Edgar Filing: AMERICA MOVIL SAB DE CV/

Form 20-F

As filed with the Securities and Exchange Commission on April 11, 2019

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, 2018

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, 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, Miguel Hidalgo, 11529 Mexico City,

Mexico Telephone: (5255) 2581-3700

Facsimile: (5255) 2581-4422

E-mail: daniela.lecuona@americamovil.com

(name, telephone, e-mail and/or facsimile number and address of company contact person) Securities registered pursuant to Section 12(b) of the Act:


Title of each class:		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, 2018:


20,602 million		AA Shares
567 million		A Shares
44,887 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 every Interactive Data File required to be submitted 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 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

2018 ANNUAL REPORT FORM 20-F

LOGO

TABLE OF CONTENTS

(See Form 20-F Cross Reference Guide on page 114)



Selected Financial Data			2

PART I: INFORMATION ON THE COMPANY			5

About América Móvil			6

Our Networks			14

Our Competitors			16

Acquisitions, Other Investments and Divestitures			16

Marketing, Sales and Distribution, Customer Services			17

PART II: OPERATING AND FINANCIAL REVIEW AND PROSPECTS			19

Overview			20

Composition of Operating Revenues			21

Results of Operations			22

Liquidity and Capital Resources			37

Risk Management			42

Critical Accounting Policies and Estimates			43

PART III: RISK FACTORS			47

PART IV: SHARE OWNERSHIP AND TRADING			59

Major Shareholders			60

Related Party Transactions			61

Dividends			62

Trading Markets			62

Bylaws			63

Purchases of Equity Securities by the Issuer and Affiliated			67

Taxation of Shares and ADSs			68

PART V: CORPORATE GOVERNANCE			73

Management			74

Corporate Governance			84

Controls and Procedures			87

Code of Ethics			89

Corporate Sustainability Report			89

PART VI: REGULATION			91

PART VII: ADDITIONAL INFORMATION			109

Employees			110

Legal Proceedings			110

Principal Accountant Fees and Services			111

Additional Information			112

Forward-Looking Statements			113

Form 20-F Cross Reference Guide			114

Signatures			117

PART VIII: CONSOLIDATED FINANCIAL STATEMENTS			119

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.19.6829 to U.S.$1.00, which was the rate reported by Banco de México on December 31, 2018, 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.


		FOR THE YEAR ENDED DECEMBER 31,⁽¹⁾
	2014		2015		2016		2017		2018		2018
	(in millions of Mexican pesos, except share and per share amounts)										(in millions of U.S. dollars, except share and per share amounts)

STATEMENT OF COMPREHENSIVE INCOME DATA:

Operating revenues	Ps.	848,580	Ps.	893,738	Ps.	975,412	Ps.	1,021,634	Ps.	1,038,208	U.S.$	52,747

Operating costs and expenses		692,026		752,325		865,802		921,490		898,651		45,657

Depreciation and amortization		114,994		125,715		148,526		160,175		155,713		7,911

Operating income		156,554		141,413		109,610		100,144		139,557		7,090

Net profit for the year	Ps.	47,498	Ps.	36,961	Ps.	12,079	Ps.	32,155	Ps.	54,517	U.S.$	2,770

NET PROFIT ATTRIBUTABLE FOR THE YEAR TO:

Equity holders of the parent	Ps.	46,146	Ps.	35,055	Ps.	8,650	Ps.	29,326	Ps.	52,566	U.S.$	2,670

Non-controlling interests		1,352		1,906		3,429		2,829		1,951		100

Net profit for the year	Ps.	47,498	Ps.	36,961	Ps.	12,079	Ps.	32,155	Ps.	54,517	U.S.$	2,770

EARNINGS PER SHARE:

Basic	Ps.	0.67	Ps.	0.52	Ps.	0.13	Ps.	0.44	Ps.	0.79	U.S.$	0.04

Diluted	Ps.	0.67	Ps.	0.52	Ps.	0.13	Ps.	0.44	Ps.	0.79	U.S.$	0.04

Dividends declared per share⁽²⁾	Ps.	0.24	Ps.	0.26	Ps.	0.28	Ps.	0.30	Ps.	0.32	U.S.$	0.02

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (MILLIONS):

Basic		69,254		66,869		65,693		65,909		66,055

Diluted		69,254		66,869		65,693		65,909		66,055

BALANCE SHEET DATA:

Property, plant and equipment, net	Ps.	588,106	Ps.	573,529	Ps.	701,190	Ps.	676,343	Ps.	640,001	U.S.$	32,516

Total assets		1,278,357		1,296,487		1,515,042		1,486,212		1,429,223		72,613

Short-term debt and current portion of long-term debt		57,806		119,590		82,607		51,746		96,230		4,889

Long-term debt		545,949		563,627		625,194		646,139		542,692		27,572

Capital stock		96,383		96,338		96,338		96,339		96,338		4,895

Total equity		234,639		160,854		271,024		260,634		245,872		12,492

NUMBER OF OUTSTANDING SHARES (MILLIONS):

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

A Shares		649		625		592		567		546

L Shares		44,120		41,990		44,571		44,901		44,887

⁽¹⁾ As of December 31, 2018, 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 2014 through 2018. ⁽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 trans- lated into U.S. dollars, see “Share Ownership and Trading—Dividends” under Part IV of this annual report.

