Edgar Filing: AMERICA MOVIL SAB DE CV/

Form 20-F

As filed with the Securities and Exchange Commission on April 26, 2018

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 20-F

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2017

Commission file number: 1-16269

AMÉRICA MÓVIL, S.A.B DE C.V.

(exact name of registrant as specified in its charter)

America Mobile

(translation of registrant’s name into English)

United Mexican States

(jurisdiction of incorporation)

Lago Zurich 245, Plaza Carso / Edificio Telcel

Colonia Ampliación Granada, 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

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:		Name of each exchange on which registered:
A Shares, without par value		New York Stock Exchange
L Shares, without par value		New York Stock Exchange
5.000% Senior Notes Due 2019		New York Stock Exchange
5.000% Senior Notes Due 2020		New York Stock Exchange
3.125% Senior Notes Due 2022		New York Stock Exchange
6.375% Notes Due 2035		New York Stock Exchange
6.125% Notes Due 2037		New York Stock Exchange
6.125% Senior Notes Due 2040		New York Stock Exchange
4.375% Senior Notes Due 2042		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:


20,602 million		AA Shares
567 million		A Shares
44,901 million		L Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ 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 Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

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

Large accelerated filer ☒ Accelerated filer ☐ 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.

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 Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

LOGO

TABLE OF CONTENTS


(See Form 20-F Cross Reference Guide on page 113)
Selected Financial Data			1
Part I: Information on the Company			5
About América Móvil			6
Our Networks			11
Our Competitors			13
Marketing, Sales and Distribution, Customer Services			14
Acquisitions, Other Investments and Divestitures			14
Part II: Operating and Financial Review and Prospects			17
Overview			18
Results of Operations			20
Liquidity and Capital Resources			34
Critical Accounting Policies and Estimates			38
Part III: Risk Factors			43
Part IV: Share Ownership and Trading			55
Major Shareholders			56
Related Party Transactions			57
Dividends			57
Trading Markets			58
Bylaws			60
Depositary Shares			63
Purchases of Equity Securities by the Issuer and Affiliated Purchasers			64
Taxation of Shares and ADSs			65
Part V: Corporate Governance			71
Management			72
Management Compensation			80
Corporate Governance			81
Controls and Procedures			84
Code of Ethics			86
Part VI: Regulation			88
Regulation			89
Part VII: Additional Information			106
Employees			107
Legal Proceedings			107
Principal Accountant Fees and Services			108
Exchange Rates			108
Additional Information			109
Forward-Looking Statements			110
Glossary			111
Form 20-F Cross Reference Guide			113
Signatures			115
Part VIII: Consolidated Financial Statements			118

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


		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.

LOGO

ABOUT AMÉRICA MÓVIL

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.

BUSINESS OVERVIEW

We provide telecommunications services in 25 countries. We are the 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. For a list of our principal subsidiaries, see Note 2 a) 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.

LOGO

ABOUT AMÉRICA MÓVIL

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 Wireless

•

Mexico Fixed;

•

Brazil;

•

Colombia;

•

Southern Cone (Argentina, Chile, Paraguay and Uruguay);

•

Andean Region (Ecuador and Peru);

•

Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama);

•

the Caribbean (the Dominican Republic and Puerto Rico);

•

the United States; and

•

Europe (Austria, Belarus, Bulgaria, Croatia, Macedonia, Serbia and Slovenia).


		AS OF DECEMBER 31,
		2015	2016	2017
	(in thousands)
WIRELESS SUBSCRIBERS:
Mexico Wireless		73,697	72,953	73,855
Brazil		65,978	60,171	59,022
Colombia		28,973	28,954	29,353
Southern Cone		29,186	30,377	31,076
Andean Region		20,743	20,801	20,352
Central America		15,317	15,085	15,927
Caribbean		5,261	5,453	5,637
United States		25,668	26,070	23,132
Europe		20,711	20,708	20,658
Total Wireless Subscribers		285,534	280,572	279,012
FIXED RGUs:
Mexico Fixed		21,735	22,178	21,851
Brazil		36,627	36,716	35,904
Colombia		5,801	6,304	6,753
Southern Cone		1,819	1,942	2,023
Andean Region		1,727	1,820	1,765
Central America		4,950	5,392	5,811
Caribbean		2,511	2,663	2,700
Europe		5,642	5,900	6,036
Total Fixed RGUs		80,812	82,915	82,844
Total RGUs		366,346	363,488	361,856

PRINCIPAL BRANDS

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


Country	Principal Brands	Services and Products
Mexico	Telcel	Wireless voice Wireless data
	Telmex Infinitum	Fixed voice Fixed data
United States	TracFone	Wireless voice
	Straight Talk	Wireless data
Europe	A1⁽¹⁾	Wireless voice
		Wireless data
		Fixed voice
		Fixed data
		Pay TV
⁽¹⁾In 2017, Telekom Austria announced the rebranding of all its regional operating companies as A1.

SERVICES AND PRODUCTS

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

Wireless Operations

In 2017, our wireless voice and data operations generated revenues of Ps.530.3 billion, representing 51.9% of our consolidated revenues. As of December 31, 2017, our wireless operations represented approximately 77.1% of our total RGUs.

Voice and Data

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

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.

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 composition of the wireless base from 23.7% in December 2016 to 25.3% as of December 31, 2017, while prepaid plans represented 74.7%.

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

In general, our average rates per minute of wireless voice are very competitive for both prepaid and postpaid plans. The rates in 2017 decreased an average of 16.6%, at constant exchange rates relative to 2016. 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. (“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, our fixed voice, data, broadband and IT solutions had revenues of Ps.229.1 billion, representing 22.4% of our consolidated revenues. As of December 31, 2017, our fixed operations represented approximately 22.9% of our total RGUs, compared to 22.8% as of December 31, 2016.

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.

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, we had approximately 21.6 million Pay TV RGUs, a decrease of approximately 567 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 through direct-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, an on-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 customers unlimited access to ClaroVideo for a fixed monthly subscription fee.

Services and Products by Country

The following table is a summary of our principal services rendered and products produced as of December 31, 2017 in the countries in which we operate.


