América Móvil

November 20, 2020 │ Company Update Rafael León | Telecommuncations & Media [email protected] +52 (55) 1103 6699 A Resilient Player On A Thriving Industry Ext. 2178 Reiterating ‘Outperform’; YE2021 PT Of P$17.00 /Shr. Actinver: (55) 1103 6600

Resilient Player And Positive Industry Trends. As the pandemic took AMX L Outperform its toll on most industries and companies all around the world, AMX has proven to be more resilient than initially expected. Its geographic Local Ticker: AMX L diversification across 25 countries, should continue to provide a more stable Last Price: P$ 14.26 environment to face macro risks. The company generates 32% of its Price Target YE2021: P$ 17.00 EBITDA in Mexico, while the rest comes from LATAM, the US and Europe. Expected Return: 19.2% Long-term trends for internet usage remain positive worldwide. The pandemic has increased the importance of connectivity, which will not fade Dividend Yield 2021E: 2.8% in our view. This, along with the entrance of new technologies such as 5G Total Potential Return: 22.0% and the Internet of Things, combined with increasing smartphone penetration, will continue to increase data traffic across the globe, implying a Liquidity: High positive trend for mobile ARPU. We continue to see the company as the Market Cap. (US$ M) 47,040 most resilient player in our sample, due to its operating and financial Enterprise Value (US$ M): 85,767 strength and strong FCF generation, standing strongly positioned to strive 52-Week Price Range (P$): (12.3 - 16.8) into the post crisis era. Free Float: 27%

Appealing Valuation. From a relative valuation perspective, AMX is trading at 5.0x EV/ EBITDA 2021 E, an ~20% discount over global telecom peers (see page 8), which seems unjustified in our view, given the Share Price vs. MEXBOL (IPC) company’s resilient business model, lower indebtedness levels than the industry, strong FCF generation and valuable infrastructure assets. 150 140 Possible Short-Term Catalyst. The company is currently participating 130 on a bidding offer, jointly with TEF and TIM, for the acquisition of Oi’s mobile 120 business. We believe this could be a short-term catalyst for AMX’s stock if they obtain the winning bid, as the company would benefit from an increase 110 in its mobile clients’ base and from market consolidation. We estimate this 100 could drive AMX’s mobile market share in Brazil to 31% vs. 26% as of today. Return Index 90 80 Introducing Price Target YE2021 Of P$17.00 /Shr. It implies a 19.2% 70 potential capital appreciation over AMX’s last price. Our price target was Dec-15 Oct-16 Aug-17 Jun-18 Apr-19 Feb-20 determined through the weighted average of the fair values reached in two AMX MEXBOL (IPC) models with different scenarios: central and alternate, to which we applied different macro & operating assumptions.

Reiterating Our ‘Market Outperform’ Rating. We maintain our positive view towards AMX with a long-term horizon, as we continue to see the company as the most resilient player in our sample, while it stands strongly positioned to strive into the post crisis era.

Estimates and Valuation 2019A 2020E 2021E 2022E Total Revenues (P$ M) 1,007,390 1,027,657 1,073,515 1,124,937 Gross Profit (P$ M) 155,102 170,543 187,690 198,139 Adjusted EBITDA (P$ M) 313,315 331,827 346,378 364,917 Net Income (P$ M) 68,042 30,102 81,023 87,844 EPS (P$) 1.03 0.45 1.21 1.31 Dividend /Shr. (P$) 0.37 0.38 0.40 0.42 EV /Adj. EBITDA (LTM) (x) 5.3x 5.3x 5.0x 4.7x P/E (LTM) (x) 30.8x 31.4x 11.7x 11.0x Net Debt To EBITDA (x) 1.78x 1.87x 1.77x 1.67x Dividend Yield (%) - To Mkt. Cap. 2.6% 2.7% 2.8% 2.9%

actinverresearch.com Disclaimer: https://goo.gl/6b8m3o Table of Contents

América Móvil Overview ………...... …………………….… 3-5 Investment Thesis .……………………………...……………. 3-4 Key Investment Highlights .………….………...……………. 3-4 Risks To Investment Thesis ..………….……...……………. 5 Strongly Positioned For A Post Crisis Era…...………... 6-7 Source: The Company. Looking Ahead ……………………………………………..... 6-7 Resilient Player With Operating and Financial Strength … 6 FCF Generation & De-leveraging Focus …....……………. 7 Industry Trends ….....……………………………………… 8 Relative Valuation ....………………………………………. 9 Corporate Events....………………………………………… 10 Possible Short-Term Catalyst With Oi In Brazil ………….. 10 Tracfone Sale To Be Completed By 2021 ………………... 10 Updated Forecasts…..…....……………...………………….. 11 Operating Estimates By Country…………………………… 11 Valuation: Methodologies, Key Assumptions & Scenarios …………………………..……..……….....……... 12 Forecasted Financials - Central Scenario ……....…….. 13-14 Forecasted Financials - Alternate Scenario …....……... 15-16

2 actinverresearch.com América Móvil Overview

América Móvil is a leading provider of telecommunications services at a global scale. Excluding China and India, América Móvil is the largest company in terms of wireless subscribers. Through its world-class integrated platform of telecommunications services, the company provides to its customers a portfolio of value added services and enhanced communications solutions in 25 countries in Latin America, Central and Eastern Europe, and the United States (once Tracfone’s sale completes, AMX will exit the US mobile market). The company’s robust network footprint is one of its main competitive advantages, accounting for more than 923 thousand km of fiber-optic network, which passes approximately 79 million homes. Additionally, the company owns more than 256 thousand cell sites, a submarine cable with more than 189 thousand km and a fleet of six “Star One” satellites.