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. (“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, Miguel Hidalgo, 11529, Mexico City, Mexico. Our telephone number at this location is (5255) 2581-3700.

BUSINESS OVERVIEW

We provide telecommunications services in 25 countries. We are a 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 operations in 16 other countries in the Americas and seven countries in Central and Eastern Europe as of December 31, 2018. For a list of our principal subsidiaries, see note 2 a(ii) to our audited consolidated financial statements and “Additional Information—Exhibit 8.1” under Part VII of this annual report.

We intend to build on our position as leaders in integrated telecommunications services in Latin America and the Caribbean, and to grow in other parts of the world by continuing to expand our subscriber base through the development of our existing businesses and strategic acquisitions when opportunities arise. We have developed world-class integrated telecommunications platforms to offer our customers new services and enhanced communications solutions with higher data speed transmissions at lower prices. We continue investing in our networks to increase coverage and implement new technologies to optimize our network capabilities. See “Operating and Financial Review and Prospects—Overview” under Part II of this annual report for a discussion on the seasonality of our business.

RECENT DEVELOPMENTS

Acquisition of Nextel Operations in Brazil

In March 2019, we entered into an agreement to acquire 100% of the outstanding shares of Nextel Telecomunicações Ltda. (“Nextel Brazil”) from NII Holdings Inc. (“NII”) and AI Brazil Holdings B.V. for U.S.$905 million. The transaction is subject to the satisfaction of certain customary closing conditions, including the approval of the stockholders of NII and receipt of regulatory and antitrust approvals from Brazilian government authorities. Nextel Brazil provides nationwide mobile telecommunications services.

Acquisition of Telefónica’s Operations in Guatemala and El Salvador

In January 2019, we entered into an agreement to acquire 100% of the outstanding shares of Telefónica Móviles Guatemala, S.A. (“Telefónica Guatemala”) for U.S.$333 million and 99.3% of the outstanding shares of Telefónica Móviles El Salvador, S.A. de C.V. (“Telefónica El Salvador”) for U.S.$315 million. The acquired companies provide mobile and fixed telecommunications services, including voice, data and Pay TV in Guatemala and El Salvador, respectively. The Telefónica Guatemala acquisition was completed on January 24, 2019. The completion of the Telefónica El Salvador acquisition is subject to certain customary closing conditions, including regulatory approval.

LOGO
ABOUT AMERICA MOVIL The following map illustrates the geographic diversity of our operations and certain key performance indicators ("KPIs") as of December 31, 2018. UNITED STATES / TRACFONE Licensed Population 334 Wireless Subscribers 21,688 Revenue Generating Units (RGUs) - Wireless Penetration 126% Wireless operation CENTRAL AMERICA & CARIBBEAN / CLARO Licensed Population 63 Wireless Subscribers 20,250 Revenue Generating Units (RGUs) 9,011 Wireless Penetration 111% Wireless and fixed operations MEXICO / TELCEL TELMEX Licensed Population 125 Wireless Subscribers 75,448 Revenue Generating Units (RGUs) 22,337 Wireless Penetration 95% Wireless and fixed operations ECUADOR / CLARO Licensed Population 17 Wireless Subscribers 8,246 Revenue Generating Units (RGUs) 384 Wireless Penetration 92% Wireless and fixed operations

LOGO PERU / CLARO Licensed Population 32 Wireless Subscribers 12,098 Revenue Generating Units (RGUs) 1,472 Wireless Penetration 121% Wireless and fixed operations CHILE / CLARO Licensed Population 19 Wireless Subscribers 6,707 Revenue Generating Units (RGUs) 1,424 Wireless Penetration 153% Wireless and fixed operations AUSTRIA & EASTERN EUROPE Licensed Population 41 Wireless Subscribers 21,000 Revenue Generating Units (RGUs) 6,261 Wireless Penetration 145% Wireless operations: Austria, Belarus, Bulgaria, Croatia, Serbia, Slovenia and Macedonia Fixed operations: Austria, Belarus, Bulgaria, Croatia, Slovenia and Macedonia COLOMBIA / CLARO Licensed Population 50 Wireless Subscribers 29,681 Revenue Generating Units (RGUs) 7,171 Wireless Penetration 119% Wireless and fixed operations BRAZIL / CLARO Licensed Population 210 Wireless Subscribers 56,416 Revenue Generating Units (RGUs) 35,285 Wireless Penetration 111% Wireless and fixed operations ARGENTINA, PARAGUAY & URUGUAY / CLARO Licensed Population 55 Wireless Subscribers 24,264 Revenue Generating Units (RGUs) 775 Wireless Penetration 129% Wireless operation: Argentina, Paraguay and Uruguay Fixed operations: Argentina and Paraguay Licensed Population in millions Wireless Subscribers and Revenue Generating Units in thousands