	Wireless Voice, Data and Value Added Services⁽¹⁾	Fixed Voice, Broadband, Data and IT Services⁽²⁾	Pay TV	OTT Services⁽³⁾
Argentina	✓	✓		✓
Austria	✓	✓	✓	✓
Belarus	✓	✓	✓
Brazil	✓	✓	✓	✓
Bulgaria	✓	✓	✓	✓
Chile	✓	✓	✓	✓
Colombia	✓	✓	✓	✓
Costa Rica	✓	✓	✓	✓
Croatia	✓	✓	✓	✓
Dominican Republic	✓	✓	✓	✓
Ecuador	✓	✓	✓	✓
El Salvador	✓	✓	✓	✓
Guatemala	✓	✓	✓	✓
Honduras	✓	✓	✓	✓
Macedonia	✓	✓	✓
Mexico	✓	✓		✓⁽⁴⁾
Nicaragua	✓	✓	✓	✓
Panama	✓	✓	✓	✓
Paraguay	✓	✓	✓	✓
Peru	✓	✓	✓	✓
Puerto Rico	✓	✓	✓	✓
Serbia	✓
Slovenia	✓	✓	✓
Uruguay	✓	✓	✓	✓
United States	✓
⁽¹⁾ Includes voice communication and international roaming services, interconnection and termination services, SMS, MMS, e-mail, mobile browsing, entertainment and gaming applications. ⁽²⁾ Includes local calls, national and international long distance. ⁽³⁾ Includes ClaroVideo and ClaroMúsica. ⁽⁴⁾ Services provided by non-concessionaire subsidiaries.

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.

Infrastructure

For the year ended December 31, 2017, our capital expenditures totaled Ps.136.7 billion, which allowed us to increase our network, to expand their capacity and to upgrade our systems to operate with the latest technologies. With fully convergent platforms, we are able to widely deliver high-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, the main components of our infrastructure were comprised of:

•

Base stations: 163,033 bases stations with 2G, 3G and 4G technologies (of which approximately 65% are equipped with 3G and 4G capabilities).

•

Fiber-optic network: More than 815 thousand km. Our network passed approximately 70 million homes as of December 31, 2017.

•

Submarine cable system: Capacity of more than 168 thousand km in submarine cable, including the AMX-1 submarine cable that extends 17,500 km and connects the United States to Central and South America throughout 12 landing points and provides international connectivity to all of our subsidiaries in these geographic areas.

•

Satellites: Nine. 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.

•

Data centers: 21. We use our data centers to manage a number of cloud solutions, such as Infrastructure as a Service (“IAAS”), Software as a Service (“SAAS”), security solutions and unified communications.

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

Technology

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


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

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

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

We build upon 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 is the most valuable telecom brand in the Latin America region, according to the Telecoms 300 2018 report by Brand Finance. BrandZ’s Top 50 Most Valuable Latin American Brands 2017 list ranked Telcel as the second-most valuable national brand in Mexico. In the same year, BrandZ also named Telcel and Telmex as the highest recognized telecom brands in Mexico and as two of the top four highest-ranked telecom brands in Latin America. In addition, a 2017 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 420,000 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 57,400 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.


		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.

LOGO

OVERVIEW

INTRODUCTION

Segments

We have operations in 25 countries, which are aggregated for financial reporting purposes into ten reportable segments. Our operations in Mexico are presented in two segments—Mexico Wireless and Mexico Fixed, which consist principally of Telcel and Telmex, respectively. Our headquarters’ operations are allocated to the Mexico Wireless segment. Financial information about our segments is presented in Note 22 to our audited consolidated financial statements.

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

Constant Currency Presentation

Our financial statements are presented in Mexican pesos, but our operations outside Mexico account for a significant portion of our revenues. Currency variations between the Mexican peso and the currencies of our non-Mexican subsidiaries, especially the Euro, U.S. dollar, Brazilian real, Colombian 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 our non-Mexican operations for both periods. We believe that this additional information helps investors better understand the performance of our non-Mexican operations and their contribution to our consolidated results.

Effects of Exchange Rates

Our results of operations are affected by changes in currency exchange rates. As discussed above, currency variations between the Mexican peso and the currencies of our non-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, the Mexican peso was generally weaker against our other operating currencies than in 2016, which tended to increase the reported amounts in Mexican pesos attributable to our non- Mexican operations.

In addition, we recognize foreign exchange gains and losses attributable to changes in the value of our operating currencies, particularly the Mexican peso and Brazilian real, against the currencies in which our indebtedness and accounts payable are denominated, especially the U.S. dollar, the pound sterling and the Euro. Appreciation of our operating currencies generally results in foreign exchange gains, while depreciation of these currencies generally results in foreign exchange losses. 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, 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, and we recorded net foreign exchange losses of Ps.40.4 billion. We also recorded 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. See Note 7 to our audited 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.

COMPOSITION OF OPERATING REVENUES

In 2017, our total operating revenues consisted of: mobile voice revenues (21.7% of total

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

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

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

Equipment, accessories and computer sales revenues primarily include revenues from the sale of handsets, accessories and other equipment such as office equipment, household appliances and electronics. Most of our sales in handsets are driven by the number of new customers and contract renewals. 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 2017 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;

•

changes 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;

•

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

•

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

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

Other recent trends affecting our performance included:

•

the ongoing effects of Mexico’s regulatory measures; and

•

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

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS FOR 2017 AND 2016

Operating Revenues

Total operating revenues for 2017 increased by 4.7%, or Ps.46.2 billion, over 2016. At constant exchange rates, total operating revenues for 2017 increased by 2.0% over 2016. This increase principally reflects increases in revenues from our mobile data, fixed data and Pay TV operations, 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 and machine-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 growth 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.

EQUIPMENT, ACCESSORIES AND COMPUTER SALES — Equipment, accessories and computer sales revenues for 2017 decreased by 0.2%, or Ps.0.3 billion, over 2016. At constant exchange rates, revenues from equipment, accessories and computer sales for 2017 decreased by 0.7% over 2016. This decrease principally reflects lower sales of higher-end smartphones, other data-enabled devices and tablets, which were partially offset by higher sales of lower-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.

Operating Costs and Expenses

COST OF SALES AND SERVICES — Cost of sales and services for 2017 increased by 2.3%, or Ps.11.3 billion, over 2016, representing 48.6% of operating revenues for 2017, as compared to 49.7% of operating revenues for 2016. At constant exchange rates, cost of sales and services for 2017 decreased by 0.2% over 2016.

