This increase principally reflects increases in sales ofhigher-end smartphones, feature phones and other data-enabled devices, handsets, tablets and electronic household appliances, which were driven by new commercial plans and promotions among postpaid and prepaid subscribers, such as handset financing plans.

OTHER SERVICES —Revenues from other services for 2016 increased by 35.8%, or Ps.8.6 billion, over 2015. At constant exchange rates, revenues from other services for 2016 increased by 23.8% over 2015.2017. This increase principally reflects increases in revenues from advertisingour mobile voice and mediafixed and mobile

data services, online content, wireless security services, telephone directorieswhich were partially offset by a decrease in revenues from our fixed voice services.

SALES OF EQUIPMENT, ACCESSORIES AND COMPUTERS.Sales of equipment, accessories and call center services.computer sales revenues for 2018 increased by 21.9%, or Ps.31.3 billion, over 2017. At constant exchange rates, revenues from sales of equipment, accessories and computer sales for 2018 increased by 22.1% over 2017. This increase principally reflects higher sales of data-enabled devices and accessories.

Operating Costs and Expenses

COST OF SALES AND SERVICES —SALES.Cost of sales and serviceswas Ps.180.0 billion for 2016 increased by 15.4%, or Ps.64.82018, an increase of 5.8% from Ps.170.2 billion over 2015, representing 49.7% of operating revenues for 2016, as compared to 47.0% of operating revenues for 2015.in 2017. At constant exchange rates, cost of sales and services for 20162018 increased by 7.0%5.5% over 2015.

Cost of sales was Ps.172.5 billion for 2016, an increase of 18.6% from Ps.145.5 billion in 2015.2017. This increase principally reflects the impact from a depreciation of the Mexican peso and other Latin American currencies against the U.S. dollar, and higher sales of higher- end smartphones provided to our postpaid subscribers and an increase in all countries in which we operate,handset financing plans.

COST OF SERVICES. Cost of services was Ps.328.8 billion for IT services, as well as TV content acquisition, which was partially offset by a decrease in the costs associated with handset subsidies on financing plans we offer to acquire and retain subscribers.


22


Cost of services was Ps.312.6 billion for 2016, an increase of 13.8% from Ps.274.8 billion in 2015. This increase principally reflects an increase in network services

payments to third-party U.S. operators and costs related to our Pay TV operations, network maintenance and labor, as well as an increase in rental and leasing costs associated with third-party mobile-site infrastructure.corporate cost savings program.

COMMERCIAL, ADMINISTRATIVE AND GENERAL EXPENSES —EXPENSES.Commercial, administrative and general expenses for 2016 increased2018 decreased by 13.3%5.6%, or Ps.26.7Ps.13.4 billion, over 2015.2017. As a percentage of operating revenues, commercial, administrative and general expenses were 23.4%21.9% for 2016,2018, as compared to 22.5%23.6% for 2015.2017. At constant exchange rates, commercial, administrative and general expenses for 2016 increased2018 decreased by 5.9%3.8% over 2015.2017. This increasedecrease principally reflects higher advertisinga decrease in costs as we seekrelated to expand our subscriber base,customer services, systems development and higher customer service costs, including increases in the number of customer service centers, back office call centers and employees, as we seek to provide better customer care and quality of service.

Telcel and Telmex, like other Mexican companies, are required by law to pay their employees, in addition to their agreed compensation and benefits, profit sharing in an aggregate amount equal to 10.0% of each entity’s taxable income. Our subsidiaries in Ecuador and Peru are also required to pay employee profit sharing at rates of 15.0% and 10.0% of taxable income, respectively. We account for these profit sharing contributions under commercial, administrative and general expenses.local taxes.

OTHER EXPENSES —EXPENSES.Other expenses for 20162018 decreased by 17.5%, or Ps.0.9Ps.17.4 billion over 2015,2017, principally reflecting unusually high regulatory chargesthe payment in Brazil2017 of an arbitration award granted in 2015.Colombia.

DEPRECIATION AND AMORTIZATION —AMORTIZATION.Depreciation and amortization for 2016 increased2018 decreased by 18.1%2.8%, or Ps.22.8Ps.4.5 billion, over 2015.2017. As a percentage of operating revenues, depreciation and amortization was 15.2%15.0% for 2016,2018, as compared to 14.1%15.7% for 2015.2017. At constant exchange rates, depreciation and amortization for 2016 increased2018 decreased by 8.5%1.8% over 2015. This increase stems, for the most part, from higher capital investments in Argentina, Colombia, Austria and Mexico.2017.

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RESULTS OF OPERATIONS

Operating Income

Operating income for 2016 decreased2018 increased by 22.5%39.4%, or Ps.31.8Ps.39.4 billion, over 2015.2017. Operating margin (operating income as a percentage of operating revenues) was 11.2%13.4% for 2016,2018, as compared to 15.8%9.8% for 2015.2017.

Non-Operating Items

NET INTEREST EXPENSE —EXPENSE.Net interest expense (interest expense less interest income) for 2016 increased2018 decreased by 12.6%22.8%, or Ps.3.3Ps.6.3 billion, over 2015.2017. This increasedecrease principally reflects higher interest expenses duethe favorable resolution of certain tax contingencies.

FOREIGN CURRENCY EXCHANGE LOSS, NET.We recorded a net foreign currency exchange loss of Ps.7.3 billion for 2018, compared to our net foreign currency exchange loss of Ps.13.8 billion for 2017. The loss principally reflects the appreciationdepreciation of some of the currencies in which our indebtedness is denominated, particularly the U.S. dollar.

FOREIGN CURRENCY EXCHANGE LOSS, NET — We recorded a net foreign currency exchange loss of Ps.40.4 billion for 2016, compared to our net foreign currency exchange loss of Ps.79.0 billion for 2015. This loss in both periods principally reflectsEuro and the appreciation of some of the currencies in which our indebtedness is denominated, particularly the U.S. dollar.pound sterling.

VALUATION OF DERIVATIVES, INTEREST COST FROM LABOR OBLIGATIONS AND OTHER FINANCIAL ITEMS, NET —NET.The changes inWe recorded a loss of Ps.10.2 billion for 2018 on the valuation of derivatives, interest cost from labor obligations and other financial items, net, represented a loss of Ps.16.2 billion for 2016, compared to a gain of Ps.21.5 billion for 2015. The net loss in 2016 principally relates to market value losses on derivatives positions we use to offset exchange risk on indebtedness, particularly in connection with the pound sterling, and increased interest cost recognized on labor obligations, which were partially offset by increased dividends from KPN.

EQUITY INTEREST IN NET INCOME OF ASSOCIATED COMPANIES —Our share of the net income of associated companies accounted for under the equity method was Ps.0.2 billion in 2016, as compared to a loss of Ps.1.4Ps.1.9 billion for 2015. This increase2017. The loss in 2018 principally reflects the derecognition of the equity method investmenta derivatives loss, which was partially offset by gains in KPN, which we reclassified as anavailable-for-sale security in June 2015.our monetary position.

INCOME TAX —TAX.Our income tax expense for 2016 decreased2018 increased by 40.6%86.3%, or Ps.7.8Ps.21.5 billion, over 2015.2017. This decrease wasincrease principally reflects higher pretax income due to neta smaller foreign currency exchange losses as a result of the depreciation of the Mexican peso against the currenciesloss in which a portion of our debt is denominated.2018 compared to 2017.

Our effective corporate income tax rate as a percentage of profit before income tax was 48.6%46.0% for 2016,2018, compared to 34.2%43.7% for 2015.2017. This rate differed from the Mexican statutory rate of 30% and changed year over year principally as a result of an increasechanges in permanent items such as local tax inflationaryinflation effects and derivatives.other impacts ofnon-taxable items.

Net Profit

We recorded a net profit of Ps.12.1Ps.54.5 billion for 2016, a decrease2018, an increase of 67.3%69.5%, or Ps.24.9Ps.22.4 billion, over 2015.2017.

 

 


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         RESULTS OF OPERATIONS

SEGMENT RESULTS OF OPERATIONS

We discuss below the operating results of each reportable segment. Note 22Notes 2. z) and 23 to our audited consolidated financial statements describesdescribe how we translate the financial statements of ournon-Mexican subsidiaries.

Exchange rate changes between the Mexican peso and the currencies in which our subsidiaries do businessoperate 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 significantnon-Mexicannon- 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)

MEXICAN PESOS PER FOREIGN CURRENCY UNIT (AVERAGE FOR THE PERIOD)

 
    

2017/2018

     

2018/2019

    
  MEXICAN PESOS PER FOREIGN CURRENCY UNIT (AVERAGE FOR THE PERIOD)    

2017

  

% CHANGE

  

2018

  

% CHANGE

  

2019

 
  2015   

2015/2016

% CHANGE

    2016   

2016/2017

% CHANGE

   2017   
Brazilian real   4.8068   12.1     5.3868   10.2    5.9346  

 

5.9346

 

 

 

(10.8

) 

 

 

5.2937

 

 

 

(7.6

) 

 

 

4.8907

 

  
Colombian peso   0.0058   5.3     0.0061   4.8    0.0064  

 

0.0064

 

 

 

1.6

 

 

 

0.0065

 

 

 

(9.2

) 

 

 

0.0059

 

  
Argentine peso   1.7152   (26.4)     1.2632   (9.0)    1.1489  

 

1.1489

 

 

 

(36.4

) 

 

 

0.7311

 

 

 

(43.8

) 

 

 

0.4110

 

  
U.S. dollar   15.8504   17.7     18.6529   1.5    18.9400  

 

18.9400

 

 

 

1.6

 

 

 

19.2397

 

 

 

0.1

 

 

 

19.2641

 

  
Euro   17.3886   18.7     20.6334   3.5    21.3649  

 

21.3649

 

 

 

6.3

 

 

 

22.7093

 

 

 

(5.0

) 

 

 

21.5642

 

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

 

YEAR ENDED DECEMBER 31, 2019

YEAR ENDED DECEMBER 31, 2019

 
  YEAR ENDED DECEMBER 31, 2017 

OPERATING REVENUES

  

OPERATING INCOME

 
  OPERATING REVENUES  OPERATING INCOME (LOSS) 

(in millions of
Mexican pesos)

 

  

(as a% of total
operating revenues)

 

  

(in millions of
(Mexican pesos)

 

  

 

(as a% of total
operating income)

 

 
  

(in millions of

Mexican pesos)

    (as a % of total
operating revenues)		    

(in millions of

Mexican pesos)

    

(as a % of total

operating income)

     
Mexico Wireless   Ps.        206,771     20.2%     Ps.        50,666     50.6%    

Ps.

237,840

 

 

 

23.6

% 

 

Ps.

67,694

 

 

 

43.7

% 

  
Mexico Fixed   98,485     9.6     7,922     7.9    

 

96,037

 

 

 

9.5

 

 

 

9,732

 

 

 

6.3

 

  
Brazil   215,322     21.1     11,601     11.6    

 

181,778

 

 

 

18.0

 

 

 

28,847

 

 

 

18.6

 

  
Colombia   72,740     7.1     (4,704)     (4.7)    

 

74,636

 

 

 

7.4

 

 

 

15,325

 

 

 

9.9

 

  
Southern Cone   82,344     8.1     11,676     11.7    

 

65,272

 

 

 

6.5

 

 

 

4,008

 

 

 

2.6

 

  
Andean Region   56,571     5.5     5,650     5.6    

 

55,533

 

 

 

5.5

 

 

 

8,023

 

 

 

5.2

 

  
Central America   44,282     4.3     5,252     5.2    

 

46,734

 

 

 

4.6

 

 

 

5,712

 

 

 

3.7

 

  
United States   148,590     14.5     2,915     2.9    

 

155,864

 

 

 

15.5

 

 

 

2,968

 

 

 

1.9

 

  
Caribbean   35,215     3.4     4,752     4.7    

 

35,718

 

 

 

3.5

 

 

 

5,741

 

 

 

3.7

 

  
Europe   93,644     9.2     4,524     4.5    

 

98,420

 

 

 

9.8

 

 

 

8,688

 

 

 

5.6

 

  
Eliminations   (32,330)    (3.0)    (111)    (0.0)   

 

(40,484)

 

 

 

(3.9

) 

 

 

(1,897

) 

 

 

(1.2

) 

  
Total    Ps.      1,021,634     100.0%     Ps.      100,143     100.0%   

 

Ps.        1,007,348

 

 

 

100

% 

 

 

Ps.        154,841

 

 

 

100

% 

 


25

24


LOGO

   YEAR ENDED DECEMBER 31, 2016 
   OPERATING REVENUES   OPERATING INCOME 
    

(in millions of

Mexican pesos)

      

(as a % of total

operating revenues)

      

(in millions of

Mexican pesos)

      

(as a % of total

operating income)

    
Mexico Wireless   Ps.        203,567        20.9%        Ps.        48,220        44.0%     
Mexico Fixed   102,216        10.5        12,276        11.2     
Brazil   197,357        20.2        6,325        5.8     
Colombia   67,589        6.9        11,210        10.2     
Southern Cone   72,330        7.4        8,317        7.6     
Andean Region   56,131        5.8        6,087        5.6     
Central America   42,421        4.3        3,831        3.5     
United States   140,856        14.4        1,221        1.1     
Caribbean   36,498        3.7        6,143        5.6     
Europe   86,979        8.9        5,389        4.9     
Eliminations   (30,532)        (3.0)        591        0.5     
Total   Ps.        975,412     100.0%     Ps.        109,610     100.0%   

   YEAR ENDED DECEMBER 31, 2015 
   OPERATING REVENUES   OPERATING INCOME 
    

(in millions of

Mexican pesos)

      

(as a % of total

operating revenues)

      

(in millions of

Mexican pesos)

      

(as a % of total

operating income)

    
Mexico Wireless   Ps.        204,825        22.9%        Ps.        70,726        50.0%     
Mexico Fixed   101,078        11.3        15,947        11.3     
Brazil   178,174        19.9        10,879        7.7     
Colombia   66,137        7.4        13,362        9.4     
Southern Cone   68,948        7.7        9,185        6.5     
Andean Region   51,959        5.8        7,853        5.6     
Central America   34,752        3.9        1,750        1.2     
United States   110,654        12.4        1,294        0.9     
Caribbean   29,658        3.3        3,891        2.8     
Europe   72,681        8.1        6,205        4.4     
Eliminations   (25,128)        (2.7)        321        0.2     
Total   Ps.        893,738     100.0%     Ps.        141,413     100.0%   


25RESULTS OF OPERATIONS

 


YEAR ENDED DECEMBER31, 2018

 
  

OPERATING REVENUES

  

OPERATING INCOME

 
   

(in millions of
Mexican pesos)

 

  

 

(as a% of total
operating revenues)

 

  

(in millions of
Mexican pesos)

 

  

 

(as a% of total
operating income)

 

 
     

Mexico Wireless

 

Ps.

224,557

 

 

 

21.6

% 

 

Ps.

57,451

 

 

 

41.2

% 

     

Mexico Fixed

 

 

96,081

 

 

 

9.3

 

 

 

8,086

 

 

 

5.8

 

     

Brazil

 

 

193,306

 

 

 

18.6

 

 

 

23,495

 

 

 

16.8

 

     

Colombia

 

 

75,805

 

 

 

7.3

 

 

 

14,389

 

 

 

10.3

 

     

Southern Cone

 

 

102,350

 

 

 

9.9

 

 

 

16,976

 

 

 

12.2

 

     

Andean Region

 

 

55,787

 

 

 

5.4

 

 

 

5,004

 

 

 

3.6

 

     

Central America

 

 

45,033

 

 

 

4.3

 

 

 

4,868

 

 

 

3.5

 

     

United States

 

 

153,266

 

 

 

14.8

 

 

 

2,665

 

 

 

1.9

 

     

Caribbean

 

 

36,640

 

 

 

3.5

 

 

 

5,812

 

 

 

4.2

 

     

Europe

 

 

100,716

 

 

 

9.7

 

 

 

4,732

 

 

 

3.4

 

     

Eliminations

 

 

(45,333)

 

 

 

(4.4

) 

 

 

(3,921

) 

 

 

(2.9

) 

     

Total

 

 

Ps.    1,038,208

 

 

 

100.0

% 

 

 

Ps.    139,557

 

 

 

100.0

% 

YEAR ENDED DECEMBER 31, 2017

 
  

OPERATING REVENUES

  

OPERATING INCOME

 
   

(in millions of

Mexican pesos)

  

(as a % of total

operating revenues)

  

(in millions of

Mexican pesos)

  

(as a % of total

operating income)

 
     

Mexico Wireless

 

Ps.

206,771

 

 

 

20.2

% 

 

Ps.

50,666

 

 

 

50.6

% 

     

Mexico Fixed

 

 

98,485

 

 

 

9.6

 

 

 

7,922

 

 

 

7.9

 

     

Brazil

 

 

215,322

 

 

 

21.1

 

 

 

11,601

 

 

 

11.6

 

     

Colombia

 

 

72,740

 

 

 

7.1

 

 

 

(4,704

) 

 

 

(4.7

) 

     

Southern Cone

 

 

82,344

 

 

 

8.1

 

 

 

11,676

 

 

 

11.7

 

     

Andean Region

 

 

56,571

 

 

 

5.5

 

 

 

5,650

 

 

 

5.6

 

     

Central America

 

 

44,282

 

 

 

4.3

 

 

 

5,252

 

 

 

5.2

 

     

United States

 

 

148,590

 

 

 

14.5

 

 

 

2,915

 

 

 

2.9

 

     

Caribbean

 

 

35,215

 

 

 

3.4

 

 

 

4,752

 

 

 

4.7

 

     

Europe

 

 

93,644

 

 

 

9.2

 

 

 

4,524

 

 

 

4.5

 

     

Eliminations

 

 

(32,330)

 

 

 

(3.0

) 

 

 

(111

) 

 

 

(0.0

) 

     

Total

 

 

Ps.        1,021,634

 

 

 

100.0

% 

 

 

Ps.        100,143

 

 

 

100.0

% 

26

         RESULTS OF OPERATIONS

LOGO

 

INTERPERIOD SEGMENT COMPARISONS

The following discussion addresses the financial performance of each of our reportable segments, first by comparing results for 20172019 and 20162018 and then by comparing results for 20162018 and 2015. 2017.

In theyear-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 2223 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 ournon-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.

20172019 COMPARED TO 20162018

Mexico Wireless

The number of net prepaid wireless subscribers for 20172019 increased by 0.2%1.0% over 2016,2018, and the number of net postpaid wireless subscribers increased by 6.2%, resulting in a netan increase in the total number of wireless subscribers in Mexico of 1.2%1.9%, or 902 thousand,1.5 million, to approximately 73.977.0 million as of December 31, 2017.2019.

Segment operating revenues for 20172019 increased by 1.6%5.9% over 2016.2018. Adjusted segment operating revenues for 20172019 increased by 6.5% over 2018. This increase in segment operating revenues principally reflects an increase in mobile

data revenues, which were partially offset by a decrease in wireless voice revenues.

Segment operating income for 2019 increased by 17.8% over 2018. Adjusted segment operating income for 2019 increased by 20.3% over 2018.

Segment operating margin was 28.5% in 2019, as compared to 25.6% in 2018. Adjusted segment operating margin for this segment was 35.1% in 2019, as compared to 31.1% in 2018. This increase in segment operating margin for 2019 principally reflects our corporate costs savings program in operations, networks and maintenance, which we successfully implemented without affecting the quality of our services and coverage.

Mexico Fixed

The number of fixed voice RGUs in Mexico for 2019 decreased by 3.3% over 2018, and the number of broadband RGUs in Mexico increased by 0.7%, resulting in a decrease in total fixed RGUs in Mexico of 1.5% over 2018, or 345 thousand, to approximately 22.0 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 0.05% over 2018. Adjusted segment operating revenues for 2019 decreased by 2.5% over 2018. This decrease in segment operating revenues principally reflects a decrease in fixed voice revenues of 5.6%, driven by RGU disconnections, which was partially offset by higher revenues from corporate networks services and broadband.

Segment operating income for 2019 increased by 20.4% over 2018. Adjusted segment operating income for 2019 decreased by 34.5% over 2018. This decrease principally reflects increases in the contractual salary increases to our employees, and higher information technology and customer service costs.

Segment operating margin was 10.1% in 2019, as compared to 8.4% in 2018. Adjusted segment operating margin was 2.5% in 2019, as compared to 3.7% in 2018. This decrease in segment operating margin for 2019 principally reflects increases in costs associated with customer service and service quality improvements, as well as networks maintenance. Such costs were principally attributable to increased labor costs.

27

LOGO

RESULTS OF OPERATIONS

Brazil

The number of prepaid wireless subscribers for 2019 decreased by 18.0% over 2018, and the number of postpaid wireless subscribers increased by 17.0%, resulting in a decrease in the total number of wireless subscribers in Brazil of 3.4%, or 1.9 million, to approximately 54.5 million as of December 31, 2019. The number of fixed voice RGUs for 2019 decreased by 5.2% over 2018, the number of broadband RGUs decreased by 1.9%, and the number of Pay TV RGUs decreased by 5.7%, resulting in a decrease in total fixed RGUs in Brazil of 3.5%, or 1.2 million, to approximately 34.0 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 6.0% over 2018. Adjusted segment operating revenues for 2019 increased by 1.9% over 2018. This increase in segment operating revenues principally reflects higher mobile data and fixed data revenues of 17.0% and 7.7%, respectively, in 2019 over 2018. The increase in mobile data revenues in 2019 principally reflects the increased usage of social networking platforms, cloud services and content, and fixed data revenues increased principally due to an increase in broadband RGUs and corporate network services. The increase in segment operating revenues was partially offset by a decrease in mobile voice, fixed voice and Pay TV revenues of 6.6%, 12.0% and 7.6%, respectively, in 2019 over 2018, driven by RGUs disconnections and lower traffic.

Segment operating income for 2019 increased by 22.8% over 2018. Adjusted segment operating income for 2019 increased by 36.0% over 2018.

Segment operating margin was 15.9% in 2019, as compared to 12.2% in 2018. Adjusted segment operating margin was 15.1% in 2019, as compared to 11.3% in 2018. This increase in segment operating margin for 2019 principally reflects improved cost management as a result of our cost savings program.

Colombia

The number of prepaid wireless subscribers for 2019 increased by 4.4% over 2018, and the number of postpaid wireless subscribers increased by 6.0%, resulting in an increase in the total number of wireless subscribers in Colombia of 4.8%, or 1.4 million, to approximately 31.1 million as of December 31, 2019. The number of fixed

voice RGUs for 2019 increased by 7.3% over 2018, the number of broadband RGUs increased by 6.6% and the number of Pay TV RGUs increased by 4.7%, resulting in an increase in total fixed RGUs in Colombia of 6.2%, or 441 thousand, to approximately 7.6 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 1.5% over 2018. Adjusted segment operating revenues for 2019 increased by 9.3% over 2018. 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 2019 increased by 6.5% over 2018. Adjusted segment operating income for 2019 increased by 19.8% over 2018.

Segment operating margin was 20.5% in 2019, as compared to 19.0% in 2018. Adjusted segment operating margin was 25.6% in 2019, as compared to 23.3% in 2018. This increase in segment operating margin for 2019 principally reflects a decrease in costs and expenses under our cost savings program.

Southern Cone—Argentina, Chile, Paraguay and Uruguay

The number of prepaid wireless subscribers for 2019 increased by 1.2% over 2016.2018, and the number of postpaid wireless subscribers increased by 2.8%, resulting in an increase in the total number of wireless subscribers in our Southern Cone segment of 1.7%, or 536 thousand, to approximately 31.5 million as of December 31, 2019. The number of fixed voice RGUs for 2019 increased by 19.5% over 2018, the number of broadband RGUs increased by 22.5%, and the number of Pay TV RGUs increased by 4.3%, resulting in an increase in total fixed RGUs in our Southern Cone segment of 14.4%, or 316 thousand, to approximately 2.5 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 36.2% over 2018. Adjusted segment operating revenues for 2019 decreased by 4.1% over 2018. This decrease principally reflects a decrease of 5.8% in adjusted operating revenues in Argentina, Paraguay and Uruguay. In Argentina, an

28

LOGO

increase in fixed data, corporate networks and broadband, and fixed voice were offset by a decrease in mobile voice and data. 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 2019 decreased by 76.4% over 2018. Adjusted segment operating income for 2019 decreased by 4.7% over 2018. This decrease principally reflects a decline in operating income from our operations in Chile related to an interconnection rate reduction and a contraction of mobile services revenues due to competitive pressures. Additionally, services revenues declined in Argentina due to adverse economic conditions.

Segment operating margin was 6.1% in 2019, as compared to 16.6% in 2018. Adjusted segment operating margin was 18.5% in 2019, which decreased in comparison to 20.2% in 2018. This decrease in the segment operating margin for 2019 principally reflects a decrease in revenues coupled with an increase in costs and expenses, including higher wages and salaries and other expense items as a result of inflation or exchange rates.

Andean Region—Ecuador and Peru

The number of prepaid wireless subscribers for 2019 decreased by 2.6% over 2018, and the number of postpaid wireless subscribers increased by 1.6%, resulting in a decrease in the total number of wireless subscribers in our Andean Region segment of 1.2%, or 239 thousand, to approximately 20.1 million as of December 31, 2019. The number of fixed voice RGUs for 2019 increased by 2.0% over 2018, the number of broadband RGUs increased by 21.8% and the number of Pay TV RGUs increased by 5.5%, resulting in an increase in total fixed RGUs in our Andean Region segment of 10.4%, or 193 thousand, to approximately 2.0 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 0.5% over 2018. Adjusted segment operating revenues for 2019 increased by 0.4% over 2018. This increase principally reflects an increase of 0.9% in Ecuador and a decrease of 0.05% in Peru. This increase was driven by an increase in revenues from broadband and Pay TV services. Our fixed voice operations had a slight increase considering this a growing market in Ecuador. In Peru, fixed revenues

increased, however, they were partially offset by lower revenues on mobile services.

Segment operating income for 2019 increased by 60.3% over 2018. Adjusted segment operating income for 2019 increased by 12.2% over 2018. This increase principally reflects an increase of 13.2% in Peru and an increase of 11.7% in Ecuador.

Segment operating margin was 14.4% in 2019, as compared to 9.0% in 2018. Adjusted segment operating margin was 17.1% in 2019, as compared to 15.1% in 2018. This increase in the segment operating margin for 2019 principally reflects gains from our cost savings program.

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

The number of prepaid wireless subscribers for 2019 increased by 8.0% over 2018, and the number of postpaid wireless subscribers increased by 7.0%, resulting in an increase in the total number of wireless subscribers in our Central America segment of 7.8%, or 1.1 million, to approximately 15.5 million as of December 31, 2019. The number of fixed voice RGUs for 2019 increased by 5.4% over 2018, the number of broadband RGUs decreased by 64.0% and the number of Pay TV RGUs increased by 1.4%, resulting in a decrease in total fixed RGUs in our Central America segment of 31.8%, or 2.0 million, to approximately 4.4 million as of December 31, 2019.

Segment operating revenues for 2019 increased by 3.8% over 2018. Adjusted segment operating revenues for 2019 decreased by 3.8% over 2018.

Segment operating income for 2019 increased by 17.3% over 2018. Adjusted segment operating income for 2019 increased by 28.1% over 2018. This increase principally reflects the acquisition of Telefónica Guatemala, partially offset by adverse business conditions, particularly in Nicaragua and El Salvador.

Segment operating margin was 12.2% in 2019, as compared to 10.8% in 2018. Adjusted segment operating margin was 13.7% in 2019, as compared to 12.2% in 2018. This increase in segment operating margin for 2019 principally reflects lower costs compared to 2018, including theone-time charge related to the settlement of an interconnection dispute in Guatemala and an unusual

29

LOGO

RESULTS OF OPERATIONS

charge arising from a government challenge to tax credits in Honduras in 2018.

Caribbean—Dominican Republic and Puerto Rico

The number of prepaid wireless subscribers for 2019 increased by 6.7% over 2018, and the number of postpaid wireless subscribers increased by 4.8%, resulting in an increase in the total number of wireless subscribers in our Caribbean segment of 6.1%, or 358 thousand, to approximately 6.2 million as of December 31, 2019. The number of fixed voice RGUs for 2019 decreased by 4.3% over 2018, the number of broadband RGUs increased by 3.1% and the number of Pay TV RGUs increased by 3.0%, resulting in a decrease in total fixed RGUs in our Caribbean segment of 0.7%, or 18 thousand, to approximately 2.5 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 2.5% over 2018. Adjusted segment operating revenues for 2019 decreased by 5.2% over 2018. This decrease in segment operating revenues principally reflects a decrease in revenues in Puerto Rico which resulted from extraordinary revenue items booked in 2018 from government aid received and insurance proceeds resulting from the effects of Hurricane Maria, which were substantially offset by an increase in all lines of revenues except in fixed voice revenues in the Dominican Republic. We analyze segment results in U.S. dollars because it is the functional currency of our operations in Puerto Rico, and the currency of the Dominican Republic is relatively stable against the U.S. dollar.

Segment operating income for 2019 decreased by 1.2% over 2018. Adjusted segment operating income for 2019 decreased by 17.6% over 2018. This decrease principally reflects a decrease of 1024.9% in Puerto Rico and an increase of 11.3% in the Dominican Republic.

Segment operating margin was 16.1% in 2019, as compared to 15.9% in 2018. Adjusted segment operating margin was 14.1% in 2019, as compared to 16.3% in 2018. This decrease in segment operating margin for 2019 principally reflects lower operating revenues in Puerto Rico, partially offset by increased revenues and our cost savings program in the Dominican Republic.

United States

The number of prepaid wireless subscribers for 2019 decreased by 3.7% over 2018, or 811 thousand, to approximately 20.9 million total wireless subscribers in the United States as of December 31, 2019.

Segment operating revenues for 2019 increased by 1.7% over 2018. Adjusted segment operating revenues for 2019 increased by 1.6% over 2018. 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 2019 increased by 11.4% over 2018. Adjusted segment operating income for 2019 increased by 6.0% over 2018.

Segment operating margin was 1.9% in 2019, as compared to 1.7% in 2018. Adjusted segment operating margin was 7.1% in 2019, as compared to 6.8% in 2018. This increase in segment operating margin for 2019 principally reflects better controls over commercial, operational and administrative costs.

Europe

The number of prepaid wireless subscribers for 2019 decreased by 9.4% over 2018, and the number of postpaid wireless subscribers increased by 4.4%, resulting in an increase in the total number of wireless subscribers in our Europe segment of 1.3%, or 268 thousand, to approximately 21.3 million as of December 31, 2019. The number of fixed voice RGUs for 2019 decreased by 3.6% over 2018, the number of broadband RGUs decreased by 0.7% and the number of Pay TV RGUs increased by 1.8%, resulting in a decrease in total fixed RGUs in our Europe segment of 1.0%, or 59 thousand, to approximately 6.1 million as of December 31, 2019.

Segment operating revenues for 2019 decreased by 2.3% over 2018. Adjusted segment operating revenues for 2019 increased by 2.9% over 2018. This increase in segment operating revenues principally reflects an increase in corporate networks, postpaid mobile data, and an increase in Pay TV revenues. We analyze segment results in euros because it is the functional currency in our operations in Europe.

Segment operating income for 2019 increased by 83.6% over 2018. Adjusted segment operating income for 2019 increased by 81.5% over 2018.

30

LOGO

Segment operating margin was 8.8% in 2019, as compared to 4.7% in 2018. Adjusted segment operating margin was 8.8% in 2019, as compared to 4.8% in 2018. This increase in segment operating margin for 2019 principally reflects our corporate cost savings program in all countries and improved performance in some countries.

2018 COMPARED TO 2017

Mexico Wireless

The number of prepaid wireless subscribers for 2018 increased by 1.4% over 2017, and the number of postpaid wireless subscribers increased by 5.8%, resulting in an increase in the total number of wireless subscribers in Mexico of 2.2%, or 1.5 million, to approximately 75.0 million as of December 31, 2018.

Segment operating revenues for 2018 increased by 8.6% over 2017. Adjusted segment operating revenues for 2018 increased by 11.4% over 2017. This increase in segment operating revenues principally reflects an increase of 18.9%11.7% in mobile data revenues, driven by increased use of value-added services by our wireless subscribers, including activity from messaging, content downloading, mobile applications and social media, and an increase in revenues from service plans offering higher data capacity. The increase in segment operating revenues was partially offset by a decrease of 24.0% in mobile voice revenues, reflecting a decrease in the average wireless rates per user.

Segment operating income for 20172018 increased by 5.1%13.4% over 2016.2017. Adjusted segment operating income for 20172018 increased by 0.9%20.2% over 2016.2017.

Segment operating margin was 24.5%25.6% in 2017,2018, as compared to 23.7%24.5% in 2016.2017. Adjusted segment operating margin for this segment was 31.1% in 2018, as compared to 28.8% in 2017, which remained stable2017. This increase in comparison to 28.9% in 2016. The segment operating margin in 2017for 2018 principally reflects costs related to interconnection rates, licensing fees, mobile site infrastructure rentals, maintenance and roaming charges.

Mexico Fixed

The number of fixed voice RGUs in Mexico for 2017 decreased2018 increased by 2.8%1.0% over 2016,2017, and the number of broadband RGUs in Mexico increased by 0.4%3.8%, resulting in a decreasean increase in total fixed RGUs in Mexico of 1.5%2.2% over 2016,2017, or 327486 thousand, to approximately 21.922.0 million as of December 31, 2017.2018.

Segment operating revenues for 20172018 decreased by 3.7%2.4% over 2016.2017. Adjusted segment operating revenues for 20172018 decreased by 3.9%3.8% over 2016.2017. This decrease in segment

operating revenues principally reflects a falldecrease in fixed voice revenues of 8.2%4.4%, driven by RGU disconnections, a decrease in long-distance calls and a fall in long-distance calls. The decrease in segment operating revenues was partially offset by an increase in fixed data revenues of 2.9%0.7%, principally due towhich was partially offset by higher revenues from broadband and corporate network services.

Segment operating income for 2017 decreased2018 increased by 35.5%2.1% over 2016.2017. Adjusted segment operating income for 20172018 decreased by 49.1%18.1% over 2016.2017. This decrease principally reflects lower revenues from long-distance services and equipment sales.

Segment operating margin was 8.0%8.4% in 2017,2018, as compared to 12.0%8.0% in 2016.2017. Adjusted segment operating margin was 4.3%3.7% in 2017,2018, as compared to 8.3%4.3% in 2016. The2017. This decrease in the segment operating margin in 2017for 2018 principally reflects increases in costs associated with customer service and service quality improvements, as well as network maintenance.


26


Brazil

The number of net prepaid wireless subscribers for 20172018 decreased by 7.6%14.9% over 2016,2017, and the number of net postpaid wireless subscribers increased by 11.1%15.6%, resulting in a net decrease in the total number of wireless subscribers in Brazil of 1.9%4.4%, or 1.12.6 million, to approximately 59.056.0 million as of December 31, 2017.2018. The number of fixed voice RGUs for 20172018 decreased by 2.8%5.0% over 2016,2017, the number of broadband RGUs increased by 4.2%5.0%, and the number of Pay TV RGUs decreased by 5.3%3.1%, resulting in a decrease in total fixed RGUs in Brazil of 2.2%1.7%, or 812619 thousand, to approximately 35.935.0 million as of December 31, 2017.2018.

Segment operating revenues for 2017 increased2018 decreased by 9.1%10.2% over 2016.2017. Adjusted segment operating revenues for 2017 decreased2018 increased by 1.4%0.5% over 2016.2017. This decreaseincrease in segment operating revenues principally reflects a fall in mobile voice, fixed voice and Pay TV revenues of 18.8%, 15.1% and 0.4%, respectively, in 2017 over 2016, driven by RGU disconnections and lower traffic reflecting a decrease in disposable income following an overall economic downturn in the country. The decrease in segment operating revenues was partially offset by higher mobile data and fixed data revenues of 28.1%31.0% and 5.2%7.6%, respectively, in 20172018 over 2016. Mobile2017. The increase in mobile data revenues increasedin 2018 principally due toreflects the usage of social networking platforms, cloud services and content, and fixed data revenues increased principally due to an increase in broadband RGUs and corporate network services. The increase in segment operating revenues was partially offset by a decrease in mobile voice, fixed voice and Pay TV revenues of 31.9%, 17.5% and 5.2%, respectively, in 2018 over 2017, driven by RGU disconnections and lower traffic reflecting a decrease in disposable income.

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Segment operating income for 20172018 increased by 83.4%102.5% over 2016.2017. Adjusted segment operating income for 20172018 increased by 81.1%172.4% over 2016.2017. This increase principally reflects the favorable resolution of certain tax contingencies.

Segment operating margin was 5.4%12.2% in 2017,2018, as compared to 3.2%5.4% in 2016.2017. Adjusted segment operating margin was 4.2%11.3% in 2017,2018, as compared to 2.3%4.2% in 2016. The2017. This increase in segment operating margin in 2017for 2018 principally reflects synergy gains in marketing, network maintenance, information technology, subscriber acquisition and customer service related to the ongoing integration of our three Brazilian subsidiaries, which have collectively driven our costs down.

Colombia

The number of net prepaid wireless subscribers for 20172018 increased by 0.4% over 2016,2017, and the number of net postpaid wireless subscribers increased by 5.0%3.7%, resulting in a netan increase in the total number of wireless subscribers in Colombia of 1.4%1.1%, or 399328 thousand, to approximately 29.430.0 million as of December 31, 2017.2018. The number of fixed voice RGUs for 20172018 increased by 11.1%10.1% over 2016,2017, the number of broadband RGUs increased by 8.1%6.4% and the number of Pay TV RGUs increased by 3.3%2.8%, resulting in an increase in total fixed RGUs in Colombia of 7.1%6.2%, or 450418 thousand, to approximately 6.87.1 million as of December 31, 2017.2018.

Segment operating revenues for 20172018 increased by 7.6%4.2% over 2016.2017. Adjusted segment operating revenues for 20172018 increased by 2.8%2.6% over 2016.2017. This increase in segment operating revenues principally reflects increases in fixed data revenues, mobile data revenues, fixed voice revenues and Pay TV revenues, which increased by 9.7%8.9%, 14.3%3.2%, 11.7%9.0% and 15.9%8.6%, respectively, in 2017,2018, principally due to an increase in sales of bundled packages of wireless services, higher demand for data plans and an increase in subscribers for internet services. The increase in segment operating revenues was partially offset by a decrease of 13.9%8.1% in mobile voice revenues, driven by more competitive commercial offerings in response to pricing pressure from competitors.

Segment operating income for 2018 was Ps.14.4 billion, compared to a segment operating loss of Ps 4.7 billion in 2017. This change is principally due to the payment

in 2017 decreased by 142.0% over 2016.of an arbitration award granted in Colombia. Adjusted segment operating income for 2017 decreased by 125.2% over 2016. Excluding the effects of the approximately U.S.$1.0 billion arbitration payment in Colombia, adjusted segment operating income for 20172018 increased by 15.2%.576.5% over 2017.

Segment operating margin was (6.5)%19.0% in 2017,2018, as compared to 16.6%(6.5%) in 2016.2017. Adjusted segment operating margin was (5.0)%23.3% in 2017,2018, as compared to 20.5%(5.0%) in 2016. The decrease2017. This increase in segment operating margin for 20172018 principally reflects higher costs related to the arbitration payment in Colombia, content licensing and maintenance of our networks, which was partially offset by Comcel’s cost savings program.


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         RESULTS OF OPERATIONS

Southern Cone — Cone—Argentina, Chile, Paraguay and Uruguay

The number of net prepaid wireless subscribers for 2017 increased2018 decreased by 2.0%1.4% over 2016,2017, and the number of net postpaid wireless subscribers increased by 2.9%1.7%, resulting in a net increasedecrease in the total number of wireless subscribers in our Southern Cone segment of 2.3%0.3%, or 699105 thousand, to approximately 31.131.0 million as of December 31, 2017.2018. The number of fixed voice RGUs for 20172018 increased by 4.6%8.3% over 2016,2017, the number of broadband RGUs increased by 9.1%12.6%, and the number of Pay TV RGUs increased by 0.6%6.1%, resulting in an increase in total fixed RGUs in our Southern Cone segment of 4.2%8.7%, or 81175 thousand, to approximately 2.02.2 million as of December 31, 2017.2018.

Segment operating revenues for 20172018 increased by 13.8%24.3% over 2016.2017. Adjusted segment operating revenues for 2017

2018 increased by 19.0%17.4% over 2016.2017. This increase principally reflects an aggregate increase of 22.5%33.4% in Argentina, Paraguay and Uruguay and an increase of 10.9% in Chile.Uruguay. This increase was driven by higher data usage, particularly in the form of mobile data, video streaming, content downloading and service package purchases in Argentina, Paraguay and Uruguay and in the form of Pay TV, corporate network and broadband services in Chile. 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 20172018 increased by 40.4%45.4% over 2016.2017. Adjusted segment operating income for 20172018 increased by 56.2%52.1% over 2016.2017. This increase principally reflects an increase in adjusted operating income of 16.8%41.0% in Argentina, Paraguay and Uruguay, which was partially offset by an increasea decrease in adjusted operating loss of 30.8%16.2% in Chile.

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Segment operating margin was 14.2%16.6% in 2017,2018, as compared to 11.5%14.2% in 2016.2017. Adjusted segment operating margin was 17.0%20.2% in 2017,2018, which remained stableincreased in comparison to 17.0% in 2016. The2017. This increase in the segment operating margin in 2017for 2018 principally reflectedreflects the cost saving programs of our subsidiaries in the Southern Cone.

Andean Region — Region—Ecuador and Peru

The number of net prepaid wireless subscribers for 20172018 decreased by 4.3%0.1% over 2016,2017, and the number of net postpaid wireless subscribers increased by 2.5%0.2%, resulting in a net decrease in the total number of wireless subscribers in our Andean Region segment of 2.2%0.04%, or 4508 thousand, to approximately 20.420.3 million as of December 31, 2017.2018. The

number of fixed voice RGUs for 2017 decreased2018 increased by 7.1%2.9% over 2016,2017, the number of broadband RGUs increased by 5.4%12.4% and the number of Pay TV RGUs decreased by 7.8%3.2%, resulting in a decreasean increase in total fixed RGUs in our Andean Region segment of 3.0%5.2%, or 5591 thousand, to approximately 1.8 million as of December 31, 2017.2018.

Segment operating revenues for 2017 increased2018 decreased by 0.8%1.4% over 2016.2017. Adjusted segment operating revenues for 20172018 decreased by 2.4%2.0% over 2016.2017. This decrease principally reflects a decrease of 8.9%0.1% in Ecuador which was partially offset by an increaseand a decrease of 3.6%4.3% in Peru. This decrease was driven by lower revenues from our wireless and fixed voice operations, an increase in tax obligations and bad debt expenses in Ecuador and competitive pricing practices, bundled packages and smartphones subsidies in Peru, which werewas partially offset by higher revenues from mobile data and higher revenues from fixed data, especially broadband and corporate data services.

Segment operating income for 20172018 decreased by 7.2%11.4% over 2016.2017. Adjusted segment operating income for 2017 increased2018 decreased by 0.9%5.5% over 2016.2017. This increasedecrease principally reflects an increase of 138.7% in Peru, which was partially offset by a decrease of 21.4%15.4% in Peru and a decrease of 0.1% in Ecuador.

Segment operating margin was 10.0%9.0% in 2017,2018, as compared to 10.8%10.0% in 2016.2017. Adjusted segment operating margin was 15.9%15.1% in 2017,2018, as compared to 15.1%15.9% in 2016.2017. This increasedecrease in the segment operating margin for 2018 principally reflects gains from our cost-savingscost savings program and lower direct taxes in Ecuador as well as operation, information technology, marketing and sales costs, which

was partially offset by postpaid subscriber acquisition costs driven by a more aggressively competitive environment in Peru.

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

The number of net prepaid wireless subscribers for 2017 increased2018 decreased by 5.4%11.3% over 2016,2017, and the number of net postpaid wireless subscribers increaseddecreased by 6.7%1.5%, resulting in a net increasedecrease in the total number of wireless subscribers in our Central America segment of 5.6%9.8%, or approximately 842 thousand,1.6 million, to approximately 15.914.3 million as of December 31, 2017.2018. The number of fixed voice RGUs for 2017 decreased2018 increased by 0.1%8.7% over 2016,2017, the number of broadband RGUs increased by 15.1%16.0% and the number of Pay TV RGUs increased by 3.9%3.2%, resulting in an increase in total fixed RGUs in our Central America segment of 7.8%11.3%, or 419654 thousand, to approximately 5.86.4 million as of December 31, 2017.2018.


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Segment operating revenues for 20172018 increased by 4.4%1.7% over 2016.2017. Adjusted segment operating revenues for 20172018 were unchanged over 2017.

increasedSegment operating income for 2018 decreased by 3.2%7.3% over 2016.2017. Adjusted segment operating income for 2018 decreased by 6.7% over 2017. This increasedecrease principally reflects higher mobile data, fixed dataa decrease of 14.9% in Guatemala and Pay TV revenuesa decrease of 131.5% in Central America,Honduras, which was partially offset by decreases in mobile voice and fixed voice in Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica and decreases in mobile voice and Pay TV in Panama. For this purpose, we analyze adjusted segment results in U.S. dollars because it is the functional currency for our operations in El Salvador and Panama, and the currencies in Costa Rica, Guatemala, Honduras and Nicaragua are relatively stable against the U.S. dollar.

Segment operating income for 2017 increased by 37.1% over 2016. Adjusted segment operating income for 2017 increased by 41.2% over 2016. This increase principally reflects an increase of 4.2% in Guatemala, an increase of 10.2%18.3% in El Salvador, an increase of 56.2% in Honduras, an increase of 41.2%3.1% in Nicaragua, an increase of 30.0%30.2% in Panama and an increase of 1.4%27.7% in Costa Rica.

Segment operating margin was 11.9%,10.8% in 2018, as compared to 9.0%11.9% in 2016.2017. Adjusted segment operating margin was 13.1%12.2% in 2017,2018, as compared to 9.6%13.1% in 2016.2017. This increasedecrease in segment operating margin for 2018 principally reflects lowerhigher costs related to maintenance, customer servicedoubtful accounts, aone-time charge related to the settlement of an interconnection dispute in Guatemala and customer acquisition.an unusual charge arising from a government challenge to tax credits in Honduras.

Caribbean — Caribbean—Dominican Republic and Puerto Rico

The number of net prepaid wireless subscribers for 20172018 increased by 3.0%4.8% over 2016,2017, and the number of net postpaid wireless subscribers increased by 4.1%3.7%, resulting in a net an

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RESULTS OF OPERATIONS

increase in the total number of wireless subscribers in our Caribbean segment of 3.4%4.4%, or approximately 184250 thousand, to approximately 5.65.9 million as of December 31, 2017.2018. The number of fixed voice RGUs for 20172018 decreased by 1.3%8.1% over 2016,2017, the number of broadband RGUs increaseddecreased by 1.6%6.4% and the number of Pay TV RGUs increased by 11.4%3.9%, resulting in an increasea decrease in total fixed RGUs in our Caribbean segment of 1.4%5.7%, or 37154 thousand, to approximately 2.72.6 million as of December 31, 2017.2018.

Segment operating revenues for 2017 decreased2018 increased by 3.5%4.0% over 2016.2017. Adjusted segment operating revenues for 2017 decreased by 5.5% over 2016. This decrease in segment operating revenues principally reflects lower revenues from wireless and fixed voice services in Puerto Rico, which was partially offset by an increase in segment mobile data revenues and an increase in Pay TV revenues in the Dominican Republic. We analyze segment results in U.S. dollars because it is the functional currency in our

operations in Puerto Rico, and the currency in the Dominican Republic is relatively stable against the U.S. dollar.

Segment operating income for 2017 decreased by 22.6% over 2016. Adjusted segment operating income for 2017 decreased by 23.8% over 2016. This decrease principally reflects a decrease of 5.7% in the Dominican Republic and a decrease of 102.2% in Puerto Rico.

Segment operating margin was 13.5% in 2017, as compared to 16.8% in 2016. Adjusted segment operating margin was 13.8% in 2017, as compared to 17.2% in 2016. This decrease principally reflects higher extraordinary costs related to the reconstruction and operation of our networks in the aftermath of Hurricane Maria and bad debt expense in Puerto Rico and higher costs related to upgrades to our information technology systems in the Dominican Republic, which were partially offset by our corporate cost-savings program.

United States

The number of net prepaid wireless subscribers for 2017 decreased by 11.3% over 2016, or approximately 2.9 million, to approximately 23.1 million total net wireless subscribers in the United States as of December 31, 2017.

Segment operating revenues for 20172018 increased by 5.5%2.6% over 2016. Adjusted segment operating revenues for 2017 increased by 4.1% over 2016.2017. This increase in segment operating revenues principally reflects higher mobile voice and data usage and revenues driven by the success of existing unlimited data plans, principally those offered under our Straight Talk brand and our recently acquired Walmart Family Mobile brand.

Segment operating income for 2017 increased by 138.8% over 2016. Adjusted segment operating income for 2017 increased by 15.0% over 2016.

Segment operating margin was 2.0% in 2017, as compared to 0.9% in 2016. Adjusted segment operating margin was 8.4% in 2017, as compared to 7.6% in 2016. This increase principally reflects a decrease in subscriber acquisition costs.


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         RESULTS OF OPERATIONS

Europe

The number of net prepaid wireless subscribers for 2017 decreased by 10.4% over 2016, and the number of net postpaid wireless subscribers increased by 3.6%, resulting in a net decrease in the total number of wireless subscribers in our Europe segment of 0.2%, or approximately 50 thousand, to approximately 20.7 million as of December 31, 2017. The number of fixed voice RGUs for 2017 decreased by 3.7% over 2016, the number of broadband RGUs increased by 3.3% and the number of Pay TV RGUs increased by 10.7%, resulting in an increase in total fixed RGUs in our Europe segment of 2.3%, or 136 thousand, to approximately 6.0 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 7.7% over 2016. Adjusted segment operating revenues for 2017 increased by 4.1% over 2016. This increase in segment operating revenues principally reflects higher revenues in Pay TV as well as mobile and fixed data, which were partially offset by lower revenues from wireless and fixed voice services due to the negative effects of the elimination of retail roaming in the EU in June 2017 and April 2016, as well as losses in the prepaid segment. We analyze segment results in euros because it is the functional currency in our operations in Europe.

Segment operating income for 2017 decreased by 16.0% over 2016. Adjusted segment operating income for 2017 decreased by 16.3% over 2016.

Segment operating margin was 4.8% in 2017, as compared to 6.2% in 2016. Adjusted segment operating margin was 5.0% in 2017, as compared to 6.2% in 2016. The decrease principally reflects increases in costs related to marketing, subscriber acquisitions and local taxes.

2016 COMPARED TO 2015

Mexico Wireless

The number of net prepaid wireless subscribers for 2016 decreased by 2.5% over 2015, and the number of net postpaid wireless subscribers decreased by 7.0%, resulting in a net decrease in the total number of wireless subscribers in Mexico of 1.0%, or 74 thousand, to approximately 73 million as of December 31, 2016.

Segment operating revenues for 2016 decreased by 0.6% over 2015. Adjusted segment operating revenues for 2016 decreased by 3.2% over 2015. This decrease was principally due to a decrease in mobile voice revenues by 37.9% in 2016 over 2015, reflecting a reduction in the average wireless rates per user. The decrease in segment operating revenues was partially offset by an increase in mobile data revenues of 0.8% in 2016 over 2015, principally due to the increased use of value-added services by our wireless subscribers, including activity from messaging, content downloading, mobile applications and social media, and an increase in revenues from service plans offering higher data capacity.

Segment operating income for 2016 decreased by 31.8% over 2015. Adjusted segment operating income for 2016 decreased by 29.3% over 2015. Segment operating margin was 23.7% in 2016, as compared to 34.5% in 2015. Adjusted segment operating margin for this segment was 28.9% in 2016 and 39.5% in 2015. The decrease in operating margin in 2016 was due principally to higher costs related to mobile site infrastructure rentals, interconnection and other Dollar-denominated costs, such as roaming charges and licensing fees.

Mexico Fixed

The number of fixed voice RGUs in Mexico for 2016 increased by 0.1% over 2015, and the number of broadband RGUs in Mexico increased by 4.9%, resulting in an increase in total fixed RGUs in Mexico of 2.0% to approximately 22.2 million as of December 31, 2016 over 2015.

Segment operating revenues for 2016 increased by 1.1% over 2015. Adjusted segment operating revenues for 2016 decreased by 0.3% over 2015. This decrease was principally due to a fall in fixed voice revenues of 10.9% in 2016 over 2015, reflecting RGU disconnections and a fall in long-distance calls. The decrease in segment operating revenues was partially offset by an increase in fixed data revenues of 3.2% in 2016 over 2015, principally due to higher revenues from broadband and corporate network services.


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Segment operating income for 2016 decreased by 23.0% over 2015. Adjusted segment operating income for 2016 decreased by 38.5% over 2015. Segment operating margin was 12.0% in 2016 and 15.8% in 2015. Adjusted segment operating margin for this segment was 8.3% in 2016 and 13.4% in 2015. The decrease in the segment operating margin for 2016 was principally due to increases in costs associated with customer service and service quality improvements as well as network maintenance.

Brazil

The number of net prepaid wireless subscribers for 2016 decreased by 15.1% over 2015, and the number of net postpaid wireless subscribers increased by 10.0%, resulting in a net decrease in the total number of wireless subscribers in Brazil of 8.8%, or 5.8 million over 2015, to approximately 60.2 million as of December 31, 2016. The number of fixed voice RGUs for 2016 decreased by 2.9% over 2015, the number of broadband RGUs increased by 5.4%, and the number of Pay TV RGUs increased by 0.1%, resulting in an increase in total fixed RGUs in Brazil of 0.2% to approximately 36.7 million as of December 31, 2016.

Segment operating revenues for 2016 increased by 10.8% over 2015. Adjusted segment operating revenues for 2016 decreased by 1.1% over 2015. This decrease in segment operating revenues was principally due to a fall in mobile data, mobile voice and fixed voice revenues of 4.9%, 11.6% and 6.1%, respectively, in 2016 over 2015, driven by RGU disconnections and lower traffic reflecting lower disposable income caused by an overall economic downturn in the country. The decrease in wireless and fixed voice revenues was also affected by a 30.0% reduction in interconnection revenues. The decrease in segment operating revenues was partially offset by higher fixed data and Pay TV revenues of 10.3% and 3.6%, respectively, in 2016 over 2015. Fixed data revenues increased principally due to an increase in broadband RGUs and corporate network services, and Pay TV revenues increased as a result of an increase in the purchase of additional services, such asvideo-on-demand and bundled packages.

Segment operating income for 2016 decreased by 41.9% over 2015. Adjusted segment operating income for 2016 decreased by 54.1% over 2015. Segment operating margin was 3.2% in 2016 and 6.1% in 2015. Adjusted segment operating margin was 2.3% in 2016 and 4.9% in 2015. The decrease in segment operating margin for 2016 was principally due to higher marketing, subscriber acquisition and customer service costs related to the ongoing integration of our three Brazilian subsidiaries, as well as the reduction in the estimated useful life of televisionset-up boxes from five years to three years.

Colombia

The number of net prepaid wireless subscribers for 2016 decreased by 2.3%, and the number of net postpaid wireless subscribers increased by 8.6%, resulting in a net decrease in the total number of wireless subscribers in Colombia of 0.1%, or 19 thousand, to approximately 29 million as of December 31, 2016. In 2016, the number of fixed voice RGUs increased by 12.1%, the number of broadband RGUs increased by 11.3% and the number of Pay TV RGUs increased by 4.0%, resulting in an increase in total fixed RGUs in Colombia of 8.7% to approximately 6.3 million as of December 31, 2016.

Segment operating revenues for 2016 increased by 2.2% over 2015. Adjusted operating revenues for 2016 decreased by 3.1% over 2015. This decrease was principally due to a reduction of 26.7% in mobile voice revenues, driven by more competitive commercial offerings in response to pricing pressure from competitors. The decrease was partially offset by increases in fixed data revenues, mobile data revenues, fixed voice revenues and Pay TV revenues, which increased by 9.7%, 18.3%, 15.0% and 17.0%, respectively, in 2016, principally due to an increase in sales of bundled packages of wireless services, higher demand for data plans and an increase in subscribers for internet services.

Segment operating income for 2016 decreased by 16.1% over 2015. Adjusted segment operating income for 2016 decreased by 16.7% over 2015. Segment operating margin was 16.6% in 2016 and 20.2% in 2015.

Adjusted segment operating margin was 20.5% in 2016 and 23.8% in 2015. The decrease in segment operating margin for 2016 was driven by higher costs related to infrastructure rentals, content licensing, maintenance of our networks and an increase in bad debt expense.

Southern Cone — Argentina, Chile, Paraguay and Uruguay

The number of net prepaid wireless subscribers for 2016 increased by 5.6%, and the number of net postpaid wireless subscribers increased by 1.3%, resulting in a net increase in the total number of wireless subscribers in our Southern Cone segment of 4.1%, or 1.2 million, to approximately 30.4 million as of December 31, 2016. In 2016, the number of fixed voice RGUs increased by 5.7%, the number of broadband RGUs increased by 14.9%, and the number of Pay TV RGUs increased by 2.8%, resulting in an increase in total fixed RGUs in our Southern Cone segment of 6.8% to approximately 1.9 million as of December 31, 2016.


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         RESULTS OF OPERATIONS

Segment operating revenues for 2016 increased by 4.9% over 2015, reflecting an aggregate increase of 0.2% in Argentina, Paraguay and Uruguay and an increase of 16.1% in Chile. Adjusted segment operating revenues for 2016 increased by 23.9% over 2015, reflecting an aggregate increase of 32.1% in Argentina, Paraguay and Uruguay and an increase of 1.6% in Chile. The increase in operating revenues primarily reflects higher inflation rates in Argentina. It was also driven by higher data usage, such as mobile data, purchased in bundled service packages in Argentina and Chile. 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 2016 decreased by 9.5% over 2015, reflecting a decrease in operating income of 7.9% in Argentina, Paraguay and Uruguay and a decrease in operating loss of 2.3% in Chile. Adjusted segment operating income for 2016 increased by 40.7% over 2015, reflecting an increase in adjusted operating income of 25.7% in Argentina, Paraguay and Uruguay and a decrease in adjusted operating loss by 13.5% in Chile.

Segment operating margin was 11.5% in 2016 and 13.3% in 2015. This decrease reflects a negative operating margin of 18.0% in Chile, partially offset by an aggregate positive operating margin of 26.0% in Argentina, Paraguay and Uruguay. Adjusted segment operating margin was 17.0% in 2016, compared to 15.0% in 2015, and reflects a higher margin in Chile, as a result of our cost-saving program, partially offset by a lower margin in Argentina, caused by an increase in the costs of handsets and the full year amortization of our license, purchased in 2015.

Andean Region — Ecuador and Peru

The number of net prepaid wireless subscribers for 2016 increased by 0.6%, and the number of net postpaid wireless subscribers decreased by 0.5%, resulting in a net increase in the total number of wireless subscribers in our Andean Region segment of 0.3%, or 58 thousand, to approximately 20.8 million as of December 31, 2016. In 2016, the number of fixed voice RGUs decreased by 0.2%, the number of broadband RGUs increased by 17.8% and

the number of Pay TV RGUs increased by 0.7%, resulting in an increase in total fixed RGUs in our Andean Region segment of 5.4% to approximately 1.8 million as of December 31, 2016.

Segment operating revenues for 2016 increased by 8.0% over 2015, reflecting operating revenue increases of 5.5% in Ecuador and 10.2% in Peru. Adjusted segment operating revenues for 2016 decreased by 5.5%, reflecting a decrease

of 10.3% in Ecuador and a decrease of 0.9% in Peru. This decrease in operating revenues reflects a decrease in revenues from our wireless and fixed voice operations, driven by an increase in tax obligations in Ecuador and aggressive price reductions in Peru, which were partially offset by higher revenues from mobile data and higher revenues from fixed data, especially broadband and corporate data services.

Segment operating income for 2016 decreased by 22.5% over 2015, reflecting an increase in operating income of 24.5% in Ecuador and a decrease of 68.3% in Peru. Adjusted segment operating income for 2016 decreased by 24.2%, reflecting an increase of 5.8% in Ecuador and a decrease of 70.9% in Peru. Segment operating margin was 10.8% in 2016, reflecting operating margins of 27.5% in Ecuador and 4.2% in Peru, and was 15.1% in 2015. Adjusted segment operating margin was 15.1% in 2016, reflecting adjusted operating margins of 27.5% in Ecuador and 4.2% in Peru, and was 18.8% in 2015. The results of operations were impacted in 2016 by increases in customer service, marketing and sales costs, as well as direct taxes in Ecuador, and higher interconnection costs and postpaid subscriber acquisition costs driven by a more aggressively competitive environment in Peru.

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

The number of net prepaid wireless subscribers for 2016 decreased by 2.0%, and the number of net postpaid wireless subscribers increased by 1.5%, resulting in a net decrease in the total number of wireless subscribers in our Central America segment of 1.5%, or approximately 231 thousand, to approximately 15.1 million as of December 31, 2016. In 2016, the number of fixed voice RGUs increased by 0.4%, the number of broadband RGUs increased by 19.1% and the number of Pay TV RGUs increased by 3.0%, resulting in an increase in total fixed RGUs in our Central America segment of 8.9% to approximately 5.3 million as of December 31, 2016.

Segment operating revenues for 2016 increased by 22.1% over 2015. Adjusted segment operating revenues for 2016 increased by 3.9% over 2015. This increase in segment operating revenues was driven principally by higher mobile data, fixed data and Pay TV revenues in Central America, which was partially offset by decreases in mobile voice and fixed voice in Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica and decreases in mobile voice and Pay TV in Panama. For this purpose, we analyze adjusted segment results in U.S. dollars because it is the functional currency in our operations in El Salvador and Panama, and the currencies in Costa Rica, Guatemala, Honduras and Nicaragua are relatively stable against the U.S. dollar.


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Segment operating income and adjusted segment operating income increased by approximately ten times in 2016 over 2015. Segment operating margin was 9.0% for 2016 and 5.0% for 2015. Adjusted segment operating margin was 9.6% for 2016 and 5.4% in 2015. The results of operations in the segment in 2016 were impacted by lower costs related to maintenance, customer service and customer acquisition.

Caribbean — Dominican Republic and Puerto Rico

The number of net prepaid wireless subscribers for 2016 increased by 2.2%, and the number of net postpaid wireless subscribers increased by 6.7%, resulting in a net increase in the total number of wireless subscribers in our Caribbean segment of 3.6%, or approximately 192 thousand, to approximately 5.4 million as of December 31, 2016. In 2016, the number of fixed voice RGUs increased by 2.8%, the number of broadband RGUs increased by 8.3% and the number of Pay TV RGUs increased 14.2%, resulting in an increase in total fixed RGUs in our Caribbean segment of 6.0% to approximately 2.7 million as of December 31, 2016.

Segment operating revenues for 2016 increased by 23.1% over 2015. Adjusted segment operating revenues for 2016 increased by 0.1% over 2015. This increase in operating revenues was principally due to an increase in segment mobile data revenues and an increase in Pay TV revenues in the Dominican Republic, which was partially offset by lower revenues from wireless and fixed voice services in Puerto Rico. We analyze segment results in U.S. dollars because it is the functional currency inof our operations in Puerto Rico, and the currency inof the Dominican Republic is relatively stable against the U.S. dollar.

Segment operating income for 20162018 increased by 57.9%22.3% over 2015.2017. Adjusted segment operating income for 20162018 increased by 0.9%20.7% over 2015. 2017. This increase principally reflects an increase of 21.9% in the Dominican Republic and an increase of 730.5% in Puerto Rico.

Segment operating margin was 16.8%15.9% in 2016 and 13.1%2018, as compared to 13.5% in 2015.2017. Adjusted segment operating margin was 17.2%16.3% in 2016 and 17.1%2018, as compared to 13.8% in 2015.2017. This increase in segment operating income and operating margin for 2016 resulted from2018 principally reflects lower unusual costs in 2018 related to the reconstruction and operation of our cost-networks in the aftermath of Hurricane Maria, as well as increased revenues in the Dominican Republic and our corporate cost savings programs, which was partially offset by increased expenses in connection with our pension obligations in Puerto Rico.program.

United States

The number of net prepaid wireless subscribers for 2016 increased2018 decreased by 1.6%,6.2% over 2017, or approximately 401 thousand,1.4 million, to approximately 26.122.0 million total net wireless subscribers in the United States as of December 31, 2016.2018.

Segment operating revenues for 20162018 increased by 27.3%3.1% over 2015.2017. Adjusted segment operating revenues for 20162018 increased by 7.9%1.6% over 2015.2017. This increase in segment operating revenues principally reflects higher mobile voice

and data usage and revenues driven by the success of existing unlimited data plans principally those offered by Straight Talk.and increased equipment sales ofhigher-end smartphones.

Segment operating income for 20162018 decreased by 5.6%8.6% over 2015.2017. Adjusted segment operating income for 2016 increased2018 decreased by 4.2%17.4% over 2015. 2017.

Segment operating margin was 0.9%1.7% in 2016 and 1.2%2018, as compared to 2.0% in 2015.2017. Adjusted segment operating margin was 7.6%6.8% in 2016 and 7.8%2018, as compared to 8.4% in 2015.2017. This decrease in segment operating margin for 2016 was2018 principally due to increased payments to third-party network operators for voice and data,reflects an increase in content costs as a result of higher usage of unlimited plans.increased data usage.

Europe

The number of net prepaid wireless subscribers for 20162018 decreased by 4.3%,5.8% over 2017, and the number of net postpaid wireless subscribers increased by 1.7%4.1%, resulting in a net decreasean increase in the total number of wireless subscribers in our Europe segment of 1.7%, or approximately 3342 thousand, to approximately 20.721.0 million as of December 31, 2016. In 2016, the2018. The number of fixed voice RGUs for 2018 decreased by 3.5%,2.9% over 2017, the number of broadband RGUs increased by 5.9%2.4% and the number of Pay TV RGUs increased by 18.3%15.9%, resulting in an increase in total fixed RGUs in our Europe segment of 4.6%3.7%, or 224 thousand, to approximately 5.96.2 million as of December 31, 2016.2018.

Segment operating revenues for 20162018 increased by 19.7%7.6% over 2015.2017. Adjusted segment operating revenues for 20162018 increased by 2.1%1.2% over 2015.2017. This increase in segment operating revenues was principally due to higher revenuesreflects an increase in wirelesshigh-value customers in the mobile business and fixed data, driven by our acquisitionsan ongoing strong fixed-line business, along with an increase in Macedonia, Bulgaria and Slovenia during the second half of 2015, which were partially offset by lower revenues from wireless and fixed voice services following recent regulations in Austria blocking roaming charges.connectivity. We analyze segment results in euros because it is the functional currency in our operations in Europe.

Segment operating income for 2016 decreased2018 increased by 13.2%4.6% over 2015.2017. Adjusted segment operating income for 20162018 decreased by 24.4%4.3% over 2015. 2017.

Segment operating margin was 6.2%4.7% in 2016 and 8.5%2018, as compared to 4.8% in 2015.2017. Adjusted segment operating margin was 6.2%4.8% in 2016 and 8.4%2018, as compared to 5.0% in 2015. The2017. This decrease in segment operating income and operating margin for 20162018 principally reflects increases in costs related to advertisingmarketing and subscriber acquisition andnon-cash revisions for future pension liabilities in Austria.acquisition.

 

 


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         LIQUIDITYLOGO

LIGUIDITY AND CAPITAL RESOURCES

SOURCES

 

FUNDING REQUIREMENTS

We generate substantial cash flows from our operations. On a consolidated basis, our cash flows from operating activities were Ps.217.8Ps.234.3 billion in 2017,2019, compared to Ps.235.8Ps.248.3 billion in 2016.2018. Our cash and cash equivalents amounted to Ps.24.3Ps.19.7 billion at December 31, 2017,2019, compared to Ps.23.2Ps.21.7 billion at December 31, 2016.2018. We believe our working capital is sufficient for our present requirements. 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.151.8 billion in 2019, Ps.151.8 billion in 2018, and Ps.136.7 billion in 2017, Ps.155.0 billion in 2016 and Ps.151.6 billion in 2015.2017. The amount of these capital expenditures variescan 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 20182020 of approximately U.S.$88.5 billion (Ps.148.3(Ps.170.0 billion), which will be primarily funded throughby our operating activities. That amount is subject to change as we continue to evaluate our capital expenditure needs and opportunities in light of the ongoingCOVID-19 outbreak.

 

In some years, we haveAcquisitions — We made substantial expenditures on acquisitions.acquisitions in 2019. In January 2019, we acquired 100% of the capital of Telefonica Guatemala. The amount paid for the business acquisition was U.S.$333.0 million, net of acquired cash. In 2019, we acquired 100% of Nextel Brazil from NII Holdings, Inc. and certain of its affiliates (“NII”) and AI Brazil Holdings B.V. The adjusted amount paid for the business acquisition was U.S.$948.5 million, on a cash-free and debt-free basis. Also in January 2019, we entered into an agreement to acquire 99.3% of Telefónica El Salvador for the amount of U.S.$315.0 million. The completion of the acquisition of Telefónica El Salvador is subject to certain customary conditions, including regulatory approval.

Indebtedness — We must pay interest on our indebtedness and repay principal when due. As of December 31, 2017,2019, we had approximately Ps.51.7Ps. 129.2 billion of principal and amortization due in 2018.2020.

 

Dividends — We pay regular dividends. We paid Ps.16.1Ps.24.2 billion in dividends in 20172019 and Ps.13.8Ps.22.4 billion in 2016.2018. Our shareholders approved on April 16, 201824, 2020 the payment of a Ps.0.32Ps.0.38 ordinary cash dividend per share in two installments in 2018.2020. See “Share Ownership and Trading—Dividends” under Part IV in this annual report.

 

Share repurchases. — We regularly repurchase our own shares. We spent Ps.1.2 billionPs.435.7 million repurchasing our own shares in the open market in 20172019 and Ps.7.0Ps.511.4 billion in 2016.2018. Our shareholders have authorized additional repurchases, and as of March 31, 2018,2020, we have spent Ps.101.9Ps.121.3 million repurchasing our shares in the open market in 2018,2020, 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.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2017,2019, we had nooff-balance sheet arrangements that require disclosure under applicable SEC regulations.

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CONTRACTUAL OBLIGATIONS

The following table summarizes certain contractual obligations as of December 31, 2017.2019. Many of our obligations are denominated in currencies other than Mexican pesos, and in particular our purchase obligations and approximately 28.6% of our debt are denominated in U.S. dollars.pesos. The table does not include accounts payable, pension liabilities, interest payments or payments under derivatives contracts. See Note 16notes 14, 15 and 17 to our audited consolidated financial statements.statements included in this annual report.

  PAYMENTS DUE BY PERIOD 
  TOTAL    LESS THAN 1 YEAR   1-3 YEARS 4-5 YEARS   AFTER 5 YEARS   
       (in millions of Mexican pesos)    
CONTRACTUAL OBLIGATIONS AS OF DECEMBER 31, 2017           

Equipment leases, real estate leases and

mobile site rentals

  Ps.    125,650  Ps.      20,422   Ps.      37,356   Ps.      23,567    Ps.      44,305 
Short-term debt  51,746  51,746   —   —    —   
Long-term debt  646,139  —   245,716   115,038    285,385 
Purchase obligations  167,345  24,228   143,117   —    —   
Total  Ps.    990,880  Ps.    96,396   Ps.    426,189   Ps.    138,605    Ps.    329,690 


34


 

PAYMENTS DUE BY PERIOD

 

   

TOTAL

  

 

LESS THAN
1 YEAR

  

 

1-3 YEARS

  

 

4-5 YEARS

  

 

AFTER 5 YEARS

 
   

(in millions of Mexican pesos)

 
 
CONTRACTUAL OBLIGATIONS AS OF DECEMBER 31, 2019:

 

      
Short-term debt Ps.129,172  Ps.129,172  Ps.—  Ps.—  Ps.— 
      
Short-term lease debt  25,895   25,895   —   —   — 
      
Long-term debt  495,082   —   184,391   33,732   276,959 
      
Long-term lease debt  94,702   —   64,717   16,264   13,720 
      
Purchase obligations  138,687   69,338   68,816   532   — 
      
Total Ps.883,539  Ps.224,405  Ps.317,925  Ps.50,529  Ps.290,679 

Other than the amounts in the table above, we had no other outstanding material purchase commitments as of December 31, 2017.2019. 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.

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, 20172019 was Ps.697.9Ps.624.3 billion, of which Ps.51.7Ps.129.2 billion was short-term debt (including the current portion of long-term debt), compared to Ps.707.8Ps.638.9 billion as of December 31, 2016.2018.

Management defines net debt as total debt minus cash and cash equivalents, minus marketable securities (including Koninklijke KPN N.V. (“KPN”) shares) or other short-termshort- term investments. As of December 31, 2017,2019, we had net debt of Ps.614.5Ps.556.8 billion, compared to Ps.629.7Ps.568.2 billion as of December 31, 2016, which represented a decrease of Ps.15.2 billion in net debt. This decrease principally reflects a net amortization of debt in the amount of Ps.47.9 billion during 2017, the arbitration ruling in Colombia (which added Ps.18.5 billion to our debt) and the impact of foreign exchange variation (in Mexican peso terms) on our balance sheet.

2018. Without taking into account the effects of derivative financial instruments that we use to manage our interest rate and currency risk, approximately 88.1%87.2% of our indebtedness at December 31, 20172019 was denominated in currencies other than Mexican pesos (approximately 32.5%32.8% of suchnon-Mexican peso debt in U.S. dollars and 67.5%67.2% in other currencies), and approximately 5.7%10.1% of our consolidated debt obligations bore interest at floating rates. After the effects of derivative transactions and excluding the debt owned byof Telekom Austria, approximately 28.8%36.5% of our net debt as of December 31, 20172019 was denominated in Mexican pesos.

The weighted average cost of all our third-party debt at December 31, 20172019 (excluding commissions and reimbursement of certain lenders for Mexican taxes withheld) was approximately 4.3%4.2% per annum.

Our major categories of indebtedness at December 31, 20172019 are summarized in the table below. The majority of our consolidated indebtedness is owned by América Móvil and most of the remaining debt is owed by Telekom Austria, in which we own a 51% interest. The amounts are based on book values in our financial statements under IFRS and may differ from the principal amount. See also Note 14 to our audited consolidated financial statements.statements included in this annual report.

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LIGUIDITY AND CAPITAL SOURCES

 

  DEBT

DEBT

(millions of Mexican pesos)

   

SENIOR NOTES

     
(millions of Mexican pesos) 

DENOMINATED IN U.S. DOLLARS:

     

América Móvil 5.000% Senior Notes due 2020

Ps.

11,775

  

América Móvil 3.125% Senior Notes due 2022

30,152

  

América Móvil 3.625% Senior Notes due 2029

18,845

América Móvil 6.375% Senior Notes due 2035

18,493

América Móvil 6.125% Senior Notes due 2037

6,958

América Móvil 6.125% Senior Notes due 2040

37,691

América Móvil 4.375% Senior Notes due 2042

21,672

América Móvil 4.375% Senior Notes due 2049

23,557

Total

Ps.

169,143

DENOMINATED IN MEXICAN PESOS

     
DENOMINATED IN U.S. DOLLARS

América Móvil 8.600% Domestic Senior Notes due 2020

Ps.

7,000

  

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

4,757

América Móvil 8.460% Senior Notes due 2036

7,872

Telmex 8.360% Domestic Senior Notes due 2037

5,000

Total

Ps.

58,129

DENOMINATED IN EURO

     
América Móvil 5.000% Senior Notes due 2019Ps.14,840 
Telmex 5.500%

Commercial Paper -0.230% due 2020

Ps.

2,599

América Móvil B.V. 0.000% Exchangeable Bonds due 2020

60,051

América Móvil 3.000% Senior Notes due 20192021

  

21,131

 7,467 
América Móvil 5.000% Senior Notes due 202042,043
América Móvil

TKA 3.125% Senior Notes due 20222021

  

15,849

 31,659 
América Móvil 6.375%

TKA 4.000% Senior Notes due 20352022

  

15,849

 19,417 

América Móvil 6.125% senior4.750% Senior Notes due 20372022

  

15,849

 7,306 
América Móvil 6.125%

TKA 3.500% Senior Notes due 20402023

  

6,339

 39,573 

América Móvil 4.375%3.259% Senior Notes due 20422023

  

15,848

 22,755 
Total

América Móvil 1.500% Senior Notes due 2024

  

Ps.

17,961

 185,060 
DENOMINATED IN MEXICAN PESOS

TKA 1.500% Senior Notes due 2026

15,848

  

América Móvil 0.750% Senior Notes due 2027

21,131

  

América Móvil 2.125% Senior Notes due 2028

13,735

Total

Ps.

222,190

DENOMINATED IN POUND STERLING

     

América Móvil 8.11% Domestic5.000% Senior Notes due 20182026

Ps.

12,492

  

América Móvil 5.750% Senior Notes due 2030

16,239

América Móvil 4.948% Senior Notes due 2033

7,495

América Móvil 4.375% Senior Notes due 2041

18,737

Total

Ps.

54,963

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  DEBT

(millions of Mexican pesos)

    
1,750 
Telmex 8.27% Domestic Senior Notes due 20181,160
América Móvil 8.60% Domestic Senior Notes due 20207,000
América Móvil 0.00% Domestic Senior Notes due 20254,410
Telmex 8.36% Domestic Senior Notes due 20375,000
América Móvil 6.000% Senior Notes due 201910,000
América Móvil 6.45% Senior Notes due 202222,500
América Móvil 7.125% Senior Notes due 202411,000
América Móvil 8.46% Senior Notes due 20367,872
TotalPs.70,692

DENOMINATED IN EUROJAPANESE YEN

     
América Móvil 1.00% Senior Notes due 2018Ps.14,252 

América Móvil 4.125%2.950% Senior Notes due 20192039

  

Ps.

2,255

 23,754 
América Móvil B.V. 0.00% Exchangeable Bonds due 2020

Total

  

Ps.

2,255

 67,505 
América Móvil 3.00% Senior Notes due 202123,754
TKA 3.125% Senior Notes due 202118,728
TKA 4.00% Senior Notes due 202219,334
América Móvil 4.75% Senior Notes due 202217,815
TKA 3.5% Senior Notes due 20237,594
América Móvil 3.259% Senior Notes due 202317,815
América Móvil 1.50% Senior Notes due 202420,191
TKA 1.50% Senior Notes due 202617,815
América Móvil 2.125% Senior Notes due 202815,440
TotalPs.263,998

DENOMINATED IN CHILEAN PESOS


35


          LIQUIDITY AND CAPITAL RESOURCES

DEBT     
DENOMINATED IN POUND STERLING

América Móvil 3.961% Senior Notes due 2035

Ps.

3,563

  

Total

Ps.

3,563

  

DENOMINATED IN BRAZILIAN REAIS

     
América Móvil 5.000%

Claro Brasil 102.900% of CDI Domestic Senior Notes due 20262020

  

Ps.

Ps.

7,013

 13,369 
América Móvil 5.750%

Claro Brasil 104.000% of CDI Domestic Senior Notes due 20302021

  

5,143

 17,380 
América Móvil 4.948%

Claro Brasil 104.250% of CDI Domestic Senior Notes due 20332021

  

7,083

 8,021 
América Móvil 4.375%

Claro Brasil CDI + 0.600% Domestic Senior Notes due 20412021

  

1,683

 20,053 
Total

Claro Brasil 106.000% of CDI Domestic Senior Notes due 2022

  

Ps.

9,351

 58,823 
DENOMINATED IN SWISS FRANCS

Claro Brasil 106.500% of CDI Domestic Senior Notes due 2022

4,676

  

Total

Ps.

34,949

  

HYBRID NOTES

     
América Móvil 1.125% Senior Notes due 2018Ps.11,170 
TotalPs.11,170

DENOMINATED IN JAPANESE YENEURO:

     
América Móvil 2.95% Senior Notes due 2039Ps.2,283 
Total

América Móvil NC10 (Series B) Capital Securities due 2073

  

Ps.

Ps.

11,622

 2,283 
DENOMINATED IN CHILEAN PESOS

Total

Ps.

11,622

  

DENOMINATED IN POUND STERLING

     
América Móvil 3.961% Senior Notes due 2035Ps.4,312 
Total

América Móvil NC7 Capital Securities due 2073

  

Ps.

Ps.

13,741

 4,312 
DENOMINATED IN BRAZILIAN REALS

Total

Ps.

13,741

  

BANK DEBT AND OTHER

     
Claro Brasil 102.4% of CDI Domestic senior notes due 2019Ps.5,981 
Claro Brasil 103.9% of CDI Domestic senior notes due 2019

DENOMINATED IN U.S. DOLLARS

  

Ps.

9,359

5,981

Claro Brasil 102.9% of CDI Domestic senior notes due 20208,973
TotalPs.20,935
Hybrid Notes  

DENOMINATED IN EURO:MEXICAN PESOS

  

Ps.