Investment Thesis

Key Investment Highlights:

Increasing Internet Demand Long-term trends for internet usage remains positive worldwide. The pandemic has increased the importance of connectivity needs, which will not fade in our view. This, along with the entrance of new technologies such as 5G and the Internet of Things, combined with increasing smartphone penetration, will continue to increase data traffic across the globe, implying a positive trend for mobile ARPU.

Resilient Player As the pandemic took its toll on most industries and companies all around the world, AMX has proven to be more resilient than initially expected. Its geographic diversification across 25 countries, should continue to provide a more stable environment to face macro risks. The company generates 32% of its EBITDA in Mexico, while the rest comes from LATAM, the US and Europe.

Operating and Financial Strength One of the company’s goals is to continue creating operating efficiencies through digital transformation of its operations across the globe; this should continue to provide a steady margin expansion for the following years, at a consolidated level. Additionally, AMX has a strong balance sheet with a solid liquidity position (˃P$81 Bn), while its indebtedness levels remain below the industry’s average. All of this, brings more flexibility to the company to manage its operating and capital expenditures, better adjusting to any kind of environment, without compromising growth or profitability.

Appealing Valuation From a relative valuation perspective, AMX is trading at 5.0x EV/ EBITDA 2021E, a 18% discount over global telecom peers (see page 8), which seems unjustified in our view, given the company’s resilient business model, lower indebtedness levels than the industry, strong FCF generation and valuable infrastructure assets. Hence, we would expect a multiple appreciation in the following periods.

De-Leveraging Focus One of the management’s goal is known to be focused on reducing the company’s debt. As of 3Q20, Net to Debt /EBITDA ratio stands at 1.86x (without leases), and the management’s goal is to reach 1.5x; this is expected to be achieved with the benefits of the Tracfone sale and potential towers’ sale, as well as with the company’s cash flow generation.

3 actinverresearch.com Strong Cash Flow Generation We expect free cash flow (FCF) generation for 2020 to be P$108 Bn, which implies a 11.3 % FCF yield, on the back of lower capital expenditures due to the Covid-19 pandemic uncertainty. We expect FCF yields for the following years to be at 6-9% levels. Accordingly, we see likely that the company increase its dividend for the next year or begin repurchasing its own shares.

Mobile Markets in Mexico and LATAM on Recovery Mode After the pandemic had a wider impact on wireless services, during 3Q20 we started to see recovery signs among most countries. In Mexico, the company added 1.2 million mobile subscribers (mostly prepaid), after losing 1.8 million during 2Q20. We noted similar improvements in countries such as Brazil, Colombia, Perú and Austria.

Possible Short-term Catalyst Ahead The company is currently participating on a bidding offer, jointly with Telefónica Brasil and TIM, for the acquisition of Oi’s mobile business in Brazil. If the three parties win the bid, we believe this could be a short-term catalyst for AMX’s stock, as the company would benefit from increasing its mobile clients’ base and from market consolidation. Assuming all three parties receive an equivalent portion of Oi’s business, we calculate AMX could add around 11 M mobile clients. We estimate this could drive AMX’s mobile market share in Brasil to 31% vs. 26% as of today (including Nextel).

Tracfone Sale To Be Completed By 2021 On September 2020, the company announced that it entered into an agreement with Verizon Communications to sell its 100% interest in its subsidiary Tracfone. The transaction is subject to governmental approvals and both parties expect the closing to occur during 2021, thus, we are not incorporating this into our estimates so far. However, assuming all the cash proceedings from the sale are used to repay debt, we estimate Net Debt to EBITDA ratio could reach the 1.50x-1.60x range.

4 actinverresearch.com Main Potential Risks To Our Investment Thesis:

Evolution Of The Covid-19 Pandemic The Covid-19 pandemic has had a material impact on businesses around the world. The ongoing second Covid-19 wave in Europe & the U.S., as well as new outbreaks in other countries could lead to new confinement measures and/or a setback in the reopening of the local economy, and, consequently, impacting demand for telecommunication services. This could also imply higher costs for the company or the implementation of policies that could limit the efficiency and effectiveness of the operations.

Deeper Economic Contraction Than Anticipated In Mexico And LATAM Financial performance may be significantly affected by general economic conditions in the markets where the company operates. A higher-than- expected economic impact on any country where AMX has presence could result into lower disposable income of the general public, resulting into lower demand for telecommunication services, causing an adverse effect on the company’s operating and/or financial results.

Exchange Rate Risks The depreciation of the Mexican Peso against other currencies, in which most of the company’s debt is denominated, could result in net foreign exchange losses and net fair value losses on derivatives. On the other hand, a depreciation of the Mexican Peso against the rest of the operating currencies could lead to a favorable effect on the company’s revenues in Mexican peso terms, which is the company’s functional currency.

Regulatory Risks Changes in laws or potential new regulatory obligations in any country where the company operates could adversely affect its operations. This risk is particularly more present in Mexico where the company has to follow asymmetric regulations as it is considered as a preponderant player in the market. These asymmetric regulations will be analyzed in the biennial revision by the telecom regulator and a resolution will be known before the end of 2020.

Equity Market Volatility Equity market volatility amid a highly uncertain economic environment that may prevent AMX’s price to reach its fundamental (intrinsic) value (i.e., our price target). This, requires more relevance for AMX as it is one of the stocks in the MEXBOL (IPC) with the highest liquidity levels and highest trading volumes.

Increasing Levels Of Competition The entry of new competitors, the development of new technologies, products and services, market consolidation, more aggressive pricing and packages, convergence services, among other factors, could adversely affect the revenues and profitability of the company.

Higher-Than-Expected Capital Expenditures Requirements Given the high capex intensity nature of the sector, a higher-than-expected need for capital deployment could have an adverse impact to the company’s financials. This risk includes potentially higher costs for network deployment, higher costs related to clients disconnections, among others.