Cost of sales was Ps.170.2 billion for 2017, a decrease of 1.4% from Ps.172.5 billion in 2016. This decrease principally reflects higher sales of lower-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.

Cost of services was Ps.326.2 billion for 2017, an increase of 4.4% from Ps.312.6 billion in 2016. This increase principally reflects an increase in costs related to network operations, including energy and leasing tower sites, third-party technical and IT services, as well as TV content acquisition.

COMMERCIAL, ADMINISTRATIVE AND GENERAL EXPENSES — Commercial, administrative and general expenses for 2017 increased by 5.5%, or Ps.12.5 billion, over 2016. As a percentage of operating revenues, commercial, administrative and general expenses were 23.6% for 2017, as compared to 23.4% for 2016. At constant exchange rates, commercial, administrative and general expenses for 2017 increased by 2.2% over 2016. This increase principally reflects an increase in costs related to customer services, allowance for doubtful accounts, systems development 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.

OTHER EXPENSES — Other expenses for 2017 increased by Ps.20.2 billion over 2016, principally reflecting the payment of an arbitration award granted 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.

DEPRECIATION AND AMORTIZATION — Depreciation and amortization for 2017 increased by 7.8%, or Ps.11.6 billion, over 2016. As a percentage of operating revenues, depreciation and amortization was 15.7% for 2017, as compared to 15.2% for 2016. At constant exchange rates, depreciation and amortization for 2017 increased by 3.4% over 2016. This increase principally reflects investments in our networks and the acceleration of amortizing the costs of various brands of Telekom Austria.

Operating Income

Operating income for 2017 decreased by 8.6%, or Ps.9.5 billion, over 2016. Operating margin (operating income as a percentage of operating revenues) was 9.8% for 2017, as compared to 11.2% 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.

Non-Operating Items

NET INTEREST EXPENSE — Net interest expense (interest expense less interest income) for 2017 decreased by 7.7%,

or Ps.2.3 billion, over 2016. This decrease principally reflects lower interest expense due to the amortization of debt during this period.

FOREIGN CURRENCY EXCHANGE LOSS, NET — We recorded a net foreign currency exchange loss of Ps.13.8 billion for 2017, compared to our net foreign currency exchange loss of Ps.40.4 billion for 2016. The loss in both periods principally reflects the appreciation of some of the currencies in which our indebtedness is denominated, particularly the U.S. dollar, the Euro and the pound sterling.

VALUATION OF DERIVATIVES, INTEREST COST FROM LABOR OBLIGATIONS AND OTHER FINANCIAL ITEMS, NET — We recorded a loss of Ps.1.9 billion for 2017 on the valuation of derivatives, interest cost from labor obligations and other financial items, net, compared to a loss of Ps.16.2 billion for 2016. The net loss in 2017 principally reflects the interest cost of labor obligations, which was partially offset by a gain 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.

INCOME TAX — Our income tax expense for 2017 increased by 118.8%, or Ps.13.5 billion, over 2016. This increase principally reflects the effect of a smaller foreign exchange loss than the one observed in 2016.

Our effective corporate income tax rate as a percentage of profit before income tax was 43.7% for 2017, compared to 48.6% for 2016. 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 derivatives and other impacts of non-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.32.2 billion for 2017, an increase of 166.2%, or Ps.20.1 billion, over 2016.

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS FOR 2016 AND 2015

Operating Revenues

Total operating revenues for 2016 increased by 9.1%, or Ps.81.7 billion, over 2015. At constant exchange rates, total operating revenues for 2016 increased by 2.1% over 2015. This increase principally reflects increases in revenues from our mobile data, fixed data and Pay TV operations, which were partially offset by a decrease in revenues from our mobile voice and fixed voice operations.

MOBILE VOICE — Mobile voice revenues for 2016 decreased by 5.4%, or Ps.13.8 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 and machine-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. At constant exchange rates, revenues from equipment, accessories and computer sales for 2016 increased by 20.4% over 2015. This increase principally reflects increases in sales of higher-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. This increase principally reflects increases in revenues from advertising and media services, online content, wireless security services, telephone directories and call center services.

Operating Costs and Expenses

COST OF SALES AND SERVICES — Cost of sales and services for 2016 increased by 15.4%, or Ps.64.8 billion, over 2015, representing 49.7% of operating revenues for 2016, as compared to 47.0% of operating revenues for 2015. At constant exchange rates, cost of sales and services for 2016 increased by 7.0% over 2015.

Cost of sales was Ps.172.5 billion for 2016, an increase of 18.6% from Ps.145.5 billion in 2015. 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 smartphones to subscribers in all countries in which we operate, which was partially offset by a decrease in the costs associated with handset subsidies on financing plans we offer to acquire and retain subscribers.

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.

COMMERCIAL, ADMINISTRATIVE AND GENERAL EXPENSES — Commercial, administrative and general expenses for 2016 increased by 13.3%, or Ps.26.7 billion, over 2015. As a percentage of operating revenues, commercial, administrative and general expenses were 23.4% for 2016, as compared to 22.5% for 2015. At constant exchange rates, commercial, administrative and general expenses for 2016 increased by 5.9% over 2015. This increase principally reflects higher advertising costs, as we seek to expand our subscriber base, 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.

OTHER EXPENSES — Other expenses for 2016 decreased by 17.5%, or Ps.0.9 billion, over 2015, reflecting unusually high regulatory charges in Brazil in 2015.

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

Operating Income

Operating income for 2016 decreased by 22.5%, or Ps.31.8 billion, over 2015. Operating margin (operating income as a percentage of operating revenues) was 11.2% for 2016, as compared to 15.8% for 2015.

Non-Operating Items

NET INTEREST EXPENSE — Net interest expense (interest expense less interest income) for 2016 increased by 12.6%, or Ps.3.3 billion, over 2015. This increase principally reflects higher interest expenses due to the appreciation 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 reflects the appreciation of some of the currencies in which our indebtedness is denominated, particularly the U.S. dollar.