22,000

  
América Móvil Euro NC5 (Euro Series A) Capital Securities due 2073

DENOMINATED IN EUROS

  

Ps.

Ps.

2,113

21,378

América Móvil Euro NC10 (Euro Series B) Capital Securities due 207313,065
TotalPs.34,443
DENOMINATED IN POUND STERLING  
América Móvil GBP NC7 Capital Securities due 2073

DENOMINATED IN CHILEAN PESOS

  

Ps.

Ps.

4,876

14,706

TotalPs.14,706
Bank Debt and Other  

DENOMINATED IN U.S. DOLLARSPERUVIAN SOLES

  

Ps.

Ps.

15,351

 14,474 
DENOMINATED IN MEXICAN PESOS

Total

  

Ps.

Ps.

53,699

 12,500 
DENOMINATED IN CHILEAN PESOS

Total Debt

  

Ps.

Ps.

624,254

 100 
DENOMINATED IN BRAZILIAN REALSPs.4,389
TotalPs.31,463
Total DebtPs.697,885

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

  

Ps.

129,172

(51,746) 

Total Long-term DebtPs.646,139 
Equity:

Total Long-term Debt

Ps.

495,082

  

EQUITY:

     
Capital stockPs.96,339 
Total retained earnings

Capital stock

  

Ps.

96,338

 171,088 

Total retained earnings

281,450

Other comprehensive income (loss) items

  

(199,878

(73,262

) 

Non-controlling interest66,469 
Total Equity

Non-controlling interest

48,997

  
Ps.

Total Equity

  

Ps.

226,907

260,634

 

Total Capitalization

(total (total long-term debt plus equity)

  

Ps.

Ps.

721,989

906,773

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LIGUIDITY AND CAPITAL SOURCES

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 2020 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, pound sterling and euros. We have also issued debt securities in the local market in Japan.

Hybrid notes. We have outstanding two series of Capital Securities maturing in 2073: one series denominated in euros totaling€550 million, and one series denominated in pound sterling in the amount of £550 million. The Capital Securities are subject to redemption at our option at varying dates beginning in 2023 for the euro-denominated series and beginning in 2020 for the sterling-denominated series. Our hybrid notes are deeply subordinated, and when they were issued, the principal rating agencies stated that they would treat only half of the principal amount as indebtedness for purposes of evaluating our leverage (an analysis referred to as 50.0% equity credit).

Bank loans. At December 31, 2019, we had approximately Ps.53.7 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. As long as the facilities are committed, a commitment fee is paid. As of December 31, 2019, these credit facilities were
• 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 certain specified procedures.

•Mexican peso-denominated domestic notes. Our domestic senior notes (certificados bursátiles) sold in the Mexican capital markets have varying maturities, ranging from 2018 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, pound sterling and euros. We have also issued debt securities in the local markets in Switzerland and Japan.

•Hybrid notes. In September 2013, we issued three series of Capital Securities maturing in 2073: two series denominated in euros and totaling €1,450 million, and one series denominated in pound sterling in the amount of £550 million. The Capital Securities are subject to redemption at our option at varying dates beginning in 2018 and 2023 for the euro-denominated series and beginning in 2020 for the sterling-denominated series. Our hybrid notes are deeply subordinated, and when they were issued, the principal rating agencies stated that they would treat only half of the principal amount as indebtedness for purposes of evaluating our leverage (an analysis referred to as 50.0% equity credit).

In February 2018, Telekom Austria redeemed its €600 million aggregate principal amount of hybrid bonds at their nominal value, plus all interest on the first call date. These were nominally perpetual bonds but with the option to be called at specific dates. In accordance with IFRS, they were classified within shareholders’ equity. For additional information, see Notes 19 and 24 to our audited consolidated financial statements.


36


•Bank loans. At December 31, 2017, we had approximately Ps.31.4 billion outstanding under a number of bank facilities bearing interest at fixed and variable rates. We also have two revolving syndicated facilities—one for U.S.$2.5 billion expiring in 2019 and one for the Euro equivalent of U.S.$2.0 billion expiring in May 2021. Loans under the facilities bear interest at variable rates based on LIBOR and EURIBOR, respectively.

undrawn. 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. On March 25, 2020, we drew the full amount of both facilities. For more information see “Recent Developments.” Telekom Austria also has aan undrawn revolving syndicated credit facility for €1.0€1.0 billion (the “TKA Facility”) expiring in 2019.July 2024. The TKA Facility bears interest at variable rates based on EURIBOR and 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 KPN and TKA shares.shares. The Company has entered into certain option contracts related to shares that are or have been a strategic investment for the Company. These options include a sale of call options related to our KPN shares with an exercise period that will expire in May 2020 and the sale of a cash-settled put option related to TKA shares that will expire in August 2023. See Notenote 7 to our audited consolidated financial statements.statements included in this annual report.

Euro-denominated commercial paper program. At December 31, 2019, debt under our euro-denominated commercial paper program aggregated to Ps. $2,599.1 million.

Some of the public securities issued by América Móvil in international and Mexican capital markets are guaranteed by Telcel. As of December 31, 2017,2019, we had, on an

unconsolidated basis, unsecured and unsubordinated indebtedness of approximately Ps.582.1Ps.498.2 billion (U.S.$29.426.4 billion), excluding guarantees of subsidiaries’ indebtedness. As of December 31, 2017,2019, our subsidiaries had indebtedness (excluding guarantees of indebtedness of us and our other subsidiaries) of approximately Ps.115.8Ps.126.0 billion (U.S.$5.96.7 billion)., and a substantial portion of our subsidiaries’ indebtedness is owed by Telekom Austria.

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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 cross-currency swaps and forwardsderivatives 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.

We also use interest rate swaps from time to time to adjust our exposure to variable interest rates or to reduce our costs of financing. 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, 2017,2019, we had derivatives positions with an aggregate net fair value liability of Ps.6.3Ps.2.8 billion, which are described in Note 7 to our audited consolidated financial statements. For additional information, see Notenote 2 w)v) to our audited consolidated financial statements.


37statements included in this annual report.

 


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CRITICAL ACCOUNTING POLICIES AND ESTIMATESESTIMATES6

 

USE OF ESTIMATES IN CERTAIN ACCOUNTING POLICIES

In preparing our financial statements, we make estimates concerning a variety of matters. Some of these matters are highly uncertain, and our estimates involve judgments we make based on the information available to us. In the discussion below, we have identified several of these matters for which our financial presentation would be materially affected if either (i) we used different estimates that we could reasonably have used or (ii) in the future, we change our estimates in response to changes that are reasonably likely to occur.

The discussion addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material impact if we used a different estimate. There are many other areas in which we use estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to our financial presentation.

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We have substantial financial assets and liabilities that we recognize at their fair value, which is an estimate of the amount at which the instrument could be exchanged in a current transaction between willing parties. The methodologies and assumptions we use to estimate an instrument’s fair value depend on the type of instrument and include (i) recognizing cash and cash equivalents, trade receivables, trade payables and other current liabilities at close to their carrying amount, (ii) recognizing quoted instruments at their market price quotations, without any deduction for transaction costs, for financial instruments such asavailable-for-sale marketable securities and certain debt instruments on the reporting date, (iii) recognizing unquoted instruments, such as loans from banks and obligations under financial leases, by discounting future cash flows using rates for similar instruments and (iv) applying various valuation techniques, such as present value calculations, to derivative instruments. Using different methodologies or assumptions to estimate the fair value of our financial assets and liabilities could materially impact our reported financial results.

We maintain investments inavailable-for-sale securities that are valued at market prices obtained from the stock exchange where these shares are listed. At each reporting date, we evaluate whether an impairment exists on itsavailable-for-sale securities. This analysis first involves an evaluation of the objective measures of impairment as described in IAS 39. We will then evaluate whether the loss recognized in other comprehensive income on its available for sale securities is either prolonged or significant. As of December 31, 2017, we have not observed an objective measure of impairment on itsavailable-for-sale securities, nor has significant or prolonged unrealized losses on itsavailable-for-sale securities.

ESTIMATED USEFUL LIVES OF PLANT, PROPERTY AND EQUIPMENT

We estimate the useful lives of particular classes of plant, property and equipment in order to determine the amount of depreciation expense to be recorded in each period. Depreciation expense is a significant element of our costs and expenses, amounting in 20172019 to Ps.135.2Ps.114.8 billion, or 14.7%13.5% of our operating costs and expenses. See Note 10 to our audited consolidated financial statements.statements included in this annual report.


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We currently depreciate most of our property, plant and equipment based on an estimated useful life determined upon the expected particular conditions of operations and maintenance in each of the countries in which we operate.

The estimates are based on our historical experience with similar assets, anticipated technological changes and other factors, taking into account the practices of other telecommunications companies. We review estimated useful lives each year to determine whether they should be changed, and, at times, we have changed them for particular classes of assets. We may shorten the estimated useful life of an asset class in response to technological changes,

changes in the market or other developments, which would result in higher depreciation expense.

IMPAIRMENT OF LONG-LIVED ASSETS

We have large amounts of long-lived assets, including property, plant and equipment, intangible assets, investments in associates and goodwill, on our balance sheet. Under IFRS, we are required to test long-lived assets for impairment when circumstances indicate a potential impairment or, in some cases, at least on an annual basis. The impairment analysis for long-lived assets requires us to estimate the recovery value of the asset, which is the greater of its fair value (minus any disposal costs) and its value in use. To estimate the fair value of a long-lived asset, we typically take into account recent market transactions, or, if no such transactions can be identified, we use a valuation model that requires the making of certain assumptions and estimates. Similarly, to estimate the value in use of long-livedlong- lived assets, we typically make various assumptions about the future prospects for the business to which the asset relates, consider market factors specific to that business and estimate discounted future cash flows to be generated by that business. Based on this impairment analysis, including all assumptions and estimates related thereto, as well as guidance provided by IFRS relating to the impairment of long-lived assets, we determine whether we need to recognize an impairment to reduce the carrying value of the asset as stated on our balance sheet. Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors, such as industry and economic trends, and internal factors, such as changes in our business strategy and our internal forecasts. Different assumptions and estimates could materially impact our

reported financial results. More conservative assumptions of the anticipated future benefits from these businesses could result in impairment charges, which would decrease net income and result in lower asset values on our balance sheet. Conversely, less conservative assumptions could result in lower or no impairment charges, higher net income and higher asset values. See Note 2 ac)ab) to our audited consolidated financial statements.statements included in this annual report.

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DEFERRED INCOME TAXES

We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves thejurisdiction-by-jurisdiction estimation of actual current tax exposure and the assessment of temporary differences resulting from the differing treatment of certain items, such as accruals and amortization, for tax and financial reporting purposes, as well as net operating loss carry forwards and other tax credits. These items result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must assess, in the course of our tax planning procedures, the fiscal yearyears of the reversal of our deferred tax assets and liabilities, and if there will be future taxable profits in those periods to support the recognition of the deferred tax assets. Significant management judgment is required in determining our provisions for income taxes, deferred tax assets and liabilities. The analysis is based on estimates of future taxable income in the jurisdictions in which the group operates and the period over which the deferred tax assets and liabilities will be recoverable or settled. If actual results differ from these estimates, or if we adjust these estimates in future periods, our financial position and results of operations may be materially affected.

We record deferred tax assets based on the amount that we believe is more likely than not to be realized. In assessing the future realization of deferred tax assets, we consider future taxable income and ongoing tax planning strategies. In the event that our estimates of projected future taxable

income and benefits from tax planning strategies are lowered, or changes in current tax regulations are enacted that would impose restrictions on the timing or the extent of our ability to utilize the tax benefits of net operating loss carry forwards in the future, an adjustment to the recorded amount of deferred tax assets would be made, with a related charge to income.made.


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         CRITICAL ACCOUNTING POLICIES AND ESTIMATES

ACCRUALS

Accruals are recorded when, at the end of the period, we have a present obligation as a result of past events whose settlement requires an outflow of resources that is considered probable and can be measured reliably. This obligation may be legal or constructive, arising from, but not limited to, regulation, contracts, common practice or public commitments which have created a valid expectation for third parties that we will assume certain responsibilities. The amount recorded is the best estimation performed by our management in respect of the expenditure that will be required to settle the obligations, considering all the information available at the date of our financial statements, including the opinion of external experts, such as legal advisors or consultants. Accruals are adjusted to account for changes in circumstances for ongoing matters and the establishment of additional accruals for new matters.

If we are unable to reliably measure the obligation, no accrual is recorded and information is then presented in the notes to our audited consolidated financial statements. Because of the inherent uncertainties in this estimation, actual expenditures may be different from the originally estimated amount recognized.

LABOR OBLIGATIONS

We recognize liabilities on our balance sheet and expenses in our statement of comprehensive income statement to reflect our obligations related to our post-retirement seniority premiums, pension and retirement plans in the countries in which we operate and offer defined contribution and benefit pension plans. The amounts we recognize are determined on an actuarial basis that involves many estimates and assumptions for post-retirement pension and termination benefits in accordance with IFRS.

We use estimates in four specific areas that have a significant effect on these amounts: (i) the rate of return we assume our labor obligation plans will achieve on their investments, (ii) the rate of increase in salaries that we assume we will observe in future years, (iii) the discount rates that we use to calculate the present value of our future obligations and (iv) the expected rate of inflation. The assumptions we have applied are identified in Note 1718 to our audited consolidated financial statements.statements included in this annual report. These estimates are determined based on actuarial studies performed by independent experts using the projected unit-credit method.

ALLOWANCE FOR BAD DEBTS

We maintain an allowance for bad debts for estimated losses resulting from the failure of customers, distributors and cellular operators to make required payments. We base these estimates on the individual conditions of each of the markets in which we operate that may impact the collectability of accounts. In particular, in making these estimates, we take into account (i) with respect to accounts with customers and distributors, the number of days since invoices are overdue and (ii) with respect to accounts with telecom operators, both the number of days since the invoices are due and any disputes with respect to such invoiced traffic. The amount of loss, if any, that we actually experience with respect to these accounts may differ from the amount of the allowance maintained in connection with them. See Note 5 to our audited consolidated financial statements.

 

 


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PART III RISK FACTORS you can Trust

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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 increasedhigher 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.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 possible consumer confusion 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 VII and Note 1617 to our audited consolidated financial statements included in this annual report.

In addition, changes in political administrations could lead to the adoption of policies concerning competition and taxation of communications services. For example, since 2013, Mexico has overseenimplemented reforms to the telecommunications sector that aim to promote more competition and investment by imposing asymmetric regulation upon economic agents deemed “preponderant.“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

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impossible for us to continue to develop our businesses. Restrictions such as those described above could result in our incurring losses oflower 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 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.


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Dominant and 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.

Changes in the regulatory framework for telecommunications services in Mexico may have a material adverse effect on our business and results of operations

The Mexican legal framework for the regulation of telecommunications and broadcasting services has changed, beginning with constitutional amendments in 2013, implementing legislation in 2014, and the establishment in 2014 of a new regulator, the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones, or the “IFT”). The IFT determined in 2014 that our operating subsidiaries in Mexico are part of an “economic interest group” that is a “preponderant economic agent” in the Mexican telecommunications sector, and, based on this determination, the IFT has imposed extensive asymmetric regulations on our Mexican fixed-line and wireless businesses. The asymmetric regulations took effect in 2015 and were amended in 2017, when the IFT added new requirements, including the functional separation of certain assets used to provide local loop unbundling services. For further information, see “Regulation” under Part III of this annual report. The IFT measures have adversely affected the results of our Mexican operations, and we expect that those effects will continue, but their long-term impact remains uncertain.

We must continue to acquire additional radio spectrum capacity and upgrade our existing 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 not only for our global system for mobile communications (“GSM”), universal mobile telecommunications systems (“UMTS”) and long-term evolution (“LTE”) networks, but also 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.

In addition, the continual maintenance and upgrading of our wireless networks is critical to expanding our coverage, increasing our capacity to absorb higher bandwidth usage and adapting to new technologies, as well as offering more specialized services to our customers.

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

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environment at the time of renewal. Fees are typically established at the time of renewal. As a condition for


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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 Notes 1 and 16Note 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 expropriate 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.

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 1617 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 1617 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 which include the review of internal controls over financial reporting, 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 standardsregulatory requirements could harm our reputation, subject us to substantial fines, sanctions or penalties and adversely affect our business and ability to access financial markets.

 

 


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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

disruptions beyond our control.

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, in 2017, our operations in Puerto Rico suffered significant damage in the aftermath of Hurricane Maria, and our operations in Mexico experienced network overloads and power outages following the earthquake on September 19, 2017.

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.

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 outbreak has had a material impact on the global economy and our business

The COVID-19 outbreak has had, and continues to have, a material impact on businesses around the world and the economic environments in which they operate. In April 2020, the International Monetary Fund warned that the outbreak is likely to trigger the worst recession since the Great Depression. 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.

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

The economic slowdown has had an adverse impact on demand for our services, beginning in March 2020.

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. 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.

We have taken steps to strengthen our cash position, including by drawing on our credit facilities. See “Recent Developments” under Part I hereof.

Most of the impact and actions described above were implemented during the latter part of the first quarter of 2020. The extent of the impact of the COVID-19 on the Company’s operational and financial performance for the remainder of the year and beyond will depend on future developments, including the duration and spread of the outbreak, all of which are highly uncertain and cannot be predicted. If the COVID-19 outbreak 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.

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.

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-servicedenial- 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. As of the date of this annual report, we have no knowledge of any significant data loss, significant compromise or material financial loss related to a cybersecurity incident. 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,

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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.

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 weighted monthly average churn rate on a consolidated basis was 4.1% for the year ended December 31, 20172019 and 4.2% for the year ended December 31, 2016.2018. 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.


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

We rely upon various key suppliers and vendors 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 or vendors 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 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 transfer incomepay dividends and dividendsmake 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 like the spin-off of our Mexican tower business, 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

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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.

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- linefixed-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 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


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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

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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-downswrite- 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. See “Critical Accounting Policies and Estimates—Impairment of Long-Lived Assets” under Part II of this annual report.

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, a member of our Board of Directors, together with his sons, daughters and daughtersgrandchildren (together, the “Slim Family”), including his two sons, Carlos Slim Domit and Patrick Slim Domit, who serve as the Chairman and Vice Chairman of our Board of Directors, respectively, 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, except in very limited cases that require a vote of the holders of L Shares.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. Many of these

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.

Our bylaws restrict transfers of shares in some circumstances

Our bylaws provide that any acquisition or transfer of 10.0% or more than 10.0% 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. See “Bylaws—Restrictions of Certain Transfers” under Part IV of this annual report.


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         RISK FACTORS

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 enforce their rightsseek remedies against us or our directors or controlling shareholders than it would be for shareholders of a company incorporated in another jurisdiction, such as the United States.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

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RISK FACTORS

Mexican Securities Registry (Registro(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-Mexicannon- 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 sufferedundergone 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

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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;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 taxother policies;

imposition of trade barriers;

unexpected changes in law or regulation; and

overall political, social and economic instability.

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 acquisition efforts,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 will taketook 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. InMexican 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. Following the election of the current U.S. administration in 2016, thereThere is continuing uncertainty regarding future U.S. policies with respect to matters of importance to Mexico

and its economy, particularly includingwith respect to trade and migration. Additionally,

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. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. 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 Brazil,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 were adversely affected by weak economic conditions in Brazil during 2015 and 2016, and may be so affected again in the future.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 2017,2019, we reported net foreign exchange lossesgains of Ps.13.8Ps.5.2 billion.

In addition, currency fluctuations between the Mexican peso and the currencies of ournon-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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RISK FACTORS

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. For example, 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 realsreais 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. In the past, the government of Argentina has adopted restrictions on access to the foreign exchange market and the transfer of foreign currency outside

Argentina. The Argentine government could impose further exchange controls or restrictions on the movement of capital and take other measures in the future in response to capital flight or a significant depreciation of the Argentine peso.


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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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PART IV SHARE OWNERSHIP AND TRADING for your Growth

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MAJOR SHAREHOLDERS

 

The following table sets forth our capital structure as of March 31, 2018.2020.

 

Series

   

Number of Shares

(millions)

 

 

   Percent of Capital    

Combined A Shares

and AA Shares(1)


 

L Shares (no par value)

   44,898    68.0%    – 

AA Shares (no par value)

   20,602    31.2%    97.3% 

A Shares (no par value)

   563    0.9%    2.7% 

Total(2)

   66,063    100.0%    100.0% 

(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.

 

  

  

SERIES

 NUMBER OF SHARES
(MILLIONS)		  PERCENT OF COMBINED  

CAPITAL A SHARES AND AA

SHARES(1)

 
    

L Shares (no par value)

  44,868   68.0%   — 
    

AA Shares (no par value)

  20,602   31.2%   97.5% 
    

A Shares (no par value)

  526   0.8%   2.5% 
    

Total(2)

  65,996   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. (CEC) 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, 2018.2020. 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 “Bylaws—Share Capital”Shareholders’ Equity” under this Part IV and “Management Compensation—“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   13.4% 

Family Trust(2)

    5,998   13.4% 

Carlos Slim Helú

    3,072   6.8% 

BlackRock, Inc.(4)

    2,291   5.1% 
 

(1) Percentage figures are based on the number of shares outstanding as of March 31, 2018.

(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 21.3%, 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 anónima de capital variable and may be deemed to be controlled by the Slim Family.

(4) Based on beneficial ownership reports filed with the SEC.

 

  

  

  

  

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    13.4% 
   

Family Trust(2)

   5,998    13.4% 
   

Carlos Slim Helú

   3,072    6.8% 
   

BlackRock, Inc.(4)

   2,616    5.8% 

(1) Percentage figures are based on the number of shares outstanding as of March 31, 2020.

(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 21.3%, 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 anónima 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, 2018,2020, 15.9% of the outstanding L Shares were represented by L Share ADSs, each representing the right to receive 20 L Shares, and 99.9% of the L Share ADSs were held by 7,3936,726 registered holders with addresses in the United States. As of such date, 34.4%36.7% of the A Shares were held in the form of A Share ADSs, each representing the right to receive 20 A Shares, and 99.8%99.9% of the A Share ADSs were held by 3,2823,318 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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RELATED PARTY TRANSACTIONS

 

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. (“Sears”) 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 lease space on telecommunications towers owned by Telesites, which we spun off in December 2015. 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 sites 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.

NotesNote 6 and 17 to our audited consolidated financial statements included in this annual report provides additional information about our related party transactions.

 

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DIVIDENDS

 

DIVIDENDS

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 onreported by Banco de México, as published in the Official Gazette, for each of the respective payment dates.

 

Payment datePAYMENT DATE

PESOS PER SHARE Pesos per share DOLLARS PER SHARE
  
Dollar per share  

November 11, 2019

Ps.      0.17U.S.$       0.0090

July 15, 2019

Ps.      0.18U.S.$0.0095

November 12, 2018

Ps.      0.16U.S.$0.0080

July 16, 2018

Ps.      0.16U.S.$0.0085
 

November 13, 2017

 Ps.0.15Ps.      0.15 U.S.$0.0079
 

July 17, 2017

 Ps.0.15Ps.      0.15 U.S.$0.0085
 

November 14, 2016

 Ps.0.14Ps.      0.14 U.S.$0.0068
 

July 15, 2016

 Ps.0.14Ps.      0.14 U.S.$0.0076
 

November 13, 2015

 Ps.0.13Ps.      0.13 U.S.$0.0078
 

September 25, 2015

 Ps.0.30Ps.      0.30 U.S.$0.0177
 

July 17, 2015

 Ps.0.13U.S.$0.0082

November 14, 2014

Ps.0.12U.S.$0.0082

July 18, 2014

Ps.0.12U.S.$0.0082

November 15, 2013

Ps.0.11Ps.      0.13 U.S.$0.0084

July 19, 2013

Ps.0.11U.S.$0.00840.0082 

In November 2016, July 2017 and November 2017, we offered shareholders the option to receive a scrip dividend in the form of either cash, Series L shares or a combination thereof.

On April 16, 2018,24, 2020, our shareholders approved a cash dividend of Ps.0.32 (thirty two peso cents)Ps.0.38 per share, of which Ps.0.19 per share is payable on July 20, 2020 and Ps.0.19 is payable on November 9, 2020. Shareholders entitled to the dividend will have an option to receive it in two equal installments in July and November 2018.a cash, as series L Shares or combination thereof.

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 preferential dividend rights of holders of L Shares. See “Bylaws—Dividend Rights” and “Bylaws—Preferential Rights of L Shares” under this Part IV.

 

 


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         TRADING MARKETS

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TRADING MARKETS

Our shares and ADSs are listed on the following markets::

 

SECURITY

STOCK EXCHANGETICKER SYMBOL

L Shares(1)

  Mexican Stock Exchange—Mexico CityAMXL

L Share ADSs

  New York Stock Exchange—New YorkAMX

A Shares

  Mexican Stock Exchange—Mexico CityAMXA

A Share ADSs(2)

  New York Stock Exchange—New York

(1) L Shares were delisted from theMercado de Valores Latinoamericanos en Euros as of May 29, 2017.

(2) A Share ADSs were delisted from the NASDAQ and listed on the NYSE as of December 13, 2016.

AMOV

The following table sets forth the reported high and low market prices for the L Shares on the Mexican Stock Exchange and the reported high and low market prices for the L Share ADSs on the NYSE.

   MEXICAN STOCK EXCHANGE   NYSE 
   HIGH   LOW   HIGH   LOW 
    (Mexican pesos per L Share)   (U.S. dollars per L Share ADS) 
ANNUAL HIGHS AND LOWS 
2013   Ps.        16.19         Ps.        11.60        U.S.$        25.62        U.S.$        18.47      
2014   17.51         12.43         26.38         19.17      
2015   16.44         11.96         23.58         14.06      
2016   13.91         10.40         15.95         11.02      
2017   18.20         12.31         19.24         12.16      
QUARTERLY HIGHS AND LOWS 
2016:                                        
First quarter   Ps.        13.53         Ps.        10.92        U.S.$15.55        U.S.$12.16      
Second quarter   13.91         10.77         15.95         11.31      
Third quarter   11.97         10.40         12.92         11.02      
Fourth quarter   13.36         10.87         13.52         11.02      
2017:                                        
First quarter   Ps.        13.96         Ps.        12.31        U.S.$14.62        U.S.$12.16      
Second quarter   15.07         13.30         16.41         14.15      
Third quarter   16.71         14.63         18.88         15.89      
Fourth quarter   18.20         15.90         19.24         16.86      
2018:           ��                            
First quarter   Ps.        18.09         Ps.        16.37        U.S.$19.37        U.S.$16.93      
MONTHLY HIGHS AND LOWS 
2017:                                        
October   Ps.        18.20         Ps.        15.92        U.S.$19.24        U.S.$16.98      
November   16.93         15.99         17.61         16.86      
December   16.98         15.90         17.44         16.92      
2018:                                        
January   Ps.        17.62         Ps.        16.37        U.S.$19.00         16.93      
February   18.01         16.58         19.37         17.46      
March   18.09         17.25         19.35         18.62      
April (through April 24)   17.98         17.16         19.87         18.65      
Source: Bloomberg                 


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BYLAWS

The following tables set forth reported high and low market prices for theWe are asociedad anónima bursátil de capital variableorganized under Mexican law. For a description of our AA Shares, A Shares on the Mexican Stock Exchange, the reported high and low market prices for the A Share ADSs on the NASDAQ from 2013 until 2016 when the shares were delisted from the NASDAQ,L Shares, and the reported high and low market prices on the NYSE.

   MEXICAN STOCK EXCHANGE   NASDAQ 
   HIGH   LOW   HIGH   LOW 
    (Mexican pesos per A Share)   (U.S. dollars per A Share ADS) 
ANNUAL HIGHS AND LOWS 
2013   Ps.        16.00         Ps.        11.60        U.S.$        25.55        U.S.$        18.56      
2014   17.61         12.50         26.46         19.16      
2015   16.14         11.91         23.52         13.99      
2016   13.91         10.71         15.93         10.83      
QUARTERLY HIGHS AND LOWS 
2016:                                        
First quarter   Ps.        13.50         Ps.11.28        U.S.$15.71        U.S.$12.07      
Second quarter   13.91         10.97         15.93         11.34      
Third quarter   11.83         10.71         12.92         11.03      
Fourth quarter   13.41         10.82         13.18         10.83      

   MEXICAN STOCK EXCHANGE   NYSE 
   HIGH   LOW       HIGH   LOW 
    (Mexican pesos per A Share)   (U.S. dollars per A Share ADS) 
QUARTERLY HIGHS AND LOWS 
2017:                                        
First quarter   Ps.        14.00         Ps.        12.02        U.S.$        14.46        U.S.$        11.89      
Second quarter   16.00         12.90         16.33         14.02      
Third quarter   17.00         14.09         18.84         15.68      
Fourth quarter   18.50         15.90         19.06         16.76      
2018:                                        
First quarter   Ps.        18.01         Ps.        16.41        U.S.$19.46        U.S.$16.83      
MONTHLY HIGHS AND LOWS 
2017:                                        
October   Ps.        18.50         Ps.        15.91        U.S.$19.06        U.S.$16.76      
November   16.90         16.11         17.55         16.78      
December   16.87         15.90         17.45         16.78      
2018:                                        
January   Ps.        17.40         Ps.        16.41        U.S.$18.96        U.S.$16.83      
February   18.00         16.50         19.36         19.36      
March   18.01         17.50         19.46         18.35      
April (through April 24)   18.00         17.27         19.87         18.51      
Source: Bloomberg                 


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         BYLAWS

Below is a brief summary of certain significant provisions in our current bylaws and Mexican law. It does not purport to be complete and is qualified by reference tolaw, see “Description of Securities Registered Under Section 12 of the bylaws themselves. An English translation of our bylaws has beenExchange Act,” filed with the SEC as an exhibit and is incorporated by reference toExhibit 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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Organization

We are asociedad anónima bursátil de capital variable organized under Mexican law.

Shareholders’ Equity

We have three classes of outstanding shares: AA Shares, A Shares and L Shares, all without par value, fully paid and non-assessable.

AA Shares and A Shares have full voting rights.

L Shares may vote only in limited circumstances as described under “—Voting Rights” under this Part IV.

The rights of all series of shares are generally identical except for voting rights and the limitations on non-Mexican ownership of AA Shares and A Shares. The AA Shares must always represent at least 51.0% of the combined AA Shares and A Shares. At least 20.0% of our outstanding shares must consist of AA Shares, and not more than 80% can be A Shares and L Shares.

Each AA Share or A Share may be exchanged at the option of the holder for one L Share, provided that the AA Shares may never represent less than 20.0% of our outstanding shares or less than 51.0% of our combined AA Shares and A Shares.

Any capital increase must be represented by new shares of each series in proportion to the number of shares of each series outstanding.

Voting Rights

Each AA Share or A Share entitles the holder to one vote at any shareholders meeting.

Each L Share entitles the holder to one vote at any meeting at which L Shares are entitled to vote. L Shares are entitled to vote to elect only two members of the Board and the corresponding alternate directors, as well as on the

following limited matters: our transformation from one type of company to another; any merger involving us; the extension of our authorized corporate duration; our voluntary dissolution; any change in our corporate purpose; any transaction that represents 20.0% or more of the Company’s consolidated assets; any change in our jurisdiction of incorporation; removal of our shares from listing on the Mexican Stock Exchange or any foreign exchange; and any action that would prejudice the rights of L Shares. A resolution on any of the specified matters requires the affirmative vote of both a majority of all outstanding shares and a majority of the AA Shares and the A Shares voting together.

Shares of any series are also entitled to vote as a class on any action that would prejudice the rights of that series and are entitled to judicial relief against any action taken without their vote.

Shareholders’ Meetings

General shareholders’ meetings may be ordinary or extraordinary. Extraordinary general meetings are those called to consider certain specified matters, including, principally, changes to the bylaws, liquidation, merger and transformation, as well as to consider the removal of our shares from listing on the Mexican Stock Exchange or any foreign stock exchange. General meetings called to consider all other matters are ordinary meetings.

An ordinary general meeting of AA Shares and A Shares must be held each year to consider the approval of the financial statements for the preceding fiscal year, to elect directors and to determine the allocation of the profits. Transactions that represent 20.0% or more of our consolidated assets in any fiscal year must be approved by an ordinary general shareholder meeting of all shareholders, including L Shares. All other matters on which L Shares are entitled to vote would be considered at an extraordinary general meeting.


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The two directors elected by the L Shares are elected at a special meeting of L Shares. A special meeting of the L Shares must be held each year for the election of directors.LOGO

The quorum for an ordinary general meeting of the AA Shares and A Shares is 50.0% of such shares, and action may be taken by a majority of the shares present. If a quorum is not available, a second meeting may be called at which action may be taken by a majority of the AA Shares and A Shares present, regardless of the number of such shares. Special meetings of L Shares are governed by the same rules applicable to ordinary general meetings of AA Shares and A Shares. The quorum for an extraordinary general meeting at which L Shares may not vote is 75.0% of the AA Shares and A Shares, and the quorum for an extraordinary general meeting at which L Shares are entitled to vote is 75.0% of the outstanding capital stock. If a quorum is not available in either case, a second meeting may be called and action may be taken, provided a majority of the shares entitled to vote is present. Whether on first or second call, actions at an extraordinary general meeting may be taken by a majority vote of the AA Shares and A Shares outstanding and, on matters which L Shares are entitled to vote, a majority vote of all the capital stock.

Holders of 20.0% of our outstanding capital stock may have any shareholder action set aside by filing a complaint with a Mexican court of law within 15 days after the close of the meeting at which such action was taken and showing that the challenged action violates Mexican law or our bylaws. In addition, any holder of our capital stock may bring an action at any time within five years challenging any shareholder action. Relief under these provisions is only available to holders who were entitled to vote on, or whose rights as shareholders were adversely affected by, the challenged shareholder action and whose shares were not represented when the action was taken or, if represented, voted against it.

Shareholders’ meetings may be called by the Board, its chairman, its corporate secretary, the Chairman of the Audit and Corporate Practices Committee or a Mexican court of law. The Chairman of the Board or the Chairman of the Audit and Corporate Practices Committee may be required to call a meeting of shareholders by the holders of 10.0% of the outstanding shares. Notice of meetings must be published at least 15 days prior to the meeting.

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. However, 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.

Dividend Rights

At the annual ordinary general meeting of AA Shares and A Shares, the Board submits our financial statements for the previous fiscal year to the holders of AA Shares and A Shares for approval. Once financial statements are approved, the allocation of our net profits is determined, and we must allocate 5.0% of such net profits to a legal reserve, which is not thereafter available for distribution except as a stock dividend, until the amount of the legal reserve equals 20.0% of our capital stock. The remainder of net profits is available for distribution.

All shares outstanding are entitled to participate in a dividend or other distribution. L shares are entitled to a nominal preference with respect to dividends or liquidation, but the preference has no economic significance.

Preemptive Rights

In new issuances of shares, each shareholder has a preferential right to subscribe for a sufficient number of shares of the same series to maintain its existing proportionate holdings, except in certain circumstances such as mergers, convertible debentures, public offers and placement of treasury or repurchased shares. These rights cannot be traded separately from the shares. As a result, there is no trading market for such rights. Holders of ADSs may exercise these rights only through the depositary. We are not required to take steps that may be necessary to make this possible.

Limitations on Share Ownership

AA Shares and A Shares may be owned only by holders that qualify as Mexican investors as defined in the Foreign Investment Law (Ley de Inversión Extranjera) and our bylaws. AA Shares can only be held or acquired by Mexican citizens, Mexican corporations whose capital stock is held completely by Mexican citizens or other Mexican qualified investors. Non- Mexican investors cannot hold AA Shares except through trusts that effectively neutralize their votes.

If a foreign government or state acquires our AA Shares, such shares would immediately be rendered without effect or value.


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         BYLAWS

We have a foreign exclusion clause that restricts ownership of our shares to holders that qualify as Mexican investors. It does not apply to the L Shares, and, under transitional provisions adopted by our shareholders, it does not limit foreign ownership of A Shares outstanding as of the date of the shareholders’ meeting approving the amendment.

Restrictions on Certain Transfers

Any transfer of more than 10.0% of our voting shares, in one or more transactions, by any person or group of persons acting in concert, requires prior approval by our Board. If the Board denies such approval, however, it shall designate an alternate transferee, who must pay market price for the shares as quoted on the Mexican Stock Exchange.

Restrictions on Deregistration in Mexico

Our shares are registered with the RNV maintained by the CNBV.

If we wish to cancel our registration, or if it is cancelled by the CNBV, we are required to conduct a public offer to purchase all of the outstanding shares prior to such cancellation. Such offer shall exclude our controlling group of shareholders. If, after the public offer is concluded, there are still outstanding shares held by the general public, we will be required to create a trust for a period of six months, with funds in an amount sufficient to purchase, at the same price as the offer price, the number of outstanding shares held by the public that did not participate in the offer.

Unless the CNBV authorizes otherwise, upon the prior approval of the Board, which must take into account the opinion of the Audit and Corporate Practices Committee, the offer price will be the higher of (i) the average of the closing price during the previous 30 days on which the shares may have been quoted or (ii) the book value of the shares in accordance with the most recent quarterly report submitted to the CNBV and to the Mexican Stock Exchange.

The voluntary cancellation of the registration shall be subject to (i) the prior authorization of the CNBV and (ii) the

authorization of not less than 95.0% of the outstanding capital stock in a general extraordinary shareholders’ meeting.

Tender Offer Requirement

Certain significant acquisitions of our capital stock may require the purchaser to make a tender offer.

Other Provisions

EXCLUSIVE JURISDICTION. Our bylaws provide that legal actions relating to the execution, interpretation or performance of the bylaws shall be brought only in Mexican courts.

PURCHASE OF OUR OWN SHARES. We may repurchase our shares on the Mexican Stock Exchange at any time at the then-prevailing market price. Any such repurchase must conform to guidelines established by the Board, and the amount available to repurchase shares must be approved by the general ordinary shareholders’ meeting. The economic and voting rights corresponding to repurchased shares may not be exercised during the period in which we own such shares, and such shares are not deemed to be outstanding for purposes of calculating any quorum or vote at any shareholders’ meeting during such period.

CONFLICT OF INTEREST. A shareholder that votes on a business transaction in which its interest conflicts with our interests may be liable for damages, but only if the transaction would not have been approved without its vote.

WITHDRAWAL RIGHTS. Whenever a shareholders meeting approve a change of corporate purposes, change of nationality of the corporation or transformation from one type of company to another, any shareholder entitled to vote on such change that has voted against may withdraw and receive the book value of its shares, provided this right is exercised within 15 days following the meeting.


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American Depositary Shares

Citibank, N.A. (“the Depositary”) serves as the depositary for our ADSs and our American Depository Receipts (“ADR”) program. ADS holders are required to pay various fees to the Depositary, and the Depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid.

ADS holders are required to pay the Depositary amounts in respect of expenses incurred by the Depositary or its agents on behalf of ADS holders, including expenses arising from (i) taxes or other governmental charges, (ii) registration fees payable to us that may be applicable to the transfer of shares

upon deposits to or withdrawals from the ADS program, (iii) cable, telex and facsimile transmission, (iv) conversion of foreign currency into U.S. dollars, (v) compliance with exchange control regulations and other regulatory requirements or (vi) servicing of the ADSs or the shares underlying ADSs. The Depositary may decide in its sole discretion to seek payment either by billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

ADS holders are also required to pay additional fees for certain services provided by the Depositary, as set forth in the table below.

Depositary ServiceFee Payable by ADS Holders
Issuance and delivery of ADSs, including in connection with share distributions, purchase rights, sales and stock splitsUp to U.S.$5.00 per 100 ADSs (or a fraction thereof)
Cash distributionsUp to U.S.$5.00 per 100 ADSs (or a fraction thereof)
Surrender, withdrawal or cancellationUp to U.S.$5.00 per 100 ADSs (or a fraction thereof)
Share distributions other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares)Up to U.S.$5.00 per 100 ADSs (or a fraction thereof)
ADS servicesUp to U.S.$5.00 per 100 ADSs (or a fraction thereof) held on the applicable record date(s) established by the Depositary

Payments by the Depositary

The Depositary reimburses us for certain expenses we incur in connection with the ADR program, subject to a ceiling agreed between us and the Depositary from time to time. These reimbursable expenses currently include legal and accounting fees, listing fees, investor relations expenses and fees payable to service providers for the distribution of material to ADS holders. During the year ended December 31, 2017, the Depositary did not pay us for any reimbursable expenses.


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PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATEDAFFLICATED PURCHASERS

 

We periodically repurchase our L Shares and A Shares on the open market using funds authorized by our shareholders specifically for the repurchase of L Shares and A Shares by us at our discretion. In the annual ordinary shareholders’ meeting held on April 16, 2018,24, 2020, our shareholders authorized an allocation of Ps.3.0Ps.6 billion to repurchase L Shares and A Shares from April 20182020 to April 2019.

2021.

The following tables set out information concerning purchases of our L Shares and A Shares by us and our affiliated purchasers in 2017.2019. We did not repurchase our L Shares or A Shares other than through the share repurchase program. At the annual general shareholders’ meeting held on April 16, 2018, our shareholders approved the cancellation of all our treasury shares, except for 5 billion L Shares, acquired under our repurchase program.

 

Period Total Number of
L Shares Purchased (1) 		  Average Price per 
L Shares		  Total Number of L Shares
Purchased as part of Publicly
Announced Plans or Programs 		  Approximate Mexican
Peso Value of L Shares
that May Yet Be Purchased
Under the Plans or Programs (2) 		 

January 2017

  6,600,000   13.50   6,600,000   22,672,144,564 

February 2017

  6,600,000   12.89   6,600,000   22,587,040,531 

March 2017

  7,900,000   13.18   7,900,000   22,482,929,951 

April 2017

  9,311,804   13.68   9,311,804   2,892,759,292 

May 2017

  6,950,000   14.66   6,950,000   2,790,870,064 

June 2017

  6,952,000   14.52   6,952,000   2,689,945,772 

July 2017

  6,650,000   15.11   6,650,000   2,589,496,895 

August 2017

  3,990,000   16.13   3,990,000   2,522,466,549 

September 2017

  3,082,000   16.30   3,082,000   2,472,243,828 

October 2017

  7,137,000   16.87   7,137,000   2,348,240,205 

November 2017

  2,958,773   16.36   2,958,773   2,299,158,766 

December 2017

  2,082,000   16.46   2,082,000   2,261,427,182 

Total

  70,213,577    70,213,577   

(1) This includes purchases by us and our affiliated purchasers in 2017.

(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.

  

  

PERIOD

  TOTAL NUMBER
OF SHARES
PURCHASED(1)(3)		   AVERAGE PRICE
PER SHARE(3)		   TOTAL NUMBER OF SHARES
PURCHASED AS PART OF
PUBLICLY ANNOUNCED
PLANS OR PROGRAMS(3)		   APPROXIMATE MEXICAN PESO
VALUE OF SHARES THAT MAY
YET BE PURCHASED UNDER THE
PLANS OR PROGRAMS(2)		 
     

January 2019

   3,400,000           Ps.      14.74        3,400,000                      2,529,653,368                 
     

February 2019

   5,008,180           14.28        5,008,180                      2,458,160,850                 
     

March 2019

   3,544,075           13.70        3,544,075                      2,409,569,852                 
     

March 2019(4)

   1,652           13.75        1,652                      2,409,569,852                 
     

April 2019

   3,346,504           14.19        3,346,504                      2,960,276,576                 
     

May 2019

   4,000,000           13.47        4,000,000                      2,906,382,343                 
     

June 2019

   750,000           14.04        750,000                      2,895,853,559                 
     

July 2019

   1,869,756           13.72        1,869,756                      2,870,207,277                 
     

August 2019

   4,712,186           13.06        4,712,186                      2,808,649,183                 
     

September 2019

   785,032           14.22        785,032                      2,797,485,567                 
     

October 2019

   350,000           14.87        350,000                      2,792,279,567                 
     

November 2019

   400,000           15.06        400,000                      2,786,257,067                 
     

December 2019

   2,410,311           14.78        2,410,311                      2,750,633,256                 

Total L Shares

  30,576,044              30,576,044                       

Total A Shares

  1,652              1,652                       

(1) This includes purchases by us and our affiliated purchasers in 2019.

(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.

(3) Refers to L Shares unless otherwise indicated.

(4) Refers to A Shares.

 

  

  

  

  

 

63

Period Total Number of
A Shares Purchased (1) 		  

Average Price per 

A Shares

  Total Number of A Shares
Purchased as part of Publicly
Announced Plans or Programs 		  Approximate Mexican
Peso Value of A Shares
that May Yet Be Purchased
Under the Plans  or Programs (2) 		 

January 2017

  –   –   –   22,672,144,564 

February 2017

  –   –   –   22,587,040,531 

March 2017

  –   –   –   22,482,929,951 

April 2017

  288,196   13.61   288,196   2,892,759,292 

May 2017

  –   –   –   2,790,870,064 

June 2017

  –   –   –   2,689,945,772 

July 2017

  –   –   –   2,589,496,895 

August 2017

  160,000   16.60   160,000   2,522,466,549 

September 2017

  –   –   –   2,472,243,828 

October 2017

  213,000   16.84   213,000   2,348,240,205 

November 2017

  41,227   16.30   41,227   2,299,158,766 

December 2017

  218,000   15.90   218,000   2,261,427,182 

Total

  920,423    920,423   

(1) This includes purchases by us and our affiliated purchasers in 2017.

(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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LOGO

TAXATION OF SHARES AND ADSs

 

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 laRenta) 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;

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

64

LOGO

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.


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         TAXATION OF SHARES AND ADSs

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).

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 non-residentsnonresidents 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 non- residentsnonresidents 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

65

LOGO

TAXATION OF SHARES AND ADSs

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.


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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.

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- receiveddividends-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 (or, in the case of certain U.S. holders, “general category income”). 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,

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and we believe we are eligible for the benefits of the Tax Treaty. Based on our audited consolidated financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to the 2016 or 20172018 and 2019 taxable year.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 and shareholder data, we do not anticipate becoming a PFIC for our 2018the 2020 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


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         TAXATION OF SHARES AND ADSs

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.

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 ServiceForm 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 non- residentnonresident 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:

such 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 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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LOGOLOGO

The Network for

LOGOLOGO

PART V CORPORATE GOVERNANCE

         MANAGEMENT

LOGO

MANAGEMENT

 

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, and each serves until a successor is elected and takes office.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 general shareholders’ meetingmeetings held on April 16, 2018, 1424, 2020, 13 of the current members of the Board of Directors, as well as all current members of the Executive Committee and three of the Audit and Corporate Practices Committee, were reelected, and the Corporate Secretary and the Corporate Pro-SecretaryPro Secretary were reappointed, with 1411 directors elected by the AA Shares and A Shares voting together and two directors elected by the L Shares. At such meeting, Vanessa Hajj Slim was elected to54% of the members of the Board of Directors were considered independent by the annual ordinary general shareholders´ meeting held on April 24, 2020 and Juan Antonio Pérez Simón was replaced by Francisco Medina Chavez.8% of the members of the Board of Directors 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 additional30-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.


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The names and positions of the members of the Board reelected or elected for the first time at the annual general shareholders’ meeting held on April 16, 2018,24, 2020, their year of birth, and information concerning their committee membership and principal business activities outside América Móvil are set forth below:

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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:

  2019

2021

 

Principal occupation:

  

Chairman of the Board of Telmex

 

Other directorships:

  

Chairman of the Board of Grupo Carso Grupo Sanborns, S.A.B. de C.V. (“Grupo Sanborns”) and U.S. Commercial Corp, S.A. de C.V.its subsidiaries

 

Business experience:

  

Chief Executive Officer of Sanborn Hermanos, S.A. de C.V. (“Sanborn Hermanos”)

 

PATRICK SLIM DOMIT

Vice Chairman and Member

of the Executive Committee

 

Born:

  

1969

 

First elected:

  

2004

 

Term expires:

  2019

2021

 

Principal occupation:

  

Vice Chairman of our Board of Directors

 

Other directorships:

  

Director of Grupo Carso, Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. (“IDEAL”) and Telmex

 

Business experience:

  

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:

  2019

2021

 

Principal occupation:

  

Chief Executive Officer of América Móvil

 

Other directorships:

  

Director of Grupo Carso and Telmex

 

Business experience:

  

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

  CARLOS SLIM HELÚ

  Director

Born:1940
First elected:2015
Term expires:2019
Principal occupation and Business experience:Chairman of the Board of Minera Frisco, S.A.B. de C.V. and Carso Infraestructura y Construcción, S.A. de C.V.; Director of IDEAL, Grupo Sanborns and Inmuebles Carso, S.A.B. de C.V. (“Inmuebles Carso”)


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         MANAGEMENT

LUIS ALEJANDRO SOBERÓN KURI

Director

 

Born:

  

1960

 

First elected:

  

2000

 

Term expires:

  2019

2021

 

Principal occupation:

  

Chief Executive Officer and Chairman of the Board of Serinem México, S.A. de C.V. (a subsidiary of Corporación Interamericana de Entretenimiento, S.A.B. de C.V. (“CIE”))

 

Other directorships:

  

Director of CIE; Director of Banco Nacional de México, S.A.

 

Business experience:

  

Various positions at CIE

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MANAGEMENT

 

  CARLOS BREMER GUTIÉRREZ

Director and Member of the Audit and Corporate Practices Committee

Born:1960
First elected:2004
Term expires:2019
Principal occupation:Chief Executive Officer of Value Grupo Financiero, S.A.B. de C.V. and Value S.A. de C.V., Casa de Bolsa
Other directorships:Chairman of Value Grupo Financiero, S.A.B. de C.V.
Business experience:Chief Operating Officer of Abaco Casa de Bolsa, S.A. de C.V.

FRANCISCO MEDINA CHÁVEZ

Director

 

Born:

  

1956

 

First elected:

  

2018

 

Term expires:

  2019

2021

 

Principal occupation:

  

Chief Executive Officer and Chairman of Grupo Fame, S.A. de C.V., and Chairman of Grupo Altozano

 

Other directorships:

  Director of Banamex Citigroup México and Telmex
 

Business experience:

  

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:

  2019

2021

 

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, S.A.B. de C.V., Dine, S.A.B. de C.V., Inmuebles Carso, IDEAL; Alternate Director ofand Industrias Peñoles, S.A.B. de C.V.

 

Business experience:

  

Various positions in Desc Group, including Corporate Vice-President


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RAFAEL MOISÉS KALACH MIZRAHI

Director and Member of the Audit and Corporate Practices Committee

 

Born:

  

1946

 

First elected:

  

2012

 

Term expires:

  2019

2021

 

Principal occupation:

  

Chairman and Chief Executive Officer of Grupo Kaltex, S.A. de C.V. (“Grupo Kaltex”)

 

Other directorships:

  

Director of Telmex and Grupo Carso

 

Business experience:

  

Various positions in Grupo Kaltex

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ANTONIO COSÍO PANDO

Director

 

Born:

  

1968

 

First elected:

  

2015

 

Term expires:

  2019

2021

 

Principal occupation:

  

Vice President of Grupo Hotelero las Brisas, S.A. de C.V. (“Grupo Brisas”), Compañía Industrial Tepeji del Río, S.A. de C.V., and Bodegas de Santo Tomás, S.A. de C.V.

 

Other directorships:

  

Director of Grupo Financiero Inbursa, Inmuebles Carso, Grupo Carso, Grupo Sanborns, Corporación Actinver S.A.B. de C.V., Grupo AerromexicoAeromexico S.A.B. de C.V., Kimberly Clark de México, S.A.B. de C.V. (“Kimberly Clark de México”) and Telmex

 

Business experience:

  

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:

  2019

2021

 

Principal occupation:

  

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

 

Other directorships:

  

Chairman of the Board of Publicidad y Contenido Editorial, S.A. de C.V.; Director of Grupo Sanborns, Grupo Carso Sears and TM&MS LLCits subsidiaries

 

Business experience:

  

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


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         MANAGEMENT

OSCAR VON HAUSKE SOLÍS

Director

 

Born:

  

1957

 

First elected:

  

2011

 

Term expires:

  2019

2021

 

Principal occupation:

  

Chief Fixed-line Operations Officer of América Móvil

 

Other directorships:

  Alternate Director of Telmex, Claro Brasil;

Member of Telekom Austria’s Supervisory Board

 

Business experience:

  

Chief Executive Officer of Telmex Internacional S.A.B. de C.V., 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:

2021

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LOGO

MANAGEMENT

Directors elected by holders of Series L Shares

 

LOUIS C. CAMILLERI

Director

Born:1955
First elected:2011
Term expires:2019
Principal occupation:Chairman of Philip Morris International
Other directorships:Director of Ferrari N.V.
Business experience:Chairman and Chief Executive Officer of Altria and various positions in Philip Morris International

VANESSA HAJJ SLIM

Director

Born:

1997

First elected:2018
Term expires:2019

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:

 2019

2021

 

Principal occupation:

 

Chief Executive Officer of Kimberly Clark de México

 

Other directorships:

 

Director of Kimberly Clark de México, Sistema IntegralS.A.B de Abasto Rural, S.A.P.IC.V. (“Kimberly Clark de C.V.México”), Grupo Sanborns, and Grupo Lala, S.A.B. de C.V. and Acciones y Valores Banamex S.A. de C.V. Casa de Bolsa

 

Business experience:

 

Various positions in the Kimberly Clark Corporation and Kimberly Clark de México as well as Director of Acciones y Valores Banamex S.A. de C.V. Casa de Bolsa

 


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DAVID IBARRA MUÑOZ

Director

 

Born:

 

1930

 

First elected:

 

2000

 

Term expires:

 2019

2021

 

Principal occupation:

 

Retired

 

Other directorships:

 

Director of Grupo Financiero Inbursa, IDEAL and Grupo Carso

 

Business experience:

 

Chief Executive Officer of Nacional Financiera, S.N.C., served in the Mexican Ministry of Finance and Public Credit

 

The annual ordinary general shareholders’ meeting held on April 16, 2018,24, 2020, determined that the following directors are independent: Messrs. Ernesto Vega Velasco, Carlos Bremer Gutiérrez, Pablo Roberto González Guajardo, David Ibarra Muñoz, Antonio Cosío Pando, Louis C. Camilleri, 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 CorporatePro- Secretary. Pro-Secretary.

Patrick Slim Domit and Carlos Slim Domit are brothers. Daniel Hajj Aboumrad and Arturo Elías Ayub aresons-in-law of Carlos Slim Helú andbrothers-in-law brothers-in- law of Patrick Slim Domit and Carlos Slim Domit. Patrick Slim Domit and Carlos Slim Domit are sons of Carlos Slim Helú. Vanessa Hajj Slim is the daughter of Daniel Hajj Aboumrad and the granddaughter of Carlos Slim Helú.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 within 10 calendar days 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 orattorneys-in-fact.

The Executive Committee is elected from among the directors and alternate directors by a majority vote of the

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holders of common shares (AA Shares and A Shares). The Executive Committee currently has three members. The majority of its members must be Mexican citizens and elected by Mexican shareholders. Three members of the Executive Committee were appointed by our Mexican controlling shareholders. See “Major Shareholders” under Part IV of this annual report. The current members of the Executive Committee are Messrs. Carlos Slim Domit, Patrick Slim Domit and Daniel Hajj Aboumrad appointed by the Mexican controlling shareholders.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. The Audit and Corporate Practices Committee consists of Messrs. Ernesto Vega Velasco (Chairman), Rafael Moisés Kalach Mizrahi and Pablo Roberto González Guajardo and Carlos Bremer Gutiérrez.Guajardo. The mandate of the Audit and Corporate Practices Committee is to assist our Board of Directors in overseeing our operations, 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:

 


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         MANAGEMENT

provide opinions to the Board of Directors on certain matters as provided by the Mexican Securities Market Law;

 

call shareholders’ meetings and recommend inclusion of matters it deems appropriate on the agenda;

 

inform the Board of Directors of our internal controls and their adequacy;

 

select our auditors, review andpre-approve the scope and terms of their engagement and determine their compensation;

 

monitor the performance of our auditors andre-evaluate the terms of their engagement;

 

recommend procedures for preparing financial statements and internal controls;

 

monitor internal controls and accounting for specified types of matters;

 

propose procedures for the preparation of financial statements for internal use that are consistent with the published financial statements;

assist the Board of Directors in preparing reports as provided by the Mexican Securities Market Law;

 

discuss with our auditors the annual financial statements and the accounting principles being applied in the annual and the interim financial statements and, based on such discussions, recommend their approval to the Board of Directors;

 

resolve disagreements between our management and auditors relating to our financial statements;

 

request the opinion of independent experts when deemed appropriate or when required by law;

 

approve services to be provided by our auditors or establish policies and procedures for thepre-approval of services by our auditors;

 

obtain from our auditors a report that includes a discussion of critical accounting policies used by us, any alternative accounting treatments for material items that have been discussed by management with our auditorauditors and any other written communications between our auditors and management;

 

report to the Board of Directors on its activities;

develop procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters, including for the confidential submission of concerns regarding such matters by employees;

 

evaluate the performance of the external auditors;

 

review and discuss our financial statements and advise the Board of Directors of the committee’s recommendations for approval of such financial statements;

 

receive and analyze recommendations and observations to its functions from shareholders, members of the Board of Directors and senior management and receive the authority to act upon such recommendations and observations;

 

recommend to the Board of Directors procedures for the selection and succession of our Chief Executive Officer and our other principal executives;

 

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MANAGEMENT

propose criteria for evaluating executive performance;

 

analyze the proposals of the Chief Executive Officer concerning the structure and amount of compensation for our senior executives and raise them with the Board of Directors;

 

review new executive compensation programs and the operations of existing programs;

establish contracting practices to avoid excessive payments to executives;

assist the Board of Directors in developing appropriate personnel policies;

 

participate with the Board of Directors in developing a plan for employees to invest in our L Shares and review the implementation of such plan; and

 

perform any other functions the Board of Directors may delegate to the Audit and Corporate Practices Committee.

Under certain circumstances specified in our bylaws, the Audit and Corporate Practices Committee is required to provide its opinion to the Board of Directors. 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.


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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. The Board of Directors must seek the

opinion of the Audit and Corporate Practices Committee regarding any transaction with a related party that is outside the ordinary course of our business as defined under the Mexican Securities Market Law. Each member of the Audit and Corporate Practices Committee is independent, as determined by our shareholders pursuant to the Mexican Securities Market Law and as defined under Rule10A-3 under the Exchange.

 

 

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, Cortésys y Fuentes, S.C.

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OSCAR VON HAUSKE SOLÍS

Chief Fixed-line Operations Officer

  Appointed:  2010
  Business experience:  Chief Executive Officer of Telmex Internacional;Internacional S.A.B. de C.V.; Chief Systems and Telecommunications Officer of Telmex; Head of Finance at Grupo Condumex, S.A. de C.V.; Director of Telmex, Telmex Internacional, Empresa Brasileira de Telecomunicações S.A. (“Embratel”), and Net Serviços de Comunicação 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.

 


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         MANAGEMENT COMPENSATION

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 20172019 was approximately Ps.5.1Ps.5.2 million and Ps.66.7Ps.75 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.

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MANAGEMENT

SHARE OWNERSHIP OF DIRECTORS AND SENIOR MANAGEMENT

Carlos Slim Domit, Chairman of our Board of Directors, holds 647 million (or 3.1%3.2%) of our AA Shares and 1,567 million (or 3.5%) 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. Carlos Slim Helú, member of our Board of Directors, holds 1,879 million (or 9.1%) of our AA Shares and 3,072 million (or 6.8%) 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 and “Bylaws—Share Capital”Shareholders’ Equity” 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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CORPORATE GOVERNANCE

 

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 PrácticasCorporativas). 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 StandardsSTANDARDS

  

Our Corporate Governance PracticesOUR 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 senon-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 inis independent.

EXECUTIVE SESSIONS

 

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.

 

  Ournon-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.

 

“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.

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.

 


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         CORPORATE GOVERNANCE

NYSE StandardsSTANDARDS

  

Our Corporate Governance PracticesOUR CORPORATE GOVERNANCE PRACTICES

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

Audit committee satisfying the independence and other requirements of Rule10A-3 under the Exchange 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 fourthree 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 Rule10A-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 Rule10A-3 (2) our bylaws and (3) Mexican law. For a more detailed description of the duties of our auditAudit and corporate practices committee,Corporate Practices Committee, see “Management” under Part V of this annual report.

EQUITY COMPENSATION PLANS

 

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.


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Our Corporate Governance Practices

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.

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  OUR CORPORATE GOVERNANCE PRACTICES

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

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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CONTROLS AND PROCEDURES

 

A) DISCLOSURE CONTROLS AND PROCEDURES

(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, 2017.2019. 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)B) MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules13a-15(f) and15d-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—Integrated 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, 2017.2019.

Our management’s assessment and conclusion on the effectiveness of internal control over financial reporting as of December 31, 2019 excludes, in accordance with applicable guidance provided by the SEC, an assessment of the internal control over financial reporting of Nextel Telecomunicações Ltda. and subsidiaries, which we acquired in 2019. Nextel Telecomunicações Ltda represented 2.1% and 5.1% of our total and net assets, respectively, as of December 31, 2019, and represented 0.0% of revenues and net income by 0.0% for the year then ended. No material changes in our internal control over financial reporting were identified as a result of this acquisition.

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 26, 2018.29, 2020.

(C)C) ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM.FIRM


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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

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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, 2017,2019, based on criteria established in Internal Control — 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, 2017,2019, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Nextel Telecomunicações Ltda. and its subsidiaries (Nextel Brazil), acquired in 2019, which is included in the 2019 consolidated financial statements of América Móvil, S.A.B. de C.V. and subsidiaries and constituted 2.1% and 5.1% of total and net assets, respectively, as of December 31, 2019, and represented 0.0% of revenues and net income by 0.0% for the year then ended. Our audit of internal control over financial reporting of América Móvil, S.A.B. de C.V. and subsidiaries also did not include an evaluation of the internal control over financial reporting of Nextel Brazil excluded from the scope of management’s assessment.

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, 20172019 and 2016,2018, 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, 2017,2019, and the related notes, and our report dated April 26, 201829, 2020 expressed an unqualified opinion thereon.

BASIS FOR OPINIONBasis 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 REPORTINGDefinitions 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

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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 26, 201829, 2020

(D)D) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

There has been no change in our internal control over financial reporting during 20172019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 


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CODE OF ETHICS

 

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. We revised our Code of Ethics in early 2018. 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 in Exhibit 14.1 of this annual report or on our website at www.americamovil.com.

Along with the updates to our Code of Ethics, we have created a new whistleblower portal, as well as an ethics committee which will follow investigations regarding violations to the Code of Ethics. The ethics committee will also coordinate training programs for employees to enhance the ethical culture in the Company.


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CORPORATE SUSTAINABILITY REPORT

We have created a corporate sustainability committee which is composed of senior management, to define our corporate sustainability objectives and oversee their implementation. Our corporate sustainability objectives were developed following an extensive assessment of various sustainability factors on the basis of their materiality and impact and have been further tailored to enhance the dialogue between us and our constituents. Through the creation of a corporate sustainability committee, we seekthat seeks to foster greater operational efficiencies, promote social responsibility and adopt environmentally friendly initiatives.

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

 


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PART VI: REGULATION

         REGULATION

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REGULATION

 

MEXICO

Legal Framework

Over the last five years, a newThe legal framework for the regulation of telecommunications and broadcasting services has been developed in Mexico. This legal framework 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 and the Federal Law on Economic Competition (Ley Federal de Competencia Económica) enacted in May 2014.

Under the current legal 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 Teléfonos del Noroeste, S.A. de C.V. (“Telnor”)),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 2013 constitutional amendments authorize the IFT has authority to impose on any preponderant economic agent a special

regulatory regime, as supplemented by the 2014 implementing legislation.regime. The special regime is referred to as “asymmetric” regulation because it applies to one marketsector 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”Telnor Wholesale Services” under this Part VI.

This legal framework has had a substantial impact on our business and operations in Mexico. The long-term effects will depend on further regulations and other actions by the IFT, how we and our competitors adapt, how customers behave in response and how the telecommunications and media markets develop.

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.

While most of the powers previously exercised by the The Mexican Ministry of Communications and Transportation (Secretaríade Comunicaciones y Transportes) were transferred to the IFT, there areretains regulatory authority over a few specific public policy matters over which it retains authority.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

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

 

• INTERCONNECTION RATESInterconnection Rates.. Since the enactment of theThe Federal Law on Telecommunications and Broadcasting provides that we wereare not permitted to charge other carriers for the termination services we provide in our networks. In August 2017, suchThese provisions of the law 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, starting inas of January 1, 2018, Telcel would be able to charge such carriers Ps. 0.028562 per minute for calls to our network. On April 18, 2018,in the Mexican Supreme Court issued a similar resolution regarding fixed interconnection rates,case of Telcel, and as a result, starting inof January 1, 2019, in the case of Telmex, will bewe are able to charge other carriers for termination servicesterminating calls to our networks at a rate to be determinedasymmetric 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.
 

 


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         REGULATION

 

• SHARING OF WIRELESS INFRASTRUCTURE AND SERVICES.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 IFTpre-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 as applicable, along-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, the economicthrough a replicability of thetest, that MVNOs can match our end user rates with respect to rates applicable to services provided by mobile virtual network operators.rates.

 

SHARING OF FIXED 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 to resell those services we provide to our customers and (iii) our dedicated links. The IFT will determine the rates applicable to all wholesale regulated fixed services based onlong-run average incremental cost methodologies.
•Sharing of Fixed 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 to use our network or resell those services we provide to our customers and (iii) our dedicated links. If we cannot reach an agreement with other carriers, our rates may be determined by the IFT using a long-run average incremental cost methodology.

For fixed services, the IFT has the right to verify, the economicthrough a replicability of thetest, that other competitors can match our end user rates.

 

ACCESS TO LOCAL LOOP.We must offer other carriers access to elements of our local network separately on terms and conditionspre-approved by the IFT. In March 2017, the IFT ordered the legal and functional separation of the provision of wholesale regulated fixed services related to local loop (acceso local) and shared access and use of passive infrastructure. On March 5, 2018, the IFT approved a separation plan. See “Functional Separation of Telmex and Telnor” under this Part VI.
•Access to Local Loop.We must offer other carriers access to elements of our local 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 (acceso local) and shared access and use of passive infrastructure. 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.
CERTAIN OBLIGATIONS RELATING TO RETAIL SERVICES.Certain rates for the provision of telecommunications services to our customers are subject to the IFT’s prior authorization, in the case of fixed-line and wireless services, and to rate controls, in the case of fixed-line services only, using historical cost methodologies to determine the maximum prices Telmex may charge its customers.

We are also subject to certain obligations and restrictions relating to the sale of our services and products; such obligations include

unlocking mobile devices for our customers and offering individually all services that we previously offered under a bundled scheme. unlocking mobile devices for our customers and offering individually all services that we previously offered under a bundled plan.

 

• CONTENT.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 but not limited to, certainthe Mexican national team soccer matches, the opening and closing ceremonies of the Summer Olympics, the opening and closing ceremonies and certain matches of the FIFA World Cup, the semifinal and the finalsfinal matches of the Liga MX soccer tournament.tournament and the Super Bowl.

 

REPORTING OF SERVICE OBLIGATIONS.We are subject to obligations related to reporting of service, including the publication of reference terms for wholesale and interconnection services that are subject to asymmetric regulation.
•Publication of Reference Terms.We are subject to obligations related to the publication of reference terms for all wholesale and interconnection services that are subject to asymmetric regulation.

The measures are transitory and may be amended or eliminated by the IFT, or terminated if the IFT declares thatit 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, including the structural or functional separation or divestiture of assets of the preponderant economic agent.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.

In March 2014, the Company, Telcel, Telmex and Telnor filed challenges (juicios de amparo) against the declaration by the The IFT that Telcel, Telmex and Telnor, together with certain affiliates, constitute an economic interest group that isalready began a “preponderant economic agent” (agente económico preponderante)new review in the Mexican telecommunications marketsecond quarter of 2019, which is expected to be completed in the first quarter of 2020. The new review may result in changes, which could include additional or reduced asymmetric regulations or the structural separation or divesture of assets of the preponderant economic agent.

We have challenged the determination that we are a preponderant economic agent and imposed certain specific asymmetrical regulations.the asymmetric regulations in court. These challenges were denied in the case of Telmex, Telnor and the Company, and a final resolution is still pending in the case of Telcel. We have also challenged the 2017 resolution. However, given that, under the new regulatory framework, IFT’s determinations are not suspended while legal challenges against them are resolved, the enforceability of the IFT’s declaration cannot be suspended.resolved.

 

 


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REGULATION

 

Functional Separation of Telmex and Telnor Wholesale Services

OnIn March 5, 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”). The Separation Plan differs substantially from the proposed plan presented by Telmex and Telnor pursuant to the IFT’s separation order of March 2017. We are currently reviewing

In compliance with the Separation Plan and analyzing its possible effects on us and our subsidiaries.

Theas of the date of this annual report, we have complied with all milestones of the Separation Plan establishes, among other provisions,including the following:

 

WHOLESALE UNIT.Telmex and Telnor must establish a business unit to provide certain wholesale services to other concessionaires, including interconnection,co-location for interconnection, intercity 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.

NEW COMPANIES.Telmex and Telnor are required to establish separate new corporations (the “New Companies”) to provide 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 New Companies will be direct subsidiaries of Telmex. The main features of the New Companies are as follows:
•New Companies.Telmex and Telnor established separate new corporations,Red Nacional Ultima MillaandRed Ultima Milla 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 New Companies are subsidiaries of Telmex and they began operations as separated entities on March 6, 2020. The main features of the New Companies are as follows:

 

 ◇• Financial Viability.The Separation Plan contemplates that the New Companies will be financially viable. The implementation and consequencesPrice of this requirement are uncertain, both with respect to the initial composition of the New Companies’ assets and resources and with respect to their subsequent operations. Services.The prices and terms of the services to be provided by the New Companies are generally subject to IFT regulation, which could affect the viability and financial requirements of the New Companies.

 

 ◇• Corporate Governance.The New Companies will have their own corporate governance, including: (i) a board of directors with at least seven members, of which a majority (including the Chairman) must beis 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 must be previouslywere approved by the IFT. Independence for these purposes is used as defined under Mexican Securities Market Law.

Personnel. Subject to the discussion under “Services Through Union Employees” below, the New Companies have independent 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.

 

◇• Personnel.Wholesale Unit.The New Companies must have the personnel necessary to operate their assets and to provide wholesale services required by the Separation Plan.

◇Systems and Procedures.The New Companies must have procedures, operating and management systems that are independent from those of América Móvil and its other subsidiaries.

◇Branding.The New Companies must have their own branding distinct from América Móvil’s concessionaire subsidiaries. The brands must be dissociated from those of Telmex and Telnor within four years.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.

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

We have up to two years to implement the Separation Plan. The implementation will bePlan has been complex, and manysome features remain uncertain and willmay require further development in consultation with the IFT.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 may not be finally determined before the Separation Plan is fully implemented.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

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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.

In 2007, Cofeco initiated various investigations to evaluate whether Telmex and its subsidiary Telnor have substantial


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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.

In the case of the market for wholesale dedicated-linkdedicated- 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 two 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.

 

SPECTRUM CONCESSIONS.Telcel holds multiple concessions, granted under both the previous and current regulatory framework,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.

A public telecommunications concessionaire is required by law to establish an open-network architecture that permits interconnection and interoperability.

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

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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 129.5232.7 MHz of capacity in

Mexico’s nine regions in the 850 MHz, 1900 MHzMHz,1.7/2.1 GHz, 2.5 GHz and 1.7/2.13.5 GHz bands. The following tables summarizetable summarizes Telcel’s concessions.

 

 


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FrequencyFREQUENCY

  

Region in MexicoCOVERAGE AREA

  

Initial DateINITIAL DATE

  

Termination DateTERMINATION DATE

 

Fee Structure  

Band A (1900 MHz)

  Nationwide  Sep.1999Sep. 1999  Oct. 2039
 Upfront

Band D (1900MHz)

NationwideOct. 1998Oct. 2038

Band B (850 MHz)

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

Band B (850 MHz)

  Regions 4, 5  Aug. 2010  Aug. 2025
 Annual

Band B (850 MHz)

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

Band B (850 MHz)

  Region 9  Oct. 2015  Oct. 2030Annual
Band D (1900MHz) Nationwide Oct. 1998Oct. 2018(1)Upfront

Band F (1900MHz)

  Nationwide  Apr. 2005  Apr. 2025
 Annual

Bands A and B (1.7/2.1 GHz)

  Nationwide  Oct. 2010  Oct. 2030
 Annual

Bands H, I and J (1.7/2.1 GHz)

  Nationwide  May 2016  Oct. 2030
 Annual

Band 7 (2.5 GHz)

88% of the populationJul. 2017Sep. 2020(1) -Nov.  2028

Band 3.5 GHz

NationwideOct. 2020(2)Oct. 2040

(1) RequestA request for renewal haveextension has already been submitted andfiled with the IFT.

(2) The term of this concession is currently subjectin force and was extended by IFT in favor of Telmex until 2040 and afterwards it was assigned by Telmex to approval.Telcel as of March 11, 2020.

 

In 2017, Telcel received the required regulatory approval to close its indirect acquisition of approximately 60 MHz of spectrum owned by Grupo MVS, S.A. de C.V. in the 2.5 GHz band. Following this acquisition, Telcel holds approximately 60 MHz in the 2.5 GHz band in several municipalities, representing approximately 75% of Mexico’s population.

ConcessionConcessions Fees

In addition to the upfront concession fees applicable to allAll of the 1900 MHz (Bands A, D and F) concessions, all 1.7/2.1 GHz (Bands A, B, H, I and J), 850 MHz (Regions 1 to 8) and 2.5 GHz concessions, owners ofTelcel’s concessions granted or renewed on or after January 1, 2003 are also 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. Currently, Telcel is not required to pay these fees for its 1900 MHz concessions (Band A) since they were awarded prior to 2003.

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 a30-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.

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 a30-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 wireless local access, as well as

point-to-point andpoint-to-multipoint transmission. Telmex obtained these

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concessions, fromincluding thenow-defunct Federal Commission 3.5 GHz band assigned in favor of Telecommunications (Comisión Federal de Telecomunicaciones, or “Cofetel”) through a competitive bidding processTelcel, for a term of up to 20 years that may beand were extended by the IFT for additional20-year terms with terms.

In 2018, Telmex was notified of a resolution issued by the IFT.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 RatesService

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 topre-approval by the IFT before they can take effect. In addition, the 2014 legislation established that preponderant economic agents may not charge termination rates. See “— Asymmetric Regulation of the Preponderant Economic Agent” under this Part VI.

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.


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Rates for Fixed RatesService

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 thelong-run average incremental cost. As a result of the preponderance determination, Telmex’s retail prices are subject topre-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 since March 2001, for local services and since March 1999 for international long- distance services.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 schemestructure 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; all of which areIFT based on thelong-run average incremental cost model methodology.

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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 deTelecomunicações, 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. Additionally, Claro Brasil is subject

The Brazilian Congress has approved an updated legislation to regulation by the Brazilian National Cinema Agency (Agência Nacional do Cinema).

As of the date of this annual report, Brazilian lawmakers are considering the passage of a revamped legal telecommunications framework aimed at modernizingmodernize the current concession-based model to an authorization-based model. The telecom reform bill under review would allowupdated law brings the possibility of allowing fixed-line concessionaires, such as Claro Brasil, to provide services under an authorization instead ofrather 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. As a result,Brasil, with all licenses previously granted to Embratel and Net Serviços wereour subsidiaries transferred to Claro Brasil. Embrapar held no licenses to transfer.

Following its acquisition of Brasil Telecomunicações S.A. in 2016, Claro Brasil was transferred an additionalrelinquished the cable TV license. This license hasand data services licenses it had been transferred by Embrapar and Net Serviços.

In 2018, subsidiary Star One merged into Claro Brasil. As a result, all Brasilian 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 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 2019, the subsidiary Primesys was merged into Claro Brasil’s other cable TV license.


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Brasil. As a result, service authorizations granted to Primesys were transferred under the same terms and conditions to Claro Basil.

Our Brazilian subsidiaries hold licenses for the telecommunications services listed below:

Subsidiary

License

Termination Date

Claro BrasilFixed Local Voice ServicesIndefinite
Domesticbelow and International Long Distance Voice Services2025
Personal Communication ServicesIndefinite
Data ServicesIndefinite
Cable TV ServicesIndefinite
Mobile Maritime ServicesIndefinite
Global Mobile Satellite ServicesIndefinite
Claro TVDTH TV ServicesIndefinite
Data ServicesIndefinite
Americel S.A.Data ServicesIndefinite
Star OneData ServicesIndefinite
Satellite ExploitationSee table below
PrimesysData ServicesIndefinite
Telmex do BrasilData ServicesIndefinite

Our Brazilian subsidiary Star One has the following authorizations for satellite exploitation:

Authorization TypeContract NumberOrbital PositionIssue DateExpiration Date(1)
Orbital PositionPVSS/SPV 007/200663°W, 65°W, 68°W, 70°W and 84°W – C BandJan. 2006Dec. 2020
Orbital PositionPVSS/SPV 001/200365°W – Ku BandFeb. 2003Feb. 2033
Orbital PositionPVSS/SPV 12/200792°W – C and Ku BandNov. 2007Nov. 2022
Orbital PositionPVSS/SPV 002/200370°W – Ku BandOct. 2003Oct. 2018(2)
Orbital PositionPVSS/SPV 001/200775°W – C and Ku BandFeb. 2007Feb. 2022
Orbital PositionPVSS/SPV 156/201270°W – Ka and Ku BandMar. 2012Mar. 2027
Orbital PositionPVSS/SPV 076/201284°W – Ka and Ku BandFeb. 2012Feb. 2027
Landing RightsPVSS/SPV 002/200937.5°W – C BandMay 2009May 2019(3)

(1) Unless otherwise noted, the standard license term is 15 years.

(2) Request for renewal have been submitted and is currently subject to approval.

(3) Expiration date to the landing rights coincides with the end of C12 Satellite’s lifetime.


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Our Brazilian subsidiaries expect to continue acquiring spectrum shouldif Anatel conductconducts additional public auctions, although Claro Brasil,Brazil, like all of its peer competitors, is subject to a cap on the additional spectrum it may acquire per frequency band.

The following table sets forth the regions in Brazil in which Claro Brasil holds licenses to provide PCS as well as their termination dates:

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Frequency and Geographic BlockSUBSIDIARY

LICENSE Termination DateTERMINATION DATE
2500 MHZ:
Nationwide

Claro Brasil

 Oct. 2027
RegionalFixed Local Voice Services Feb. 2024Indefinite
Regional Oct. 2027
Regional(1) Oct. 2031
700 MHZ:
NationwideDomestic and International Long-Distance Dec. 20292025
1900-2100 MHZ:
Nationwide Mar. 2023
1800 MHZ:
Regional Apr. 2020
RegionalVoice Services Dec. 2022Indefinite
Regional Mar. 2023
Regional July 2027
RegionalPersonal Communication Services Aug. 2027Indefinite
Regional Apr. 2028
Regional Mar. 2028
RegionalData Services Dec. 2032Indefinite
900 MHZ:
Regional Apr. 2020
Regional Dec. 2022
RegionalCable TV Services July 2027Indefinite
Regional Aug. 2027
Regional Apr. 2028
RegionalMobile Maritime Services Mar. 2028Indefinite
Regional Dec. 2032
850 MHZ:
Regional Mar. 2023
RegionalGlobal Mobile Satellite Services July 2027Indefinite
Regional Aug. 2027
Regional

Claro TV

 Apr. 2028
RegionalDTH TV Services Mar. 2028Indefinite
450MHZ:
Regional Oct. 2027
Data ServicesIndefinite

Americel S.A.

Data ServicesIndefinite

(1) This is Claro Brasil’s most recent license acquisition from a spectrum auction held by Anatel in 2015, in which it acquired 19 licenses (10+10 MHz—Band P) in different regional blocks.Telmex do Brasil

Data ServicesIndefinite

Nextel Brazil

Personal Communication ServicesIndefinite
Domestic and International Long-DistanceIndefinite
Data ServicesIndefinite
Trunking ServicesIndefinite

Sunbird

Trunking ServicesIndefinite

In addition, Claro Brasil has various orbital position authorizations for our satellite operations, which expire between 2022 and 2033, and radio frequency licenses to provide PCS, which expire between 2020 and 2032.

Nextel Brazil has radio frequency licenses to provide PCS, which expire between 2026 and 2031, and, radio frequency licenses to provide Trunking Services, which expire between 2020 and 2025, Sunbird has radio frequency licenses to provide Trunking Services, which expire in 2024.

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 the15-year 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-distancelong- distance telephone services, net of taxes and social contributions, for the year preceding the payment.

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 concession.concessions. Compensation for those assets would be their depreciated cost. See Note 1617 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-holderslicense 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 (less a factor determined by Anatel based on the productivity of each operator during the year). Claro Brasil may set international long-distance and mobile rates freely, provided that it gives Anatel and the public advance notice.