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,
		2016	2017	2018
	(in thousands)
WIRELESS SUBSCRIBERS:
Mexico Wireless		72,953	73,855	75,448
Brazil		60,171	59,022	56,416
Colombia		28,954	29,353	29,681
Southern Cone		30,377	31,076	30,971
Andean Region		20,801	20,352	20,344
Central America		15,085	15,927	14,364
Caribbean		5,453	5,637	5,887
United States		26,070	23,132	21,688
Europe		20,708	20,658	21,000
Total Wireless Subscribers		280,572	279,012	275,798
FIXED RGUS:
Mexico Fixed		22,178	21,851	22,337
Brazil		36,716	35,904	35,285
Colombia		6,304	6,753	7,171
Southern Cone		1,942	2,023	2,199
Andean Region		1,820	1,765	1,856
Central America		5,392	5,811	6,465
Caribbean		2,663	2,700	2,546
Europe		5,900	6,036	6,261
Total Fixed RGUs		82,915	82,844	84,120
Total RGUs		363,488	361,856	359,919

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 Wireless data
	Straight Talk	Wireless voice Wireless data
Europe	A1⁽¹⁾	Wireless vocie Wireless data Fixed voice Fixed data Pay TV
⁽¹⁾ Since 2017, Telekom Austria has been extending a rollout of the A1 brand to all its regional operating companies.

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 2018, our wireless voice and data operations generated revenues of Ps. 529.2 billion, representing 51.0% of our consolidated revenues. As of December 31, 2018, our wireless operations represented approximately 76.6% 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.

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 as a percentage of the wireless base from 25.3% in December 2017 to 27.5% as of December 31, 2018, while prepaid plans represented 72.5%.

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 276 million wireless voice and data subscribers as of December 31, 2018.

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 2018 decreased an average of 11.12%, at constant exchange rates relative to 2017. In addition, the plans we offer our retail customers include selective discounts and promotions that reduce the 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 2018, our fixed voice, data, broadband and IT solutions had revenues of Ps.222.6 billion, representing 21.4% of our consolidated revenues. As of December 31, 2018, our fixed operations represented approximately 23.4% of our total RGUs, compared to 22.9% as of December 31, 2017.

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, 2018, we had approximately 21.5 million Pay TV RGUs, a decrease of approximately 88.2 thousand Pay TV RGUs from the prior year.

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, which may include:

•

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

•

Transactional video on demand and electronic sell-through, offering the option to rent or buy new content releases; and

•

Add-on services such as subscription and other OTT services through a platform payment system, including access to FOX, HBO and Noggin.

We also offer an advertised and unlimited music streaming and downloading service in 16 countries in Latin America and Europe through ClaroMúsica, with access to more than 50,000 titles across all music genres.

Services and Products by Country

The following table is a summary of our principal services rendered and products produced as of December 31, 2018 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, 2018, our capital expenditures totaled Ps.151.8 billion, which allowed us to increase our network, to expand our capacity and to upgrade our systems to operate with the latest technologies. With fully convergent platforms, we are able to deliver high-quality voice, video and data products.

As of December 31, 2018, the main components of our infrastructure were comprised of:

•

Base stations: 241,990 base stations with 2G, 3G and 4G technologies (of which approximately 65% are equipped with 3G and 4G capabilities) across Latin America and Europe.

•

Fiber-optic network: More than 859 thousand km. Our network passed approximately 75 million homes.

•

Submarine cable system: Capacity of more than 189 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 with 11 landing points and provides international connectivity to all of our subsidiaries in these geographic areas.

•

Satellites: Six. Star One S.A. (“Star One”) has the most extensive satellite system in Latin America, with a fleet that covers the United States, Mexico, Central America and South America. We use these satellites to supply capacity for DTH services for Claro TV throughout Brazil and in other DTH Operations, as well as cellular backhaul, video

broadcast and corporate data networks. In 2015 and 2016, we launched the Star One D1 and the Star One C4 to replace two limited capacity satellites.

•

Data centers: 27. 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. In 2018, we rolled out our 4.5G coverage in most of our operations.

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 2018, we spent Ps.4.2 billion on the acquisition of spectrum licenses, mainly in Paraguay and Argentina.

The table below presents a summary of the population covered by our network, by country, as of December 31, 2018.


GENERATION TECHNOLOGY
		GSM	UMTS	LTE
	(% of covered population)

Argentina		98	91	88

Austria		100	98	98

Belarus		99	99	—

Brazil		93	94	81

Bulgaria		100	100	99

Chile		99	97	94

Colombia		92	79	61

Costa Rica		74	80	40

Croatia		99	99	99

Dominican Republic		100	99	94

Ecuador		96	76	59

El Salvador		91	82	64

Guatemala		89	81	62

Honduras		86	81	52

Macedonia		100	100	99

Mexico		93	94	86

Nicaragua		85	80	46

Panama		84	84	67

Paraguay		76	73	53

Peru		87	80	73

Puerto Rico		80	96	86

Serbia		99	98	98

Slovenia		100	100	99

Uruguay		96	91	80

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

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 Recent Developments above and note 12 to our audited consolidated financial statements included in 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 2018, our efforts were mainly focused on promoting our 4.5G LTE services, leveraging the speed and quality of our networks and our fixed bundled offers, which compete on broadband speed and premium content.