VALUATION OF DERIVATIVES, INTEREST COST FROM LABOR OBLIGATIONS AND OTHER FINANCIAL ITEMS, NET — The changes in 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.1.4 billion for 2015. This increase principally reflects the derecognition of the equity method investment in KPN, which we reclassified as an available-for-sale security in June 2015.

INCOME TAX — Our income tax expense for 2016 decreased by 40.6%, or Ps.7.8 billion, over 2015. This decrease was principally due to net foreign currency exchange losses as a result of the depreciation of the Mexican peso against the currencies in which a portion of our debt is denominated.

Our effective corporate income tax rate as a percentage of profit before income tax was 48.6% for 2016, compared to 34.2% for 2015. This rate differed from the Mexican statutory rate of 30% and changed year over year principally as a result of an increase in tax inflationary effects and derivatives.

Net Profit

We recorded a net profit of Ps.12.1 billion for 2016, a decrease of 67.3%, or Ps.24.9 billion, over 2015.

RESULTS OF OPERATIONS

SEGMENT RESULTS OF OPERATIONS

We discuss below the operating results of each reportable segment. Note 22 to our audited consolidated financial statements describes how we translate the financial statements of our non-Mexican subsidiaries. Exchange rate changes between the Mexican peso and the currencies in which our subsidiaries do business affect our reported results in Mexican pesos and the comparability of reported results between periods.

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


	MEXICAN PESOS PER FOREIGN CURRENCY UNIT (AVERAGE FOR THE PERIOD)
	2015		2015/2016 % CHANGE	2016		2016/2017 % CHANGE	2017
Brazilian real		4.8068	12.1		5.3868	10.2		5.9346
Colombian peso		0.0058	5.3		0.0061	4.8		0.0064
Argentine peso		1.7152	(26.4)		1.2632	(9.0)		1.1489
U.S. dollar		15.8504	17.7		18.6529	1.5		18.9400
Euro		17.3886	18.7		20.6334	3.5		21.3649

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


	YEAR ENDED DECEMBER 31, 2017
	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)
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	%


	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%

RESULTS OF OPERATIONS

INTERPERIOD SEGMENT COMPARISONS

The following discussion addresses the financial performance of each of our reportable segments, first by comparing results for 2017 and 2016 and then by comparing results for 2016 and 2015. In the year-to- year comparisons for each segment, we include percentage changes in operating revenues, percentage changes in operating income and operating margin (operating income as a percentage of operating revenues), in each case calculated based on the segment financial information presented in Note 22 to our audited consolidated financial statements, which is prepared in accordance with IFRS.

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

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

2017 COMPARED TO 2016

Mexico Wireless

The number of net prepaid wireless subscribers for 2017 increased by 0.2% over 2016, and the number of net postpaid wireless subscribers increased by 6.2%, resulting in a net increase in the total number of wireless subscribers in Mexico of 1.2%, or 902 thousand, to approximately 73.9 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 1.6% over 2016. Adjusted segment operating revenues for 2017 increased by 1.2% over 2016. This increase in segment operating revenues principally reflects an increase of 18.9% 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 2017 increased by 5.1% over 2016. Adjusted segment operating income for 2017 increased by 0.9% over 2016.

Segment operating margin was 24.5% in 2017, as compared to 23.7% in 2016. Adjusted segment operating margin for this segment was 28.8% in 2017, which remained stable in comparison to 28.9% in 2016. The segment operating margin in 2017 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 decreased by 2.8% over 2016, and the number of broadband RGUs in Mexico increased by 0.4%, resulting in a decrease in total fixed RGUs in Mexico of 1.5% over 2016, or 327 thousand, to approximately 21.9 million as of December 31, 2017.

Segment operating revenues for 2017 decreased by 3.7% over 2016. Adjusted segment operating revenues for 2017 decreased by 3.9% over 2016. This decrease in segment operating revenues principally reflects a fall in fixed voice revenues of 8.2%, driven by 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 2.9%, principally due to higher revenues from broadband and corporate network services.

Segment operating income for 2017 decreased by 35.5% over 2016. Adjusted segment operating income for 2017 decreased by 49.1% over 2016.

Segment operating margin was 8.0% in 2017, as compared to 12.0% in 2016. Adjusted segment operating margin was 4.3% in 2017, as compared to 8.3% in 2016. The decrease in the segment operating margin in 2017 principally reflects 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 2017 decreased by 7.6% over 2016, and the number of net postpaid wireless subscribers increased by 11.1%, resulting in a net decrease in the total number of wireless subscribers in Brazil of 1.9%, or 1.1 million, to approximately 59.0 million as of December 31, 2017. The number of fixed voice RGUs for 2017 decreased by 2.8% over 2016, the number of broadband RGUs increased by 4.2%, and the number of Pay TV RGUs decreased by 5.3%, resulting in a decrease in total fixed RGUs in Brazil of 2.2%, or 812 thousand, to approximately 35.9 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 9.1% over 2016. Adjusted segment operating revenues for 2017 decreased by 1.4% over 2016. This decrease 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% and 5.2%, respectively, in 2017 over 2016. Mobile data revenues increased principally due to 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.

Segment operating income for 2017 increased by 83.4% over 2016. Adjusted segment operating income for 2017 increased by 81.1% over 2016.

Segment operating margin was 5.4% in 2017, as compared to 3.2% in 2016. Adjusted segment operating margin was 4.2% in 2017, as compared to 2.3% in 2016. The increase in segment operating margin in 2017 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 2017 increased by 0.4% over 2016, and the number of net postpaid wireless subscribers increased by 5.0%, resulting in a net increase in the total number of wireless subscribers in Colombia of 1.4%, or 399 thousand, to approximately 29.4 million as of December 31, 2017. The number of fixed voice RGUs for 2017 increased by 11.1% over 2016, the number of broadband RGUs increased by 8.1% and the number of Pay TV RGUs increased by 3.3%, resulting in an increase in total fixed RGUs in Colombia of 7.1%, or 450 thousand, to approximately 6.8 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 7.6% over 2016. Adjusted segment operating revenues for 2017 increased by 2.8% over 2016. 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%, 14.3%, 11.7% and 15.9%, respectively, in 2017, 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% in mobile voice revenues, driven by more competitive commercial offerings in response to pricing pressure from competitors.