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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

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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 2019.2019, based on a cost model, and in December 2018, Anatel established termination rates for mobile services applicable to operators with significant market power through 2023. Claro Brasil is also required to publish and Anatel must approve, its reference roaming prices for voice, data and SMS on a semi-annualan 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 such prices by Anatel took place on January 2020.

In addition, Embratel was determined to have significant market power in the market for long-distance leased lines, Claro Brasil and Embratel were determined to have significant market power in the telecommunications infrastructure market, and Net Serviços was determined to have significant market power in the local coaxial transmissions market, together with several of their mobile and fixed-line competitors. Following the merger of Embratel and Net Serviços into Claro Brasil in 2014, Claro Brasil is required to publish, and Anatel must approve,approved its reference offers in each of these markets. Moreover, wholesale contracts entered into by operators determined to have significant market power for the sale of such operators’ services are overseen for compliance purposes by independent third-party companies.

In 2018, Anatel has approved Claro Brasil’s most recent wholesale reference offers with respect to national roaming, telecommunications duct infrastructure, long-distancelong- distance leased lines, high capacity transport above 34 Mbps, wireless termination rates,networks interconnection, fixed network interconnection, internet network interconnection and internet links, which it reviewsare reviewed and approved by Anatel on a biennialan annual basis.

Anatel also reviews its determination of which operators have significant market power on a biennialquadrennial basis. Anatel began its first review of all telecom operators in 2014 but this first review has not been completed.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 has proposed modifications tochanged some of the asymmetric measures applicable under the PGMC whichand added two new wholesale markets covering high capacity transport and fixed network interconnection. Anatel has been made available for public comment, although the new regulationdetermined that Claro Brasil has not yet been published.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.

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. Claro Brasil was not determined to have significant market power in the local fixed-line market and thus may set interconnection rates up to 20.0% higher than such cap.

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, (iii) meetquality-of-service targets and (iv) comply with applicable telecommunications services consumer rights.


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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

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telecommunications sector. The main audiovisual regulatory authorityauthorities in Colombia with respect to Pay TV services isare the National Television AuthorityCRC, the ICT Ministry and the Industry and Commerce Superintendence (Autoridad NacionalSuperintendencia de TelevisiónIndustria y Comercio, or “ANTV”“SIC”). We areClaro 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 registerregistry 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. For further information on these proceedings, see Notes 1 and 16 to our audited consolidated financial statements included in this annual report.

Licenses and Permits

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

 FrequencyFREQUENCY

BANDWIDTH BandwidthTermination DateTERMINATION
DATE

850 MHz

 25 MHz Mar. 2024

1900 MHz

 10 MHz Dec. 20192039
  5 MHz Sept. 2021
  15 MHz Apr. 2024
5 MHzJune 2018(1)

2.5 GHz

 30 MHz Aug. 2023
10 MHzFeb. 2021(1)
10 MHzMar. 2040
10 MHzMar. 2040
10 MHzMar. 2040

700 MHz

20 MHzPending

(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 ANTV’sthe ICT Ministry’s unified licensing system. The permission will expire in 2020 and may be renewed at the appropriate time for another10-year term. 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 yetreleased its plan to release its final announcement regarding the upcomingconduct spectrum auctions in the 700 MHz, and 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 administrative proceeding to evaluate and

decide on the effects caused by such resignation. Comcel was notified by the ICT Ministry and was considered an interested third party in the administrative proceeding.

Asymmetric Charges

In 2012, the CRC issued resolutions seeking to correct an alleged market failure and imposing the following measures on Comcel: (i) asymmetric charges for mobile and incoming long distancelong-distance call terminations by other operators on Comcel’s wireless network, with access rates lower than the rates we pay our competitors, and (ii) restrictions on the rates we charge our users for calls outside our network(off-netoff- net calls), which must not exceed the rates we charge for calls within our network(on-net calls).

These asymmetric access charges ended in December 2016.

In January 2017, the Colombian government approved symmetrical access charges among established operators like Comcel, Movistar and Tigo. However, under current regulation, new market entrants continue to receive a higher access rate than established operators for a limited period.

In 2017, the CRC issued a resolution updating the list of relevant telecommunication markets by adding the mobile services market (including bundled mobile voice and data services) and by also including the mobile service market in the list of relevant markets subject toex-ante regulation. In connection with the mobile services market, the CRC initiated a proceeding to evaluate Comcel’s substantial market power in this new market and, if applicable, the imposition of asymmetric regulatory measures that could affect Comcel. As of the date of this annual report, a resolution is pending.


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ARGENTINA

Following the election of President Mauricio Macri in 2015, the Argentine government issued a Decree of Necessity and Urgency (Decreto de Necesidad y Urgencia, or “DNU”) to create a new communications ministry and regulator to oversee the telecommunications and media sectors. The National Communications Agency (Ente Nacional de Comunicaciones, or “Enacom”) is now the main telecommunications regulatory authority in Argentina and became operational in 2016.

As part of the measures passed under the DNU, fixedFixed and mobile services providers are prohibited from providing DTH technology, which is currently the fastest way to provide Pay TV services. In 2017, the Argentine government issued a decree allowing telecommunications providers, including AMX Argentina S.A. (“AMX Argentina”), to provide Pay TV services via cable within a limited number of territories as of January 2018. The start date for providing such Pay TV services2018 and to the rest of the country is to be determined by Enacom.as of January 2019. AMX Argentina has obtained the permissions necessary to provide Pay TV services via cable in accordance with the decree to the territories approved by Enacom.decree.

AMX Argentina holds licenses in the 700 MHz, 900 MHz, 1700/2100 MHz (AWS), 1900 MHz and 2600 MHz frequency bands, some of which expire in 15 years and some of which have no expiration date. Each license also contains certain coverage parameters, reporting and service requirements and provides Enacom a revocation right upon a material breach of the license terms.

All telecommunications providers in Argentina must contribute approximately 1.0% of their monthly revenues to finance the provision of telecommunications services in underserved areas and to underserved persons. All providers must also meet certainquality-of-service requirements.

CHILE

The General Telecommunications Law (Ley General de Telecomunicaciones) establishedestablishes the legal framework for telecommunications services in Chile, including the regulation of concessions, permits, rates and interconnection. The main regulatory agency of the telecommunications sector is the Chilean Transportation and Communications Ministry (Ministerio de Transportes y Telecomunicaciones), which acts primarily through the Undersecretary of Telecommunications (Subsecretaría de Telecomunicaciones, “SUBTEL”).

Claro Chile S.A. (“Claro Chile”) holds concessions to provide mobile and fixed-line services in the 700 MHz,700MHz, 850 MHz, 1900 MHz, 2.6 GHz, 3.4 to 3.6 GHz and 5.8 GHz frequency bands. Additionally,Except for the concession to provide services in the 850 MHz frequency, which has an indefinite termination date, the concessions to provide services in the 700 MHz, 1900 MHz, 2.6 GHz, 3.4 GHz and 5.8 GHz frequencies have termination dates that vary from 2027 to 2045. Claro Chile also holds a10-year license to provide DTH technology services until

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2024 and a license with an indefinite term to provide Pay TV services. In 2018, the Chilean Supreme Court (Corte Suprema de Justicia) issued a ruling requiring Claro to return 20 MHz of spectrum acquired through a band auction because Claro supposedly exceeded the limit of spectrum any given operator is permitted to hold. The return of such spectrum is currently being implemented before the Competition Court (Tribunal de Defensa de la Libre Competencia, or the “TDLC”). In addition, pursuant to the ruling, and in order to increase the maximum limit, SUBTEL initiated a review of such limit of spectrum through a regulatory proceeding before the TDLC, which shall now be reviewed by the Chilean Supreme Court.

Some of Claro Chile’s concessions impose additional requirements, such as coverage, reporting and service quality requirements. The Chilean Transportation and Communications Ministry is authorized to terminate any concession in the event of specified breaches under the terms of such concessions. Additionally, Claro Chile’s concession in the 700 MHz band imposes certain obligations to expand mobile and data services in rural areas. In 2017, the Undersecretary of Telecommunication approved Claro Chile’s expansion project in connection with its obligations under its concession in the 700 MHz band.

PARAGUAY

The National Telecommunications Commission of Paraguay (Comisión Nacional de Telecomunicaciones de Paraguay) is in charge of supervising the telecommunications industry in Paraguay. It is authorized to cancel licenses in the event of specified breaches of the terms of a license.

AMX Paraguay, S.A. (“AMX Paraguay”) holds licenses to operate in the 1900 MHz and the 1700/2100 MHz bands. AMX Paraguay also holds a nationwide internet access and data transmission license. In addition, AMX Paraguay holds licenses to provide DTH services and cable TV services. Additionally, in January 2018, AMX Paraguay participated in a spectrum auction and was awarded a license to provide telecommunications services in the 700 MHz band. In November 2018, the Telecommunications Commission of Paraguay granted the renewal of spectrum license in the 1900 MHz band. These licenses are renewable, subject to regulatory approval, and contain coverage, reporting and service requirements.

In November 2019, the Telecommunications Commission of Paraguay granted AMX Paraguay a license to provide internet access and data transmission services in the 3,500 MHz frequency band, effective until January 12, 2024


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         REGULATION

URUGUAY

The Regulatory Unit of Communications Services (Unidad Reguladora de Servicios de Comunicaciones) is in charge of the regulation of the telecommunications industry in Uruguay.

AM Wireless Uruguay, S.A. holds licenses to operate in the 1900 MHz, 1700/2100 MHz and 700 MHz frequency bands that expire in 2024, 2033, 2037, 2039 and 2037, respectively,2045, and Telstar S.A. holds licenses to provide international longlong- distance communications and mobileinternational and national data services that have no expiration date.

The license initially granted to Flimay S.A. (“Flimay”) to provide DTH technology services in Uruguay has been contested by the government since 2012. In 2017, the executive branch of Uruguay held under a new ruling that FilmayFlimay does not have a valid license to provide DTH services in the country. Flimay requested this ruling be voided, but in February 2018, the executive branch of Uruguay, with support from the Administrative Court (TCA), requested the process be closed. As of the date of this annual report, our challenge to sucha decision on Flimay’s appeal is pending.

ANDEAN REGION

ECUADOR

The primary regulatory authorities for our mobile and fixed-line operations are the National Telecommunications, Regulation and Control Agency (Agencia de Regulación y Control de las Telecomunicaciones, or “Arcotel”) and the Telecommunications and Information Society Ministry (Ministerio de Telecomunicaciones y Sociedad de la Información, or “Mintel”). Arcotel is responsible for the licensing and oversight of radio-electric spectrum use and telecommunications services provisions. Mintel is responsible for the promotion of equal access to telecommunications services.

The Telecommunications Law (Ley Orgánica de Telecomunicaciones), adopted in 2015, serves as the legal framework for telecommunications services. It established

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new regulations for operators with significant market power, new penalties based on their gross incomes as well as additional fees also based on an operator’s gross income, but that can vary depending on the size of their market share. Consorcio Ecuatoriano de Telecomunicaciones, S.A. (“Conecel”) has been deemed to have significant market power in the advanced wireless services market, and as a result, such fee payments are made on a quarterly basis on the dates established by Arcotel.

For fiscal year 2017, Conecel has an obligationpaid to pay the Ecuadorian government 5.0%U.S. $29.7 million, which corresponds to 3.0% of its advance wireless services for 2017, which represents approximately Ps.1.0 billion (U.S.$51.6 million). Asrevenues generated in 2019. An arbitration proceeding to partially void the payment by Conecel of such fees was conducted and a decision in favor of the government was reached. Conecel has appealed this decision and, as of the date of this annual report, Conecel has paida decision of the Ecuadorian government Ps.0.8 billion (U.S.$38.9 million), which represents 5.0% of such revenues generated in the first three quarters of 2017. Conecel has made a provision for Ps.0.3 billion (U.S.$12.7 million), which corresponds to the approximate amount owed for the fourth quarter of 2017 and will be paid in due course. The regulator’s decision to enact such penalties and the fee paid by Conecel are under dispute and subject to an arbitration proceeding.Constitutional Court is pending.

Conecel holds concessions to operate in the 850MHz, 1900 MHz and AWS bands, which include concessions for PCS that expire in 2023. The PCS concession containsquality-of- service requirements for successful call completions, SMS delivery times, customer service, geographic coverage and other service conditions.

Conecel also holds licenses to provide internet value-addedvalue- added services, Pay TV Services (through DTH technology) and bearer services, expiring in 2021, 2023 and 2027,2032, respectively.

Conecel, following the acquisition of Ecuador Telecom, S.A. in 2016, also holds a concession to offer fixed-line voice, public telephone and domestic and international long-distancelong- distance wholesale services, as well as a license to provide Pay TV (through DTHHFC technology) that expires in 2031.

In 2017, Arcotel eliminated the asymmetry in termination rates between Conecel and Telefónica S.A. starting in the second quarter of 2018 and reduced the asymmetry from 21.78% to 6.54%.

Recalculation of Concession FeesBasis for Opinion

Arcotel has initiated several proceedings to recalculate the variable portionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the concession fees payableeffectiveness 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

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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 29, 2020

D) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

There has been no change in our internal control over financial reporting during 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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CODE OF ETHICS

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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CORPORATE SUSTAINABILITY REPORT

We have a corporate sustainability committee that seeks to foster greater operational efficiencies, promote social responsibility and adopt environmentally friendly initiatives.

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

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PART VI: REGULATION

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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 and the Federal Law on Economic Competition (Ley Federal de Competencia Económica) enacted in May 2014.

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 Conecel’s concessions,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 Telnor,RedNacional Ultima Milla S.A.P.I. de C.V.andRed Ultima Milla Del NoroesteS.A.P.I. de C.V.) and certain affiliates constitute the preponderant economic agent in the telecommunications sector. 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.

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•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 MVNOs 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, ducts and rights of way, (ii) elements of our network that allow other carriers to use our network or resell those services we provide to our customers and (iii) our dedicated links. If we cannot reach an agreement with other carriers, our rates may be 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 other competitors can match our end user rates.

•Access to Local Loop.We must offer other carriers access to elements of our local 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 (acceso local) and shared access and use of passive infrastructure. 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; such obligations include unlocking mobile devices for our customers and offering individually all services that we previously offered under a bundled plan.

•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.

•Publication of Reference Terms.We are subject to obligations related to the publication of reference terms for all wholesale and interconnection services that are subject to asymmetric regulation.

The measures are transitory and may be amended or eliminated by the IFT, or terminated if it 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. The IFT already began a new review in the second quarter of 2019, which is expected to be completed in the first quarter of 2020. The new review may result in changes, which could include additional or reduced asymmetric regulations or the structural separation or divesture of assets of the preponderant economic agent.

We have challenged the determination that we are a preponderant economic agent and the asymmetric regulations in court. These challenges were denied in the case of Telmex, Telnor and the Company, and a final resolution is still pending in the case of Telcel. However, IFT’s determinations are not suspended while legal challenges against them are resolved.

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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”).

In compliance with the Separation Plan and 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 separate new corporations,Red Nacional Ultima MillaandRed Ultima Milla 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 New Companies are subsidiaries of Telmex and they began operations as separated entities on March 6, 2020. 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.

Personnel. Subject to the discussion under “Services Through Union Employees” below, the New Companies have independent 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 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

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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 equivalentstill pending. If upheld, these decisions would allow the IFT to 2.93%impose additional requirements as to rates, quality of Conecel’sservice and information, among other 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.

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 two 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.

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.

A public telecommunications concessionaire is required by law to establish an open-network architecture that permits interconnection and interoperability.

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

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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 232.7 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 AREAINITIAL DATETERMINATION DATE

Band A (1900 MHz)

NationwideSep. 1999Oct. 2039

Band D (1900MHz)

NationwideOct. 1998Oct. 2038

Band B (850 MHz)

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

Band B (850 MHz)

Regions 4, 5Aug. 2010Aug. 2025

Band B (850 MHz)

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

Band B (850 MHz)

Region 9Oct. 2015Oct. 2030

Band F (1900MHz)

NationwideApr. 2005Apr. 2025

Bands A and B (1.7/2.1 GHz)

NationwideOct. 2010Oct. 2030

Bands H, I and J (1.7/2.1 GHz)

NationwideMay 2016Oct. 2030

Band 7 (2.5 GHz)

88% of the populationJul. 2017Sep. 2020(1) -Nov.  2028

Band 3.5 GHz

NationwideOct. 2020(2)Oct. 2040

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

(2) 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 Fees

All of Telcel’s concessions granted or renewed on or after January 1, 2003 are required to pay annual revenues.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, Conecel paid Ps.0.6the 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.

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. Telmex obtained these

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concessions, including the 3.5 GHz band assigned in favor of Telcel, for a term of up to 20 years and were extended by the IFT for additional 20-year terms.

In 2018, Telmex was notified of a resolution issued by the IFT, through which the IFT imposed a fine of Ps.2.5 billion (U.S.$31.3 million)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.

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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 deTelecomunicações, 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 variable feesas 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. Following its acquisition of Brasil Telecomunicações S.A. in 2016, Claro Brasil relinquished the cable TV and data services licenses it had been transferred by Embrapar and Net Serviços.

In 2018, subsidiary Star One merged into Claro Brasil. As a result, all Brasilian 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 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 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 Basil.

Our Brazilian subsidiaries hold licenses for the 2009telecommunications services listed below and expect to 2011 periodcontinue 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.

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LICENSETERMINATION DATE

Claro Brasil

Fixed Local Voice ServicesIndefinite
Domestic and International Long-Distance2025
Voice ServicesIndefinite
Personal Communication ServicesIndefinite
Data ServicesIndefinite
Cable TV ServicesIndefinite
Mobile Maritime ServicesIndefinite
Global Mobile Satellite ServicesIndefinite

Claro TV

DTH TV ServicesIndefinite
Data ServicesIndefinite

Americel S.A.

Data ServicesIndefinite

Telmex do Brasil

Data ServicesIndefinite

Nextel Brazil

Personal Communication ServicesIndefinite
Domestic and International Long-DistanceIndefinite
Data ServicesIndefinite
Trunking ServicesIndefinite

Sunbird

Trunking ServicesIndefinite

In addition, Claro Brasil has various orbital position authorizations for our satellite operations, which expire between 2022 and Ps.0.3 billion (U.S.$13.8 million)2033, and radio frequency licenses to provide PCS, which expire between 2020 and 2032.

Nextel Brazil has radio frequency licenses to provide PCS, which expire between 2026 and 2031, and, radio frequency licenses to provide Trunking Services, which expire between 2020 and 2025, Sunbird has radio frequency licenses to provide Trunking Services, which expire in 2024.

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.

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 (less a factor determined by Anatel based on the productivity of each operator during the year). 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

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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, period.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 through 2023. 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 recalculationsapproval of such prices by Anatel took place on January 2020.

In addition, Embratel was determined to have significant market power in the market for long-distance leased lines, Claro Brasil and Embratel were determined to have significant market power in the telecommunications infrastructure market, and Net Serviços was determined to have significant market power in the local coaxial transmissions market, together with several of their mobile and fixed-line competitors. Following the merger of Embratel and Net Serviços into Claro Brasil in 2014, Claro Brasil is required to publish, and Anatel approved its reference offers in each of these markets. Moreover, wholesale contracts entered into by operators determined to have significant market power for the sale of such operators’ services are overseen for compliance purposes by independent third-party companies.

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 2015use of their mobile network and 2016 fiscal years continueleased lines and set a price cap on fees charged for fixed network usage by operators deemed to be under reviewhave significant market power. Such fees, based on costs of allocation services (coubicación), have been applicable since February 2016.

Fixed-line operators determined by Arcotel.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, (iii) meetquality-of-service targets and (iv) comply with applicable telecommunications services consumer rights.

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

 

 


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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

BANDWIDTHTERMINATION
DATE

850 MHz

25 MHzMar. 2024

1900 MHz

10 MHzDec. 2039
5 MHzSept. 2021
15 MHzApr. 2024

2.5 GHz

30 MHzAug. 2023
10 MHzFeb. 2021(1)
10 MHzMar. 2040
10 MHzMar. 2040
10 MHzMar. 2040

700 MHz

20 MHzPending

(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. The permission will expire in 2020 and may be renewed at the appropriate time for another10-year term. 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 administrative proceeding to evaluate and

decide on the effects caused by such resignation. Comcel was notified by the ICT Ministry and was considered an interested third party in the administrative proceeding.

PERUAsymmetric Charges

In 2012, the CRC issued resolutions seeking to correct an alleged market failure and imposing the following measures on Comcel: (i) asymmetric charges for mobile and incoming long-distance call terminations by other operators on Comcel’s wireless network, with access rates lower than the rates we pay our competitors, and (ii) restrictions on the rates we charge our users for calls outside our network(off- net calls), which must not exceed the rates we charge for calls within our network(on-net calls). These asymmetric access charges ended in December 2016.

In January 2017, the Colombian government approved symmetrical access charges among established operators like Comcel, Movistar and Tigo. However, under current regulation, new market entrants continue to receive a higher rate than operators for a limited period.

In 2017, the CRC issued a resolution updating the list of relevant telecommunication markets by adding the mobile services market (including bundled mobile voice and data services) and by also including the mobile service market in the list of relevant markets subject toex-ante regulation. In connection with the mobile services market, the CRC initiated a proceeding to evaluate Comcel’s substantial market power in this new market and, if applicable, the imposition of asymmetric regulatory measures that could affect Comcel. As of the date of this annual report, a resolution is pending.

SOUTHERN CONE

ARGENTINA

The SupervisoryNational Communications Agency (Ente Nacional de Comunicaciones, or “Enacom”) is the main telecommunications regulatory authority in Argentina and became operational in 2016.

Fixed and mobile services providers are prohibited from providing DTH technology, which is currently the fastest way to provide Pay TV services. In 2017, the Argentine government issued a decree allowing telecommunications providers, including AMX Argentina S.A. (“AMX Argentina”), to provide Pay TV services via cable within a limited number of territories as of January 2018 and to the rest of the country as of January 2019. AMX Argentina has obtained the permissions necessary to provide Pay TV services via cable in accordance with the decree.

AMX Argentina holds licenses in the 700 MHz, 900 MHz, 1700/2100 MHz (AWS), 1900 MHz and 2600 MHz frequency bands, some of which expire in 15 years and some of which have no expiration date. Each license also contains certain coverage parameters, reporting and service requirements and provides Enacom a revocation right upon a material breach of the license terms.

All telecommunications providers in Argentina must contribute approximately 1.0% of their monthly revenues to finance the provision of telecommunications services in underserved areas and to underserved persons. All providers must also meet certainquality-of-service requirements.

CHILE

The General Telecommunications Law (Ley General de Telecomunicaciones) establishes the legal framework for Private Investmenttelecommunications services in TelecommunicationChile, including the regulation of concessions, permits, rates and interconnection. The main regulatory agency of the telecommunications sector is the Chilean Transportation and Communications Ministry (Organismo SupervisorMinisterio de Transportes y Telecomunicaciones), which acts primarily through the Undersecretary of Telecommunications (Subsecretaría de Telecomunicaciones, “SUBTEL”).

Claro Chile S.A. (“Claro Chile”) holds concessions to provide mobile and fixed-line services in the 700MHz, 850 MHz, 1900 MHz, 2.6 GHz, 3.4 GHz and 5.8 GHz frequency bands. Except for the concession to provide services in the 850 MHz frequency, which has an indefinite termination date, the concessions to provide services in the 700 MHz, 1900 MHz, 2.6 GHz, 3.4 GHz and 5.8 GHz frequencies have termination dates that vary from 2027 to 2045. Claro Chile also holds license to provide DTH technology services until

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2024 and a license with an indefinite term to provide Pay TV services. In 2018, the Chilean Supreme Court (Corte Suprema de Justicia) issued a ruling requiring Claro to return 20 MHz of spectrum acquired through a band auction because Claro supposedly exceeded the limit of spectrum any given operator is permitted to hold. The return of such spectrum is currently being implemented before the Competition Court (Tribunal de Defensa de la Inversión Privada en TelecomunicacionesLibre Competencia, or “OSIPTEL”the “TDLC”). In addition, pursuant to the ruling, and in order to increase the maximum limit, SUBTEL initiated a review of such limit of spectrum through a regulatory proceeding before the TDLC, which shall now be reviewed by the Chilean Supreme Court.

Some of Claro Chile’s concessions impose additional requirements, such as coverage, reporting and service quality requirements. The Chilean Transportation and Communications Ministry is authorized to terminate any concession in the event of specified breaches under the terms of such concessions. Additionally, Claro Chile’s concession in the 700 MHz band imposes certain obligations to expand mobile and data services in rural areas. In 2017, the Undersecretary of Telecommunication approved Claro Chile’s expansion project in connection with its obligations under its concession in the 700 MHz band.

PARAGUAY

The National Telecommunications Commission of Paraguay (Comisión Nacional de Telecomunicaciones de Paraguay) is in charge of supervising the telecommunications industry in Paraguay. It is authorized to cancel licenses in the event of specified breaches of the terms of a license.

AMX Paraguay, S.A. (“AMX Paraguay”) holds licenses to operate in the 1900 MHz and the 1700/2100 MHz bands. AMX Paraguay also holds a nationwide internet access and data transmission license. In addition, AMX Paraguay holds licenses to provide DTH services and cable TV services. Additionally, in January 2018, AMX Paraguay participated in a spectrum auction and was awarded a license to provide telecommunications services in the 700 MHz band. In November 2018, the Telecommunications Commission of Paraguay granted the renewal of spectrum license in the 1900 MHz band. These licenses are renewable, subject to regulatory approval, and contain coverage, reporting and service requirements.

In November 2019, the Telecommunications Commission of Paraguay granted AMX Paraguay a license to provide internet access and data transmission services in the 3,500 MHz frequency band, effective until January 12, 2024

URUGUAY

The Regulatory Unit of Communications Services (Unidad Reguladora de Servicios de Comunicaciones) is in charge of the regulation of the telecommunications industry in Peru. Uruguay.

AM Wireless Uruguay, S.A. holds licenses to operate in the 1900 MHz, 1700/2100 MHz and 700 MHz frequency bands that expire in 2024, 2033, 2037, 2039 and 2045, and Telstar S.A. holds licenses to provide international long- distance communications and international and national data services that have no expiration date.

The Ministrylicense initially granted to Flimay S.A. (“Flimay”) to provide DTH technology services in Uruguay has been contested by the government since 2012. In 2017, the executive branch of TransportUruguay held under a new ruling that Flimay does not have a valid license to provide DTH services in the country. Flimay requested this ruling be voided, but in February 2018, the executive branch of Uruguay, with support from the Administrative Court (TCA), requested the process be closed. As of the date of this annual report, a decision on Flimay’s appeal is pending.

ANDEAN REGION

ECUADOR

The primary regulatory authorities for our mobile and Communicationsfixed-line operations are the National Telecommunications, Regulation and Control Agency (Agencia de Regulación y Control de las Telecomunicaciones, or “Arcotel”) and the Telecommunications and Information Society Ministry (Ministerio de TransportesTelecomunicaciones y ComunicacionesSociedad de la Información, or “Mintel”) grants concessions, permits. Arcotel is responsible for the licensing and licenses. oversight of radio-electric spectrum use and telecommunications services provisions. Mintel is responsible for the promotion of equal access to telecommunications services.

The Telecommunications Law (Decreto SupremoN°013-93-TCCLey Orgánica de Telecomunicaciones), adopted in 1993,2015, serves as the legal framework for telecommunications services.

América Móvil Perú, S.A.C. (“Claro Perú”) holds nationwide concessions to provide wireless, PCS, fixed-line, local wholesale, domestic and international long-distance, Pay TV services (through DTH and HFC technologies), public telephone and value-added services (including internet access). The concessions allow Claro Perú to operate on the 450 MHz, 700 MHz, 850 MHz, 1900 MHz, 3.5 GHz and 10.5 GHz bands. As part of Claro Perú’s acquisition of Olo del Perú S.A.C., TVS Wireless S.A.C. and their respective subsidiaries in 2016, Claro has a resale agreement with such companies to operate on the 2.5 GHz band.

Each of the concessions was awarded by the MTC and covers a20-year period. The concessions contain coverage, reporting, service requirement and spectral efficiency goals. The MTC is authorized to cancel any of the concessions in the case of specified breaches of its terms.

In 2015, new mobile termination rates were issued for 2015 through 2017, establishing two different rates, one for Claro Perú and Telefónica del Perú and a different one for our competitors, Viettel Perú S.A.C. and Entel. In 2017, the OSIPTEL announced the new mobile termination rate for the period 2018 to 2021, establishing a single rate for all operators.

It established

 

 


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EUROPE

Legal Framework and Principal Regulatory Authorities

The telecommunications regulatory framework in the EU is comprised of a set of directives and regulations that apply to all EU member countries and cover fixed and wireless services, internet, broadcasting and transmission services. Austria, Bulgaria, Croatia and Slovenia are EU member countries. Macedonia and Serbia, candidates for accession to the EU, are expected to gradually harmonize their regulatory frameworks with the EU’s framework.

In 2015, the EU enacted Regulation (EU) 2015/2120, also known as the Telecoms Single Market Regulation, concerning retail roaming charges and net neutrality. The regulation (i) implemented additional regulations on net neutrality to protect the right of every European tonon-discriminatory access to the internet, which came into effect in 2016 and (ii) ended most retail roaming surcharges in 2017. The net neutrality rules in the EU were similar to those enacted in the United States prior to their repeal by the Federal Communications Commission (“FCC”) in 2017. In the EU, all internet traffic must to be treated equally, subject to strict and clearly identified exceptions. Telecommunications providers are still able to offer specialized services, so long as these services are not supplied at the expense of the quality of the open internet.

In 2016, the EU Commission initiated its second review of such framework (the first was in 2009) and presented a proposal for a new legal framework in the form of a European Electronic Communications Code (EECC), along with new connectivity policy objectives for Europe up to 2025, a draft regulation for internet access in public places and a 5G action plan. The draft proposal remains under negotiation between the European Parliament and the Council on the European Union.

In each European country in which we operate, we are also subject to a domestic telecommunications regulatory framework and to oversight by one or more local regulators.

Licenses

CountryFrequencyTermination Date

AUSTRIA

800 MHzDec. 2029
900 MHzDec. 2034
1800 MHzDec. 2034
2100 MHzDec. 2020
2600 MHzDec. 2026

BULGARIA

900 MHzJune 2024
1800 MHzJune 2024
2100 MHzApr. 2025

CROATIA

800 MHzOct. 2024
900 MHzOct. 2024
1800 MHzOct. 2024
1900 MHzOct. 2024
2100 MHzOct. 2024

BELARUS

900 MHzDec. 2020
1800 MHzDec. 2020
2100 MHzDec. 2020

SLOVENIA

800 MHzMay 2029
900 MHzJan. 2031
1800 MHzJan. 2031
2600 MHzMay 2029
2100 MHzSept. 2021

SERBIA

800 MHzJan. 2026
900 MHzNov. 2026
1800 MHzNov. 2026
2100 MHzNov. 2026

MACEDONIA

800 MHzDec. 2033
1800 MHzDec. 2033
900 MHzSept. 2023
2100 MHzFeb. 2028


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CountryPrincipal Regulatory AuthoritiesConcession and Licenses
COSTA RICA

Superintendency of Telecommunications (Superintendencia de Telecomunicaciones)

Ministry of Science, Technology and Telecommunications (Ministerio de Ciencia, Tecnología y Telecomunicaciones)

•  Concessions in the AWS and 1800 MHz bands that expire in 2032

•  Concessions in the 2100 MHz band that expire in 2026

•  License to operate Pay TV services using DTH technology that will expire in 2027

EL SALVADORElectricity and Telecommunications Superintendency (Superintendencia General de Electricidad y Telecomunicaciones)

•  Concession of 50 MHz in the 1900 MHz band of which 30 MHz that expire in 2037, 10 MHz that expire in 2021 and 10 MHz that expire in 2028

•  Concession to provide public telephone service that expires in 2027

•  Licenses to provide Pay TV Services through HFC and DTH technologies have an indefinite term

GUATEMALAGuatemalan Telecommunications Agency (Superintendencia de Telecomunicaciones)

•  Licenses to use 12 MHz in the 900 MHz band and 40 MHz in the 1900 MHz band that all expire in 2033

NICARAGUANicaraguan Telecommunications and Mailing Institute (Instituto Nicaragüense de Telecomunicaciones y Correos)

•  Concessions in the 700 MHz, 850 MHz, 1900 MHz and 1700/2100 MHz bands that all expire in 2032

•  Concession of 50 MHz in the 3.5 GHz band that will expire in 2042

•  Licenses to provide DTH technology that will expire in January 2028 (for which an application for renewal has been submitted) and Pay TV services that has an indefinite term

HONDURASHonduran National Telecommunications Commission (Comisión Nacional de Telecomunicaciones)

•  Concessions to use 80 MHz in the 1900 MHz PCS band and 40 MHz in theLTE-4G 1700/2100 MHz band that all expire in 2033

•  Licenses to operate Pay TV services through (i) HFC technology that will expire in 2027 and (ii) DTH technology that will expire in 2020

PANAMANational Authority of Public Services (Autoridad Nacional de los Servicios Públicos)

•  License to use 40 MHz in the 1900 MHz and 20 MHz in the 700 MHz bands that all expire in 2028

•  Licenses to provide fixed local and long distance services that expire in 2030

•  Licenses to provide international long-distance, value-added services, interactive television, and Pay TV service through DTH and IPTV technologies, which expire in 2028, 2030, 2037 and 2034, respectively

UNITED STATESThe FCC

•  Not required to hold wireless licenses to carry out its business


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         REGULATION

CountryPrincipal Regulatory AuthoritiesConcession and Licenses
DOMINICAN REPUBLICDominican Institute of Telecommunications (Instituto Dominicano de las Telecomunicaciones)

•  Concessions to use 25 MHz in the 800 MHz band, 30 MHz in the 1900 MHz band, 30 MHz in the 3.5 GHz band and 40 MHz in the 1.7/2.1 GHz (AWS) band that expire in 2030

•  Licenses to provide Pay TV Services through DTH and IPTV technologies that expire in 2030

PUERTO RICOFCC and the Telecommunications Regulatory Board of Puerto Rico

•  Concessions to use the 700 MHz, 1900 MHz and the 30 GHz bands that expire in 2021, 2027 and 2019, respectively

•  Concessions to use the 800 MHz that expire in March 2018 (for which an application for renewal has been submitted), 2020, 2021 and 2026

•  Concessions to use the 1.7/2.1 GHz bands that expire in 2026 and 2028

•  Long-term transfer lease concessions to use 35.6 MHz of the 2.5 GHz EBS band that expire in 2020, 2022, 2023, 2025 and 2026

•  Franchise to operate Pay TV Services using IPTV technology that expires in 2030


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         EMPLOYEES

Many of our employees are members of labor unions with which we conduct collective negotiations on wages, benefits and working conditions. We believe that we have good current relations with our workforce.

The following table sets forth the total number of employees and a breakdown of employees by main category of activity and geographic location, as of the end of each year in the three-year period ended December 31, 2017.

   DECEMBER 31, 
   2015   2016      2017 
NUMBER OF EMPLOYEES   195,475    194,431        191,851 
CATEGORY OF ACTIVITY:               
Wireless   77,701    78,887        78,910 
Fixed   101,077    97,104        94,496 
Other businesses   16,697    18,440        18,445 
GEOGRAPHIC LOCATION:               
Mexico   88,446    90,306        88,417 
South America   69,269    65,817        64,619 
Central America   9,581    9,767        9,694 
United States   902    848        852 
Caribbean   9,605    9,488        9,311 
Europe   17,672    18,205        18,958 


REGULATION

 

         LEGAL PROCEEDINGS

new regulations for operators with significant market power, new penalties based on their gross incomes as well as additional fees also based on an operator’s gross income, but that can vary depending on the size of their market share. Consorcio Ecuatoriano de Telecomunicaciones, S.A. (“Conecel”) has been deemed to have significant market power in the advanced wireless services market, and as a result, such fee payments are made on a quarterly basis on the dates established by Arcotel.

In eachConecel paid to the Ecuadorian government U.S. $29.7 million, which corresponds to 3.0% of its wireless services revenues generated in 2019. An arbitration proceeding to partially void the payment by Conecel of such fees was conducted and a decision in favor of the countries in which we operate, we are party to various legal proceedings in the ordinary course of business. These proceedings include tax, labor, antitrust, contractual mattersgovernment was reached. Conecel has appealed this decision and, administrative and judicial proceedings concerning regulatory matters such as interconnection and tariffs. We are party to a number of proceedings regarding our compliance with administrative rules and regulations and concession standards.

Our material legal proceedings are described in Note 16 to our audited consolidated financial statements included in this annual report and in “Regulation” under Part VI.


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         PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT ANDNON-AUDIT FEES

The following table sets forth the fees billed to us and our subsidiaries by our independent registered public accounting firm, Mancera, during the fiscal years ended December 31, 2016 and 2017:

   YEAR ENDED DECEMBER 31, 
   2016   2017 
    (in millions of Mexican pesos) 

Audit fees(1)

   Ps.         241    Ps.         245 

Audit-related fees(2)

   15    31 

Tax fees(3)

   31    34 

Total fees

   Ps.         287    Ps.         310 

(1) Audit fees represent the aggregate fees billed by Mancera and its Ernst & Young Global affiliated firms in connection with the audit of our annual financial statements and statutory and regulatory audits.

(2) Audit-related fees represent the aggregate fees billed by Mancera and its Ernst & Young Global affiliated firms for the review of reports on our operations submitted to IFT and attestation services that are not required by statute or regulation.

(3) Tax fees represent fees billed by Mancera and its Ernst & Young Global affiliated firms for tax compliance services, tax planning services and tax advice services.

  

  

  

AUDIT AND CORPORATE PRACTICES COMMITTEE APPROVAL POLICIES AND PROCEDURES

Our audit and corporate practices committee has established policies and procedures for the engagement of our independent auditors for services. Our audit and corporate practices committee expressly approves any engagement of our independent auditors for audit ornon-audit services provided to us or our subsidiaries. Prior to providing any service that requires specificpre-approval, our independent auditor and our Chief Financial Officer present to the audit committee a request for approval of services in which they confirm that the request complies with the applicable rules.


         EXCHANGE RATES

Mexico has had a free market for foreign exchange since 1991, and the government has allowed the peso to float freely against the U.S. dollar since December 1994.

The following table sets forth, for the periods indicated, the high, low, average andperiod-end rate reported by Banco de México for December 31, 2017 as published in the Official Gazette, expressed in pesos per U.S. dollar.

 PERIOD  HIGH   LOW   AVERAGE (1)   PERIOD END 
 2013   13.4394    11.9807    12.8210    13.0765 
 2014   14.7853    12.8462    13.3580    14.7180 
 2015   17.3776    14.5559    16.0379    17.2065 
 2016   21.0511    17.1767    18.6567    20.6640 
 2017   21.9076    17.4937    18.9066    19.6629 

October

   19.2188    18.2113    18.8161    19.1478 

November

   19.2268    18.5190    18.9158    18.6229 

December

   19.7867    18.6399    19.1812    19.6629 
 2018                    

January

   19.4899    18.4672    18.9074    18.6069 

February

   18.8949    18.3447    18.6592    18.8381 

March

   18.8508    18.1869    18.6027    18.1869 

April (through April 24)

   18.9429    18.0115    18.2956    18.8188 

(1) Average ofmonth-end rates.

  

On April 24, 2018 the rate published by the Official Gazette was Ps.18.8188 to U.S.$1.00.


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         ADDITIONAL INFORMATION

We file reports, including annual reports on Form20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its public reference rooms in Washington, D.C. Please call the SEC at1-800-SEC-0330 for further information on the public reference room.

Any filings we make electronically will be available to the public over the internet at the SEC’s web site at www.sec.gov and at our website at www.americamovil.com. This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be incorporated into this annual report.

The following documents have been filed with the SEC as exhibits to this annual report:

1.1Amended and Restated Bylaws (estatutos sociales) of América Móvil, S.A.B. de C.V., dated as of April 16, 2018 (together with an English translation).
7.1Computation of Ratios of Earnings to Fixed Charges.
8.1List of certain subsidiaries of América Móvil, S.A.B. de C.V.
12.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1Certification pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
14.1Code of Ethics.
15.1Consent of independent registered public accounting firm.
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Document.

Omitted from the exhibits filed with this annual report are certain instruments and agreements with respect to long-term debt of América Móvil, none of which authorizes securities in a total amount that exceeds 10% of the total assets of América Móvil. We hereby agree to furnish to the SEC copies of any such omitted instruments or agreements as the Commission requests.



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         FORWARD-LOOKING STATEMENTS

Some of the information contained or incorporated by reference in this annual report constitutes “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we have based these forward-looking statements on our expectations and projections about future events, it is possible that actual events may differ materially from our expectations. In many cases, we include, together with the forward-looking statements themselves, a discussion of factors that may cause actual events to differ from our forward-looking statements. Examples of forward-looking statements include the following:

projections of our commercial, operating or financial performance, our financing, our capital structure or our other financial items or ratios;
statements of our plans, objectives or goals, including those relating to acquisitions, competition and rates;
statements concerning regulation or regulatory developments;
statements about our future economic performance or that of Mexico or other countries in which we operate;
competitive developments in the telecommunications sector;
other factors and trends affecting the telecommunications industry generally and our financial condition in particular; and
statements of assumptions underlying the foregoing statements.

We use words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and other similar expressions to identify forward-looking statements, but they are not the only way we identify such statements.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors, some of which are discussed under “Risk Factors,” include economic and political conditions and government policies in Mexico, Brazil, Colombia, Europe and elsewhere, inflation rates, exchange rates, regulatory developments, technological improvements, customer demand and competition. We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements. You should evaluate any statements made by us in light of these important factors.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or for any other reason.


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         GLOSSARY

TermDefinition
AWSAdvanced Wireless Services. This is a wireless telecommunications spectrum band used for wireless voice and data services, video and messaging.
BroadbandHigh-speed data transmission in which a single cable (coaxial cable or optical fiber) can carry a large amount of data at once.
Bundle or bundlingThe marketing of different services as one combined service.
Churn rateDisconnection rate. The ratio of wireless subscribers disconnected during a given period to the number of subscribers at the beginning of that period.
Covered populationPopulation covered by our wireless networks, expressed as the population count or as a percentage of the total population.
Cloud servicesInternet-based services providing users withon-demand access to resources, data and information.
Data administrationServices that plan, organize and control data resources for customers according to their needs.
Data centerA facility used to house computer systems and associated components. We use our data centers to manage a number of cloud solutions.
DTHDirect-to-home broadcasting is a method for transmitting satellite signals directly to the subscriber’s home.
Fixed-lineTelephone services requiring the use of a metal wire or fiber optic telephone line for transmission.
Fixed RGUsRGUs from fixed voice, fixed data and Pay TV services.
GSMGlobal System for Mobile Communications. A standard used to describe the protocols for certain digital cellular networks.
GSM EDGEEnhanced Data Rates for GSM Evolution is a 3rd generation (“3G”) standard for wireless communication of data for mobile phones and data terminals.
HFCHybrid fiber-coaxial is a broadband network that combines optical fiber and coaxial cable.
Hosting servicesServices allowing customers to provide content on the internet, either through maintaining a webpage, an email address or other services.
IAASInfrastructure as a service is a cloud-service model offering virtual machines and other resources.
IMT-2000International Mobile Telecommunciations-2000 is a set of global standards by the International Telecommunication Union for 3G wireless telecommunications services and equipment.
Interconnection ratesThe charges that one telecommunications network operator charges another network operator for allowing customers to access its network.
IPTVInternet Protocol television, which refers to the use of Internet technology to deliver television programs “on demand”
Licensed populationPopulation covered by the licenses that each of our subsidiaries manages.
Long-distanceLong-distance calls are calls made outside a defined area and may incur additional charges or be subject to specific regulations.
LTE/4GLong-term evolution is a 4th generation (“4G”) standard for wireless communication of high-speed data for mobile phones and data terminals.
Machine-to-machine servicesServices allowing direct communication between devices over a network, including fixed and wireless devices.
Market shareA company’s subscriber base in a given country divided by the total number of subscribers in that country.
Mobile paymentRefers to payment services and applications operated and performed on a mobile device.


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         GLOSSARY

TermDefinition
MHzMegahertz. The unit of frequency to measure one thousand cycles per second that is used to determine radio frequencies.
MVNOMobile Virtual Network Operator. A wireless communications services provider that does not own the wireless network infrastructure but enters into agreements with other mobile service providers for the use of their networks.
Net debtTotal debt minus cash and cash equivalents, minus marketable securities or other short-term investments.
On-demandDescribes services providing customers with the ability to stream content over our network immediately upon their request.
OTT servicesOver-the-top Services. The provision of content, including videos, television and other information, directly from the content provider to the viewer or end user.
Pay TVPay Television. This refers to television services we offer to subscribers through cable and satellite networks.
PCSPersonal Communications Service refers to a wide range of wireless communication technologies, including cellular, mobile data, Internet or paging services. Similar but distinct from cellular telephone services in the frequencies on which they operate and the power levels each uses to transmit signals, among other differences.
Prepaid subscriberA subscriber who does not hold a contract with the company for voice and data services but pays in advance for specific use of services.
Postpaid subscriberA subscriber who has a contract with the company for voice and data services and is billed recurrently for use of services.
RGURevenue Generating Unit. This is an individual subscriber who provides recurring revenue.
RoamingAllows wireless subscribers to access networks other than our own, enabling them to use their devices, including for voice and data transmission. Typically refers to using accessing a network while abroad.
SMSShort Message Service. A text messaging service component of a fixed or wireless communication system.
SAASSoftware as a service is a cloud-service model offering users access to software applications and databases.
Subscriber acquisition costThe sum of handset subsidies, marketing expenses and commissions to distributors for handset activation. Handset subsidy is the difference between equipment cost and equipment revenues.
Total RGUsFixed RGUs and wireless subscribers.
UMTSUniversal Mobile Telecommunications System is a 3G mobile cellular system for networks based on the GSM standard.
VPNVirtual private network grants users access to a private network virtually across a public network.
Wireless penetrationTotal wireless subscribers in a given country divided by the total population in that country.


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         FORM20-F CROSS REFERENCE GUIDE

ITEMFORM20-F CAPTIONLOCATION IN THIS REPORTPAGES
1IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable—
2OFFER STATISTICS AND EXPECTED TIMETABLENot applicable—
3KEY INFORMATION
3A Selected financial dataSelected financial data1
Exchange rates108
3B Capitalization and indebtednessNot applicable—
3C Reasons for the offer and use of proceedsNot applicable—
3D Risk factorsRisk factors43
4INFORMATION ON THE COMPANY
4A History and development of the CompanyInformation on the Company5
Note 10—Property, Plant and Equipment, NetF-38
Liquidity and capital resources34
4B Business overviewInformation on the Company5
Regulation88
4C Organizational structureExhibit 8.1—
4D Property, plant and equipmentInformation on the Company5
Note 10—Property Plant and Equipment, NetF-38
Liquidity and capital resources34
Regulation88
4AUnresolved staff commentsNone—
5OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5A Operating results

Overview18
Results of operations20
Regulation88
Liquidity and capital resources34
5B Liquidity and capital resourcesNote 14—DebtF-50
5C Research and development, patents and licenses, etc.Not applicable—
5D Trend informationOverview18
Results of operations20
5EOff-balance sheet arrangementsOff-balance sheet arrangement34
5F Tabular disclosure of contractual obligationsContractual obligations34
6DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6A Directors and senior managementManagement72
6B CompensationManagement compensation80
6C Board practicesManagement72
Management compensation80
6D EmployeesEmployees107
6E Share ownershipMajor shareholders56
Management compensation80
7MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7A Major shareholdersMajor shareholders56
7B Related party transactionsRelated party transactions57
7C Interests of experts and counselNot applicable—


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         FORM20-F CROSS REFERENCE GUIDE

ITEM FORM20-F CAPTION  LOCATION IN THIS REPORT  PAGES
8 FINANCIAL INFORMATION      
 8A Consolidated statements and other financial information  Consolidated Financial Statements  118
   Dividends  57
   Note 16—Commitments and Contingencies  F-57
 8B Significant changes  Not applicable  —
9 THE OFFER AND LISTING      
 9A Offer and listing details  Trading markets  58
 9B Plan of distribution  Not applicable  —
 9C Markets  Trading markets  58
 9D Selling shareholders  Not applicable  —
 9E Dilution  Not applicable  —
 9F Expenses of the issue  Not applicable  —
10 ADDITIONAL INFORMATION      
 10A Share capital  Bylaws  60
 10B Memorandum and articles of association  Bylaws  60
 10C Material contracts  Information on the Company  5
   Results of operations  20
   Related party transactions  57
   Regulation  88
 10D Exchange controls  Additional information  106
 10E Taxation  Taxation of shares and ADSs  65
 10F Dividends and paying agents  Not applicable  —
 10G Statement by experts  Not applicable  —
 10H Documents on display  Additional information  106
 10I Subsidiary information  Not applicable  —
11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Risk management  37
     Note 2 w)—Basis of Preparation of the Consolidated Financial Statements and Summary of Significant Accounting Policies and Practices  F-25
12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES      
 12A Debt securities  Not applicable  —
 12B Warrants and rights  Not applicable  —
 12C Other securities  Not applicable  —
 12D American Depositary Shares  Depositary shares  63
13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES  Not applicable  —
14 

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

HOLDERS AND USE OF PROCEEDS

  Not applicable  —
15 CONTROLS AND PROCEDURES  Controls and procedures  84
16A AUDIT COMMITTEE FINANCIAL EXPERT  Management  72
16B CODE OF ETHICS  Code of ethics  86
16C PRINCIPAL ACCOUNTANT FEES AND SERVICES  Principal accountant fees and services  108
16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES  Not applicable  —
16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFIIATED PURCHASERS  Purchases of equity securities by the issuer and affiliated purchasers  64
16F CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT  Not applicable  —
16G CORPORATE GOVERNANCE  Corporate governance  71
16H MINE SAFETY DISCLOSURE  Not applicable  —
17 FINANCIAL STATEMENTS  Not applicable  —
18 FINANCIAL STATEMENTS  Consolidated Financial statements  118
19 EXHIBITS  Additional Information  109


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         SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report, on its behalf.a decision of the Constitutional Court is pending.

Dated: April 26, 2018

AMÉRICA MÓVIL, S.A.B. DE C.V.

By:/s/ Carlos José García Moreno Elizondo
Name:  Carlos José García Moreno Elizondo
Title:Chief Financial Officer

By:/s/ Alejandro Cantú Jiménez
Name:  Alejandro Cantú Jiménez
Title:General Counsel


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AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Financial Statements

Years Ended December 31, 2015, 2016 and 2017

with Report of Independent Registered Public Accounting Firm

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Financial Statements

Years Ended December 31, 2015, 2016, and 2017

Contents:

Report of Independent Registered Public Accounting Firm

F-1

Audited Consolidated Financial Statements:

Consolidated Statements of Financial Position

F-2

Consolidated Statements of Comprehensive Income

F-3

Consolidated Statements of Changes in Shareholders’ Equity

F-4

Consolidated Statements of Cash Flows

F-5

Notes to Consolidated Financial Statements

F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

América Móvil, S.A.B. de C.V.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of América Móvil, S.A.B. de C.V. and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for each of three yearsConecel holds concessions to operate in the period ended December 31, 2017,850MHz, 1900 MHz and AWS bands, which include concessions for PCS that expire in 2023. The PCS concession containsquality-of- service requirements for successful call completions, SMS delivery times, customer service, geographic coverage and other service conditions.

Conecel also holds licenses to provide internet value- added services, Pay TV Services (through DTH technology) and bearer services, expiring in 2021, 2023 and 2032, respectively.

Conecel, following the related notes (collectively referredacquisition of Ecuador Telecom, S.A. in 2016, also holds a concession to offer fixed-line voice, public telephone and domestic and international long- distance wholesale services, as the “financial statements”). In our opinion, the consolidated financial statements present fairly,well as a license to provide Pay TV (through HFC technology) that expires in all material respects, the consolidated financial position of the Company as of December 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.2031.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company´s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated April 26, 2018 expressed an unqualified opinion thereon.

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

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CONTROLS AND PROCEDURES

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 29, 2020

D) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

There has been no change in our internal control over financial reporting during 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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CODE OF ETHICS

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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CORPORATE SUSTAINABILITY REPORT

We have a corporate sustainability committee that seeks to foster greater operational efficiencies, promote social responsibility and adopt environmentally friendly initiatives.

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

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PART VI: REGULATION

LOGO

REGULATION

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 and the Federal Law on Economic Competition (Ley Federal de Competencia Económica) enacted in May 2014.

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 Telnor,RedNacional Ultima Milla S.A.P.I. de C.V.andRed Ultima Milla Del NoroesteS.A.P.I. de C.V.) and certain affiliates constitute the preponderant economic agent in the telecommunications sector. 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.

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•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 MVNOs 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, ducts and rights of way, (ii) elements of our network that allow other carriers to use our network or resell those services we provide to our customers and (iii) our dedicated links. If we cannot reach an agreement with other carriers, our rates may be 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 other competitors can match our end user rates.

•Access to Local Loop.We must offer other carriers access to elements of our local 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 (acceso local) and shared access and use of passive infrastructure. 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; such obligations include unlocking mobile devices for our customers and offering individually all services that we previously offered under a bundled plan.

•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.

•Publication of Reference Terms.We are subject to obligations related to the publication of reference terms for all wholesale and interconnection services that are subject to asymmetric regulation.

The measures are transitory and may be amended or eliminated by the IFT, or terminated if it 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. The IFT already began a new review in the second quarter of 2019, which is expected to be completed in the first quarter of 2020. The new review may result in changes, which could include additional or reduced asymmetric regulations or the structural separation or divesture of assets of the preponderant economic agent.

We have challenged the determination that we are a preponderant economic agent and the asymmetric regulations in court. These challenges were denied in the case of Telmex, Telnor and the Company, and a final resolution is still pending in the case of Telcel. However, IFT’s determinations are not suspended while legal challenges against them are resolved.

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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”).

In compliance with the Separation Plan and 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 separate new corporations,Red Nacional Ultima MillaandRed Ultima Milla 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 New Companies are subsidiaries of Telmex and they began operations as separated entities on March 6, 2020. 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.

Personnel. Subject to the discussion under “Services Through Union Employees” below, the New Companies have independent 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 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

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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.

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.

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 two 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.

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.

A public telecommunications concessionaire is required by law to establish an open-network architecture that permits interconnection and interoperability.

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

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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 232.7 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 AREAINITIAL DATETERMINATION DATE

Band A (1900 MHz)

NationwideSep. 1999Oct. 2039

Band D (1900MHz)

NationwideOct. 1998Oct. 2038

Band B (850 MHz)

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

Band B (850 MHz)

Regions 4, 5Aug. 2010Aug. 2025

Band B (850 MHz)

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

Band B (850 MHz)

Region 9Oct. 2015Oct. 2030

Band F (1900MHz)

NationwideApr. 2005Apr. 2025

Bands A and B (1.7/2.1 GHz)

NationwideOct. 2010Oct. 2030

Bands H, I and J (1.7/2.1 GHz)

NationwideMay 2016Oct. 2030

Band 7 (2.5 GHz)

88% of the populationJul. 2017Sep. 2020(1) -Nov.  2028

Band 3.5 GHz

NationwideOct. 2020(2)Oct. 2040

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

(2) 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 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.

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. Telmex obtained these

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concessions, including the 3.5 GHz band assigned in favor of Telcel, for a term of up to 20 years and were extended by the IFT for additional 20-year terms.

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.

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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 deTelecomunicações, 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 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. Following its acquisition of Brasil Telecomunicações S.A. in 2016, Claro Brasil relinquished the cable TV and data services licenses it had been transferred by Embrapar and Net Serviços.

In 2018, subsidiary Star One merged into Claro Brasil. As a result, all Brasilian 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 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 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 Basil.

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.

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SUBSIDIARY

LICENSETERMINATION DATE

Claro Brasil

Fixed Local Voice ServicesIndefinite
Domestic and International Long-Distance2025
Voice ServicesIndefinite
Personal Communication ServicesIndefinite
Data ServicesIndefinite
Cable TV ServicesIndefinite
Mobile Maritime ServicesIndefinite
Global Mobile Satellite ServicesIndefinite

Claro TV

DTH TV ServicesIndefinite
Data ServicesIndefinite

Americel S.A.

Data ServicesIndefinite

Telmex do Brasil

Data ServicesIndefinite

Nextel Brazil

Personal Communication ServicesIndefinite
Domestic and International Long-DistanceIndefinite
Data ServicesIndefinite
Trunking ServicesIndefinite

Sunbird

Trunking ServicesIndefinite

In addition, Claro Brasil has various orbital position authorizations for our satellite operations, which expire between 2022 and 2033, and radio frequency licenses to provide PCS, which expire between 2020 and 2032.

Nextel Brazil has radio frequency licenses to provide PCS, which expire between 2026 and 2031, and, radio frequency licenses to provide Trunking Services, which expire between 2020 and 2025, Sunbird has radio frequency licenses to provide Trunking Services, which expire in 2024.

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.

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 (less a factor determined by Anatel based on the productivity of each operator during the year). 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

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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 through 2023. 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 such prices by Anatel took place on January 2020.

In addition, Embratel was determined to have significant market power in the market for long-distance leased lines, Claro Brasil and Embratel were determined to have significant market power in the telecommunications infrastructure market, and Net Serviços was determined to have significant market power in the local coaxial transmissions market, together with several of their mobile and fixed-line competitors. Following the merger of Embratel and Net Serviços into Claro Brasil in 2014, Claro Brasil is required to publish, and Anatel approved its reference offers in each of these markets. Moreover, wholesale contracts entered into by operators determined to have significant market power for the sale of such operators’ services are overseen for compliance purposes by independent third-party companies.

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.

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, (iii) meetquality-of-service targets and (iv) comply with applicable telecommunications services consumer rights.

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

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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

BANDWIDTHTERMINATION
DATE

850 MHz

25 MHzMar. 2024

1900 MHz

10 MHzDec. 2039
5 MHzSept. 2021
15 MHzApr. 2024

2.5 GHz

30 MHzAug. 2023
10 MHzFeb. 2021(1)
10 MHzMar. 2040
10 MHzMar. 2040
10 MHzMar. 2040

700 MHz

20 MHzPending

(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. The permission will expire in 2020 and may be renewed at the appropriate time for another10-year term. 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 administrative proceeding to evaluate and

decide on the effects caused by such resignation. Comcel was notified by the ICT Ministry and was considered an interested third party in the administrative proceeding.

Asymmetric Charges

In 2012, the CRC issued resolutions seeking to correct an alleged market failure and imposing the following measures on Comcel: (i) asymmetric charges for mobile and incoming long-distance call terminations by other operators on Comcel’s wireless network, with access rates lower than the rates we pay our competitors, and (ii) restrictions on the rates we charge our users for calls outside our network(off- net calls), which must not exceed the rates we charge for calls within our network(on-net calls). These asymmetric access charges ended in December 2016.

In January 2017, the Colombian government approved symmetrical access charges among established operators like Comcel, Movistar and Tigo. However, under current regulation, new market entrants continue to receive a higher rate than operators for a limited period.

In 2017, the CRC issued a resolution updating the list of relevant telecommunication markets by adding the mobile services market (including bundled mobile voice and data services) and by also including the mobile service market in the list of relevant markets subject toex-ante regulation. In connection with the mobile services market, the CRC initiated a proceeding to evaluate Comcel’s substantial market power in this new market and, if applicable, the imposition of asymmetric regulatory measures that could affect Comcel. As of the date of this annual report, a resolution is pending.

SOUTHERN CONE

ARGENTINA

The National Communications Agency (Ente Nacional de Comunicaciones, or “Enacom”) is the main telecommunications regulatory authority in Argentina and became operational in 2016.

Fixed and mobile services providers are prohibited from providing DTH technology, which is currently the fastest way to provide Pay TV services. In 2017, the Argentine government issued a decree allowing telecommunications providers, including AMX Argentina S.A. (“AMX Argentina”), to provide Pay TV services via cable within a limited number of territories as of January 2018 and to the rest of the country as of January 2019. AMX Argentina has obtained the permissions necessary to provide Pay TV services via cable in accordance with the decree.

AMX Argentina holds licenses in the 700 MHz, 900 MHz, 1700/2100 MHz (AWS), 1900 MHz and 2600 MHz frequency bands, some of which expire in 15 years and some of which have no expiration date. Each license also contains certain coverage parameters, reporting and service requirements and provides Enacom a revocation right upon a material breach of the license terms.

All telecommunications providers in Argentina must contribute approximately 1.0% of their monthly revenues to finance the provision of telecommunications services in underserved areas and to underserved persons. All providers must also meet certainquality-of-service requirements.

CHILE

The General Telecommunications Law (Ley General de Telecomunicaciones) establishes the legal framework for telecommunications services in Chile, including the regulation of concessions, permits, rates and interconnection. The main regulatory agency of the telecommunications sector is the Chilean Transportation and Communications Ministry (Ministerio de Transportes y Telecomunicaciones), which acts primarily through the Undersecretary of Telecommunications (Subsecretaría de Telecomunicaciones, “SUBTEL”).

Claro Chile S.A. (“Claro Chile”) holds concessions to provide mobile and fixed-line services in the 700MHz, 850 MHz, 1900 MHz, 2.6 GHz, 3.4 GHz and 5.8 GHz frequency bands. Except for the concession to provide services in the 850 MHz frequency, which has an indefinite termination date, the concessions to provide services in the 700 MHz, 1900 MHz, 2.6 GHz, 3.4 GHz and 5.8 GHz frequencies have termination dates that vary from 2027 to 2045. Claro Chile also holds license to provide DTH technology services until

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2024 and a license with an indefinite term to provide Pay TV services. In 2018, the Chilean Supreme Court (Corte Suprema de Justicia) issued a ruling requiring Claro to return 20 MHz of spectrum acquired through a band auction because Claro supposedly exceeded the limit of spectrum any given operator is permitted to hold. The return of such spectrum is currently being implemented before the Competition Court (Tribunal de Defensa de la Libre Competencia, or the “TDLC”). In addition, pursuant to the ruling, and in order to increase the maximum limit, SUBTEL initiated a review of such limit of spectrum through a regulatory proceeding before the TDLC, which shall now be reviewed by the Chilean Supreme Court.

Some of Claro Chile’s concessions impose additional requirements, such as coverage, reporting and service quality requirements. The Chilean Transportation and Communications Ministry is authorized to terminate any concession in the event of specified breaches under the terms of such concessions. Additionally, Claro Chile’s concession in the 700 MHz band imposes certain obligations to expand mobile and data services in rural areas. In 2017, the Undersecretary of Telecommunication approved Claro Chile’s expansion project in connection with its obligations under its concession in the 700 MHz band.

PARAGUAY

The National Telecommunications Commission of Paraguay (Comisión Nacional de Telecomunicaciones de Paraguay) is in charge of supervising the telecommunications industry in Paraguay. It is authorized to cancel licenses in the event of specified breaches of the terms of a license.

AMX Paraguay, S.A. (“AMX Paraguay”) holds licenses to operate in the 1900 MHz and the 1700/2100 MHz bands. AMX Paraguay also holds a nationwide internet access and data transmission license. In addition, AMX Paraguay holds licenses to provide DTH services and cable TV services. Additionally, in January 2018, AMX Paraguay participated in a spectrum auction and was awarded a license to provide telecommunications services in the 700 MHz band. In November 2018, the Telecommunications Commission of Paraguay granted the renewal of spectrum license in the 1900 MHz band. These licenses are renewable, subject to regulatory approval, and contain coverage, reporting and service requirements.

In November 2019, the Telecommunications Commission of Paraguay granted AMX Paraguay a license to provide internet access and data transmission services in the 3,500 MHz frequency band, effective until January 12, 2024

URUGUAY

The Regulatory Unit of Communications Services (Unidad Reguladora de Servicios de Comunicaciones) is in charge of the regulation of the telecommunications industry in Uruguay.

AM Wireless Uruguay, S.A. holds licenses to operate in the 1900 MHz, 1700/2100 MHz and 700 MHz frequency bands that expire in 2024, 2033, 2037, 2039 and 2045, and Telstar S.A. holds licenses to provide international long- distance communications and international and national data services that have no expiration date.

The license initially granted to Flimay S.A. (“Flimay”) to provide DTH technology services in Uruguay has been contested by the government since 2012. In 2017, the executive branch of Uruguay held under a new ruling that Flimay does not have a valid license to provide DTH services in the country. Flimay requested this ruling be voided, but in February 2018, the executive branch of Uruguay, with support from the Administrative Court (TCA), requested the process be closed. As of the date of this annual report, a decision on Flimay’s appeal is pending.

ANDEAN REGION

ECUADOR

The primary regulatory authorities for our mobile and fixed-line operations are the National Telecommunications, Regulation and Control Agency (Agencia de Regulación y Control de las Telecomunicaciones, or “Arcotel”) and the Telecommunications and Information Society Ministry (Ministerio de Telecomunicaciones y Sociedad de la Información, or “Mintel”). Arcotel is responsible for the licensing and oversight of radio-electric spectrum use and telecommunications services provisions. Mintel is responsible for the promotion of equal access to telecommunications services.

The Telecommunications Law (Ley Orgánica de Telecomunicaciones), adopted in 2015, serves as the legal framework for telecommunications services. It established

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REGULATION

new regulations for operators with significant market power, new penalties based on their gross incomes as well as additional fees also based on an operator’s gross income, but that can vary depending on the size of their market share. Consorcio Ecuatoriano de Telecomunicaciones, S.A. (“Conecel”) has been deemed to have significant market power in the advanced wireless services market, and as a result, such fee payments are made on a quarterly basis on the dates established by Arcotel.

Conecel paid to the Ecuadorian government U.S. $29.7 million, which corresponds to 3.0% of its wireless services revenues generated in 2019. An arbitration proceeding to partially void the payment by Conecel of such fees was conducted and a decision in favor of the government was reached. Conecel has appealed this decision and, as of the date of this annual report, a decision of the Constitutional Court is pending.

Conecel holds concessions to operate in the 850MHz, 1900 MHz and AWS bands, which include concessions for PCS that expire in 2023. The PCS concession containsquality-of- service requirements for successful call completions, SMS delivery times, customer service, geographic coverage and other service conditions.

Conecel also holds licenses to provide internet value- added services, Pay TV Services (through DTH technology) and bearer services, expiring in 2021, 2023 and 2032, respectively.

Conecel, following the acquisition of Ecuador Telecom, S.A. in 2016, also holds a concession to offer fixed-line voice, public telephone and domestic and international long- distance wholesale services, as well as a license to provide Pay TV (through HFC technology) that expires in 2031.

Recalculation of Concession Fees

Arcotel initiated several proceedings to recalculate the variable portion of the concession fees payable under Conecel’s concessions, which, as of the date of this annual report, is equivalent to 2.93% of Conecel’s annual subscriber base revenues, in addition to its contribution for Universal Service (Servicio Universal 1%). These recalculation proceedings with Arcotel remain ongoing.

In 2018, Conecel paid Arcotel U.S.$11.9 million based on its annual revenues for the 2015 period and was required to pay U.S.$13 million based on its annual revenues for the 2016 period.

For its Universal Service contribution, Conecel was required to pay U.S.$5 million for the 2015 period and U.S.$6 million for the 2016 period. Conocel obtained a judicial order that suspended the collection process for the 2015 and 2016 periods.

All these recalculation proceedings are under dispute with Arcotel and subject to arbitration proceedings where resolutions are pending.

PERU

The Supervisory Agency for Private Investment in Telecommunication (Organismo Supervisor de la Inversión Privada en Telecomunicaciones, or “OSIPTEL”) is in charge of the regulation of the telecommunications industry in Peru. The Ministry of Transport and Communications (Ministerio de Transportes y Comunicaciones or “MTC”) grants concessions, permits and licenses. The Telecommunications Law (Decreto Supremo N°013-93-TCC Ley de Telecomunicaciones), adopted in 1993, serves as the legal framework for telecommunications services.

América Móvil Perú, S.A.C. (“Claro Perú”) holds nationwide concessions to provide wireless, PCS, fixed-line, local wholesale, domestic and international long-distance, Pay TV services (through DTH and HFC technologies), public telephone and value-added services (including internet access). The concessions allow Claro Perú to operate on the 450 MHz, 700 MHz, 850 MHz, 1900 MHz, 3.5 GHz and 10.5 GHz bands. As part of Claro Perú’s acquisition of Olo del Perú S.A.C., TVS Wireless S.A.C. and their respective subsidiaries in 2016, Claro has a resale agreement with such companies to operate in certain regions on the 2.5 GHz band.

Spectrum reframing is the process conducted by the MTC to properly order the assignment of a frequency band in order to have continuous coverage nationwide and adequate bandwidth. The MTC issued the final decision on the spectrum reframing for the 2.5 Ghz band, granting 80 Mhz to TVS Wireless, S.A.C. (Lima and Callao) and Olo del Peru, S.A.C. (rest of the country).

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Each of the concessions was awarded by the MTC and covers a20-year period. The concessions contain coverage, reporting, service requirement and spectral efficiency goals. The MTC is authorized to cancel any of the concessions in the case of specified breaches of its terms.

EUROPE AND OTHER JURISDICTIONS

European Legal Framework and Principal Regulatory Authorities

The telecommunications regulatory framework in the EU is currently based on five Directives (“Framework”, “Access and Interconnection”, “Authorization”, “Universal Service and Users’ Rights” and “Privacy and Data Protection”) that apply to all EU member countries and regulate all forms of fixed and wireless services, internet, broadcasting and transmission services. Austria, Bulgaria, Croatia and Slovenia are EU member countries. Macedonia and Serbia, candidates for accession to the EU, are expected to gradually harmonize their regulatory frameworks with the EU’s framework. The framework is going to be replaced by the European Electronic Communications Code which is to be transposed into national law before December 21st, 2020.

In each European country in which we operate, we are also subject to a domestic telecommunications regulatory framework and to oversight by one or more local regulators.

Licenses

COUNTRY

FREQUENCYTERMINATION DATE

AUSTRIA

800 MHzDec. 2029
900 MHzDec. 2034
1800 MHzDec. 2034
2100 MHzDec. 2020
2600 MHzDec. 2026
3500 MHzDec 2039

BELARUS

900 MHzDec. 2020
1800 MHzDec. 2020
2100 MHzDec. 2020

BULGARIA

900 MHzJune 2024
1800 MHzJune 2024
2100 MHzApr. 2025

CROATIA

800 MHzOct. 2024
900 MHzOct. 2024
1800 MHzOct. 2024
2100 MHzOct. 2024

MACEDONIA

800 MHzDec. 2033
900 MHzSept. 2023
1800 MHzDec. 2033
2100 MHzFeb. 2028

SERBIA

800 MHzJan. 2026
900 MHzNov. 2026
1800 MHzNov. 2026
2100 MHzNov. 2026

SLOVENIA

800 MHzMay 2029
900 MHzJan. 2031
1800 MHzJan. 2031
2100 MHzSept. 2021
2600 MHzMay 2029

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REGULATION

OTHER JURISDICTIONS

COUNTRY

PRINCIPAL REGULATORY AUTHORITIESCONCESSION AND LICENSES

COSTA RICA

Superintendency of Telecommunications (Superintendencia de Telecomunicaciones)

Ministry of Science, Technology and Telecommunications (Ministerio de Ciencia, Tecnología y Telecomunicaciones)

•  Concessions in the AWS and 1800 MHz bands that expire in 2032

•  Concessions in the 2100 MHz band that expire in 2026

•  License to operate Pay TV services using DTH technology that will expire in 2026

EL SALVADOR

Electricity and Telecommunications Superintendency (Superintendencia General de Electricidad y Telecomunicaciones)

•  Concession of 50 MHz in the 1900 MHz band of which 30 MHz that expire in 2038, 10 MHz that expire in 2041 and 10 MHz that expire in 2028

•  Concession to provide public telephone service that expires in 2027

•  Licenses to provide Pay TV Services through HFC and DTH technologies have an indefinite term

GUATEMALA

Guatemalan Telecommunications Agency (Superintendencia de Telecomunicaciones)

•  Licenses to use 12 MHz in the 900 MHz band and 120 MHz in the 1900 MHz band that all expire in 2033

•  Concession of 175 MHz in the 3.5 GHz band that will expire in 2033

NICARAGUA

Nicaraguan Telecommunications and Mailing Institute (Instituto Nicaragüense de Telecomunicaciones y Correos)

•  Concessions in the 700 MHz, 850 MHz, 1900 MHz and 1700/2100 MHz bands that all expire in 2032

•  Concession of 50 MHz in the 3.5 GHz band that will expire in 2042

•  Licenses to provide DTH technology that will expire in January 2028 (renewal granted in 2018) and Pay TV services that has an indefinite term

HONDURAS

Honduran National Telecommunications Commission (Comisión Nacional de Telecomunicaciones)

•  Concessions to use 80 MHz in the 1900 MHz PCS band and 40 MHz in theLTE-4G 1700/2100 MHz band that all expire in 2033

•  Licenses to operate Pay TV services through (i) HFC technology that will expire in 2027 and (ii) DTH technology that will expire in 2020

PANAMA

National Authority of Public Services (Autoridad Nacional de los Servicios Públicos)

•  License to use 40 MHz in the 1900 MHz and 20 MHz in the 700 MHz bands that all expire in 2028

•  Licenses to provide fixed local and long-distance services that expire in 2030

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COUNTRY

PRINCIPAL REGULATORY AUTHORITIESCONCESSION AND LICENSES

•  License to provide internet service that expires in 2033

•  Licenses to provide international long-distance, value-added services, interactive television, and Pay TV service through DTH and IPTV technologies, which expire in 2028, 2030, 2037 and 2034, respectively

•  License for data transportation, Service No. 200, which expires in 2023

UNITED STATES

The FCC

•  International Section 214 Authorization (Claro Enterprise Solutions)

DOMINICAN REPUBLIC

Dominican Institute of Telecommunications (Instituto Dominicano de las Telecomunicaciones)

•  Concession to provide fixed and wireless services, internet and pay TV services through DTH and IPTV technologies that expire in 2030

•  Licenses to use 25 MHz in the 800 MHz band, 30 MHz in the 1900 MHz band, 80 MHz in the 2.5/2.7 GHz band, 30 MHz in the 3.5 GHz band and 40 MHz in the 1.7/2.1 GHz (AWS) band that expire in 2030

PUERTO RICO

Federal Communications Commission (FCC) and the Telecommunications Bureau of Puerto Rico

•  Concessions to use the 700 MHz, 1900 MHz and the 28 GHz bands that expire in 2021, 2027 and 2029, respectively

•  Concessions to use the 800 MHz that expire in, 2020, 2021 and 2026 and 2028.

•  Concessions to use the AWS-1 and AWS-3 bands (1.7/2.1 GHz) that expire in 2026 and 2028, respectively

•  Long-term transfer lease concessions to use 35.6 MHz of the 2.5 GHz band that expire in 2020, 2022, 2023, 2025 and 2026

•  Franchise to operate Pay TV services using IPTV technology that expires in 2030

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The Network for

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PART VII ADDITIONAL INFORMATION Development

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EMPLOYEES

Many of our employees are members of labor unions with which we conduct collective negotiations on wages, benefits and working conditions. We believe that we have good current relations with our workforce.

The following table sets forth the total number of employees and a breakdown of employees by main category of activity and geographic location, as of the end of each year in the three-year period ended December 31, 2019.

  DECEMBER 31, 
  2017  2018  2019 

NUMBER OF EMPLOYEES

  191,851   189,448   191,523 

CATEGORY OF ACTIVITY:

            

Wireless

  78,910   77,845   83,091 

Fixed

  94,496   92,429   87,034 

Other businesses

  18,445   19,174   21,398 

GEOGRAPHIC LOCATION:

            

Mexico

  88,417   88,613   89,539 

South America

  64,619   62,500   61,058 

Central America

  9,694   9,586   10,372 

United States

  852   848   859 

Caribbean

  9,311   9,195   11,351 

Europe

  18,958   18,706   18,344 

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LEGAL PROCEEDINGS

In each of the countries in which we operate, we are party to various legal proceedings in the ordinary course of business. These proceedings include tax, labor, antitrust, contractual matters and administrative and judicial proceedings concerning regulatory matters such as interconnection and tariffs. We are party to a number of proceedings regarding our compliance with administrative rules and regulations and concession standards.

Our material legal proceedings are described in Note 17 to our audited consolidated financial statements included in this annual report and in “Regulation” under Part VI of this annual report.

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PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT ANDNON-AUDIT FEES

The following table sets forth the fees billed to us and our subsidiaries by our independent registered public accounting firm, Mancera, during the fiscal years ended December 31, 2018 and 2019:

   YEAR ENDED DECEMBER 31, 
   2018   2019 
    (in millions of Mexican pesos) 
   

Audit fees(1)

   Ps.         248    Ps.         250 
   

Audit-related fees(2)

   23    17 
   

Tax fees(3)

   30    34 
   

Total fees

   Ps.         301    Ps.         301 

(1) Audit fees represent the aggregate fees billed by Mancera and its Ernst & Young Global affiliated firms in connection with the audit of our annual financial state- ments and statutory and regulatory audits.

(2) Audit-related fees represent the aggregate fees billed by Mancera and its Ernst & Young Global affiliated firms for the review of reports on our operations submitted to IFT and attestation services that are not required by statute or regulation.

(3) Tax fees represent fees billed by Mancera and its Ernst & Young Global affiliated firms for tax compliance services, tax planning services and tax advice services.

AUDIT AND CORPORATE PRACTICES COMMITTEE APPROVAL POLICIES AND PROCEDURES

Our audit and corporate practices committee has established policies and procedures for the engagement of our independent auditors for services.

Our audit and corporate practices committee expressly approves any engagement of our independent auditors for audit ornon-audit services provided to us or our subsidiaries. Prior to providing any service that requires specificpre-approval, our independent auditor and our Chief Financial Officer present to the audit committee a request for approval of services in which they confirm that the request complies with the applicable rules.

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We file reports, including annual reports on Form20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers.

Any filings we make electronically will be available to the public over the internet at the SEC’s web site at www.sec.gov and at our website at www.americamovil.com. This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not incorporated into this annual report.

The following documents have been filed with the SEC as exhibits to this annual report:

1.1Amended and Restated Bylaws (estatutos sociales) of América Móvil, S.A.B. de C.V., dated as of April  16, 2018 (together with an English translation) (incorporated by reference to Exhibit 1.1 of our annual report on Form20-F FileNo. 001-16269, filed on April  26, 2018).
2.1Description of Rights of Each Class of Securities
8.1List of certain subsidiaries of América Móvil, S.A.B. de C.V.
12.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1Certification pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
15.1Code of Ethics (incorporated by reference to Exhibit 14.1 of our annual report on Form20-F, FileNo. 001-16269, filed on April 26, 2018).
15.2Consent of independent registered public accounting firm.
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Document.

Omitted from the exhibits filed with this annual report are certain instruments and agreements with respect to long-term debt of América Móvil, none of which authorizes securities in a total amount that exceeds 10% of the total assets of América Móvil. We hereby agree to furnish to the SEC copies of any such omitted instruments or agreements as the Commission requests.

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FORWARD-LOOKING STATEMENTS

Some of the information contained or incorporated by reference in this annual report constitutes “forward- looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we have based these forward-looking statements on our expectations and projections about future events, it is possible that actual events may differ materially from our expectations. In many cases, we include, together with the forward-looking statements themselves, a discussion of factors that may cause actual events to differ from our forward-looking statements.

Examples of forward-looking statements include the following:

projections of our commercial, operating or financial performance, our financing, our capital structure or our other financial items or ratios;

statements of our plans, objectives or goals, including those relating to acquisitions, competition and rates;

statements concerning regulation;

the impact ofCOVID-19;

or regulatory developments;

statements about our future economic performance or that of Mexico or other countries in which we operate;

competitive developments in the telecommunications sector;

other factors and trends affecting the telecommunications industry generally and our financial condition in particular; and

statements of assumptions underlying the foregoing statements.

We use words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and other similar expressions to identify forward-looking statements, but they are not the only way we identify such statements.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors, some of which are discussed under “Risk Factors,” include the impact of theCOVID-19 pandemic, economic and political conditions and government policies in Mexico, Brazil, Colombia, Europe and elsewhere, inflation rates, exchange rates, regulatory developments, technological improvements, customer demand and competition. We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements. You should evaluate any statements made by us in light of these important factors.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or for any other reason.