Increasing Spectrum Costs Carriers incur in costs related to the payment of spectrum rights in order to provide telecom services. Higher-than-expected spectrum auction costs could adversely impact the company’s financials. In Mexico, the Ministry of Finance and Public Credit (SHCP by its acronym in Spanish), recently proposed an increase of ~56% in the payment for spectrum rights for 2021; this is currently under review for approval. 5 actinverresearch.com Strongly Positioned For A Post Crisis Era

Looking Ahead

This has been, without a doubt, one of the most challenging years the entire world has experienced, bringing high levels of uncertainty in financial markets. From the beginning of the year till today, AMX’s share price has fallen –3.8% vs. –3.0% from the MEXBOL (IPC).

Due to the pandemic, all industries and companies around the world were required to adapt its businesses to the “new normal” conditions, with AMX not being the exception. Looking forward, the company’s focus relies on 4 key strategies: 1) continue providing high quality services in order to keep gaining market share in every market where it participates; 2) continue to implement operating efficiencies through digital transformation; 3) de-leveraging process; and 4) maintaining a strong financial position.

Resilient Player With Operating and Financial Strength

As the pandemic took its toll on most industries and companies all around the EBITDA Contribution By Country (2020E) world, AMX has proven to be more resilient than initially expected. Through its geographic diversification across 25 countries, the company managed to increase its adj. EBITDA 6.6% during the first 9 months of the year compared 32% to the same period in 2019, which is a solid growth considering the full Covid- 9% 19 impact, especially on the 2Q20. We expect AMX to deliver 5.9% and 4.4% annual increases in adj. EBITDA for 2020 and 2021, respectively, on the back 6% of the company’s focus on continue with the implementation of operating 4% efficiencies through the digital transformation of its operations across the 10% globe. We expect these initiatives to continue providing a steady margin 20% expansion for the following years, reaching 32.3% in 2021. 10% 10% Breaking down by country, 2020E EBITDA contribution accounts for 32.5% for Mexico, 19.7% for Brazil, 10% for Colombia, 9.6% for Austria, 6.1% for the Mexico Brazil United States and the remaining 22% for other countries in LATAM, including Colombia Austria & CEE Argentina, Peru and Ecuador, among others. We expect Mexico’s EBITDA CA&C A,P&U contribution to slightly decrease to 32.2% in 2021, as we anticipate other US Others markets like Brazil and Colombia to slightly increase its contributions to 20.0% and 10.4%, respectively, given its faster expected growth in top-line. Source: The Company, Actinver.

Additional to its operating strength, AMX has a solid financial position with a healthy liquidity position of ˃P$81 Bn, while its indebtedness levels at 1.86x Net Debt /EBITDA ratio, remains slightly below the industry’s average (2x). AMX’s solid balance sheet brings more flexibility to the company to manage its operating and capital expenditures, better adjusting to any kind of environment, without compromising growth or profitability. For our balance sheet estimates please refer to page 14 (base case scenario).

We continue to see the company as the most resilient player in our sample. Due to its operating and financial strength, AMX stands strongly positioned to strive into the post crisis era.

6 actinverresearch.com Strong Free Cash Flow Generation Capex Deployments In US$ Bn (2018-2022E)

We highlight AMX’s strong free cash flow generation of P$108 Bn for 2020 E, $8.6 implying a 11.3% FCF yield, mainly on the back of lower Capex deployment for $7.9 $7.9 $8.1 the year, which is expected to reach US$6 Bn (-30% vs. 2019 and 25-30% lower than the original guidance of US$8.5 Bn) as the company decided to $6.1 postpone/cancel some projects in order to prioritize its liquidity position. This, along with a solid operating free cash flow generation for the year of P$239 Bn. For 2021, we expect investments to start to normalize gradually, reaching levels close to ~US$7.9 Bn (still below the original guidance for 2020), while we anticipate a 6.2% FCF yield. On a long-term horizon, we anticipate FCF yield to move between the 6-9% range.

2018 2019 2020E 2021E 2022E De-Leveraging Focus Source: The Company, Actinver. One of the management’s goals is known to be focused on reducing the company’s debt. As we mentioned before, as of 3Q20, Net to Debt /EBITDA ratio stands at 1.86x (without leases), and the management’s goal is to bring it down to 1.5x. In addition to the company’s cash flow generation, this is also expected to be achieved with the benefits of the Tracfone sale, as well as a potential sale of its tower portfolio across Latin America (see page 10 for additional information).

The company’s outstanding debt is ~13% denominated in Mexican peso terms Debt By Currency (% Of Total Debt, As Of Dec- and ~77% is in hard currencies (USD, EUR and GBP), which implies an 2019) exchange rate risk on unfavorable movements for the Mexican peso. The company has a comfortable debt maturity profile and has the advantage of a 4.2% wide access to international debt markets, given its solid credit ratings. We 12.8% expect the company’s debt position to continue at manageable levels for the following years, without implying a relevant financial risk. 5.6% 28.6%

11.0%

Net Debt & Net Debt To EBITDA Ratio (2018-2022E)

P$ Bn 640 2.0x 37.8%

620 1.9x MXN USD EUR GBP 600 1.8x BRL Others 580 1.7x *Other currencies include PEN, CLP and JPY. 560 Source: BMV Filing, The Company, Actinver. 1.6x 540

520 1.5x

500 1.4x 2018 2019 2020e 2021e 2022e

Net Debt Net Debt /EBITDA

*Debt does not consider leases. Source: The Company, Actinver.