Segment operating income for 2017 decreased by 142.0% over 2016. 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 2017 increased by 15.2%.

Segment operating margin was (6.5)% in 2017, as compared to 16.6% in 2016. Adjusted segment operating margin was (5.0)% in 2017, as compared to 20.5% in 2016. The decrease in segment operating margin for 2017 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.

RESULTS OF OPERATIONS

Southern Cone — Argentina, Chile, Paraguay and Uruguay

The number of net prepaid wireless subscribers for 2017 increased by 2.0% over 2016, and the number of net postpaid wireless subscribers increased by 2.9%, resulting in a net increase in the total number of wireless subscribers in our Southern Cone segment of 2.3%, or 699 thousand, to approximately 31.1 million as of December 31, 2017. The number of fixed voice RGUs for 2017 increased by 4.6% over 2016, the number of broadband RGUs increased by 9.1%, and the number of Pay TV RGUs increased by 0.6%, resulting in an increase in total fixed RGUs in our Southern Cone segment of 4.2%, or 81 thousand, to approximately 2.0 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 13.8% over 2016. Adjusted segment operating revenues for 2017

increased by 19.0% over 2016. This increase principally reflects an aggregate increase of 22.5% in Argentina, Paraguay and Uruguay and an increase of 10.9% in Chile. 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 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 2017 increased by 40.4% over 2016. Adjusted segment operating income for 2017 increased by 56.2% over 2016. This increase principally reflects an increase in adjusted operating income of 16.8% in Argentina, Paraguay and Uruguay, which was partially offset by an increase in adjusted operating loss of 30.8% in Chile.

Segment operating margin was 14.2% in 2017, as compared to 11.5% in 2016. Adjusted segment operating margin was 17.0% in 2017, which remained stable in comparison to 17.0% in 2016. The segment operating margin in 2017 principally reflected the cost saving programs of our subsidiaries in the Southern Cone.

Andean Region — Ecuador and Peru

The number of net prepaid wireless subscribers for 2017 decreased by 4.3% over 2016, and the number of net postpaid wireless subscribers increased by 2.5%, resulting in a net decrease in the total number of wireless subscribers in our Andean Region segment of 2.2%, or 450 thousand, to approximately 20.4 million as of December 31, 2017. The

number of fixed voice RGUs for 2017 decreased by 7.1% over 2016, the number of broadband RGUs increased by 5.4% and the number of Pay TV RGUs decreased by 7.8%, resulting in a decrease in total fixed RGUs in our Andean Region segment of 3.0%, or 55 thousand, to approximately 1.8 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 0.8% over 2016. Adjusted segment operating revenues for 2017 decreased by 2.4% over 2016. This decrease principally reflects a decrease of 8.9% in Ecuador, which was partially offset by an increase of 3.6% 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 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 2017 decreased by 7.2% over 2016. Adjusted segment operating income for 2017 increased by 0.9% over 2016. This increase principally reflects an increase of 138.7% in Peru, which was partially offset by a decrease of 21.4% in Ecuador.

Segment operating margin was 10.0% in 2017, as compared to 10.8% in 2016. Adjusted segment operating margin was 15.9% in 2017, as compared to 15.1% in 2016. This increase principally reflects gains from our cost-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 — Guatemala, El Salvador, Honduras, Nicaragua, Panama and Costa Rica

The number of net prepaid wireless subscribers for 2017 increased by 5.4% over 2016, 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 Central America segment of 5.6%, or approximately 842 thousand, to approximately 15.9 million as of December 31, 2017. The number of fixed voice RGUs for 2017 decreased by 0.1% over 2016, the number of broadband RGUs increased by 15.1% and the number of Pay TV RGUs increased by 3.9%, resulting in an increase in total fixed RGUs in our Central America segment of 7.8%, or 419 thousand, to approximately 5.8 million as of December 31, 2017.

Segment operating revenues for 2017 increased by 4.4% over 2016. Adjusted segment operating revenues for 2017

increased by 3.2% over 2016. This increase principally reflects 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 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% in El Salvador, an increase of 56.2% in Honduras, an increase of 41.2% in Nicaragua, an increase of 30.0% in Panama and an increase of 1.4% in Costa Rica.

Segment operating margin was 11.9%, as compared to 9.0% in 2016. Adjusted segment operating margin was 13.1% in 2017, as compared to 9.6% in 2016. This increase principally reflects lower costs related to maintenance, customer service and customer acquisition.

Caribbean — Dominican Republic and Puerto Rico

The number of net prepaid wireless subscribers for 2017 increased by 3.0% over 2016, and the number of net postpaid wireless subscribers increased by 4.1%, resulting in a net increase in the total number of wireless subscribers in our Caribbean segment of 3.4%, or approximately 184 thousand, to approximately 5.6 million as of December 31, 2017. The number of fixed voice RGUs for 2017 decreased by 1.3% over 2016, the number of broadband RGUs increased by 1.6% and the number of Pay TV RGUs increased by 11.4%, resulting in an increase in total fixed RGUs in our Caribbean segment of 1.4%, or 37 thousand, to approximately 2.7 million as of December 31, 2017.

Segment operating revenues for 2017 decreased by 3.5% over 2016. 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 2017 increased by 5.5% over 2016. Adjusted segment operating revenues for 2017 increased by 4.1% over 2016. 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.

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.

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 as video-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 television set-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.

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.

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 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 2016 increased by 57.9% over 2015. Adjusted segment operating income for 2016 increased by 0.9% over 2015. Segment operating margin was 16.8% in 2016 and 13.1% in 2015. Adjusted segment operating margin was 17.2% in 2016 and 17.1% in 2015. This increase in segment operating income and operating margin for 2016 resulted from our cost- savings programs, which was partially offset by increased expenses in connection with our pension obligations in Puerto Rico.

United States

The number of net prepaid wireless subscribers for 2016 increased by 1.6%, or approximately 401 thousand, to approximately 26.1 million total net wireless subscribers in the United States as of December 31, 2016.

Segment operating revenues for 2016 increased by 27.3% over 2015. Adjusted segment operating revenues for 2016 increased by 7.9% over 2015. This increase in operating revenues reflects higher mobile voice and data usage and revenues driven by the success of existing unlimited data plans, principally those offered by Straight Talk.