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FORM 20-F CROSS REFERENCE GUIDE

ITEM

FORM 20-F CAPTIONLOCATION IN THIS REPORTPAGE
1IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable—
2OFFER STATISTICS AND EXPECTED TIMETABLENot applicable—
3KEY INFORMATION
3A Selected financial dataSelected financial data2
3B Capitalization and indebtednessNot applicable—
3C Reasons for the offer and use of proceedsNot applicable—
3D Risk factorsRisk factors45
4INFORMATION ON THE COMPANY
4A History and development of the CompanyInformation on the Company5
Note 10—Property, Plant and Equipment, NetF-39
Liquidity and capital resources36
Additional Information109
4B Business overviewInformation on the Company5
Regulation89
4C Organizational structureExhibit 8.1—
4D Property, plant and equipmentInformation on the Company5
Note 10—Property Plant and Equipment, NetF-39
Liquidity and capital resources36
Regulation89
4AUnresolved staff commentsNone—
5OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A Operating resultsOverview20
Results of operations22
Regulation89
Liquidity and capital resources36
5B Liquidity and capital resourcesNote 14—DebtF-51
5C Research and development, patents and licenses, etc.Not applicable—
5D Trend informationOverview20
Results of operations22
5EOff-balance sheet arrangementsOff-balance sheet arrangement36
5F Tabular disclosure of contractual obligationsContractual obligations37
6DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6A Directors and senior managementManagement70
6B CompensationManagement70
6C Board practicesManagement70
Management70
6D EmployeesEmployees107
6E Share ownershipMajor shareholders60
Management70

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ITEM

 FORM 20-F CAPTION  LOCATION IN THIS REPORT  PAGE 
    
7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS        
    
  7A Major shareholders  Major shareholders   60 
    
  7B Related party transactions  Related party transactions   61 
    
  7C Interests of experts and counsel  Not applicable   — 
    
8 FINANCIAL INFORMATION        
    
  8A Consolidated statements and other financial information  Consolidated Financial Statements   116 
   Dividends   62 
   Note 17—Commitments and Contingencies   F-59 
    
  8B Significant changes  Not applicable   — 
    
9 THE OFFER AND LISTING        
 9A Offer and listing details  Trading markets   62 
 9B Plan of distribution  Not applicable   — 
 9C Markets  Trading markets   62 
 9D Selling shareholders  Not applicable   — 
 9E Dilution  Not applicable   — 
 9F Expenses of the issue  Not applicable   — 
    
10 ADDITIONAL INFORMATION        
 10A Shareholders’ equity  Bylaws   62 
 10B Memorandum and articles of association  Bylaws   62 
 10C Material contracts  Information on the Company   5 
    Results of operations   22 
    Related party transactions   61 
    Regulation   89 
    
  10D Exchange controls  Additional information   109 
    
  10E Taxation  Taxation of shares and ADSs   64 
    
  10F Dividends and paying agents  Not applicable   — 
    
  10G Statement by experts  Not applicable   — 
    
  10H Documents on display  Additional information   109 
    
  10I Subsidiary information  Not applicable   — 
    
11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Risk management   41 
    Note 2 a)—Basis of Preparation of the Consolidated Financial Statements and Summary of Significant Accounting Policies and Practices   F-7 
    
12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES        
 12A Debt securities  Not applicable   — 
    
  12B Warrants and rights  Not applicable   — 
    
  12C Other securities  Not applicable   — 
    
  12D American Depositary Shares  Bylaws   62 
    
13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES  Not applicable   — 

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FORM 20-F CROSS REFERENCE GUIDE

ITEM

 FORM 20-F CAPTION  LOCATION IN THIS REPORT  PAGE
    
14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY      
    
  HOLDERS AND USE OF PROCEEDS  Not applicable  —
    
15 CONTROLS AND PROCEDURES  Controls and procedures  82
    
16A AUDIT COMMITTEE FINANCIAL EXPERT  Management  70
    
16B CODE OF ETHICS  Code of ethics  85
    
16C PRINCIPAL ACCOUNTANT FEES AND SERVICES  Principal accountant fees and services  108
    
16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES  Not applicable  —
    
16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS  Purchases of equity securities by the issuer and affiliated purchasers  63
    
16F CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT  Not applicable  —
    
16G CORPORATE GOVERNANCE  Corporate governance  79
    
16H MINE SAFETY DISCLOSURE  Not applicable  —
    
17 FINANCIAL STATEMENTS  Not applicable  —
    
18 FINANCIAL STATEMENTS  Consolidated Financial statements  116
    
19 EXHIBITS  Additional Information  109

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Dated: April 29, 2020

AMÉRICA MÓVIL, S.A.B. DE C.V.

By:/s/ Carlos José García Moreno Elizondo
Name:  Carlos José García Moreno Elizondo
Title:Chief Financial Officer

By:/s/ Alejandro Cantú Jiménez
Name:  Alejandro Cantú Jiménez
Title:General Counsel

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PART VIII CONSOLIDATED FINANCIAL STATEMENTS

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Financial Statements

Years Ended December 31, 2017, 2018 and 2019

with Report of Independent Registered Public Accounting Firm

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Financial Statements

Years Ended December 31, 2017, 2018 and 2019

Contents:

Report of Independent Registered Public Accounting Firm

F-2

Audited Consolidated Financial Statements:

Consolidated Statements of Financial Position

F-6

Consolidated Statements of Comprehensive Income

F-7

Consolidated Statements of Changes in Shareholders’ Equity

F-8

Consolidated Statements of Cash Flows

F-9

Notes to Consolidated Financial Statements

F-10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

América Móvil, S.A.B. de C.V.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of América Móvil, S.A.B. de C.V. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 29, 2020 expressed an unqualified opinion thereon.

Adoption of International Financial Accounting Standard (IFRS) 16

As discussed in Note 2 a), item i) to the consolidated financial statements, effective January 1, 2019, the Company changed its method of accounting for leases, as a result of the adoption of International Financial Accounting Standard 16, “Leases” (IFRS 16), applying the modified retrospective approach. As explained below, auditing the Company’s adoption of IFRS 16 was a Critical Audit Matter.

Basis for Opinion

These financial statements are the responsibility of the Company´sCompany’s management. Our responsibility is to express an opinion on the Company´sCompany’s financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Deferred tax assets, realizability of Net Operating Loss Carryforwards

Description of

the Matter

As discussed in Note 13 to the consolidated financial statements, at December 31, 2019, the balance of deferred tax assets was $106,167,897 thousands of Mexican pesos. The Company has recognized deferred tax assets arising from net operating loss carryforwards (NOLs) of approximately $26,630,407 thousands of Mexican pesos, the majority of which arises from one of its subsidiaries.

Auditing management´s assessment of the realizability of the deferred tax assets arising from NOLs involved complex auditor judgement because management´s estimate of realizability was based on assessing the probability, timing and sufficiency of expected reversals of taxable temporary differences, future taxable profits and available tax planning opportunities. These projections are sensitive because they are affected by future operating results and future market and economic conditions.

How We

Addressed the

Matter in Our

Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement related to the realizability of the deferred tax assets. We tested controls over management’s analyses of the reversal of existing taxable temporary differences, their projections of future taxable income and related assumptions used in developing the projected financial information and their identification of available tax planning opportunities. Our audit also included the evaluation of controls that address the completeness and accuracy of the data utilized in the valuation models.

Our audit procedures to test the realizability of the deferred tax assets arising from NOLs also included, among others, the review of management´s estimates of future taxable income, the methodology used, the significant assumptions and the underlying data used by the Company in developing the projected financial information, such as the weighted average cost of capital, customer attrition rates, growth rates, and other key assumptions by comparing them with historical, economic and industry trends and evaluating whether changes to the Company´s business model and other factors would significantly affect the projected financial information. We also involved specialists to evaluate the methodologies and assumptions used, and to test the calculations used by the Company.

In addition, with the assistance of our tax professionals, we assessed the application of relevant tax law, including assessing the Company’s future tax planning opportunities and scheduling of the timing and amounts of expected reversals of taxable temporary differences.

Impairment of goodwill

Description of

the Matter

As discussed in Notes 2 item i) and 11 to the consolidated financial statements, at December 31, 2019, the Company’s goodwill balance was $152,899,801 thousands of Mexican pesos, the Company tests goodwill at least annually at the Cash Generating Unit (CGU) level. Impairment exists when the carrying value of a CGU exceeds its recoverable amount, which is the higher of its fair value less cost to sell and its value-in-use.

Auditing management´s assessment of impairment of goodwill involved complex auditor judgement because the estimations required to determine the fair value and value-in-use of the CGUs, including revenue growth rates, operating margins and weighted average cost of capital, are sensitive to, and affected by, economic factors, technological changes and market conditions, among other factors.

How We

Addressed the

Matter in Our

Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement related to the determination of the impairment of goodwill, including controls over management’s review of the significant assumptions described above, projected financial information and the valuation model used to develop such estimates.

Our audit procedures to test the impairment of goodwill also included, among others, evaluating the methodology used, testing the significant assumptions mentioned above and the underlying data used by the Company. We assessed the historical accuracy of management’s estimates and projections by comparing them to actual results and obtaining appropriate explanations for the variances; examined management’s support for the current estimates and projections, by comparing them to industry and economic trends, including market participant data; evaluated management’s methodology for determining that the weighted average cost of capital that reflects the economic conditions impacting CGUs; and also tested the completeness and accuracy of the underlying data, and evaluated other factors that would significantly affect the projected financial information and thus the fair value and value-in-use of the CGUs.

We also involved our valuation specialist to evaluate the methodologies and assumptions used, and to test the calculations used by the Company.

Valuation of Employee Benefit Obligations

Description of

the Matter

As discussed in Note 2, item q) to the consolidated financial statements, at December 31, 2019, the defined benefit pension obligation balance was $152,507,058 thousands of Mexican pesos. The Company assessed and updated its estimates and assumptions used to actuarially measure and value the defined benefit pension obligation as of December 31, 2019, using the assistance of independent actuarial specialists.

Auditing the defined benefit pension obligation involved complex auditor judgement and required the involvement of actuarial specialists because of the highly judgmental nature of the actuarial assumptions, such as discount rates, inflation rates, future compensation levels, mortality rates and longevity, among others. These assumptions have significant effects on the amount of the projected benefit obligation.

How We

Addressed the

Matter in Our

Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to the measurement and valuation of the defined benefit pension obligation. We tested controls over management’s review of the defined benefit pension obligation calculations, the significant actuarial assumptions used and the data inputs provided to the independent actuary. We also evaluated the objectivity and competence of the specialists used by management.

Our audit procedures to test the measurement and valuation of the defined benefit pension obligation included, among others, evaluating the methodology used, assessing the significant actuarial assumptions noted above and testing the underlying data used by the Company. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the defined benefit pension obligation from prior year due to changes in service cost, interest cost, actuarial gains and losses, benefit payments, contributions and other activities; we involved our specialists to assist in the assessment of the actuarial model and the evaluation of the Company´s key assumptions by comparing them with publicly available market data and historical experience; in addition, our specialists evaluated management’s methodology for determining discount rates which reflect the maturity and duration of the benefit payments.

To evaluate the future compensation levels, the mortality rate and the longevity, we assessed whether the information is consistent with publicly available information, and whether any market data adjusted for entity-specific adjustments were applied. We also tested the completeness and accuracy of the underlying data, including the market participant data provided by management to its actuarial specialists.
Adoption of IFRS 16—“Leases”

Description of

the Matter

As discussed in Note 2 a), item i) to the consolidated financial statements, the Company adopted the IFRS 16 effective January 1, 2019, which included recognizing a right-of-use asset and corresponding lease liability. Upon adoption, the Company recorded $119,387,660 thousands of Mexican pesos of right-of-use assets and lease liabilities using the modified retrospective method with no material impact on equity.

Auditing the adoption of IFRS 16 involved complex auditor judgement and required the involvement of specialists because of the highly judgmental nature of the methodology, assumptions and other factors, such as the estimation of the incremental borrowing rate, lease terms and the large volume of contracts which vary per business units and locations. These assumptions and factors have a significant effect on the lease liability and right-of-use asset values.

How We

Addressed the

Matter in Our

Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to the measurement, valuation and completeness of the implementation of the standard. We tested controls over the Company’s process for evaluating the completeness of their lease population, assessed the terms of lease agreements and assumptions used to determine the incremental borrowing rate.

Our audit procedures to test the implementation of IFRS 16 included, among others, evaluating the methodology used, the significant assumptions noted above and the underlying data used by the Company. To test the completeness and accuracy of the underlying data used to calculate the right of use asset and lease liability, we selected a sample of contracts with recurring payments and assessing their inclusion in the Company’s analysis and evaluating the Company’s conclusions on whether such arrangements were leases, in addition, we corroborated lease terms of leases to determine whether these attributes were considered and computed in the calculation; we involved our valuation specialists to assist in evaluating significant assumptions and management´s methodology for determining the incremental borrowing rate. We tested the Company’s calculations to determine the right-of-use asset and lease liability as of adoption.

/s/ MANCERA,Mancera, S.C.

We have served as the Company´sCompany’s auditor since 1993.

Mexico City, Mexico

April 26, 201829, 2020

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Financial Position

(In thousands of Mexican pesos)

 

     At December 31,     Note    At December 31, 
    Note    2016 2017 2017
Millions of
U.S. dollars		  2018 2019 2019
Millions of
U.S. dollars		 

Assets

            

Current assets:

            

Cash and cash equivalents

  3  Ps.23,218,383  Ps.24,270,473  US$1,227   3  Ps.21,659,962  Ps.19,745,656  US$1,048 

Marketable securities and other short-term investments

  4   54,857,157   59,120,676   2,988 

Equity investments at fair value through other comprehensive income (OCI) and other short-term investments

  4   49,015,934   47,718,025   2,532 

Accounts receivable:

            

Subscribers, distributors, recoverable taxes and other, net

  5   205,774,539   193,776,144   9,793 

Subscribers, distributors, recoverable taxes, contract assets and other, net

  5   216,226,920   204,706,296   10,863 

Related parties

  6   740,492   868,230   44   6   1,263,605   1,273,140   68 

Derivative financial instruments

  7   909,051   8,037,384   406   7   5,287,548   6,825,760   362 

Inventories, net

  8   36,871,292   38,809,565   1,961   8   40,305,362   41,102,012   2,181 

Other current assets, net

  9   19,538,093   17,352,746   877   9   15,296,193   9,473,434   503 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total current assets

    Ps.341,909,007  Ps.342,235,218  US$17,296     Ps.349,055,524  Ps.330,844,323  US$17,557 

Non-current assets:

            

Property, plant and equipment, net

  10  Ps.701,190,066  Ps.676,343,198  US$34,182   10  Ps.640,000,720  Ps.639,343,370  US$33,926 

Intangibles, net

  11   152,369,446   143,539,626   7,254   11   122,137,703   125,169,389   6,642 

Goodwill

  11   152,632,635   151,463,232   7,655   11   145,566,497   152,899,801   8,113 

Investments in associated companies

     3,603,484   3,735,172   189      3,132,707   2,474,193   131 

Deferred income taxes

  13   112,651,699   116,571,349   5,891   13   111,186,768   106,167,897   5,634 

Accounts receivable, subscribers and distributors

  5   11,184,860   9,786,581   495 

Accounts receivable, subscriber, distributors and contract assets, net

  5   15,681,872   15,139,442   803 

Other assets, net

  9   39,501,077   42,537,476   2,150   9   42,461,601   41,892,019   2,223 

Right-of-use assets

  15   —     118,003,223   6,262 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total assets

    Ps.  1,515,042,274  Ps.  1,486,211,852  US$  75,112    Ps.1,429,223,392  Ps.1,531,933,657  US$81,291 
    

 

  

 

  

 

     

 

  

 

  

 

 

Liabilities and equity

            

Current liabilities:

            

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

 ��14  Ps.82,607,259  Ps.51,745,841  US$2,615   14  Ps.96,230,634  Ps.129,172,033  US$6,854 

Short-term liability related toright-of-use of assets

  15   —     25,894,711   1,374 

Accounts payable

  15a   237,265,126   212,673,407   10,749   16a   221,957,267   216,112,824   11,468 

Accrued liabilities

  15b   70,479,230   67,752,758   3,425   16b   56,433,691   52,371,252   2,779 

Income tax

     3,200,673   9,362,009   473   13   19,232,191   33,026,606   1,752 

Other taxes payable

     22,087,957   24,387,484   1,233      23,979,334   24,373,400   1,293 

Derivative financial instruments

  7   14,136,351   10,602,539   536   7   13,539,716   9,596,751   509 

Related parties

  6   2,971,325   2,540,412   128   6   2,974,213   3,460,419   184 

Deferred revenues

     37,255,328   34,272,047   1,732      32,743,843   31,391,749   1,666 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total current liabilities

    Ps.470,003,249  Ps.413,336,497  US$20,891     Ps.467,090,889  Ps.525,399,745  US$27,879 

Non-current-liabilities:

            

Long-term debt

  14  Ps.625,194,144  Ps.646,139,058  US$32,655   14  Ps.542,691,819  Ps.495,082,444  US$26,271 

Long-term liability related toright-of-use of assets

  15   —     94,702,022   5,025 

Deferred income taxes

  13   14,061,881   11,997,364   606   13   24,573,441   18,093,041   960 

Income tax

     2,348,069   8,622,500   436   13   7,891,042   —     —   

Deferred revenues

     1,625,270   3,183,727   161      3,239,301   3,425,738   182 

Derivative financial instruments

  7   3,448,396   3,756,921   190   7   3,567,863   —     —   

Asset retirement obligations

  15c   16,288,631   18,245,129   922   16c   15,971,601   15,816,744   839 

Employee benefits

  17   111,048,867   120,297,139   6,080   18   118,325,014   152,507,058   8,093 
    

 

  

 

  

 

     

 

  

 

  

 

 

Totalnon-current liabilities

    Ps.774,015,258  Ps.812,241,838  US$41,050     Ps.716,260,081  Ps.779,627,047  US$41,370 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total liabilities

    Ps.1,244,018,507  Ps.1,225,578,335  US$61,941     Ps.1,183,350,970  Ps.1,305,026,792  US$69,249 
    

 

  

 

  

 

     

 

  

 

  

 

 

Equity:

            

Capital stock

  19  Ps.96,337,514  Ps.96,338,508  US$4,869   20  Ps.96,338,378  Ps.96,338,262  US$5,112 

Retained earnings:

            

Prior years

     149,065,873   141,761,677   7,164      184,689,288   213,719,236   11,341 

Profit for the year

     8,649,427   29,325,921   1,482      52,566,197   67,730,891   3,594 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total retained earnings

     157,715,300   171,087,598   8,646      237,255,485   281,450,127   14,935 

Other comprehensive loss items

     (45,137,571)   (73,261,794)   (3,703)      (137,598,218)   (199,878,430)   (10,605) 
    

 

  

 

  

 

     

 

  

 

  

 

 

Equity attributable to equity holders of the parent

     208,915,243   194,164,312   9,812      195,995,645   177,909,959   9,442 

Non-controlling interests

     62,108,524   66,469,205   3,359      49,876,777   48,996,906   2,600 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total equity

     271,023,767   260,633,517   13,171      245,872,422   226,906,865   12,042 
    

 

  

 

  

 

     

 

  

 

  

 

 

Total liabilities and equity

    Ps.1,515,042,274  Ps.1,486,211,852  US$75,112     Ps.  1,429,223,392  Ps.  1,531,933,657  US$  81,291 
    

 

  

 

  

 

     

 

  

 

  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands of Mexican pesos, except for earnings per share)

 

 For the year ended December 31  Note For the years ended December 31 
 Note 2015 2016 2017 2017
Millions of U.S.
dollars, except
for earnings
per share		  2017 2018 2019 2019
Millions of U.S.
dollars, except
for earnings
per share		 

Operating revenues:

          

Mobile voice services

  Ps.  256,146,766  Ps.  242,302,380  Ps.  221,751,600  US$  11,207 

Fixed voice services

  95,470,187  95,299,154   89,856,743   4,541 

Mobile data services

  226,723,039  256,936,895   308,526,994   15,593 

Fixed data services

  109,257,140  126,278,206   139,277,613   7,039 

Pay television

  66,050,857  78,268,778   86,882,606   4,391 

Sales of equipment, accessories and computers

  115,938,623  143,527,123   143,222,212   7,238 

Other related services

  24,151,127  32,799,952   32,115,767   1,623 

Service revenues

  Ps.878,411,323  Ps.863,647,642  Ps.834,365,232  US$44,275 

Sales of equipment

  143,222,212  174,560,039   172,982,637   9,179 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 
  Ps.893,737,739  Ps.975,412,488  Ps. 1,021,633,535  US$51,632   Ps. 1,021,633,535  Ps.  1,038,207,681  Ps.  1,007,347,869  US$  53,454 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Operating costs and expenses:

          

Cost of sales and services

  420,263,931  485,060,579   496,335,746   25,084   496,335,746  508,822,430   471,736,157   25,032 

Commercial, administrative and general expenses

  201,360,956  228,101,116   240,634,431   12,161   240,634,431  227,192,478   215,993,865   11,461 

Other expenses

  4,984,956  4,114,562   24,345,113   1,230   24,345,113  6,923,022   5,862,102   311 

Depreciation and amortization

 9,10 and 11 125,714,735  148,525,921   160,174,942   8,095  9,10,11 and 15 160,174,942  155,712,580   158,915,210   8,433 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 
  Ps.752,324,578  Ps.865,802,178  Ps.921,490,232  US$46,570   Ps.921,490,232  Ps.898,650,510  Ps.852,507,334  US$45,237 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Operating income

  Ps.141,413,161  Ps.109,610,310  Ps.100,143,303  US$5,062   Ps.100,143,303  Ps.139,557,171  Ps.154,840,535  US$8,217 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Interest income

  4,853,012  4,192,595   2,925,648   148   2,925,648  10,646,169   6,284,672   333 

Interest expense

  (31,197,372)  (33,862,012)   (30,300,781)   (1,531)   (30,300,781)  (31,771,433)   (37,911,339)   (2,012) 

Foreign currency exchange loss, net

  (78,997,988)  (40,427,407)   (13,818,951)   (698) 

Foreign currency exchange (loss) gain, net

  (13,818,951)  (7,261,956)   5,226,071   277 

Valuation of derivatives, interest cost from labor obligations and other financial items, net

 21 21,496,316  (16,225,841)   (1,943,760)   (98)  22 (1,943,760)  (10,176,316)   (7,075,342)   (375) 

Equity interest in net (loss) income of associated companies

  (1,426,696)  189,950   91,385   5 

Equity interest in net result of associated companies

  91,385  267   (17,609)   (1) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Profit before income tax

  56,140,433  23,477,595   57,096,844   2,888   57,096,844  100,993,902   121,346,988   6,439 

Income tax

 13 19,179,651  11,398,856   24,941,511   1,261  13 24,941,511  46,477,079   51,033,533   2,708 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net profit for the year

  Ps.36,960,782  Ps.12,078,739  Ps.32,155,333  US$1,627   Ps.32,155,333  Ps.54,516,823  Ps.70,313,455  US$3,731 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net profit for the year attributable to:

          

Equity holders of the parent

  Ps.35,054,772  Ps.8,649,427  Ps.29,325,921  US$1,482   Ps.29,325,921  Ps.52,566,197  Ps.67,730,891  US$3,594 

Non-controlling interests

  1,906,010  3,429,312   2,829,412   145   2,829,412  1,950,626   2,582,564   137 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 
  Ps.36,960,782  Ps.12,078,739  Ps.32,155,333  US$1,627   Ps.32,155,333  Ps.54,516,823  Ps.70,313,455  US$3,731 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Basic and diluted earnings per share attributable to equity holders of the parent

  Ps.0.52  Ps.0.13  Ps.0.44  US$0.02   Ps.0.44  Ps.0.79  Ps.1.03  US$0.05 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Other comprehensive income (loss) items:

          

Net other comprehensive (loss) income that may be reclassified to profit or loss in subsequent years:

          

Effect of translation of foreign entities

  Ps.(35,606,320)  Ps.107,498,708  Ps.(18,309,877)  US$(925)   Ps.(18,309,877)  Ps.(64,314,032)  Ps.(35,536,252)  US$(1,886) 

Effect of fair value of derivatives, net of deferred taxes

  37,495  49,129   12,292   1   12,292   —     —     —   

Unrealized gain (loss) on available for sale securities, net of deferred taxes

  4,011  (6,673,731)   622,424   31 

Items that will not be reclassified to (loss) or profit in subsequent years:

          

Re-measurement of defined benefit plan, net of deferred taxes

  (17,980,418)  14,773,399   (7,046,089)   (356)   (7,046,089)  757,278   (29,535,672)   (1,567) 

Unrealized gain (loss) on equity investments at fair value, net of deferred taxes

  622,424  (3,765,688)   883,408   47 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Total other comprehensive (loss) income items for the year, net of deferred taxes

 20 (53,545,232)  115,647,505   (24,721,250)   (1,249) 

Total other comprehensive loss items for the year, net of deferred taxes

 21 (24,721,250)  (67,322,442)   (64,188,516)   (3,406) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Total comprehensive (loss) income for the year

  Ps.(16,584,450)  Ps.127,726,244  Ps.7,434,083  US$378 

Total comprehensive income (loss) for the year

  Ps.7,434,083  Ps.(12,805,619)  Ps.6,124,939  US$325 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Comprehensive (loss) income for the year attributable to:

     

Comprehensive income (loss) for the year attributable to:

     

Equity holders of the parent

  Ps.(16,750,963)  Ps.120,974,842  Ps.1,201,698  US$62   Ps.1,201,698  Ps.(11,770,227)  Ps.5,450,679  US$289 

Non-controlling interests

  166,513  6,751,402   6,232,385   316   6,232,385  (1,035,392)   674,260   36 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 
  Ps.(16,584,450)  Ps.127,726,244  Ps.7,434,083  US$378   Ps.7,434,083  Ps.(12,805,619)  Ps.6,124,939  US$325 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity

For the yearyears ended December 31, 2015, 20162017, 2018 and 20172019

(In thousands of Mexican pesos)

 

 Capital
stock		 Legal
reserve		 Retained
earnings		 Effect of
derivative
financial
instruments
acquired for
hedging
purposes		 Unrealized
gain (loss) on
available
for sale
securities		 Re-measurement
of defined
benefit plans		 Cumulative
translation
adjustment		 Total equity
attributable to
equity holders
of the parent		 Non-
controlling
interests		 Total
equity		  Capital
stock		 Legal
reserve		 Retained
earnings		 Effect of
derivative
financial
instruments
acquired
for hedging
purposes		 Unrealized
gain (loss) on
equity
investment at
fair value		 Re-measurement
of defined
benefit plans		 Cumulative
translation
adjustment		 Total equity
attributable to
equity holders
of the parent		 Non-
controlling
interests		 Total
equity		 

Balance at December 31, 2014

 Ps.  96,382,631  Ps.  358,440  Ps.  191,975,968  Ps.  (1,556,693)  Ps.—   Ps.  (62,992,683)  Ps.(39,783,387)  Ps.  184,384,276  Ps.  50,254,772  Ps.  234,639,048 

Balance at January 1, 2017

 Ps.  96,337,514  Ps.  358,440  Ps.  157,356,860  Ps.  (12,292)  Ps.  (6,669,720)  Ps.  (68,005,050)  Ps.  29,549,491  Ps.  208,915,243  Ps.  62,108,524  Ps.  271,023,767 

Net profit for the year

  —     —    35,054,772   —     —     —     —    35,054,772  1,906,010  36,960,782   —     —    29,325,921   —     —     —     —    29,325,921  2,829,412  32,155,333 

Effect of fair value of derivatives, net of deferred taxes

  —     —     —    37,011   —     —     —    37,011  484  37,495   —     —     —    12,292   —     —     —    12,292   —    12,292 

Unrealized gain on available for sale securities, net of deferred taxes

  —     —     —     —    4,011   —     —    4,011   —    4,011 

Unrealized gain on equity investments at fair value, net of deferred taxes

  —     —     —     —    622,424   —     —    622,424   —    622,424 

Remeasurement of defined benefit plan, net of deferred taxes

  —     —     —     —     —    (7,075,606)   —    (7,075,606)  29,517  (7,046,089) 

Effect of translation of foreign entities

  —     —     —     —     —     —    (21,683,333)  (21,683,333)  3,373,456  (18,309,877) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Comprehensive income (loss) for the year

  —     —    29,325,921  12,292  622,424  (7,075,606)  (21,683,333)  1,201,698  6,232,385  7,434,083 

Dividends declared

  —     —    (19,815,470)   —     —     —     —    (19,815,470)  (1,848,108)  (21,663,578) 

Stock dividend

 1,264   —    4,902,818   —     —     —     —    4,904,082   —    4,904,082 

Repurchase of shares

 (270)   —    (1,040,686)   —     —     —     —    (1,040,956)   —    (1,040,956) 

Other acquisitions ofnon-controlling interests

  —     —    (285)   —     —     —     —    (285)  (23,596)  (23,881) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

As of January 1, 2018

 96,338,508  358,440  170,729,158   —    (6,047,296)  (75,080,656)  7,866,158  194,164,312  66,469,205  260,633,517 

Effect of adoption of new accounting standards

  —     —    19,598,349   —     —     —     —    19,598,349  518,440  20,116,789 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

As of January 1, 2018 (restated)

 96,338,508  358,440  190,327,507   —    (6,047,296)  (75,080,656)  7,866,158  213,762,661  66,987,645  280,750,306 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net profit for the year

  —     —    52,566,197   —     —     —     —    52,566,197  1,950,626  54,516,823 

Unrealized loss on equity investments at fair value, net of deferred taxes

  —     —     —     —    (3,765,688)   —     —    (3,765,688)   —    (3,765,688) 

Remeasurement of defined benefit plan, net of deferred taxes

  —     —     —     —     —    652,722   —    652,722  104,556  757,278 

Effect of translation of foreign entities

  —     —     —     —     —     —    (61,223,458)  (61,223,458)  (3,090,574)  (64,314,032) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Comprehensive income (loss) for the year

  —     —    52,566,197   (3,765,688)  652,722  (61,223,458)  (11,770,227)  (1,035,392)  (12,805,619) 

Dividends declared

  —     —    (21,134,520)   —     —     —     —    (21,134,520)  (1,850,462)  (22,984,982) 

Hyperinflation adjustment

  —     —    15,826,934   —     —     —     —    15,826,934   —    15,826,934 

Repurchase of shares

 (130)   —    (518,633)   —     —     —     —    (518,763)   —    (518,763) 

Redemption of hybrid bond

  —     —     —     —     —     —     —     —    (13,440,120)  (13,440,120) 

Other acquisitions ofnon-controlling interests

  —     —    (170,440)   —     —     —     —    (170,440)  (784,894)  (955,334) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance at December 31, 2018

 Ps.96,338,378  Ps.358,440  Ps.236,897,045  Ps.—   Ps.(9,812,984)  Ps.(74,427,934)  Ps.(53,357,300)  Ps.195,995,645  Ps.49,876,777  Ps.245,872,422 

Net profit for the year

  —     —    67,730,891   —     —     —     —    67,730,891  2,582,564  70,313,455 

Unrealized gain on equity investments at fair value, net of deferred taxes

  —     —     —     —    883,408   —     —    883,408   —    883,408 

Remeasurement of defined benefit plan, net of deferred taxes

  —     —     —     —     —    (17,791,354)   —    (17,791,354)  (189,064)  (17,980,418)   —     —     —     —     —    (29,153,554)   —    (29,153,554)  (382,118)  (29,535,672) 

Effect of translation of foreign entities

  —     —     —     —     —     —    (34,055,403)  (34,055,403)  (1,550,917)  (35,606,320)   —     —     —     —     —     —    (34,010,066)  (34,010,066)  (1,526,186)  (35,536,252) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Comprehensive income (loss) for the year

  —     —    35,054,772  37,011  4,011  (17,791,354)  (34,055,403)  (16,750,963)  166,513  (16,584,450)   —     —    67,730,891   883,408  (29,153,554)  (34,010,066)  5,450,679  674,260  6,124,939 

Dividends declared

  —     —    (37,192,594)   —     —     —     —    (37,192,594)  (447,085)  (37,639,679)   —     —    (23,106,823)   —     —     —     —    (23,106,823)  (1,473,290)  (24,580,113) 

Repurchase of shares

 (9,154)   —    (33,942,627)   —     —     —     —    (33,951,781)   —    (33,951,781)  (116)   —    (427,212)   —     —     —     —    (427,328)   —    (427,328) 

Effect ofspin-off

 (35,000)   —    16,193,640   —     —     —     —    16,158,640   —    16,158,640 

Derecognition of the equity method investment in KoninKlijke KPN, with retained available for sale financial interest

  —     —     —    1,458,894   —    (2,060,910)  348,593  (253,423)   —    (253,423) 

Other acquisitions ofnon-controlling interests and others

  —     —    (116,160)   —     —     —     —    (116,160)  (1,398,009)  (1,514,169) 

Other acquisitions ofnon-controlling interests

  —     —    (2,214)   —     —     —     —    (2,214)  (80,841)  (83,055) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance at December 31, 2015

 96,338,477  358,440  171,972,999  (60,788)  4,011  (82,844,947)  (73,490,197)  112,277,995  48,576,191  160,854,186 

Net profit for the year

  —     —    8,649,427   —     —     —     —    8,649,427  3,429,312  12,078,739 

Effect of fair value of derivatives, net of deferred taxes

  —     —     —    48,496   —     —     —    48,496  633  49,129 

Unrealized loss on available for sale securities, net of deferred taxes

  —     —     —     —    (6,673,731)   —     —    (6,673,731)   —    (6,673,731) 

Remeasurement of defined benefit plan, net of deferred taxes

  —     —     —     —     —    14,771,770   —    14,771,770  1,629  14,773,399 

Effect of translation of foreign entities

  —     —     —     —     —     —    104,178,880  104,178,880  3,319,828  107,498,708 

Balance at December 31, 2019

 Ps.96,338,262  Ps.358,440  Ps.281,091,687  Ps.—   Ps.(8,929,576)  Ps. (103,581,488)  Ps. (87,367,366)  Ps.177,909,959  Ps.48,996,906  Ps.226,906,865 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Comprehensive income (loss) for the year

  —     —    8,649,427  48,496  (6,673,731)  14,771,770  104,178,880  120,974,842  6,751,402  127,726,244 

Dividends declared

  —     —    (18,339,294)   —     —     —     —    (18,339,294)  (652,341)  (18,991,635) 

Stock dividend (Note 19)

 1,512   —    4,606,274   —     —     —     —    4,607,786   —    4,607,786 

Repurchase of shares

 (2,475)   —    (7,213,397)   —     —     —     —    (7,215,872)   —    (7,215,872) 

Partial sale of shares of Telekom Austria
(Note 12)

  —     —     —     —     —    68,127  (1,139,192)  (1,071,065)  7,394,401  6,323,336 

Other acquisitions ofnon-controlling interests (Note 12)

  —     —    (2,319,149)   —     —     —     —    (2,319,149)  38,871  (2,280,278) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance at December 31, 2016

 96,337,514  358,440  157,356,860  (12,292)  (6,669,720)  (68,005,050)  29,549,491  208,915,243  62,108,524  271,023,767 

Net profit for the year

  —     —     29,325,921   —     —     —     —     29,325,921   2,829,412   32,155,333 

Effect of fair value of derivatives, net of deferred taxes

  —     —     12,292  —     —     —     12,292    12,292 

Unrealized loss on available for sale securities, net of deferred taxes

  —     —     —     —     622,424  —     —     622,424  —     622,424

Remeasurement of defined benefit plan, net of deferred taxes

  —     —     —     —     —     (7,075,606)   —     (7,075,606)   29,517  (7,046,089) 

Effect of translation of foreign entities

  —     —     —     —     —     —     (21,683,333)   (21,683,333)   3,373,456  (18,309,877) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Comprehensive income (loss) for the year

  —     —     29,325,921  12,292  622,424  (7,075,606)   (21,683,333)   1,201,698  6,232,385  7,434,083

Dividends declared

  —     —     (19,815,470)   —     —     —     —     (19,815,470)   (1,848,108)   (21,663,578) 

Stock dividend (Note 19)

  1,264  —     4,902,818  —     —     —     —     4,904,082  —     4,904,082

Repurchase of shares

 (270)   —     (1,040,686)   —     —     —     —     (1,040,956)   —     (1,040,956) 

Other acquisitions ofnon-controlling interests (Note 12)

  —     —     (285)   —     —     —     —     (285)   (23,596)   (23,881) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance at December 31, 2017

 Ps.96,338,508  Ps.358,440  Ps.170,729,158  Ps.—  Ps.  (6,047,296)  Ps.(75,080,656)  Ps.7,866,158  Ps.194,164,312  Ps.  66,469,205 Ps.260,633,517 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands of Mexican pesos)

 

 For the year ended December 31   For the years ended December 31 
 Note 2015 2016 2017 2017
Millions of U.S.
dollars		  Note 2017 2018 2019 2019
Millions of
U.S. dollars		 

Operating activities

          

Profit before income tax

  Ps.56,140,433  Ps.23,477,595  Ps.57,096,844  US$2,888   Ps.57,096,844  Ps.100,993,902  Ps.121,346,988  US$6,439 

Items not requiring the use of cash:

          

Depreciation

 10 110,155,403  127,662,344   135,206,080   6,833 

Depreciation property, plant and equipment andright-of-use assets

  
10 and
15		 
 		 135,206,080  129,115,727   138,386,952   7,344 

Amortization of intangible and other assets

 9 and 11 15,559,332  20,863,577   24,968,862   1,262  9 and 11  24,968,862  26,596,853   20,528,258   1,089 

Equity interest in net loss (income) of associated companies

  1,426,696  (189,950)   (91,385)   (5) 

Gain on derecognition of equity method investment

  (11,988,038)   —     —     —   

Equity interest in net income of associated companies

  (91,385)  (267)   17,609   1 

Loss on sale of property, plant and equipment

  127,379  8,059   145,225   7   145,225  664,777   119,272   6 

Net period cost of labor obligations

 17 9,278,081  14,240,271   13,636,182   689  18  13,636,182  13,989,100   16,609,565   881 

Foreign currency exchange loss, net

  59,251,486  34,049,726   11,699,985   591   11,699,985  6,148,612   (7,250,635)   (387) 

Interest income

  (4,853,012)  (4,192,595)   (2,925,648)   (148)   (2,925,648)  (10,646,169)   (6,284,672)   (333) 

Interest expense

  31,197,372  33,862,012   30,300,781   1,531   30,300,781  31,771,433   37,911,339   2,012 

Employee profit sharing

  3,311,887  2,235,267   1,751,312   89   1,751,312  1,500,342   1,618,695   86 

Loss on partial sales of shares of associated company

  545   —     —     —   

(Gain) loss in valuation of derivative financial instruments, capitalized interest expense and other, net

  (18,313,877)  85,216   (19,010,851)   (961) 

Loss in valuation of derivative financial instruments, capitalized interest expense and other, net

  (19,010,851)  (7,518,445)   (9,202,167)   (488) 

Gain on net monetary positions

 22   —    (4,429,145)   (4,267,194)   (226) 

Working capital changes:

          

Accounts receivable from subscribers, distributors, recoverable taxes and other, net

  (17,641,833)  (14,192,651)   1,799,095   91 

Subscribers, distributors, recoverable taxes, contract assets and other, net

  1,799,095  (15,420,291)   6,800,942   361 

Prepaid expenses

  (1,765,071)  792,979   4,588,584   232   4,588,584  3,264,685   9,079,931   482 

Related parties

  113,662  829,632   (558,651)   (28)   (558,651)  38,426   476,671   25 

Inventories

  (83,902)  3,076,159   (2,991,009)   (151)   (2,991,009)  (3,232,136)   (2,095,622)   (111) 

Other assets

  (8,378,977)  (2,944,581)   (4,763,394)   (241)   (4,763,394)  (6,081,740)   (6,597,262)   (350) 

Employee benefits

  (3,058,536)  (5,384,944)   (14,692,218)   (743)   (14,692,218)  (14,235,549)   (20,224,276)   (1,073) 

Accounts payable and accrued liabilities

  (6,269,338)  18,196,349   5,190,137   262   5,190,137  23,997,632   (16,811,135)   (892) 

Employee profit sharing paid

  (4,055,711)  (3,297,439)   (1,471,946)   (74)   (1,471,946)  (1,013,799)   (2,187,316)   (116) 

Financial instruments and other

  (1,882,540)  28,878,632   1,515,668   77   1,515,668  5,286,290   (1,774,932)   (94) 

Deferred revenues

  782,803  (972,376)   (452,913)   (23)   (452,913)  38,243   (636,221)   (34) 

Interest received

  5,275,303  3,239,845   819,940   41   819,940  1,215,800   1,008,076   53 

Income taxes paid

  (50,602,556)  (44,525,073)   (23,988,305)   (1,211)   (23,988,305)  (33,713,753)   (42,294,398)   (2,244) 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net cash flows provided by operating activities

  Ps.163,726,991  Ps.235,798,054  Ps.217,772,375  US$11,008   Ps.217,772,375  Ps.248,330,528  Ps.234,278,468  US$  12,431 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Investing activities

          

Purchase of property, plant and equipment

  (128,039,913)  (138,707,157)   (119,185,137)   (6,024)   (119,185,137)  (143,888,033)   (132,884,335)   (7,051) 

Acquisition of intangibles

  (23,532,826)  (16,316,738)   (17,538,541)   (886)   (17,538,541)  (7,933,647)   (18,962,856)   (1,006) 

Dividends received

 21 1,645,712  5,740,092   2,385,559   121  22  2,385,559  2,622,237   1,773,336   94 

Proceeds from sale of plant, property and equipment

  27,329  115,600   133,349   7   133,349  178,532   344,924   18 

Acquisition of businesses, net of cash acquired

  (3,457,153)  (1,823,813)   (6,878,793)   (348)  12  (6,878,793)  (310,604)   (13,330,651)   (707) 

Partial sale of shares of associated company

  633,270   —     340,040  17  340,040  548,484   36,478   2 

Proceeds from repayment of related party loan

  21,000,000   —     —     —   

Investments in associate companies

  (177,965)  (3,487)   —     —      —     —     (56,985)   (3) 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net cash flows used in investing activities

  Ps. (131,901,546)  Ps. (150,995,503)  Ps. (140,743,523)  US$(7,113)   Ps. (140,743,523)  Ps. (148,783,031)  Ps. (163,080,089)  US$(8,653) 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Financing activities

          

Loans obtained

  189,073,791  64,281,631   143,607,726   7,258   143,607,726  155,263,221   118,082,256   6,266 

Repayment of loans

  (133,110,776)  (125,672,444)   (171,041,215)   (8,644)   (171,041,215)  (189,314,144)   (109,808,816)   (5,827) 

Payment of liability related toright-of-use of assets

 15   —     —     (26,765,075)   (1,420) 

Interest paid

  (32,830,432)  (32,125,872)   (31,196,441)   (1,577)   (31,196,441)  (30,869,017)   (28,046,695)   (1,488) 

Repurchase of shares

  (34,443,084)  (7,021,247)   (1,233,371)   (62)   (1,233,371)  (511,421)   (435,713)   (23) 

Dividends paid

  (37,359,600)  (13,809,957)   (16,091,390)   (813)   (16,091,390)  (22,369,793)   (24,248,145)   (1,287) 

Derivative financial instruments

  (503,444)  (351,213)   (71,474)   (4)   (71,474)   —     —     —   

Partial sale of shares in subsidiary

   —    6,323,336   —     —   

Redemption of hybrid bond

   —    (13,440,120)   —     —   

Acquisition ofnon-controlling interests

  (1,031,049)  (2,280,278)   (11,930)   (1)   (11,930)  (115,821)   (83,055)   (4) 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net cash flows used in financing activities

  Ps.(50,204,594)  Ps.(110,656,044)  Ps.(76,038,095)  US$(3,843)   Ps.(76,038,095)  Ps.(101,357,095)  Ps.(71,305,243)  US$(3,783) 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net (decrease) increase in cash and cash equivalents

  Ps.(18,379,149)  Ps.(25,853,493)  Ps.990,757  US $52 

Net increase (decrease) in cash and cash equivalents

  Ps.990,757  Ps.(1,809,598)  Ps.(106,864)  US$(5) 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Adjustment to cash flows due to exchange rate fluctuations, net

  (2,934,522)  3,911,844   61,333   3   61,333  (800,913)   (1,807,442)   (96) 

Cash and cash equivalents at beginning of the year

  66,473,703  45,160,032   23,218,383   1,172   23,218,383  24,270,473   21,659,962   1,149 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Cash and cash equivalents at end of the year

  Ps.45,160,032  Ps.23,218,383  Ps.24,270,473  US$1,227   Ps.24,270,473  Ps.21,659,962  Ps.19,745,656  US$1,048 
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Non-cash transactions related to:

          

Acquisitions of property, plant and equipment in accounts payable at end of year

  Ps.12,785,347  Ps.13,497,804  Ps.18,869,210  US$954 

Acquisitions of property, plant and equipment in accounts payable at end year

  Ps.18,869,210  Ps.19,099,066  Ps.19,673,706  US$1,044 

Redemption of exchangeable bond

   —    16,446,262   —     —   
  

 

 

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Non-cash transactions

  Ps.18,869,210  Ps.35,545,328  Ps.19,673,706  US$1,044 
  

 

  

 

  

 

  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

AMÉRICA MÓVIL, S.A.B. DE C.V. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years ended December 31, 2015, 20162017, 2018 and 20172019

(In thousands of Mexican pesos [Ps.] and thousands of

U.S. dollars [US$], unless otherwise indicated)

1. Description of the Business and Relevant Events

I. Corporate Information

América Móvil, S.A.B. de C.V. and subsidiaries (hereinafter, the “Company”, “América Móvil” or “AMX”) was incorporated under laws of Mexico on September 25, 2000. The Company provides telecommunications services in 25 countries throughout Latin America, the United States, the Caribbean and Europe. These telecommunications services include mobile and fixed-line voice services, wireless and fixed data services, internet access and Pay TV, over the top and other related services. The Company also sells equipment, accessories and computers.

 

Voice services provided by the Company, both wireless and fixed, mainly include the following: airtime, local, domestic and international long-distance services, and network interconnection services.

 

Data services include value added, corporate networks, data and Internet services.

 

Pay TV represents basic services, as well as pay per view and additional programming and advertising services.

 

AMX provides other related services to advertising in telephone directories, publishing and call center services.

 

The Company also provides video, audio and other media content that is delivered through the internet directly from the content provider to the end user.

In order to provide these services, América Móvil has licenses, permits and concessions (collectively referred to herein as “licenses”) to build, install, operate and exploit public and/or private telecommunications networks and provide miscellaneous telecommunications services (mostly mobile and fixed voice and data services) and to operate frequency bands in the radio-electric spectrum forpoint-to-point andpoint-to-multipoint microwave links. The Company holds licenses in the 24 countries where it has networks, and such licenses have different dates of expiration through 2046.2056.

Certain licenses require the payment to the respective governments of a share in sales determined as a percentage of revenues from services under concession. The percentage is set as either a fixed rate or in some cases based on certain size of the infrastructure in operation.

The corporate offices of América Móvil are located in Mexico City, Mexico, at Lago Zurich 245, Colonia Ampliación Granada, Delegación Miguel Hidalgo, 11529, Mexico City, Mexico.

The accompanying consolidated financial statements were approved for their issuance by the Company’s Chief Financial Officer on April 26, 2018,24, 2020, and subsequent events have been considered through that date.

II. Relevant events in 2017

a)

On July 25, 2017, an arbitration tribunal, constituted at the request of Colombia’s Ministry of Information Technologies and Communications (the “ITC Ministry”) to implement a decision of the Colombian

Constitutional Court, ordered the reversion of certain assets of our subsidiary Comunicación Celular, S.A. (“Comcel”) to the ITC Ministry. Such asset reversion was ordered under Comcel’s original concession agreements granted in 1994 and extended through 2013 without applying laws 422 of 1998 and 1341 of 2009 which had eliminated such reversion. In lieu of surrendering the assets, the arbitration tribunal ordered Comcel to pay the ITC Ministry an amount of 3,155 billion Colombian pesos (Ps.18,547,629). On that date Comcel booked the obligation as part of other expenses in the Consolidated Statement of Comprehensive Income. As required by the ITC Ministry, on August 29, 2017, Comcel made such payment under protest reserving all of its rights and those of its shareholders. The Company and Comcel have challenged the legality of the decisions of the Constitutional Court and the arbitration tribunal before all competent national and international fora. See Note 16 c).

b)During 2017, there was a currency depreciation of the Mexican peso against the Euro and the Great Britain Pound (GBP). Because a significant portion of the Company´s debt is denominated in Euros and in GBPs, even when the portion of the debt denominated in US dollars reported a foreign exchange gain due to the appreciation of the Mexican peso against the US dollar, the currency depreciation adversely affected the results of the Company as part of the foreign currency exchange loss of the period.

c)In addition, during 2017 the Mexican peso appreciated against the Brazilian real. Due to the fact that a significant portion of the Company´s subsidiary operations has the Brazilian real as functional currency, the Company recognized an adverse effect in the Cumulative Translation adjustment in the Shareholders’ Equity.

2. Basis of Preparation of the Consolidated Financial Statements and Summary of Significant Accounting Policies and Practices

a) Basis of preparation

The accompanying consolidated financial statements have been prepared in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IASB”) (hereafter referred to as IFRS).

The consolidated financial statements have been prepared on the historical cost basis, except for the derivative financial instruments, the trust assets of post-employment and other employee benefit plans and the investments in marketable securitiesequity at fair value through other comprehensive income (OCI), which are presented at their market value.

Effective July 1, 2018, the Argentinian economy has been considered to be hyperinflationary in accordance with the criteria in IAS 29 “Financial Reporting in Hyperinflationary Economies” (“IAS 29”). Accordingly, for the Argentinian subsidiaries, we have included, adjustments for hyperinflation and reclassifications as is required by the standard for purposes of presentation of IFRS in the consolidated financial statements.

The preparation of these consolidated financial statements under IFRS requires the use of critical estimates and assumptions that affect the amounts reported for certain assets, liabilities, income and expenses. It also requires that management exercise judgment in the application of the Company’s accounting policies. Actual results could differ from these estimates and assumptions.

The Mexican peso is the functional currency of the Company’s Mexican operations and the consolidated reporting currency of the Company.

i) Changes in Accounting Policies and Disclosures in 2019

a) IFRS 16 Leases

IFRS 16 replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease,SIC-15 Operating Leases- Incentives andSIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a singleon-balance sheet model similar to the accounting for finance leases under IAS 17.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Company is the lessor.

The Company adopted the IFRS 16 using the modified retrospective method with the date of initial application on January 1, 2019. Under this method, the Company recognizes the cumulative effect of initially adoption at the date of adoption, that is, the value of the asset byright-of-use is the same to the liability for leases. The Company applied the new requirements regarding IFRS 16 to all contracts identified as leases under the previous accounting standard and reassessed all services, in order to identify lease components or an implicit accounting lease within these contracts. Additionally, the Company chose to use the exemptions applicable to the standard on lease contracts for which the leases terms ends within 12 months as of the date of the initial application, and the lease contracts for which the underlying asset is of low value.

As of the date of the initial adoption of IFRS 16, the Company recognized an increase in theright-of-use assets and lease liabilities in the amount of Ps. 119,387,660, with no material impact on equity.

The Company identified a significant number of lease assets such as towers, physical facilities (office buildings, stores and sites, mainly), circuits, among others. Before the adoption of IFRS 16, the Company classified each of its leases (as lessee), at the inception date as either a finance lease or an operating lease.

Leases previously classified as finance leases.

The Company did not change the initial carrying amounts of the recognized assets and liabilities at the date of the initial application for leases previously classified as finance leases (ie, the right-of- use assets and lease liabilities equal the lease assets and lease liabilities recognized under IAS 17). The requirements of IFRS 16 were applied to these leases from January 1, 2019.

Leases previously accounted for as operating leases

The Company recognizedright-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases oflow-value assets. Therights-of-use assets were recognized based on the amount equivalent to the lease liabilities, adjusted for any prepayment related to the previously recognized contract. Lease liabilities were recognized based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

The Company also applied the available practical expedients wherein it:

Common discount rates were used for groups of contracts with reasonably similar characteristics related to the term, type of asset, currency and economic environment.

Short-term lease exemptions were applied to leases with a term that ends within 12 months after the date of initial application.

Thenon-lease components were not separated and the associatednon-lease components were accounted for as if they were a single lease component.

Retrospective reasoning was used to determine the term of the lease, if the contract contains options to extend or terminate the lease.

The lease liabilities as of January 1, 2019 can be reconciled to the operating lease commitments as of December 31, 2018, as follows:

Operating lease commitments as of December 31, 2018

Ps.  137,949,821

Lease commitments not in scope of IFRS 16

(29,624,063) 

Lease payments not included in the operating lease commitments
as at 31 December 2018, resulting from differences between IAS 17
and IFRS 16 at implementation date

60,064,406

Short-term leases and leases oflow-value assets

(5,498,423) 

Effect of discounting

(43,504,081) 

Lease liabilities as of January 1, 2019

Ps.  119,387,660

The weighted average rate applied to lease liabilities recognized in the statement of financial position at the date of initial application was 7.29 %.

b) IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The Interpretation specifically addresses the following:

Whether an entity considers uncertain tax treatments separately

The assumptions an entity makes about the examination of tax treatments by taxation authorities

How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

How an entity considers changes in facts and circumstances

How an entity determines the amount of tax expenses to be recognized within the financial statements based in the better predict the resolution of the uncertainty (the most likely amount or the expected value).

In Note 17b) to the consolidated financial statements Company is including disclosures related to uncertain tax treatments. Uncertainty in a tax treatment may arise as tax laws are subject to interpretation. Changes in circumstances, such as changes in tax laws and communications with taxing authorities may affect the amount of uncertain tax treatments; however, none of these circumstances have occurred in 2019 and for this reason the recognition and disclosure are consistent with the analysis and disclosure under IAS 37 in the previous years.

The Company determined, based on its tax compliance is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The interpretation did not have an impact on the consolidated financial statements of the Company.

ii) Basis of consolidation

The consolidated financial statements include the accounts of América Móvil, S.A.B. de C.V. and those subsidiaries over which the Company exercises control. The consolidated financial statements for the subsidiaries were prepared for the same period as the Company´s and applying consistent accounting policies. All of the subsidiary companies operate in the telecommunications sector or related.

Subsidiaries are entities over which the Company has control. Control is achieved when the Company has power over the investee, when it is exposed to, or has rights to, variable returns from its involvement with the investee, and has the ability to use its power over the investee to affect the amount of the investor’s returns. Subsidiaries

are consolidated on a line by line basis from the date which control is achieved by the Company. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

On March 6, 2020, in accordance with a resolution of the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones or IFT), the subsidiaries Teléfonos de México, S.A.B. de C.V. and Teléfonos del Noroeste, S.A. de C.V. created separate companies related to the wholesale services named Red Nacional Última Milla S.A.P.I. de C.V., Servicios de Telecomunicaciones Ultima Milla, S.A. de C.V. and Red Última Milla del Noroeste S.A.P.I. de C.V.

Changes in the Company’s ownership interests in a subsidiary that do not result in the Company losing control over the subsidiary are accounted for as equity transactions. The carrying amounts of the equity attributable to owners of the parent andnon-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the carrying amount of thenon-controlling interests and the fair value of the consideration paid or received in the transaction is recognized directly in the equity attributable to the owners.

Subsidiaries are deconsolidated from the date which control ceases. When the Company ceases to have control over a subsidiary, it derecognizes the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts, derecognizes the carrying amount ofnon-controlling interests in the former subsidiary and recognizes the fair value of any consideration received from the transaction. Any retained interest in the former subsidiary is then remeasured to its fair value.

All intra-Company balances and transactions, and any unrealized gains and losses arising from intra-Company transactions, are eliminated in preparing the consolidated financial statements.

Non-controlling interests represent the portion of profits or losses and net assets not held by the Company.Non-controlling interests are presented separately in the consolidated statements of comprehensive income and in equity in the consolidated statements of financial position separately from América Móvil’sCompany’s own equity.

Associates:

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those decisions.

The Company’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment losses.

The investments in associated companies in which the Company exercises significant influence are accounted for using the equity method, whereby América MóvilCompany recognizes its share in the net profit (losses) and equity of the associate.

The results of operations of the subsidiaries and associates are included in the Company’s consolidated financial statements beginning as of the month following their acquisition and its share of other comprehensive income after acquisition is recognized directly in other comprehensive income.

The Company assesses at each reporting date whether there is objective evidence that investment in associates is impaired. If so, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value.

The equity interest in the most significant subsidiaries at December 31, 20162018 and 2017,2019 is as follows:

 

    Equity interest at
December 31		 

Company name

 Country   2016       2017   

Subsidiaries:

    

América Móvil B.V.a)

 Netherlands  100.0%    100.0% 

Compañía Dominicana de Teléfonos, S.A. (“Codetel”)b)

 Dominican Republic  100.0%    100.0% 

Sercotel, S.A. de C.V.a)

 Mexico  100.0%    100.0% 

Radiomóvil Dipsa, S.A. de C.V. and subsidiaries (“Telcel”) b)

 Mexico  100.0%    100.0% 

Puerto Rico Telephone Company, Inc.b)

 Puerto Rico  100.0%    100.0% 

Servicios de Comunicaciones de Honduras, S.A. de C.V.
(“Sercom Honduras”)b)

 Honduras  100.0%    100.0% 

TracFone Wireless, Inc. (“TracFone”)b)

 USA  100.0%    100.0% 

Claro S.A. (Claro Brasil)b)

 Brazil  97.7%    97.7% 

Telecomunicaciones de Guatemala, S.A. (“Telgua”)b)

 Guatemala  99.3%    99.3% 

Empresa Nicaragüense de Telecomunicaciones, S.A. (“Enitel”) b)

 Nicaragua  99.6%    99.6% 

Compañía de Telecomunicaciones de El Salvador, S.A. de C.V. (“CTE”)b)

 El Salvador  95.8%    95.8% 

Comunicación Celular, S.A. (“Comcel”)b)

 Colombia  99.4%    99.4% 

Telmex Colombia, S.A.b)

 Colombia  99.3%    99.3% 

Consorcio Ecuatoriano de Telecomunicaciones,
S.A. (“Conecel”)b)

 Ecuador  100.0%    100.0% 

AMX Argentina, S.A.b)

 Argentina  100.0%    100.0% 

AMX Paraguay, S.A.b)

 Paraguay  100.0%    100.0% 

AM Wireless Uruguay, S.A.b)

 Uruguay  100.0%    100.0% 

Claro Chile, S.A.b)

 Chile  100.0%    100.0% 

América Móvil Perú, S.A.Cb)

 Peru  100.0%    100.0% 

Claro Panamá, S.A.b)

 Panama  100.0%    100.0% 

Teléfonos de México, S.A.B. de C.V.b)

 Mexico  98.7%    98.8% 

Telekom Austria AGb)

 Austria  51.0%    51.0% 

Company name

 Country  Equity
interest at
December 31		 
 2018  2019 

Subsidiaries:

   

América Móvil B.V. a)

  Netherlands   100.0%   100.0% 

Compañía Dominicana de Teléfonos, S.A. (“Codetel”) b)

  Dominican Republic   100.0%   100.0% 

Sercotel, S.A. de C.V. a)

  Mexico   100.0%   100.0% 

Radiomóvil Dipsa, S.A. de C.V. and subsidiaries (“Telcel”) b)

  Mexico   100.0%   100.0% 

Puerto Rico Telephone Company, Inc. b)

  Puerto Rico   100.0%   100.0% 

Servicios de Comunicaciones de Honduras, S.A. de C.V. (“Sercom Honduras”) b)

  Honduras   100.0%   100.0% 

TracFone Wireless, Inc. (“TracFone”) b)

  USA   100.0%   100.0% 

Claro S.A. (Claro Brasil) b)

  Brazil   98.2%   98.2% 

NII Brazil Holding S.A.R.L a)

  Luxembourg   —     100.0% 

Nextel Telecomunicações Ltda b)

  Brazil   —     100.0% 

Telecomunicaciones de Guatemala, S.A. (“Telgua”) b)

  Guatemala   99.3%   99.3% 

Claro Guatemala, S.A. b)

  Guatemala   —     100% 

Empresa Nicaragüense de Telecomunicaciones, S.A.
(“Enitel”) b)

  Nicaragua   99.6%   99.6% 

Compañía de Telecomunicaciones de El Salvador, S.A. de C.V. (“CTE”) b)

  El Salvador   95.8%   95.8% 

Comunicación Celular, S.A. (“Comcel”) b)

  Colombia   99.4%   99.4% 

Telmex Colombia, S.A.

  Colombia   99.3%   —   

Consorcio Ecuatoriano de Telecomunicaciones, S.A. (“Conecel”) b)

  Ecuador   100.0%   100.0% 

AMX Argentina, S.A. b)

  Argentina   100.0%   100.0% 

AMX Paraguay, S.A. b)

  Paraguay   100.0%   100.0% 

AM Wireless Uruguay, S.A. b)

  Uruguay   100.0%   100.0% 

Claro Chile, S.A. b)

  Chile   100.0%   100.0% 

América Móvil Perú, S.A.C b)

  Peru   100.0%   100.0% 

Claro Panamá, S.A. b)

  Panamá   100.0%   100.0% 

Teléfonos de México, S.A.B. de C.V. b)

  Mexico   98.8%   98.8% 

Telekom Austria AG b)

  Austria   51.0%   51.0% 

a)

Holding companies

b)

Operating companies of mobile and fixed services

ii)iii) Basis of translation of financial statements of foreign subsidiaries and associated companies

The operating revenues of foreign subsidiaries jointly represent approximately 69%74%, 72%73% and 74%71% of consolidated operating revenues of 2015, 2016for the years ended December 31, 2017, 2018 and 2017,2019, respectively, and their total assets jointly represent approximately 83%80% and 81%73% of consolidated total assets at December 31, 20162018 and 2017,2019, respectively.

The financial statements of foreign subsidiaries have been prepared under or translated to IFRS in the respective local currency (which is their functional currency) and then translated into the Company´s reporting currency as follows:

 

all monetary assets and liabilities were translated at the closing exchange rate of the period;

 

allnon-monetary assets and liabilities at the closing exchange rate of the period;

 

equity accounts are translated at the exchange rate at the time the capital contributions were made and the profits were generated;

 

revenues, costs and expenses are translated at the average exchange rate of the period;

period, except for the resulting difference fromoperations of the translation processsubsidiaries in Argentina, whose economy is recognized in equity in the caption Cumulative translation adjustment;considered hyperinflationary since 2018;

 

the consolidated statements of cash flows presented using the indirect method were translated using the weighted-average exchange rate for the applicable period (except for Argentina), and the resulting difference is shown in the consolidated statementstatements of cash flows under the heading “Adjustment to cash flows due to exchange rate fluctuations, net”.

The basis of translation for the operations of the subsidiaries in Argentina are described:    

In recent years, the Argentina economy has shown high rates of inflation. Although inflation data has not been consistent in recent years and several indexes have coexisted, inflation in Argentina indicates that the three-year cumulative inflation rate exceeded 100% in 2018, which is the quantitative reference established by IAS 29. As a result, Argentina was considered a hyperinflationary economy in 2018 and the Company applies hyperinflation accounting to its subsidiary whose functional currency is the Argentine peso for financial information for periods ending on or after July 1, 2018, however the calculation of the cumulative impact was measured as of January 1, 2018.

In order to restate for hyperinflation its financial statements, the subsidiary used the series of indices defined by resolution JG No. 539/18 issued by the “Federación Argentina de Consejos Profesionales de Ciencias Económicas” (FACPCE), based on the National Consumer Price Index (IPC) published by the Instituto Nacional de Estadística y Censos (INDEC) of the Argentine Republic and the Wholesale Internal Price Index (IPIM) published by FACPCE. The cumulative index at December 31, 2019 is 283.444, while on an annual inflation for 2019 is 53.83%.

The main implications are as follows:

Adjustment of the historical cost ofnon-monetary assets and liabilities and equity items from their date of acquisition, or the date of inclusion in the consolidated statements of financial position, to the end of the year, in order to reflect changes in the currency’s purchasing power caused by inflation.

•

The gain on the net monetary position caused by the impact of inflation in the year is included in the consolidated statements of comprehensive income as part of the caption “Valuation of derivatives, interest cost from labor obligations and other financial items, net”. Items in the statement of comprehensive income and in the statements of cash flows are adjusted by the inflation index since their origination, with a balancing entry, and a reconciling item in the statements of cash flows, respectively.

All items in the financial statements of the Argentine company are translated at the closing exchange rate, which at December 31, 2018 and 2019 were 0.5221 and 0.3147, respectively, per argentine pesos per Mexican Peso.

Financial information for financial years prior to 2018 are not restated.

The difference resulting from the translation process is recognized in equity in the caption “Effect of translation of foreign entities”. At December 31, 20162018 and 2017,2019, the cumulative translation adjustment was Ps. 29,549,491(53,357,300) and Ps. 7,866,158,(87,367,366), respectively.

b) Revenue recognition

The Company revenues are derived principally from providing the following telecommunications services and products: wireless voice, wireless data and value-added services, fixed voice, fixed data, broadband and IT services, Pay TV andover-the-top (“OTT”) services.

The Company provides fixed and mobile services. These services are offered independently in contracts with customers or together with the sale of handsets (mobile) under the postpaid model. In accordance with IFRS 15“Revenues arefrom contracts with customers”, the transaction price should be assigned to the different performance obligations based on their relative standalone selling price.

The Company with respect to the provided services, it has market observable information, to determine the standalone selling price of the services. On the other hand, in the case of the sale of bundled mobile phones sold (including service and handset) by the Company, the allocation of the sales is done based on their relative standalone selling price of each individual component related to the total bundled price. The result is that more equipment revenue is recognized at the moment of a sale and, therefore, less service revenue from the monthly fee are being recognized under IFRS 15.

The services provided by the Company are satisfied over the time of the relatedcontract period, given that the customer simultaneously receives and consumes the benefits provided by the Company.

Such service bundles, voice and data, accomplish the criteria mentioned in IFRS 15 of being substantially similar and of having the same transfer pattern which is rendered orwhy the Company concluded that the revenue from these different services offered to its customers are considered as a single performance obligation with revenue being recognized over time, except for sales of equipment.

Under IFRS 15, for those contracts with customers in which generally the sale of equipment and other electronic equipment is delivereda single performance obligation, the Company recognizes the revenue at the moment when it transfers control to the customer providedwhich generally occurs when such goods are delivered.

The commissions are considered incremental contract acquisition costs that are capitalized and are amortized over the revenueexpected period of benefit, during the average duration of customer contracts.

Some subsidiaries have loyalty programs where the Company awards credits customer credit awards referred as “points”. The customer can be measured reliably, itredeem accrued “points” for awards such as devices, accessories or airtime. The Company provides all awards. The consideration allocated to the award credits is probable thatidentified as a separate performance obligation; the entity will receive the economic benefits associated with the transaction, the stage of completioncorresponding liability of the transaction may be reliablyaward credits is measured and there is high certainty of its collectability.

For some postpaid plans, the amount billed to customers combines a fixed tariff for a specific quantity of services, plus the rates for the use above the specified quantities (minutes and Mega Bytes included in each plan). Revenues billed for services to be rendered in the future are initially recorded as deferred revenues. Costs related to these services are recognized when the service is rendered.

The Company accounts separately for multiple elements. To recognize the multi-elements or multiple services at its fair value,value. The consideration allocated to award credits amount is recognized as a contract liability until the Company assigns its fair value to each typepoints are redeemed. Revenue is recognized upon redemption of element.products by the customer.

c) Cost of sales

The cost of mobile equipment and computers is recognized at the time the client and distributor receives the device thatwhich is when all significant risks and rewards of ownershipthe control is are transferred to the customer. The costs related to the sale of such equipment are recognized in the ¨cost of sales and services¨ line in the consolidated statements of comprehensive income.

d) Cost of services

The cost of services represents the costs incurred to properly deliver the services to the customers, it includes the network operating costs and licenses related costs and is accounted at the moment in which such services are provided.

e) ComissionsCommissions to distributors

The Company pays commissions to its distribution network mainly for acquiring and retaining customers for the Company.distributors different than those that acquire customers. Such commissions are recognized in “commercial, administrative and general expenses” in the consolidated statements of comprehensive income at the time in which the distributor either reports an activation or reaches certain number of lines activated or obtained at a certain point of time.

f) Cash and cash equivalents

Cash and cash equivalents represent bank deposits and liquid investments with maturities of less than three months. These amounts are stated at cost plus accrued interest, which is similar to their market value.

The Company also maintains restricted cash held as collateral to meet certain contractual obligations. Restricted cash is presented as part of “Other assets” within othernon-current financial assets given that the restrictions are long-term in nature (See Note 9).

g) Marketable securitiesEquity investments at fair value through OCI and other short termshort-term investments

Marketable securitiesEquity investments at fair value through OCI and other short termshort-term investments are primarily composed of investment securities available for saleequity investments and other short-term financial investments. Amounts are initially recorded at cost and adjusted to their estimated fair value. Fair value adjustments for available for sale securitiesequity investments are recorded through other comprehensive income, while fair value adjustments for other short-term investments are recorded in the Consolidated StatementStatements of Comprehensive Income as they occur. Anavailable-for-sale equity security is considered to be impaired if there is objective evidence that the cost may not be recovered and if there is a significant or prolonged decline in the fair value of an investment below its cost to determine if such impairment exists.

h) Allowance for bad debts

The Company periodically recognizes a provision for doubtful accounts based mainly on its past experience, the aging of its accounts receivable, the delay in resolving its disputes with other carriers, and the market segments conditions (government, business and mass market).

Collection policies and procedures vary depending on the credit history of the customer, the credit granted and the age of the unpaid balances among other reasons.

Cash deposits from customers in default are deducted from the account balance to be impaired once the deposit has been identified.

i) Inventories

Inventories are initially recognized at historical cost and are valued using the average cost method without exceeding their net realizable value.

The estimate of the realizable value of inventorieson-hand is based on their age and turnover.

j)i) Business combinations and goodwill

Business combinations are accounted for using the acquisition method, which in accordance with IFRS 3, “Business acquisitions”, consists in general terms as follows:

 

(i)

Identify the acquirer

 

(ii)

Determine the acquisition date

 

(iii)

Value the acquired identifiable assets and assumed liabilities

 

(iv)

Recognize the goodwill or a bargain purchase gain

For acquired subsidiaries, goodwill represents the difference between the purchase price and the fair value of the net assets acquired at the acquisition date. The investment in acquired associates includes goodwill identified on acquisition, net of any impairment loss.

Goodwill is reviewed annually to determine its recoverability or more often if circumstances indicate that the carrying value of the goodwill might not be fully recoverable.

The possible loss of value in goodwill is determined by analyzing the recovery value of the cash generating unit (or the group thereof) to which the goodwill is associated at the time it was originated. If this recovery valuerecoverable amount is lower than the carrying value, an impairment loss is charged to the results of operations. The recoverable amount is determined based on the higher of fair value less cost of disposal or value in use.

For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, no impairment losses were recognized for the goodwill shown in the Company’s consolidated statements of financial position.goodwill.

k)j) Property, plant and equipment

i) Property, plant and equipment are recorded at acquisition cost, net of accumulated depreciation. Depreciation is computed on the cost of the assets using the straight line method, based on the estimated useful lives of the related assets, beginning the month after they become available for use.

Borrowing costs that are incurred for general financing for construction in progress for periods exceeding six months are capitalized as part of the cost of the asset. During 2015, 2016the years ended December 31, 2017, 2018 and 2017 the2019, borrowing costs that were capitalized amounted to Ps. 3,524,841,2,875,034, Ps. 2,861,3072,020,288 and Ps. 2,875,034,2,233,358, respectively.

In addition to the purchase price and costs directly attributable to preparing an asset in terms of its physical location and condition for operating as intended by management, when required, the cost also includes the estimated costs of dismantling and removal of the asset and for restoration of the site where it is located (See Note 15c)16c).

ii) The net book value of property, plant and equipment is removed from the consolidated statements of financial position at the time the asset is sold or when no future economic benefits are expected from its use or sale. Any gains or losses on the sale of property, plant and equipment represent the difference between net proceeds of the sale and the net book value of the item at the time of sale. These gains or losses are recognized as either other operating income or other operating expenses upon sale.

iii) The Company periodically assesses the residual values, useful lives and depreciation methods associated with its property, plant and equipment. If necessary, the effects of any changes in accounting estimates is recognized prospectively, at the closing of each period, in accordance with IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”.

For property, plant and equipment made up of several components with different useful lives, the major individual components are depreciated over their individual useful lives. Maintenance costs and repairs are expensed as incurred.

Annual depreciation rates are as follows:

 

Network infrastructure

5%-33%

Buildings and leasehold improvement

2%-33%

Other assets

10%-50%

Network infrastructure

   5%-33% 

Buildings and leasehold improvement

   2%-33% 

Other assets

   10%-50% 

iv) The carrying value of property, plant and equipment is reviewed if there are indicators of impairment in such assets. If an asset’s recovery value is less than the asset’s net carrying value, the difference is recognized as an impairment loss.

During the years ended December 31, 2015, 20162017, 2018 and 2017,2019, no impairment losses were recognized.

v) InventorySpare parts for network operation is valued using the average cost method, without exceeding its net realizable value.are recognized at cost.

The valuation of inventory for network considered obsolete, defective or slow-moving, is reduced to their estimated net realizable value. The estimate of the recovery value of inventories is based on their age and turnover.

l)k) Intangibles

i) Licenses

Licenses to operate wireless telecommunications networks granted by the governments of the countries in which the Company operates are recorded at acquisition cost or at fair value at their acquisition date, net of accumulated amortization. Certain licenses require payments to the goverments,governments, such payments are recognized in the cost of service and equipment.

The licenses that in accordance with government requirements are categorized as automatically renewable, for a nominal cost and with substantially consistent terms, are considered by the Company as intangible assets with an indefinite useful life. Accordingly, they are not amortized. Licenses are amortized when the Company does not have a basis to conclude that they are indefinite lived. Licenses are amortized using the straight-line method over a period ranging from 3 to 30 years, which represents the usage period of the assets.

The Company has conducted an internal analysis on the applicability of the International Financial Reporting Interpretation Committee (“IFRIC”) No. 12 (Service Concession Agreements) and has concluded that its concessions are outside the scope of IFRIC 12. To determine the applicability of IFRIC 12, the Company analyzes each concession or group of similar concessions in a given jurisdiction. As a threshold matter, the Company identifies those government concessions that provide for the development, financing, operation or maintenance of infrastructure used to render a public service, and that set out performance standards, mechanisms for adjusting prices and arrangements for arbitrating disputes.

With respect to those services, the Company evaluates whether the grantor controls or regulates (i) what services the operator must provide, (ii) to whom it must provide them and (iii) the applicable price (the “Services Criterion”). In evaluating whether the applicable government, as grantor, controls the price at which the Company provides its services, the Company looks at the terms of the concession agreement according to all applicable regulations. If the Company determines that the concession under analysis meets the Services Criterion, then the Company evaluates whether the grantor would hold a significant residual interest in the concession’s infrastructure at the end of the term of the arrangement.

In some of the jurisdictions where the Company operates and under certain circumstances, the Company may be required to transfer certain assets covered by some of its concessions to the government pursuant to valuation methodologies that vary in each jurisdiction. In Brazil, for example, Claro Brasil is required to maintain and file before the Brazilian Agency of Telecommunications (Agência Nacional de Telecomunicações, or “Anatel”) a list of assets potentially subject to reversion. The list of potentially reversible assets, delivered in 2017 (referring to the base year 2016) identified an estimated gross book value of Ps. 20,637,743 (3,450,100 Brazilian reals). The Company believes that this list significantly overstates the extent of assets that would as a legal matter be subject to reversion, but there is no regulatory requirement or legal basis for a more refined analysis. See also Notes 10 and 16c).

ii) Trademarks

Trademarks acquired are recordedmeasured on initial recognition at cost. The cost of trademarks acquired in a business combination is their fair value at the valuation date when acquired.of acquisition. The useful lives of trademarks are assessed as either definite or indefinite. Trademarks with finite useful lives are amortized using the straight-line method over a period ranging from 1 to 10 years. Trademarks with indefinite useful lives are not amortized but are tested for impairment annually at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable, if not, the change in useful life from indefinite to definite is made on a prospective basis.

iii) RightsIrrevocable rights of use

RightsIrrevocable rights of use are recognized according to the amount paid for the right and are amortized over the period in which they are granted.

The carrying values of the Company’s licenses and trademarks are reviewed annually and whenever there are indicators of impairment in the value of such assets. When an asset’s recoverable amount, which is the higher of the asset’s fair value, less disposal costs and its value in use (the present value of future cash flows), is less than the asset’s carrying value, the difference is recognized as an impairment loss.

iv) Customer relationships

The value of customer relations is determined and valued at the time that a new subsidiary is acquired, as determined by the Company with the assistance of independent appraisers and is amortized onover a 5 year period.

During the years ended December 31, 2015, 20162017, 2018 and 2017,2019, no significant impairment losses were recognized for licenses, trademarks, irrevocable rights of use or customer relationships.

m)l) Impairment in the value of long-lived assets

The Company assesses the existence of indicators of impairment in the carrying value of long-lived assets, investments in associates, goodwill and intangible assets according to IAS 36 “Impairment of assets”. When there are such indicators, or in the case of assets whose nature requires an annual impairment analysis (goodwill and intangible assets with indefinite useful lives), the Company estimates the recoverable amount of the asset, which is the higher of its fair value, less disposal costs, and its value in use. Value in use is determined by discounting estimated future cash flows, applying apre-tax discount rate that reflects the time value of money and taking into consideration the specific risks associated with the asset. When the recoverable amount of an asset is below its carrying value, impairment is considered to exist. In this case, the carrying value of the asset is reduced to the asset’s recoverable amount, recognizing the loss in results of operations for the respective period. Depreciation and/or amortization expense of future periods is adjusted based on the new carrying value determined for the asset over the asset’s remaining useful life. Impairment is computed individually for each asset. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.

In the estimation of impairments, the Company uses the strategic plans established for the separate cash-generating units to which the assets are assigned. Such strategic plans generally cover a period from 3 to 5 years. For longer periods, beginning in the fifth year, projections are based on such strategic plans while applying a constant or declining expected perpetual growth rate.

Key assumptions used in value in use calculations

The forecasts are made in real terms (net of inflation) and in the functional currency of the subsidiary as of December 31, 2017.

2019. Financial forecasts, premises and assumptions are similar to what any other market participant in similar conditions would consider.

Local synergies, that any other market participant would not have taken into consideration to prepare similar forecasted financial information, have not been included.

The assumptions used to develop the financial forecasts were validated for each of the cash generating units (“CGUs”), typically identified by country and by service (in the case of Mexico) taking into consideration the following:

 

Current subscribers and expected growth.

Type of subscribers (prepaid, postpaid, fixed line, multiple services)

 

Market environment and penetration expectations

 

New products and services

 

Economic environment of each country

 

Expenses for maintaining the current assets

 

Investments in technology for expanding the current assets

 

Market consolidation and synergies

The foregoing forecasts could differ from the results obtained through time; however, América Móvilthe Company prepares its estimates based on the current situation of each of the CGUs.

The recoverable amounts are based on value in use. The value in use is determined based on the method of discounted cash flows. The key assumptions used in projecting cash flows are:

 

Margin on EBITDA is determined by dividing EBITDA (operating income plus depreciation and amortization) by total revenues.

 

Margin on CAPEX is determined by dividing capital expenditures (“CAPEX”) by total revenues.

 

Pre-tax weighted average cost of capital (“WACC”) is used to discount the projected cash flows.

As discount rate, the Company uses the WACC which was determined for each of the cash generating units and is described in the following paragraphs.

The estimated discount rates to perform the IAS 36 “Impairment of assets”, impairment test for each CGU consider market participants assumptions. Market participants were selected taking into consideration size, operations and characteristics of the business that were similar to those of América Móvil.Company.

The discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and its operating segments. The WACC takes into account both debt and equity costs. The cost of equity is derived from the expected return on investment by América Móvil’s investors.for each GCU. The cost of debt is based on the interest bearinginterest-bearing borrowings América Móvilthe Company is obliged to service. Segment-specific risk is incorporated by applying individual beta factors.

The beta factors are evaluated annually based on publicly available market data.

Market participant assumptions are important because, not only do they include industry data for growth rates, but also management assesses how the CGU’s position, relative to its competitors, might change over the forecasted period.