7 actinverresearch.com Industry Trends

Increasing Data Demand & 5G

Long-term trends for internet usage remains positive around the globe. The Data Traffic Increase In The US pandemic has increased the importance of connectivity needs, which will not fade going forward, in our view. According to S&P Global, on March, data GB 1.2 traffic in the U.S. increased ~30%. We expect that the acceleration of technological adoption will continue to have a positive impact on broadband 1 subscriber growth among carriers, which will be the main driver for growth in the telecom sector for the following years. 0.8 0.6 The aforementioned trend fits like hand in glove with the entrance of new technologies such as 5G and the Internet of Things. Asian countries lead in the 0.4 implementation of 5G services, while in the U.S. there are already some cities 0.2 with 5G coverage footprint which will continue to increase over time. Other January March 16-20 March 23-27 countries in Europe and Latin America already have plans to provide 5G Day (GB) Night (GB) services in the near term, however, in some countries such as Mexico, 5G spectrum auctions have been delayed due to the pandemic (until 2021 for Source: S&P Global, Actinver. Mexico), which should take a little longer than initially expected to be implemented. Nonetheless, the entrance of 5G services is a sure thing in all regions in the world; it is expected that 75 million devices will be connected by AMX has already deployed 5G services in Aus- 2025, which is three times more than current numbers. Also, the launch of new tria and in 14 cities in Brazil, including Sao Paulo compatible mobile devices with 5G, such as the iPhone 12, will accelerate the and Rio de Janeiro. According to the company, adoption of this technology in distinct markets. This technology will eventually 5G technology will be available in all Brazilian change and improve the way people interact with the online ecosystem. In regions by year-end. conclusion, given its recent investments in this technology and its forward- looking vision, AMX is set to be the leading 5G operator in Latin America in the following years, in our view.

Mobile Markets In Recovery Mode

During the 3Q20, wireless services posted a generalized sequential recovery in terms of revenues and subscribers, partially offsetting the negative effect seen during 2Q20 due to the economy lockdowns in most countries. At a consolidated level, AMX posted a 3.5% YoY increase in mobile service revenues, a sequential improvement vs the 2.3% YoY growth registered in 2Q20. In terms of mobile subscribers, AMX posted 3.2 million net adds (1.8 M in postpaid and 1.4 M in prepaid), showing a healthy recovery from the 5 million subscriber loss registered in 2Q20 (-500k in postpaid and –4.5 M in prepaid). This recovery was seen in most countries and is expected to continue with a positive trend going forward.

Mexico: Tighter Fixed Market; The Opposite For Wireless

As for Mexico, the most important market for AMX, representing ~28% and Fixed Broadband Market Share (As Of 4Q19) ~33% of LTM revenues and EBITDA, respectively, we anticipate softer market dynamics for the mobile segment but tighter market conditions for the fixed Grupo one, during 2021. As for mobile, AT&T and Telefónica’s performance in Mexico Televisa has been worsening over the last years, losing market share despite the tough 24.3% asymmetric regulations for AMX (which had 62.4% of mobile market share as Megacable of 4Q19); a trend that is unlikely to change in the near term, in our view. 16.0% Additionally, despite we acknowledge an increasing competition from new MVNOs, this type of service only accounts for less than 2% of the market; there are a few years ahead for competitors to become relevant in Mexico. Total Play America 8.1% As for the fixed segment, competition is more aggressive and is expected to Movil 50.1% Other remain tight. Convergence services, pricing pressures, adoption of streaming 1.5% platforms and aggressive expansion plans from smaller carriers continue to threat AMX’s fixed business. Since 2016 AMX has lost 8.2 percentage points Source: IFT, Actinver. of market share to operators like Izzi, Megacable and Totalplay; we see likely a continuance on this trend for the following years (assuming no Pay TV license) 8 Source: The Company, Statista, Deloitte, IoT World, eSemanal, IFT. actinverresearch.com Relative Valuation

Appealing Valuation Vs. Global Peers

In terms of EV/ EBITDA 2021E, AMX’s 5.0x multiple stands at a ~20% discount over the global peers’ average (6.3x), which seems unjustified in our view, given the company’s resilient business model, indebtedness levels slightly below the industry’s average, higher ROE than the average, strong FCF generation and valuable infrastructure assets. As for earnings, AMX trades at a 11.7x P/ E multiple 2021E, which is also showing a discount over global peers (15.8x). We see likely a multiple appreciation over the following periods.

As from a profitability standpoint, AMX’s ROE of 17.8% stands way above the 8.4% average from global peers; even adjusting the sample without the negative ROEs from Veon and Bharti Airtel, average ROE from telecom companies stands at 12.1%, which is still below AMX’s figure. Regarding EBITDA margin (LTM), AMX’s 32.0% margin stands slightly below the 35.1% average from the sample.

Relative Valuation

Market Cap EV/EBITDA P/E Net Debt / EBITDA Company Country P/BV ROE (US$Mn) 2020 E 2021 E 2020 E 2021 E EBITDA Margin