Segment operating income for 2016 decreased by 5.6% over 2015. Adjusted segment operating income for 2016 increased by 4.2% over 2015. Segment operating margin was 0.9% in 2016 and 1.2% in 2015. Adjusted segment operating margin was 7.6% in 2016 and 7.8% in 2015. This decrease in segment operating margin for 2016 was principally due to increased payments to third-party network operators for voice and data, as a result of higher usage of unlimited plans.

Europe

The number of net prepaid wireless subscribers for 2016 decreased by 4.3%, and the number of net postpaid wireless subscribers increased by 1.7%, resulting in a net decrease in the total number of wireless subscribers in our Europe segment of approximately 3 thousand to approximately 20.7 million as of December 31, 2016. In 2016, the number of fixed voice RGUs decreased by 3.5%, the number of broadband RGUs increased by 5.9% and the number of Pay TV RGUs increased by 18.3%, resulting in an increase in total fixed RGUs in our Europe segment of 4.6% to approximately 5.9 million as of December 31, 2016.

Segment operating revenues for 2016 increased by 19.7% over 2015. Adjusted segment operating revenues for 2016 increased by 2.1% over 2015. This increase in operating revenues was principally due to higher revenues in wireless and fixed data, driven by our acquisitions 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. We analyze segment results in euros because it is the functional currency in our operations in Europe.

Segment operating income for 2016 decreased by 13.2% over 2015. Adjusted segment operating income for 2016 decreased by 24.4% over 2015. Segment operating margin was 6.2% in 2016 and 8.5% in 2015. Adjusted segment operating margin was 6.2% in 2016 and 8.4% in 2015. The decrease in segment operating income and operating margin for 2016 reflects increases in costs related to advertising and subscriber acquisition and non-cash revisions for future pension liabilities in Austria.

LIQUIDITY AND CAPITAL RESOURCES

FUNDING REQUIREMENTS

We generate substantial cash flows from our operations. On a consolidated basis, our cash flows from operating activities were Ps.217.8 billion in 2017, compared to Ps.235.8 billion in 2016. Our cash and cash equivalents amounted to Ps.24.3 billion at December 31, 2017, compared to Ps.23.2 billion at December 31, 2016. 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:

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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.136.7 billion in 2017, Ps.155.0 billion in 2016 and Ps.151.6 billion in 2015. The amount of these capital expenditures varies significantly from year to year, depending on acquisition opportunities, concession renewal schedules and the need for more spectrum. We have budgeted capital expenditures for 2018 of approximately U.S.$8 billion (Ps.148.3 billion), which will be primarily funded through our operating activities.

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In some years, we have made substantial expenditures on acquisitions.

•

We must pay interest on our indebtedness and repay principal when due. As of December 31, 2017, we had approximately Ps.51.7 billion of principal and amortization due in 2018.

•

We pay regular dividends. We paid Ps.16.1 billion in dividends in 2017 and Ps.13.8 billion in 2016. Our shareholders approved on April 16, 2018 the payment of a Ps.0.32 ordinary cash dividend per share in two installments in 2018. See “Share Ownership and Trading—Dividends” under Part IV in this annual report.

•

We regularly repurchase our own shares. We spent Ps.1.2 billion repurchasing our own shares in the open market in 2017 and Ps.7.0 billion in 2016. Our shareholders have authorized additional repurchases, and as of March 31, 2018, we have spent Ps.101.9 million repurchasing our shares in the open market in 2018, 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, we had no off-balance sheet arrangements that require disclosure under applicable SEC regulations.

CONTRACTUAL OBLIGATIONS

The following table summarizes certain contractual obligations as of December 31, 2017. 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. The table does not include accounts payable, pension liabilities, interest payments or payments under derivatives contracts. See Note 16 to our audited consolidated financial statements.

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

—

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

Other than the amounts in the table above, we had no other outstanding material purchase commitments as of December 31, 2017. 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, 2017 was Ps.697.9 billion, of which Ps.51.7 billion was short-term debt (including the current portion of long-term debt), compared to Ps.707.8 billion as of December 31, 2016.

Management defines net debt as total debt minus cash and cash equivalents, minus marketable securities (including KPN shares) or other short-term investments. As of December 31, 2017, we had net debt of Ps.614.5 billion, compared to Ps.629.7 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.

Without taking into account the effects of derivative financial instruments that we use to manage our interest rate and currency risk, approximately 88.1% of our indebtedness at December 31, 2017 was denominated in currencies other than Mexican pesos (approximately 32.5% of such non-Mexican peso debt in U.S. dollars and 67.5% in other currencies), and approximately 5.7% of our consolidated debt obligations bore interest at floating rates. After the effects of derivative transactions and excluding the debt owned by Telekom Austria, approximately 28.8% of our net debt as of December 31, 2017 was denominated in Mexican pesos.

The weighted average cost of all our third-party debt at December 31, 2017 (excluding commissions and reimbursement of certain lenders for Mexican taxes withheld) was approximately 4.3% per annum.

Our major categories of indebtedness at December 31, 2017 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.


DEBT
(millions of Mexican pesos)
Senior Notes
DENOMINATED IN U.S. DOLLARS
América Móvil 5.000% Senior Notes due 2019	Ps.	14,840
Telmex 5.500% Senior Notes due 2019		7,467
América Móvil 5.000% Senior Notes due 2020		42,043
América Móvil 3.125% Senior Notes due 2022		31,659
América Móvil 6.375% Senior Notes due 2035		19,417
América Móvil 6.125% senior Notes due 2037		7,306
América Móvil 6.125% Senior Notes due 2040		39,573
América Móvil 4.375% Senior Notes due 2042		22,755
Total	Ps.	185,060
DENOMINATED IN MEXICAN PESOS
América Móvil 8.11% Domestic Senior Notes due 2018	Ps.	1,750
Telmex 8.27% Domestic Senior Notes due 2018		1,160
América Móvil 8.60% Domestic Senior Notes due 2020		7,000
América Móvil 0.00% Domestic Senior Notes due 2025		4,410
Telmex 8.36% Domestic Senior Notes due 2037		5,000
América Móvil 6.000% Senior Notes due 2019		10,000
América Móvil 6.45% Senior Notes due 2022		22,500
América Móvil 7.125% Senior Notes due 2024		11,000
América Móvil 8.46% Senior Notes due 2036		7,872
Total	Ps.	70,692
DENOMINATED IN EURO
América Móvil 1.00% Senior Notes due 2018	Ps.	14,252
América Móvil 4.125% Senior Notes due 2019		23,754
América Móvil B.V. 0.00% Exchangeable Bonds due 2020		67,505
América Móvil 3.00% Senior Notes due 2021		23,754
TKA 3.125% Senior Notes due 2021		18,728
TKA 4.00% Senior Notes due 2022		19,334
América Móvil 4.75% Senior Notes due 2022		17,815
TKA 3.5% Senior Notes due 2023		7,594
América Móvil 3.259% Senior Notes due 2023		17,815
América Móvil 1.50% Senior Notes due 2024		20,191
TKA 1.50% Senior Notes due 2026		17,815
América Móvil 2.125% Senior Notes due 2028		15,440
Total	Ps.	263,998