The most significant forward lookingforward-looking estimates used for the 20162018 and 20172019 impairment evaluations are shown below:

 

 Average margin on
EBIDTA		 Average margin on
CAPEX		 Average pre-tax
discount rate
(WACC)		  Average margin on
EBIDTA		  Average margin on
CAPEX		  Average pre-tax
discount rate
(WACC)

2016:

   

2018:

      

Europe (7 countries)

 23.61% - 51.58% 8.29% - 20.72% 8.74% - 20.07%  22.13% - 41.51%  8.13% - 19.40%  8.36% - 22.08%

Brazil (fixed line, wireless and TV)

 31.65% 18.21% 9.70%  36.43%  21.88%  10.38%

Puerto Rico

 28.91% 9.08% 11.29%  23.86%  9.89%  4.81%

Dominican Republic

 45.83% 10.55% 19.70%  48.64%  18.43%  17.66%

Mexico (fixed line and wireless)

 33.38% 10.75% 14.34%  36.33%  7.93%  16.30%

Ecuador

 35.80% 7.92% 22.84%  39.83%  11.26%  24.45%

Peru

 28.92% 14.18% 14.20%  30.29%  19.95%  11.52%

El Salvador

 39.43% 23.69% 21.95%  45.36%  22.61%  18.01%

Chile

 25.92% 8.61% 7.87%  25.91%  14.99%  6.62%

Colombia

 38.34% 14.40% 13.93%  45.01%  17.14%  20.29%

Other countries

 10.1% - 48.92% 0.5% - 21.39% 7.39% - 23.79%  7.90% - 45.91%  0.61% - 23.96%  9.97% - 31.63%

  Average margin on
EBITDA		  Average margin on
CAPEX		  Average pre-tax
discount rate
(WACC)		 

2017:

   

Europe (7 countries)

  25.59% - 52.46%   7.34% - 14.97%   9.06% - 19.04% 

Brazil (fixed line, wireless and TV)

  35.28%   22.13%   11.71% 

Puerto Rico

  23.31%   8.31%   4.42% 

Dominican Republic

  45.79%   15.55%   19.23% 

Mexico (fixed line and wireless)

  35.48%   8.72%   16.13% 

Ecuador

  37.83%   10.07%   23.57% 

Peru

  29.64%   16.75%   13.61% 

El Salvador

  40.36%   17.99%   25.14% 

Chile

  22.04%   12.45%   6.15% 

Colombia

  41.93%   19.88%   19.06% 

Other countries

  9.16% - 48.18%   0.43% - 23.43%   7.89% - 24.28% 
   Average margin on
EBIDTA		   Average margin on
CAPEX		   Average pre-tax
discount rate
(WACC)		 

2019:

      

Europe (7 countries)

   29.40% - 44.50%    10.90% - 19.30%    5.77% - 14.96% 

Brazil (fixed line, wireless and TV)

   40.43%    23.50%    11.00% 

Puerto Rico

   21.94%    17.94%    4.39% 

Dominican Republic

   47.23%    16.17%    13.84% 

Mexico (fixed line and wireless)

   38.81%    9.84%    11.85% 

Ecuador

   44.98%    11.65%    19.85% 

Peru

   32.51%    18.51%    8.86% 

El Salvador

   44.04%    25.03%    16.05% 

Chile

   26.85%    18.00%    4.16% 

Colombia

   45.58%    19.25%    17.27% 

Other countries

   7.40% - 52.40%    0.57% - 31.0%    6.41% - 34.75% 

Sensitivity to changes in assumptions:

The implications of the key assumptions for the recoverable amount are discussed below:

Margin on CAPEX- The Company performed a sensitivity analysis by increasing its CAPEX by 5% and maintaining all other assumptions the same. The sensitivity analysis would require the Company to adjust the amount of its long-lived assets in its CGUs with potential impairment of approximately Ps. 2,386,782.2,129,800.

WACC- Additionally, should the Company increase by 50 base points in WACC per CGU and maintain all other assumptions the same, the carrying amount of the long-lived assets, in its CGUs with potential impairment, would be impaired by approximately Ps. 3,517,584.

1,819,169.

n) Leasesm)Right-of-use assets

The determinationCompany applies a single recognition and measurement approach for all leases, except for short-term leases and leases of whether an agreement is, or contains, alow-value assets. The Company recognizes lease is based onliabilities to make lease payments andright-of-use assets representing the substanceright to use the underlying assets.

i)

Right-of-use assets

The Company recognizesright-of-use assets at the commencement date of the agreementlease (i.e., the date the underlying asset is available for use).Right-of-use assets are measured at cost, less any accumulated depreciation and requiresimpairment losses, and adjusted for any remeasurement of lease liabilities. The cost ofright-of-use assets includes the Company to assess if performanceamount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the agreement is dependent on the use of a specific asset and whether the agreement transfers the right of use of the asset to the Company.

Operating leases

Leases under which the lessor retains a significant portion of the risks and benefits inherent to the ownership of the leased assetcommencement date less any lease incentives received.Right-of-use assets are considered operating leases. Payments made under operating lease agreements are charged to results of operationsdepreciated on a straight-line basis over the rental period.

Finance leases

Lease agreements that substantially transfer all the risks and benefits of ownershipshorter of the leasedlease term and the estimated useful lives of the assets, as follows:

AssetsUseful life
Towers and sites5 to 12 years
Property10 to 25 years
Other equipment5 to 15 years

Theright-of-use assets are also subject to impairment.

ii)

Lease liabilities.

At the Company are accounted for as finance leases. Accordingly, upon commencement date of the lease, the asset, which is classified based on its nature, and its associated debt are recordedCompany recognizes the lease liabilities measured at the lower of the fair value of the leased asset or the present value of the lease payments. Financepayments to be made over the lease term. Lease payments include fixed payments (includingin-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an

index or rate, and amounts expected to be paid under residual value guarantees. The lease payments also include payments of penalties for early termination of the lease, if the term of the lease reflects that the Company exercises the option to terminate early. The variable lease payments that do not depend on an index or a rate are apportioned betweenrecognized as an expense in the reductionperiod on which the event or condition that triggers the payment occurs.

In calculating the present value of the lease payments, the Company uses an incremental borrowing rate at the lease commencement date, if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilityliabilities is increased to reflect the accretion of interest and reduced for the finance cost solease payments made. In addition, the carrying amount of the lease liabilities is remeasured if there is a modification, a change in the lease term, a change in thein-substance fixed payments or change in the assessment to purchase the underlying asset.

iii)

Short-term leases and leases of low value assets.

The Company applies the short-term lease recognition exemption for its leases of machinery and equipment (i.e., those leases that have a constant interest ratelease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the recognition exemption lease oflow-value assets (that is, determinedbelow US$ 5,000). Short-term lease payments and leases oflow-value assets are recognized as expenses on the outstanding liability balance. Finance costs are charged to results of operationsstraight-line basis over the life of the agreement.lease term.

o)n) Financial assets and liabilities

Financial assets

Financial assets are categorized, at initial recognition, as (i) financial assets at fair value through profit or loss, (ii) loans and receivables,(iii) held-to-maturity investments,(iv) available-for-sale financial assets, or as (v) derivatives designated as hedging instruments in an effective hedge, as appropriate.

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them, with the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially recognizedmeasures a financial asset at its fair value plus, directly attributable transactions costs, except forin the case of a financial assets designated upon initial recognitionasset not at fair value through profit or loss.loss, transaction costs.

– Subsequent measurement

TheFor purposes of subsequent measurement, of assets depends on their categorization as either financial assets are classified in four categories:

Financial assets at amortized cost (debt instruments)

Financial assets at fair value through OCI with recycling of cumulative gains and liabilities measuredlosses (debt instruments)

Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

Financial assets at fair value through profit or loss

Financial assets at amortized cost (debt instruments)

The Company measures financial assets at amortized cost if both of the following conditions are met:

The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows, and

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

The Company’s financial assets at amortized cost includes cash and cash equivalents, loans and receivables,receivables.

Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

The Company measures debt instruments at fair value through OCI if both of the following conditions are met:

The financial asset is held within a business model with the objective of both holding to maturitycollect contractual cash flows and selling, and

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or availablereversals are recognized in the statements of profit or loss and computed in the same manner as for sale financial assets measured at amortized cost. The remaining fair value changes are recognized in OCI. Upon derecognition, the cumulative fair value change recognized in OCI is recycled to profit or derivativesloss.

Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

Upon initial recognition, the Company can elect to classify irrevocably its equity investments as hedgingequity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument by instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in an effective hedge.the statements of profit or loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the shortnear term. Derivatives, including separated embedded derivatives, are also classified as held for trading fair value through profit or loss, unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as defined in IAS 39. described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are recordedcarried in the consolidated statements of financial position at fair value with net changes in fair value recognized in the consolidated statements of comprehensive income within “Valuation of derivatives, interest cost from labor obligations and other financial items”.

Held-to-maturity investments

Held-to-maturity investments are those that the Company has the intention and ability to hold to maturity and are recorded at cost which includes transaction costs and premiums or discounts related to the investment that are amortized over the life of the investment based on its outstanding balance, less any impairment. Interest and dividends on investments classified asheld-to-maturity are included within interest income.

Available-for-sale financial assets

Available-for-sale financial assets are recorded at fair value, with gains and losses, net of tax, reported in other comprehensive income. Interest and dividends on investments classified asavailable-for-sale are included in “valuation of derivatives, interest cost from labor obligations and other financial items”. The fair value of investments is readily available based on market value. The foreign exchange gain or losses of securities available for sale are recognized in the caption ¨Foreign currency exchange loss, net¨ of the consolidated statement of comprehensive income.

Loans and receivables

Loans and receivables arenon-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. Loans and receivables with a relevant period (including accounts receivable to subscribers, distributors and other receivables) are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for accounts receivable from subscribers, distributors and other in the short term when the recognition of interest would be immaterial.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the consolidated statement of financial position) when: the

The rights to receive cash flows from the asset have expired, or the

The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i)(a) the Company has transferred substantially all the risks and rewards of the asset, or (ii)(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.asset

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-throughpassthrough arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company’sits continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Impairment of financial assets

The Company assesses,recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next12-months (a12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For some trade receivables and contract assetsbased on available information, the Company applies the simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date, whether theredate. The Company has established aloss rate approach that is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemedbased on its historical credit loss experience, adjusted for forward-looking factors specific to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indicators that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments,and the probability that they will enter bankruptcy or other financial reorganization and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortized cost

For financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment

exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.environment.

Financial liabilities

Initial recognition

Financial liabilities are classified, into the following categories based on the nature of theat initial recognition, as financial instruments contracted or issued: (i) financial liabilities measured at fair value and (ii) financial liabilities measured at amortized cost. The Company’s financial liabilities include accounts payable to suppliers, deferred revenues, other accounts payable,through profit or loss, loans and derivative financial instruments. Derivative financialborrowings, payables, or as derivatives designated as hedging instruments are measured at fair value; short- and long-term debt and accounts payable are accounted forin an effective hedge, as financial liabilities and measured at amortized cost.

Initial recognitionappropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss

Financial financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39, “Financial Instruments: Recognition and Measurement”.IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on financial liabilities held for trading are recognized in the consolidated statements of comprehensive income in the line “valuation of derivatives, interest cost from labor obligations and other financial items”.profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IAS 39IFRS 9 are satisfied. The Company has not designated any financial liability as at fair value through profit or loss.

Loans and borrowings

After initial recognition, interest bearinginterest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rateEIR method. Gains and losses are recognized in the consolidated statements of comprehensive incomeprofit or loss when the liabilities are derecognized as well as through the effective interest rate (“EIR”)EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in interest incomeas finance costs in the consolidated statements of comprehensive income.profit or loss.

This category generally applies to interest-bearing loans and borrowings. For more information refer to Note 14.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or when it expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statements of comprehensive income.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is presentedreported in the consolidated statements of financial position if there is a currently enforceable legal right to offset the recognized amounts and only if, there is:is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

(i)a current legally enforceable right to offset the recognized amounts, and

(ii)the intention to either settle them on a net basis, or to realize the assets and settle the liabilities simultaneously.

Fair value of financial instruments

At each financial statement reporting date, the fair value of financial instruments traded in active markets is determined based on market prices, or prices quoted by brokers (purchase price for asset positions and sales price for liability positions), without any deduction for transaction costs.

For financial instruments that are not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions, references to the current fair value of another financial instrument that is substantially similar, a discounted cash flow analysis or other valuation models.

Notes 7 and 18 provide an analysis of the fair values of the Company’s financial instruments.

p)o) Transactions in foreign currency

Transactions in foreign currency are initially recorded at the prevailing exchange rate at the time of the related transactions. Foreign currency denominated assets and liabilities are subsequently translated at the prevailing exchange rate at the financial statementstatements reporting date. Exchange differences determined from the transaction date to the time foreign currency denominated assets and liabilities are settled or translated at the financial statementstatements reporting date are charged or credited to the results of operations.

In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of anon-monetary asset ornon-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognizes thenon-monetary asset ornon-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.

The exchange rates used for the translation of foreign currencies against the Mexican peso are as follows:

 

     Average exchange rate   Closing exchange rate at
December 31,		      Average exchange rate   Closing exchange rate
at December 31,		 

Country or Zone

  

Currency

  2015   2016   2017       2016           2017       

Currency

  2017   2018   2019       2018           2019     

Argentina (1)

  Argentine Peso (AR$)   1.7152    1.2632    1.1489    1.3047    1.0610   Argentine Peso (AR$)   1.1489    0.7311    0.4110    0.5221    0.3147 

Brazil

  Real (R$)   4.8068    5.3868    5.9346    6.3611    5.9815   Real (R$)   5.9346    5.2937    4.8907    5.0797    4.6754 

Colombia

  Colombian Peso (COP$)   0.0058    0.0061    0.0064    0.0069    0.0066   Colombian Peso (COP$)   0.0064    0.0065    0.0059    0.0061    0.0058 

Guatemala

  Quetzal   2.0704    2.4548    2.5755    2.7561    2.6940   Quetzal   2.5755    2.5591    2.5023    2.5440    2.4478 

U.S.A.(2)

  US Dollar   15.8504    18.6529    18.9400    20.7314    19.7867   US Dollar   18.9400    19.2397    19.2641    19.6829    18.8452 

Uruguay

  Uruguay Peso   0.5810    0.6206    0.6606    0.7066    0.6869   Uruguay Peso   0.6606    0.6274    0.5479    0.6074    0.5051 

Nicaragua

  Cordoba   0.5813    0.6515    0.6307    0.7071    0.6428   Cordoba   0.6307    0.6097    0.5817    0.6088    0.5569 

Honduras

  Lempira   0.7171    0.8109    0.8007    0.8759    0.8330   Lempira   0.8007    0.7994    0.7806   ��0.8031    0.7597 

Chile

  Chilean Peso   0.0243    0.0276    0.0292    0.0310    0.0322   Chilean Peso   0.0292    0.0300    0.0275    0.0283    0.0252 

Paraguay

  Guaraní   0.0031    0.0033    0.0034    0.0036    0.0035   Guaraní   0.0034    0.0034    0.0031    0.0033    0.0029 

Peru

  Sol (PEN$)   4.9746    5.5232    5.8054    6.1701    6.0976   Sol (PEN$)   5.8054    5.8517    5.7708    5.8406    5.6814 

Dominican Republic

  Dominican Peso   0.3515    0.4048    0.3983    0.4438    0.4095   Dominican Peso   0.3983    0.3876    0.3737    0.3898    0.3542 

Costa Rica

  Colon   0.0293    0.0338    0.0331    0.0369    0.0346   Colon   0.0331    0.0332    0.0326    0.0322    0.0327 

European Union

  Euro   17.3886    20.6334    21.3649    21.8032    23.7539   Euro   21.3649    22.7101    21.5642    22.5586    21.1311 

Bulgaria

  Lev   9.3785    10.5483    10.9223    11.1561    12.1406   Lev   10.9223    11.6110    11.0257    11.5327    10.8076 

Belarus(3)

  New Belarusian Ruble   9.9808    9.3929    9.8087    10.5622    9.9882   New Belarusian Ruble   9.8087    9.4451    9.2159    9.1319    8.9420 

Croatia

  Croatian Kuna   2.4096    2.7392    2.8619    2.8886    3.1954   Croatian Kuna   2.8619    3.0613    2.9069    3.0435    2.8406 

Macedonia

  Macedonian Denar   0.2984    0.3350    0.3471    0.3546    0.3861   Macedonian Denar   0.3471    0.3688    0.3504    0.3667    0.3431 

Serbia

  Serbian Denar   0.1517    0.1676    0.1762    0.1768    0.2009   Serbian Denar   0.1762    0.1920    0.1830    0.1907    0.1795 

 

(1)In

Year-end rates are used for the years ended December 31, 2016translation of revenues and 2017,expenses if IAS 29 “Financial Reporting in Hyperinflationary Economies” is applied.

Financial reporting in hyperinflationary economies

Financial statements of Argentina subsidiaries are restated before translation to the Argentine peso depreciated againstreporting currency of the US dollar by 21.8%Company and 17.4%, respectively. The Company considersbefore consolidation in order to reflect the same value of money for all items. Items recognized in the statements of financial position which are not measured at the applicableyear-end measuring unit are restated based on the basisgeneral price index. Allnon-monetary items measured at cost or amortized cost is restated for the changes in the general price index from the date of transaction or the last hyperinflationary calculation to the reporting date. Monetary items are not restated. All items of shareholders’ equity are restated for the changes in the general price index since their addition or the last hyperinflationary calculation until the end of the quantitativereporting period. All items of comprehensive income are restated for the change in a general price index from the date of initial recognition to the reporting date. Gains and qualitative indicatorslosses resulting from thenet-position of monetary items are reported in IAS 29, that Argentina shouldthe consolidated statements of operations in financial result in exchange differences. In accordance with IFRS, prior year financial statements were not be considered a hyperinflationary economy as of December 31, 2017. However, it is possible that certain market participants and regulators could have varying views on this topic during 2018 as Argentina’s economy evolves. The Company will continue to carefully monitor the situation and make appropriate changes if and when necessary.restated.

(2)

Includes U.S.A., Ecuador, El Salvador, Puerto Rico and Panama.

(3)In July 2016, a new ruble was introduced, at a rate of 1 BYN = 10,000 BYR. Old and new rubles circulated in parallel from July 1 to December 31, 2016.

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in other comprehensive income in respect of that operation attributable to the owners of the Company are recognized in the consolidated statements of comprehensive income.

As of April 26, 2018,24, 2020, the exchange rate between the US dollar and the Mexican Peso was $18.8139.$24.5883. The depreciation of the Mexican peso against the US dollar represent 30.5% with respect to theyear-end value.

q)p) Accounts payable, accrued liabilities and provisions

Liabilities are recognized whenever (i) the Company has current obligations (legal or assumed) resulting from a past event, (ii) when it is probable the obligation will give rise to a future cash disbursement for its settlement, and (iii) the amount of the obligation can be reasonably estimated.

When the effect of the time value of money is significant, the amount of the liability is determined as the present value of the expected disbursements to settle the obligation. The discount rate is determined on apre-tax basis and reflects current market conditions at the financial statements´statements reporting date and, where appropriate, the risks specific to the liability. Where discounting is used, an increase in the liability is recognized as finance expense.

Contingent liabilities are recognized only when it is probable they will give rise to a future cash disbursement for their settlement.

Also, contingencies are only recognized when they will generate a loss.

r)q) Employee benefits

The Company has defined benefit pension plans for its subsidiaries Puerto Rico Telephone Company, Teléfonos de Mexico, Claro Brasil, and Telekom Austria. Claro Brasil also has medical plans and defined contribution plans and Telekom Austria provides retirement benefits to its employees under a defined contribution plan. The Company recognizes the costs of these plans based upon independent actuarial computations and are determined using the projected unit credit method. The latest actuarial computations were prepared as of December 31, 2017.2019.

Mexico

Mexican subsidiaries have the obligation to pay seniority premiums to personnel based on the Mexican Federal labor lawLabor Law which also establishes the obligation to make certain payments to personnel who cease to provide services under certain circumstances. Pensions (for Telmex) and seniority premiums are determined based on the salary of employees in their final year of service, the number of years worked at and their age at the moment of retirement.

The costs of pensions, seniority premiums and severance benefits, are recognized based on calculations by independent actuaries using the projected unit credit method using financial hypotheses, net of inflation.

Telmex has established an irrevocable trust fund and makes annual contributions to that fund.

Puerto Rico

In Puerto Rico, the Company has noncontributing pension plans for full-time employees, which are tax qualified as they meet Employee Retirement Income Security Act of 1974 requirements.

The pension benefit is composed of two elements:

(i) An employee receives an annuity at retirement if they meet the rule of 85 (age at retirement plus accumulated years of service). The annuity is calculated by applying a percentage times years of services to the last three years of salary.

(ii) The second element is alump-sum benefit based on years of service ranging from 9 to 12 months of salary. Health care and life insurance benefits are also provided to retirees under a separate plan (post-retirement benefits).

Brazil

Claro Brasil provides a defined benefit plan and post-retirement medical assistance plan, and a defined contribution plan, through a pension fund that supplements the government retirement benefit for certain employees.

Under the defined benefit plan, the Company makes monthly contributions to the pension fund equal to 17.5% of the employee’s aggregate salary. In addition, the Company contributes a percentage of the aggregate salary base for funding the post-retirement medical assistance plan for the employees who remain in the defined benefit plan. Each employee makes contributions to the pension fund based on age and salary. All newly hired employees automatically adhere to the defined contribution plan and no further admittance to the defined benefit plan is allowed. For the defined contribution plan, see Note 17.18.

Austria

Telekom Austria provides retirement benefits to its employees under defined contribution and defined benefit plans.

The Company pays contributions to publicly or privately administered pension or severance insurance plans on mandatory or contractual basis. Once the contributions have been paid, the Company has no further payment obligations. The regular contributions are recognized as employee expenses in the year in which they are due.

All other employee benefit obligations provided in Austria are unfunded defined benefit plans for which the Company records provisions which are calculated using the projected unit credit method. The future benefit obligations are measured using actuarial methods on the basis of an appropriate assessment of the discount rate, rate of employee turnover, rate of compensation increase and rate of increase in pensions.

For severance and pensions, the subsidiary recognizes actuarial gains and losses in other comprehensive income. There-measurement of defined benefit plans relates to actuarial gains and losses only as Telekom Austria holds no plan assets. Interest expense related to employee benefit obligations is reported in the Valuation“Valuation of derivatives, interests cost from labor obligation and other financial item, net.items, net” in the statements of comprehensive income.

Other subsidiaries

For the rest of the Company’s subsidiaries, there are no defined benefit plans or compulsory defined contribution structures. However, certain subsidiaries make contributions to national pension, social security and severance plans in accordance with the percentages and rates established by the applicable social security and labor laws of each country. Such contributions are made to the entities designated by the countries legislation and are recorded as direct labor expenses in the consolidated statements of comprehensive income as they are incurred.

Remeasurements of defined benefit plans, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding net interest and the return on plan assets (excluding net interest), are recognized immediately in the consolidated statements of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.Re-measurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognized in profit or loss on the earlier of:

 

(i)

The date of the plan amendment or curtailment, and

 

(ii)

The date that the Company recognizes restructuring-related costs

Net interest on liability for defined benefits is calculated by applying the discount rate to the net defined benefit liability or asset and it is recognized in the “valuation of derivatives, interest cost from labor obligations and other financial items” in the consolidated statements of comprehensive income. The Company recognizes the changes in the net defined benefit obligation under “Cost of sales and services” and “Commercial, administrative and general expenses” in the consolidated statements of comprehensive income.

Paid absences

The Company recognizes a provision for the cost of paid absences, such as vacation time, based on the accrual method.

s)r) Employee profit sharing

Employee profit sharing is paid by certain subsidiaries of the Company to its eligible employees. The Company has employee profit sharing in Mexico, Ecuador and Peru. In Mexico, employee profit sharing is computed at the rate of 10% on the individual subsidiaries taxable base adjusted for employee profit sharing purposes as provided by law.

Employee profit sharing is presented as an operating expense in the consolidated statements of comprehensive income.

t)s) Taxes

Income taxes

Current income tax payable is presented as a short-term liability, net of prepayments made during the year.

Deferred income tax is determined using the liability method based on the temporary differences between the tax values of the assets and liabilities and their book values at the consolidated financial statements reporting date.

Deferred tax assets and liabilities are measured using the tax rates that are expected to be in effect in the period when the asset will materialize or the liability will be settled, based on the enacted tax rates (and tax legislation) that have been enacted or substantially enacted at the financial statements reporting date. The value of deferred tax assets is reviewed by the Company at each financial statements reporting date and is reduced to the extent that it is more likely that the Company will not have sufficient future tax profits to allow for the realization of all or a part of its deferred tax assets. Unrecognized deferred tax assets are revalued at each financial statements reporting date and are recognized when it is more likely that there will be sufficient future tax profits to allow for the realization of these assets.

Deferred taxes relating to items recognized in Other Comprehensive Income are recognized together with the concept that generated such deferred taxes. Deferred taxes consequence on unremitted foreign earnings from subsidiaries and associates are considered as temporary differences, except to the extent that the Company is not able to controlwhen the timing of the reversal of the temporary difference;differences can be controlled and it is probable that the temporary differencedifferences will not reverse in the foreseeable future. Taxes withheld on remitted foreign earnings are creditable against Mexican taxes, thus to the extent that a remittance is to be made, the deferred tax would be limited to the incremental difference between the Mexican tax rate and the rate of the remitting country. As of December 31, 20162018 and 2017,2019, the Company has not provided for any deferred taxes related to unremitted foreign earnings.

The Company offsets tax assets and liabilities if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Sales tax

Revenues, expenses and assets are recognized net of the amount of sales tax, except:

 

When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable.

 

Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the tax authorities is included as part of the current receivables or payables in the consolidated statements of financial position unless they are due in more than a year in which case they are classified asnon-current.

u)t) Advertising

Advertising expenses are recognized as incurred. For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, advertising expenses were Ps. 24,673,557,28,718,563, Ps. 28,180,53826,255,952 and Ps. 28,718,563,22,810,211 respectively, and are recordedpresented in the consolidated statements of comprehensive income in the caption “Commercial, administrative and general expenses”.

v)u) Earnings per share

Basic and diluted earnings per share are determined by dividing net profit of the year by the weighted-average number of shares outstanding during the year. In determining the weighted average number of outstanding shares, shares repurchased by the Company have been excluded.

w)v) Financial risks

The main risks associated with the Company’s financial instruments are: (i) liquidity risk, (ii) market risk (foreign currency exchange risk and interest rate risk) and (iii) credit risk and counterparty risk. The Board of Directors approves the policies submitted by management to mitigate these risks.

i) Liquidity risk

Liquidity risk is the risk that the Company may not meet its financial obligations associated with financial instruments when they are due. The Company’s financial obligations and commitments are included in Notes 14 and 16.17.

ii) Market risk

The Company is exposed to certain market risks derived from changes in interest rates and fluctuations in exchange rates of foreign currencies. The Company’s debt is denominated in foreign currencies, mainly in US dollars and euros, other than its functional currency. In order to reduce the risks related to fluctuations in the exchange rate of foreign currency, the Company uses derivative financial instruments such as cross-currency swaps and forwards to adjust exposures resulting from foreign exchange currency. The Company does not use derivatives to hedge the exchange risk arising from having operations in different countries.

Additionally, the Company occasionally uses interest rate swaps to adjust its exposure to the variability of the interest rates or to reduce their financing costs. The Company’s practices vary from time to time depending on judgments about the level of risk, expectations of change in the movements of interest rates and the costs of using derivatives. The Company may terminate or modify a derivative financial instrument at any time. See Note 7 for disclosure of the fair value of derivatives as of December 31, 20162018 and 2017.2019.

iii) Credit risk

Credit risk represents the loss that could be recognized in case the counterparties fail to comply with their contractual obligations.

The financial instruments that potentially represent concentrations of credit risk are cash and short-term deposits, trade accounts receivable and financial instruments related to debt and derivatives. The Company’s policy is designed in order to limit its exposure to any one financial institution; therefore, the Company’s financial instruments are contracted with several different financial institutions located in different geographic regions.

The credit risk in accounts receivable is diversified because the Company has a broad customer base that is geographically dispersed. The Company continuously evaluates the credit conditions of its customers and generally does not require collateral to guarantee collection of its accounts receivable. The Company monitors on a monthly basis its collection cycle to avoid deterioration of its results of operations.

A portion of the Company’s cash surplus is invested in short- term deposits with financial institutions with high credit ratings.

iv) Sensitivity analysis for market risks

The Company uses sensitivity analysesanalysis to measure the potential losses based on a theoretical increase of 100 basis points in interest rates and a 5% fluctuation in exchange rates:

Interest rate

In the event that the Company’s agreed-upon interest rates at December 31, 2017 increased/(decreased)2019 increase/(decrease) by 100 basis points and a 5% fluctuation in exchange rates, the increase in net interest expense would increase/(decrease) by Ps. 8,221,4113,674,609 and Ps. (8,002,209)(11,393,767), respectively.

Exchange rate fluctuations

Should the Company’s debt at December 31, 20172019 of Ps. 697,884,899,624,254,477, suffer a 5% increase/(decrease) in exchange rates, the debt would increase/(decrease) by Ps. 36,079,85731,391,368 and Ps. (33,821,548)(31,051,093), respectively.

v) Concentration of risk

The Company depends on several key suppliers and sellers. During the years ended December 31, 2015, 2016 and 2017, approximately 67%, 73% and 69%, respectively, of the total cost of the cellular phones of the Company represented purchases made from three suppliers. If any of these suppliers were to cease to provide equipment and services to the Company, or to provide them in a timely manner and at a reasonable cost, the Company’s business and results of operations might be adversely affected.

vi) Capital management

The Company manages its capital to ensure that its subsidiaries continue as going concerns while maximizing the return to stakeholders through the optimization of their balances and debt capital to maintain the lowest cost of capital available. The Company manages its capital structure and makes adjustments according to economic conditions. To maintain the capital structure, the Company may adjust the dividend payment to shareholders or its share buyback program for which the Company holds a reserve. In addition, the Company creates a legal reserve, as required by law (See Note 19).

x)w) Derivative financial instruments

Derivative financial instruments are recognized in the consolidated statementstatements of financial position at fair value. Valuations obtained by the Company are compared against those of the financial institutions with which the agreements are entered into, and it is the Company’s policy to compare such fair value to a valuation provided by an independent pricing provider in case of discrepancies. Changes in the fair value of derivatives that do not qualify as hedging instruments are recognized immediately in the line “Valuation of derivatives, interest cost from labor obligations and other financial items, net”.

The Company is exposed to interest rate and foreign currency risks, which tries to mitigate through a controlled risk management program that includes the use of derivative financial instruments. The Company principally uses cross-currency swaps and foreign currency forwards to offset the risk of exchange rate fluctuations. For purposes of reducing the risks from changes in interest rates, the Company utilizesand interest rate swaps through which it pays or receives the net amount resulting from paying or receiving a fixed rate, and from receiving or paying cash based on a variable rate.fluctuations. Additionally, for the years ended December 31, 20162017, 2018 and 2017,2019 certain of the Company’s derivative financial instruments had been designated, and had qualified, as cash flow hedges. The effective portion of gains or losses on the cash flow derivatives is recognized in equity under the heading “Effect for fair value of derivatives”, and the ineffective portion is charged to results of operations of the period.

The change in fair value recognized in results of operations, corresponding to derivatives that qualify as hedges, is presented in the same caption of the consolidated statements of comprehensive income as the gain or loss of the hedged item (interests and foreign exchange rate).

The policy of the Company in this regard comprises: (i) the formal documentation of all transactions between the hedging instruments and hedged positions, (ii) risk management objectives, and (iii) the strategy for executing hedging transactions. This documentation also includes the relationship between the cash flows of the derivatives with those of the Company’s assets and liabilities recognized in the consolidated statement of financial position.

The hedge effectiveness of the Company’s derivatives is evaluated prior to their designation as hedges, as well as during the hedging period, which is performed at least quarterly based on recognized statistical techniques. Whenever it is determined that a derivative ceases to be a highly effective hedge, the Company ceases to apply hedge accounting for the derivative on a prospective basis.

y)x) Current versusnon-current classification

The Company presents assets and liabilities in its consolidated statements of financial position based oncurrent/non-current classification.

An asset is current when it is either:

 

(i)

Expected to be realized or intended to be sold or consumed in the normal operating cycle.

 

(ii)

Held primarily for the purpose of trading.

 

(iii)

Expected to be realized within twelve months after the reporting period.

 

(iv)

Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is current when:

 

It is expected to be settled in the normal operating cycle.

 

It is held primarily for the purpose of trading.

 

It is due to be settled within twelve months after the reporting period.

 

There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Company classifies all other assets and liabilities, including deferred income tax assets and liabilities, asnon-current.

z)y) Presentation of consolidated statements of comprehensive income

The costs and expenses shown in the consolidated statements of comprehensive income are presented in combined manner (based on both their function and nature), which allows a better understanding of the components of the Company’s operating income. This classification allows a comparison to the telecommunications industry.

The Company presents operating income in its consolidated statements of comprehensive income since it is a key indicator of the Company’s performance. Operating income represents operating revenues less operating costs and expenses.

The employee benefits expense recognized in 2015, 2016 and 2017 of Ps. 41,366,183, Ps. 46,759,415 and Ps. 48,696,331, respectively is presented as “Cost of sales and services” and of Ps. 58,977,212, Ps. 63,691,855 and Ps. 66,920,537 is presented respectively in “Commercial, administrative and general expenses”.

aa)z) Operating Segmentssegments

Segment information is presented based on information used by management in its decision-making processes. Segment information is presented based on the geographic areas in which the Company operates.

The management of the Company is responsible for making decisions regarding the resources to be allocated to the Company’s different segments, as well as evaluating the performance of each segment. Intersegment revenues and costs, intercompany balances as well as investments in shares in consolidated entities are eliminated upon consolidation and reflected in the “eliminations” column in Note 22.23.

None of the segments records revenue from transactions with a single external customer amounting to at least 10% or more of the revenues.

ab)Aa) Convenience Translationtranslation

At December 31, 2017, amounts in U.S. dollars have been included in theThe consolidated financial statements are stated in thousands of Mexican pesos (“Ps.”); however, solely for the convenience of the reader and have been translated from Mexican pesos atreaders, the consolidated statement of financial position as of December 31, 20172019 and the consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended December 31, 2019 were converted into U.S. dollars at anthe exchange rate of Ps. 19.7867 per18.8452per U.S. dollar, which was the exchange rate at that date. Such translationThis arithmetic conversion should not be construed as a representationrepresentations that the amounts expressed in Mexican peso canpesos may be converted tointo U.S. dollars at the exchange rate in effect on December 31, 2017that or any other exchange rate.

ac)Ab) Significant Accounting Judgments, Estimatesaccounting judgments, estimates and Assumptionsassumptions

In preparing its consolidated financial statements, América Móvilthe Company makes estimates concerning a variety of matters. Some of these matters are highly uncertain, and its estimates involve judgments it makes based on the available information. In the discussion below, América Móvilthe Company has identified several of these matters for which its financial statements would be materially affected if either (1) América Móvilthe Company uses different estimates that it could have reasonably used or (2) in the future América Móvil changes its estimates in response to changes that are reasonably likely to occur.

The following discussion addresses only those estimates that América Móvilthe Company considers most important based on the degree of uncertainty and the likelihood of a material impact had it used a different estimate. There are many other areas in which América Móvilthe Company uses estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to the financial presentation for those other areas.

Fair Value of Financial Assets and Liabilities

América Móvil has substantial financial assets and liabilities that it recognizes at their fair value, which is an estimate of the amount at which the instrument could be exchanged in a current transaction between willing parties. The methodologies and assumptions América Móvil uses to estimate an instrument’s fair value depend on the type of instrument and include (i) recognizing cash and cash equivalents, trade receivables, trade payables and other current liabilities at close to their carrying amount, (ii) recognizing quoted instruments at their price quotations on the reporting date, (iii) recognizing unquoted instruments, such as loans from banks and obligations under financial leases, by discounting future cash flows using rates for similar instruments and (iv) applying various valuation techniques, such as net present value calculations. Using different methodologies or assumptions to estimate the fair value of América Móvil’s financial assets and liabilities could materially impact the reported financial results. See Note 18.

The Company maintains investments in available for sale securities that are valued at market prices obtained from the stock exchange where these shares are listed. At each reporting date, the Company evaluates whether impairment exists on its available for sale securities according to the accounting policy outlined in Note 2. This analysis first involves an evaluation of the objective measures of impairment as described in IAS 39. The Company will then evaluate whether the loss recognized in other comprehensive income on its available for sale securities is either prolonged or significant, as described in the accounting policies in Note 2. At December 31, 2017, the Company has not observed an objective measure of impairment on its available for sale securities, nor has significant or prolonged unrealized losses on its available for sale securities.

Estimated useful lives of plant, property and equipment

América MóvilThe Company currently depreciates most of its network infrastructure based on an estimated useful life determined upon the expected particular conditions of operation and maintenance in each of the countries in which it operates. The estimates are based on AMX’s historical experience with similar assets, anticipated technological changes and other factors, taking into account the practices of other telecommunications companies. América MóvilThe Company reviews estimated useful lives each year to determine, for each particular class of assets, whether they should be changed. América MóvilThe Company may shorten/extend the estimated useful life of an asset class in response to technological changes, changes in the market or other developments. This results in increased/decreased depreciation expense. See Notes 2k) and 10.expense (See Note 10).

Impairment of Long-Lived Assets

América MóvilThe Company has large amounts of long-lived assets, including property, plant and equipment, intangible assets, investments in affiliates and goodwill on its consolidated statements of financial position. América MóvilThe Company is required to test long-lived assets for impairment when circumstances indicate a potential impairment or, in some cases, at least on an annual basis. The impairment analysis for long-lived assets requires the Company to estimate the recovery valuerecoverable amount of the asset, which is the higher of its fair value (minus any disposal costs) and its value in use. To estimate the fair value of a long-lived asset, América Móvilthe Company typically takes into account recent market transactions or, if no such transactions can be identified, América Móvilthe Company uses a valuation model that requires making certain assumptions and estimates. Similarly, to estimate the value in use of long-lived assets, América Móvilthe Company typically makes various assumptions about the future prospects for the business to which the asset relates, considers market factors specific to that business and estimates future cash flows to be generated by that business. Based on this impairment analysis, including all assumptions and estimates related thereto, as well as guidance provided by IFRS relating to the impairment of long-lived assets different assumptions and estimates could materially impact the Company’s reported financial results. More conservative assumptions of the anticipated future benefits from these businesses could result in impairment charges, which would decrease net income and result in lower asset values on the consolidated statements of financial position. Conversely, less conservative assumptions could result in smaller or no impairment charges, higher net income and higher asset values. The key assumptions used to determine the recoverable amount for the Company’s CGUs, are further explained in Notes 2m),23, 10 and 11.

Deferred Income Taxes

América MóvilThe Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves thejurisdiction-by-jurisdiction estimation of actual current tax exposure and the assessment of temporary differences resulting from the differing treatment of certain items, such as accruals and amortization, for tax and financial reporting purposes, as well as net operating loss carry-forwards and other tax credits. These items result in deferred tax assets and liabilities as discussed in Note 2 t)s). The analysis is based on estimates of taxable income in the jurisdictions in which América Móvilthe Company operates and the period on which the deferred tax assets and liabilities will be recovered or settled. If actual results differ from these estimates, or América Móvilthe Company adjusts these estimates in future periods, its financial position and results of operations may be materially affected.

In assessing the future realization of deferred tax assets, the Company considers future taxable income, ongoing planning strategies and future results in its operations. In the event that the estimates of projected future taxable income are lowered, or changes in current tax regulations are enacted that would impose restrictions on the timing or extent of the ability to utilize the tax benefits of net operating loss carry-forwards in the future, an adjustment to the recorded amount of deferred tax assets would be made, with a related charge to income. See Note 13.

Accruals

Accruals are recorded when, at the end of the period, the Company has a present obligation as a result of past events, whose settlement requires an outflow of resources that is considered probable and can be measured reliably. This obligation may be legal or constructive, arising from, but not limited to, regulation, contracts, common practice or public commitments, which have created a valid expectation for third parties that the Company will assume certain responsibilities. The amount recorded is the best estimation performed by the Company’s management in respect of the disbursement that will be required to settle the obligations, considering all the information available at the date of the financial statements, including the opinion of external experts, such as legal advisors or consultants. Accruals are adjusted to account for changes in circumstances for ongoing matters and the establishment of additional accruals for new matters.

If América Móvilthe Company is unable to reliably measure the obligation, no accrual is recorded and information is then presented in the notes to its consolidated financial statements. Because of the inherent uncertainties in these estimations, actual expenditures may be different from the originally estimated amount recognized. See Note 15.16.

América MóvilThe Company is subject to various claims and contingencies related to tax, labor and legal proceedings as described in Note 16(c)17b).

Labor Obligations

América MóvilThe Company recognizes liabilities on its consolidated statementstatements of financial position and expenses in its statementstatements of comprehensive income to reflect its obligations related to its post-retirement seniority premiums, pension and retirement plans in the countries in which it operates and offer defined contribution and benefit pension plans. The amounts the Company recognizes are determined on an actuarial basis that involves estimations and accounts for post-retirement and termination benefits.

América MóvilThe Company uses estimates in four specific areas that have a significant effect on these amounts: (i) the rate of return América Móvilthe Company assumes its pension plans will earn on its investments, (ii) the salaries increase rate that the Company assumes it will observe in future years, (iii) the discount rates that the Company uses to calculate the present value of its future obligations and (iv) the expected inflation rate. The assumptions applied are further disclosed in Note 17.18. These estimates are determined based on actuarial studies performed by independent experts using the projected unit-credit method.

Allowance for Bad Debts

América Móvil maintains an allowance for bad debts for estimated losses resulting from the failure of its customers, distributors and telecommunications operators to make required payments. The Company bases these estimates on the individual conditions of each of the markets in which it operates that may impact the collectability of accounts. In particular, in making these estimates, the Company takes into account the number of days invoices are overdue and with telecommunications operators, both the number of days since the invoices are due and any disputes with respect to such invoiced traffic. The loss that América Móvil actually experiences with respect to these accounts may differ from the amount of the estimated allowance maintained in connection with them. See Note 5.

3. Cash and Cash Equivalents

Cash and cash equivalents are comprised of short-term deposits with different financial institutions. Cash equivalents only include instruments with purchased maturity of less than three months. The amount includes the amount deposited, plus any interest earned.

4. Marketable securitiesEquity investments at fair value through OCI and other short-term investments

As of December 31, 20162018 and 2017, marketable securities2019, equity investments at fair value through OCI and other short-term investments includes an available for saleequity investment in KPN for Ps. 41,463,51139,028,083 and Ps. 46,682,657,37,572,410, respectively, and other short-term investments for Ps. 13,393,6469,987,851 and Ps. 12,438,019, respectively.10,145,615, respectively, which represents a cash deposit used to guarantee a short-term obligation for one of the Company’s foreign subsidiaries and are presented at their carrying value, which approximates fair value.

The investment in KPN is carried at fair value with changes in fair value being recognized through other comprehensive (loss) gain items (equity) in the Company’s consolidated statements of financial position. When the Company changed the classification of its KPN investment, the Company recorded apre-tax gain of approximately Ps. 11,988,038 in its 2015 consolidated statements of comprehensive income. As of December 31, 20162018 and 2017,2019, the Company has recognized in equity changes in fair value of the investment of Ps. (6,673,731)(3,765,688) and Ps. 622,424,883,408, respectively, net of deferred taxes, through other comprehensive (loss) gain items (equity).in equity.

At December 31, 2017, the Company has not observed an objective measure of impairment on its available for sale securities, nor has unrealized losses on its available for sale securities been considered either significant or prolonged.

During the years ended December 31, 2015, 20162017, 2018 and 2017,2019, the Company received dividends from KPN for an amount of Ps. 1,645,712,2,370,559, Ps. 5,740,0922,605,333 and Ps. 2,370,559,1,742,242, respectively; which are included within “Valuation of derivatives, interest cost from labor obligations, and other financial items, net” in the consolidated statements of comprehensive income. Another short-term investment item during the years ended December 31, 2018 and 2019 of Ps. 12,438,019, as of December 31, 2017 (Ps. 13,393,646 in 2016) represents a cash deposit used to guarantee a short term obligation for one of the Company’s foreign subsidiaries9,987,851 and are presented at their carrying value, which approximates fair value.Ps. 10,145,615, respectively.

5. Accounts receivable from subscribers, distributors, recoverable taxes contractual assets and other, net

a)An analysis of accounts receivable by component at December 31, 20162018 and 20172019 is as follows:

 

  At December 31,   At December 31, 
  2016 2017   2018 2019 

Subscribers and distributors

  Ps.186,744,954  Ps.178,722,706   Ps.173,053,226  Ps.184,260,099 

Telecommunications carriers for network interconnection and other services

   9,649,849   8,671,416    5,543,263   5,079,763 

Recoverable taxes

   41,899,517   40,477,188    46,706,298   23,628,728 

Sundry debtors

   16,016,756   14,736,340    12,685,281   12,084,050 

Contract assets

   34,718,749   34,274,007 

Impairment of trade receivables

   ( 40,798,025)   (39,480,909) 
  

 

  

 

   

 

  

 

 

Total net

  Ps.231,908,792  Ps.219,845,738 
   254,311,076   242,607,650   

 

  

 

 

Less: Allowance for bad debts

   (37,351,677)   (39,044,925) 

Non-current subscribers, distributors and contractual assets

   15,681,872   15,139,442 
  

 

  

 

   

 

  

 

 

Net

  Ps.216,959,399  Ps.203,562,725 

Total current subscribers, distributors and contractual assets

  Ps.216,226,920  Ps.204,706,296
  

 

  

 

   

 

  

 

 

Non-current subscribers and distributors

   11,184,860   9,786,581 
  

 

  

 

 

Total current Subscribers, distributors, recoverable taxes and other, net

  Ps. 205,774,539  Ps. 193,776,144 
  

 

  

 

 

b) Changes in the impairment of trade receivables is as follows:

   For the years ended December 31, 
   2017   2018   2019 

Balance at beginning of year

  Ps.(37,351,677)   Ps.(39,044,925)   Ps.(40,798,025) 

Increases recorded in expenses

   (20,766,362)    (19,535,707)    (16,346,395) 

Adjustment on initial application of IFRS 9

   —      (2,400,783)    —   

Write-offs

   17,713,992    15,497,254    17,839,957 

Business combination

       (3,265,490) 

Translation effect

   1,359,122    4,686,136    3,089,044 
  

 

 

   

 

 

   

 

 

 

Balance at end of year

  Ps.(39,044,925)   Ps.(40,798,025)   Ps.(39,480,909) 
  

 

 

   

 

 

   

 

 

 

b)Changes in the allowance for bad debts were as follows:

   For the years ended December 31, 
   2015   2016   2017 

Balance at beginning of year

   Ps. (25,685,528)    Ps. (27,495,158)    Ps. (37,351,677) 

Increases recorded in expenses

   (13,171,120)    (16,987,769)    (20,744,242) 

Write-offs

   9,555,734    12,587,567    17,713,992 

Business combination

       (22,120) 

Translation effect

   1,805,756    (5,456,317)    1,359,122 
  

 

 

   

 

 

   

 

 

 

Balance at end of year

   Ps. (27,495,158)    Ps. (37,351,677)    Ps. (39,044,925) 
  

 

 

   

 

 

   

 

 

 

c)The following table shows the aging of accounts receivable at December 31, 20162018 and 2017,2019, for subscribers and distributors:

 

  Past due 
  Total  Unbilled services
provided		  1-30a-30 days  31-60 days  61-90 days  Greater than
90 days		 

December 31, 20162018

  Ps. 186,744,954173,053,226   Ps. 113,014,70662,623,654   Ps. 19,175,00846,816,302   Ps. 5,835,1626,315,277   Ps. 4,209,4564,168,952   Ps. 44,510,62253,129,041 

December 31, 20172019

  Ps. 178,722,706184,260,099  Ps. 78,384,17476,223,243  Ps. 46,758,82546,083,644  Ps. 6,780,6716,076,281  Ps. 4,375,1884,121,929  Ps. 42,423,84851,755,002

In accordance with the Company’s accounting policy for the allowance for bad debts, as of December 31, 2016 and 2017, there are certain accounts receivable greater than 90 days that are not impaired as they are primarily due from government institutions and distributors for which the Company has a collateral. To estimate the recoverability of accounts receivable, the Company considers any change in the credit quality of the subscribers and distributors from the date the credit was granted until the end of period.

d)The following table shows the accounts receivable from subscribers and distributors included in the allowance for doubtful accounts,impairments of trade receivables, as of December 31, 20162018 and 2017:2019:

 

   Total   61-901-90 days   Greater than
90 days		 

December 31, 20162018

   Ps. 37,351,67740,798,025    Ps. 3,970,7704,079,803    Ps. 33,380,90736,718,222 

December 31, 20172019

   Ps. 39,044,925Ps. 3,807,94539,480,909   Ps. 35,236,9803,948,091Ps. 35,532,818

e) An analysis of contract assets and liabilities at December 31, 2018 and 2019 is as follows:

   2018  2019 

Contract Assets:

   

Balance at the beginning of the year

  Ps.29,640,953  Ps.34,718,749 

Additions

   32,029,279   34,877,851 

Disposals

   (739,580)   (2,658,641) 

Business Combination

   —     576,463 

Amortization

   (24,503,907)   (30,501,315) 

Translation effect

   (1,707,996)   (2,739,100) 
  

 

 

  

 

 

 

Balance at the end of the year

  Ps.34,718,749  Ps.34,274,007 

Non-current contract assets

  Ps.5,437,263  Ps.1,786,560 
  

 

 

  

 

 

 

Current portion contracts assets

  Ps.29,281,486  Ps.32,487,447 

6. Related Parties

a)The following is an analysis of the balances with related parties as of December 31, 20162018 and 2017.2019. All of the companies were considered affiliates of América Móvil since the Company’s principal shareholders are either direct or indirect shareholders in the related parties.

 

  2016   2017   2018   2019 

Accounts receivable:

        

Sears Roebuck de Mexico, S.A. de C.V.

  Ps.230,974   Ps.211,491 

Sears Roebuck de México, S.A. de C.V. and Subsidiaries.

  Ps.284,917   Ps.228,523 

Sanborns Hermanos, S.A.

   119,423    91,233    336,134    229,964 

Carso Infraestructura y Construcción, S.A. de C.V and Subsidiaries

   112,834    89,585 

Enesa, S.A. de C.V. and Subsidiaries

   93,360    33,208 

Patrimonial Inbursa, S.A.

   261,754    386,194 

Carso Infraestructura y Construcción, S.A. de C.V. and Subsidiaries

   179,852    41,204 

Grupo Condumex, S.A. de C.V. and Subsidiaries

   41,057    47,269    35,007    12,018 

Operadora de Sites Mexicanos, S.A. de C.V.

   22,629    14,252 

Patrimonial Inbursa, S.A.

   9,299    246,874 

Hiubard y Bourlon, S.A. de C.V.

   5,983    172,952 

Claroshop.com, S.A.P.I. de C.V.

   29,219    91,874 

Other

   110,916    134,318    130,739    110,411 
  

 

   

 

   

 

   

 

 

Total

  Ps.740,492   Ps.868,230   Ps.1,263,605   Ps.1,273,140 
  

 

   

 

   

 

   

 

 
  2016   2017   2018   2019 

Accounts payable:

        

Carso Infraestructura y Construcción, S.A. de C.V and Subsidiaries

  Ps.1,291,062   Ps.947,761 

Carso Infraestructura y Construcción, S.A. de C.V. and Subsidiaries

  Ps.1,403,414   Ps.1,656,123 

Grupo Condumex, S.A. de C.V. and Subsidiaries

   753,603    812,427    784,678    905,776 

Grupo Financiero Inbursa, S.A.B. de C.V.

   235,745    246,804 

Fianzas Guardiana Inbursa, S.A. de C.V.

   409,293    276,633    227,014    241,305 

PC Industrial, S.A. de C.V. and Subsidiaries

   117,841    136,859    83,502    68,189 

Grupo Financiero Inbursa, S.A.B. de C.V.

   40,737    38,847 

Enesa, S.A. de C.V. and Subsidiaries

   53,670    50,609    22,630    25,076 

Other

   305,119    277,276    217,230    317,146 
  

 

   

 

   

 

   

 

 

Total

  Ps. 2,971,325   Ps. 2,540,412   Ps. 2,974,213   Ps. 3,460,419 
  

 

   

 

   

 

   

 

 

For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, the Company has not recorded any impairment of receivables in connection with amounts owed by related parties.

b)For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, the Company conducted the following transactions with related parties:

 

 2015 2016 2017   2017   2018   2019 

Investments and expenses:

         

Construction services, purchases of materials, inventories and property, plant and equipment(i)

 Ps.5,975,677  Ps.9,917,280  Ps.11,030,944   Ps. 11,030,944   Ps. 7,211,960   Ps. 8,573,894 

Insurance premiums, fees paid for administrative and operating services, brokerage services and others(ii)

 4,332,331  4,118,469   4,135,578    4,135,578    4,134,380    4,590,620 

Rent of towers(iii)

 927,678  4,748,503   5,326,366    5,326,366    6,168,592    — 

Other services

 1,379,269  1,899,818   2,802,667    2,802,667    1,864,017    1,277,404 
 

 

  

 

  

 

   

 

   

 

   

 

 
 Ps. 12,614,955  Ps. 20,684,070  Ps. 23,295,555   Ps.23,295,555   Ps. 19,378,949   Ps. 14,441,918 
 

 

  

 

  

 

   

 

   

 

   

 

 

Revenues:

         

Telecommunications services

 Ps.271,196  Ps.411,076  Ps.416,047 

Sale of materials and other services

 2,398,994  2,679,591   2,313,840 

Service revenues

  Ps.416,047   Ps.679,220   Ps.538,110 

Sales of equipment

   2,313,840    1,296,204    944,697 
 

 

  

 

  

 

   

 

   

 

   

 

 
 Ps.2,670,190  Ps.3,090,667  Ps.2,729,887   Ps.2,729,887   Ps.1,975,424   Ps.1,482,807 
 

 

  

 

  

 

   

 

   

 

   

 

 

 

i)

In 2017,2019, this amount includes Ps.6,809,244 (Ps. 5,622,791 in 2018 and Ps. 9,829,991 (Ps. 9,547,530 in 2016 and Ps. 5,823,537 in 2015)2017) for network construction services and construction materials purchased from subsidiaries of Grupo Carso, S.A.B. de C.V. (Grupo Carso).

ii)

In 2017,2019, this amount includes Ps. 956,132 (Ps. 778,191 in 2018 and Ps. 789,253 (Ps. 812,247 in 2016 and 721,416 in 2015)2017) for network maintenance services performed by Grupo Carso subsidiaries; Ps. 16,161 in 2019 (Ps. 13,784 in 2018, and Ps. 15,695 in 2017 (Ps. 705,074 in 2016, and Ps. 216,910 in 2015)2017) for software services provided by an associate; Ps. 2,623,795 in 2019 (Ps. 2,541,703 in 2018 and Ps. 3,330,038 in 2017 (Ps. 2,406,058 in 2016 and Ps. 2,635,342 in 2015)2017) for insurance premiums with Seguros Inbursa S.A. and Fianzas Guardiana Inbursa, S.A., which, in turn, places most of such insurance with reinsurers.

iii)In October 2015, following

Due to the approvalimplementation of the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones, or “IFT”) and confirmation by the Mexican Tax Administration Service (Servicio de Administración Tributaria) of its tax implications the Company completed thespin-off process of its telecom towers located in Mexico creating the company Telesites, S.A.B. de C.V. (“Telesites”). Suchspin-off was approved in an extraordinary meeting of shareholders held in April 2015. The National Securities and Banking Commission (Comisión Nacional Bancaria y de Valores) authorized the registration of the shares of Telesites in December 2015, and the Company concluded the listing process on December 21, 2015.IFRS 16 amounts related to payments for tower leases are no longer considered rental expenses.

c)During 2017, the Company paid Ps. 1,229,442 (Ps. 1,255,326 and Ps. 915,135 in 2016 and 2015, respectively) for short-term direct benefits to its executives.

The aggregate compensation paid to the Company’s, directors (including compensation paid to members of the Audit and Corporate Practices Committee), and senior management in 20172019 was approximately Ps. 5,1005,200 and Ps. 66,700,75,000, respectively. None of the Company’s directors is a party to any contract with the Company or any of its subsidiaries that provides for benefits upon termination of employment. The Company does not provide pension, retirement or similar benefits to its directors in their capacity as directors. The Company’s executive officers are eligible for retirement and severance benefits required by Mexican law on the same terms as all other employees.

d)Österreichische Österreichische Bundes- und Industriebeteiligungen GmbH (ÖBIB) is considered a related party due to it is a significantnon-controlling shareholder in Telekom Austria. Through Telekom Austria, América Móvil is related to the Republic of Austria and its subsidiaries, which are mainly ÖBB Group, ASFINAG Group and Post Group

as well as Rundfunk und Telekom Reguliegungs-GmbH, all of which these are related parties. In 2017, 20162018 and 2015,2019, none of the individual transactions associated with government agencies or government-owned entities of Austria are consideringwere considered significant to América Móvil.

7. Derivative Financial Instruments

To mitigate the risks of future increases in interest rates and foreign exchange rates for the servicing of its debt, the Company has entered into interest-rate swapderivative contracts inover-the-counter transactions carried out with financial institutions. No collateral is given as security in connection with these transactions. In 20172019 the weighted-average interest rate of the total debt including the impact of interest rate derivatives held by the Company is 3.8% (4.1% and 4.0% (3.7%in 2018 and 3.9% in 2016 and 2015,2017, respectively).

An analysis of the derivative financial instruments contracted by the Company at December 31, 20162018 and 20172019 is as follows:

 

   At December 31, 
   2016   2017 

Instrument

  Notional amount in
millions		   Fair value   Notional amount in
millions		   Fair value 

Assets:

        

Swaps US Dollar-Mexican peso

  US$—      —     US$2,800   Ps. 4,766,102 

Swaps Euro-Mexican peso

  €70   Ps. 479,007   €—      —   

SwapsYen-US Dollar

  ¥  13,000    430,044   ¥13,000    521,270 

Forwards US Dollar-Mexican peso

  US$—      —     US$1,744    1,600,666 

Forwards US Dollar-Brazilian real

  US$—      —     US$100    44,280 

Swaps SwissFranc-US Dollar

  CHF—      —     CHF475    178,710 

Swaps Euro-Brazilian real

  €—      —     €450    359,671 

Interest rate swap

  Ps.—      —     Ps.200    916 

Forwards Euro-Brazilian real

  €—      —     €400    330,427 

Forwards US Dollar-Swiss franc

  CHF—      —     CHF75    121,981 

ForwardsEuro-US Dollar

  €—      —     €204    113,361 
    

 

 

     

 

 

 

Total Assets

     Ps. 909,051      Ps. 8,037,384 
    

 

 

     

 

 

 
   At December 31, 
   2018   2019 

Instrument

  Notional amount in
millions		   Fair Value   Notional amount in
millions		   Fair Value 

Assets:

        

Swaps US Dollar-Mexican Peso

  US$3,490    Ps. 2,058,831   US$3,290    Ps. 4,420,433

Swaps US Dollar-Euro

  US$—      —     US$150    96,967 

SwapsYen-US Dollar

  ¥13,000    581,948   ¥6,500    262,993 

Swaps Pound sterling-US Dollar

  £—      —     £100    2,988 

SwapsEuro-Brazilian Real

  €300    1,080,552   €—      —   

Forwards US Dollar-Mexican Peso

  US$—      —     US$100    18 

Forwards USDollar-Brazilian Real

  US$150    126,287   US$83    90,429 

Forwards BrazilianReal-US Dollar

  BRL $2,823    1,107,630   BRL $ 5,803    1,620,605 

ForwardsEuro-Brazilian Real

  €150    123,005   €50    4,255 

ForwardsEuro-US Dollar

  €710    209,295   €1,506    204,241 

Forwards Argentinean Peso-US Dollar

  ARS$—      —     ARS$1,388    122,831 
    

 

 

     

 

 

 

Total Assets

     Ps. 5,287,548      Ps. 6,825,760 
    

 

 

     

 

 

 

 

   At December 31, 
   2016   2017 

Instrument

  Notional amount
in millions		   Fair value   Notional amount
in millions		   Fair value 

Liabilities:

        

Interest rate swaps in Mexican peso

  Ps.15,750   Ps.     (131,998)   Ps.—     Ps.—   

Forwards US Dollar-Mexican peso

  US$80    (99,228)   US$—      —   

Forwards Euro-US Dollar

  €460    (1,142,155)   €—      —   

SwapsEuro-US Dollar

  €500    (1,807,332)   €—      —   

Swaps US Dollar-Euro

  US$2,192    (698,917)   US$2,092    (8,340,970) 

Swaps Swissfranc-US Dollar

  CHF745    (745,263)   CHF—      —   

Swaps Poundsterling-Euro

  £740    (2,585,890)   £740    (3,376,091) 

Swap Poundsterling-US Dollar

  £2,010    (5,961,324)   £2,010    (1,676,636) 

Call spread option

  €750    (155,950)   €750    (48,422) 

Put option

  €374    (2,379,434)   €374    (482,645) 

Call spread option

  €3,000    (1,877,256)   €3,000    (434,696) 
    

 

 

     

 

 

 

Total liability

    Ps. (17,584,747)     Ps. (14,359,460) 
    

 

 

     

 

 

 

Non-current liability

    Ps.   (3,448,396)     Ps.   (3,756,921) 
    

 

 

     

 

 

 

Total current liability

    Ps. (14,136,351)     Ps. (10,602,539) 
    

 

 

     

 

 

 

   At December 31, 
   2018   2019 

Instrument

  Notional amount in
millions		   Fair Value   Notional amount in
millions		   Fair Value 

Liabilities:

        

Swaps US Dollar-Mexican Peso

  US$—    Ps.—    US$200   Ps.(33,253) 

Swaps US Dollar-Euro

  US$ 2,025    (5,114,863)   US$800    (2,228,287) 

Swaps Pound sterling-Euro

  £740    (4,027,312)   £640    (2,201,997) 

Swap Poundsterling-US Dollar

  £2,010    (5,836,607)   £2,010    (3,019,255) 

Forwards US Dollar-Mexican Peso

  US$977   (772,704)   US$ 2,343    (1,398,247) 

ForwardsEuro-US Dollar

  €950   (333,586)   €1,094    (554,278) 

Forwards US Dollar-Euro

  US$—      —     US$20    (3,787) 

Forwards Euro-Brazilian Real

  €—      —     €140    (10,196) 

Forwards Yen-US Dollar

  ¥—      —     ¥6,500    (18,769) 

Put option

  €374    (988,669)   €374    (126,569) 

Call option

  €3,000    (33,838)   €3,000    (2,113) 
    

 

 

     

 

 

 

Total Liabilities

    Ps. (17,107,579)     Ps. (9,596,751)
    

 

 

     

 

 

 

Non-current liability

    Ps.(3,567,863)     Ps.—   
    

 

 

     

 

 

 

Total current liability

    Ps.(13,539,716)     Ps. (9,596,751) 
    

 

 

     

 

 

 

The changes in the fair value of these derivative financial instruments for the years ended December 31, 2015, 20162017, 2018 and 20172019 amounted to a gain (loss) of Ps. 15,128,269,8,192,567, Ps. (9,622,233)(4,686,407) and Ps. 8,192,567, respectively, and such4,432,023. Such amounts are included in the consolidated statements of comprehensive income as part of the caption “Valuation of derivatives interest cost from labor obligations and other financial items, net” and Ps. 37,011, Ps. 48,496 and Ps. 12,292, net of tax, respectively, that are accounted for as “Effect of derivative financial instruments acquired for hedging purposes” in equity..

The maturities of the notional amount of the derivatives are as follows:

 

Instrument

  Notional
amount in
millions		   2018   2019   2020   2021   2022
Thereafter		   Notional
amount in
millions		   2020   2021   2022   2023   2024 Thereafter 

Assets

                        

Swaps US Dollar-Mexican peso

  US$2,800    —      —      —      —      2,800 

Swaps US Dollar-Mexican Peso

   US$    —      —      1,400    —      1,890 

SwapsYen-US Dollar

  ¥13,000    —      —      —      —      13,000    ¥    —      —      —      —      6,500 

Forwards US Dollar-Mexican peso

  US$1,744    1,744    —      —      —      —   

Forwards US Dollar-Brazilian real

  US$100    100    —        —      —   

Swaps Swissfranc-US Dollar

  CHF475    475    —      —      —      —   

Swaps Euro-Brazilian real

  €450    150    300    —      —      —   

Interest rate swap

  Ps.200    —      200    —      —      —   

Forwards Euro-Brazilian real

  €400    400    —      —      —      —   

Forwards US Dollar-Swiss franc

  CHF75    75    —      —      —      —   

Swaps US Dollar-Euro

   US$    —      —      —      —      150 

Swaps Pound sterling-US Dollar

   £    —      —      —      —      100 

Forwards US Dollar-Mexican Peso

   US$    100    —      —      —      —   

Forwards BrazilianReal-US Dollar

   BRL    4,660    1,143    —      —      —   

Forwards US Dollar-Brazilian Real

   US$    83    —      —      —      —   

Forwards Argentinean Pesos-US Dollar

   ARS    1,388    —      —      —      —   

ForwardsEuro-Brazilian Real

   €    50    —      —      —      —   

ForwardsEuro-US Dollar

  €204    204    —      —      —      —      €    1,506    —      —      —      —   

Liabilities

                        

Swaps US Dollar-Euro

  US$2,092    67    25    —      —      2,000    US$    —      —      —      —      800 

Swaps Poundsterling-Euro

  £740    —      —      —      —      740    £    —      —      —      —      640 

Swap Poundsterling-US Dollar

  £2,010    —      —      550    —      1,460    £    550    —      —      —      1,460 

Call spread option

  €750    750    —      —      —      —   

Swap US Dollar-Mexican Peso

   US$    —      —      200    —      —   

Forwards US Dollar-Mexican Peso

   US$    2,343    —      —      —      —   

Forwards Yen-US Dollar

   ¥    6,500    —      —      —      —   

ForwardsEuro-US Dollar

   €    1,094    —      —      —      —   

Forwards US Dollar-Euro

   US$    20    —      —      —      —   

ForwardsEuro-Brazilian Real

   €    140    —      —      —      —   

Put option

  €374    —      —      —      —      374    €    —      —      —      —      374 

Call spread option

  €3,000    —      —      3,000    —      —      €    3,000    —      —      —      —   

8. Inventories, net

An analysis of inventories at December 31, 20162018 and 20172019 is as follows:

 

  2016   2017   2018   2019 

Mobile phones, accessories, computers, TVs, cards and other materials

   Ps. 41,020,172    Ps. 42,262,511    Ps. 43,723,492    Ps. 43,954,616 

Less: Reserve for obsolete and slow-moving inventories

   (4,148,880)    (3,452,946)    (3,418,130)    (2,852,604) 
  

 

   

 

   

 

   

 

 

Total

   Ps. 36,871,292    Ps. 38,809,565    Ps. 40,305,362    Ps. 41,102,012 
  

 

   

 

   

 

   

 

 

For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, the cost of inventories recognized in cost of sales was Ps. 145,491,598,170,154,336, Ps. 172,495,376180,013,986 and Ps. 170,154,336,174,543,602, respectively.

9. Other assets, net

An analysis of other assets at December 31, 20162018 and 20172019 is as follows:

 

  2016   2017   2018   2019 

Current portion:

        

Advances to suppliers (different from PP&E and inventories)

  Ps. 12,078,114   Ps.9,536,654    Ps. 12,931,247    Ps.   7,718,343

Costs of mobile equipment and computers associated with deferred revenues

   5,914,166    6,182,010 

Prepaid insurance

   786,683    683,091    949,590    978,927 

Other

   759,130    950,991    1,415,356    776,164 
  

 

   

 

   

 

   

 

 
  Ps. 19,538,093   Ps. 17,352,746    Ps. 15,296,193    Ps.   9,473,434 
  

 

   

 

   

 

   

 

 

Non-current portion:

        

Recoverable taxes

  Ps.9,971,482   Ps. 12,249,372    Ps. 11,514,455    Ps. 14,647,726 

Prepayments for the use of fiber optics

   4,262,387    4,361,668    3,985,216    2,095,556 

Prepaid expenses and judicial deposits (1)

   25,267,208    25,926,436 

Judicial Deposits (1)

   18,172,342    19,506,147 

Prepaid expenses

   8,789,588    5,642,590 
  

 

   

 

   

 

   

 

 

Total

   Ps. 39,501,077    Ps. 42,537,476    Ps. 42,461,601    Ps. 41,892,019
  

 

   

 

   

 

   

 

 

For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, amortization expense for other assets was Ps. 558,457,620,680, Ps. 1,340,609798,243 and Ps. 620,680,318,824, respectively.

 

(1)

Judicial deposits represent cash and cash equivalents pledged in order to fulfill the collateral requirements for tax contingencies mainly in Brazil. At December 31, 20162018 and 2017,2019, the amount for these deposits is Ps. 20,030,04118,172,342 and Ps. 20,288,382, respectively.19,506,147, respectively for Brazil. Based on its evaluation of the underlying contingencies, the Company believes that such amounts are recoverable.

10. Property, Plant and Equipment, net

a)An analysis of activity in property, plant and equipment, net atfor the years ended December 31, 2015, 20162017, 2018 and 20172019 is as follows:

 

  At
December 31,
2014		  Additions  Retirements  Business
combinations		  Spin-off
effects
(Note 12)		  Effect of
translation of
foreign
subsidiaries		  Depreciation
of
the year		  At
December 31,
2015		 

Cost

        

Network in operation and equipment

 Ps. 642,617,237  Ps.78,632,899  Ps.(16,061,956)  Ps.4,293,671  Ps.—   Ps.(68,097,149)  Ps.—   Ps. 641,384,702 

Land and buildings

  56,463,536   2,559,088   (2,492,288)   54,902   —     (1,790,852)   —     54,794,386 

Other assets

  105,550,807   27,711,493   (10,169,829)   820,329   (12,643,381)   (4,800,817)   —     106,468,602 

Construction in process and advances plant suppliers (1)

  39,107,185   72,899,705   (68,666,020)   160,311   (348,395)   (4,302,010)   —     38,850,776 

Inventories for operation of the network

  20,848,714   44,423,898   (43,911,307)   —     —     (1,018,916)   —     20,342,389 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  864,587,479   226,227,083   (141,301,400)   5,329,213   (12,991,776)   (80,009,744)   —     861,840,855 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accumulated depreciation

        

Network in operation and equipment

  234,527,131   —     (31,529,529)   —     (7,403,656)   (51,082,202)   92,219,984   236,731,728 

Buildings

  3,728,405   —     (433,368)   —     —     (1,334,962)   2,607,513   4,567,588 

Other assets

  38,276,028   —     (4,533,893)   —     —     (1,995,119)   15,310,068   47,057,084 

Inventories for operation of the network

  (50,265)   —     (13,405)   —     —     1,409   17,838   (44,423) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps. 276,481,299  Ps.—   Ps.(36,510,195)  Ps.        —   Ps.(7,403,656)  Ps.(54,410,874)  Ps.110,155,403  Ps. 288,311,977 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net Cost

 Ps. 588,106,180  Ps. 226,227,083  Ps. (104,791,205)  Ps. 5,329,213  Ps.(5,588,120)  Ps. (25,598,870)  Ps. (110,155,403)  Ps. 573,528,878 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 At
December 31,
2015		 Additions Retirements Business
combinations		 Effect of
translation of
foreign
subsidiaries		 Depreciation
of
the year		 At
December 31,
2016		  At December 31,
2016		 Additions Retirements Business
combinations		 Effect of
translation
of foreign
subsidiaries		 Depreciation
for
the year		 At December 31,
2017		 

Cost

        

Network in operation and equipment

 Ps. 641,384,702  Ps.101,794,197  Ps.     (8,963,076)  Ps.1,873,445  Ps. 235,186,745  Ps.            —   Ps. 971,276,013  Ps. 971,276,013  Ps. 78,272,882  Ps. (21,657,715)  Ps. 599,306  Ps. (38,824,540)  Ps.—    Ps. 989,665,946 

Land and buildings

 54,794,386  2,900,511  (2,845,298)  3,839  7,281,973   —    62,135,411  62,135,411  2,858,996  (415,219)  27,686  (2,022,685)   —    62,584,189 

Other assets

 106,468,602  24,368,918  (10,717,096)  69,937  24,736,655   —    144,927,016  144,927,016  19,287,525  (8,112,571)  80,734  (5,866,897)   —    150,315,807 

Construction in process and
advances plant suppliers (1)

 38,850,776  70,517,319  (70,911,593)  11,255  11,252,127   —    49,719,884  49,719,884  66,383,381  (41,279,573)  34,705  (737,023)   —    74,121,374 

Inventories for operation of the network

 20,342,389  34,010,751  (27,641,919)  5,520  1,566,307   —    28,283,048 

Spare parts for operation of the network

 28,283,048  27,013,148  (27,979,816)  3,576  (728,358)   —    26,591,598 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

 861,840,855  233,591,696  (121,078,982)  1,963,996  280,023,807   —    1,256,341,372  1,256,341,372  193,815,932  (99,444,894)  746,007  (48,179,503)   —    1,303,278,914 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Accumulated depreciation

              

Network in operation and equipment

 236,731,728                 —    (1,968,376)               —    153,147,349  107,976,385  495,887,086  495,887,086   —    (21,214,724)   —    (32,860,339)  110,533,486  552,345,509 

Buildings

 4,567,588   —    (975,284)   —    3,709,952  3,179,066  10,481,322  10,481,322   —    (1,568,542)   —    (940,054)  2,682,559  10,655,285 

Other assets

 47,057,084   —    (25,099,710)   —    10,396,438  16,105,885  48,459,697  48,459,697   —    (4,572,509)   —    (2,251,958)  21,724,299  63,359,529 

Inventories for operation of the network

 (44,423)   —    (54,280)   —    20,896  401,008  323,201 

Spare parts for operation of the network

 323,201   —    (9,205)   —    (4,339)  265,736  575,393 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

 Ps. 288,311,977  Ps.             —   Ps.    (28,097,650)  Ps.            —   Ps. 167,274,635  Ps.127,662,344  Ps. 555,151,306  Ps.555,151,306  Ps.—   Ps. (27,364,980)  Ps.—   Ps. (36,056,690)  Ps.135,206,080  Ps.626,935,716 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net Cost

 Ps. 573,528,878  Ps. 233,591,696  Ps.    (92,981,332)  Ps.1,963,996  Ps. 112,749,172  Ps. (127,662,344)  Ps. 701,190,066  Ps.701,190,066  Ps.193,815,932  Ps.(72,079,914)  Ps.746,007  Ps.(12,122,813) Ps.(135,206,080)  Ps.676,343,198 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 At
December 31,
2016		 Additions Retirements Business
combinations		 Effect of
translation of
foreign
subsidiaries		 Depreciation
of
the year		 At
December 31,
2017		  At December 31,
2017		 Additions Retirements Business
combinations		 Effect of
translation of
foreign
subsidiaries and
hyperinflation
adjustment		 Depreciation
for
the year		 At December 31,
2018		 

Cost

        

Network in operation and equipment

 Ps. 971,276,013  Ps.   78,272,882  Ps. (21,657,715)  Ps.599,306  Ps. (38,824,540)  Ps.               —    Ps.989,665,946  Ps. 989,665,946  Ps.68,900,443  Ps.(1,610,246)  Ps. 128,246  Ps. (87,888,453)  Ps.—   Ps. 969,195,936 

Land and buildings

  62,135,411   2,858,996   (415,219)   27,686   (2,022,685)   —     62,584,189  62,584,189  4,429,433  (3,987,671)  8,874  (5,904,499)   —    57,130,326 

Other assets

  144,927,016   19,287,525   (8,112,571)   80,734   (5,866,897)   —     150,315,807  150,315,807  25,268,252  (13,377,798)  2,578  (12,399,702)   —    149,809,137 

Construction in process and advances plant suppliers (1)

  49,719,884   66,383,381   (41,279,573)   34,705   (737,023)   —     74,121,374  74,121,374  92,285,397  (76,978,798)  1,379  (8,336,823)   —    81,092,529 

Inventories for operation of the network

  28,283,048   27,013,148   (27,979,816)   3,576   (728,358)   —     26,591,598 

Spare parts for operation of the network

 26,591,598  49,380,349  (44,626,488)  1,939  (2,902,869)   —    28,444,529 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

  1,256,341,372   193,815,932   (99,444,894)   746,007   (48,179,503)   —     1,303,278,914  1,303,278,914  240,263,874  (140,581,001)  143,016  (117,432,346)   —    1,285,672,457 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Accumulated depreciation

              

Network in operation and equipment

  495,887,086   —     (21,214,724)   —     (32,860,339)   110,533,486   552,345,509  552,345,509   —    (28,712,096)   —    (67,907,227)  104,279,361  560,005,547 

Buildings

  10,481,322   —     (1,568,542)   —     (940,054)   2,682,559   10,655,285  10,655,285   —    (2,311,442)   —    (2,157,996)  2,625,102  8,810,949 

Other assets

  48,459,697   —     (4,572,509)   —     (2,251,958)   21,724,299   63,359,529  63,359,529   —    (2,418,837)   —    (6,579,983)  22,172,785  76,533,494 

Inventories for operation of the network

  323,201   —     (9,205)   —     (4,339)   265,736   575,393 

Spare parts for operation of the network

 575,393   —    (160,696)   —    (131,429)  38,479  321,747 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

 Ps. 555,151,306  Ps.                       Ps. (27,364,980)  Ps.   Ps. (36,056,690)  Ps.  135,206,080  Ps.626,935,716 Ps. 626,935,716  Ps.—   Ps. (33,603,071)  Ps.—    Ps. (76,776,635)  Ps.129,115,727  Ps.645,671,737 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net Cost

 Ps. 701,190,066  Ps. 193,815,932  Ps. (72,079,914)  Ps. 746,007  Ps. (12,122,813)  Ps. (135,206,080) Ps.676,343,198 Ps. 676,343,198  Ps.240,263,874  Ps. (106,977,930)  Ps. 143,016  Ps. (40,655,711)  Ps.(129,115,727)  Ps. 640,000,720 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

  At December 31,
2018		  Additions  Retirements  Business
combinations		  Effect of
translation of
foreign
subsidiaries and
hyperinflation
adjustment		  Depreciation
for
the year		  At December 31,
2019		 

Cost

 

Network in operation and equipment

 Ps. 969,195,936  Ps.82,992,062  Ps. (13,417,360)  Ps.9,572,805  Ps. (57,669,840)  Ps.—   Ps.990,673,603

Land and buildings

  57,130,326   1,530,677   (4,025,222)   115,935   (3,950,463)   —     50,801,253 

Other assets

  149,809,137   26,881,611   (7,594,735)   1,021,051   (7,776,500)   —     162,340,564 

Construction in process and advances plant suppliers(1)

  81,092,529   82,640,305   (76,892,011)   209,790   (5,511,439)   —     81,539,174 

Spare parts for operation of the network

  28,444,529   44,776,904   (36,525,735)   —     (2,462,605)   —     34,233,093 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  1,285,672,457   238,821,559   (138,455,063)   10,919,581   (77,370,847)   —     1,319,587,687 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accumulated depreciation

       

Network in operation and equipment

  560,005,547   —     (24,954,514)   —     (47,778,627)   93,097,695   580,370,101 

Buildings

  8,810,949   —     (287,072)   —     (1,386,974)   2,330,405   9,467,308 

Other assets

  76,533,494   —     (695,425)   —     (4,754,982)   19,249,104   90,332,191 

Spare parts for operation of the network

  321,747   —     (283,986)   —     (79,226)   116,182   74,717 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.645,671,737  Ps.—   Ps. (26,220,997)  Ps.—    Ps. (53,999,809)  Ps. 114,793,386  Ps.680,244,317
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net Cost

 Ps. 640,000,720  Ps.238,821,559  Ps. (112,234,066)  Ps.10,919,581  Ps. (23,371,038)  Ps. (114,793,386)  Ps.639,343,370
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

Construction in progress includes fixed and mobile network facilities as well as satellite developments and fiber optic which is in the process of being installed.

The completion period of construction in progress is variable and depends upon the type of fixed assetsplant and equipment under construction.

b) At December 31, 2016 and 2017, property, plant and equipment include the following assets under capital leases:

   2016   2017 

Assets under capital leases

   Ps.  8,210,557    Ps.  8,116,532 

Accumulated depreciation

   (4,839,007)    (3,475,014) 
  

 

 

   

 

 

 
   Ps.  3,371,550    Ps.  4,641,518 
  

 

 

   

 

 

 

c)At December 31, 2017,2018, Claro Brasil has land and buildings and other equipment that are pledged in guarantee of legal proceedings in the amount of Ps. 3,521,082 (Ps. 3,530,845 as of December 31, 2016).Ps.3,166,882.

d)

c) Relevant information related to the computation of the capitalized borrowing costs is as follows:

 

  Years ended December 31,   Year ended December 31, 
  2015   2016   2017   2017   2018   2019 

Amount invested in the acquisition of qualifying assets

   Ps. 52,922,105        Ps. 52,974,400        Ps. 49,642,370         Ps. 49,642,370        Ps. 45,456,630        Ps. 50,783,957      

Capitalized interest

   3,524,841       2,861,307        2,875,034         2,875,034        2,020,288        2,233,358      

Capitalization rate

   6.7%    5.4%    5.8%    5.8%    4.4%    4.4% 

Capitalized interest is being amortized over a period of seven years, which is the estimated useful life of the related assets.

e)On October 20, 2017, our subsidiary Star One signed a contract with SSL — Space Systems Loral for construction of the Star One D2 satellite, which will be equipped with transponders 52 in the C and Ku bands,

20 Gbps of capacity in Band Ka and a certain capacity inX-band. The cost of this Project is estimated to be approximately Ps. 6,391,104 (US$ 323,000) and the launch will take place at the end of 2019. At December 31, 2017 the amount recorded in Construction in progress amounts to Ps. 916,240 (R$153,179).

f)The Company’s concessions in Brazil establish certain conditions under which assets may be reverted to the government, as discussed in Note 16(c).

g)During 2016, Claro Brasil reviewed the useful life of its set top boxes. Such review was supported by historical data, change in the economic environment in which Claro Brasil operates and based on a professional technical evaluation. Based on the review the Company shortened such useful lives and recorded an increase in depreciation expense for Ps. 2,468,415 (R$458,234).