We build on 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 2018 list ranked Telcel among the top-ten brands in Latin America. In the same year, BrandZ also named Telcel and Telmex as the highest recognized telecom brands in Mexico, and Telcel and Claro as two of the highest-ranked telecom brands in Latin America. In addition, Embratel and NET, our brands in Brazil, are among the top fifteen most valuable brands in the country. A 2018 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 450,000 points of sale and almost 2,800 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 120,000 employees dedicated to customer service. We focus our efforts on constantly improving our customers’ experience by leveraging our commercial offerings and our sales and distribution networks. Customers may make inquiries by calling a toll-free telephone number, accessing our subsidiaries’ web sites and social media accounts or visiting one of the customer sales and service centers located throughout the countries we serve.

LOGO

PART II OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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 included in this annual report.

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

Constant Currency Presentation

Our financial statements are presented in Mexican pesos, but our operations outside Mexico account for a significant portion of our revenues. Currency variations between the Mexican peso and the currencies of our non-Mexican subsidiaries, especially the Euro, U.S. dollar, Brazilian real, Colombian 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. In 2018 compared to 2017, the Mexican peso was stronger against some of our operating currencies (including the Brazilian Real and the Argentine Peso) and weaker against others (including the U.S. Dollar and the Euro).

Since most of our debt is issued by América Móvil out of Mexico, to the extent that our functional currency, the Mexican peso, appreciates or depreciates against the currencies in which our indebtedness is denominated, we

may incur foreign exchange gains or losses that are recorded as other comprehensive income in our consolidated statements of financial position.

Changes in exchange rates also affect the fair value of derivative financial instruments that we use to manage our currency-risk exposure, which are generally not accounted for as hedging instruments. In 2018, the Mexican peso and the Brazilian real weakened against the currencies in which most of our indebtedness is denominated. We recorded net foreign exchange losses of Ps.7.3 billion and net fair value losses on derivatives of Ps.4.7 billion. 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. See note 7 to our audited consolidated financial statements included in this annual report.

Recent Changes in Accounting Standards

We adopted IFRS 15 on revenue recognition for the first time in 2018 using the modified retrospective method, which does not require us to restate our financial information from prior periods. The impact of applying IFRS 15 to our audited consolidated financial statements in 2018 was not significant, see note 2 i) to our audited consolidated financial statements included in this annual report.

We have adopted IFRS 16 on leasing as of January 1, 2019 using the modified retrospective method. The implementation of IFRS 16 will have a significant impact on our consolidated statements of financial position by requiring that we recognize right-of-use assets and lease liabilities. In our consolidated statements of comprehensive income, we expect the impact of the new standard will be to increase interest expense and depreciation while reducing other operating costs, without a significant impact on net income. The future impact of IFRS 16 on our results of operations will depend not only on the lease agreements in effect at the time of adoption but also on any new lease agreements. For more information, see note 23 to our audited consolidated financial statements included in this annual report.

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. 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 2018, our total operating revenues were Ps.1,038.2 billion.

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

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

Pay TV revenues consist primarily of charges from subscription services, additional programming, 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.

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 2018 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; and

•

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

These trends are broadly characteristic of our businesses in all regions in recent years, and they have affected comparable telecommunications providers as well. Our performance in recent years has also been affected by ongoing regulatory changes in Mexico.

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS FOR 2018 AND 2017

Operating Revenues

Total operating revenues for 2018 increased by 1.6%, or Ps.16.6 billion, over 2017. At constant exchange rates, total operating revenues for 2018 increased by 3.5% over 2017. This increase principally reflects increases in revenues from our mobile and fixed data services, and equipment, accessories and computer sales operations, which were partially offset by a decrease in revenues from our mobile and fixed voice services.

REVENUES SERVICES. Revenues services for 2018 decreased by 1.7%, or Ps.14.8 billion, over 2017. At constant exchange rates, revenues services for 2018 increased by 0.5% over 2017. This increase principally reflects increases in revenues from our mobile voice and fixed and mobile data services, which were partially offset by a decrease in revenues from our fixed voice services.

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

Operating Costs and Expenses

COST OF SALES. Cost of sales was Ps.180.0 billion for 2018, an increase of 5.8% from Ps.170.2 billion in 2017. At constant exchange rates, cost of sales for 2018 increased by 5.5% over 2017. This increase principally reflects sales of higher-end smartphones provided to our postpaid subscribers and an increase in handset financing plans.

COST OF SERVICES. Cost of services was Ps.328.8 billion for 2018, an increase of 0.8% from Ps.326.2 billion in 2017. At constant exchange rates, cost of services for 2018 increased by 2.8% over 2017. 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, which was partially offset by our coporate cost-savings program.

COMMERCIAL, ADMINISTRATIVE AND GENERAL EXPENSES. Commercial, administrative and general expenses for 2018 decreased by 5.6%, or Ps.13.4 billion, over 2017. As a percentage of operating revenues, commercial, administrative and general expenses were 21.9% for 2018, as compared to 23.6% for 2017. At constant exchange rates, commercial, administrative and general expenses for 2018 decreased by 3.8% over 2017. This decrease principally reflects a decrease in costs related to customer services, systems development and local taxes.

OTHER EXPENSES. Other expenses for 2018 decreased by Ps.17.4 billion over 2017, principally reflecting the payment in 2017 of an arbitration award granted in Colombia.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 2018 decreased by 2.8%, or Ps.4.5 billion, over 2017. As a percentage of operating revenues, depreciation and amortization was 15.0% for 2018, as compared to 15.7% for 2017. At constant exchange rates, depreciation and amortization for 2018 decreased by 1.8% over 2017.