LIQUIDITY AND CAPITAL RESOURCES


DEBT
DENOMINATED IN POUND STERLING
América Móvil 5.000% Senior Notes due 2026	Ps.	13,369
América Móvil 5.750% Senior Notes due 2030		17,380
América Móvil 4.948% Senior Notes due 2033		8,021
América Móvil 4.375% Senior Notes due 2041		20,053
Total	Ps.	58,823
DENOMINATED IN SWISS FRANCS
América Móvil 1.125% Senior Notes due 2018	Ps.	11,170
Total	Ps.	11,170
DENOMINATED IN JAPANESE YEN
América Móvil 2.95% Senior Notes due 2039	Ps.	2,283
Total	Ps.	2,283
DENOMINATED IN CHILEAN PESOS
América Móvil 3.961% Senior Notes due 2035	Ps.	4,312
Total	Ps.	4,312
DENOMINATED IN BRAZILIAN REALS
Claro Brasil 102.4% of CDI Domestic senior notes due 2019	Ps.	5,981
Claro Brasil 103.9% of CDI Domestic senior notes due 2019		5,981
Claro Brasil 102.9% of CDI Domestic senior notes due 2020		8,973
Total	Ps.	20,935
Hybrid Notes
DENOMINATED IN EURO:
América Móvil Euro NC5 (Euro Series A) Capital Securities due 2073	Ps.	21,378
América Móvil Euro NC10 (Euro Series B) Capital Securities due 2073		13,065
Total	Ps.	34,443
DENOMINATED IN POUND STERLING
América Móvil GBP NC7 Capital Securities due 2073	Ps.	14,706
Total	Ps.	14,706
Bank Debt and Other
DENOMINATED IN U.S. DOLLARS	Ps.	14,474
DENOMINATED IN MEXICAN PESOS	Ps.	12,500
DENOMINATED IN CHILEAN PESOS	Ps.	100
DENOMINATED IN BRAZILIAN REALS	Ps.	4,389
Total	Ps.	31,463
Total Debt	Ps.	697,885
Less short-term debt and current portion of long-term debt		(51,746	)
Total Long-term Debt	Ps.	646,139
Equity:
Capital stock	Ps.	96,339
Total retained earnings		171,088
Other comprehensive income (loss) items		(73,262	)
Non-controlling interest		66,469
Total Equity	Ps.	260,634
Total Capitalization (total long-term debt plus equity)	Ps.	906,773

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 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.

•

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. Both facilities include covenants that limit our ability to incur secured debt, to effect a merger in which the surviving entity would not be América Móvil or to sell substantially all of our assets. In addition, both facilities require us to maintain a consolidated ratio of debt to EBITDA not greater than 4.0 to 1.0 and a consolidated ratio of EBITDA to interest expense not less than 2.5 to 1.0. As of the date of this annual report, we are in compliance with these covenants. Telekom Austria also has a revolving syndicated facility for €1.0 billion (the “TKA Facility”) expiring in 2019. 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.

Options involving KPN and TKA 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 Note 7 to our audited consolidated financial statements.

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

unconsolidated basis, unsecured and unsubordinated indebtedness of approximately Ps.582.1 billion (U.S.$29.4 billion), excluding guarantees of subsidiaries’ indebtedness. As of December 31, 2017, our subsidiaries had indebtedness (excluding guarantees of indebtedness of us and our other subsidiaries) of approximately Ps.115.8 billion (U.S.$5.9 billion).

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 forwards to adjust the resulting exchange 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, we had derivatives positions with an aggregate net fair value liability of Ps.6.3 billion, which are described in Note 7 to our audited consolidated financial statements. For additional information, see Note 2 w) to our audited consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 as available-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 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, we evaluate whether an impairment exists on its available-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 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

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 2017 to Ps.135.2 billion, or 14.7% of our operating costs and expenses. See Note 10 to our audited consolidated financial statements.

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-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) to our audited consolidated financial statements.

DEFERRED INCOME TAXES

We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves the jurisdiction-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 year 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 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.

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 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 17 to our audited consolidated financial statements. 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.

LOGO

RISK FACTORS

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 increased 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.

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, “Legal Proceedings” under Part VII and Note 16 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 overseen reforms to the telecommunications sector that aim to promote competition and investment by imposing asymmetric regulation upon economic agents deemed “preponderant.” In other countries, we could also face policies such as preferences for local over foreign ownership of communications licenses and assets or for government over private ownership, which could make it more cumbersome or impossible for us to continue to develop our businesses. Restrictions such as those described above could result in our incurring losses of 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.

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 deployment of new generation networks 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 environment at the time of renewal. Fees are typically established at the time of renewal. As a condition for

RISK FACTORS

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 16 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 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 16 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 16 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 standards could harm our reputation, subject us to substantial fines, sanctions or penalties and adversely affect our business and ability to access financial markets.

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

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

•

physical damage to access lines and fixed networks;

•

power surges or outages;

•

natural disasters;

•

climate change;

•

malicious actions, such as theft or misuse of customer data;

•

limitations on the use of our radio bases;

•

software defects;

•

human error; and

•

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.