In some of the jurisdictions where the Company operates and under certain circumstances, the Company may be required to transfer certain assets covered by some of their concessions to the government pursuant to valuation methodologies that vary in each jurisdiction (assets reversion). It is uncertain whether reversion would ever be applied and how reversion provisions would be interpreted in practice.

11. Intangible assets, net and goodwill

a)An analysis of intangible assets at December 31, 2015, 20162017, 2018 and 20172019 is as follows:

 

 For the year ended December 31, 2015  For the year ended December 31, 2017 
 Balance at
beginning of
year		 Acquisitions Acquisitions
in business
combinations		 Disposals
and other		 Amortization
of the year		 Effect of
translation of
foreign
subsidiaries		 Balance at
end
of year		  Balance at
beginning of
year		 Acquisitions Acquisitions
in business
combinations		 Disposals and
other		 Amortization
of the year		 Effect of
translation of
foreign
subsidiaries		 Balance at end
of year		 

Licenses and rights of use

 Ps.174,795,094  Ps.19,507,462  Ps.448,364  Ps.1,109,172  Ps.—   Ps. (20,564,317)  Ps.175,295,775  Ps. 242,739,362  Ps.12,347,051  Ps.53,923  Ps. (1,037,458)  Ps.—   Ps. (6,689,054)  Ps. 247,413,824 

Accumulated amortization

 (91,231,249)   —     —    (25,976)  (7,419,551)  13,830,252  (84,846,524)  (126,708,098)   —     —    244,564  (11,879,489)  4,233,585  (134,109,438) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 83,563,845  19,507,462  448,364  1,083,196  (7,419,551)  (6,734,065)  90,449,251  116,031,264  12,347,051  53,923  (792,894)  (11,879,489)  (2,455,469)  113,304,386 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Trademarks

 22,274,991   —    252,728  207,251   —    89,043  22,824,013  27,789,150  127,823  82,868  (29,804)   —    809,175  28,779,212 

Accumulated amortization

 (10,829,402)   —     —     —    (936,606)  242,301  (11,523,707)  (15,222,257)   —     —    34,464  (3,179,461)  (474,151)  (18,841,405) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 11,445,589   —    252,728  207,251  (936,606)  331,344  11,300,306  12,566,893  127,823  82,868  4,660  (3,179,461)  335,024  9,937,807 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Customer relationships

 15,306,167   —    949,915  791,548   —    1,346,777  18,394,407  26,245,508   —    512,667  (882,338)   —    1,109,877  26,985,714 

Accumulated amortization

 (485,951)   —     —     —    (3,452,760)  (24,164)  (3,962,875)  (12,435,074)   —     —    882,338  (3,769,777)  (806,982)  (16,129,495) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 14,820,216   —    949,915  791,548  (3,452,760)  1,322,613  14,431,532  13,810,434   —    512,667   —    (3,769,777)  302,895  10,856,219 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Software licenses

 7,297,177  2,245,027  42,760  (307,955)   —    (494,241)  8,782,768  12,874,796  3,351,200   —    (1,698,118)   —    527,720  15,055,598 

Accumulated amortization

 (1,510,514)   —     —    1,434,129  (2,921,767)  573,554  (2,424,598)  (5,123,740)   —     —    1,212,669  (3,699,363)  (204,727)  (7,815,161) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 5,786,663  2,245,027  42,760  1,126,174  (2,921,767)  79,313  6,358,170  7,751,056  3,351,200   —    (485,449)  (3,699,363)  322,993  7,240,437 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Content rights

 1,862,030  768,888   —     —     —    3,609  2,634,527  4,876,298  2,099,084   —    (63,137)   —    (194,803)  6,717,442 

Accumulated amortization

 (158,555)   —     —     —    (270,191)   —    (428,746)  (2,666,499)   —     —    (195,658)  (1,820,092)  165,584  (4,516,665) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 1,703,475  768,888   —     —    (270,191)  3,609  2,205,781  2,209,799  2,099,084   —    (258,795)  (1,820,092)  (29,219)  2,200,777 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total of intangibles, net

 Ps.117,319,788  Ps. 22,521,377  Ps. 1,693,767  Ps. 3,208,169  Ps. (15,000,875)  Ps.(4,997,186)  Ps.124,745,040  Ps. 152,369,446  Ps. 17,925,158  Ps.649,458  Ps. (1,532,478)  Ps. (24,348,182)  Ps.(1,523,776)  Ps.143,539,626 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Goodwill (Note 12)

 Ps. 140,903,391  Ps.220,124  Ps.711,723  Ps.—   Ps.—   Ps.(4,721,522)  Ps. 137,113,716  Ps.152,632,635  Ps.—   Ps. 951,348  Ps.(134,525)  Ps.—   Ps.(1,986,226)  Ps.151,463,232 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 For the year ended December 31, 2016  For the year ended December 31, 2018 
 Balance at
beginning of
year		 Acquisitions Acquisitions
in business
combinations		 Disposals
and other		 Amortization
of the year		 Effect of
translation of
foreign
subsidiaries		 Balance at
end
of year		  Balance at
beginning of
year		 Acquisitions Acquisitions
in business
combinations		 Disposals and
other		 Amortization
of the year		 Effect of
translation of
foreign
subsidiaries
and
Hyperinflation
adjustment		 Balance at end
of year		 

Licenses and rights of use

 Ps.175,295,775  Ps.9,129,949  Ps.360,144  Ps.1,269,478  Ps.—   Ps.56,684,016  Ps.242,739,362  Ps. 247,413,824  Ps. 4,227,244  Ps.—   Ps.1,508,274  Ps.—   Ps. (19,670,368)  Ps. 233,478,974 

Accumulated amortization

 (84,846,524)   —     —     —     (10,255,271)  (31,606,303)  (126,708,098)  (134,109,438)   —     —    (1,005,877)   (11,347,089)  16,281,825  (130,180,579) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 90,449,251  9,129,949  360,144  1,269,478  (10,255,271)  25,077,713  116,031,264  113,304,386  4,227,244   —    502,397  (11,347,089)  (3,388,543)  103,298,395 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Trademarks

 22,824,013   —    101,655  (13,820)   —    4,877,302  27,789,150  28,779,212  159,958  6,631   —     —    (738,635)  28,207,166 

Accumulated amortization

 (11,523,707)   —     —     —    (330,576)  (3,367,974)  (15,222,257)  (18,841,405)   —     —     —    (4,973,602)  275,046  (23,539,961) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 11,300,306   —    101,655  (13,820)  (330,576)  1,509,328  12,566,893  9,937,807  159,958  6,631   —    (4,973,602)  (463,589)  4,667,205 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Customer relationships

 18,394,407   —    1,904,503   —     —    5,946,598  26,245,508  26,985,714  74,637  15,556   —     —    (1,532,839)  25,543,068 

Accumulated amortization

 (3,962,875)   —     —     —    (3,231,518)  (5,240,681)  (12,435,074)  (16,129,495)   —     —     —    (3,754,312)  1,122,270  (18,761,537) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 14,431,532   —    1,904,503   —    (3,231,518)  705,917  13,810,434  10,856,219  74,637  15,556   —    (3,754,312)  (410,569)  6,781,531 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Software licenses

 8,782,768  3,854,066  26,871  (829,680)   —    1,040,771  12,874,796  15,055,598  2,004,550  3,006  (905,610)   —    (1,848,286)  14,309,258 

Accumulated amortization

 (2,424,598)  (41,185)  (8,367)  829,680  (3,469,461)  (9,809)  (5,123,740)  (7,815,161)   —     —    2,677,848  (3,491,629)  924,139  (7,704,803) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 6,358,170  3,812,881  18,504   —    (3,469,461)  1,030,962  7,751,056  7,240,437  2,004,550  3,006  1,772,238  (3,491,629)  (924,147)  6,604,455 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Content rights

 2,634,527  2,242,556   —    (217,057)   —    216,272  4,876,298  6,717,442  850,779   —     —     —    (18,512)  7,549,709 

Accumulated amortization

 (428,746)   —     —    (1,612)  (2,236,141)   —    (2,666,499)  (4,516,665)   —     —     —    (2,231,978)  (14,949)  (6,763,592) 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net

 2,205,781  2,242,556   —    (218,669)  (2,236,141)  216,272  2,209,799  2,200,777  850,779   —     —    (2,231,978)  (33,461)  786,117 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total of intangibles, net

 Ps.124,745,040  Ps. 15,185,386  Ps.2,384,806  Ps.1,036,989  Ps.(19,522,967)  Ps. 28,540,192  Ps.152,369,446  Ps.143,539,626  Ps.7,317,168  Ps.25,193  Ps.2,274,635  Ps. (25,798,610)  Ps. (5,220,309)  Ps. 122,137,703 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Goodwill (Note 12)

 Ps. 137,113,716  Ps.           —   Ps. 3,953,023  Ps. (356,832)  Ps.               —   Ps. 11,922,728  Ps.152,632,635 

Goodwill

 Ps. 151,463,232  Ps.—    Ps. 334,739  Ps. (1,094,861)   —    Ps.(5,136,613)  Ps.145,566,497 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

  For the year ended December 31, 2017 
  Balance at
beginning of
year		  Acquisitions  Acquisitions
in business
combinations		  Disposals
and other		  Amortization
of the year		  Effect of
translation of
foreign
subsidiaries		  Balance at
end
of year		 

Licenses and rights of use

 Ps.242,739,362  Ps. 12,347,051  Ps.53,923  Ps. (1,037,458)  Ps.               —   Ps. (6,689,054)  Ps.247,413,824 

Accumulated amortization

  (126,708,098)   —     —     244,564   (11,879,489)   4,233,585   (134,109,438) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  116,031,264   12,347,051   53,923   (792,894)   (11,879,489)   (2,455,469)   113,304,386 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Trademarks

  27,789,150   127,823   82,868   (29,804)   —     809,175   28,779,212 

Accumulated amortization

  (15,222,257)   —     —     34,464   (3,179,461)   (474,151)   (18,841,405) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  12,566,893   127,823   82,868   4,660   (3,179,461)   335,024   9,937,807 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Customer relationships

  26,245,508   —     512,667   (882,338)   —     1,109,877   26,985,714 

Accumulated amortization

  (12,435,074)   —     —     882,338   (3,769,777)   (806,982)   (16,129,495) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  13,810,434   —     512,667   —     (3,769,777)   302,895   10,856,219 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Software licenses

  12,874,796   3,351,200   —     (1,698,118)   —     527,720   15,055,598 

Accumulated amortization

  (5,123,740)   —     —     1,212,669   (3,699,363)   (204,727)   (7,815,161) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  7,751,056   3,351,200   —     (485,449)   (3,699,363)   322,993   7,240,437 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Content rights

  4,876,298   2,099,084   —     (63,137)   —     (194,803)   6,717,442 

Accumulated amortization

  (2,666,499)   —     —     (195,658)   (1,820,092)   165,584   (4,516,665) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  2,209,799   2,099,084   —     (258,795)   (1,820,092)   (29,219)   2,200,777 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total of intangibles, net

 Ps.152,369,446  Ps.17,925,158  Ps. 649,458  Ps.(1,532,478)  Ps.(24,348,182)  Ps.(1,523,776)  Ps.143,539,626 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Goodwill (Note 12)

 Ps.152,632,635  Ps.—   Ps.951,348  Ps.(134,525)  Ps.               —   Ps.(1,986,226)  Ps.151,463,232 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  For the year ended December 31, 2019 
  Balance at
beginning of
year		  Acquisitions  Acquisitions
in business
combinations		  Disposals and
other		  Amortization
of the year		  Effect of
translation of
foreign
subsidiaries
and
Hyperinflation
adjustment		  Balance at end
of year		 

Licenses and rights of use

 Ps. 233,478,974  Ps.13,206,877  Ps.7,844,339 Ps.7,286,114  Ps.—   Ps. (15,715,442)  Ps. 246,100,862 

Accumulated amortization

  (130,180,579)   —     —     (2,391,624)   (11,577,160)   9,481,480   (134,667,883) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  103,298,395   13,206,877   7,844,339   4,894,490   (11,577,160)   (6,233,962)   111,432,979 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Trademarks

  28,207,166   53,467   —     (6,012)   —     (835,613)   27,419,008 

Accumulated amortization

  (23,539,961)   —     —     —     (1,008,483)   618,145   (23,930,299) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  4,667,205   53,467   —     (6,012)   (1,008,483)   (217,468)   3,488,709 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Customer relationships

  25,543,068   20,248   —     5,507   —     (2,693,812)   22,875,011 

Accumulated amortization

  (18,761,537)   —     —     —     (3,371,924)   2,357,831   (19,775,630) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  6,781,531   20,248   —     5,507   (3,371,924)   (335,981)   3,099,381 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Software licenses

  14,309,258   2,729,480   —     (949,858)   —     (2,984,770)   13,104,110 

Accumulated amortization

  (7,704,803)   —     —     (1)   (2,479,088)   2,183,149   (8,000,743) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  6,604,455   2,729,480   —     (949,859)   (2,479,088)   (801,621)   5,103,367 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Content rights

  7,549,709   1,427,694   —     1,638,007   —     (455,228)   10,160,182 

Accumulated amortization

  (6,763,592)   —     —     (8,720)   (1,772,779)   429,862   (8,115,229) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net

  786,117   1,427,694   —     1,629,287   (1,772,779)   (25,366)   2,044,953 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total of intangibles, net

 Ps.122,137,703  Ps.17,437,766  Ps.7,844,339  Ps.5,573,413  Ps. (20,209,434)  Ps.(7,614,398)  Ps.125,169,389 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Goodwill

 Ps. 145,566,497  Ps.—    Ps.10,869,571  Ps. (843,005)   —    Ps.(2,693,262)  Ps.152,899,801 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

b)The aggregate carrying amount of goodwill is allocated as follows:

 

  December 31, 
  2016   2017   2018   2019 

Europe (7 countries)

  Ps.52,207,877   Ps.53,143,542    Ps. 53,066,729    Ps.52,950,325 

Brazil (Fixed, wireless and TV)

   26,106,623    24,708,740    21,388,124    28,062,398 

Puerto Rico

   17,463,393    17,463,394    17,463,394    17,463,394 

Dominican Republic

   14,186,724    14,186,723    14,186,723    14,186,723 

Mexico (includes Telmex)

   9,936,857    9,852,912 

Colombia

   12,770,381    12,124,685 

México

   9,856,601    10,148,380 

Peru

   3,086,981    2,739,947 

Chile

   2,576,214    2,364,816 

El Salvador

   2,510,577    2,499,552 

Ecuador

   2,155,385    2,155,385    2,155,385    2,155,384 

Peru

   3,792,950    3,958,110 

El Salvador

   2,510,596    2,510,577 

Chile

   2,758,653    2,834,134 

Colombia

   14,659,892    13,981,033 

Other countries

   6,853,685    6,668,682    6,505,388    8,204,197 
  

 

   

 

   

 

   

 

 
  Ps. 152,632,635   Ps. 151,463,232    Ps. 145,566,497    Ps.152,899,801
  

 

   

 

   

 

   

 

 

c)The following is a description of the major changes in the”Licensesthe “Licenses and rights of use” caption during the years ended December 31, 2015, 20162017, 2018 and 2017:

2015 Acquisitions

i) In October 2015, Radiomóvil Dipsa renewed a license to provide cellular service in the 800 MHz frequency band. The frequency band expires in 2030. The amount paid was Ps. 1,007,410.

ii) In May 2015, Claro Ecuador acquired licenses related to 4G/LTE services. The frequency band expires in 2023. The amount paid was Ps. 2,861,060.

iii) In 2015, Claro Brasil obtained renewals related with the frequency bands of national 700Mhz. Funding for these procedures must be transmitted by operators in four annual installments adjusted by theIGP-ID of Ps. 4,412,730 (R$ 1,001,414) for which the corresponding renewal was performed.

iv) In November 2015, Vipnet located in Croatia acquired 2 x 3 MHz and 2 x 4.8 MHz in the 1.800 MHz spectrum for EUR 18,513. Vipnet already holds 2 x 29.4 MHz in the lower frequency band (below 1 GHz), 2 x 25.0 in the higher frequency band (above 1 GHz) as well as 5.0 MHz TDD spectrum. The amount paid was Ps. 321,915.

v) In November 2015, Vip mobile, the Serbian subsidiary acquired 2 x 5 MHz of the 800 MHz spectrum. The new spectrum will be used by VIP mobile for the LTE rollout and will enhance the high-speed data service in rural areas as well as data usage in connection with smartphones. Vip mobile already holds a 2 x 4.2 MHz in the lower frequency band (below 1 GHz) as well as 2 x 45.0 MHz in the higher frequency band (above 1 GHz). The amount paid was Ps. 1,129,988 (EUR 60,942).

As a part of the business combinations, the Company recognized licenses for an amount of Ps. 448,364. The Company holds licenses provided by the regulatory authorities in those jurisdictions. These licenses are estimated to have a remaining useful life of 10 years.

vi) In 2015, Argentina paid Ps. 5,599,745 (AR$ 3,269,312) for the acquisition of 4G licenses to increase the service throughout the country.

vii) Additionally the Company acquired other licenses in Puerto Rico, Panama and others countries in the amount of Ps. 4,174,614.

2016 Acquisitions

i) In February 2016, the Company´s subsidiary in Paraguay was granted with the use of 30 MHz of spectrum in the 1700/2100 Mhz frequency. The total cost was Ps. 830,719 (US$ 46,000).

ii) In February 2016, the Company through its subsidiary Radiomóvil Dipsa, S.A. de C.V. (Telcel), acquired through an auction a total of 20MHz in the national wideAWS-1 band and 40 MHz in theAWS-3 band. The concession expires in October 2030. The Company paid an amount of Ps. 2,098,060.

iii) In May 2016, Mtel, located in Bulgaria, acquired 2 x 5 MHz in the1,800-MHz spectrum for Ps. 135,441 (EUR 6,212). During 2016, Telekom Austria paid Ps. 410,713 (EUR 18,837) for the renewals referring to an obligation obtained from concessions granted in previous years.

iv) On May 26, 2016, the Company’s subsidiary in Peru acquired spectrum in a public auction of the 700 MHz band. The frequency band expires in 2036. The cost of the spectrum was Ps. 5,627,316 (PEN$. 1,002,523).

v) In July 2016, Ecuador Telecom acquired a license to operate TV in Ecuador for a period that ends in 2031. The amount paid was Ps. 27,700 (US$ 1,500).2019:

2017 Acquisitions

i) In 2017, Claro Brasil increased its licenses value by Ps. 3,592,034 due to the cleaning process of the 700 MHz national frequency acquired in September 2014.

ii) On February 24, 2017 Radiomóvil Dipsa renewed its 8.4 MHz national license by paying Ps. 917,431, and on July 14, 2017, it acquired 43 concession titles for frequencies of 2.5 GHz in the amount of Ps. 5,305,498.

iii) Additionally, in 2017, the Company acquired other licenses in Chile, Europe, Uruguay and others countries in the amount of Ps. 2,532,088.

2018 Acquisitions

i. In December, Dominican Republic acquired radio spectrum totaling Ps. 709,829 (RD$ 1,831,427) with a useful life of 11 years.

ii. Additionally, in 2018, the Company acquired other licenses in Paraguay, Puerto Rico, Europe, Argentina, Chile and others countries in the amount of Ps. 3,517,415.

2019 Acquisitions

i) In 2019, Claro Brasil increased its licenses value by Ps. 3,457,251 by renewal licenses Anatel and reversion of IRU of Telxus referring to ICMS.

ii) In 2019, Austria acquired licenses to operate certain frequencies for Ps. 3,023,732, (3.5 GHz; EUR 64.3 mn), Belarus (2.1 GHz; EUR 9.5 mn) and Croatia (2.1 GHz; EUR 7.2 mn).

iii) In 2019, Telmex increased its licenses value by Ps. 459,668 for rights to use IFETEL with a validity of 20 years, and a right to use submarine cable with a validity of 10 years.

iv) In January 2019, Telcel acquired licenses for an amount of Ps.1,649,525 for PC´s 98 concessions titles and September 30, 2019 for 400 MHZ concessions titles.

v) In December 2019, Comcel increased its licenses value by Ps. 2,753,768 or (468,511,573,375 Colombian pesos) in accordance with Res.3386 of December 23, granted Claro (Comcel) the 20 years renewal of 10 MHz of spectrum in the 1900 MHz band.

vi) Additionally, in 2019, the Company acquired other licenses in Puerto Rico, Argentina, Guatemala, Panamá and other countries in the amount of Ps. 1,862,934.

Amortization of intangibles for the years ended December 31, 2015, 20162017, 2018 and 20172019 amounted to Ps. 15,000,875,24,348,182, Ps. 19,522,96825,798,610 and Ps. 24,348,182,20,209,434, respectively.

In September 2017, the Company decided to consolidate the brands in Telekom Austria Group. Depending on the respective markets, the Austrian brand “A1” will be rolled out to all the subsidiaries through the third quarter 2019, at the latest, and the local brands are amortized accordingly.

Some of the jurisdictions in which the Company operates can revoke their concessions under certain circumstances such as imminent danger to national security, national economy and natural disasters.

12. Business combinations, acquisitions, sale andnon-controlling interest

a)The following is a description of the major acquisitions of investments in associates and subsidiaries during the years ended December 31, 2015, 20162017 and 2017:

Acquisitions — 2015

a)In February 2015, the Company acquired throughout its Telmex and Consertel subsidiaries an additional 35% of Hitss Solutions, S. A. de C.V. (Hitss) increasing its equity interest in this entity to 68.9%. Hitss offers information technology service. This acquisition was valued at is fair value at the purchase date. The Company started consolidating this subsidiary beginning March, 2015. The amount paid for the additional equity interest was Ps. 472,481, net of cash, and the goodwill recorded as part of this acquisition was Ps. 205,141. The identified goodwill has been allocated to the Mexico segment. The goodwill recognized is not deductible for income tax purposes.

b)The following entities were acquired by Telekom Austria:

i)In June 2015, acquired 100% of eight cable operators in the Republic of Macedonia through its subsidiary Blizoo.

ii)In September 2015, acquired 100% of Amisco NV (‘Amis’), the holding entity of Amis Slovenia and Amis Croatia. Amis operates as a fixed-line reseller in Slovenia and owns a fiber network in Croatia. The companies offer internet, IPTV and telephone services.

iii)In September 2015, acquired 100% of Bultel Cable Bulgaria EAD (‘Blizoo Bulgaria’).

The acquired companies were consolidated beginning October 2015. The amount paid was Ps. 2,864,968, net of cash, and the goodwill recognized as part of these acquisitions was Ps. 711,723. The identified goodwill has been allocated to the Europe segment. The goodwill recognized is not deductible for income tax purposes.

c)During 2015, the Company acquired throughout its Mexican and Brazil subsidiaries other entities for which they paid Ps. 119,704, net of cash.

d)The Company acquired an additionalnon-controlling interest in its Mexican and Brazil entities for an amount of Ps. 1,031,049.

Acquisitions and sale 2016

a) In January 2016, in order to expand and strengthen its operations in Brazil, the Company through its Brazilian subsidiary, acquired a controlling interest of 99.99% in Brazil Telecomunicações S.A. (“BRTel”), a company operating in the market for Pay TV, Internet and broadband services and serving various municipalities of Brazil under the BLUE brand. The amount paid for the business acquisition was Ps. 1,088,668, net of acquired cash. The goodwill recognized amounted to Ps. 1,046,253.

b) In May 2016, the Company acquired an additionalnon-controlling interest of 1.8% in Tracfone Wireless Inc. thereby obtaining 100% of its capital stock. The amount paid was Ps. 2,300,553 (US$ 124,673). This transaction was recorded as an equity transaction, and therefore, no gain or loss was recognized.

c) In May 2016, the Company through his subsidiary, América Móvil Perú, S.A.C. acquired 100% of the capital stock of Olo del Perú S.A.C. (“Olo”), and TVS Wireless S.A.C. (“TVS”). Olo and TVS provide telecommunications services throughout Peru and hold radio spectrum in the 2.5 GHz band. The transaction was conditioned to the obtention of the approval of the Peruvian regulator, such approval was finally obtained in December 2016. The amount of the transaction was Ps. 1,854,379 (US$. 102,343) net of acquired cash. In May 2016 the Company paid Ps. 152,214 (US$ 7,554) and in January 2017, after the approval, Ps. 2,079,095 (US$ 94,789). The goodwill recognized amounted to Ps. 1,454,333 in December 2016 and Ps. 188,452 in December 2017.

d) Based on a 2014 shareholder agreement, the Company agreed to ensure a minimal free float of Telekom Austria shares in the market. Consequently, in July 2016, the Company sold shares corresponding to 7.8% of the outstanding common stock of Telekom Austria AG. This sale reduced the overall shareholding of América Movil in Telekom Austria AG from 59.70% to 51.89%. Additionally, in August 2016, the Company sold 0.89% of the outstanding common stock of Telekom Austria AG. Following the successful completion of this transaction, AMX’s stake was reduced to 51.0%. The amount of cash received for these transactions was Ps. 6,323,336. As América Móvil still retains control over Telekom Austria AG, these transactions were recorded as equity transactions.

e) In September 2016, the Company, through his subsidiary Tracfone, acquired certain assets ofT-Mobile, that represented a business, which included the brands known as Walmart Mobile and Go Smart. These assets were acquired in order to expand the Company’s distribution channels, add an incremental revenue stream, and assist in the growth of subscribers. There was no cash exchanged in the acquisition. The goodwill recognized amounted to Ps. 1,251,464.

f) In November 2016, Telekom Austria Group acquired 100% of the Belarusian fixed-line operator Atlant Telecom (Atlant) and its subsidiary TeleSet. After the acquisition, Atlant was renamed velcom ACS. Both companies are the leading privately owned fixed-line operators in Belarus offering fixed-line broadband, IPTV and cable TV as well as a video and audio library. The acquisition of Atlant and TeleSet is a further step in Telekom Austria Group’s convergence strategy. The final allocation of consideration transferred will be determined once all necessary information regarding identifiable assets is available. The amount paid for the business acquisition was Ps. 582,931, net of acquired cash. The goodwill recognized amounted to Ps. 200,973.2019:

Acquisitions 2017

a) In February 2017, Telekom Austria Group acquired 97.68% of Metronet telekomunikacije through its Croatian subsidiary Vipnet. Metronet is one of the leading alternative fixed business solutions providerproviders in Croatia. The fair values of the assets acquired and liabilities assumed at the acquisition date are reported in the Europe segment. The amount paid for the business acquisition was Ps. 1,550,534, net of acquired cash. The goodwill recognized amounted to Ps. 502,574.

b) During 2017, the Company acquired through its subsidiaries, other entities for which ifit paid Ps. 3,249,164, net of acquired cash. The identified goodwill has been allocated to the Europe segment. The goodwill recognized amounted to Ps. 260,355.

c) The Company acquired an additionalnon-controlling interest in its Mexican entities for an amount of Ps. 23,881.

Acquisitions 2019

a) On January 24, 2019, the Company acquired 100% of Telefónica Móviles Guatemala, S.A (“Telefónica Guatemala”) from Telefónica S.A. and certain of its affiliates. The acquired company provides mobile and fixed telecommunications services, including voice, data and Pay TV. The final purchase price paid for the business acquisition was Ps. 5,946,787, net of acquired cash. For the purchase accounting, the Company determined the fair value of Telefónica Guatemala´s identifiable assets and liabilities based on relative fair values. The purchase accounting is substantially completed as of the date of the financial statements and the values of the assets acquired and liabilities assumed are as follows:

2019
Provisional
amounts at the
acquisition date

Current assets

Ps. 1,214,178

Othernon-current assets

252,469

Intangible assets (excluding goodwill)

676,884

Property, plant and equipment

5,757,958

Rights-of-use

2,331,029

Total assets acquired

10,232,518

Accounts payable

4,579,590

Other liabilities

2,338,592

Total liabilities assumed

6,918,182

Fair value of assets acquired and liabilities assumed, net

3,314,336

Acquisition price

5,946,787

Provisional goodwill

Ps. 2,632,451

b) On December 18, 2019, after receipt of the necessary approvals from local regulators, the Company completed the previously announced acquisition of 100% of Nextel Telecomunicações Ltda. and its subsidiaries (“Nextel Brazil”), from NII Holdings, Inc. and certain of its affiliates (“NII”) and AI Brazil Holdings B.V. Nextel Brazil provides nationwide mobile telecommunications services. With this transaction, the Company consolidates its operations as one of the leading telecommunication service providers in Brazil, strengthening its mobile network capacity, spectrum portfolio, subscriber base, coverage and quality, particularly in the cities of São Paulo and Rio de Janeiro, the main markets in Brazil.

The aggregate purchase price was Ps. 18,028,103, after making adjustments pursuant to the Purchase Agreement. After deducting Ps. 9,325,750 of net debt, the net purchase price at closing was Ps. 7,335,045 net of acquired cash. The purchase price is subject to review and adjustment by the Company.

Derived from the recent date of completion of the acquisition, as of the date when the present consolidated financial statements were drawn up, the process for allocating the purchase price is provisional. This analysis should conclude in the coming months, yet will not last longer than twelve months from the acquisition date stipulated in the standard.

The provisional purchase accounting as of December 31, 2019, is as follows:

 

b)
Consolidated subsidiaries with2019
Provisional
amounts at the
acquisition date

Current assets

Ps. 3,624,576

Othernon-controllingnon-current interestsassets

4,805,319

Intangible assets (excluding goodwill)

7,167,455

Property, plant and equipment

5,161,676

Rights-of-use

7,337,478

Total assets acquired

28,096,504

Accounts payable

14,036,438

Other liabilities

14,953,685

Total liabilities assumed

28,990,123

Fair value of assets acquired and liabilities assumed, net

(893,619) 

Acquisition Price

7,335,045

Provisional goodwill

Ps. 8,228,664

c) During 2019, the Company acquired through its subsidiaries, other entities for which it paid Ps. 48,808, net of acquired cash.

d) The Company acquired an additionalnon-controlling interest in its entities for an amount of Ps. 83,055.

b) Consolidated subsidiaries withnon-controlling interests

The Company has control over Telekom Austria, which has a materialnon-controlling interest in Telekom Austria.interest. Set out below is summarized information as of December 31, 20162018 and 20172019 of TKA’s consolidated financial statements. The amounts disclosed for this subsidiary are before inter-company eliminations and using the same accounting policies of América Móvil.

Selected financial data from the consolidated statements of financial position

 

   December 31, 
   2016   2017 

Assets:

    

Current assets

  Ps.31,371,809   Ps.29,128,486 

Non-current assets

   143,708,470    150,225,260 
  

 

 

   

 

 

 

Total assets

  Ps.175,080,279   Ps.179,353,746 
  

 

 

   

 

 

 

Liabilities and equity:

    

Current liabilities

  Ps.40,961,299   Ps.30,192,384 

Non-current liabilities

   80,966,903    89,048,150 
  

 

 

   

 

 

 

Total liabilities

   121,928,202    119,240,534 

Equity attributable to equity holders of the parent

   23,527,370    25,808,318 

Non-controlling interest(1)

   29,624,707    34,304,894 
  

 

 

   

 

 

 

Total equity

  Ps.53,152,077   Ps.60,113,212 
  

 

 

   

 

 

 

Total liabilities and equity

  Ps. 175,080,279   Ps. 179,353,746 
  

 

 

   

 

 

 

(1)In 2017 this amount includes Ps. 14,942,886 (Ps. 13,715,747 in 2016) for the undated subordinated fixed rate bond (see Note 19).
   December 31, 
   2018   2019 

Assets:

    

Current assets

  Ps.  29,854,542   Ps.  29,516,038 

Non-current assets

   131,407,408    137,724,390 
  

 

 

   

 

 

 

Total assets

  Ps.161,261,950   Ps.167,240,428 
  

 

 

   

 

 

 

Liabilities and equity:

    

Current liabilities

  Ps.  36,822,034   Ps.  34,608,254 

Non-current liabilities

   80,023,800    89,711,288 
  

 

 

   

 

 

 

Total liabilities

   116,845,834    124,319,542 

Equity attributable to equity holders of the parent

   22,621,625    21,864,132 

Non-controlling interest

   21,794,491    21,056,754 
  

 

 

   

 

 

 

Total equity

  Ps.  44,416,116   Ps.  42,920,886 
  

 

 

   

 

 

 

Total liabilities and equity

  Ps. 161,261,950   Ps. 167,240,428 
  

 

 

   

 

 

 

Summarized consolidated statements of comprehensive income

 

  For the year ended December 31,   For the year ended December 31, 
  2015   2016   2017   2017   2018   2019 

Operating revenues

  Ps. 73,159,960   Ps. 85,185,177   Ps. 93,644,173   Ps. 93,644,173   Ps. 100,716,444   Ps.98,420,289 

Operating costs and expenses

   66,913,434    81,590,233    86,920,692    86,920,692    95,984,880    89,732,428 
  

 

   

 

   

 

   

 

   

 

   

 

 

Operating income

   6,246,526    3,594,944    6,723,481   Ps.6,723,481   Ps.4,731,564   Ps.    8,687,861 
  

 

   

 

   

 

   

 

   

 

   

 

 

Net income

   6,157,758    7,065,770    5,656,132   Ps.5,656,132   Ps.3,809,694   Ps.    5,051,145 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total comprehensive income

  Ps.4,968,909   Ps.8,450,837   Ps.7,737,797   Ps.7,737,797   Ps.5,047,838   Ps.    1,466,783 
  

 

   

 

   

 

   

 

   

 

   

 

 

Net income attributable to:

            

Equity holders of the parent

  Ps.3,674,886   Ps.3,241,556   Ps.2,884,627   Ps.2,884,627   Ps.1,942,944   Ps.    2,565,733 

Non-controlling interest

   2,482,872    3,824,214    2,771,505    2,771,505    1,866,750    2,485,412 
  

 

   

 

   

 

   

 

   

 

   

 

 
  Ps.6,157,758   Ps.7,065,770   Ps.5,656,132   Ps.5,656,132   Ps.3,809,694   Ps.5,051,145 
  

 

   

 

   

 

   

 

   

 

   

 

 

Comprehensive income attributable to:

            

Equity holders of the parent

  Ps.2,967,698   Ps.4,311,801   Ps.3,978,263   Ps.3,978,263   Ps.2,574,397   Ps.    748,059 

Non-controlling interest

   2,001,211    4,139,036    3,759,534    3,759,534    2,473,441    718,724 
  

 

   

 

   

 

   

 

   

 

   

 

 
  Ps.4,968,909   Ps.8,450,837   Ps.7,737,797   Ps.7,737,797   Ps.5,047,838   Ps.1,466,783 
  

 

   

 

   

 

   

 

   

 

   

 

 

13. Income Taxes

13.Income Taxes

As explained previously in these consolidated financial statements, the Company is a Mexican corporation which has numerous consolidated subsidiaries operating in different countries. Presented below is a discussion of income tax matters that relates to the Company’s consolidated operations, its Mexican operations and significant foreign operations.

 

i)

Consolidated income tax matters

The composition of income tax expense for the years ended December 31, 2015, 20162017, 2018 and 20172019 is as follows:

 

  2015 2016 2017   2017 2018 2019 

In Mexico:

        

Current year income tax

  Ps.17,156,638  Ps.14,316,005  Ps. 16,568,274   Ps.16,568,274  Ps. 28,572,414  Ps. 26,295,431 

Deferred income tax

   (4,095,128)  (12,086,232)   2,582,287    2,582,287  (2,688,727)   208,658 

Foreign:

        

Current year income tax

   17,775,360  15,367,903   13,524,729    13,524,729  19,898,728   20,843,720 

Deferred income tax

   (11,657,219)  (6,198,820)   (7,733,779)    (7,733,779)  694,664   3,685,724 
  

 

  

 

  

 

   

 

  

 

  

 

 
  Ps.19,179,651  Ps.11,398,856  Ps. 24,941,511   Ps.24,941,511  Ps.46,477,079  Ps.51,033,533 
  

 

  

 

  

 

   

 

  

 

  

 

 

Deferred tax related to items recognized in OCI during the year:

 

  For the years ended December 31, 
  2015 2016 2017   2017 2018 2019 

Remeasurement of defined benefit plans

  Ps.7,786,292  Ps.(7,734,732)  Ps.3,032,403   Ps.3,032,403  Ps.408,735  Ps.9,217,320 

Effect of financial instruments acquired for hedging purposes

   (16,069)  (21,046)   (5,337)    (5,337)   

Available for sale securities

   169,529      2,858,452   (266,753) 

Equity investments at fair value

   (266,753)    1,613,667   (378,606) 

Other

   (4,019)  136,879   —      —    (8,922)   —   
  

 

  

 

  

 

   

 

  

 

  

 

 

Deferred tax benefit (expense) recognized in OCI

  Ps.   7,935,733  Ps.(4,760,447)  Ps.  2,760,313   Ps.  2,760,313  Ps.2,013,480  Ps.  8,838,714
  

 

  

 

  

 

   

 

  

 

  

 

 

A reconciliation of the statutory income tax rate in Mexico to the consolidated effective income tax rate recognized by the Company is as follows:

 

  Year ended December 31,   Year ended December 31, 
      2015         2016         2017           2017         2018         2019     

Statutory income tax rate in Mexico

   30.0%  30.0%   30.0%    30.0%  30.0%   30.0% 

Impact ofnon-deductible andnon-taxable items:

        

Tax inflation effects

   6.2%  15.9%   17.8%    17.8%  7.3%   3.5% 

Derivatives

   0.5%  8.0%   1.0%    1.0%  0.4%   (0.1%) 

Employee benefits

   1.7%  4.4%   2.2%    2.2%  1.3%   1.8% 

Other

   (0.1%)  9.8%   2.6%    2.6%  6.3%   1.8% 
  

 

  

 

  

 

   

 

  

 

  

 

 

Effective tax rate on Mexican operations

   38.3%  68.1%   53.6%    53.6%  45.3%   37.0% 

Use of tax credits in Brazil

   0.4%  (0.6%)   (0.4%) 

Equity interest in net loss (income) of associated companies

   0.8%  (0.2%)   — 

Gain on derecognition of equity method investment

   (6.4%)   —   — 

Dividends received from associates

   (0.9%)  (7.9%)   (1.2%) 

Use of unrecognized tax credits in Brazil

   (0.4%)   —     —   

Dividends received from associates Equity

   (1.2%)  (0.8%)   (0.4%) 

Foreign subsidiaries and othernon-deductible items, net

   2.0%  (10.8%)   (8.3%)    (8.3%)  1.5%   5.5% 
  

 

  

 

  

 

   

 

  

 

  

 

 

Effective tax rate

   34.2%  48.6%   43.7%    43.7%  46.0%   42.1% 
  

 

  

 

  

 

   

 

  

 

  

 

 

An analysis of temporary differences giving rise to the net deferred tax liability is as follows:

 

  Consolidated statement of financial position Consolidated statement of comprehensive income   Consolidated statements of financial position   Consolidated statements of comprehensive income 
              2016                         2017             2015 2016 2017               2018                           2019               2017   2018   2019 

Provisions

  Ps.25,850,131  Ps.26,268,666  Ps.(126,330)  Ps.1,622,132  Ps.1,579,604    Ps. 20,781,421    Ps. 17,964,305    Ps. 1,579,604    Ps. 1,841,705    Ps. (257,070) 

Deferred revenues

   8,222,412   7,461,802  1,065,242  (12,128)   (965,010)    6,866,120    5,820,260    (965,010)    3,632,051    (1,077,259) 

Tax losses carry forward

   38,208,079   38,332,408  (1,222,172)  12,706,245   (323,506)    27,881,491    26,630,407    (323,506)    (5,833,660)    (9,873) 

Property, plant and equipment(1)

   (9,716,615)   (9,929,129)  7,110,085  2,445,783   1,974,753    (11,756,590)    (11,962,544)    1,974,753    453,493    (461,594) 

Inventories

   1,522,739   2,003,049  (1,527,453)  (229,571)   519,046    2,106,976    1,787,065    519,046    81,270    (291,531) 

Licenses and rights of use(1)

   (2,530,747)   (2,455,877)  2,548,353  54,182   348,201    (3,896,788)    (3,399,931)    348,201    961,402    432,403 

Employee benefits

   28,243,207   33,253,071  2,614,932  3,616,952   1,225,310    33,673,874    41,743,744    1,225,310    1,128,209    (1,019,042) 

Other

   8,790,612   9,639,995  5,289,690  (1,918,543)   793,094    10,956,823    9,491,550    793,094    (270,407)    (1,210,417) 
  

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

   

 

 

Net deferred tax assets

  Ps. 98,589,818  Ps. 104,573,985       Ps. 86,613,327    Ps. 88,074,856       
  

 

  

 

      

 

   

 

       

Deferred tax expense in net profit for the year

Deferred tax expense in net profit for the year

 

 Ps. 15,752,347  Ps. 18,285,052  Ps. 5,151,492 

Deferred tax expense in net profit for the year

 

   Ps. 5,151,492    Ps. 1,994,063    Ps. (3,894,383) 
    

 

  

 

  

 

   

 

   

 

   

 

 

(1)

As of December 31, 2018 and 2019 the balance included the effects of hyperinflation.

Reconciliation of deferred tax assets and liabilities, net:

 

  2015 2016 2017   2017 2018 2019 

Opening balance as of January 1,

  Ps.52,310,097  Ps.69,817,147  Ps.98,589,818   Ps.98,589,818  Ps.104,573,985  Ps.86,613,327 

Deferred tax benefit

   15,752,347  18,285,052   5,151,492    5,151,492  1,994,063   (3,894,384) 

Effect of translation

   (6,259,252)  15,273,228   (1,687,276) 

Deferred tax benefit (expense) recognized in OCI

   7,935,732  (4,760,447)   2,760,313 

Translation effect

   (1,687,276)  (8,854,010)   2,047,916 

Deferred tax benefit recognized in OCI

   2,760,313  2,013,480   8,838,714 

Deferred taxes acquired in business combinations

   78,223  (25,162)   (240,362)    (240,362)  (25,827)   (276,568) 

Hyperinflationary effect in Argentina

   —    (4,907,151)   (5,254,149) 

Effect of adoption of IFRS 9

   —    544,628   —   

Effect of adoption of IFRS 15

   —    (8,725,841)   —   
  

 

  

 

  

 

   

 

  

 

  

 

 

Closing balance as of December 31,

  Ps.69,817,147  Ps.98,589,818  Ps.104,573,985   Ps.104,573,985  Ps.86,613,327  Ps.88,074,856 
  

 

  

 

  

 

   

 

  

 

  

 

 

Presented in the consolidated statements of financial position as follows:

        

Deferred income tax assets

  Ps.81,407,012  Ps. 112,651,699  Ps.116,571,349   Ps.116,571,349  Ps.111,186,768  Ps.106,167,897 

Deferred income tax liabilities

   (11,589,865)  (14,061,881)   (11,997,364)    (11,997,364)  (24,573,441)   (18,093,041) 
  

 

  

 

  

 

   

 

  

 

  

 

 
  Ps.69,817,147  Ps.98,589,818  Ps. 104,573,985   Ps.104,573,985  Ps.86,613,327  Ps.88,074,856 
  

 

  

 

  

 

   

 

  

 

  

 

 

The deferred tax assets are in tax jurisdictions in which the Company considers that based on financial projections of its cash flows, results of operations and synergies between subsidiaries, will generate sufficient taxable income in subsequent periods to utilize or realize such assets.

The Company does not recognize a deferred tax liability related to the undistributed earnings of its subsidiaries, because it currently does not expect these earnings to be taxable or to be repatriated in the near future. The Company’s policy has been to distribute the profits when it has paid the corresponding taxes in its home jurisdiction and the tax can be accredited in Mexico.

At December 31, 20162018 and 2017,2019, the balance of the contributed capital account (“CUCA”) is Ps. 478,087,224536,278,717 and Ps. 510,832,194,551,221,490, respectively. On January 1, 2014, theCuenta de Utilidad Fiscal Neta(“CUFIN”) is computed on an América Móvil’s stand-alone basis. The balance of the América Móvil’s stand-alone basis CUFIN amounted to Ps. 191,795,991276,185,284 and Ps. 225,105,342320,880,512 as of December 31, 20162018 and 2017,2019, respectively.

Corporate tax rate

The income tax rate applicable in Mexico from 2015 through 2017 was 30%.

 

ii)

Significant foreign income tax matters

a)

a)

Results of operations

The foreign subsidiaries determine their taxes on profits based on their individual taxable income, in accordance with the specific tax regimes of each country.

The combined income before taxes and the combined provision for taxes of such subsidiaries in 2015, 2016 and 2017 are as follows:

   2015   2016   2017 

Combined income before taxes

  Ps. 27,933,182   Ps. 45,697,258   Ps. 38,286,046 

Combined tax provision differences notdeductible-not cumulative in the foreign subsidiaries

  Ps.6,118,142   Ps.9,169,083   Ps.5,790,950 

The effective income tax rate for the Company’s foreign jurisdictions was 22% in 2015, 20% in 2016 and 15% in 2017, as shown31% in the table above.2018 and 40% in 2019. The statutory tax rates in these jurisdictions vary, although many approximate 22%21% to 40%. The primary difference between the statutory rates and the effective rates in 2015 was attributable to the gain on derecognition of the equity method investment in KPN. The primary difference between the statutory rates2017, 2018 and the effective rates in 2016 and 20172019 was attributable to dividends received from KPN and othernon-deductible items andnon-taxable income.

iii)

Tax losses

a)At December 31, 2017,2019, the available tax loss carryforwards recorded in deferred tax assets are as follows on a country by country basis:

 

Country

  Balance of available tax
loss carryforwards at
December 31, 2017		   Tax loss carryforward
benefit		   Balance of available tax
loss carryforwards at
December 31, 2019		   Tax loss carryforward
benefit		 

Brazil

   Ps.78,617,318    Ps.26,729,887    Ps. 52,118,464   Ps.17,720,278

Austria

   14,470,465    3,617,616 

Mexico

   1,850,216    555,065    13,980,757    4,194,227 

Colombia

   11,221,937    4,488,775    2,354,479    776,978 

Peru

   421,788    124,427    392,999    115,935 

Austria

   25,733,966    6,433,492 

Nicaragua

   2,536    762 

Chile

   754,221    203,640 

Puerto Rico

   4,598    1,733 
  

 

   

 

   

 

   

 

 

Total

   Ps. 117,847,761    Ps. 38,332,408    Ps. 84,075,983   Ps.26,630,407
  

 

   

 

   

 

   

 

 

b)The tax loss carryforwards in the different countries in which the Company operates have the following terms and characteristics:

bi)The Company has accumulated Ps. 78,617,31852,118,464 in net operating loss carryforwards (NOL’s) in Brazil as of December 31, 2017.2019. In Brazil, there is no expiration of the NOL’s. However, the NOL´s amount used against taxable income in each year may not exceed 30% of the taxable income for such year. Consequently, in the year in which taxable income is generated, the effective tax rate is 25% rather than the 34% corporate tax rate.

The Company believes that it is more likely than not that the accumulated balances of its net deferred tax assets are recoverable, based on the positive evidence of the Company to generate future taxable temporary differencesincome related to the same taxation authority which will result in taxable amounts against which the available tax losses can be utilized before they expire. Positive evidence includes the Company’s recent restructure in 2017 of its operations in Brazil, resulting in an organizational structure that is anticipated to be more efficient and profitable.

bii)The Company has accumulated Ps. 25,733,96614,470,465 in NOL’s in Austria as of December 31, 2017.2019. In Austria, the NOL´s have no expiration, but its annual usage is limited to 75% of the taxable income of the year. The realization of deferred tax assets is dependent upon the expected generation of future taxable income during the periods in which these temporary differences become deductible.

biii) The Company has accumulated Ps. 11,221,937Ps.13,980,757 of tax losses in NOL’sMexico. The company estimates that there is positive evidence that allows it to use these losses, these should be reduced to the extent that it is considered likely that there will be sufficient taxable profits to allow them to recover in Colombiafull or in part, the losses will only be compensated when there is a right legally required and are approved by the tax authorities in Mexico.

iv)

Optional regime

The Mexican Tax Law establishes an optional regime for group companies called: Optional Regime for Groups of Companies. For these purposes, the integrating (controlling) company must own more than 80% of the shares with voting rights of the integrated (controlled) companies. In general terms, the Integration regime allows to differ, for each of the companies that in accordance withmake up the Colombiangroup, and for up to three years, or sooner if certain assumptions are made, the whole of the income tax law can be carried forward with no time limitation. The Company expectsthat results from considering the determination of the individual income tax to generate operatingits charge is the effect derived from recognizing, indirectly, the tax profitslosses incurred by the companies in the following years and realizegroup for the year in question.

On December 19, 2019, the integrating company submitted to the Mexican tax authorities, the notice to end to belong under the Optional Regime for Groups of Companies, which implies, pay in January 2020, the deferred income tax asset. NOL’s were generated in 2017 byfor the transaction described in Note 1.II.a)years 2016-2018. Therefore, from the year 2020, the group will be taxable under the General Regime for Legal Persons.

14.

Debt

a)The Company’s short- and long-term debt consists of the following:

 

At December 31, 2016

 

At December 31, 2018

At December 31, 2018

 (thousand pesos) 

Currency

 

Loan

 

Interest rate

 Maturity Total  

Loan

 

Interest rate

 Maturity Total 

Senior Notes

                

U.S. dollars

        
 Fixed-rate Senior notes (i) 5.625% 2017  Ps. 12,088,686  Fixed-rate Senior notes (i) 5.000% 2019  Ps. 14,762,175 
 Fixed-rate Senior notes (i) 5.000% 2019  15,548,550  Fixed-rate Senior notes (i) 5.500% 2019  7,427,972 
 Fixed-rate Senior notes (i) 5.500% 2019  7,823,657  Fixed-rate Senior notes (i) 5.000% 2020  41,822,521 
 Fixed-rate Senior notes (i) 5.000% 2020  44,050,390  Fixed-rate Senior notes (i) 3.125% 2022  31,492,640 
 Fixed-rate Senior notes (i) 3.125% 2022  33,170,240  Fixed-rate Senior notes (i) 6.375% 2035  19,315,420 
 Fixed-rate Senior notes (i) 6.375% 2035  20,344,345  Fixed-rate Senior notes (i) 6.125% 2037  7,267,419 
 Fixed-rate Senior notes (i) 6.125% 2037  7,654,551  Fixed-rate Senior notes (i) 6.125% 2040  39,365,800 
 Fixed-rate Senior notes (i) 6.125% 2040  25,914,250  Fixed-rate Senior notes (i) 4.375%  2042   22,635,335 
 Fixed-rate Senior notes (i) 6.125% 2040  15,548,550     

 

 
 Fixed-rate Senior notes (i) 4.375%  2042   23,841,110  Subtotal U.S. dollars   Ps. 184,089,282 
    

 

     

 

 
 Subtotal U.S. dollars   Ps. 205,984,329 
    

 

 

Mexican pesos

        
 Domestic Senior notes (ii) 8.390% 2017  Ps.2,000,000 
 Domestic Senior notes (ii) 8.110% 2018  1,750,000 
 Domestic Senior notes (ii) 8.270% 2018  1,160,109 
 Domestic Senior notes (ii) 8.600% 2020  7,000,000  Fixed-rate Senior notes (i) 6.000% 2019  Ps.10,000,000 
 Domestic Senior notes (ii) 0.000% 2025  4,133,793  Domestic Senior notes (i) 8.600% 2020  7,000,000 
 Domestic Senior notes (ii) 8.360% 2037  5,000,000  Fixed-rate Senior notes (i) 6.450% 2022  22,500,000 
 Fixed-rate Senior notes (i) 6.000% 2019  10,000,000  Fixed-rate Senior notes (i) 7.125% 2024  11,000,000 
 Fixed-rate Senior notes (i) 6.450% 2022  22,500,000  Domestic Senior notes (i) 0.000% 2025  4,629,425 
 Fixed-rate Senior notes (i) 7.125% 2024  11,000,000  Fixed-rate Senior notes (i) 8.460% 2036  7,871,700 
 Fixed-rate Senior notes (i) 8.460%  2036   7,871,700  Domestic Senior notes (i) 8.360%  2037   5,000,000 
    

 

     

 

 
 Subtotal Mexican pesos   Ps.72,415,602  Subtotal Mexican pesos   Ps.68,001,125 
    

 

     

 

 

Euros

        
 Fixed-rate Senior notes (i) 4.250% 2017  Ps.10,962,292  Fixed-rate Senior notes (i) 4.125% 2019  Ps.22,558,572 
 Fixed-rate Senior notes (i) 3.750% 2017  21,803,213  Exchangeable Bonds (i) 0.000% 2020  64,107,851 
 Fixed-rate Senior notes (i) 1.000% 2018  13,081,928  Fixed-rate Senior notes (i) 3.000% 2021  22,558,572 
 Fixed-rate Senior notes (i) 4.125% 2019  21,803,213  Fixed-rate Senior notes (i) 3.125% 2021  17,568,739 
 Exchangeable Bonds (i) 0.000% 2020  61,961,244  Fixed-rate Senior notes (i) 4.000% 2022  18,028,031 
 Fixed-rate Senior notes (i) 3.000% 2021  21,803,213  Fixed-rate Senior notes (i) 4.750% 2022  16,918,929 
 Fixed-rate Senior notes (i) 3.125% 2021  17,399,163  Fixed-rate Senior notes (i) 3.500% 2023  7,132,481 
 Fixed-rate Senior notes (i) 4.000% 2022  18,067,554  Fixed-rate Senior notes (i) 3.259% 2023  16,918,929 
 Fixed-rate Senior notes (i) 4.750% 2022  16,352,410  Fixed-rate Senior notes (i) 1.500% 2024  19,174,786 
 Fixed-rate Senior notes (i) 3.500% 2023  7,047,557  Fixed-rate Senior notes (i) 1.500% 2026  16,918,929 
 Fixed-rate Senior notes (i) 3.259% 2023  16,352,410  Fixed-rate Senior notes (i) 2.125%  2028   14,663,072 
 Fixed-rate Senior notes (i) 1.500% 2024  18,532,731     

 

 
 Fixed-rate Senior notes (i) 1.500% 2026  10,901,607  Subtotal Euros   Ps.236,548,891 
 Fixed-rate Senior notes (i) 2.125%  2028   14,172,089     

 

 

Pounds sterling

    
    

 

  Fixed-rate Senior notes (i) 5.000% 2026  Ps. 12,550,801 
 Subtotal Euros   Ps. 270,240,624  Fixed-rate Senior notes (i) 5.750% 2030  16,316,042 
    

 

  Fixed-rate Senior notes (i) 4.948% 2033  7,530,481 
 Fixed-rate Senior notes (i) 4.375%  2041   18,826,202 
    

 

 
 Subtotal Pounds sterling   Ps.55,223,526 
    

 

 

At December 31, 2016

 

At December 31, 2018

At December 31, 2018

 (thousand pesos) 

Currency

 

Loan

 

Interest rate

 Maturity Total  

Loan

 

Interest rate

 Maturity Total 

Pound sterling

    

Brazilian reais

    
 Fixed-rate Senior notes (i) 5.000% 2026  Ps.12,791,274  Debenture (i) 103.900% of CDI 2019  Ps.5,079,720 
 Fixed-rate Senior notes (i) 5.750% 2030  16,628,656  Promissory notes (i) 102.400% of CDI 2019  5,079,720 
 Fixed-rate Senior notes (i) 4.948% 2033  7,674,764  Promissory notes (i) 103.250% of CDI  2019   1,828,699 
 Fixed-rate Senior notes (i) 4.375%  2041   19,186,911  Debenture (i) 102.900% of CDI 2020  7,619,580 
    

 

 
 Subtotal Pound sterling   Ps. 56,281,605 
    

 

 

Swiss francs

    
 Fixed-rate Senior notes (i) 2.000%  2017  Ps.5,493,109  Debenture (i) 104.000% of CDI 2021  5,587,692 
 Fixed-rate Senior notes (i) 1.125%  2018   11,189,666  Debenture (i) 104.250% of CDI  2021   7,695,776 
    

 

     

 

 
 Subtotal Swiss francs   Ps.16,682,775  Subtotal Brazilian reais   Ps.32,891,187 
    

 

     

 

 

Other currencies

  

Japanese yen

        
 Fixed-rate Senior notes (i) 2.950% 2039  Ps.2,306,643  Fixed-rate Senior notes (i) 2.950%  2039  Ps.2,334,864 
    

 

     

 

 
 Subtotal Japanese yen   Ps.2,306,643  Subtotal Japanese yen   Ps.2,334,864 
    

 

     

 

 

Chilean pesos

        
 Fixed-rate Senior notes (i) 3.961% 2035  Ps.4,079,443  Fixed-rate Senior notes (i) 3.961% 2035  Ps.3,904,707 
    

 

     

 

 
 Subtotal Chilean pesos   Ps.4,079,443  Subtotal Chilean pesos   Ps.3,904,707 
    

 

     

 

 
 Subtotal other currencies   Ps.6,386,086  Subtotal other currencies   Ps.6,239,571 
    

 

     

 

 

Hybrid Notes

  

Euros

        
 Euro NC5 Series A Capital Securities (iv) 5.125% 2073  Ps.19,622,892  Euro NC10 Series B Capital Securities (iii) 6.375% 2073  Ps.12,407,214 
 Euro NC10 Series B Capital Securities (iv) 6.375% 2073  11,991,767     

 

 
    

 

  Subtotal Euros   Ps.12,407,214 
 Subtotal Euros   Ps.31,614,659     

 

 
    

 

 

Pound sterling

    

Pounds sterling

    
 GBP NC7 Capital Securities (iv) 6.375% 2073  Ps.14,070,401  GBP NC7 Capital Securities (iii) 6.375% 2073  Ps.13,805,881 
    

 

     

 

 
 Subtotal Pound sterling   Ps.14,070,401  Subtotal Pounds sterling   Ps. 13,805,881 
    

 

     

 

 
 Subtotal Hybrid Notes   Ps.45,685,060  Subtotal Hybrid Notes    26,213,095 
    

 

     

 

 

Lines of Credit and others

 

U.S. dollars

    
 Lines of credit (ii) L + 0.200% and 1.500% - 8.950% 2019 - 2021  Ps.11,698,885 

Mexican pesos

    
 Lines of credit (ii) TIIE + 0.175% 2019  Ps.4,500,000 

Euros

    
 Lines of credit (ii) -0.100% - 0.000% 2019  Ps.5,526,850 

Brazilian reais

    
 Lines of credit (ii) 5.000% - 6.000% 2019 - 2027  Ps.27,009 

Peruvian Soles

    
 Lines of credit (ii) 4.700% - 12.100% 2019  Ps.7,898,595 

Chilean pesos

    
 Financial Leases 8.700% - 8.970%  2019 - 2027  Ps.64,437 
    

 

 
 Subtotal Lines of Credit and others   Ps.29,715,776 
    

 

 
 Total debt   Ps. 638,922,453 
    

 

 
 Less: Short-term debt and current portion of long-term debt   Ps.96,230,634 
    

 

 
 Long-term debt   Ps.542,691,819 
    

 

 

At December 31, 2016

 

Currency

 

Loan

 

Interest rate

 Maturity  Total 

Lines of Credit and others

            

U.S. dollars

    
 Lines of credit (iii) 1.500% - 8.500%  2017  Ps.14,929,806 

Mexican pesos

    
 Lines of credit (iii) TIIE + 0.150% - TIIE + 2.000%  2017  Ps.15,111,048 

Euros

    
 Lines of credit (iii) 3.525%  2018  Ps.491,144 

Brazilian reals

    
 Lines of credit (iii) 3.000% - 9.500%  2018 - 2021  Ps.3,467,091 

Chilean pesos

    
 Financial Leases 8.700% - 8.970%  2018 - 2027  Ps.126,233 
    

 

 

 
 Subtotal lines of credit and others   Ps.34,125,322 
    

 

 

 
 Total debt   Ps. 707,801,403 
    

 

 

 
 Less: Short-term debt and current portion of long-term debt    82,607,259 
 Long-term debt   Ps. 625,194,144 
    

 

 

 

At December 31, 2017

 

At December 31, 2019

At December 31, 2019

 (thousand pesos) 

Currency

 

Loan

 

Interest rate

 Maturity Total  

Loan

 

Interest rate

 Maturity Total 

Senior Notes

                

U.S. dollars

        
 Fixed-rate Senior notes (i) 5.000% 2019  Ps.14,840,025  Fixed-rate Senior notes (i) 5.000% 2020  Ps. 11,774,764 
 Fixed-rate Senior notes (i) 5.500% 2019  7,467,145  Fixed-rate Senior notes (i) 3.125% 2022  30,152,320 
 Fixed-rate Senior notes (i) 5.000% 2020  42,043,077  Fixed-rate Senior notes (i) 3.625% 2029  18,845,200 
 Fixed-rate Senior notes (i) 3.125% 2022  31,658,720  Fixed-rate Senior notes (i) 6.375% 2035  18,493,360 
 Fixed-rate Senior notes (i) 6.375% 2035  19,417,282  Fixed-rate Senior notes (i) 6.125% 2037  6,958,119 
 Fixed-rate Senior notes (i) 6.125% 2037  7,305,744  Fixed-rate Senior notes (i) 6.125% 2040  37,690,400 
 Fixed-rate Senior notes (i) 6.125% 2040  39,573,400  Fixed-rate Senior notes (i) 4.375% 2042  21,671,980 
 Fixed-rate Senior notes (i) 4.375% 2042  22,754,705  Fixed-rate Senior notes (i) 4.375%  2049   23,556,500 
    

 

     

 

 
 Subtotal U.S. dollars   Ps.185,060,098  Subtotal U.S. dollars   Ps. 169,142,643 
    

 

     

 

 

Mexican pesos

        
 Domestic Senior notes (ii) 8.110% 2018  Ps.1,750,000  Domestic Senior notes (i) 8.600% 2020  Ps.7,000,000 
 Domestic Senior notes (ii) 8.270% 2018  1,160,110  Fixed-rate Senior notes (i) 6.450% 2022  22,500,000 
 Domestic Senior notes (ii) 8.600% 2020  7,000,000  Fixed-rate Senior notes (i) 7.125%  2024   11,000,000 
 Domestic Senior notes (ii) 0.000% 2025  4,409,873  Domestic Senior notes (i) 0.000% 2025  4,757,592 
 Domestic Senior notes (ii) 8.360% 2037  5,000,000  Fixed-rate Senior notes (i) 8.460% 2036  7,871,700 
 Fixed-rate Senior notes (i) 6.000% 2019  10,000,000  Domestic Senior notes (i) 8.360%  2037   5,000,000 
 Fixed-rate Senior notes (i) 6.450% 2022  22,500,000     

 

 
 Fixed-rate Senior notes (i) 7.125% 2024  11,000,000  Subtotal Mexican pesos   Ps.58,129,292 
 Fixed-rate Senior notes (i) 8.460% 2036  7,871,700     

 

 

Euros

    
    

 

  Commercial Paper (iv) -0.230% 2020  Ps.380,360 
 Subtotal Mexican pesos   Ps.70,691,683  Commercial Paper (iv) -0.230% 2020  211,311 
    

 

  Commercial Paper (iv) -0.230%  2020   211,311 
 Commercial Paper (iv) -0.230% 2020  950,901 
 Commercial Paper (iv) -0.230% 2020  633,934 
 Commercial Paper (iv) -0.230% 2020  211,311 
 Exchangeable Bond (i) 0.000% 2020  60,051,270 
 Fixed-rate Senior notes (i) 3.000% 2021  21,131,123 
 Fixed-rate Senior notes (i) 3.125% 2021  15,848,342 
 Fixed-rate Senior notes (i) 4.000% 2022  15,848,342 
 Fixed-rate Senior notes (i) 4.750% 2022  15,848,342 
 Fixed-rate Senior notes (i) 3.500% 2023  6,339,337 
 Fixed-rate Senior notes (i) 3.259% 2023  15,848,342 
 Fixed-rate Senior notes (i) 1.500% 2024  17,961,454 
 Fixed-rate Senior notes (i) 1.500% 2026  15,848,342 
 Fixed-rate Senior notes (i) 0.750% 2027  21,131,123 
 Fixed-rate Senior notes (i) 2.125% 2028  13,735,230 
    

 

 
 Subtotal Euros   Ps. 222,190,375 
    

 

 

Pound Sterling

    
 Fixed-rate Senior notes (i) 5.000% 2026  Ps.12,491,541 
 Fixed-rate Senior notes (i) 5.750% 2030  16,239,003 
 Fixed-rate Senior notes (i) 4.948%  2033   7,494,924 
 Fixed-rate Senior notes (i) 4.375% 2041  18,737,311 
    

 

 
 Subtotal Pound Sterling   Ps.54,962,779 
    

 

 

At December 31, 2017

 

At December 31, 2019

At December 31, 2019

 (thousand pesos) 

Currency

 

Loan

 

Interest rate

 Maturity Total  

Loan

 

Interest rate

 Maturity Total 

Euros

    

Brazilian reais

    
 Fixed-rate Senior notes (i) 1.000% 2018  Ps.14,252,360  Debentures (i) 102.900% de CDI 2020  Ps.7,013,124 
 Fixed-rate Senior notes (i) 4.125% 2019  23,753,933  Debentures (i) 104.000% de CDI 2021  5,142,958 
 Exchangeable Bonds (i) 0.000% 2020  67,504,878  Debentures (i) 104.250% de CDI 2021  7,083,256 
 Fixed-rate Senior notes (i) 3.000% 2021  23,753,933 
 Fixed-rate Senior notes (i) 3.125% 2021  18,727,775 
 Fixed-rate Senior notes (i) 4.000% 2022  19,333,685 
 Fixed-rate Senior notes (i) 4.750% 2022  17,815,450 
 Fixed-rate Senior notes (i) 3.500% 2023  7,594,262 
 Fixed-rate Senior notes (i) 3.259% 2023  17,815,450 
 Fixed-rate Senior notes (i) 1.500% 2024  20,190,843 
 Fixed-rate Senior notes (i) 1.500% 2026  17,815,450 
 Fixed-rate Senior notes (i) 2.125% 2028  15,440,057 
    

 

 
 Subtotal Euros   Ps.263,998,076 
    

 

 

Pound sterling

    
 Fixed-rate Senior notes (i) 5.000% 2026  Ps.13,368,884 
 Fixed-rate Senior notes (i) 5.750% 2030  17,379,549 
 Fixed-rate Senior notes (i) 4.948% 2033  8,021,330 
 Fixed-rate Senior notes (i) 4.375% 2041  20,053,326 
    

 

 
 Subtotal Pound sterling   Ps.58,823,089 
    

 

 

Swiss francs

    
 Fixed-rate Senior notes (i) 1.125% 2018  Ps.11,169,748 
    

 

 
 Subtotal Swiss francs   Ps.11,169,748 
    

 

 

Brazilian reals

    
 Domestic Senior notes (ii) 102.9% of CDI 2020  Ps.8,972,204  Promissory notes (i) CDI + 0.600% 2021  1,683,150 
 Domestic Senior notes (ii) 102.4% of CDI 2019  5,981,469  Promissory notes (i) 106.000% de CDI  2022   9,350,832 
 Domestic Senior notes (ii) 103.9% of CDI  2019   5,981,469  Promissory notes (i) 106.500% de CDI 2022  4,675,416 
    

 

     

 

 
 Subtotal Brazilian reals   Ps.20,935,142  Subtotal Brazilian reais   Ps.34,948,736 
    

 

     

 

 

Other currencies

  

Japanese yen

        
 Fixed-rate Senior notes (i) 2.950% 2039  Ps.2,282,608  Fixed-rate Senior notes (i) 2.950%  2039  Ps.2,255,663 
    

 

     

 

 
 Subtotal Japanese yen   Ps.2,282,608  Subtotal Japanese yen   Ps.2,255,663 
    

 

     

 

 

Chilean pesos

        
 Fixed-rate Senior notes (i) 3.961% 2035  Ps.4,312,424  Fixed-rate Senior notes (i) 3.961%  2035  Ps.3,562,695 
    

 

     

 

 
 Subtotal Chilean pesos   Ps.4,312,424  Subtotal Chilean pesos   Ps.3,562,695 
    

 

     

 

 
 Subtotal other currencies   Ps.6,595,032  Subtotal other currencies   Ps.5,818,358 
    

 

     

 

 

Hybrid Notes

  

Euros

        
 Euro NC5 Series A Capital Securities (iv) 5.125% 2073  Ps.21,378,540  Euro NC10 Series B Capital Securities (iii) 6.375% 2073  Ps.11,622,118 
 Euro NC10 Series B Capital Securities (iv) 6.375% 2073  13,064,663     

 

 
    

 

  Subtotal Euros   Ps.11,622,118 
 Subtotal Euros   Ps.34,443,203     

 

 

Pound Sterling

    
    

 

  GBP NC7 Capital Securities (iii) 6.375% 2073  Ps.13,740,695 
    

 

 
 Subtotal Pound Sterling   Ps.13,740,695 
    

 

 
 Subtotal Hybrid Notes   Ps.25,362,813 
    

 

 

Lines of Credit and others

 

U.S. dollars

    
 Lines of credit (ii) 5.500% - 9.020% 2020 - 2024  Ps.9,359,340 

Mexican pesos

    
 Lines of credit (ii) TIIE + 0.050% - TIIE + 0.090% 2020  Ps.22,000,000 

Euros

    
 Lines of credit (ii) 0.030% 2020  Ps.2,113,112 

Peruvian Soles

    
 Lines of credit (ii) 3.550% - 3.700% 2020 - 2021  Ps.15,351,211 

Chilean pesos

    
 Lines of credit (ii) TAB + 0.350%  2021  Ps.4,821,222 
 Financial Leases 8.700% - 8.970%  2020 - 2027  Ps.54,596 
    

 

 
 Subtotal Lines of Credit and others   Ps.53,699,481 
    

 

 
 Total debt   Ps.624,254,477 
    

 

 
 Less: Short-term debt and current portion of long-term debt   Ps. 129,172,033 
    

 

 
 Long-term debt   Ps. 495,082,444 
    

 

 

At December 31, 2017

 

Currency

 

Loan

 

Interest rate

 Maturity  Total 

Pound sterling

    
 GBP NC7 Capital Securities (iv) 6.375%  2073  Ps.14,705,772 
    

 

 

 
 Subtotal Pound sterling   Ps.14,705,772 
    

 

 

 
 Subtotal Hybrid Notes   Ps.49,148,975 
    

 

 

 

Lines of Credit & others

            

U.S. dollars

    
 Lines of credit (iii) L + 0.020% & 1.500% -7.250%  2018 - 2019  Ps.14,474,350 

Mexican pesos

    
 Lines of credit (iii) TIIE + 0.040% -TIIE + 0.175%  2018 - 2019  Ps.12,500,000 

Brazilian reals

    
 Lines of credit (iii) 107.000% of CDI -TJLP + 3.500% & 3.000% -9.500%  2018 - 2027  Ps.4,389,260 

Chilean pesos

    
 Financial Leases 8.700% - 8.970%  2018 - 2027  Ps.99,446 
    

 

 

 
 Subtotal Lines of Credit and others   Ps.31,463,056 
    

 

 

 
 Total debt   Ps.697,884,899 
    

 

 

 
 Less: Short-term debt and current portion of long-term debt    51,745,841 
    

 

 

 
 Long-term debt   Ps.646,139,058 
    

 

 

 

L = LIBOR (London Interbank OfferOffered Rate)

TIIE = Mexican Interbank Rate

EURIBOR = Euro Interbank OfferedInterest Rate

CDI = Brazil Interbank Deposit Rate

TJLPTAB = Brazil Long Term Interest RateChilean Weighted average funding rate

Interest rates on the Company’s debt are subject to variances in international and local rates. The Company’s weighted average cost of borrowed funds at December 31, 2016,2018, and December 31, 20172019 was approximately 4.2%4.31% and 4.3%4.16%, respectively.

Such rates do not include commissions or the reimbursements for Mexican tax withholdings (typically a tax rate of 4.9%) that the Company must pay to international lenders.

An analysis of the Company’s short-term debt maturities as of December 31, 2016,2018, and December 31, 2017,2019, is as follows:

 

  2016   2017   2018   2019 

Domestic Senior Notes

   Ps.    2,000,000    Ps.      2,910,110 

International Senior Notes

   50,955,191    26,084,386 

Obligations and Senior Notes

   Ps.      67,365,810    Ps.      88,438,286 

Lines of credit

   29,619,908    22,714,383    28,852,364    40,722,004 

Financial Leases

   32,160    36,962    12,460    11,743 
  

 

   

 

   

 

   

 

 

Total

   Ps. 82,607,259    Ps.    51,745,841    Ps.      96,230,634    Ps.    129,172,033 
  

 

   

 

   

 

   

 

 

Weighted average interest rate

   5.1%    4.0%    5.20%    3.31% 
  

 

   

 

   

 

   

 

 

The Company’s long-term debt maturities as of December 31, 20172019 are as follows:

 

Years

  Amount   Amount 

2019

  Ps. 76,492,210 

2020

   126,769,569 

2021

   42,453,673    Ps.    63,552,328 

2022 and thereafter

   400,423,606 

2022

   98,645,036 

2023

   22,193,586 

2024 and thereafter

   310,691,494 
  

 

   

 

 

Total

  Ps.    646,139,058    Ps.  495,082,444 
  

 

   

 

 

(i) Senior Notes

The outstanding Senior Notes at December 31, 2016,2018, and December 31, 2017,2019, are as follows:

 

Currency*

  2016   2017 

U.S. dollars

   Ps. 205,984,329    Ps.    185,060,098 

Mexican pesos

   72,415,602    70,691,683 

Euros**

   270,240,624    263,998,076 

Pound sterling**

   56,281,605    58,823,089 

Swiss francs

   16,682,775    11,169,748 

Japanese yens

   2,306,643    2,282,608 

Brazilian reals

   —      20,935,142 

Chilean pesos

   4,079,443    4,312,424 

Currency*

  2018   2019 

U.S. dollars

   Ps.    184,089,282    Ps.    169,142,643 

Mexican pesos

   68,001,125    58,129,292 

Euros**

   236,548,891    222,190,375 

Pounds sterling**

   55,223,526    54,962,779 

Brazilian reais

   32,891,187    34,948,736 

Japanese yens

   2,334,864    2,255,663 

Chilean pesos

   3,904,707    3,562,695 
*

Thousands of Mexican pesos

**

Includes secured and unsecured senior notes.

(ii) Domestic Senior Notes

At December 31, 2016, and December 31, 2017, debt under Domestic Senior Notes aggregated to Ps. 21,044 million and Ps. 40,255 million, respectively. In general these issues bear a fixed-rate or floating rate determined as a differential on the TIIE and CDI rate.

(iii) Lines of credit

At December 31, 2016, and December 31, 2017,2018, 2019, debt under lines of credit aggregated to Ps. 33,999$29,651 million and Ps. 31,364$53,645 million, respectively.

The Company has two undrawn revolving syndicated credit facilities, –oneone for the Euro equivalent of U.S. 2,000$2,000 million and the other for U.S. 2,500$2,500 million maturing in 2021 and 2024, respectively. As long as the facilities are committed, a commitment fee is paid. As of December 31, 2019, respectively. These loans bear interest at variable rates based on LIBOR and EURIBOR.these credit facilities were undrawn. Telekom Austria has also an undrawn revolving syndicated credit facility in Euros for 1,000€1,000 million at a variable rate based on EURIBOR that matures in 2019.

2024.

(iv)(iii) Hybrid Notes

In September 2013 the Company issued three series ofWe currently have two Capital Securities (hybrid notes) maturing in 2073: twoa series denominated in Euroseuros for €1,450a total amount of €550 million with a coupon of 5.125%6.375% and 6.375% respectively, and onea series denominated in pound sterling in the amount offor £550 million with a coupon of 6.375%. The Capital Securities are deeply subordinated, and when they were issued the principal rating agencies stated that they would treat only half of the principal amount as indebtedness for purposes of evaluating our leverage (an analysis referred to as 50.0% equity credit). The Capital Securities are subject to redemption at our option at varying dates beginning in 2018 and 2023 respectively, for the euro-denominated series and beginning in 2020 for the sterling-denominated series.

On September 2018, we exercised the option to call our hybrid bond with a maturity date in 2073 for a total amount of €900 million euros.

KPN

On September 2018, América Móvil delivered 224,695,844 KPN shares, equivalent to 5% of the total outstanding shares, after the maturity of a mandatory conversion bond with a nominal outstanding amount of €750 million Euros.

The transaction represented the sale of those shares at an effective price of €3.3374 euros per share.

(iv) Commercial Paper

At December 31, 2019, debt under commercial paper aggregated to Ps. $2,599.1 million.

Restrictions

A portion of the debt is subject to certain restrictions with respect to maintaining certain financial ratios, as well as restrictions on selling a significant portion of groups of assets, among others. At December 31, 2017,2019, the Company was in compliance with all these requirements.

A portion of the debt is also subject to early maturity or repurchase at the option of the holders in the event of a change in control of the Company, as defined in each instrument. The definition of change in control varies from instrument to instrument; however, no change in control shall be considered to have occurred as long as its current shareholders continue to hold the majority of the Company’s voting shares.

Covenants

In conformity with the credit agreements, the Company is obliged to comply with certain financial and operating commitments. Such covenants limit in certain cases, the ability of the Company or the guarantor to: pledge assets, carry out certain types of mergers, sell all or substantially all of its assets, and sell control of Telcel.

Such covenants do not restrict the ability of AMX’s subsidiaries to pay dividends or other payment distributions to AMX. The more restrictive financial covenants require the Company to maintain a consolidated ratio of debt to EBITDA (defined as operating income plus depreciation and amortization) that does not exceed 4 to 1, and a consolidated ratio of EBITDA to interest paid that is not below 2.5 to 1 (in accordance with the clauses included in the credit agreements).

Several of the financing instruments of the Company may be accelerated, at the option of the debt holder in the case that a change in control occurs.

At December 31, 2017,2019, the Company was in compliance with all the covenants.

15.Right-of-use assets and lease debt

The Company has lease contracts for various items of towers & sites, property and other equipment used in its operations. Towers and sites generally have lease terms between 5 and 12 years, while property and other equipment generally have lease terms between 5 and 25 years.

Set out below, are the carrying amounts of the Company’sright-of-use assets and lease liabilities and the movements during the period:

  Right-of-use assets  

 

 
  Towers & Sites  Property  Other
equipment		  Total  Liability related to
right-of-use of
assets		 

As of January 1, 2019

  Ps.  94,252,098   Ps.  21,075,884   Ps.  4,750,320   Ps.  120,078,302   Ps.  119,387,660 

Additions and release

  6,364,508   921,542   729,001   8,015,051   7,437,621 

Business Combinations

  9,668,507   —     —     9,668,507   10,810,111 

Modifications

  7,474,469   1,288,974   728,837   9,492,280   8,363,045 

Depreciation

  (17,286,497)   (4,941,222)   (1,365,847)   (23,593,566)   —   

Interest expense

  —     —     —     —     7,940,240 

Payments

  —     —     —     —     (26,765,075) 

Translation adjustment

  (4,370,636)   (905,808)   (380,907)   (5,657,351)   (6,576,869) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2019

  Ps.  96,102,449   Ps.  17,439,370   Ps.  4,461,404   Ps.  118,003,223   Ps.  120,596,733 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The total of theright-of-use assets include an amount of Ps. 22,878,245 corresponding to related parties and the total of lease liabilities include an amount of Ps. 23,805,275 corresponding to related parties.

The implementation of IFRS 16 required a significant effort due to the fact of the need to make certain estimates, such as the lease term, based on thenon-cancelable period and the periods covered by options to extend the lease. The Company considered the extension of the lease terms beyond thenon-cancelable period only when it was reasonably certain to extend it. The reasonability of the extension was affected by several factors, such as regulation, business model, and geographical business strategies.