Operating Income

Operating income for 2018 increased by 39.4%, or Ps.39.4 billion, over 2017. Operating margin (operating income as a percentage of operating revenues) was 13.4% for 2018, as compared to 9.8% for 2017.

Non-Operating Items

NET INTEREST EXPENSE. Net interest expense (interest expense less interest income) for 2018 decreased by 22.8%, or Ps.6.3 billion, over 2017. This decrease principally reflects the favorable resolution of certain tax contingencies.

FOREIGN CURRENCY EXCHANGE LOSS, NET. We recorded a net foreign currency exchange loss of Ps.7.3 billion for 2018, compared to our net foreign currency exchange loss of Ps.13.8 billion for 2017. The loss principally reflects the depreciation of some of the currencies in which our indebtedness is denominated, particularly 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.10.2 billion for 2018 on the

valuation of derivatives, interest cost from labor obligations and other financial items, net, compared to a loss of Ps.1.9 billion for 2017. The loss in 2018 principally reflects a derivatives loss, which was partially offset by gains in our monetary position.

INCOME TAX. Our income tax expense for 2018 increased by 86.3%, or Ps.21.5 billion, over 2017. This increase principally reflects higher pretax income due to a smaller foreign exchange loss in 2018 compared to 2017.

Our effective corporate income tax rate as a percentage of profit before income tax was 46.0% for 2018, compared to 43.7% for 2017. 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 local tax inflation effects and other impacts of non-taxable items.

Net Profit

We recorded a net profit of Ps.54.5 billion for 2018, an increase of 69.5%, or Ps.22.4 billion, over 2017.

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 our 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

RESULTS OF OPERATIONS

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 note 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

SEGMENT RESULTS OF OPERATIONS

We discuss below the operating results of each reportable segment. Notes 2 z) and 22 to our audited consolidated financial statements describe 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 operate 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)
			2016/2017					2017/2018
	2016		% CHANGE			2017		% CHANGE			2018

Brazilian real		5.3868		10.2			5.9346		(10.8	)		5.2937

Colombian peso		0.0061		4.9			0.0064		1.6			0.0065

Argentine peso		1.2632		(9.0	)		1.1489		(36.4	)		0.7311

U.S. dollar		18.6529		1.5			18.9400		1.6			19.2397

Euro		20.6334		3.5			21.3649		6.3			22.7101

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


YEAR ENDED DECEMBER 31, 2018
	OPERATING REVENUES						OPERATING INCOME
	(in millions of Mexican pesos)			(as a % of total operating revenues)			(in millions of Mexican pesos)			(as a % of total operating income)

Mexico Wireless	Ps.	224,557			21.6	%	Ps.	57,451			41.2	%

Mexico Fixed		96,081			9.3			8,086			5.8

Brazil		193,306			18.6			23,495			16.8

Colombia		75,805			7.3			14,389			10.3

Southern Cone		102,350			9.9			16,976			12.2

Andean Region		55,787			5.4			5,004			3.6

Central America		45,033			4.3			4,868			3.5

United States		153,266			14.8			2,665			1.9

Caribbean		36,640			3.5			5,812			4.2

Europe		100,716			9.7			4,732			3.4

Eliminations		(45,333	)		(4.4	)		(3,921	)		(2.9	)

Total	Ps.	1,038,208			100.0	%	Ps.	139,557			100.0	%


YEAR ENDED DECEMBER 31, 2017
	OPERATING REVENUES						OPERATING INCOME
	(in millions of Mexican pesos)			(as a % of total operating revenues)			(in millions of Mexican pesos)			(as a % of total operating income)

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

Mexico Fixed		98,485			9.6			7,922			7.9

Brazil		215,322			21.1			11,601			11.6

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

Southern Cone		82,344			8.1			11,676			11.7

Andean Region		56,571			5.5			5,650			5.6

Central America		44,282			4.3			5,252			5.2

United States		148,590			14.5			2,915			2.9

Caribbean		35,215			3.4			4,752			4.7

Europe		93,644			9.2			4,524			4.5

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

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


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	%

RESULTS OF OPERATIONS

INTERPERIOD SEGMENT COMPARISONS

The following discussion addresses the financial performance of each of our reportable segments, first by comparing results for 2018 and 2017 and then by comparing results for 2017 and 2016. 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.

2018 COMPARED TO 2017

Mexico Wireless

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

Segment operating revenues for 2018 increased by 8.6% over 2017. Adjusted segment operating revenues for 2018 increased by 11.4% over 2017. This increase in segment operating revenues principally reflects an increase of 11.7% in mobile data revenues, driven by increased use of value-

added services by our wireless subscribers, including activity from messaging, content downloading, mobile applications and social media, and an increase in revenues from service plans offering higher data capacity.

Segment operating income for 2018 increased by 13.4% over 2017. Adjusted segment operating income for 2018 increased by 20.2% over 2017.

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

Mexico Fixed

The number of fixed voice RGUs in Mexico for 2018 increased by 1.0% over 2017, and the number of broadband RGUs in Mexico increased by 3.8%, resulting in an increase in total fixed RGUs in Mexico of 2.2% over 2017, or 486 thousand, to approximately 22.0 million as of December 31, 2018.