AMERICA MOVIL MX $ 47,040 5.3 5.0 31.4 11.7 5.5 1.9 17.8% 32.0% GRUPO TELEVISA MX $ 4,590 5.7 5.3 NA 16.7 1.3 2.8 -2.8% 38.9% MEGACABLE MX $ 3,050 6.0 5.5 13.6 12.8 1.9 0.5 14.1% 48.8% TELEFONICA SP $ 21,352 5.2 5.2 9.6 7.9 1.7 3.7 -0.6% 29.2% TELEFONICA BRASIL BZ $ 14,765 4.8 4.6 16.3 13.8 1.1 0.2 6.8% 33.4% CHARTER COMMUNIC. US $ 114,978 12.6 11.7 46.2 31.3 4.8 4.4 9.0% 37.1% ENTEL CL $ 1,870 5.8 5.5 90.3 16.4 0.9 2.6 12.0% 25.8% AT&T INC US $ 202,849 7.2 7.1 8.9 8.8 1.1 3.1 6.1% 31.7% VERIZON COMMUNIC. US $ 249,018 8.1 7.8 12.5 12.1 3.8 2.8 29.5% 36.8% T-MOBILE US $ 110,909 10.3 9.6 48.2 41.0 2.5 4.4 6.0% 33.5% BCE INC CA $ 39,222 8.5 8.1 19.1 17.0 3.1 2.7 13.5% 41.8% TELUS CORP CA $ 22,676 8.8 8.2 22.0 19.5 2.6 3.3 11.5% 31.2% VODAFONE GROUP GB $ 43,160 7.7 7.6 20.3 16.0 0.6 3.2 4.3% 33.2% DEUTSCHE TELEKOM GE $ 83,609 7.3 6.9 14.8 13.5 2.0 3.7 11.4% 31.5% BT GROUP PLC GB $ 16,761 4.3 4.2 6.8 6.6 1.1 2.6 13.6% 30.1% ORANGE FR $ 32,676 5.3 5.1 10.5 9.7 1.0 2.2 8.4% 30.2% TELECOM ITALIA IT $ 9,026 5.4 5.5 7.8 9.0 0.3 4.2 6.1% 39.6% SWISSCOM AG-REG SZ $ 27,237 7.8 7.9 17.4 17.0 2.9 2.1 20.2% 35.7% TELENOR ASA NO $ 23,956 6.3 6.2 16.2 14.1 6.5 2.5 29.5% 40.3% KPN (KONIN) NV NE $ 12,938 7.3 7.2 22.4 19.2 4.5 2.7 31.3% 38.3% TELEKOM AUSTRIA AS $ 4,754 4.5 4.5 10.1 9.6 1.4 1.8 14.2% 30.3% VEON LTD NE $ 2,363 3.4 3.2 7.0 5.0 NA 2.3 -55.0% 43.0% MILLICOM INTL LX $ 3,560 3.9 3.7 NA 28.2 1.8 3.5 -2.7% 36.5% CHINA MOBILE HK $ 124,386 1.4 1.4 7.6 7.5 0.7 -1.4 9.6% 36.7% NTT DOCOMO INC JN $ 120,349 8.5 8.5 20.3 19.8 2.3 0.0 11.2% 32.0% KDDI CORP JN $ 68,460 4.9 4.8 10.8 10.4 1.5 0.6 14.9% 33.7% CHINA UNICOM HK $ 19,061 1.4 1.4 9.9 8.6 0.4 0.1 NA 28.7% SINGAPORE TELECO SI $ 29,005 13.3 12.7 19.0 15.3 NA NA 3.8% 23.4% BHARTI AIRTEL IN $ 34,492 9.0 7.5 NA 39.1 3.3 3.3 -35.5% 38.6% MTN GROUP LTD SA $ 7,785 3.2 3.2 9.1 8.6 1.2 1.5 18.4% 38.7% SAUDI TELECOM CO SR $ 57,166 10.2 9.8 19.5 19.0 3.4 0.3 17.2% 33.7% ETISALAT UA $ 40,157 6.0 5.9 16.1 15.9 3.1 0.0 19.6% 42.5% MAROC TELECOM MO $ 13,745 7.7 7.3 20.2 16.9 13.5 NA 15.4% 38.7%

Peers' Average 6.6 6.3 19.1 15.8 2.5 2.2 8.4% 35.1%

*Information As Of 19/11/2020. Source: Bloomberg, Market Screener, Investing, Finbox, The Company, Actinver estimates.

9 actinverresearch.com Corporate Events

Possible Short-Term Catalyst

As of today, the company is participating on a bidding offer, jointly with According to the management team, Oi’s mobile Telefónica Brasil and TIM, for the acquisition of Oi’s mobile business, for an assets final auction is expected to be happening amount of R$16,500 M (US$3,185 M). This amount would include a R$756 M before the end of the year. payment for transition services provided by Oi for up to 12 months. Additionally, the companies commit to enter into long-term agreements with Oi Expected Brazil’s Mobile Market Share (If AMX- for transmission capacity services valued at R$819 M. A key takeaway is that TEF-TIM Wins The Bid For Oi’s Mobile Assets) the three companies are qualified to participate in the competitive process as “stalking horse”, which means they will have the right to top any other proposal 1% that comes into place. 38%

If the three parties win the bid, we believe this could be a short-term positive catalyst for AMX’s stock, as the company would benefit from increasing its 29% mobile client base and from market consolidation, reducing Brasil’s mobile market to 3 main operators (currently 4 with Oi). Assuming all three parties receive an equivalent portion of Oi’s business, we calculate AMX could add around 11 M mobile clients (equivalent to 18% of its Brazilian mobile portfolio) 31% reaching 71 M. We estimate this could drive AMX’s mobile market share in Brasil to 31% vs. 26% as of today (including Nextel). Vivo (TEF) Claro (AMX) TIM Others

Tracfone Sale To Be Completed By 2021 Source: Telesemana, Actinver.

On September 2020, the company announced that it entered into an agreement with Verizon Communications to sell its 100% interest in its subsidiary Tracfone for US$6,250 M, of which one-half will be in cash and the other in Verizon stock, plus variable conditions up to US$650 M. The Evolution of Tracfone Subscribers (2015-3Q20) transaction is subject to governmental approvals and both parties expect the Million closing to occur during 2021, thus, we are not incorporating this into our subs estimates so far. However, assuming all the cash proceedings from the sale 30 (US$3,125 M) are used to repay debt, we estimate Net Debt to EBITDA ratio 25.7 26.1 25 23.1 21.7 could reach the 1.50x-1.60x range. 20.9 20.9 20 Tracfone is the largest MVNO operator in the United States with almost 21 million subscribers. AMX will continue to benefit from EBITDA generated by 15 Tracfone during the fiscal year 2020 and until the transaction closes. The 1.6% -11% -6.2% -3.7% 0.0% 10 transaction is subject to variable conditions where Verizon shall pay US$500 M to AMX if Tracfone continues to achieve certain performance measures during 5 24 months after the transaction closes and US$150 M deferred commercial 0 consideration payable within 2 years following the transaction. In line with the 2015 2016 2017 2018 2019 3Q20 management’s comments in 2Q20’s conference call, we would expect the resources to be used to reduce debt, at least partially, which we believe is Source: The Company, Actinver. positive for the company.