The maturity analysis of lease debt is disclosed as follows as of December 31, 2019:

2019

Short term

Ps.25,894,711

Long term

94,702,022

Total

Ps.  120,596,733

Maturity analysis2019

Within one year

Ps.25,894,711

After one year but not more than five years

80,981,832

More than five years

13,720,190

Total

Ps.  120,596,733

The following are the amounts recognized in profit or loss:

   2019 
   Others   Related parties   Total 

Depreciation expense ofright-of-use assets

   Ps. 18,176,521    Ps. 5,417,045    Ps. 23,593,566 

Interest expense on lease liabilities

   5,654,721    2,285,519    7,940,240 

Expense relating to short-term leases

   1,978,403    1,958    1,980,361 

Expense relating to leases oflow-value assets

   25,935    —      25,935 

Variable lease payments

   1,299,502    —      1,299,502 
  

 

 

   

 

 

   

 

 

 

Total

   Ps. 27,135,082    Ps. 7,704,522    Ps. 34,839,604 
  

 

 

   

 

 

   

 

 

 

16. Accounts Payable, Accrued Liabilitiespayable, accrued liabilities and Asset Retirement Obligationsasset retirement obligations

a) The components of the captioncaptions accounts payable and accrued liabilities are as follows:

 

   At December 31, 
   2016   2017 

Suppliers

   Ps. 132,796,101    Ps. 106,483,848 

Sundry creditors

   89,494,976    91,842,929 

Interest payable

   9,971,959    8,930,561 

Guarantee deposits from customers

   1,258,065    1,460,286 

Dividends payable

   3,744,025    3,955,783 
  

 

 

   

 

 

 

Total

   Ps. 237,265,126    Ps. 212,673,407 
  

 

 

   

 

 

 

   At December 31, 
   2018   2019 

Suppliers

  Ps.118,406,380   Ps.113,370,716 

Sundry creditors

   91,087,197    90,849,195 

Interest payable

   8,535,519    8,057,170 

Guarantee deposits from customers

   1,421,336    1,467,835 

Dividends payable

   2,506,835    2,367,908 
  

 

 

   

 

 

 

Total

  Ps. 221,957,267   Ps. 216,112,824 
  

 

 

   

 

 

 

b)The balance of accrued liabilities at December 31, 20162018 and 20172019 are as follows:

 

  At December 31,   At December 31, 
  2016   2017   2018   2019 

Current liabilities

        

Direct employee benefits payable

   Ps. 19,713,160    Ps. 16,673,627   Ps.16,152,118   Ps.17,991,283 

Contingencies

   50,766,070    51,079,131    40,281,573    34,379,969 
  

 

   

 

   

 

   

 

 

Total

   Ps. 70,479,230    Ps. 67,752,758   Ps. 56,433,691   Ps. 52,371,252 
  

 

   

 

   

 

   

 

 

The movements in contingencies for the years ended December 31, 20162018 and 20172019 are as follows:

 

  Balance at
December 31,
20152017		  Business
combination		  Effect of
translation		  Increase of
the year		  Applications  Balance at
December 31,
20162018		 
  Payments  Reversals 

Contingencies

Ps. 51,079,131Ps. 7,812Ps. (5,729,826)Ps. 15,683,252Ps. (6,203,329)Ps. (14,555,467)Ps. 40,281,573

Balance at
December 31,
2018		Business
combination		Effect of
translation		Increase of
the year		ApplicationsReclassification by
adoption of
IFRIC 23		Balance at
December 31,
2019
PaymentsReversals 

Contingencies

  Ps. 34,611,09140,281,573Ps.1,378,611   Ps. 30,333(2,302,058)Ps.6,410,975Ps. (5,483,327)   Ps. 15,397,279(1,833,518)   Ps. 12,199,311(4,072,287)   Ps. (8,959,55134,379,969) 

Contingencies include tax, labor, regulatory and other legal type contingencies. See Note 17 b) for detail of contingencies.

c) The movements in the asset retirement obligations for the years ended December 31, 2018 and 2019 are as follows:

Balance at
December 31,
2017		Business
combination		Effect of
translation		Increase of
the year		ApplicationsBalance at
December 31,
2018
PaymentsReversals

Asset retirement obligations

  Ps. (2,512,39318,245,129)   Ps. 50,766,070—  Ps. (2,020,853)Ps. 1,062,745Ps. (151,364)Ps. (1,164,056)Ps. 15,971,601 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

  Balance at
December 31,
20162018		  Business
combination		  Effect of
translation		  Increase of
the year		  Applications  Balance at
December 31,
20172019		 
  Payments  Reversals 

ContingenciesAsset retirement obligations

  Ps. 50,766,07015,971,601   Ps. 115,971293,548   Ps. (648,685) Ps. 10,510,473(1,339,033)   Ps. (7,618,5201,600,197)   Ps. (2,046,178(128,842))   Ps. 51,079,131(580,727) Ps. 15,816,744
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Contingencies include tax, labor, regulatory and other legal type contingencies. See Note 16 c) for detail of contingencies.

c)The movements in the asset retirement obligations for the years ended December 31, 2016 and 2017, are as follows:

  Balance at
December 31,
2015		  Effect of
translation		  Increase of
the year		  Applications  Balance at
December 31,
2016		 
     Payments  Reversals  

Asset retirement obligations

 Ps. 11,569,897  Ps. 2,806,374  Ps.2,510,635  Ps.(121,317)  Ps.(476,958)  Ps.16,288,631 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Balance at
December 31,
2016		  Effect of
translation		  Increase of
the year		  Applications  Balance at
December 31,
2017		 
     Payments  Reversals  

Asset retirement obligations

 Ps. 16,288,631  Ps.(119,928)  Ps. 3,160,320  Ps. (126,088)  Ps. (957,806)  Ps. 18,245,129 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The discount rates used for the asset retirement obligation are based on market rates that are expected to be undertaken by the dismantling or restoration of cell sites and may include labor costs.

16.17. Commitments and Contingencies

a) LeasesCommitments

At December 31, 2016 and 2017, the Company has entered into several lease agreements with related parties and third parties for the buildings where its offices are located (as a lessee), as well as with the owners of towers and or premises where the Company has installed radio bases. The lease agreements generally have terms from one to fourteen years.

An analysis of the minimum rental payments for the next five years is shown below. In some cases, rental amounts are increased each year based on the National Consumer Price Index.

The Company has the followingnon-cancelableand its subsidiaries have commitments under finance leases:

Year ended December 31,

    

2018

   Ps. 45,355 

2019

   10,244 

2020

   10,244 

2021

   10,244 

2022

   10,244 

2023 and thereafter

   47,812 
  

 

 

 

Total

   134,143 

Less: amounts representing finance charges

   (34,697) 
  

 

 

 

Present value of net minimum lease payments

   99,446 

Less current portion

   (36,965) 
  

 

 

 

Long-term obligations

   Ps. 62,481 
  

 

 

 

An analysis ofnon-cancellable operating leases is as follows:

Year ended December 31,

    

2018

  Ps.20,385,429 

2019

   19,465,817 

2020

   17,828,512 

2021

   11,868,287 

2022

   11,698,510 

2023 and thereafter

   44,304,913 
  

 

 

 

Total

  Ps. 125,551,468 
  

 

 

 

Rent expense for the years ended December 31, 2015, 2016that mature on different dates, related to committed capital expenditures and 2017 was Ps. 22,015,761, Ps. 32,300,963 and Ps. 35,571,283, respectively.cell phone purchases.

b) Commitments

At December 31, 2017, there were commitments in certain subsidiaries for the acquisition of equipment for incorporation into their 4G networks for an amount up to approximately Ps. 13,186,926 (US$ 666,454). The completion period of these projects depends upon the type of fixed assets under construction. In the case of telephone plant (switching transmission), it takes six months on average; for others, it may take more than 2 years.

These commitments will be paid as follows:

Less than 1 year

Ps. 11,920,981

1 to 3 years

1,265,945

Total

Ps. 13,186,926

As of December 31, 2017,2019, the Company has purchase commitments with telephone manufacturers for cellular phones for resale for approximately Ps. 12,307,327 (US$622,000), for delivery through March 2018.

In addition, Tracfone has entered into long-term contracts with wireless carriers fortotal amounts equivalent to the purchase of airtime minutes and data at current market prices. The purchase commitmentscontract period are with two carriers and at December 31, 2017, these commitments are expected to be paid as follows:detailed below:

 

Year ended December 31,

        

2018

  Ps.   72,201,668 

2019

   53,621,957 

2020

   16,027,227   Ps.69,338,478 

2021

   55,304,232 

2022

   13,512,005 

2023

   532,373 
  

 

   

 

 

Total

  Ps. 141,850,852   Ps. 138,687,088 
  

 

   

 

 

c)b) Contingencies

I. MEXICOIn each of the countries in which we operate, we are party to legal proceedings in the ordinary course of business. These proceedings include tax, labor, antitrust, contractual matters and administrative and judicial proceedings concerning regulatory matters such as interconnection and tariffs. The following is a description of our material legal proceedings.

a. América Móvil

(1) Mexican Tax Assessment and Fine

In December 2014, the Mexican Tax Administration Service (Servicio de Administración Tributaria,or “SAT”) notified the Company of a Ps. 529,700 tax assessment related to the Company’s tax return for the fiscal year ended December 31, 2005 and reduced the Company’s consolidated tax loss for that year from Ps. 8,556,000 to zero. The Company has challenged this assessment in federal tax court,before the competent courts and the challengea final resolution is still pending. The Company has not established a provision in the accompanying consolidated financial statements for aan eventual loss arising from this assessment, which it does not consider probable.

ICSID (Additional Facility) Arbitration Proceedings

In August 2016, AMX initiated an arbitration claim against2012, the Republic of Colombia (the “ICSID Arbitration”) on behalf of itselfSAT notified the Company and its subsidiary Comcel underSercotel, S.A. de C.V. (“Sercotel”) of a tax assessment of approximately Ps. 1,400,000 for alleged tax improprieties arising from the ICSID Additional Facility Rules pursuant to the investment chaptertransfer of certain accounts

receivable from one of the Mexico-Colombia Free Trade Agreement (the “Mexico-Colombia FTA”).Company’s subsidiaries to Sercotel. In 2014, the Company challenged the tax assessment, and a final resolution is pending. The claim relates to certain measures adopted by Colombia since August 2013, includingCompany has not established a provision in the Colombian Constitutional Court’s decision of 2013 holding that certain laws eliminatingaccompanying consolidated financial statements for an eventual loss arising from this tax assessment, which the reversion of telecommunication assets didCompany does not apply to concessions granted prior to 1998, among them, Comcel’s concessions. As a result, the Ministry of Information Technology and Communications (Ministerio de Tecnologías de la Información y las Comunicaciones or “ITC Ministry”) refused to recognize Comcel’s property rights over its assets following the termination of its concession contracts and decided that Comcel must pay a fee to rent those assets. Moreover, the ITC Ministry initiated an arbitration proceeding pursuant to the concession contracts seeking the reversion of all assets related to those contracts. This has prevented Comcel from using or disposing of its assets freely. AMX has requested compensation on the basis of Colombia’s breach of the Mexico-Colombia FTA and other international legal obligations.consider probable.

In September 2017, the tribunal issued the first procedural order setting out the procedural calendar. AMX submitted its memorial on jurisdiction and the merits of its claim in December 2017. The parties to the arbitration will exchange further written pleadings in 2018. No hearing date has yet been fixed.

b.(2) Telcel

Mobile Termination Rates

The mobile termination rates between Telcel and other network operators have been the subject of various legal proceedings. As of the date of this report, all proceedings arising fromWith respect to interconnection disagreements in which the IFT set the tariffs applicablefees for 2014 have been resolved, confirming the IFT’s rates. As such resolutions were not subject to suspension, there was no contingency at the expense of the Company.

All proceedings related to the interconnection rates between 20152017, 2018, 2019 and 2016 were resolved by the IFT.2020, Telcel has contested the fact that the rates set by the IFT were not determined as of the date ofchallenged the applicable resolutions but since January, 2015, and such challengefinal resolutions are pending.

Given that the “zero rate” that prevented Telcel from charging termination rates in its mobile network was resolved in favor of the Companyheld unconstitutional by the Mexican Supreme Court (Suprema Corte de Justicia de la Naciónor “SCJN”). As a consequence, Telcel has a balance it may collect from other operators, due to the difference between the amount actually paid and the amount that should have been paid in accordance with the applicable rates.

With respect to the termination rates for 2017, Telcel has challenged the applicable resolutions and such challenges are still pending.

Given the fact that the “zero rate” that prevented Telcel from charging interconnection rates in its mobile network was held unconstitutional by the SCJN,, the IFT has determined asymmetric interconnection rates for the termination of traffic in Telcel’s and other operators’ networks for 2018.2018, 2019 and 2020. The resolutions setting saidsuch rates have been challenged by Telcel, and such challengesfinal resolutions are still pending.

The Company expects that mobile termination rates, as well as other rates applicable to mobile interconnection (such as transit), will continue to be the subject of litigation and administrative proceedings in Mexico.proceedings. The Company cannot predict when or how these mattersdisputes will be resolved or the financial effects of any such resolution. As of December 31, 2017, the Company has a provision of approximately Ps. 494,488 in the accompanying consolidated financial statements to cover the losses considered probable.

(3) Telcel Class Action Lawsuits

The Federal Consumer Bureau (Procuraduría Federal del Consumidor, or “Profeco”) initiated a proceeding before Mexican courts in 2011 on behalf of customers who alleged deficiencies in the quality of Telcel’s network in 2010 and breach of customer agreements. In June 2017, this proceeding was resolved in favor of Telcel, as Profeco failed to prove any breach by Telcel of the standard contract form executed by Telcel’s customers.

Telcel is also subject to twoTwo class action lawsuits initiatedhave been filed against Telcel by customers allegedly affected by Telcel’s quality of service and wireless and broadband rates. TheAt this stage, the Company does not currently have enough information oncannot assess whether these proceedings to determine whether any of the class action lawsuits could have an adverse effect on the Company’s business and results of operations in the event that they are resolved against Telcel.Telcel, due to uncertainty about the factual and legal claims underlying these proceedings. Consequently, the Company has not established a provision in the accompanying consolidated financial statements for aan eventual loss arising from these proceedings.

c. Telmex and Telnor

Monopolistic Practices Investigation

During 2007, Cofeco initiated one investigation into alleged monopolistic practices of Telmex and Telnor related to the fixed-network interconnection services market. Telmex and Telnor have filed legal proceedings in connection with this ruling, including an appeal for relief, which was resolved against Telmex and Telnor on April 16, 2018.

(4) IFT Proceedings Against Telmex

In November 2008, Telmex entered into certain commercial agreements with Dish México Holdings, S. de R.L. de C.V. and its related companies (“Dish”), involving billing, collection services, distribution and equipment leasing. In addition, Telmex had an option that allowed it to purchase shares representing 51% of the capital stock of Dish México, S. de R.L. de C.V. (“Dish México”). In July 2014, Telmex waived its rights under such option.

In January 2015,2018, the IFT imposed a fine of Ps. 2,543,937 on Telmex relating to a sanction procedure triggered by the alleged breach in 2013 and 2014 of certain minimum quality goals for an amountlink services. Telmex challenged this fine, and a final resolution is pending.

(5) Brazilian Tax Matters

As of December 31, 2019, certain Company’s Brazilian subsidiaries had aggregate tax contingencies of Ps. 14,414 on137,382,429 (R$ 29,384,000) for which the grounds that an alleged merger (concentración) between Telmex and Dish was not notified in November 2008. Telmex filed an appeal for relief against this resolution (amparo)and the case is pending. The Company cannot predict the outcome of such proceedings.

In August 2015, in relation with some Dish operations, the IFT initiated several proceedings in order to determine potential violations of (i) Telmex’s concession, with respect to an alleged indirect exploitation of a public television services concession and (ii) certainhas established provisions of the Mexican Constitution (Constitución Política de los Estados Unidos Mexicanos)and the Federal Telecommunications and Broadcasting Law (Ley Federal de Telecomunicaciones y Radiodifusión)regarding the cost-free rule ofre-transmission of television broadcast signals (commonly known as “must offer”), through other operators.

d. America Central Tel

Tax Assessment

In August 2016, the SAT notified the Company’s subsidiary América Central Tel, S.A. de C.V. (“ACT”) of a tax assessment of approximately Ps. 1,244,000, for alleged tax improprieties for the fiscal year ended December 31, 2008. The SAT alleged that certain taxes paid by ACT in Guatemala in relation to dividends received in Mexico could not be applied as tax credits for income tax purposes in Mexico. ACT has challenged the SAT’s assessment though an administrative appeal and a resolution is still pending. The Company has not established a provision20,637,287 (R$ 4,414,000) in the accompanying consolidated financial statements for a losseventual losses arising from this assessment, whichcontingencies that the Company does not considerconsiders probable. The most significant contingencies for which provisions have been established are:

e. Sercotel

•

Ps. 53,252,990 (R$ 11,390,000) aggregate contingencies and Ps. 3,515,913 (R$ 752,000) provisions related to value-added tax (Imposto sobre a Circulação de Mercadorias e Prestação de Serviços or “ICMS”) assessments;

•

Ps. 18,182,694 (R$ 3,889,000) aggregate contingencies and Ps. 4,072,287 (R$ 871,000) provisions related to social contribution on net income (Contribuição Social sobre o Lucro Líquido or “CSLL”) and corporate income tax (Imposto de Renda sobre Pessoa Jurídicaor “IRPJ”) assessments;

Tax Assessment

•

Ps. 18,084,510 (R$ 3,868,000) aggregate contingencies and Ps. 5,825,569 (R$ 1,246,000) provisions related to the social integration program (Programa de Integração Social or “PIS”) and the contribution for social security financing (Contribuição para o Financiamento da Seguridade Social or “COFINS”) assessments;

•

Ps. 16,265,773 (R$ 3,479,000) aggregate contingencies and Ps. 1,613,019 (R$ 345,000) provisions mainly related to an allegedly improper exclusion of interconnection revenues and costs from the basis used to calculate Fund for Universal Telecommunication Services (Fundo de Universalização dos Serviços de Telecomunicações or “FUST”) obligations, which are being contested;

In March 2012, the SAT notified the Company

•

Ps. 4,937,239 (R$ 1,056,000) aggregate contingencies and Ps. 1,384 (R$ 296) provisions related to an alleged underpayment of obligations to the Telecommunications Technology Development Fund (Fundo para o Desenvolvimento Tecnológico das Telecomunicações or “FUNTTEL”), which are being challenged and a final resolution is pending;

•

Ps. 1,954,324 (R$ 418,000) aggregate contingencies and Ps. 14,026 (R$ 3,000) provisions related to the alleged nonpayment of Services Tax (Imposto Sobre Serviços or “ISS”) over several communication services, including Pay TV services, considered taxable for ISS by the Municipal Revenue Services, which are being challenged and a final resolution is pending;

Ps. 3,356,949 (R$ 718,000) aggregate contingencies and its subsidiary Sercotel, S.A. de C.V. (“Sercotel”) of a fine of approximately Ps. 1,400,000 for alleged tax improprieties98,184 (R$ 21,000) provisions arising, among others, from the transferalleged underpayment of certain accounts receivable from oneIRRF and CIDE taxes and on remittances made to foreign operators as remuneration for completing international calls abroad (outgoing traffic); and

Ps. 4,599,207 (R$ 983,700) aggregate contingencies and Ps. 4,574,745 (R$ 978,468) provisions related to the requirement to contribute to the Promotion of Public Radio Broadcasting (“EBC”).

In addition, the Company’s otherBrazilian subsidiaries are subject to Sercotel. In July 2014, the Company challenged the fine before the federal tax court, and the challenge is still pending. The Companya number of contingencies for which it has not established a provisionprovisions in the accompanying consolidated financial statements for a loss arising from this fine, whichbecause the Company does not consider probable.

II. BRAZIL

Following the merger in 2014 of the Company’s subsidiaries Empresa Brasileira de Telecomunicações S.A. (“Embratel”), Embratel Participações S.A. (“Embrapar”) and Net Serviços de Comunicação S.A. (“Net Serviços”) into Claro S.A. (“Claro Brasil”), Claro Brasil became the legal successor of Embratel, Embrapar and Net Serviços.

a. Tax Matters

ICMS

As of December 31, 2017, the Company’s Brazilian subsidiaries Claro Brasil, Star One S.A. (“Star One”), Primesys Soluções Empresariais S.A. (“Primesys”), Telmex Do Brasil Ltda. (“TdB”), Americel S.A. (“Americel”), Brasil Telecomunicações S.A. (“BrTel”) and TVSAT Telecomunicações S.A. (“TV SAT”), had aggregate tax contingenciespotential losses related to value-added tax (“ICMS”) of approximately Ps. 64,749,404 (R$10,825 million). As of December 31, 2017, the Company has established a provision of Ps. 3,541,030 (R$ 592 million) in the accompanying consolidated financial statements for the losses arising from these contingencies that the Company considersto be probable. Such ICMS contingencies include:

Tax assessments against Star One in the amount of Ps. 23,668,673 (R$ 3,957 million) based on allegations that the provision of satellite capacity by Star One is subject to ICMS. The Company is

contesting these tax assessments in separate proceedings at different litigation stages and has obtained favorable judicial decisions in two proceedings. The Company has not established a provision in the accompanying consolidated financial statements to cover losses arising from these assessments, which the Company does not consider probable.

Tax assessments against Claro Brasil and Americel in the amount of Ps. 7,363,189 (R$ 1,231 million), due to a decision that held certain benefits granted by the Brazilian states unconstitutional. The Company has not established a provision in the accompanying consolidated financial statements to cover losses arising from these assessments, which the Company does not consider probable.

A tax assessment against Primesys in the amount of Ps. 4,510,028 (R$ 754 million), related to ICMS over certain activities not deemed as part of data communication services. The Company has not established a provision in the accompanying consolidated financial statements to cover losses arising from this assessment, which the Company does not consider probable.

CSLL/IRPJ

As of December 31, 2017, Claro Brasil, Americel, BrTel and Star One had aggregate tax contingencies related to social contribution on net income (“CSLL”) and corporate income tax (“IRPJ”) in an amount of Ps. 20,929,161 (R$ 3,499 million). As of December 31, 2017, the Company has established a provision of Ps. 3,158,216 (R$ 528 million) in the accompanying consolidated financial statements for the losses arising from these contingencies that the Company considers probable.

The aforementioned CSLL/IRPJ contingenciesThese include a tax assessment against Claro Brasil in the amount offine for Ps. 12,728,56612,675,053 (R$ 2,128 million) alleging the undue amortization of goodwill amounts between 2009 and 2012, and charging CSLL, IRPJ and penalties due to the late payment of taxes. Claro Brasil has challenged this assessment at the administrative level and the challenge is still pending. The Company has not established a provision in the accompanying consolidated financial statements to cover losses arising from this assessment, which the Company does not consider probable.

PIS/COFINS

As of December 31, 2017, Claro Brasil, Americel, Star One, TdB and Brasil Center Comunicações Ltda. (“Brasil Center”) had aggregate tax assessments related to social integration program (“PIS”) and contribution for social security financing (“COFINS”) in the amount of Ps. 32,999,765 (R$ 5,517 million). As of December 31, 2017, the Company has established a provision of Ps. 20,743,735 (R$ 3,468 million) in the accompanying consolidated financial statements for the losses arising from the PIS/COFINS assessments that the Company considers probable. With respect to such PIS/COFINS assessments:

Claro Brasil and Americel have commenced lawsuits against the Brazilian Federal Revenue Service seeking a ruling on constitutional grounds to exclude ICMS payments and interconnection fees from the base used to calculate PIS and COFINS tax obligations. Pending a final ruling and pursuant to applicable Brazilian procedure, the companies have paid the tax based on their position in the lawsuits, and have established a provision for the disputed amounts. As of December 31, 2017, the total amount in dispute was approximately Ps. 20,636,069 (R$ 3,450 million).

Tax assessments against Claro Brasil and Americel related to the offset of PIS and COFINS credits recorded in thenon-cumulative method in an amount of Ps. 9,426,795 (approximately R$ 1,576 million) as of December 31, 2017. The Company has not established a provision in the accompanying consolidated financial statements to cover the losses arising from this contingency, which the Company does not consider probable.

FUST/FUNTTEL

Anatel has initiated administrative proceedings against Claro Brasil, Americel, Primesys, TdB, Star One, BrTel and TVSAT in an aggregate amount of Ps. 17,107,002 (R$ 2,860 million) mainly based on an allegedly improper

exclusion of interconnection revenues and costs from the basis used to calculate its fund for universal telecommunication services (“FUST”) obligations. The companies are contesting these assessments. As of December 31, 2017, the Company has established a provision of Ps. 11,963 (R$ 2 million) in the accompanying consolidated financial statements to cover the losses arising from these assessments that the Company considers probable.

In addition, the Brazilian Ministry of Communications (Ministério das Comunicações) has initiated administrative proceedings against Claro Brasil, Americel, Primesys, TdB, Star One, BrTel and TVSAT totaling an amount of Ps. 5,736,229 (R$ 959 million) as of December 31, 2017, due to an alleged underpayment of their obligations to telecommunications technology development fund (“FUNTTEL”). The companies have challenged these assessments, which are still pending. As of December 31, 2017, the Company has established a provision of Ps. 5,981 (R$ 1 million) in the accompanying consolidated financial statements to cover the losses arising from these assessments that the Company considers probable.

ISS

The Municipal Revenue Services have issued tax assessments against Claro Brasil, Brasil Center and Primesys, totaling an aggregate amount of approximately Ps. 3,535,048 (R$ 591 million) due to the alleged nonpayment of Brazilian services tax (“ISS”) over several telecommunication services, including Pay TV services, considered as taxable for ISS by these authorities. The companies have challenged the tax assessments on the grounds that the services cited are not subject to ISS tax and these challenges are still pending. As of December 31, 2017, the Company has established a provision of Ps. 29,907 (R$ 5 million) in the accompanying financial statements for the losses arising from these assessments that the Company considers probable.

TFI

As of December 31, 2017, Anatel has fined Claro Brasil and Americel a total of Ps. 13,793,268 (R$ 2,306 million),2,711,000) imposed for an unpaid installation inspection fee (Taxa de Fiscalização de Instalaçãoor “TFI”) allegedly due for the renovation of radio base stations. Claro Brasil and Americel havestations, which is being challenged on the fine, arguingbasis that there was no new equipment installation that could leadhave led to this charge, and the challenges are still pending. The Company has not established a provision in the accompanying consolidated financial statementscharge.

(6) Anatel Challenge to cover losses arising from these proceedings, which the Company does not consider probable.

Other Tax Contingencies

There are several other tax contingencies involving Claro Brasil, Americel, Star One, TdB and Primesys in an aggregate amount of Ps. 12,620,900 (R$ 2,110 million) related to a variety of taxes and government programs. As of December 31, 2017, the Company has established a provision of Ps. 5,084,249 (R$ 850 million) in the accompanying consolidated financial statements for the losses arising from these contingencies that the Company considers probable.

b. Regulatory Matters

Inflation-RelatedInflation Adjustments

Anatel has challenged the calculation of inflation-related adjustments due under the concession agreements with Tess S.A. (“Tess”), and Algar Telecom Leste S.A. (“ATL”), two of the Company’s subsidiaries that were previously merged into Claro Brasil. Anatel rejected Tess and ATL’s calculation of the inflation-related adjustments applicable to 60% of the concessions price (which was due in three equal annual installments, subject to inflation-related adjustments and interest), claiming that the companies’ calculation of the inflation-related adjustments resulted in a shortfall of the installment payments. The companies have filed declaratory and consignment actions seeking the resolution of the disputes and have obtained injunctions from a federal appeals court suspending payment until the pending appeals are resolved.

The amount of the alleged shortfall as well as the method used to calculate monetary correctioncorrections are subject to judicial disputes.in dispute. If other methods or assumptions are applied, the amount may increase. In January 2018,2019, Anatel calculated the monetary correction in a total amount of Ps. 20,336,99519,169,206 (R$ 3.4 billion)4,100,000). As of December 31, 2017,2019, the Company has established a provision of Ps. 3,983,6583,197,985 (R$ 666 million)684,000) in the accompanying consolidated financial statements for the losses arising from these contingencies, thatwhich the Company considers probable.

Reversible Assets

Claro Brasil’s long-distance fixed-line concessions provide that the concessionaire’s assets that are “indispensable” for the provision of domestic and international long-distance fixed-line services cannot be disconnected, replaced or sold without the prior regulatory approval of Anatel. Upon expiration of these concessions, those assets that are “indispensable” to provide domestic and international long distance fixed-line services will revert to the Brazilian government, in which case any compensation for investments made in those assets would be the depreciated cost of such assets. Brazilian law does not provide any guidance as to which assets would be subject to reversion under these concessions, and there is no precedent establishing: (i) which assets are “indispensable” under these concessions at the time of their expiration or (ii) the treatment of assets that are also used for telecommunications services not regulated by the concessions. Those assets Claro Brasil uses exclusively in the provision of wireless and Pay TV services are not subject to reversion. See Note 2.

In the second half of 2015, Anatel fined Claro Brasil approximately Ps. 59,815 (R$ 10 million) and imposed the obligations listed below on Claro Brasil in connection with the allegednon-compliance with requirements set out in the Reversible Assets Regulation (Regulamento de Bens Reversíveis).

To make a deposit within 180 days of approximately Ps. 5,203,878 (R$ 870 million) in an escrow account to buy other assets which would be subject to reversion and thereby replace the assets removed. However, if the assets were replaced, Claro Brasil may instead deposit the difference between their sale price and the price of assets purchase to replace them. According to Anatel, such amount represents the value of the assets that were being allegedly removed from the assets list reported to Anatel without a justification for the alleged removal.

•Within 180 days following Anatel’s decision, the inclusion in all agreements executed after the Reversible Assets Regulation (Regulamento de Bens Reversíveis) came into effect, of mandatory provisions related, among others, to the indispensability of those assets for the provision of the services under the concessions, Anatel’s subrogation rights under those agreements and the obligation of their counterparty not to encumber the assets used by Claro Brasil thereunder.

To file an appeal against any order imposing a lien on any Claro Brasil’s reversible assets within 30 days from the date Claro Brasil received notice of the decision.

In 2015, Claro Brasil appealed the decision, causing a temporary suspension of its obligations. On January 18, 2018, Anatel issued a new decision eliminating the obligation to deposit the Ps. 5,203,878 (R$ 870 million) in an escrow account and reducing the fine from Ps. 59,815 (R$ 10 million) to Ps. 14,954 (R$ 2.5 million).

Other regulatory disputes

Claro Brasil is party to other judicial disputes with Anatel in an aggregate amount of Ps. 12,267,993 (R$ 2,051 million). As of December 31, 2017, the Company has established a provision of Ps. 645,999 (R$ 108 million) in the accompanying consolidated financial statements for the losses arising from these disputes that the Company considers probable.

c. Other Civil, Environmental and Labor Contingencies

Claro Brasil and its subsidiaries are party to other civil, environmental and labor claims, as described below. In each case, the Company is contesting the claims at different stages. As of December 31, 2017, the Company has

established the following provisions for those losses arising from these claims that the Company considers probable.

•Civil: Claims for Ps. 29,458,736 (R$ 4,925 million), including those filed by its Pay TV, internet access and telephone service customers and a provision of Ps. 939,091 (R$ 157 million) in the accompanying consolidated financial statements.

•Environmental: Claims for Ps. 4,019,547 (R$ 672 million) and a provision of Ps. 65,796 (R$ 11 million) in the accompanying consolidated financial statements.

•Labor: Claims for Ps. 53,952,852 (R$ 9,020 million) filed by current and former employees and a provision of Ps. 2,667,735 (R$ 446 million) in the accompanying consolidated financial statements.

d. Third-Party Disputes

Claro Brasil, Americel, TdB, Primesys, Brasil Center and their subsidiaries are parties to certain disputes with third parties in connection with former sales agents, outsourced companies’ contract cancellation, increases in monthly subscription rates and channel transmission, class actions, real estate issues, disputes with former employees regarding health care payments and other matters. The cases, which are in advanced stages of litigation, are for claims in an aggregate amount of Ps. 25,307,596 (R$ 4,231 million). As of December 31, 2017, the Company has established a provision of Ps. 2,350,717 (R$ 393 million) in the accompanying consolidated financial statements for the losses arising from these disputes that the Company considers probable.

III. COLOMBIA

Local Arbitration Proceedings (Bogotá Chamber of Commerce)

In 2013, the Colombian Constitutional Court rendered a decision holding that certain laws eliminating the reversion of telecommunication assets in Colombia did not apply to concessions granted prior to 1998 and that the reversion of assets under those earlier concession agreements would be governed by their contractual terms. Following the termination of Comcel’s concession contracts, Comcel and the ITC Ministry initiated discussions with respect to the liquidation of Comcel’s concession contracts. However, as a result of the Constitutional Court’s decision, the ITC Ministry took the position that assets under Comcel’s concession contracts should revert to the Colombian government. Comcel disputes the ITC Ministry’s interpretation of the Constitutional Court’s decision and contends that the reversion of assets should not apply.

In February 2016, the ITC Ministry initiated an arbitration claim against Comcel before the Bogotá Chamber of Commerce pursuant to the concession contracts. In its claim, the ITC Ministry requested (a) the liquidation of the concession contracts, (b) the reversion of all assets related to the concession contracts and (c) monetary compensation in case the assets cannot be reverted without affecting the continuity of the mobile services.

In July 2017, the arbitral tribunal ordered the reversion of certain assets of Comcel to the ITC Ministry. Such asset reversion was ordered under Comcel’s original concession agreements granted in 1994 and extended through 2013 without applying laws 422 of 1998 and 1341 of 2009 which had eliminated such reversion. In lieu of surrendering the assets, the arbitration tribunal ordered Comcel to pay Ps. 18,547,629 (approximately COP$ 3,155 billion). As required by the ITC Ministry, in August 2017, Comcel made such payment under protest reserving all of its rights and those of its shareholders. Comcel has challenged the decision of the arbitral tribunal in accordance with Colombian legislation.

IV. ECUADOR

a. Conecel

Tax Assessments

In 2011 and 2012, the Ecuadorian Internal Revenue Services (Servicios de Rentas Internas del Ecuador,or “SRI”) notified Conecel of tax assessments of Ps. 2,354,617 (US$ 119,000) relating to income tax for fiscal years

2007 through 2009, which were challenged by Conecel. Following an amnesty law enacted by the National Assembly (Asamblea Nacional) in May 2015, that granted the remission of interest and penalties from tax obligations, Conecel applied for amnesty pursuant this new law in connection with the tax assessments for the 2007 and 2009 fiscal years and paid a total amount of Ps. 1,278,221 (US$ 64,600) in connection with such fiscal years. In October 2015, the National Court of Justice (Corte Nacional de Justicia)ruled in favor of SRI with regard to the tax assessment for the fiscal year 2008. As of December 31, 2017, Conecel has made payments in the amount of Ps. 892,499 (US$ 45,106), in connection with the 2008 tax assessment, representing the total amount owed in connection with such assessment.

Monopolistic Practices Proceedings

In February 2014, following a regulatory claim filed in 2012 by state-owned operatorCorporación Nacional de Telecomunicaciones(“CNT”), the Superintendency of Control of Market Power (Superintendencia de Control del Poder del Mercado,or “SCPM”) imposed a fine on Conecel of Ps. 2,738,479 (US$ 138,400) for alleged monopolistic practices. CNT alleged that Conecel had exclusive rights to deploy its network in five locations and was thereby preventing CNT from deploying its own network in the same locations. In March 2014, Conecel challenged the fine and posted a guarantee for 50% of its value. Through a judicial order issued the same month, the fine was suspended while it is pending. Conecel denies any wrongdoing and contends that CNT had other alternative sites in the same locations where it could have deployed its network. As of December 31, 2017, the Company has not established a provision in the accompanying consolidated financial statements to cover losses arising from this proceeding that the Company does not consider probable.

Conecel was also subject to one proceeding initiated by the SCPM to assess Conecel’s compliance with the administrative injunction issued by the SCPM as part of its decision that admitted the claim filed by CNT in 2012. In August 2016, the SCPM, imposed a fine on Conecel of Ps. 1,622,509 (US$ 82 million). Conecel challenged this decision and posted a guarantee for Ps. 817,191 (US$ 41.3 million). On September 1, 2017, the District Court ruled in favor of Conecel overruling the SCPM’s decision. The SCPM filled several challenges against this ruling all of which have been ruled in favor of Conecel. On January 5, 2018, Conecel was notified of a definitive and unappealable ruling by the Constitutional Court and a as consequence thereof, the guarantee posted by Conecel was returned in full and the proceeding is considered terminated.

V. BULGARIA

a. Mobiltel

Tax Assessments

In June 2014, the Bulgarian tax authorities issued a tax assessment against Mobiltel EAD (“Mobiltel”) in connection with the amortization of its brand name and customer base for fiscal year 2007, in an amount of approximately Ps. 539,214 (€ 22.7 million), including interest as of December 31, 2017. In 2015, Mobiltel challenged this assessment. In October 2015, the Administrative CourtLOGO issued a ruling favorable to Mobiltel, which was subsequently challenged by the tax authorities and forwarded to the Supreme Administrative Court. In February 2017, the Supreme Administrative Court ruled in favor of Mobiltel with respect to Mobiltel’s customer base and rejected the appeal related to the brand name.

In September 2015, the tax authorities issued a second tax assessment based on the same allegations for fiscal year 2008, in October 2016 for the year 2009 and in September 2017 for the year 2010. All three tax assessments covering the years 2008 – 2010 were challenged before the higher tax authority. In July 2017, Mobiltel received tax assessments for the years 2008 and 2009 and in November 2017, for the year 2010. All of these assessments once again included Mobiltel’s brand name and customer base as item not tax deductible in an amount totaling Ps. 1,482,245 (€ 62.4 million), including interest calculated as of December 31, 2017.

In July 2017, Mobiltel challenged the 2008 and 2009 tax assessments before the administrative court in Sofia. The accounting expertise appointed has confirmed that Mobiltel correctly treated and booked both trade name

and customer base. In December 2017, Mobiltel challenged the 2010 tax assessment. As of December 31, 2017 Mobiltel has issued bank guarantees covering up to Ps. 1,496,498 (€ 63 million) to secure the tax liability in connection with these tax assessments.

A subsequent tax audit covering the years 2011 to 2013 has already finished and the audit reports were received in December 2017. However, these reports did not take into consideration the Supreme Administrative Court ruling with respect to the 2007 fiscal year and additional tax was imposed in connection with the amortization of brand name and customer base in an amount equal to Ps. 581,971 (€ 24.5 million). These tax assessments have also been challenged by Mobiltel and a resolution is still pending. Tax and interests for brand name for the years 2008 to 2012 have been provided for.

17.18. Employee Benefits

An analysis of the net liability and net period cost for employee benefits is as follows:

 

  At December 31,   At December 31, 
  2016   2017   2018   2019 

Liability:

    

Mexico

  Ps. 70,073,351    Ps.   84,821,197    Ps.   85,517,190    Ps. 116,537,660 

Puerto Rico

   17,736,616    13,962,128    13,986,596    13,228,592 

Brazil

   7,222,762    6,276,780    5,666,694    9,503,738 

Europe

   15,748,433    14,833,840    12,705,926    12,827,318 

Ecuador

   267,705    403,194    448,608    409,750 
  

 

   

 

   

 

   

 

 

Total

   Ps. 111,048,867    Ps. 120,297,139    Ps. 118,325,014    Ps. 152,507,058 
  

 

   

 

   

 

   

 

 

 

   For the year ended December 31, 
   2015  2016   2017 

Net period cost (benefit)

     

Mexico

   Ps. 8,962,953   Ps. 12,281,154    Ps. 11,586,065 

Puerto Rico

   (455,117)   1,058,131    776,238 

Brazil

   451,353   633,159    735,855 

Austria

   260,850   226,447    385,689 

Ecuador

   58,042   41,380    152,335 
  

 

 

  

 

 

   

 

 

 

Total

   Ps. 9,278,081   Ps. 14,240,271    Ps. 13,636,182 
  

 

 

  

 

 

   

 

 

 

a) Defined benefit plans

   For the year ended December 31 
   2017   2018   2019 

Mexico

   Ps. 11,586,065    Ps. 12,046,208    Ps. 12,788,464 

Puerto Rico

   776,238    686,067    747,755 

Brazil

   735,855    579,432    511,964 

Europe

   385,689    619,039    2,526,957 

Ecuador

   152,335    58,354    34,425 
  

 

 

   

 

 

   

 

 

 
   Ps. 13,636,182    Ps. 13,989,100    Ps. 16,609,565 
  

 

 

   

 

 

   

 

 

 

The defined benefit obligation (DBO) and plan assets for the pension and other benefit obligation plans, by country, are as follows:

 

 At December 31  At December 31 
 2016 2017  2018 2019 
 DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		 DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		  DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		 DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		 

Mexico

 Ps. 249,101,141  Ps. (179,871,258)  Ps.                 Ps. 69,229,883   Ps. 266,304,948   Ps. (182,539,376)   Ps.                   Ps. 83,765,572  Ps. 247,997,060  Ps. (163,404,418)  Ps.                   Ps.   84,592,642   Ps. 280,602,176   Ps. (164,910,346)   Ps.                    Ps. 115,691,830 

Puerto Rico

 39,909,853  ( 22,173,237)   17,736,616   38,711,695   ( 24,749,567)    13,962,128  35,220,889  (21,234,293)   13,986,596   35,803,893   (22,575,301)    13,228,592 

Brazil

 19,752,908  ( 20,301,126)  7,083,218  6,535,000   19,369,664   ( 20,399,661)   6,519,560   5,489,563  18,795,315  (19,032,411)  5,087,543  4,850,447   21,412,097   (18,815,174)   4,428,021   7,024,944 

Europe

 4,366,245    4,366,245   4,554,912     4,554,912  4,477,042    4,477,042   4,538,543     4,538,543 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

 Ps. 313,130,147  Ps. (222,345,621)  Ps. 7,083,218  Ps. 97,867,744   Ps. 328,941,219   Ps. (227,688,604)   Ps. 6,519,560   Ps. 107,772,175  Ps. 306,490,306  Ps. (203,671,122)  Ps. 5,087,543  Ps. 107,906,727   Ps. 342,356,709   Ps. (206,300,821)   Ps. 4,428,021   Ps. 140,483,909 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Below is a summary of the actuarial results generated for the pension and retirement plans as well as the medical services in Puerto Rico and Brazil; the pension plans and seniority premiums related to Telmex; the pension plan, the service awards plan and severance in Austria corresponding to the years ended December 31, 2015, 20162017, 2018 and 2017:2019:

 

  At December 31, 2015   At December 31, 2017 
  DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		   DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		 

Balance at the beginning of the year

  Ps.309,639,799  Ps.(242,360,329)  Ps. 6,257,074  Ps.73,536,544   Ps. 313,282,595  Ps. (222,345,621)  Ps. 7,083,218  Ps. 98,020,192 

Current service cost

   4,540,925    4,540,925    4,285,693    4,285,693 

Interest cost on projected benefit obligation

   25,811,047    25,811,047    28,922,385    28,922,385 

Expected return on plan assets

   (20,710,965)   (20,710,965)    (20,916,104)   (20,916,104) 

Changes in the asset ceiling during the period and others

    601,540  601,540     716,330  716,330 

Past service costs and other

   (1,365,096)  118,725   (1,246,371)    53,032   53,032 

Actuarial gain for changes in experience

   (27,949)    (27,949)    (35,145)    (35,145) 

Actuarial loss from changes in financial assumptions

   30,285    30,285 

Actuarial gain from changes in demographic assumptions

   (85)    (85) 

Actuarial gain from changes in financial assumptions

   (4,294)    (4,294) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net period cost

  Ps.28,989,212  Ps.(20,592,240)  Ps.601,540  Ps.8,998,512   Ps.33,168,554  Ps.(20,863,072)  Ps.716,330  Ps.13,021,812 

Actuarial gain for changes in experience

   (2,021,790)    (2,021,790) 

Actuarial loss for changes in experience

   11,671,860    11,671,860 

Actuarial gain from changes in demographic assumptions

   (685,110)    (685,110)    (381,172)    (381,172) 

Actuarial gain from changes in financial assumptions

   (2,502,344)    (2,502,344) 

Actuarial loss from changes in financial assumptions

   2,438,078    2,438,078 

Changes in the asset ceiling during the period and others

    (754,357)  (754,357)     (856,188)  (856,188) 

Return on plan assets greater than discount rate

   31,026,539   31,026,539    (2,483,430)   (2,483,430) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Recognized in other comprehensive income

  Ps.(5,209,244)  Ps.31,026,539  Ps.(754,357)  Ps.25,062,938   Ps.13,728,766  Ps.(2,483,430)  Ps.(856,188)  Ps. 10,389,148 

Contributions made by plan participants

   231,619    231,619    198,713  (198,713)    —   

Contributions to the pension plan made by the Company

   (2,954,839)   (2,954,839)    (2,697,621)   (2,697,621) 

Benefits paid

   (22,321,686)  22,149,262   (172,424)    (18,841,754)  18,841,754    —   

Payments to employees

   (19,929)    (19,929)    (9,843,743)    (9,843,743) 

Effect of translation

   2,739,958  497,167  (1,281,110)  1,956,015    (2,579,506)  2,058,099  (423,800)  (945,207) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Others

  Ps.(19,370,038)  Ps.19,691,590  Ps.(1,281,110)  Ps.(959,558)   Ps.(31,066,290)  Ps.18,003,519  Ps.(423,800)  Ps. (13,486,571) 

Balance at the end of the year

   314,049,729  (212,234,440)  4,823,147  106,638,436    329,113,625  (227,688,604)  6,519,560  107,944,581 

Less short-term portion

   (118,411)    (118,411)    (172,406)    (172,406) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Non-current obligation

  Ps. 313,931,318  Ps. (212,234,440)  Ps.4,823,147  Ps. 106,520,025   Ps. 328,941,219  Ps. (227,688,604)  Ps.6,519,560  Ps. 107,772,175 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

  At December 31, 2016   At December 31, 2018 
  DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		   DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		 

Balance at the beginning of the year

  Ps.314,049,729  Ps.(212,234,440)  Ps.4,823,147  Ps. 106,638,436   Ps. 329,113,625  Ps. (227,688,604)  Ps. 6,519,560  Ps. 107,944,581 

Current service cost

   4,606,856    4,606,856    3,322,813    3,322,813 

Interest cost on projected benefit obligation

   27,275,363    27,275,363    30,185,257    30,185,257 

Expected return on plan assets

   (18,972,042)   (18,972,042)    (20,804,104)   (20,804,104) 

Changes in the asset ceiling during the period and others

    875,192  875,192     587,373  587,373 

Past service costs and other

   165,851   165,851    157,765   157,765 

Actuarial gain for changes in experience

   (28,867)    (28,867)    (7,222)    (7,222) 

Actuarial loss from changes in financial assumptions

   7,784    7,784 

Actuarial loss from changes in demographic assumptions

   134,625    134,625 

Actuarial gain from changes in financial assumptions

   (24,890)    (24,890) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net period cost

  Ps.31,861,136  Ps. (18,806,191)  Ps.875,192  Ps.13,930,137   Ps.   33,610,583  Ps. (20,646,339)  Ps.    587,373  Ps.   13,551,617 

Actuarial gain for changes in experience

   (20,976,837)    (20,976,837)    (21,283,470)    (21,283,470) 

Actuarial loss from changes in demographic assumptions

   397,985    397,985    68,482    68,482 

Actuarial loss from changes in financial assumptions

   1,718,189    1,718,189 

Actuarial gain from changes in financial assumptions

   (1,246,539)    (1,246,539) 

Changes in the asset ceiling during the period and others

    (754,535)  (754,535)     (1,055,409)  (1,055,409) 

Return on plan assets greater than discount rate

   (4,724,041)   (4,724,041)    23,503,296   23,503,296 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Recognized in other comprehensive income

  Ps.(18,860,663)  Ps.(4,724,041)  Ps.(754,535)  Ps.(24,339,239)   Ps. (22,461,527)  Ps.23,503,296  Ps.(1,055,409)  Ps.(13,640) 

Contributions made by plan participants

   255,760  (255,760)    —      173,722  (173,722)    —   

Contributions to the pension plan made by the Company

   (2,756,519)   (2,756,519)    (1,565,792)   (1,565,792) 

Benefits paid

   (25,694,301)  25,517,599   (176,702)    (19,546,541)  19,546,541    —   

Payments to employees

   (525,612)    (525,612)    (10,651,938)    (10,651,938) 

Effect of translation

   12,196,546  (9,086,269)  2,139,414  5,249,691    (3,535,477)  3,353,498  (963,981)  (1,145,960) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Others

  Ps.(13,767,607)  Ps.13,419,051  Ps.2,139,414  Ps.1,790,858   Ps. (33,560,234)  Ps.    21,160,525  Ps.(963,981)  Ps.  (13,363,690) 

Balance at the end of the year

   313,282,595  (222,345,621)  7,083,218  98,020,192    306,702,447  (203,671,122)  5,087,543  108,118,868 

Less short-term portion

   (152,448)    (152,448)    (212,141)    (212,141) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Non-current obligation

  Ps. 313,130,147  Ps. (222,345,621)  Ps. 7,083,218  Ps.97,867,744   Ps. 306,490,306  Ps. (203,671,122)  Ps.5,087,543  Ps. 107,906,727 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

  At December 31, 2017   At December 31, 2019 
  DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		   DBO Plan Assets Effect of asset
celling		 Net employee
benefit liability		 

Balance at the beginning of the year

  Ps. 313,282,595  Ps.(222,345,621)  Ps. 7,083,218  Ps.98,020,192   Ps.306,702,447  Ps. (203,671,122)  Ps. 5,087,543  Ps. 108,118,868 

Current service cost

   4,285,693     4,285,693    2,591,975     2,591,975 

Interest cost on projected benefit obligation

   28,922,385     28,922,385    31,001,348     31,001,348 

Expected return on plan assets

    (20,916,104)    (20,916,104)     (20,070,037)    (20,070,037) 

Changes in the asset ceiling during the period and others

     716,330   716,330      445,743   445,743 

Past service costs and other

    53,032    53,032 

Past service costs and others

    144,481    144,481 

Actuarial gain for changes in experience

   (35,145)     (35,145)    (22,599)     (22,599) 

Actuarial gain from changes in demographic assumptions

   (85)     (85)    (129)     (129) 

Actuarial gain from changes in financial assumptions

   (4,294)     (4,294) 

Actuarial loss from changes in financial assumptions

   36,163     36,163 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net period cost

  Ps.33,168,554  Ps.(20,863,072)  Ps.716,330  Ps.13,021,812   Ps.33,606,758  Ps.(19,925,556)  Ps.445,743  Ps.14,126,945 

Actuarial loss for changes in experience

   11,671,860     11,671,860    31,606,323     31,606,323 

Actuarial gain from changes in demographic assumptions

   (381,172)     (381,172)    (339,657)     (339,657) 

Actuarial loss from changes in financial assumptions

   2,438,078     2,438,078    7,207,072     7,207,072 

Changes in the asset ceiling during the period and others

     (856,188)   (856,188)      (712,064)   (712,064) 

Return on plan assets greater than discount rate

    (2,483,430)    (2,483,430)     423,514    423,514 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Recognized in other comprehensive income

  Ps.13,728,766  Ps.(2,483,430)  Ps.(856,188)  Ps.10,389,148   Ps.38,473,738  Ps.423,514  Ps.(712,064)  Ps.38,185,188 

Contributions made by plan participants

   198,713   (198,713)    —      155,188   (155,188)    —   

Contributions to the pension plan made by the Company

    (2,697,621)    (2,697,621)     (1,337,610)    (1,337,610) 

Benefits paid

   (18,841,754)   18,841,754    —      (15,836,928)   15,836,928    —   

Payments to employees

   (9,843,743)     (9,843,743)    (16,996,920)     (16,996,920) 

Effect of translation

   (2,579,506)   2,058,099   (423,800)   (945,207)    (3,534,509)   2,528,213   (393,201)   (1,399,497) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Others

  Ps.(31,066,290)  Ps.18,003,519  Ps.(423,800)  Ps. (13,486,571)   Ps. (36,213,169)  Ps.16,872,343  Ps.(393,201)  Ps. (19,734,027) 

Balance at the end of the year

   329,113,625   (227,688,604)   6,519,560   107,944,581    342,569,774   (206,300,821)   4,428,021   140,696,974 

Less short-term portion

   (172,406)     (172,406)    (213,065)     (213,065) 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Non-current obligation

  Ps.328,941,219  Ps. (227,688,604)  Ps.6,519,560  Ps. 107,772,175   Ps. 342,356,709  Ps. (206,300,821)  Ps.4,428,021  Ps.140,483,909 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

In the case of other subsidiaries in Mexico, the net period cost of other employee benefits for the years ended December 31, 2015, 20162017, 2018 and 20172019 was Ps. 160,835,165,884, Ps. 200,455(16,347) and Ps. 165,884,Ps.49,050, respectively. The balance of other employee benefits at December 31, 20162018 and 20172019 was Ps. 843,467924,548 and Ps. 1,055,625845,830 respectively.

In the case of Brazil, the net period cost of other benefits for the years ended December 31, 2015, 20162017, 2018 and 20172019 was Ps. 23,121, Ps. 65,10193,742, Ps.98,658 and Ps. 93,742,99,498, respectively. The balance of employee benefits at December 31, 20162018 and 20172019 was Ps. 522,221724,009 and Ps. 650,815,2,402,285, respectively.

In the case of Ecuador, the net period cost of other benefits for the years ended December 31, 2015, 20162017, 2018 and 20172019 was Ps. 58,042, Ps. 41,380152,335, Ps.58,354 and Ps. 152,335,34,425, respectively. The balance of employee benefits at December 31, 20162018 and 20172019 was Ps. 267,705448,608 and Ps. 403,194,409,750, respectively.

Plan assets are invested in:

 

  At December 31   At December 31 
  2016   2017   2018   2019 
  Puerto Rico   Brazil   Mexico   Puerto Rico   Brazil   Mexico   Puerto Rico   Brazil   Mexico   Puerto Rico   Brazil   Mexico 

Equity instruments

   30%    4%    65%    37%    6%    61%    37%    —      39%    41%    —      36% 

Debt instruments

   68%    90%    35%    61%    88%    39%    60%    94%    61%    58%    94%    64% 

Others

   2%    6%    —      2%    6%    —      3%    6%    —      1%    6%    —   
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
           100%        100%        100%            100%        100%        100%            100%        100%        100%            100%        100%        100% 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Included in the Telmex’s net pension plan liability are plan assets of Ps. 179,871,258163,404,418 and Ps. 182,539,376164,910,346 as of December 31, 20162018 and 2017,2019, respectively, of which 31.6%30.4% and 32.0%31.9% during 20162018 and 2017,2019, respectively, were invested in equity and debt instruments of both América Movil and also of related parties, primarily entities that are under common control of the Company’s principal shareholder. The Telmex pension plan recorded are-measurement of its defined pension plan of Ps. (26,940,226)(1,141,142) and Ps. 12,394,61734,782,129 during 20162018 and 2017,2019, respectively, attributable to a change in actuarial assumptions, and also a decline in the fair value of plan investments from December 31, 20162018 to December 31, 2017.2019. The increase (decrease)decrease in fair value of the aforementioned related party pension plan investments approximated Ps. 3,071,27521,279,760 and Ps. (437,663)4,156,919 during the yearyears ended December 31, 20162018 and 2017,2019, respectively.

The assumptions used in determining the net period cost were as follows:

 

 2015 2016 2017  2017 2018 2019 
 Puerto
Rico		 Brazil Mexico Europe Puerto
Rico		 Brazil Mexico Europe Puerto
Rico		 Brazil Mexico Europe  Puerto
Rico		 Brazil Mexico Europe Puerto
Rico		 Brazil Mexico Europe Puerto
Rico		 Brazil Mexico Europe 

Discount rate and long-term rate return

 4.42%  12.57%  9.20%   

1.25% &

2.25%    

 

 

 4.16%  10.84%  10.70%   


1.0%,   

1.5% &
1.75%   

 

 
 

  3.61%   10.18%   10.70%   


1.0%,   

1.5% &
2.00%   

 

 
 

 3.61%  10.18%  

 

10.70

% 

  

1.0%, 1.5% &

2.00%    

 

 

 4.45%  9.10%  11.81%   

1.25%,   
1.75% &
2.00%    		 
 
 		  3.23%   7.03%   10.50%   

0.75%,   
1.00% &
1.25%   		 
 
 

Rate of future salary increases

 3.50%  5.00%  4.50%   


4.9%,     

3.0% &  
4.5%      

 

 
 

 3.50%  4.85%  4.50%   

3.0.%,   

3.9% &

4.4%    


 

 

  2.75%   4.50%   4.50%   

3.0.%,   

3.5% &

4.4%    


 

 

 2.75%  4.50%  4.50%   

3.0.%,   

3.5% &

4.4%    

 

 

 

 2.75%  4.00%  3.55%   


3.0.%,   

3.5% &
4.4%    

 

 
 

  2.75%   3.80%   3.20%   

3.00%,   
3.50% &
4.40%   		 
 
 

Percentage of increase in health care costs for the coming year

 5.70%  11.50%    4.20%  11.35%     3.57%   11.00%    3.57%  11.00%    3.87%  10.50%     3.18%   10.30%   

Year to which this level will be maintained

 2027     N/A    2017     N/A     2028    N/A    2028    N/A    2029     N/A     2029   

Rate of increase of pensions

    1.60%       1.60%          1.60%        1.60%       1.60%          1.60%    

Employee turnover rate*

    0.0%-2.06%       0.0%-1.88%          0.0%-1.72%     0.0%-1.72%       0.0%-1.51%          0.00%-1.38% 
*

Depending on years of service

Biometric

 

Puerto Rico:  

Mortality:

Disability:

  

RP 2014, MSS 20172019 Tables.

Disability:1985 Pension Disability Table

Brazil:  
Mortality:  

2000 Basic AT Table for gender

Disability for assets:  

UP 84 modified table for gender

Disability retirement:  

80 CSO Code Table

Rotation:  

Probability of leaving the Company other than death, Disability and retirement is zero

AustriaEurope

Life expectancy in Austria is basebased on “AVÖ2008-P-2018-P – Rechnungsgrundlagen für die Pensionsversicherung-PaglerPensionsversicherung – Pagler & Pagler”.

 

Telmex 
Mortality: 

Mexican 2000 (CNSF) adjusted

Disability: 

Mexican Social Security adjusted by Telmex experience

Turnover: 

Telmex experience

Retirement: 

Telmex experience

For the year ended December 31, 2017,2019, the Company conducted a sensitivity analysis on the most significant variables that affect the DBO, simulating independently, reasonable changes to roughly 100 basis points in each of these variables. The increase (decrease) would have resulted in the DBO pension and other benefits at December 31, 20172018 are as follows:

 

  -100 points +100 points   100 points +100 points 

Discount rate

  Ps. 24,711,314  Ps. (33,606,469)   Ps.30,321,815  Ps.(26,138,603) 

Health care cost trend rate

  Ps.(635,289)  Ps.738,685   Ps.(878,071)  Ps.1,032,650 

Telmex Plans

Part of the Telmex´s employees are covered under defined benefit pension plans and seniority premiums. Pension benefits and seniority premiums are determined on the basis of compensation received by the employees in their final year of employment, their seniority, and their age at the time of retirement. Telmex has set up an irrevocable trust fund to finance these employee benefits and has adopted the policy of making contributions to such fund when it is considered necessary.

Europe

Defined benefits plan in Austriabenefit pension plans

A1 Telekom Austria Group provides defined benefits for certain former employees in Austria. All sucheligible employees are retired and were employed prior to January 1, January 1975. This unfunded plan provides benefits based on a percentage of salary and years employed, not exceeding 80% of the salary before retirement, and taking into consideration the pension provided by the social security system. A1 Telekom Austria Group is exposed primarily to the risk of development of life expectancy and inflation because the benefits from pension plans are lifetime benefits. Furthermore, at December 31, 2019 and 2018, approximately 10% and 7%, respectively, of the obligation for pensions relate to the employees of the company Akenes in Lausanne, which was acquired in 2017.

Service awards in Austria

Civil servants and certain employees (together ‘employees’(in the following “employees”) are eligible to receive service awards. Under these plans,In accordance with the legal regulations, eligible employees receive a cash bonus of two months’ salary after 25 years of service and four months’ salary after 40 years of service. Employees with at least 35 years of service when retiring (at the age of 65) or who are retiring based on specific legal regulations are also eligible to receive the service award of four monthly salaries. The compensationobligation is accrued as earned over the period of service, taking into account the employee turnover rate.rate of employees who leave service early. The main risk that A1 Telekom Austria Group is exposed to is mainly the risk of development of salary increases and changes of interest rates.

Severance in Austria

Defined contribution plans

Employees starting towho started work for A1 Telekom Austria Group in Austria on or after January 1, January 2003 are covered by a defined contribution plan. A1 Telekom Austria Group paid Ps. 44,21751,042 and Ps. 46,08454,945 (1.53% of the salary)salary or wage) into this defined contribution plan (BAWAG Allianz Mitarbeitervorsorgekasse AG) in 20162018 and 2017,2019, respectively.

Defined benefit plans

Severance benefit obligations for employees hired before January 1, January 2003, excluding civil servants, are covered by defined benefit plans. Upon termination by A1 Telekom Austria Group or retirement, eligible employees receive severance paymentspayments. Depending on their time in service, their severance is equal to a multiple of their monthly compensation which comprises fixedbasic compensation plus variable elements such as overtime or bonuses. Maximum severance is equal tobonuses, with a multiplemaximum of twelve times the eligible monthly compensation.salaries. In case of death, the heirs of eligible employees receive 50% of the severance benefits. The primary risks to A1 Telekom Austria Group is exposed to the risk of development ofare salary increases and changes of interest rates.

b) The defined contribution plans (DCP)Defined Contribution Plans

Brazil

Claro makes contributions to the DCP through Embratel Social Security Fund – Telos. Contributions are computed based on the salaries of the employees, who decide on the percentage of their contributions to the plan (participants enrolled before October 31st, 2014 is from 3%1% to 8% and, for those subscribed after that date, the contribution is from 1% to 7% of their salaries). Claro contributes the same percentage as the employee, capped at 8% of the participant’s balance for the employees that are eligible to participate in this plan.

The unfunded liability represents Claro’s obligation for those participants that migrated from the DBP to the DCP. This liability is being paid over a term of 20 years as of January 1, 1999. Unpaid balances are adjusted monthly based on the yield of the asset portfolio at that date and is increased based on the General Price Index of Brazil plus 6 percentage points per year.

At December 31, 20162018 and 2017,2019, the balance of the DCP liability was Ps. 165,54192,238 and Ps. 136,402,Ps.76,509, respectively.

For the years ended December 31, 2015, 20162017, 2018 and 20172019 the cost (income) of labor were Ps. 198,374, Ps. (935)2,377 and Ps. 374,3,365, respectively.

AustriaEurope

In Austria, pension benefits are generally are provided by the social security system for employees, and by the government for civil servants. The contributions of 12.55% that A1 Telekom Austria Group contributed for its employees 12.55%made in 2018 and 2019 to the social security amountingsystem and the government in Austria, amount to Ps. 657,5631,348,773 and Ps. 667,077 in 2016 and 2017,1,334,713, respectively. Contributions for active civil servantsof the foreign subsidiaries into the respective systems range between 7% and 29% and amount to 12.55% and 15.75%. In 2016 and 2017, these contributions to the government amounted to Ps. 836,655492,439 and Ps. 642,080,530,888 in 2018 and 2019, respectively.

Additionally, A1 Telekom Austria Group sponsorsoffers a defined contribution plan for employees of some of its Austrian subsidiaries. A1 Telekom Austria Group’s contributions to this plan are based on a percentage of the compensation not exceeding 5%. The annual expenses for this plan amounted to Ps. 252,368, Ps. 258,891281 693 and Ps. 256,507258,705 in 2015, 20162018 and 2017,2019, respectively.

As of December 31, 20162018 and 20172019 the liability related to this defined contribution plan amounted to Ps. 130,689126,869 and Ps. 120,892,117,975, respectively.

Other countries

For the rest of the countries where the Company operates and that do not have defined benefit plans or defined contribution plans, the Company makes contributions to the respective governmental social security agencies which are recognized in results of operations as they are incurred.

c) Long-term direct employee benefits

 

 Balance at
December 31,
2015		      Applications Balance at
December 31,
2016		   Balance at
December 31,
2017		         Applications   Balance at
December 31,
2017		 
 Effect of
translation		 Increase of
the year		 Payments Reversals   Effect of
translation		 Increase of
the year		   Payments   Reversals 

Long-term direct employee benefits

 Ps.11,116,581  Ps. 1,856,606  Ps. 2,210,026  Ps.(1,832,675)  Ps. (2,099,039)  Ps.11,251,499   Ps. 10,158,036   Ps. (493,795)  Ps. 1,750,831   Ps. (2,079,880)   Ps. (1,223,414)   Ps. 8,111,778 
 

 

  

 

  

 

  

 

  

 

  

 

   

 

   

 

  

 

   

 

   

 

   

 

 
 Balance at
December 31,
2016		      Applications Balance at
December 31,
2017		   Balance at
December 31,
2018		         Applications   Balance at
December 31,
2019		 
 Effect of
translation		 Increase of
the year		 Payments Reversals   Effect of
translation		 Increase of
the year		   Payments   Reversals 

Long-term direct employee benefits

 Ps. 11,251,499  Ps.795,581  Ps.771,274  Ps. (2,077,632)  Ps. (582,686)  Ps. 10,158,036   Ps.8,111,778   Ps.(518,180)  Ps.2,528,224   Ps.(1,946,055)   Ps.—     Ps.8,175,767 
 

 

  

 

  

 

  

 

  

 

  

 

   

 

   

 

  

 

   

 

   

 

   

 

 

In 2008, a comprehensive restructuring programmeprogram was initiated in the segment Austria. The provision for restructuring includes future compensation of employees who will no longer provide services for A1 Telekom Austria Group but who cannot be laid off due to their status as civil servants. These employment contracts are onerous contracts under IAS 37, as the unavoidable cost related to the contractual obligation exceeds the future economic benefit. The restructuring programmeprogram also includes social plans for employees whose employmentsemployment will be terminated in a socially responsible way. In 2009 and every year from 2011 to 2017,2019, new social plans were initiated whichthat provide for early retirement, special severance packages and golden handshake options. Due to their nature as termination benefits, these social plans are accounted for according to IAS 19.

18.19. Financial Assets and Liabilities

Set out below is the categorization of the financial instruments, excluding cash and cash equivalents, held by the Company as of December 31, 20162018 and 2017:2019:

 

  December 31, 2016   December 31, 2018 
  Loans and
Receivables		   Fair value
through
profit or loss		   Fair value
through OCI		   Loans and
Receivables		   Fair value
through
profit or loss		   Fair value
through OCI		 

Financial Assets:

            

Available for sale marketable securities and other short term investments

  Ps.13,393,646   Ps.—    Ps. 41,463,511 

Accounts receivable from subscribers, distributors,
and other, net

   175,059,881    —      —   

Equity investments at fair value through OCI and other short term investments

  Ps. 9,987,851   Ps.—    Ps. 39,028,083 

Accounts receivable from subscribers, distributors, contractual assets and other

   185,202,494    —      —   

Related parties

   740,492    —      —      1,263,605    —      —   

Derivative financial instruments

   —      909,051    —      —      5,287,548    —   
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps.189,194,019   Ps.909,051   Ps.41,463,511   Ps. 196,453,950   Ps. 5,287,548   Ps. 39,028,083 
  

 

   

 

   

 

   

 

   

 

   

 

 

Financial Liabilities:

            

Debt

  Ps.707,801,403   Ps.—    Ps.—    Ps. 638,922,453   Ps.—    Ps.—  

Accounts payable

   237,265,126    —      —      221,957,267    —      —   

Related parties

   2,971,325    —      —      2,974,213    —      —   

Derivative financial instruments

   —      17,504,910    79,837    —      17,107,579    —   
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps. 948,037,854   Ps. 17,504,910   Ps.79,837   Ps. 863,853,933   Ps. 17,107,579   Ps.—  
  

 

   

 

   

 

   

 

   

 

   

 

 

  December 31, 2017   December 31, 2019 
  Loans and
Receivables		   Fair value
through
profit or loss		   Fair value
through OCI		   Loans and
Receivables		   Fair value
through
profit or loss		   Fair value
through OCI		 

Financial Assets:

            

Available for sale marketable securities and other short term investments

  Ps.12,438,019   Ps.—    Ps. 46,682,657 

Accounts receivable from subscribers, distributors,
and other, net

   163,085,537    —      —   

Equity investments at fair value through OCI and other short term investments

  Ps. 10,145,615   Ps.—    Ps.37,572,410 

Accounts receivable from subscribers, distributors, contractual assets and other

   196,217,010    —      —   

Related parties

   868,230    —      —      1,273,140    —      —   

Derivative financial instruments

   —      8,037,384      —      6,825,760    —   
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps.176,391,786   Ps.8,037,384   Ps.46,682,657   Ps.207,635,765   Ps.6,825,760   Ps.37,572,410 
  

 

   

 

   

 

   

 

   

 

   

 

 

Financial Liabilities:

            

Debt

  Ps.697,884,899   Ps.—    Ps.—    Ps. 624,254,477   Ps.—    Ps.—  

Liability related toright-of-use of assets

   120,596,733    —      —   

Accounts payable

   212,673,407    —      —      216,112,824    —      —   

Related parties

   2,540,412    —      —      3,460,419    —      —   

Derivative financial instruments

   —      14,359,460    —      —      9,596,751    —   
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps. 913,098,718   Ps. 14,359,460   Ps.—  Ps. 964,424,453   Ps. 9,596,751   Ps.—  
  

 

   

 

   

 

   

 

   

 

   

 

 

Fair value hierarchy

The Company’s valuation techniques used to determine and disclose the fair value of its financial instruments are based on the following hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Variables other than quoted prices in Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and

Level 3: Variables used for the asset or liability that are not based on any observable market data(non-observable variables).

The fair value for the financial assets (excluding cash and cash equivalents) and financial liabilities shown in the consolidated statements of financial position at December 31, 20162018 and 20172019 is as follows:

 

  Measurement of fair value at December 31, 2016   Measurement of fair value at December 31, 2018 
  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 

Assets:

                

Available for sale marketable securities and other short term investments

  Ps.41,463,511   Ps.13,393,646   Ps.—    Ps.54,857,157 

Equity investments at fair value through OCI and other short-term investments

  Ps. 39,028,083   Ps. 9,987,851   Ps. —     Ps. 49,015,934 

Derivative financial instruments

   —      909,051    —      909,051    —      5,287,548    —      5,287,548 

Pension plan assets

   214,051,693    8,175,469    118,459    222,345,621    186,557,731    17,096,344    17,047    203,671,122 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps.255,515,204   Ps.22,478,166   Ps. 118,459   Ps.278,111,829   Ps. 225,585,814   Ps. 32,371,743   Ps. 17,047   Ps. 257,974,604 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Liabilities:

                

Debt

  Ps.666,457,233   Ps.80,214,836   Ps.—  Ps.746,672,069   Ps. 594,713,342   Ps. 99,723,251   Ps. —     Ps. 694,436,593 

Derivative financial instruments

   —      17,584,747    —      17,584,747    —      17,107,579    —      17,107,579 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps. 666,457,233   Ps. 97,799,583   Ps.—  Ps. 764,256,816   Ps. 594,713,342   Ps. 116,830,830   Ps. —     Ps.711,544,172 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

  Measurement of fair value at December 31, 2017   Measurement of fair value at December 31, 2019 
  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 

Assets:

                

Available for sale marketable securities and other short term investments

  Ps.46,682,657   Ps.12,438,019   Ps. —    Ps.59,120,676 

Equity investments at fair value through OCI and other short-term investments

  Ps. 37,572,410   Ps. 10,145,615   Ps. —     Ps. 47,718,025 

Derivative financial instruments

   —      8,037,384    —      8,037,384    —      6,825,760    —      6,825,760 

Pension plan assets

   218,518,358    9,039,270    130,976    227,688,604    185,981,861    20,294,557    24,404    206,300,822 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps.265,201,015   Ps.29,514,673   Ps. 130,976   Ps.294,846,664   Ps. 223,554,271   Ps. 37,265,932   Ps. 24,404   Ps. 260,844,607 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Liabilities:

                

Debt

  Ps.691,769,785   Ps.63,147,153   Ps.—    Ps.754,916,938   Ps. 582,003,256   Ps. 101,667,421   Ps. —     Ps. 683,670,677 

Liability related toright-of-use of assets

   120,596,733    —      —      120,596,733 

Derivative financial instruments

   —      14,359,460    —      14,359,460    —      9,596,751    —      9,596,751 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  Ps. 691,769,785   Ps. 77,506,613   Ps.—    Ps. 769,276,398   Ps. 702,599,989   Ps. 111,264,172   Ps.—     Ps. 813,864,161 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Fair value of derivative financial instruments is valued using valuation techniques with market observable inputs. To determine its Level 2 fair value, the Company applies different valuation techniques including forward pricing and swaps models, using present value calculations. The models incorporate various inputs including credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Fair value of debt Level 2 has been determined using a model based on present value calculation incorporating credit quality of AMX. The Company’s investment in available for sale securities,equity investments at fair value, specifically the investment in KPN, is valued using the quoted prices (unadjusted) in active markets for identical assets. The net realized lossesgain (loss) related to derivative financial instruments for the years ended December 31, 20162018 and 20172019 was Ps. 28,878,6325,286,290 and Ps. 1,515,668,(1,774,932) respectively.

For the years ended December 31, 2015, 20162018 and 2017,2019, no transfers were made between Level 1 and Level 2 fair value measurement hierarchies.

Changes in liabilities arising from financing activities

 

  At January 1,
2016		  Cash flow  Foreing currency
exchange and
other		  At December 31,
2016		 

Total liabilities from financing activities

 Ps.683,216,744  Ps.(61,390,813)  Ps.85,975,472  Ps.707,801,403 
 

 

 

  

 

 

  

 

 

  

 

 

 
  At January 1,
2017		  Cash flow  Foreing currency
exchange and
other		  At December 31,
2017		 

Total liabilities from financing activities

 Ps. 707,801,403  Ps. (27,433,489)  Ps. 17,516,985  Ps. 697,884,899 
 

 

 

  

 

 

  

 

 

  

 

 

 
  At December 31,
2017		  Cash flow  Foreign currency
exchange and
other		  At December 31,
2018		 

Total liabilities from financing activities

 Ps. 697,884,899  Ps. (34,050,923)  Ps. (24,911,523)  Ps. 638,922,453 
 

 

 

  

 

 

  

 

 

  

 

 

 

19.

  At December 31,
2018		  At January 1,
2019		  Cash flow  Foreign currency
exchange and
other		  At December 31,
2019		 

Debt

  Ps. 638,922,453   Ps.               —     Ps.      8,273,440   Ps. (22,941,416)   Ps. 624,254,477 

Liability related toright-of-use of assets

  —     119,387,660   (26,765,075)   27,974,148   120,596,733 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities from financing activities

  Ps. 638,922,453   Ps. 119,387,660   Ps. (18,491,635)   Ps.    5,032,732   Ps. 744,851,210
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

20. Shareholders’ Equity

a)Pursuant to the Company’s bylaws, the capital structurestock of the Company consists of a minimum fixed portion of Ps. 362,873$270,049, (nominal amount), represented by a total of 95,489,724,19671,063,212,170 shares (including treasury shares available for placement in accordance with the provisions of theLey del Mercado de Valores), of which (i) 23,384,632,66020,601,632,660 are “AA” shares (full voting rights); (ii) 642,279,095530,585,278 are “A” shares (full voting rights); and (iii) 71,462,812,44149,930,994,232 are “L” shares (limited voting rights).

b)As of December 31, 20172019 and 2016,2018, the Company’s capital structurestock was represented by 66,069,035,53966,004,214,830 (20,601,632,660 “AA” shares, 566,661,526530,563,378 “A” shares and 44,900,741,35344,872,018,792 “L” shares), and 65,798,000,000 (20,634,632,66066,034,792,526 (20,601,632,660 “AA” shares, 592,084,871546,112,938 “A” shares and 44,571,282,46944,887,046,928 “L” shares), respectively.

c)As of December 31, 20172019 and 2016,2018, the Company’s treasury held for placement in accordance with the provisions of theLey del Mercado de Valores and theDisposiciones de carácter general aplicables a las emisoras de valores y a otros participantes en el Mercado de valoresissued by theComisión Nacional Bancaria y de Valores,a total amount of (i)29,420,688,6575,058,997,340 shares (29,419,120,359(5,058,975,440 “L” shares and 1,568,29821,900 “A” shares); and 29,691,724,1965,028,419,644 shares (29,691,076,321(5,028,399,396 “L” shares and 647,87520,248 “A” shares), respectively, all acquired pursuant to the Company’s share repurchase program.

d)The holders of “AA” and “A” shares are entitled to full voting rights. The holders of “L” shares may only vote in limited circumstances, and they are only entitled to appoint two members of the Board of Directors and their respective alternates. The matters in which the holders of “L” shares whoholders are entitled to vote are the following: extension of the Company’sCompany´s corporate life, dissolution of the Company, change of Company’s corporate purpose, change of nationality of the Company, transformation of the Company, a merger with another company, any transaction representing 20% or more of the Company’s consolidated assets, as well as the cancellation of the registrationinscription of the shares issued by the Company inat theRegistro Nacional de Valores and any other foreign stock exchanges where they may be registered, except for quotation systems or other markets not organized as stock exchanges. Within their respective series, all shares confer the same rights to their holders.

The Company’s bylaws contain restrictions and limitations related to the subscription and acquisition of “AA” shares bynon-Mexican investors.

e)Pursuant to the Company’s bylaws, “AA” shares must at all times represent no less than 20% and no more than 51% of the Company’s capital stock, and they shall also must represent at all times, no less than 51% of the common shares (entitled to full voting rights, represented by “AA” and “A” shares) representing said capital stock.

“A” shares, which may be freely subscribed, must not represent more than 19.6% of capital stock and must not exceed 49% of the common shares representing such capital. Common shares (entitled to full voting rights, represented by “AA” and “A” shares), must represent no more than 51% of the Company’s capital stock.

Lastly, “L” shares which have limited voting rights and may be freely subscribed and “A” shares may not exceed, along with “A” shares, 80% of the Company’s capital stock. For purposes of determining these restrictions, the percentages mentioned above refer only to the number of the Company’s shares outstanding.

Dividends

On April 5, 2017,9, 2019, the Company’s shareholders approved, among othersother resolutions, the payment of a dividend of Ps. 0.30 (thirty$0.35 (thirty-five peso cents) per share to each of the shares series of its capital stock “AA”, “A” and “L”,. It was approved, that such dividend was payable, at each share holders’ election, in cash, “L” series shares or a combination thereof,would be paid in two installments of Ps. 0.15 (fifteen$0.18 (eighteen peso cents) each,and Ps. $0.17 (seventeen peso cents), on July 17, 201715 and November 13, 2017 respectively.As a result of the shareholders’ elections, on July 17, 2017 and November 13, 2017, AMX placed into circulation 325,264,125 and 16,905,414 “L” shares,11, 2019 respectively.

On April 18, 2016,16, 2018, the Company’s shareholders approved, among othersother resolutions, the payment of a

dividend of Ps. 0.28 (twenty eight peso$0.32(thirty-two pesos cents) per share to each of the shares series of its capital stock “AA”, “A” and “L”, such. Such dividend was payablepaid in two installments of Ps. 0.14 (fourteen$0.16 (sixteen peso cents) each. On October 8, 2016, the company’s shareholders approved the simultaneous grant to company’s shareholders of a right, at each, shareholders’ election, to receive the dividend payment in either cash, “L” series shares or a combination thereof, as a result, 397,909,031 “L” shares were placed into circulation.on July 16 and November 12, 2018 respectively.

Legal Reserve

According to theLey General de Sociedades Mercantiles, companies must allocate from the net profit of each year, at least 5% to increase the legal reserve until it reaches 20% of its capital stock. This reserve may not be

distributed to shareholders during the existence of the Company, except as a stock dividend. As of December 31, 20162019 and 2017,2018, the legal reserve amounted to Ps. 358,440.

Restrictions on Certain Transactions

Pursuant to the Company’s bylaws any transfer of more than 10% of the full voting shares (“A” shares and “AA” shares), effected in one or more transactions by any person or group of persons acting in concert, requires prior approval by our Board of Directors. If the Board of Directors denies such approval, however, the Company by lawsbylaws require it to designate an alternate transferee, who must pay market price for the shares as quoted on theBolsa Mexicana de Valores, S.A.B. de C.V.

Payment of Dividends

Dividends, either in cash or in kind, paid with respect to the “A” Shares, “L” Shares, “A” Share ADSs or “L” Share ADSs will generally be subject to a 10% Mexican withholding tax (provided that no Mexican withholding tax will apply to distributions of net taxable profits generated before 2015). Nonresident holders could be subject to a lower tax rate, to the extent that they are eligible for benefits under an income tax treaty to which Mexico is a party.

Earnings per Share

The following table shows the computation of the basic and diluted earnings per share:

 

   For the years ended December 31, 
   2015   2016   2017 

Net profit for the period attributable
to equity holders of the parent

  Ps. 35,054,772   Ps. 8,649,427   Ps. 29,325,921 

Weighted average shares (in millions)

   66,869    65,693    65,909 
  

 

 

   

 

 

   

 

 

 

Earnings per share attributable to
equity holders of the parent

  Ps.0.52   Ps.0.13   Ps.0.44 
  

 

 

   

 

 

   

 

 

 

Undated Subordinated Fixed Rate Bond

In January 2013, Telekom Austria issued an Undated Subordinated Fixed Rate Bond with a face value of 600 million euros, which is subordinated with indefinite maturity and which is, based on its conditions, classified as stockholders equity according to IFRS.