Segment operating revenues for 2018 decreased by 2.4% over 2017. Adjusted segment operating revenues for 2018 decreased by 3.8% over 2017. This decrease in segment operating revenues principally reflects a decrease in fixed voice revenues of 4.4%, driven by RGU disconnections, a decrease in long-distance calls and a decrease in fixed data revenues of 0.7%, which was partially offset by higher revenues from broadband and corporate network services.

Segment operating income for 2018 increased by 2.1% over 2017. Adjusted segment operating income for 2018 decreased by 18.1% over 2017. This decrease principally reflects lower revenues from long-distance services and equipment sales.

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

Brazil

The number of prepaid wireless subscribers for 2018 decreased by 14.9% over 2017, and the number of postpaid wireless subscribers increased by 15.6%, resulting in a decrease in the total number of wireless subscribers in Brazil of 4.4%, or 2.6 million, to approximately 56.0 million as of December 31, 2018. The number of fixed voice RGUs for 2018 decreased by 5.0% over 2017, the number of broadband RGUs increased by 5.0%, and the number of Pay TV RGUs decreased by 3.1%, resulting in a decrease in total fixed RGUs in Brazil of 1.7%, or 619 thousand, to approximately 35.0 million as of December 31, 2018.

Segment operating revenues for 2018 decreased by 10.2% over 2017. Adjusted segment operating revenues for 2018 increased by 0.5% over 2017. This increase in segment operating revenues principally reflects higher mobile data and fixed data revenues of 31.0% and 7.6%, respectively, in 2018 over 2017. The increase in mobile data revenues in 2018 principally reflects the usage of social networking platforms, cloud services and content, and fixed data revenues increased principally due to an increase in broadband RGUs and corporate network services. The increase in segment operating revenues was partially offset by a decrease in mobile voice, fixed voice and Pay TV revenues of 31.9%, 17.5% and 5.2%, respectively, in 2018 over 2017, driven by RGU disconnections and lower traffic reflecting a decrease in disposable income.

Segment operating income for 2018 increased by 102.5% over 2017. Adjusted segment operating income for 2018 increased by 172.4% over 2017. This increase principally reflects the favorable resolution of certain tax contingencies.

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

Colombia

The number of prepaid wireless subscribers for 2018 increased by 0.4% over 2017, and the number of postpaid wireless subscribers increased by 3.7%, resulting in an increase in the total number of wireless subscribers in Colombia of 1.1%, or 328 thousand, to approximately 30.0 million as of December 31, 2018. The number of fixed voice RGUs for 2018 increased by 10.1% over 2017, the number of broadband RGUs increased by 6.4% and the number of Pay TV RGUs increased by 2.8%, resulting in an increase in total fixed RGUs in Colombia of 6.2%, or 418 thousand, to approximately 7.1 million as of December 31, 2018.

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

Segment operating income for 2018 was Ps.14.4 billion, compared to a segment operating loss of Ps 4.7 billion in 2017. This change is principally due to the payment in 2017 of an arbitration award granted in Colombia. Adjusted segment operating income for 2018 increased by 576.5% over 2017.

Segment operating margin was 19.0% in 2018, as compared to (6.5%) in 2017. Adjusted segment operating margin was 23.3% in 2018, as compared to (5.0%) in 2017. This increase in segment operating margin for 2018 principally reflects Comcel’s cost savings program.

RESULTS OF OPERATIONS

Southern Cone—Argentina, Chile, Paraguay and Uruguay

The number of prepaid wireless subscribers for 2018 decreased by 1.4% over 2017, and the number of postpaid wireless subscribers increased by 1.7%, resulting in a decrease in the total number of wireless subscribers in our Southern Cone segment of 0.3%, or 105 thousand, to approximately 31.0 million as of December 31, 2018. The number of fixed voice RGUs for 2018 increased by 8.3% over 2017, the number of broadband RGUs increased by 12.6%, and the number of Pay TV RGUs increased by 6.1%, resulting in an increase in total fixed RGUs in our Southern Cone segment of 8.7%, or 175 thousand, to approximately 2.2 million as of December 31, 2018.

Segment operating revenues for 2018 increased by 24.3% over 2017. Adjusted segment operating revenues for 2018 increased by 17.4% over 2017. This increase principally reflects an increase of 33.4% in Argentina, Paraguay and Uruguay. This increase was driven by higher data usage, particularly in the form of mobile data, video streaming, content downloading and service package purchases in Argentina, Paraguay and Uruguay and in the form of Pay TV, corporate network and broadband services in Chile. For this segment, we analyze results in Argentina, Paraguay and Uruguay in terms of the Argentine peso, because Argentina accounts for the major portion of the operations in these three countries.

Segment operating income for 2018 increased by 45.4% over 2017. Adjusted segment operating income for 2018 increased by 52.1% over 2017. This increase principally reflects an increase in adjusted operating income of 41.0% in Argentina, Paraguay and Uruguay, which was partially offset by a decrease in adjusted operating loss of 16.2% in Chile.

Segment operating margin was 16.6% in 2018, as compared to 14.2% in 2017. Adjusted segment operating margin was 20.2% in 2018, which increased in comparison to 17.0% in 2017. This increase in the segment operating margin for 2018 principally reflects the cost saving programs of our subsidiaries in the Southern Cone.