We estimate that the transaction valuation was made at 8.0x EV/EBITDA LTM multiple, which compares favorably to AMX’s 5.3x LTM multiple. In the case the variable conditions materialize, we estimated the transaction multiple would reach 8.9x.

10 actinverresearch.com Updated Forecasts

Central And Alternative Scenarios

We have developed two different models, each accounting for specific quantitative (macro & operational) and qualitative inputs according to the following scenarios: central and alternate.

Our central scenario assumes a gradual recovery of the economies around the Adj. EBITDA & EBIDA Margin In Base Case world, especially in Latin America, following the reopening of business Scenario (2018-2022E) activities. We are not considering a material setback in the reopening process, P$Bn or a new full lockdown of economies in the countries where the company 400 365 40% operates. This scenario implies a ~6 to 12-month recovery to pre-pandemic 346 350 332 levels in terms of subscribers in most countries, as well as a generalized single 313 292 36% -digit increase in ARPUs, as increasing data consumption and a higher 300 disposable income for next year given the economic recovery, should drive 250 32% growth in this variable. EBITDA is expected to increase 4.4% on an annual 200 basis by FY2021. 28% 150 100 On the other hand, our alternate scenario assumes a more challenging 24% economic environment, with a resurgence of Covid-19 infections during the fall 50

-winter season, amid the reopening process of economies, especially in Latin 0 20% America, and the seasonal flue period. We anticipate new restriction measures 2018 2019 2020e 2021e 2022e in some or most countries where the company operates. This scenario would imply a tougher 2021 period as compared to the central scenario, with softer Source: The Company, Actinver estimates. subscriber growth rates in the mobile segment (not the same for fixed services, given the ’stay-at-home dynamics) and flat mobile ARPUs across most countries. EBITDA is expected to increase 1.8% on an annual basis by FY2021. it is important to highlight that even in this alternate scenario, we do not expect a major financial impact, given the company’s resilient business model.

Operating Estimates By Country (2021 vs. 2020)

Wireless Subs (‘000) YoY RGUs (’000) YoY % Mobile ARPU* YoY % Mexico 79,412 2.9% 22,148 0.4% 155 2.5% Brazil 61,452 1.3% 33,049 1.2% 25 3.3% Arg, Par & U 20,992 -0.8% 1,496 31% 321 8% Chile 6,712 3.2% 1,367 -1.6% 4,867 0.9% Colombia 32,800 2.9% 8,674 6.8% 18,043 3.9% Ecuador 8,055 3.2% 469 6.1% 10 5.3% Peru 10,663 -0.6% 2,008 8.9% 23 3.4% CA&C 21,277 2.1% 6,880 3.8% 10 3.9% US 20,667 -0.8% NA NA 28 2.0% Austria 22,987 4.4% 5,943 -1.7% 8 0.0% Total 285,019 1.9% 82,034 2.1% *ARPU in local currency

Source: The Company, Actinver Estimates.

11 actinverresearch.com Valuation: Methodologies, Key Assumptions & Scenarios

AMX: Valuation Sensitivity & Price Target $ 20 Our AMX’s year-end 2021 price target of P$17.00 /CPO was determined $ 18.50 through the weighted average of the fair values reached in each of 2 models: $ 18 $ 17.00 central (50% probability) and alternate (50% probability), to which we applied different macro & operating assumptions. $ 16 $ 15.50 In each model we used a blended valuation methodology consisting of: i) $ 14 discounted cash flows (DCF) and ii) target multiple (adj. EV /EBITDA). For each method, an equal 50% weight was applied for the calculation of their $ 12 independent fair values (central & alternate). With a 50% weight on the central scenario’s P$18.50 /shr. fair value and a $ 10 50% weight on the alternate’s P$15.50 /shr. fair value, we obtained our AMX’s year-end 2021 price target of P$17.00 / shr. $ 8 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21

AMX’s Historical EV /EBITDA* Multiple 7.0x IFRS-16 6.5x + 1 SD: 6.1x

6.0x Avg: 5.7x 5.5x 5.3x 5.0x - 1 SD: 5.2x

4.5x 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18 4Q18 2Q19 4Q19 2Q20e * Adj. EV /EBITDA accounting for rule IFRS-16 since 2019.

Central Scenario (50% Probability) Macro forecasts: Mexico’s GDP of -9.8% in 2020 and +3.7% in 2021; U.S. GDP of -4.7% in 2020 and +3.8% in 2021; year-end local inflation at 4.1% in 2020 and 3.7% in 2021; year-end FX at P$22.00 /US$ in 2020 and P$22.65 in 2021; local reference rate at 4.25% YE2020, unchanged throughout YE2021. Qualitative input: We assume a gradual recovery of the economies around the world, especially in Latin America, following the reopening of business activities. We are not considering a material setback in the reopening process, or a new full lockdown of the economies where the company has operations. Valuation assumptions: We are using a 12.46% cost of equity (Ke) based on Damodaran’s model: i) adjusted risk-free rate (RFR) of 3.26% based on a 6.40% Mx 10-YR sovereign bond (RFR) and a country risk premium (CRP) of 3.00%; ii) adjusted equity risk premium (adj. ERP) of 9.20% based on an Mx ERP of 8.00% in US$ and a long-term inflation spread of 1.30%; and iii) a 1.00 adjusted Beta. We use a perpetuity growth rate of 2.0%. In our multiple valuation methodology, we applied a 5.5x target adj. EV / EBITDA multiple to our 2021 EBITDA forecast.