The bond pays an annual coupon of 5.625%. Telekom Austria has the right (call), to redeem the bond on February 1, 2018. Telekom Austria has an early termination right under certain conditions. After that period (2018), the bond establishes conditions and increases the coupon rate every five years. After analyzing the conditions of the issuance, Telekom Austria recognized the instrument in equity, since it does not meet the criteria for classification as financial liability, not because it does not represent an obligation to pay.

On the consolidated statements of financial position, the Company recognized this bond as a component of equity(non-controlling interest), as financial instruments issued by its subsidiary are classified as equity in the subsidiary’s financial statements and are thus considerednon-controlling interest in the Company’s consolidated financial statements. See Note 24.

   For the years ended December 31, 
   2017   2018   2019 

Net profit for the period attributable
to equity holders of the parent

  Ps. 29,325,921   Ps. 52,566,197   Ps. 67,730,891 

Weighted average shares (in millions)

   65,909    66,055    66,016 
  

 

 

   

 

 

   

 

 

 

Earnings per share attributable to
equity holders of the parent

  Ps.0.44   Ps.0.79   Ps.1.03 
  

 

 

   

 

 

   

 

 

 

20.21. Components of other comprehensive (loss) incomeloss

The movement on the components of the other comprehensive (loss) income for the years ended December 31, 2015, 20162017, 2018 and 20172019 is as follows:

 

  For the years ended December 31, 
 2015 2016 2017   2017 2018 2019 

Controlling interest:

       

Valuation of the derivative financial instruments, net of
deferred taxes

 Ps.37,011  Ps.48,496  Ps.12,292    Ps.         12,292  Ps. —    Ps.               —  

Available for sale securities, net of deferred taxes

 4,011  (6,673,731)   622,424 

Unrealized (loss) gain on equity investments at fair value, net of deferred taxes

   622,424  (3,765,688)   883,408 

Translation effect of foreign entities

 (34,055,403)  104,178,880   (21,683,333)    (21,683,333)  (61,223,458)   (34,010,066) 

Remeasurement of defined benefit plan, net of deferred taxes

 (17,791,354)  14,771,770   (7,075,606)    (7,075,606)  652,722   (29,153,554) 

Non-controlling interest of the items above

 (1,739,497)  3,322,090   3,402,973    3,402,973  (2,986,018)   (1,908,304) 
 

 

  

 

  

 

   

 

  

 

  

 

 

Other comprehensive (loss) income

 Ps. (53,545,232)  Ps. 115,647,505  Ps. (24,721,250) 

Other comprehensive loss

   Ps.  (24,721,250)  Ps.  (67,322,442)   Ps. (64,188,516) 
 

 

  

 

  

 

   

 

  

 

  

 

 

21.22. Valuation of derivatives, interest cost from labor obligations and other financial items, net

For the years ended December 31, 2015, 20162017, 2018 and 2017,2019, valuation of derivatives and other financial items are as follows:

 

   2015  2016  2017 

Gain (loss) in valuation of derivatives, net

  Ps.15,128,269  Ps.(9,622,233)  Ps.8,192,567 

Capitalized interest expense
(Note 10 d)

   3,524,841   2,861,307   2,875,034 

Commissions

   (1,399,479)   (2,034,972)   (1,263,701) 

Interest cost of labor obligations
(Note 17)

   (5,701,622)   (9,178,513)   (8,722,611) 

Interest expense on taxes

   (135,569)   (245,922)   (1,503,981) 

Dividend received

   1,645,712   5,740,092   2,385,559 

Loss on partial sale of shares in associated Company

   (545)   —     —   

Gain onde-recognition of equity method investment (Note 12)

   11,988,038   —     —   

Other financial cost

   (3,553,329)   (3,745,600)   (3,906,627) 
  

 

 

  

 

 

  

 

 

 
  Ps. 21,496,316  Ps. (16,225,841)  Ps. (1,943,760) 
  

 

 

  

 

 

  

 

 

 
   For the years ended December 31, 
   2017  2018  2019 

Controlling interest:

    

Gain (loss) in valuation of derivatives, net

   Ps. 8,192,567  Ps.(4,686,407)   Ps.  4,432,023 

Capitalized interest expense (Note 10 c)

   2,875,034   2,020,288   2,233,358 

Commissions

   (1,263,701)   (1,901,473)   (2,820,477) 

Interest cost of labor obligations (Note 18)

   (8,722,611)   (9,968,526)   (11,377,054) 

Interest expense on taxes

   (1,503,981)   (555,921)   (516,522) 

Dividend received (Note 4)

   2,385,559   2,605,333   1,773,336 

Gain on net monetary positions

   —     4,429,145   4,267,194 

Other financial cost

   (3,906,627)   (2,118,755)   (5,067,200) 
  

 

 

  

 

 

  

 

 

 

Total

  Ps. (1,943,760)  Ps. (10,176,316)   Ps. (7,075,342) 
  

 

 

  

 

 

  

 

 

 

22.23. Segments

América Móvil operates in different countries. As mentioned in Note 1, the Company has operations in Mexico, Guatemala, Nicaragua, Ecuador, El Salvador, Costa Rica, Brazil, Argentina, Colombia, United States, Honduras,

Chile, Peru, Paraguay, Uruguay, Dominican Republic, Puerto Rico, Panama, Austria, Croatia, Bulgaria, Belarus, Macedonian, Serbia and Slovenia. The accounting policies for the segments are the same as those described in Note 2.

The Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), analyzes the financial and operating information by operating segment. All operating segments that (i) represent more than 10% of

consolidated revenues, (ii) more than the absolute amount of its reported 10% of profits or lossbefore income tax or (iii) more than 10% of consolidated assets, are presented separately.

The Company presents the following reportable segments for the purposes of its consolidated financial statements: Mexico (includes Telcel and Corporate operations and Assets)assets), Telmex (Mexico), Brazil, Southern Cone (includes Argentina, Chile, Paraguay and Uruguay), Colombia, AndeanCentral America (includes Ecuador and Peru), Central-America (which aggregates the operating segments of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama), U.S.A. (excludes Puerto Rico), Caribbean (which aggregates the operating segments of(includes Dominican Republic and Puerto Rico), and Europe (includes Austria, Bulgaria, Croatia, Belarus, Slovenia, Macedonia and Serbia).

The segment Southern Cone comprises mobile communication services in Argentina as well as Chile, Paraguay and Uruguay. Beginning in 2018, hyperinflation accounting in accordance with IAS 29 was initially applied to Argentina, which results in the restatement ofnon-monetary assets, liabilities and all items of the statement of comprehensive income for the change in a general price index and the translation of these items applying theperiod-end exchange rate.

The Company considers that the quantitative and qualitative aspects of any aggregated operating segments (that is, Central America and Caribbean reportable segments) are similar in nature for all periods presented. In evaluating the appropriateness of aggregating operating segments, the key indicators considered included but were not limited to: (i) the similarity of key financial statementstatements measures and trends, (ii) all entities provide telecommunications services, (iii) similarities of customer base and services, (iv) the methods to distribute services are the same, based on telephone plant in both cases, wireless and fixed lines, (v) similarities of governments and regulatory entities that oversee the activities and services of telecom companies, (vi) inflation trends, and (vii) currency trends.

 Mexico Telmex Brazil Southern
Cone		 Colombia Andean Central
America		 U.S.A. Caribbean Europe Eliminations Consolidated
total		  Mexico Telmex Brazil Southern Cone Colombia Andean Central
America		 U.S.A. Caribbean Europe Eliminations Consolidated
total		 

At December 31 2015 (in Ps.):

            

As of and for the year ended December 31, 2017 (in Ps.):

            

External revenues

 191,750,997  93,657,944  174,722,286  68,520,541  65,871,301  51,738,731  34,515,781  110,653,812  29,625,274  72,681,072   —    893,737,739  190,022,612  89,731,238  210,536,673  81,092,885  72,435,460  56,393,595  44,094,835  148,589,487  35,092,578  93,644,172   —    1,021,633,535 

Intersegment revenues

 13,073,782  7,420,418  3,451,846  427,609  265,474  220,094  235,779   —    32,699   —    (25,127,701)   —    16,748,428  8,753,525  4,785,601  1,250,983  304,555  177,856  187,086  44  122,656   —    (32,330,734)   —   
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total revenues

 204,824,779  101,078,362  178,174,132  68,948,150  66,136,775  51,958,825  34,751,560  110,653,812  29,657,973  72,681,072  (25,127,701)  893,737,739  206,771,040  98,484,763  215,322,274  82,343,868  72,740,015  56,571,451  44,281,921  148,589,531  35,215,234  93,644,172  (32,330,734)  1,021,633,535 

Depreciation and amortization

 14,261,516  15,416,456  38,219,152  8,608,518  9,279,871  6,368,233  9,699,082  741,038  5,315,349  17,938,198  (132,678)  125,714,735  17,030,251  18,902,238  51,486,652  10,639,591  12,373,790  8,328,705  9,668,439  1,594,727  5,349,757  25,222,962  (422,170)  160,174,942 

Operating income

 70,726,013  15,947,164  10,878,548  9,185,471  13,361,859  7,853,311 �� 1,750,027  1,293,706  3,891,263  6,205,426  320,373  141,413,161 

Operating income (loss)

 50,666,028  7,921,524  11,601,369  11,676,427  (4,704,165)  5,650,477  5,252,401  2,915,123  4,752,168  4,523,857  (111,906)  100,143,303 

Interest income

 19,094,408  272,284  1,616,356  3,505,616  366,533  743,028  227,590  232,856  396,314  474,826  (22,076,799)  4,853,012  30,083,437  619,748  3,792,242  2,884,613  211,521  1,793,974  1,064,992  394,196  1,111,980  307,021  (39,338,076)  2,925,648 

Interest expense

 27,023,466  1,413,686  16,450,388  2,599,901  577,440  713,895  349,449   —    48,751  2,861,655  (20,841,259)  31,197,372  32,185,868  1,028,593  23,578,083  4,637,989  1,955,688  1,573,929  485,684   —    377,727  2,035,716  (37,558,496)  30,300,781 

Income tax

 7,976,111  2,896,465  (4,846,932)  2,621,598  3,997,944  2,944,548  2,257,695  605,809  1,483,187  (756,774)   —    19,179,651  18,142,482  387,145  (2,991,377)  3,535,302  (1,874,594)  1,806,085  2,025,618  1,803,555  3,529,253  (1,417,358)  (4,600)  24,941,511 

Equity interest in net (loss) income of associated companies

 (1,512,226)  65,033  (5,243)  21,856   —     —     —     —     —    3,884   —    (1,426,696) 

Net profit (loss) attributable to equity holders of the parent

 28,660,395  5,852,674  (12,785,017)  (6,806,573)  3,468,029  3,766,425  (680,599)  1,142,975  2,073,287  6,157,757  4,205,419  35,054,772 

Assets by segment

 955,534,316  163,955,665  311,838,555  118,217,618  81,170,568  87,619,264  68,425,540  36,072,729  76,084,634  182,087,483  (784,519,559)  1,296,486,813 

Plant, property and equipment, net

 57,048,006  105,177,653  147,884,562  52,735,563  44,811,656  30,254,858  37,930,783  1,783,612  29,063,549  66,838,636   —    573,528,878 

Goodwill

 27,067,441  392,523  17,931,543  2,672,724  11,612,051  4,396,090  5,213,703  1,903,762  14,186,723  51,737,156   —    137,113,716 

Trademarks, net

 826,446  346,566  341,750   —    522   —     —    686,052  242,175  8,856,795   —    11,300,306 

Licenses and rights, net

 4,395,698  72,557  28,442,759  8,318,161  3,661,838  6,256,297  3,660,240   —    6,443,439  29,198,262   —    90,449,251 

Investment in associated companies

 10,818,612  1,955,186  700  115,452  371   —    16,259   —     —    908,995  (10,705,005)  3,110,570 

Liabilities by segments

 723,559,636  139,362,960  221,907,486  101,601,641  31,254,646  33,048,503  33,514,380  31,170,822  31,727,281  121,586,194  (333,100,922)  1,135,632,627 

At December 31, 2016 (in Ps.):

            

External revenues

 187,127,903  93,343,612  193,796,237  71,553,356  67,330,768  55,825,972  42,131,666  140,856,365  36,467,781  86,978,828   —    975,412,488 

Intersegment revenues

 16,438,858  8,872,248  3,560,388  776,719  257,767  304,834  289,465   —    30,210   —    (30,530,489)   —   
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total revenues

 203,566,761  102,215,860  197,356,625  72,330,075  67,588,535  56,130,806  42,421,131  140,856,365  36,497,991  86,978,828  (30,530,489)  975,412,488 

Depreciation and amortization

 16,451,496  17,150,013  47,170,935  9,739,634  11,283,749  7,764,474  10,474,681  1,073,623  5,225,498  22,525,050  (333,232)  148,525,921 

Operating income

 48,219,505  12,275,892  6,325,323  8,317,053  11,209,959  6,086,638  3,830,974  1,220,601  6,143,183  5,388,595  592,587  109,610,310 

Interest income

 28,659,372  303,915  3,747,684  2,649,539  104,304  944,945  462,779  239,797  691,132  286,784  (33,897,656)  4,192,595 

Interest expense

 32,004,944  1,135,552  22,970,335  5,049,457  1,079,989  1,147,380  411,597   —    143,322  2,953,033  (33,033,597)  33,862,012 

Expenses (income) tax

 2,502,242  921,803  (4,294,040)  2,021,090  4,456,750  1,768,066  3,291,776  767,295  2,542,080  (2,578,206)   —    11,398,856 

Equity interest in net income (loss) of associated companies

 67,472  116,368  (270)  (23,319)   —     —    171   —     —    29,528   —    189,950  99,044  16,564  (232)  (9,801)   —     —     —     —     —    (14,190)   —    91,385 

Net profit (loss) attributable
to equity holders of the parent

 378,150  902,282  (10,357,493)  3,765,015  4,022,633  3,621,863  538,890  987,790  3,318,960  7,065,769  (5,594,432)  8,649,427  26,321,442  184,387  (6,617,381)  4,421,938  (6,209,530)  1,595,382  3,713,301  1,793,875  1,262,073  5,656,132  (2,795,698)  29,325,921 

Assets by segment

 1,070,598,204  161,133,722  461,831,754  140,617,162  103,361,235  113,839,981  80,832,029  42,812,349  93,941,695  227,288,156  (981,214,013)  1,515,042,274  1,033,036,406  170,402,561  428,281,963  133,136,177  108,362,023  113,478,626  81,529,691  40,761,830  88,672,466  203,858,243  (915,308,134)  1,486,211,852 

Plant, property and equipment, net

 64,893,242  112,220,236  203,270,555  67,023,143  59,690,886  37,716,772  41,808,573  1,949,166  33,854,428  78,763,065   —    701,190,066  59,137,555  109,713,770  187,459,628  69,006,093  57,060,931  35,930,966  39,050,481  1,693,642  32,173,524  85,116,608   —    676,343,198 

Goodwill

 27,186,328  213,926  26,106,622  3,006,448  14,659,891  5,948,335  5,652,268  3,464,217  14,186,723  52,207,877   —    152,632,635  27,102,384  213,926  24,708,739  3,073,444  13,981,033  6,113,495  5,597,990  3,341,956  14,186,723  53,143,542   —    151,463,232 

Trademarks, net

 615,318  307,881  366,727   —    194   —     —    788,228  284,665  10,203,880   —    12,566,893  406,723  274,786  246,557   —     —     —     —    631,024  262,641  8,116,076   —    9,937,807 

Licenses and rights, net

 5,887,092  42,867  41,496,209  8,760,860  4,603,793  12,882,210  3,993,120   —    7,694,798  30,670,315   —    116,031,264  11,457,720  13,175  35,662,305  8,885,086  4,197,498  11,295,202  3,376,106   —    7,276,039  31,141,255   —    113,304,386 

Investment in associated companies

 7,605,220  2,218,824  699  81,284  470   —    17,390   —     —    1,072,778  (7,393,181)  3,603,484  469,662  546,872  640  63,110  451   —    16,999   —     —    806,950  1,830,488  3,735,172 

Liabilities by segments

 798,044,609  117,663,161  349,915,118  124,149,687  40,811,337  52,949,608  38,095,161  41,369,767  44,790,656  121,928,202  (485,698,799)  1,244,018,507  794,598,013  133,428,178  322,620,030  119,123,646  54,756,152  48,656,628  35,501,900  38,249,957  43,978,410  119,240,533  (484,575,112)  1,225,578,335 

As of and for the year ended December 31, 2018 (in Ps.):

            

External revenues

 207,610,244  86,339,289  188,712,666  89,149,978  75,460,428  55,633,192  44,883,585  153,266,315  36,435,541  100,716,443   —    1,038,207,681 

Intersegment revenues

 16,946,543  9,741,908  4,593,760  13,200,358  344,517  154,082  149,445   —    204,294   —    (45,334,907)   —   
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total revenues

 224,556,787  96,081,197  193,306,426  102,350,336  75,804,945  55,787,274  45,033,030  153,266,315  36,639,835  100,716,443  (45,334,907)  1,038,207,681 

Depreciation and amortization

 17,619,342  18,358,248  42,857,751  13,526,361  13,464,867  8,516,960  8,940,655  1,545,395  5,036,831  26,838,972  (992,802)  155,712,580 

Operating income (loss)

 57,450,599  8,085,764  23,494,903  16,975,797  14,388,552  5,003,915  4,867,763  2,665,270  5,811,846  4,731,562  (3,918,800)  139,557,171 

Interest income

 26,578,280  420,380  11,303,888  2,251,474  1,013,839  1,666,879  1,566,086  559,548  1,458,874  122,133  (36,295,212)  10,646,169 

Interest expense

 32,526,258  1,153,913  20,377,191  4,338,941  2,913,881  1,719,663  509,081   —    561,867  1,973,431  (34,302,793)  31,771,433 

Income tax

 28,842,505  643,377  4,026,444  1,390,039  2,251,877  2,498,666  2,533,600  810,898  2,774,204  707,093  (1,624)  46,477,079 

Equity interest in net income (loss) of associated companies

 (5,962)  44,965  (152)  (20,871)   —     —     —     —     —    (17,713)   —    267 

Net profit (loss) attributable to equity holders of the parent

 23,185,029  (2,201,572)  3,530,653  6,065,703  9,165,801  1,730,933  2,821,733  2,820,505  3,644,697  3,809,694  (2,006,979)  52,566,197 

Assets by segment

 970,564,314  174,461,398  390,791,480  127,946,573  111,975,598  96,347,779  81,640,157  38,814,907  102,531,547  186,135,358  (851,985,719)  1,429,223,392 

Plant, property and equipment, net

 56,056,634  103,737,293  173,197,708  62,988,635  51,422,548  35,800,477  37,146,601  1,356,237  38,011,242  80,421,642  (138,297)  640,000,720 

Goodwill

 27,104,632  215,381  21,388,124  2,796,759  12,770,380  5,242,365  5,466,871  3,328,533  14,186,723  53,066,729   —    145,566,497 

Trademarks, net

 227,774  243,556  124,910   —     —     —     —    507,033  249,984  3,313,948   —    4,667,205 

Licenses and rights, net

 10,573,147   —    25,873,910  12,555,496  3,400,235  9,651,582  3,605,416   —    10,294,336  27,344,273   —    103,298,395 

Investment in associated companies

 5,621,661  563,667  543  20,697  412   —    24,262   —     —    748,674  (3,847,209)  3,132,707 

Liabilities by segments

 748,965,728  136,993,838  298,308,084  94,550,901  56,211,438  50,064,761  28,592,953  35,552,678  58,716,154  117,214,746  (441,820,311)  1,183,350,970 

At December 31, 2017 (in Ps.):

            
 Mexico Telmex Brazil Southern Cone Colombia Andean Central
America		 U.S.A. Caribbean Europe Eliminations Consolidated
total		 

As of and for the year ended December 31, 2019 (in Ps.):

            

External revenues

  190,022,612   89,731,238   210,536,673   81,092,885   72,435,460   56,393,595   44,094,835   148,589,487   35,092,578   93,644,172   —     1,021,633,535   226,164,232   84,173,980   177,596,077   54,230,682   74,274,684   55,440,675   46,602,036   155,864,392   34,580,822   98,420,289   —     1,007,347,869 

Intersegment revenues

  16,748,428   8,753,525   4,785,601   1,250,983   304,555   177,856   187,086   44   122,656   —     (32,330,734)   —     11,676,015   11,863,364   4,182,248   11,041,705   361,386   92,249   132,061   —     1,136,879   —     (40,485,907)   —   
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total revenues

  206,771,040   98,484,763   215,322,274   82,343,868   72,740,015   56,571,451   44,281,921   148,589,531   35,215,234   93,644,172   (32,330,734)   1,021,633,535   237,840,247   96,037,344   181,778,325   65,272,387   74,636,070   55,532,924   46,734,097   155,864,392   35,717,701   98,420,289   (40,485,907)   1,007,347,869 

Depreciation and amortization

  17,030,251   18,902,238   51,486,652   10,639,591   12,373,790   8,328,705   9,668,439   1,594,727   5,349,757   25,222,962   (422,170)   160,174,942   24,742,622   16,346,927   39,424,474   13,847,506   13,439,489   10,256,129   11,045,817   1,396,422   6,322,648   24,975,146   (2,881,970)   158,915,210 

Operating income (loss)

  50,666,028   7,921,524   11,601,369   11,676,427   (4,704,165)   5,650,477   5,252,401   2,915,123   4,752,168   4,523,857   (111,906)   100,143,303   67,694,409   9,731,852   28,846,565   4,007,614   15,324,977   8,023,002   5,712,068   2,968,236   5,741,368   8,687,862   (1,897,418)   154,840,535 

Interest income

  30,083,437   619,748   3,792,242   2,884,613   211,521   1,793,974   1,064,992   394,196   1,111,980   307,021   (39,338,076)   2,925,648   23,713,455   1,839,973   3,155,681   896,256   1,306,571   1,283,788   532,046   324,932   1,478,560   115,359   (28,361,949)   6,284,672 

Interest expense

  32,185,868   1,028,593   23,578,083   4,637,989   1,955,688   1,573,929   485,684   —     377,727   2,035,716   (37,558,496)   30,300,781   30,972,658   1,439,785   19,021,965   3,849,318   2,952,123   2,422,887   1,406,720   385   1,435,862   2,220,168   (27,810,532)   37,911,339 

Expenses (income) tax

  18,142,482   387,145   (2,991,377)   3,535,302   (1,874,594)   1,806,085   2,025,618   1,803,555   3,529,253   (1,417,358)   (4,600)   24,941,511 

Income tax

  30,000,511   1,528,229   4,251,116   2,022,336   5,405,452   1,681,159   2,355,380   1,119,478   719,774   1,946,255   3,843   51,033,533 

Equity interest in net income (loss) of associated companies

  99,044   16,564   (232)   (9,801)   —     —     —     —     —     (14,190)   —     91,385   (3,732)   46,789   (1,538)   (23,424)   —     —     (28,795)   —     —     (6,909)   —     (17,609) 

Net profit (loss) attributable
to equity holders of the parent

  26,321,442   184,387   (6,617,381)   4,421,938   (6,209,530)   1,595,382   3,713,301   1,793,875   1,262,073   5,656,132   (2,795,698)   29,325,921   42,598,946   (1,705,068)   5,618,095   (6,984)   9,571,046   (2,604,646)   2,335,963   2,095,807   4,312,630   5,051,145   463,957   67,730,891 

Assets by segment

  1,033,036,406   170,402,561   428,281,963   133,136,177   108,362,023   113,478,626   81,529,691   40,761,830   88,672,466   203,858,243   (915,308,134)   1,486,211,852   915,233,048   201,283,526   382,561,753   132,722,497   115,851,227   94,021,632   77,355,732   30,775,893   100,694,650   191,744,924   (710,311,225)   1,531,933,657 

Plant, property and equipment, net

  59,137,555   109,713,770   187,459,628   69,006,093   57,060,931   35,930,966   39,050,481   1,693,642   32,173,524   85,116,608   —     676,343,198   54,589,459   106,869,482   174,761,167   60,537,650   50,133,642   39,068,450   38,934,747   1,405,755   38,223,641   75,707,738   (888,361)   639,343,370 

Goodwill

  27,102,384   213,926   24,708,739   3,073,444   13,981,033   6,113,495   5,597,990   3,341,956   14,186,723   53,143,542   —     151,463,232   27,396,393   215,381   25,379,805   5,241,305   12,124,685   4,895,331   7,289,748   3,220,105   14,186,723   52,950,325   —     152,899,801 

Trademarks, net

  406,723   274,786   246,557   —     —     —     —     631,024   262,641   8,116,076   —     9,937,807   46,476   212,324   37,207   —     —     —     —     369,950   227,156   2,595,596   —     3,488,709 

Licenses and rights, net

  11,457,720   13,175   35,662,305   8,885,086   4,197,498   11,295,202   3,376,106   —     7,276,039   31,141,255   —     113,304,386   11,087,882   452,504   29,324,718   12,103,980   5,530,422   8,064,487   4,390,547   —     7,942,670   25,951,335   —     104,848,545 

Investment in associated companies

  469,662   546,872   640   63,110   451   —     16,999   —     —     806,950   1,830,488   3,735,172   3,562,323   610,807   111,073   (7,806)   391   —     25,603   —     —     —     (1,828,198)   2,474,193 

Liabilities by segments

  794,598,013   133,428,178   322,620,030   119,123,646   54,756,152   48,656,628   35,501,900   38,249,957   43,978,410   119,240,533   (484,575,112)   1,225,578,335   718,354,229   175,774,964   297,877,328   103,330,525   55,576,253   55,463,339   37,993,180   31,557,816   54,276,868   124,319,541   (349,497,251)   1,305,026,792 

23.24. Recently Issued Accounting Standards

New standards and amendments effective from January 1, 2017

The following new standards and amendments applicable from January 1, 2017 were adopted by America Movil:

Amendments to IAS12 — Income Taxesthat clarify how to account for deferred tax assets related to debt instruments measured at fair value. There was no effect to the consolidated financial statements from the adoption of these amendments.

Amendments to IAS 7— Statement of Cash Flows introducing additional disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The required disclosures have been included in Note 18 to the consolidated financial statements.

Amendments to IFRS 12 — Disclosure of Interests in Other Entities,included within the Annual Improvements to IFRS Standards 2014–2016 Cycle. There was no effect to the Company’s consolidated financial statements from the adoption of these amendments.

New standards, amendments and interpretations not yet effective

The estimated impact and evaluation of the recently issued accounting standards not yet in effect as of December 31,201731, 2019 are as follow:follows:

Amendments to IFRS 9, Financial Instruments3: Definition of Business

The amendment to IFRS 9, Financial Instruments, was issued in July 20143 clarifies that to be considered a business, an integrated set of activities and relatesassets must include, at a minimum, an input and a substantive process that together significantly contribute to the classificationability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and measurement of financial assets and financial liabilities, hedge accounting and impairment of financial assets. The new standard became effectiveprocesses needed to create outputs.

These amendments had no impact on January 1, 2018. The Company does not expect significant changes to its existing accounting policies surrounding classification and measurement foravailable-for-sale securities as they are currently recognized at fair value on the consolidated statement of financial condition with changes in fair value recognized in other comprehensive income. As for the recognition of impairment of financial assets as they would relate to trade accounts receivable, the Company currently adopted the simplified approach of IFRS 9 in order to account for the expected loss of accounts receivable. Based on currently available information on the assessment undertaken to date, the Company effect of adopting this standard in the consolidated financial statements is approximately between Ps. 2,500,000 and Ps. 2,750,000 reflecting an adjustment to the net fair value of trade accounts receivables and beginning of the year retained earnings.Company but may impact future periods should the Company enter into any business combinations.

IFRS 15, Revenue from ContractsAmendments to IAS 1 and IAS 8: Definition of Material

The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with Customers

In May 2014,other information, in the IASB issued the new standard IFRS 15 “Revenue from Contracts with Customers”. The new standard for revenue recognition aims at standardizing the multitude of regulations previously included in various standards, and may require more judgment and estimates than with the revenue recognition processes that are required under the existing revenue recognition standards. The amount of revenue recognized and its timing is determined based on a five-step model. IFRS 15 contains additional qualitative and quantitative disclosure obligations. These are aimed at enabling userscontext of the financial statementsstatements. A misstatement of information is material if it could reasonably be expected to understand the nature, amount, timing and uncertainties of revenue and the resulting cash flows arising from contracts with customers. Under IFRS 15, revenue is recognized for an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or providing services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue.

IFRS allows two adoption methods under IFRS 15: retrospectively to each reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the standard in beginning retained earnings. The Company will adopt the new standard on the required effective date as of January 1, 2018, using the “modified retrospective method”.

IFRS 15 provides presentation and disclosure requirements which are more detailed than under current IFRS. The presentation requirements represent a significant change from current practice and increases the volume of disclosures required in Company’s consolidated financial statements.

Under that method, the Company will apply the rules to all contracts existing as of January 1, 2018, recognizing in retained earnings an adjustment for the cumulative effect of the change and it will be providing additional disclosures comparing results to previously recorded revenue on its 2018 consolidated financial statements.

During 2017 the Company performed an impact assessment and analysis of the new standard IFRS 15. The most significant judgements and impacts upon the adoption of IFRS 15 include the following topics:

a) Service revenues and sale of equipment

The Company provides fixed and mobile services. These services are offered independently in contracts with customers or together with the sale of handsets (mobile) under the postpaid model. Before 2018, the Company accounted for equipment and service as separated performance obligations and assigned the consideration to both performance obligations using the fair value for each element.

In accordance with IFRS 15, the transaction price should be assigned to the different performance obligations based on their relative standalone selling price.

The Company concluded that regarding the provided services, it has market observable information, to determine the standalone selling price of the services. On the other hand, in the case of the sale of bundled mobile phones sold (including service and handset) by the Company, the allocation of the sales will be done based on their relative standalone selling price of each individual component related to the total bundled price. The result is that more equipment revenue will be recognized at the moment of a sale and, therefore, less service revenue from the monthly fee will be recognized under the new standard.

The Company concluded as well that the provided services are satisfied over the time of the contract period, given that the customer simultaneously receives and consumes the benefits provided by the Company.

In connection with the sale of handsets, the Company will recognize the revenue at the moment in which it transfers control of such devices to the customer, which is the time of the physical delivery, and accordingly a higher revenue will be recognized at the beginning of the contract.

Additionally, the Company sells to its customers bundles of different services (fixed line, mobile, broad band internet, streaming and pay TV, among others). Such service bundles accomplish the criteria mentioned in IFRS 15 of being substantially similar and of having the same transfer pattern which is why the Company concluded that the revenue from these different services offered to its customers will be considered as a single performance obligation with revenue being recognized over the time.

b) Revenue from goods sold

Under IFRS 15, for those contracts with customers in which generally the sale of equipment and other electronic equipment is a single performance obligation, the Company recognizes the revenue at the moment when it transfers control to the customer which generally occurs when such goods are delivered. The latter is consistent with the previous accounting policy.

c) Contract costs

The Company pays commissions to its distributors for obtaining new customers, such commissions are expensed as incurred under the previous accounting. Under IFRS 15, are considered incremental contract acquisition costs that will be capitalized and will be amortized over the expected period of benefit, during the average duration of customer contracts.

d) Significant financial component

The Company frequently sells equipment under a financing model ranging from 12 to 36 months. According to IFRS 15, if the price of the product on credit is higher than the one paid upfront, the existence of an interest component is considered. Such amount will be recognized by the Company as a separate line in revenue as long as it is significant.

e) Contract completion costs

The Company charges installation costs to its customers, such costs are currently recognized as expenses in the moment in which control to the customer is transferred, however, if the installation costs are part of a single performance obligation together with the telecommunication services, these costs will amortized during the average lifetime of the contracts.

As a result of the analysis prepared by the Company of the impact of the adoption of the new criteria for revenue recognition, required by IFRS 15, the Company estimated that the initial recognition will increase its equity between Ps. 30,000,000 and Ps. 32,000,000, approximately, primarily related to the deferral of contract costs.

The Company has also identified and implemented changes to its accounting policies and practices, systems and controls, as well as designated and implemented specific controls over its evaluation of the impact of the new guidance the company, including the cumulative effect calculation, disclosure requirements and the collection of relevant data into the reporting process.

IFRS 16, Leases

In January 2016, the IASB issued the new accounting standard, IFRS 16 Leases. The fundamental changes in this new standard affect the lessees’ recognition of leases in the financial statements. Generally, all leases have to be recognized based on the “right of use approach”.

The new standard is effective for fiscal years beginning on or after January 1, 2019, with early adoption permitted. The standard includes two recognition exemptions for lessees — leases of’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., theright-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on theright-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to theright-of-use asset.

IFRS 16 also requires lessees to make more extensive disclosures than under IAS 17.

According to the initial assessmentinfluence decisions made by the Company, the primary effect of the new standard will be to require the Company to establish a liability and a right of use asset equal to the value of most of the Company’s leases that are currently accounted for as operating leases.users.

Based on a preliminary analysis in process and subject to changes, the Company may need to record on the consolidated statement of financial position, liabilities and right of use assets of operating leases as disclosed in Note 16a undernon-cancellable operating leases. However this preliminary analysis has not been finalized and is subject to change.

In December 2016, the IASB issued IFRIC Interpretation 22 —Foreign Currency Transactions and Advance Considerationwhich addresses the exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency. The interpretation is effective January 1, 2018. Company does not expect a materialThese amendments had no impact to our consolidated financial statements upon adoption of the interpretation.

In May 2017, the IASB issued IFRS 17 —Insurance Contracts(“IFRS 17”), which replaces IFRS 4Insurance Contracts.IFRS 17 requires all insurance contracts to be accounted for in a consistent manner and insurance obligations to be accounted for using current values, instead of historical cost. The new standard requires current measurement of the future cash flows and the recognition of profit over the period that services are provided under the contract. IFRS 17 also requires entities to present insurance service results (including presentation of insurance revenue) separately from insurance finance income or expenses, and requires an entity to make an accounting policy choice of whether to recognize all insurance finance income or expenses in profit or loss or to recognize some of those income or expenses in other comprehensive income. The standard is effective for annual periods beginning on or after January 1, 2021 with earlier adoption permitted. Company is currently evaluating the impact of adoption on its consolidated financial statements.

In June 2017, the IASB issued IFRICInterpretation 23 — Uncertainty over Income Tax Treatment, (the “Interpretation”), which clarifies application of recognition and measurement requirements in IAS 12 — Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following: (i) whether an entity considers uncertain tax treatments separately, (ii) the assumptions an entity makes about the examination of tax treatments by taxation authorities, (iii) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates and (iv) how an entity considers changes in facts and circumstances. The Interpretation does not add any new disclosure requirements, however it highlights the existing requirements in IAS 1 — Presentation of Financial Statements, related to disclosure of judgments, information about the assumptions made and other estimates and disclosures oftax-related contingencies within IAS 12 — Income Taxes. The Interpretation is applicable for annual reporting periods beginning on or after January 1, 2019 and it provides a choice of two transition approaches: (i) retrospective application using IAS 8- Accounting Policies, Changes in Accounting Estimates and Errors, only if the application is possible without the use of hindsight, or (ii) retrospective application with the cumulative effect of the initial application recognized as an adjustment to equity on the date of initial application and without restatement of the comparative information. The date of initial application is the beginning of the annual reporting period in which an entity first applies this Interpretation. Company is currently evaluating the implementation and the impact of adoption of the interpretation on our consolidated financial statements.

In October 2017, the IASB issuedPrepayment Features with Negative Compensation (Amendments to IFRS 9),allowing companies to measure particular prepayable financial assets withso-called negative compensation at amortized cost or at fair value through other comprehensive income if a specified condition is met, instead of at fair value through profit or loss, effective January 1, 2019. Company is currently evaluating the impact of adoption on the consolidated financial statements.statements of, nor is there expected to be any future impact to the Company.

In October 2017, the IASB issuedLong-term interests in associates and joint ventures (AmendmentsAmendments to IAS 28), which clarifies that companies account for long-term interests in an associate or joint venture, to which the equity method is not applied, usingIFRS 7, IFRS 9 effective January 1, 2019. Companyand IAS 39: Interest Rate Benchmark Reform

The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is currently evaluatingaffected if the impactreform gives rise to uncertainties about the timing and or amount of adoptionbenchmark-based cash flows of the hedged item or the hedging instrument.

These amendments had no impact on the consolidated financial statements.

In December 2017, the IASB issued theAnnual Improvements to IFRS’ 2015-2017, a series of amendments to IFRS’ in response to issues raised mainly on IFRS 3 — Business Combinations, which clarifies that a company remeasure its previously held interest in a joint operation when it obtains controlstatements of the business, on IFRS 11 —Joint Arrangements, a companyCompany as it does not remeasure its previously heldhave any interest in a joint operation when it obtains joint control of the business, on IAS 12 — Income Taxes, which clarifies that all income tax consequences of dividends (i.e. distribution of profits) should be recognized in profit or loss, regardless of how the tax arises, and on IAS 23 — Borrowing Costs, which clarifies that a company treats as part of general

rate hedge relationships.

borrowing any borrowing originally made to develop an asset when the asset is ready for its intended use or sale. The effective date of the amendments is January 1, 2019. Company is currently evaluating the impact of adoption on the consolidated financial statements.

In February 2018, the IASB issuedPlan Amendment, Curtailment or Settlement (Amendments to IAS 19) which specifies how companies determine pension expenses when changes to a defined benefit pension plan occur. IAS 19Employee Benefits specifies how a company accounts for a defined benefit plan. When a change to aplan-an amendment, curtailment or settlement-takes place, IAS 19 requires a company to remeasure its net defined benefit liability or asset. The amendments require a company to use the updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. The amendments are effective on or after 1 January 2019. The Company is currently evaluating the impact of adoption on the consolidated financial statements.

24.25. Subsequent Events

a) On January 3, 2018,March 25, 2020, the Company decided to call and redeemdisbursed the Telekom Austria undated subordinated Fixed Rate Bond (hybrid bond) amounting to 600 million of Euros, according to the terms and conditionsfull amount of the bond, at its nominal value plus all interesttwo existing revolving syndicated credit facilities—one for U.S.$2.5 billion and one for the Euro equivalent of U.S.$2.0 billion. The Company elected to draw on February 1, 2018, the first call date. See Note 19.facilities to assure liquidity.

b) On March 5, 2018 América Móvil receivedApril 9, 2020, the resolution issued byCompany announced a tender offer to purchase in cash its Zero Coupon Exchangeable Bonds due on May 28, 2020. The tender offer finalized on April 17, 2020 and resulted with the Federal Telecommunications Institute (“IFT”) in which it provides the final terms of implementation under which its subsidiaries Telmex and Telnor must legally and functionally separate the provision of regulated wholesale fixed services, through the creation of (i) new wholly-owned subsidiaries with an independent corporate structure, bodies and governance and (ii) a wholesale unit within Telmex and Telnor. The resolution provides for a2-year implementation period with specific events and dates regarding the separation to be achieved during such2-year period. We have presented a series of appeals to the separation order issued by the IFT. However, given that under Mexican law IFT’s determinations are not subject to a stay or suspension pending a final resolution to our legal challenges, the separation ordered by the IFT shall be complied with and therefore the separation shall be implemented as ordered under the resolution. The Company is in the process of evaluating the impactpurchasing €1,318,200 of the resolutionprincipal amount of the Exchangeable Bond. Aggregate principal amount of €1,607,300 of the Exchangeable Bonds remains outstanding.

c) The coronavirus(“COVID-19”) outbreak and can not yet estimate its impact on global economies could have an effect on the Company’s business, which will depend on the duration and spread of the outbreak. The financial resilience of the Company and its consolidated financial statements.vast and critical infrastructure will contribute to mitigate the mentioned impact.

25.

26. Supplemental Guarantor Information

Condensed Consolidating Financial Information

The following consolidating information presents condensed consolidating statements of financial position as of December 31, 20162018 and 20172019 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 20172019 of the Company and Telcel (the “wholly-owned Guarantor Subsidiary”). The unconsolidated financial statements of América Móvil and Telcel reflect their investments in subsidiaries on the basis of the equity method. These unconsolidated entities are the Guarantors of most of América Móvil’s consolidated obligations. The guarantees of the Guarantor are full and unconditional.

The Company’s consolidating condensed financial information for the (i) Company; (ii) its wholly-owned guarantor subsidiary Telcel (on standalone basis), which is a wholly and unconditional guarantor under the Senior Notes; (iii) the combinednon-guarantor subsidiaries; iv) eliminations and v) the Company’s consolidated financial statements are as follows:

Condensed consolidating statements of financial position

 

  As of December 31, 2016 
  Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Assets:

     

Cash and cash equivalents

 Ps.4,107,645  Ps.1,948,159  Ps.17,162,579  Ps.—   Ps.23,218,383 

Marketable securities

  11,716,039   —     43,141,118   —     54,857,157 

Accounts receivable, net

  41,086,859   23,541,672   142,056,406   (1,347)   206,683,590 

Related parties

  271,373,391   14,461,731   379,358,127   (664,452,757)   740,492 

Inventories, net

  323,642   10,246,083   26,575,972   (274,405)   36,871,292 

Other current assets

  —     951,739   18,586,354   —     19,538,093 

Property, plant and equipment, Net

  2,774,540   24,124,644   674,290,882   —     701,190,066 

Investments in associated companies

  704,272,725   134,150,348   59,589,480   (894,409,069)   3,603,484 

Intangible assets and othernon-current assets, net

  11,734,707   25,653,093   430,951,917   —     468,339,717 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

 Ps.  1,047,389,548  Ps.  235,077,469  Ps.  1,791,712,835  Ps. (1,559,137,578)  Ps.  1,515,042,274 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities:

     

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

 Ps.57,213,648  Ps.—   Ps.25,393,611  Ps.—   Ps.82,607,259 

Current liabilities

  222,336,894   178,205,640   643,759,333   (656,905,877)   387,395,990 

Long-term debt

  555,475,368   —     69,718,776   —     625,194,144 

Other non-current liabilities

  3,448,396   885,834   152,707,752   (8,220,868)   148,821,114 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

 Ps.838,474,306  Ps.179,091,474  Ps.891,579,472  Ps.(665,126,745)  Ps.1,244,018,507 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Equity attributable to equity holders of the parent

  208,915,242   55,985,995   714,469,820   (770,455,814)   208,915,243 

Non-controlling interests

  —     —     185,663,543   (123,555,019)   62,108,524 

Total equity

  208,915,242   55,985,995   900,133,363   (894,010,833)   271,023,767 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and equity

 Ps.1,047,389,548  Ps.235,077,469  Ps.1,791,712,835  Ps. (1,559,137,578)  Ps.1,515,042,274 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 As of December 31, 2017   As of December 31, 2018 
 Parent Wholly-owned
Guarantor
Subsidiary		 Combined
non-guarantor
Subsidiaries		 Eliminations Consolidated
Total		   Parent   Wholly-owned
Guarantor
Subsidiary		   Combined
non-guarantor
Subsidiaries		   Eliminations Consolidated
Total		 

Assets:

              

Cash and cash equivalents

 Ps.7,018,559  Ps.3,553,352  Ps.13,698,562  Ps.—   Ps.24,270,473   Ps.  8,335,101   Ps.1,745,895   Ps.  11,578,966   Ps.—    Ps.21,659,962 

Marketable securities

  10,303,535   —     48,817,141   —     59,120,676 

Accounts receivable, net

  9,874,652   24,064,936   167,873,940   —     201,813,528 

Equity investments at fair value through other comprehensive income (OCI) and other short-term investments

   9,511,368    —      39,504,566    —    49,015,934 

Accounts receivable and derivative financial instruments

   31,462,176    35,671,582    154,380,710    —    221,514,468 

Related parties

  208,240,067   957,704   503,895,549   (712,225,090)   868,230    199,566,671    1,144,534    560,142,367    (759,589,967)  1,263,605 

Inventories, net

  264,649   16,700,837   21,844,079   —     38,809,565    215,055    18,495,502    21,594,805    —    40,305,362 

Other current assets

  17,805,747   922,245   (1,375,246)   —     17,352,746 

Property, plant and equipment, Net

  1,996,721   24,287,904   650,058,573   —     676,343,198 

Other current assets, net

   —      1,218,764    14,077,429    —    15,296,193 

Property, plant and equipment, net

   1,340,358    23,192,546    615,467,816    —    640,000,720 

Investments in associated companies

  747,771,790   35,569,788   3,457,152   (783,063,558)   3,735,172    734,944,344    88,070,845    16,926,615    (836,809,097)  3,132,707 

Intangible assets and othernon-current assets, net

  4,104,268   73,557,904   386,236,092   —     463,898,264    4,113,902    26,176,381    406,744,158    —    437,034,441 
 

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Total assets

 Ps.  1,007,379,988  Ps.  179,614,670  Ps.  1,794,505,842  Ps.  (1,495,288,648)  Ps.  1,486,211,852   Ps. 989,488,975   Ps. 195,716,049   Ps. 1,840,417,432   Ps. (1,596,399,064)  Ps. 1,429,223,392 
 

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Liabilities:

     

Liabilities:

 

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

 Ps.34,345,398  Ps.—   Ps.17,400,443  Ps.—   Ps.51,745,841   Ps.  52,827,411   Ps.—     Ps.43,403,223   Ps.—    Ps.96,230,634 

Current liabilities

  161,940,198   41,304,845   797,880,314   (639,534,701)   361,590,656    153,489,868    72,282,238    597,174,025    (452,085,876)  370,860,255 

Long-term debt

  547,728,176   —     98,410,882   —     646,139,058    456,918,590    —      85,773,229    —    542,691,819 

Othernon-current liabilities

  69,201,904   132,728,838   40,909,234   (76,737,196)   166,102,780    130,257,461    109,368,210    242,232,897    (308,290,306)  173,568,262 
 

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Total liabilities

 Ps.813,215,676  Ps.174,033,683  Ps.954,600,873  Ps.(716,271,897)  Ps.1,225,578,335   Ps.  793,493,330   Ps.  181,650,448   Ps.  968,583,374   Ps.(760,376,182)  Ps.1,183,350,970 
 

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Equity attributable to equity holders of the parent

  194,164,312   5,580,987   741,988,231   (747,569,218)   194,164,312    195,995,645    14,065,601    760,485,332    (774,550,933)  195,995,645 

Non-controlling interests

  —     —     97,916,738   (31,447,533)   66,469,205    —      —      111,348,726    (61,471,949)  49,876,777 

Total equity

  194,164,312   5,580,987   839,904,969   (779,016,751)   260,633,517    195,995,645    14,065,601    871,834,058    (836,022,882)  245,872,422 
 

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Total liabilities and equity

 Ps.1,007,379,988  Ps.179,614,670  Ps.1,794,505,842  Ps.(1,495,288,648)  Ps.1,486,211,852   Ps.  989,488,975   Ps.  195,716,049   Ps.  1,840,417,432   Ps.  (1,596,399,064)  Ps.  1,429,223,392 
 

 

  

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Condensed consolidating statements of comprehensive income

For the year ended December 31, 2015financial position

 

   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Total revenues

  Ps.  173,615,615  Ps.  157,930,068  Ps.  743,147,639  Ps.  (180,955,583)  Ps.  893,737,739 

Total cost and operating expenses

   126,724,721   142,902,403   663,102,125   (180,404,671)   752,324,578 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   46,890,894   15,027,665   80,045,514   (550,912)   141,413,161 

Interest (expense) income, net

   (16,668,472)   (9,031,432)   (872,237)   227,781   (26,344,360) 

Foreign currency exchange (loss) gain, net

   (51,209,235)   (2,060,917)   (25,727,836)   —     (78,997,988) 

Other financing cost, net

   14,115,563   —     7,380,753   —     21,496,316 

Income tax

   1,150,992   1,747,302   16,281,357   —     19,179,651 

Equity interest in net income of associated companies

   43,077,014   (4,722,363)   (2,534,350)   (37,246,997)   (1,426,696) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for year

  Ps.35,054,772  Ps.(2,534,349)  Ps.42,010,487  Ps.(37,570,128)  Ps.36,960,782 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Distribution of the net profit (loss) to:

      

Equity owners of holding company

  Ps.35,054,772  Ps.(2,534,349)  Ps.41,711,424  Ps.(39,177,075)  Ps.35,054,772 

Non-controlling interest

   —     —     299,063   1,606,947   1,906,010 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss)

  Ps.35,054,772  Ps.(2,534,349)  Ps.42,010,487  Ps.(37,570,128)  Ps.36,960,782 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss) items:

      

Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:

      

Effect of translation of foreign entities

  Ps.(34,224,932)  Ps.(4,664,901)  Ps.(34,129,089)  Ps.37,412,602  Ps.(35,606,320) 

Effect of fair value of derivatives, net of deferred taxes

   37,011   —     22,482   (21,998)   37,495 

Items not to be reclassified to profit or loss in subsequent years:

      

Remeasurement of defined benefit plan, net of income tax effect

   (17,791,354)   —     (10,750,136)   10,561,072   (17,980,418) 

Available for sale

   173,540   —     (169,529)   —     4,011 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive income items for the period

   (51,805,735)   (4,664,901)   (45,026,272)   47,951,676   (53,545,232) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income for the period

  Ps.(16,750,963)  Ps.(7,199,250)  Ps.(3,015,785)  Ps.10,381,548  Ps.(16,584,450) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income for the period attributable to:

      

Equity holders of the parent

  Ps.(16,750,963)  Ps.(7,199,250)  Ps.(10,304,830)  Ps.17,504,080  Ps.(16,750,963) 

Non-controlling interests

   —     —     7,289,045   (7,122,532)   166,513 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Ps.(16,750,963)  Ps.(7,199,250)  Ps.(3,015,785)  Ps.10,381,548  Ps.(16,584,450) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Condensed consolidating statements of comprehensive income

For the year ended December 31, 2016

   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Total revenues

  Ps.  137,236,301  Ps.  173,714,225  Ps.  857,137,822  Ps. (192,675,860)  Ps.  975,412,488 

Total cost and operating expenses

   117,835,634   160,949,691   778,483,079   (191,466,226)   865,802,178 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   19,400,667   12,764,534   78,654,743   (1,209,634)   109,610,310 

Interest (expense) income, net

   (12,331,095)   97,314   (17,207,855)   (227,781)   (29,669,417) 

Foreign currency exchange (loss) gain, net

   (46,625,392)   (5,853,669)   12,051,654   —     (40,427,407) 

Other financing cost, net

   (10,475,673)   (11,203,533)   5,453,365   —     (16,225,841) 

Income tax

   (7,712,179)   1,139,631   17,971,404   —     11,398,856 

Equity interest in net income of associated companies

   50,968,741   (1,342,073)   (6,677,059)   (42,759,659)   189,950 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for year

  Ps.8,649,427  Ps.(6,677,058)  Ps.54,303,444  Ps.(44,197,074)  Ps.12,078,739 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Distribution of the net profit (loss) to:

      

Equity owners of holding company

   8,649,427   (6,677,058)   50,049,280   (43,372,222)   8,649,427 

Non-controlling interest

   —     —     4,254,164   (824,852)   3,429,312 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss)

  Ps.8,649,427  Ps.(6,677,058)  Ps.54,303,444  Ps.(44,197,074)  Ps.12,078,739 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income items:

      

Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:

      

Effect of translation of foreign entities

   104,178,880   755,978   108,291,984   (105,728,134)   107,498,708 

Effect of fair value of derivatives, net of deferred taxes

   48,496   —     30,206   (29,573)   49,129 

Items not to be reclassified to profit or loss in subsequent years:

      

Remeasurement of defined benefit plan, net of income tax effect

   14,771,770   (12,300)   7,477,926   (7,463,997)   14,773,399 

Available for sale

   (6,673,731)   —     (6,673,731)   6,673,731   (6,673,731) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive income items for the period

  Ps.112,325,415  Ps.743,678  Ps.109,126,385  Ps.(106,547,973)  Ps.115,647,505 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income for the period

  Ps.120,974,842  Ps.(5,933,380)  Ps.163,429,829  Ps.(150,745,047)  Ps.127,726,244 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income for the period attributable to:

      

Equity holders of the parent

  Ps.120,974,842  Ps.(5,933,380)  Ps.150,900,984  Ps.(144,967,604)  Ps.120,974,842 

Non-controlling interests

   —     —     12,528,845   (5,777,443)   6,751,402 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Ps.120,974,842  Ps.(5,933,380)  Ps.163,429,829  Ps.(150,745,047)  Ps.127,726,244 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  As of December 31, 2019 
  Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Assets:

     

Cash and cash equivalents

 Ps.2,181,914  Ps.1,324,828  Ps.16,238,914  Ps.—    Ps.19,745,656 

Equity investments at fair value through other comprehensive income (OCI) and other short-term investments

  7,457,617   —     40,260,408   —     47,718,025 

Accounts receivable and derivative financial instruments

  33,572,793   32,387,110   145,572,153   —     211,532,056 

Related parties

  212,730,983   1,804,175   270,172,956   (483,434,974)   1,273,140 

Inventories, net

  179,359   24,849,028   16,073,625   —     41,102,012 

Other current assets, net

  —     8,127,140   1,346,294   —     9,473,434 

Property, plant and equipment, net

  721,263   23,549,234   615,072,873   —     639,343,370 

Investments in associated companies

  589,026,740   90,975,391   16,363,504   (693,891,442)   2,474,193 

Intangible assets and othernon-current assets, net

  1,868,962   82,260,873   477,068,306   (1,926,370)   559,271,771 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

 Ps.847,739,631 Ps.265,277,779  Ps.1,598,169,033  Ps.(1,179,252,786)  Ps.1,531,933,657 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities:

     

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

 Ps.102,939,138  Ps.—    Ps.26,232,895  Ps.—    Ps.129,172,033 

Current liabilities

  104,397,419   163,515,007   324,211,152   (195,895,866)   396,227,712 

Long-term debt

  395,296,683   —     99,785,761   —     495,082,444 

Othernon-current liabilities

  67,196,432   87,597,558   417,289,721   (287,539,108)   284,544,603 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

 Ps.669,829,672  Ps.251,112,565  Ps.867,519,529  Ps.(483,434,974)  Ps.1,305,026,792 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Equity attributable to equity holders of the parent

  177,909,959   14,165,214   620,224,573   (634,389,787)   177,909,959 

Non-controlling interests

  —     —     110,424,931   (61,428,025)   48,996,906 

Total equity

  177,909,959   14,165,214   730,649,504   (695,817,812)   226,906,865 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and equity

 Ps.  847,739,631  Ps.  265,277,779  Ps.  1,598,169,033  Ps.  (1,179,252,786)  Ps.  1,531,933,657 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Condensed consolidating statements of comprehensive income

For the year ended December 31, 2017

 

  Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Total revenues

 Ps.  160,057,511  Ps.  170,991,493  Ps.  887,951,615  Ps. (197,367,084)  Ps.  1,021,633,535 

Total cost and operating expenses

  123,548,341   163,152,868   832,429,198   (197,640,175)   921,490,232 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

  36,509,170   7,838,625   55,522,417   273,091   100,143,303 

Interest (expense) income, net

  (16,779,235)   (12,365,116)   1,810,523   (41,305)   (27,375,133) 

Foreign currency exchange (loss) gain, net

  (15,223,111)   1,320,667   83,493   —     (13,818,951) 

Other financing cost, net

  6,775,455   —     (8,719,215)   —     (1,943,760) 

Income tax

  14,201,399   1,386,519   9,353,593   —     24,941,511 

Equity interest in net income of associated companies

  32,245,041   (8,977,146)   (13,466,845)   (9,709,665)   91,385 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for year

 Ps.29,325,921  Ps.(13,569,489)  Ps.25,876,780  Ps.(9,477,879)  Ps.32,155,333 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Distribution of the net profit (loss) to:

     

Equity owners of holding company

  29,325,921   (13,569,489)   21,417,549   (7,848,060)   29,325,921 

Non-controlling interest

  —     —     4,459,231   (1,629,819)   2,829,412 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss)

 Ps.29,325,921  Ps.(13,569,489)  Ps.25,876,780  Ps.(9,477,879)  Ps.32,155,333 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income items:

     

Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:

     

Effect of translation of foreign entities

  (21,683,333)   (1,897,936)   (18,309,877)   23,581,269   (18,309,877) 

Effect of fair value of derivatives, net of deferred taxes

  12,292   —     12,292   (12,292)   12,292 

Items not to be reclassified to profit or loss in subsequent years:

     

Remeasurement of defined benefit plan, net of income tax effect

  (7,075,606)   (8,439)   (7,046,089)   7,084,045   (7,046,089) 

Available for sale

  622,424   —     622,424   (622,424)   622,424 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive income items for the period

 Ps.(28,124,223)  Ps.(1,906,375)  Ps.(24,721,250)  Ps.30,030,598  Ps.(24,721,250) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income for the period

 Ps.1,201,698  Ps.(15,475,864)  Ps.1,155,530  Ps.20,552,719  Ps.7,434,083 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income for the period attributable to:

     

Equity holders of the parent

 Ps.1,201,698  Ps.(15,475,864)  Ps.(5,076,855)  Ps.20,552,719  Ps.1,201,698 

Non-controlling interests

  —     —     6,232,385   —     6,232,385 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 Ps.1,201,698  Ps.(15,475,864)  Ps.1,155,530  Ps.20,552,719  Ps.7,434,083 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Total operating revenues

  Ps.  160,057,511  Ps.  170,991,493  Ps.  887,951,615  Ps.  (197,367,084)  Ps.  1,021,633,535 

Total operating cost and expenses

   123,548,341   163,152,868   832,429,198   (197,640,175)   921,490,232 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   36,509,170   7,838,625   55,522,417   273,091   100,143,303 

Interest (expense) income, net

   (16,779,235)   (12,365,116)   1,810,523   (41,305)   (27,375,133) 

Foreign currency exchange (loss) gain, net

   (15,223,111)   1,320,667   83,493   —     (13,818,951) 

Valuation of derivatives, interest cost from labor obligations and other financial items, net

   6,775,455   —     (8,719,215)   —     (1,943,760) 

Income tax

   14,201,399   1,386,519   9,353,593   —     24,941,511 

Equity interest in net income of associated companies

   32,245,041   (8,977,146)   (13,466,845)   (9,709,665)   91,385 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for the year

  Ps.29,325,921  Ps.(13,569,489)  Ps.25,876,780  Ps.(9,477,879)  Ps.32,155,333 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit for the year attributable to:

      

Equity holders of the parent

   29,325,921   (13,569,489)   21,417,549   (7,848,060)   29,325,921 

Non-controlling interest

   —     —     4,459,231   (1,629,819)   2,829,412 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for the year

  Ps.29,325,921  Ps.(13,569,489)  Ps.25,876,780  Ps.(9,477,879)  Ps.32,155,333 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income items:

      

Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:

      

Effect of translation of foreign entities

   (21,683,333)   (1,897,936)   (18,309,877)   23,581,269   (18,309,877) 

Effect of fair value of derivatives, net of deferred taxes

   12,292   —     12,292   (12,292)   12,292 

Items not to be reclassified to profit or (loss) in subsequent years:

      

Re-measurement of defined benefit plan, net of deferred taxes

   (7,075,606)   (8,439)   (7,046,089)   7,084,045   (7,046,089) 

Unrealized gain on equity investments at fair value, net of deferred taxes

   622,424   —     622,424   (622,424)   622,424 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive loss items for the year, net of deferred taxes

  Ps.(28,124,223)  Ps.(1,906,375)  Ps.(24,721,250)  Ps.30,030,598  Ps.(24,721,250) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income for the year

  Ps.1,201,698  Ps.(15,475,864)  Ps.1,155,530  Ps.20,552,719  Ps.7,434,083 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income for the year attributable to:

      

Equity holders of the parent

  Ps.1,201,698  Ps.(15,475,864)  Ps.(5,076,855)  Ps.20,552,719  Ps.1,201,698 

Non-controlling interests

   —     —     6,232,385   —     6,232,385 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Ps.1,201,698  Ps.(15,475,864)  Ps.1,155,530  Ps.20,552,719  Ps.7,434,083 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Condensed consolidating statements of cash flowscomprehensive income

For the year ended December 31, 20152018

 

   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Operating activities:

      

Profit before taxes

  Ps.36,205,763  Ps.(787,047)  Ps.58,291,845  Ps.(37,570,128)  Ps.56,140,433 

Non-cash items

   (4,256,606)   20,449,298   141,713,565   37,246,997   195,153,254 

Changes in working capital:

   (72,746,155)   (1,580,787)   (13,562,885)   323,131   (87,566,696) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows (used in) provided by operating activities

  Ps. (40,796,998)  Ps.18,081,464  Ps.186,442,525  Ps.—   Ps.163,726,991 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing activities:

      

Purchase of property, plant and equipment

   1,498   (6,894,071)   (121,147,340)   —     (128,039,913) 

Acquisition of intangibles

   —     (3,292,490)   (20,240,336)   —     (23,532,826) 

Dividends received from associates

   74,901,349   —     —     (73,255,637)   1,645,712 

Proceeds from sale of plant, property and equipment

   —     —     27,329   —     27,329 

Acquisition of business, net of cash acquired

   —     —     (3,457,153)   —     (3,457,153) 

Partial sale of shares of associate company

   —     —     633,270   —     633,270 

Spin of company

   —     (216,626)   21,216,626   —     21,000,000 

Investment in associates companies

   (2,213,277)   (1,404,489)   3,439,801   —     (177,965) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by (used in) investing activities

  Ps.72,689,570  Ps. (11,807,676)  Ps. (119,527,803)  Ps. (73,255,637)  Ps. (131,901,546) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing activities:

      

Bank loans, net

   50,879,779   —     5,083,236   —     55,963,015 

Acquisition of no controlling interest

   (34,970)   —     (996,079)   —     (1,031,049) 

Interest paid

   (23,379,273)   (6,200,848)   (3,250,311)   —     (32,830,432) 

Repurchase of shares and others

   (34,684,520)   —     241,436   —     (34,443,084) 

Payment of dividends

   (36,524,317)   —     (74,090,920)   73,255,637   (37,359,600) 

Derivative financial instruments

   —     —     (503,444)   —     (503,444) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows (used in) financing activities

  Ps.(43,743,301)  Ps.(6,200,848)  Ps.(73,516,082)  Ps.73,255,637  Ps.(50,204,594) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (decrease) increase in cash and cash equivalents

   (11,850,729)   72,940   (6,601,360)   —     (18,379,149) 

Adjustment to cash flow for exchange rate differences

   —     —     (2,934,522)   —     (2,934,522) 

Cash and cash equivalents at beginning of the period

   25,654,313   1,395,096   39,424,294   —     66,473,703 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of the period

  Ps.13,803,584  Ps.1,468,036  Ps.29,888,412  Ps.—   Ps.45,160,032 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Total operating revenues

  Ps.  170,887,145  Ps.  190,924,413  Ps.  890,427,121  Ps.  (214,030,998)  Ps.  1,038,207,681 

Total operating cost and expenses

   129,039,749   183,542,058   799,085,884   (213,017,181)   898,650,510 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   41,847,396   7,382,355   91,341,237   (1,013,817)   139,557,171 

Interest (expense) income, net

   (24,831,538)   (11,033,069)   14,757,906   (18,563)   (21,125,264) 

Foreign currency exchange (loss) gain, net

   11,805,283   626,304   (19,693,543)   —     (7,261,956) 

Valuation of derivatives, interest cost from labor obligations and other financial items, net

   (4,443,892)   —     (5,732,424)   —     (10,176,316) 

Income tax

   17,754,010   798,639   27,924,430   —     46,477,079 

Equity interest in net income of associated companies

   46,101,188   1,325,723   (2,497,059)   (44,929,585)   267 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for year

  Ps.52,724,427  Ps.(2,497,326)  Ps.50,251,687  Ps.(45,961,965)  Ps.54,516,823 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit for the year attributable to:

      

Equity holders of the parent

   52,724,427   (2,497,326)   46,641,696   (44,302,600)   52,566,197 

Non-controlling interest

   —     —     3,609,991   (1,659,365)   1,950,626 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for the year

  Ps.52,724,427  Ps.(2,497,326)  Ps.50,251,687  Ps.(45,961,965)  Ps.54,516,823 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive loss items:

      

Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:

      

Effect of translation of foreign entities

   (61,223,458)   (724,521)   (64,314,032)   61,947,979   (64,314,032) 

Items not to be reclassified to profit or loss in subsequent years:

      

Re-measurement of defined benefit plan, net of deferred taxes

   652,722   (1,603,145)   757,278   950,423   757,278 

Unrealized loss on equity investments at fair value, net of deferred taxes

   (3,765,688)   —     (3,765,688)   3,765,688   (3,765,688) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive loss items for the year, net of deferred taxes

  Ps.(64,336,424)  Ps.(2,327,666)  Ps.(67,322,442)  Ps.66,664,090  Ps.(67,322,442) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive loss for the year

  Ps.(11,611,997)  Ps.(4,824,992)  Ps.(17,070,755)  Ps.20,702,125  Ps.(12,805,619) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive loss for the year attributable to:

      

Equity holders of the parent

  Ps.(11,611,997)  Ps.(4,824,992)  Ps.(16,035,363)  Ps.20,702,125  Ps.(11,770,227) 

Non-controlling interests

   —     —     (1,035,392)   —     (1,035,392) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Ps.(11,611,997)  Ps.(4,824,992)  Ps.(17,070,755)  Ps.20,702,125  Ps.(12,805,619) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Condensed consolidating statements of cash flowscomprehensive income

For the year ended December 31, 20162019

 

   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Operating activities:

      

Profit before taxes

  Ps.937,247  Ps.(5,537,427)  Ps.28,077,775  Ps.—   Ps.23,477,595 

Non-cash items

   (997,587)   19,800,396   209,821,118   —     228,623,927 

Changes in working capital:

   74,520,320   9,130,768   (93,359,195)   (6,595,361)   (16,303,468) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by operating activities

  Ps.74,459,980  Ps.23,393,737  Ps.144,539,698  Ps.(6,595,361)  Ps.235,798,054 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing activities:

      

Purchase of property, plant and equipment

   —     (7,860,232)   (130,846,925)   —     (138,707,157) 

Acquisition of intangibles

   —     (4,947,506)   (11,369,232)   —     (16,316,738) 

Dividends received from associates

   21,950   —     5,988,938   (270,796)   5,740,092 

Proceeds from sale of plant, property and equipment

   20,078   —     95,522   —     115,600 

Acquisition of business, net of cash acquired

   —     (2,796,254)   (1,823,813)   2,796,254   (1,823,813) 

Partial sale of shares of associate company

   756,444   —     2,796,254   (3,552,698)   —   

Investment in associates companies

   —     663,203   (666,690)   —     (3,487) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by (used in) investing activities

  Ps.798,472  Ps. (14,940,789)  Ps. (135,825,946)  Ps. (1,027,240)  Ps. (150,995,503) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing activities:

      

Bank loans, net

   (39,598,698)   —     (21,792,115)   —     (61,390,813) 

Acquisition of no controlling interest

   —     —     (2,280,278)   —     (2,280,278) 

Interest paid

   (24,826,139)   (7,972,827)   (5,922,267)   6,595,361   (32,125,872) 

Paid-In capital

   —     —     (756,444)   756,444   —   

Sale of shares of subsidiaries

   —     —     6,323,336   —     6,323,336 

Repurchase of shares and others

   (7,092,385)   —     71,138   —     (7,021,247) 

Payment of dividends

   (13,437,168)   —     (643,585)   270,796   (13,809,957) 

Derivative financial instruments

   —     —     (351,213)   —     (351,213) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows (used in) financing activities

  Ps. (84,954,390)  Ps.(7,972,827)  Ps.(25,351,428)  Ps.7,622,601  Ps.(110,656,044) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (decrease) increase in cash and cash equivalents

   (9,695,938)   480,121   (16,637,676)   —     (25,853,493) 

Adjustment to cash flow for exchange rate differences

   —     —     3,911,844   —     3,911,844 

Cash and cash equivalents at beginning of the period

   13,803,584   1,468,036   29,888,412   —     45,160,032 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of the period

  Ps.4,107,645  Ps.1,948,159  Ps.17,162,579  Ps.—   Ps.23,218,383 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Total operating revenues

  Ps.  171,369,419  Ps.  205,719,219  Ps.  867,599,640  Ps.  (237,340,409)  Ps.  1,007,347,869 

Total operating cost and expenses

   138,116,795   188,910,056   755,812,050   (230,331,567)   852,507,334 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   33,252,624   16,809,163   111,787,590   (7,008,842)   154,840,535 

Interest (expense) income, net

   (25,482,552)   (16,714,198)   10,362,884   207,199   (31,626,667) 

Foreign currency exchange (loss) gain, net

   14,553,340   (43,999)   (9,283,270)   —     5,226,071 

Valuation of derivatives, interest cost from labor obligations and other financial items, net

   4,580,710   —     (11,656,052)   —     (7,075,342) 

Income tax

   13,098,827   1,082,274   36,852,432    51,033,533 

Equity interest in net result of associated companies

   53,925,595   2,146,151   1,097,234   (57,186,589)   (17,609) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for the year

  Ps.  67,730,890  Ps.  1,114,843  Ps.  65,455,954  Ps.  (63,988,232)  Ps.  70,313,455 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit for the year attributable to:

      

Equity holders of the parent

   67,730,890   1,114,843   59,618,592   (60,733,434)   67,730,891 

Non-controlling interest

   —     —     5,837,362   (3,254,798)   2,582,564 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net profit (loss) for the year

  Ps.  67,730,890  Ps.  1,114,843  Ps.  65,455,954  Ps.  (63,988,232)  Ps.  70,313,455 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income items:

      

Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:

      

Effect of translation of foreign entities

   (34,010,066)   1,639,022   (35,536,252)   32,371,044   (35,536,252) 

Items that will not be reclassified to (loss) or profit in subsequent years:

      

Re-measurement of defined benefit plan, net of deferred taxes

   (29,153,554)   (2,654,252)   (29,535,672)   31,807,806   (29,535,672) 

Unrealized gain on equity investments at fair value, net of deferred taxes

   883,408   —     883,408   (883,408)   883,408 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total other comprehensive loss items for the year, net of deferred taxes

  Ps.  (62,280,212)  Ps.  (1,015,230)  Ps.  (64,188,516)  Ps.  63,295,442  Ps.  (64,188,516) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income for the year

  Ps.  5,450,678  Ps.  99,613  Ps.  1,267,438  Ps.  (692,790)  Ps.  6,124,939 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income for the year attributable to:

      

Equity holders of the parent

  Ps.  5,450,678  Ps.  99,613  Ps.  593,178  Ps.  (692,790)  Ps.  5,450,679 

Non-controlling interests

   —     —     674,260   —     674,260 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Ps.  5,450,678  Ps.  99,613  Ps.  1,267,438  Ps.  (692,790)  Ps.  6,124,939 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Condensed consolidating statements of cash flows

For the year ended December 31, 2017

 

  Parent Wholly-owned
Guarantor
Subsidiary		 Combined
non-guarantor
Subsidiaries		 Eliminations Consolidated
Total		  Parent Wholly-owned
Guarantor
Subsidiary		 Combined
non-guarantor
Subsidiaries		 Eliminations Consolidated
Total		 

Operating activities:

           

Profit before taxes

  Ps.43,527,320  Ps. (12,182,970)  Ps.35,230,373  Ps.(9,477,879)  Ps.57,096,844  Ps.43,527,320  Ps.  (12,182,970)  Ps.35,230,373  Ps.(9,477,879)  Ps.57,096,844 

Non-cash items

   (17,017,287)   30,000,109   171,062,158   11,635,563   195,680,543    (17,017,287)  30,000,109  171,062,158  11,635,563  195,680,543 

Changes in working capital:

   (18,973,478)   (9,486)   (66,062,629)   50,040,581   (35,005,012)  (18,973,478)  (9,486)  (66,062,629)  50,040,581  (35,005,012) 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net cash flows provided by operating activities

  Ps.7,536,555  Ps.17,807,653  Ps.140,229,902  Ps.52,198,265  Ps.217,772,375  Ps.7,536,555  Ps.17,807,653  Ps.140,229,902  Ps.52,198,265  Ps.217,772,375 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Investing activities:

           

Purchase of property, plant and equipment

   16,526   (5,571,410)   (113,630,253)   —     (119,185,137)  16,526  (5,571,410)  (113,630,253)   —    (119,185,137) 

Acquisition of intangibles

   —     (3,053,345)   (14,485,196)   —     (17,538,541)   —    (3,053,345)  (14,485,196)   —    (17,538,541) 

Dividends received from associates

   21,465,687   970,000   2,385,559   (22,435,687)   2,385,559  21,465,687  970,000  2,385,559  (22,435,687)  2,385,559 

Proceeds from sale of plant, property and equipment

   —     —     133,349   —     133,349   —     —    133,349   —    133,349 

Acquisition of business, net of cash acquired

   —     (3,381,505)   (3,497,288)   —     (6,878,793)   —    (3,381,505)  (3,497,288)   —    (6,878,793) 

Investment in associates companies

   —     1,925,898   —     (1,925,898)   —     —    1,925,898   —    (1,925,898)   —   

Sale of associated company

   —     —     340,040   —     340,040   —     —    340,040   —    340,040 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net cash flows provided by (used in) investing activities

  Ps.21,482,213  Ps.(9,110,362)  Ps. (128,753,789)  Ps. (24,361,585)  Ps. (140,743,523)  Ps.21,482,213  Ps.(9,110,362)  Ps.  (128,753,789)  Ps.  (24,361,585)  Ps.  (140,743,523) 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Financing activities:

           

Bank loans, net

   13,548,138   —     16,382,838   (57,364,465)   (27,433,489)  13,548,138   —    16,382,838  (57,364,465)  (27,433,489) 

Acquisition of no controlling interest

   —     —     (11,930)   —     (11,930)   —     —    (11,930)   —    (11,930) 

Interest paid

   (24,009,216)   (7,092,098)   (7,187,225)   7,092,098   (31,196,441)  (24,009,216)  (7,092,098)  (7,187,225)  7,092,098  (31,196,441) 

Repurchase of shares and others

   (1,240,028)   —     6,657   —     (1,233,371)  (1,240,028)   —    6,657   —    (1,233,371) 

Payment of dividends

   (14,406,748)   —     (24,120,329)   22,435,687   (16,091,390)  (14,406,748)   —    (24,120,329)  22,435,687  (16,091,390) 

Derivative financial instruments

   —     —     (71,474)   —     (71,474)   —     —    (71,474)   —    (71,474) 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net cash flows used in financing activities

  Ps. (26,107,854)  Ps.(7,092,098)  Ps.(15,001,463)  Ps. (27,836,680)  Ps.(76,038,095)  Ps.(26,107,854)  Ps.(7,092,098)  Ps.(15,001,463)  Ps.(27,836,680)  Ps.(76,038,095) 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net (decrease) increase in cash and cash equivalents

   2,910,914   1,605,193   (3,525,350)   —     990,757  2,910,914  1,605,193  (3,525,350)   —    990,757 

Adjustment to cash flow for exchange rate differences

   —     —     61,333   —     61,333   —     —    61,333   —    61,333 

Cash and cash equivalents at beginning of the period

   4,107,645   1,948,159   17,162,579   —     23,218,383 

Cash and cash equivalents at beginning of the year

 4,107,645  1,948,159  17,162,579   —    23,218,383 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Cash and cash equivalents at end of the period

  Ps.7,018,559  Ps.3,553,352  Ps.13,698,562  Ps.—   Ps.24,270,473 

Cash and cash equivalents at end of the year

 Ps.7,018,559  Ps.3,553,352  Ps.13,698,562  Ps.—    Ps.24,270,473 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Condensed consolidating statements of cash flows

For the year ended December 31, 2018

 

   Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Operating activities:

      

Profit before income tax

  Ps. 70,478,437  Ps.(1,698,687)  Ps.78,176,117  Ps.(45,961,965)  Ps.100,993,902 

Non-cash items

   (23,099,316)   20,952,414   149,503,016   39,836,704   187,192,818 

Working capital changes:

   (49,040,542)     (35,329,228)   (61,332,380)   105,845,958   (39,856,192) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by operating activities

  Ps.(1,661,421)  Ps.(16,075,501)  Ps.166,346,753  Ps.99,720,697  Ps.248,330,528 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing activities:

      

Purchase of property, plant and equipment

   (17,709)   (4,031,228)   (139,839,096)   —     (143,888,033) 

Acquisition of intangibles

   —     (2,993,373)   (4,940,274)   —     (7,933,647) 

Dividends received

   24,314,803   —     2,622,237   (24,314,803)   2,622,237 

Proceeds from sale of plant, property and equipment

   —     —     178,532   —     178,532 

Acquisition of business, net of cash acquired

   —     —     (310,604)   —     (310,604) 

Investments in associate companies

   —     (5,092,881)   —     5,092,881   —   

Partial sale of shares of associated company

   —     —     548,484   —     548,484 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by (used in) investing activities

  Ps.24,297,094  Ps.(12,117,482)  Ps.  (141,740,721)  Ps.  (19,221,922)  Ps.  (148,783,031) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing activities:

      

Bank loans, net

   24,784,341   —     19,592,788   (78,428,052)   (34,050,923) 

Acquisition ofnon-controlling interests

   —     —     (115,821)   —     (115,821) 

Interest paid

   (24,802,363)   26,385,526   (6,066,654)   (26,385,526)   (30,869,017) 

Repurchase of shares

   (514,007)   —     2,586   —     (511,421) 

Dividends paid

   (20,787,102)   —     (25,897,494)   24,314,803   (22,369,793) 

Redemption of hybrid bond

   —     —     (13,440,120)   —     (13,440,120) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows (used in) provided by financing activities

  Ps.  (21,319,131)  Ps.26,385,526  Ps.(25,924,715)  Ps.(80,498,775)  Ps.(101,357,095) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents

   1,316,542   (1,807,457)   (1,318,683)   —     (1,809,598) 

Adjustment to cash flows due to exchange rate fluctuations, net

   —     —     (800,913)   —     (800,913) 

Cash and cash equivalents at beginning of the year

   7,018,559   3,553,352   13,698,562   —     24,270,473 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of the year

  Ps.8,335,101  Ps.1,745,895  Ps.11,578,966  Ps.—    Ps.21,659,962 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Condensed consolidating statements of cash flows

For the year ended December 31, 2019

 

  Parent  Wholly-owned
Guarantor
Subsidiary		  Combined
non-guarantor
Subsidiaries		  Eliminations  Consolidated
Total		 

Operating activities:

     

Profit before income tax

 Ps.80,829,717  Ps.2,197,117  Ps.102,308,386  Ps.(63,988,232)  Ps.121,346,988 

Non-cash items

  (46,879,977)   12,508,840   174,550,273   48,007,886   188,187,022 

Working capital changes

  (24,351,260)   (36,428,726)   (56,610,878)   42,135,322   (75,255,542) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by (used in) operating activities

 Ps.9,598,480  Ps.  (21,722,769)  Ps.220,247,781  Ps.26,154,976  Ps.234,278,468 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Investing activities:

     

Purchase of property, plant and equipment

  (147,714)   (1,821,745)   (130,914,876)    (132,884,335) 

Acquisition of intangibles

   (2,413,193)   (16,549,663)    (18,962,856) 

Dividends received

  27,817,109   —     1,773,336   (27,817,109)   1,773,336 

Proceeds from sale of plant, property and equipment

    344,924    344,924 

Acquisition of business, net of cash acquired

  (7,335,058)   —     (5,995,593)    (13,330,651) 

Investments in associate companies

  (5,819,645)   (3,359,058)   (56,985)   9,178,703   (56,985) 

Partial sale of shares of associated company

    36,478    36,478 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows provided by (used in) investing activities

 Ps.14,514,692  Ps.(7,593,996)  Ps.  (151,362,379)  Ps.  (18,638,406)  Ps.  (163,080,089) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financing activities:

     

Bank loans, net

  14,815,606    (104,185)   (6,437,981)   8,273,440 

Acquisition ofnon-controlling interests

    (83,055)    (83,055) 

Interest paid

  (21,907,497)   28,895,698   (6,139,198)   (28,895,698)   (28,046,695) 

Repurchase of shares

  (435,713)      (435,713) 

Dividends paid

  (22,738,755)    (29,326,499)   27,817,109   (24,248,145) 

Payment of liability related toright-of-use of assets

    (26,765,075)    (26,765,075) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash flows (used in) provided by financing activities

 Ps.  (30,266,359)  Ps.28,895,698  Ps.(62,418,012)  Ps.(7,516,570)  Ps.(71,305,243) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (decrease) increase in cash and cash equivalents

  (6,153,187)   (421,067)   6,467,390    (106,864) 

Adjustment to cash flows due to exchange rate fluctuations, net

    (1,807,442)    (1,807,442) 

Cash and cash equivalents at beginning of the year

  8,335,101   1,745,895   11,578,966    21,659,962 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of the year

 Ps.2,181,914  Ps.1,324,828  Ps.16,238,914  Ps.—    Ps.19,745,656 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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