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

Cybersecurity incidents, and other tactics designed to gain access to and exploit sensitive information by breaching critical systems of large companies, are evolving and have been increasing in both sophistication and occurrence in recent years. While we employ a number of measures to prevent, detect and mitigate such incidents, there is no guarantee that we will be able to adequately anticipate or prevent one. Cybercrime, including attempts to overload our

servers with denial-of-service attacks, theft, social engineering, phishing, ransomware or similar disruptions from unauthorized access or attempted unauthorized access to our systems could result in the destruction, misuse or release of personal information or other sensitive data. 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, those of our third-party service providers and of our customers are vulnerable to cybersecurity incidents.

In the event that our systems are breached or damaged for any reason, we may suffer loss or unavailability of data and interruptions to our business operations. If such an event occurs, the unauthorized disclosure, loss or unavailability of data and the disruption to our fixed-line or wireless networks may have a material adverse effect on our business and results of operations. The costs associated with a cybersecurity incident could include increased expenditures on information and cybersecurity measures, damage to our reputation, loss of existing customers and business partners and lead to financial losses from remedial actions and potential liability, including possible litigation and sanctions. Any of these occurrences may result in a material adverse effect on our results of operations and financial condition.

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, 2017 and 4.2% for the year ended December 31, 2016. 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.

RISK FACTORS

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. 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.

Our ability to pay dividends and repay debt depends on our subsidiaries’ ability to transfer income and dividends 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.

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 and changes in end-user needs and preferences. There is uncertainty as to the pace and extent of growth in subscriber demand, and as to the extent to which prices for airtime, broadband access, Pay TV and fixed- line rental may continue to decline. Our ability to compete in the delivery of high-quality internet and broadband services is particularly important, given the increasing contribution of revenues from data services to our overall growth. If we are unable to meet future advances in competing technologies on a timely basis or at an acceptable cost, we could lose subscribers to our competitors. In general, the development of new services in our industry requires us to anticipate and respond to the varied and continually changing demands of our subscribers. It also requires significant capital expenditure, including investment in the continual maintenance and upgrading of our networks, in order to expand coverage, increase our capacity to absorb higher bandwidth usage and adapt to new technologies. We may not be able to accurately predict technological trends or the success of new services in the market. In addition, there could be legal or regulatory restraints to our introduction of new services. If these services fail to gain acceptance in the marketplace, or if costs associated with implementation and completion of the introduction of these services materially increase, our ability to retain and attract subscribers could be adversely affected. This is true across many of the services we provide, including wireless and cable technology.

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

Some of our products and services use intellectual property that we own or license from others. We also provide content we receive from content producers and distributors, such as ringtones, text games, video games, video, including TV programs and movies, wallpapers or screensavers, and we outsource services to service providers, including billing

and customer care functions, that incorporate or utilize intellectual property. We and some of our suppliers, content distributors and service providers have received, and may receive in the future, assertions and claims from third parties that the content, products or software utilized by us or our suppliers, content producers and distributors and service providers infringe on the patents or other intellectual property rights of these third parties. These claims could require us or an infringing supplier, content distributor or service provider to cease engaging in certain activities, including selling, offering and providing the relevant products and services. Such claims and assertions also could subject us to costly litigation and significant liabilities for damages or royalty payments, or require us to cease certain activities or prevent us from selling certain products or services.

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

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

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

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

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 rights 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.

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

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

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

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

Our bylaws may only be enforced in Mexico

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

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

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

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

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

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

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 suffered significant economic, political and social crises in the past, and these events may occur again in the future. We cannot predict whether changes in political administrations will result in changes in governmental policy and whether such changes will affect our business. Factors related to economic, political and social conditions that could affect our performance include:

•

significant governmental influence over local economies;

•

substantial fluctuations in economic growth;

•

high levels of inflation;

•

changes in currency values;

•

exchange controls or restrictions on expatriation of earnings;

•

high domestic interest rates;

•

price controls;

•

changes in governmental economic or tax policies;

•

imposition of trade barriers;

•

unexpected changes in 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, 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 take 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. In Mexico, economic conditions are strongly impacted by those of the United States. Following the election of the current U.S. administration in 2016, there is uncertainty regarding future U.S. policies with respect to matters of importance to Mexico

and its economy, particularly including trade and migration. Additionally, in Brazil, our 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.

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, we reported net foreign exchange losses of Ps.13.8 billion.

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

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 reals 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.

RISK FACTORS

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.

LOGO

MAJOR SHAREHOLDERS

The following table sets forth our capital structure as of March 31, 2018.


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.

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. 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” under this Part IV and “Management Compensation—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.

As of March 31, 2018, 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 7,393 registered holders with addresses in the United States. As of such date, 34.4% 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% of the A Share ADSs were held by 3,282 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.

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.

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


		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 on each of the respective payment dates.


Payment date	Pesos per share		Dollar per share
November 13, 2017		Ps.0.15		U.S.$0.0079
July 17, 2017		Ps.0.15		U.S.$0.0085
November 14, 2016		Ps.0.14		U.S.$0.0068
July 15, 2016		Ps.0.14		U.S.$0.0076
November 13, 2015		Ps.0.13		U.S.$0.0078
September 25, 2015		Ps.0.30		U.S.$0.0177
July 17, 2015		Ps.0.13		U.S.$0.0082
November 14, 2014		Ps.0.12		U.S.$0.0082
July 18, 2014		Ps.0.12		U.S.$0.0082
November 15, 2013		Ps.0.11	U.S.$	0.0084
July 19, 2013		Ps.0.11	U.S.$	0.0084

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, our shareholders approved a cash dividend of Ps.0.32 (thirty two peso cents) per share, payable in two equal installments in July and November 2018.

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.

TRADING MARKETS

Our shares and ADSs are listed on the following markets:


L Shares⁽¹⁾		Mexican Stock Exchange—Mexico City
L Share ADSs		New York Stock Exchange—New York
A Shares		Mexican Stock Exchange—Mexico City
A Share ADSs⁽²⁾		New York Stock Exchange—New York
⁽¹⁾ L Shares were delisted from the Mercado 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.

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

The following tables set forth reported high and low market prices for the 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, 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

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 to the bylaws themselves. An English translation of our bylaws has been filed with the SEC as an exhibit and is incorporated by reference to 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.

Organization

We are a sociedad 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.

The two directors elected by the L Shares are elect