Andean Region—Ecuador and Peru

The number of prepaid wireless subscribers for 2018 decreased by 0.1% over 2017, and the number of postpaid wireless subscribers increased by 0.2%, resulting in a decrease in the total number of wireless subscribers in our Andean Region segment of 0.04%, or 8 thousand, to approximately 20.3 million as of December 31, 2018. The number of fixed voice RGUs for 2018 increased by 2.9% over 2017, the number of broadband RGUs increased by 12.4% and the number of Pay TV RGUs decreased by 3.2%, resulting in an increase in total fixed RGUs in our Andean Region segment of 5.2%, or 91 thousand, to approximately 1.8 million as of December 31, 2018.

Segment operating revenues for 2018 decreased by 1.4% over 2017. Adjusted segment operating revenues for 2018 decreased by 2.0% over 2017. This decrease principally reflects a decrease of 0.1% in Ecuador and a decrease of 4.3% in Peru. This decrease was driven by lower revenues from our wireless and fixed voice operations, an increase in tax obligations and bad debt expenses in Ecuador and competitive pricing practices, bundled packages and smartphones subsidies in Peru, which was partially offset by higher revenues from mobile data and higher revenues from fixed data, especially broadband and corporate data services.

Segment operating income for 2018 decreased by 11.4% over 2017. Adjusted segment operating income for 2018 decreased by 5.5% over 2017. This decrease principally reflects a decrease of 15.4% in Peru and a decrease of 0.1% in Ecuador.

Segment operating margin was 9.0% in 2018, as compared to 10.0% in 2017. Adjusted segment operating margin was 15.1% in 2018, as compared to 15.9% in 2017. This decrease in the segment operating margin for 2018 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 prepaid wireless subscribers for 2018 decreased by 11.3% over 2017, and the number of postpaid wireless subscribers decreased by 1.5%, resulting in a decrease in the total number of wireless subscribers in our Central America segment of 9.8%, or approximately 1.6 million, to approximately 14.3 million as of December 31, 2018. The number of fixed voice RGUs for 2018 increased by 8.7% over 2017, the number of broadband RGUs increased by 16.0% and the number of Pay TV RGUs increased by 3.2%, resulting in an increase in total fixed RGUs in our Central America segment of 11.3%, or 654 thousand, to approximately 6.4 million as of December 31, 2018.

Segment operating revenues for 2018 increased by 1.7% over 2017. Adjusted segment operating revenues for 2018 were unchanged over 2017.

Segment operating income for 2018 decreased by 7.3% over 2017. Adjusted segment operating income for 2018 decreased by 6.7% over 2017. This decrease principally reflects a decrease of 14.9% in Guatemala and a decrease of 131.5% in Honduras, which was partially offset by an increase of 18.3% in El Salvador, an increase of 3.1% in Nicaragua, an increase of 30.2% in Panama and an increase of 27.7% in Costa Rica.

Segment operating margin was 10.8% in 2018, as compared to 11.9% in 2017. Adjusted segment operating margin was 12.2% in 2018, as compared to 13.1% in 2017. This decrease in segment operating margin for 2018 principally reflects higher costs related to doubtful accounts, a one-time charge related to the settlement of an interconnection dispute in Guatemala and an unusual charge arising from a government challenge to tax credits in Honduras.

Caribbean—Dominican Republic and Puerto Rico

The number of prepaid wireless subscribers for 2018 increased by 4.8% over 2017, and the number of postpaid wireless subscribers increased by 3.7%, resulting in an increase in the total number of wireless subscribers in our Caribbean segment of 4.4%, or approximately 250 thousand, to approximately 5.9 million as of December 31, 2018. The

number of fixed voice RGUs for 2018 decreased by 8.1% over 2017, the number of broadband RGUs decreased by 6.4% and the number of Pay TV RGUs increased by 3.9%, resulting in a decrease in total fixed RGUs in our Caribbean segment of 5.7%, or 154 thousand, to approximately 2.6 million as of December 31, 2018.

Segment operating revenues for 2018 increased by 4.0% over 2017. Adjusted segment operating revenues for 2018 increased by 2.6% over 2017. This increase in segment operating revenues principally reflects 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 of our operations in Puerto Rico, and the currency of the Dominican Republic is relatively stable against the U.S. dollar.

Segment operating income for 2018 increased by 22.3% over 2017. Adjusted segment operating income for 2018 increased by 20.7% over 2017. This increase principally reflects an increase of 21.9% in the Dominican Republic and an increase of 730.5% in Puerto Rico.

Segment operating margin was 15.9% in 2018, as compared to 13.5% in 2017. Adjusted segment operating margin was 16.3% in 2018, as compared to 13.8% in 2017. This increase in segment operating margin for 2018 principally reflects lower unusual costs in 2018 related to the reconstruction and operation of our networks in the aftermath of Hurricane Maria, as well as increased revenues in the Dominican Republic and our corporate cost-savings program.

United States

The number of prepaid wireless subscribers for 2018 decreased by 6.2% over 2017, or approximately 1.4 million, to approximately 22.0 million total wireless subscribers in the United States as of December 31, 2018.

Segment operating revenues for 2018 increased by 3.1% over 2017. Adjusted segment operating revenues for 2018 increased by 1.6% over 2017. This increase in segment operating revenues principally reflects higher mobile voice and data usage and revenues driven by the success of existing unlimited data plans and increased equipment sales of higher-end smartphones.