Alternate Scenario (50% Probability) Macro forecasts: Mexico’s GDP of -12.0% in 2020 and +2.8% in 2021; U.S. GDP of -4.7% in 2020 and +3.1% in 2021; year-end local inflation at 4.1% in 2020 and 3.7% in 2021; year-end FX at P$23.00 /US$ in 2020 and P$23.00 in 2021; local reference rate at 4.00% YE2020, unchanged throughout YE2021. Qualitative input: We assume a more challenging business environment, with a sharp resurgence of Covid-19 infections during the fall-winter season, amid the reopening process of economies, especially in Latin America, and the seasonal flue period. We anticipate new restriction measures in some or most countries where the company has operations. Valuation assumptions: We are using a 13.20% cost of equity (Ke) based on Damodaran’s model: i) adjusted risk-free rate (RFR) of 3.82% based on a 6.75% Mx 10-YR sovereign bond (RFR) and a country risk premium (CRP) of 3.50%; ii) adjusted equity risk premium (adj. ERP) of 9.38% based on an Mx ERP of 8.50% in US$ and a long-term inflation spread of 1.30%; and iii) a 1.00 adjusted Beta. We use a perpetuity growth rate of 2.0%. In our multiple valuation methodology, we applied a 5.0x target adj. EV / EBITDA multiple to our 2021 EBITDA forecast.

12 actinverresearch.com Forecasted Income Statement - Central Scenario Figures In P$ Millions, Otherwise Noted

Income Statement 2019 2020e 2021e 2022e 2023e

Revenues 1,007,390 1,027,657 1,073,515 1,124,937 1,166,754 YoY Change -1.4% 2.0% 4.5% 4.8% 3.7% Cost of Sales (630,382) (635,984) (658,198) (688,202) (712,425) Gross Profit 377,008 391,673 415,317 436,736 454,329 SG&A and Others (221,906) (222,433) (232,328) (243,324) (252,210) Operating Profit (EBIT) 155,102 170,543 187,690 198,139 206,851 Operating Margin 15.4% 16.6% 17.5% 17.6% 17.7% Depreciation and Amortization 158,213 161,284 158,689 166,778 173,306 Adjusted EBITDA 313,315 331,827 346,378 364,917 380,157 YoY Change 7.4% 5.9% 4.4% 5.4% 4.2% Adj. EBITDA Margin 31.1% 32.3% 32.3% 32.4% 32.6% Interest expense (37,861) (39,704) (36,593) (36,598) (36,596) Interest income 6,285 4,549 2,865 2,945 3,212 Profit Before Tax (EBT) 121,677 49,123 146,886 159,252 168,237 Taxes 51,034 13,215 58,755 63,701 67,295 Equity earnings of affiliate (18) (283) 2 2 2 Net Income Before Minorities 70,625 35,625 88,134 95,553 100,944 Minority Interest 2,583 5,523 7,111 7,709 8,144 Majority Net Income 68,042 30,102 81,023 87,844 92,800 YoY Change 34.4% -55.8% 169.2% 8.4% 5.6% Net Margin 6.8% 2.9% 7.5% 7.8% 8.0% EPS 1.03 0.45 1.21 1.31 1.38

13 actinverresearch.com Forecasted Balance Sheet / Cash Flow Statement - Central Scenario Figures In P$ Millions, Otherwise Noted

Balance Sheet 2019 2020e 2021e 2022e 2023e

Total Assets 1,531,934 1,584,462 1,613,970 1,649,609 1,688,418 Current Assets 330,845 362,812 373,878 390,680 410,280 Cash and Temporary Investments 67,464 59,794 65,152 71,122 80,526 Accounts Receivable 211,532 251,547 255,855 265,141 273,988 Inventories 41,102 35,249 36,649 38,197 39,546 Non-Current Assets 1,201,089 1,221,651 1,240,092 1,258,929 1,278,138 Property, Plant & Equipment 639,343 644,683 663,124 681,961 701,170 Intangible Assets 278,069 286,677 286,677 286,677 286,677 Assets By Right Of Use 118,003 110,880 110,880 110,880 110,880

Total Liabilities 1,305,027 1,345,446 1,348,210 1,351,775 1,354,909 Short-Term Liabilities 525,400 499,310 502,073 505,639 508,773 Suppliers 113,371 82,472 85,236 88,802 91,935 Long Term Liabilities 779,627 846,137 846,137 846,137 846,137 Total Debt 624,254 678,991 678,991 678,991 678,991

Total Capital 226,907 239,016 265,760 297,834 333,509 Shareholder's Equity 177,910 182,110 208,854 240,928 276,603 Non-Controling Interest 48,997 56,906 56,906 56,906 56,906

Total Liabilities and Total Capital 1,531,934 1,584,462 1,613,970 1,649,609 1,688,418

Cash Flow Statement 2019 2020e 2021e 2022e 2023e

Net income 68,042 30,102 81,023 87,844 92,800 Depreciation & amortization 158,213 161,284 158,689 166,778 173,306 Changes in Working Capital (21,089) (52,589) (2,945) (7,267) (7,062) Other, net 30,109 102,200 0 0 0 Net cash from operating activities 235,275 240,998 236,767 247,354 259,043 Capital expenditures (165,437) (132,468) (177,130) (185,615) (192,514) Other, net 1,773 (2,049) 0 0 0 Net cash from investing activities (163,664) (134,517) (177,130) (185,615) (192,514) Change in Debt (18,414) (78,151) 0 0 0 Distributions (Cash Dividend) To Shareholders (24,248) (8,096) (26,810) (28,151) (29,491) Distributions to non-controlling interest (28,047) (26,637) (27,469) (27,619) (27,634) Repurchase of Shares (436) (1,909) 0 0 0 Other, net (83) (3) 0 0 0 Net cash used for financing activities (71,227) (114,795) (54,279) (55,770) (57,125) Effect of exchange rate changes on cash (3,596) 645 0 0 0

Net Change in Cash & Equivalents (3,212) (7,670) 5,358 5,970 9,404 Cash & Equivalents at BoP 70,676 67,464 59,794 65,152 71,122 Cash & Equivalents at EoP 67,464 59,794 65,152 71,122 80,526

14 actinverresearch.com Forecasted Income Statement (Extended) - Alternate Scenario Figures In P$ Millions, Otherwise Noted

Income Statement 2019 2020e 2021e 2022e 2023e

Revenues 1,007,390 1,025,541 1,057,184 1,082,496 1,101,209 YoY Change -1.4% 1.8% 3.1% 2.4% 1.7% Cost of Sales (630,382) (634,737) (646,407) (660,250) (670,482) Gross Profit 377,008 390,804 410,777 422,246 430,727 SG&A and Others (221,906) (221,995) (228,921) (234,366) (238,342) Operating Profit (EBIT) 155,102 168,809 181,856 187,879 192,385 Operating Margin 15.4% 16.5% 17.2% 17.4% 17.5% Depreciation and Amortization 158,213 160,958 153,872 158,112 161,110 Adjusted EBITDA 313,315 329,767 335,728 345,992 353,495 YoY Change 7.4% 5.3% 1.8% 3.1% 2.2% Adj. EBITDA Margin 31.1% 32.2% 31.8% 32.0% 32.1% Interest expense (37,861) (39,704) (36,593) (36,598) (36,596) Interest income 6,285 4,549 2,732 3,064 3,510 Profit Before Tax (EBT) 121,677 36,665 145,620 153,837 158,801 Taxes 51,034 8,232 58,248 61,535 63,520 Equity earnings of affiliate (18) (283) 2 2 2 Net Income Before Minorities 70,625 28,150 87,374 92,305 95,283 Minority Interest 2,583 4,920 7,049 7,447 7,688 Majority Net Income 68,042 23,231 80,325 84,857 87,595 YoY Change 34.4% -65.9% 245.8% 5.6% 3.2% Net Margin 6.8% 2.3% 7.6% 7.8% 8.0% EPS 1.03 0.35 1.20 1.27 1.31

15 actinverresearch.com Forecasted Balance Sheet / Cash Flow Statement - Alternate Scenario Figures In P$ Millions, Otherwise Noted

Balance Sheet 2019 2020e 2021e 2022e 2023e

Total Assets 1,531,934 1,577,591 1,604,626 1,635,278 1,667,110 Current Assets 330,845 355,614 367,371 382,937 399,685 Cash and Temporary Investments 67,464 54,599 65,744 77,121 89,334 Accounts Receivable 211,532 249,545 249,520 253,022 256,970 Inventories 41,102 35,249 35,886 36,573 37,159 Non-Current Assets 1,201,089 1,221,977 1,237,254 1,252,342 1,267,425 Property, Plant & Equipment 639,343 645,009 660,286 675,374 690,457 Intangible Assets 278,069 286,677 286,677 286,677 286,677 Assets By Right Of Use 118,003 110,880 110,880 110,880 110,880

Total Liabilities 1,305,027 1,345,446 1,346,436 1,348,001 1,349,362 Short-Term Liabilities 525,400 499,310 500,299 501,864 503,225 Suppliers 113,371 82,472 83,462 85,027 86,388 Long Term Liabilities 779,627 846,137 846,137 846,137 846,137 Total Debt 624,254 678,991 678,991 678,991 678,991

Total Capital 226,907 232,144 258,190 287,278 317,748 Shareholder's Equity 177,910 175,239 201,284 230,372 260,842 Non-Controling Interest 48,997 56,906 56,906 56,906 56,906

Total Liabilities and Total Capital 1,531,934 1,577,591 1,604,626 1,635,278 1,667,110

Cash Flow Statement 2019 2020e 2021e 2022e 2023e

Net income 68,042 23,231 80,325 84,857 87,595 Depreciation & amortization 158,213 160,958 153,872 158,112 161,110 Changes in Working Capital (21,089) (50,586) 377 (2,623) (3,174) Other, net 30,109 102,200 0 0 0 Net cash from operating activities 235,275 235,802 234,574 240,346 245,531 Capital expenditures (165,437) (132,468) (169,149) (173,199) (176,193) Other, net 1,773 (2,049) 0 0 0 Net cash from investing activities (163,664) (134,517) (169,149) (173,199) (176,193) Change in Debt (18,414) (78,151) 0 0 0 Distributions (Cash Dividend) To Shareholders (24,248) (8,096) (26,810) (28,151) (29,491) Distributions to non-controlling interest (28,047) (26,637) (27,469) (27,619) (27,634) Repurchase of Shares (436) (1,909) 0 0 0 Other, net (83) (3) 0 0 0 Net cash used for financing activities (71,227) (114,795) (54,279) (55,770) (57,125) Effect of exchange rate changes on cash (3,596) 645 0 0 0

Net Change in Cash & Equivalents (3,212) (12,865) 11,145 11,377 12,213 Cash & Equivalents at BoP 70,676 67,464 54,599 65,744 77,121 Cash & Equivalents at EoP 67,464 54,599 65,744 77,121 89,334

16 actinverresearch.com