RESULTS OF OPERATIONS

Segment operating income for 2018 decreased by 8.6% over 2017. Adjusted segment operating income for 2018 decreased by 17.4% over 2017.

Segment operating margin was 1.7% in 2018, as compared to 2.0% in 2017. Adjusted segment operating margin was 6.8% in 2018, as compared to 8.4% in 2017. This decrease in segment operating margin for 2018 principally reflects an increase in content costs as a result of increased data usage.

Europe

The number of prepaid wireless subscribers for 2018 decreased by 5.8% over 2017, and the number of postpaid wireless subscribers increased by 4.1%, resulting in an increase in the total number of wireless subscribers in our Europe segment of 1.7%, or approximately 342 thousand, to approximately 21.0 million as of December 31, 2018. The number of fixed voice RGUs for 2018 decreased by 2.9% over 2017, the number of broadband RGUs increased by 2.4% and the number of Pay TV RGUs increased by 15.9%, resulting in an increase in total fixed RGUs in our Europe segment of 3.7%, or 224 thousand, to approximately 6.2 million as of December 31, 2018.

Segment operating revenues for 2018 increased by 7.6% over 2017. Adjusted segment operating revenues for 2018 increased by 1.2% over 2017. This increase in segment operating revenues principally reflects an increase in high-value customers in the mobile business and an ongoing strong fixed-line business, along with an increase in connectivity. We analyze segment results in euros because it is the functional currency in our operations in Europe.

Segment operating income for 2018 increased by 4.6% over 2017. Adjusted segment operating income for 2018 decreased by 4.3% over 2017.

Segment operating margin was 4.7% in 2018, as compared to 4.8% in 2017. Adjusted segment operating margin was 4.8% in 2018, as compared to 5.0% in 2017. This decrease in segment operating margin for 2018 principally reflects increases in costs related to marketing and subscriber acquisition.

2017 COMPARED TO 2016

Mexico Wireless

The number of prepaid wireless subscribers for 2017 increased by 0.2% over 2016, and the number of postpaid wireless subscribers increased by 6.2%, resulting in an 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 prepaid wireless subscribers for 2017 decreased by 7.6% over 2016, and the number of postpaid wireless subscribers increased by 11.1%, resulting in a 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 prepaid wireless subscribers for 2017 increased by 0.4% over 2016, and the number of postpaid wireless subscribers increased by 5.0%, resulting in an 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.

RESULTS OF OPERATIONS

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.

Southern Cone—Argentina, Chile, Paraguay and Uruguay

The number of prepaid wireless subscribers for 2017 increased by 2.0% over 2016, and the number of postpaid wireless subscribers increased by 2.9%, resulting in an 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 prepaid wireless subscribers for 2017 decreased by 4.3% over 2016, and the number of postpaid wireless subscribers increased by 2.5%, resulting in a 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 prepaid wireless subscribers for 2017 increased by 5.4% over 2016, and the number of postpaid wireless subscribers increased by 6.7%, resulting in an 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 prepaid wireless subscribers for 2017 increased by 3.0% over 2016, and the number of postpaid wireless subscribers increased by 4.1%, resulting in an 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 unusual 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.

RESULTS OF OPERATIONS

United States

The number of prepaid wireless subscribers for 2017 decreased by 11.3% over 2016, or approximately 2.9 million, to approximately 23.1 million total 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.

Europe

The number of prepaid wireless subscribers for 2017 decreased by 10.4% over 2016, and the number of postpaid wireless subscribers increased by 3.6%, resulting in a 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.

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.248.3 billion in 2018, compared to Ps.217.8 billion in 2017. Our cash and cash equivalents amounted to Ps.21.7 billion at December 31, 2018, compared to Ps.24.3 billion at December 31, 2017.

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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Capital expenditures. We make substantial capital expenditures to continue expanding and improving our networks in each country in which we operate. Our capital expenditures on plant, property and equipment and acquisition or renewal of licenses were Ps.151.8 billion in 2018, Ps.136.7 billion in 2017, and Ps.155.0 billion in 2016. 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 2019 of approximately U.S.$8.5 billion (Ps.169.0 billion), which will be primarily funded by our operating activities.

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Acquisitions. In some years, we have made substantial expenditures on acquisitions. In 2019 we entered into agreements to acquire Nextel Brazil, Telefónica Guatemala and Telefónica El Salvador. See “Recent Developments” under Part I in this annual report.

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Indebtedness. We must pay interest on our indebtedness and repay principal when due. As of December 31, 2018, we had approximately Ps.96.2 billion of principal and amortization due in 2019.

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Dividends. We pay regular dividends. We paid Ps.22.4 billion in dividends in 2018 and Ps.16.1 billion in 2017. Our shareholders approved on April 9, 2019 the payment of a Ps.0.35 ordinary cash dividend per share in two installments in 2019. See “Share Ownership and Trading—Dividends” under Part IV in this annual report.

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Share repurchases. We regularly repurchase our own shares. We spent Ps.511.4 million repurchasing our own shares in the open market in 2018 and Ps.1.2 billion in 2017. Our shareholders have authorized additional repurchases, and as of March 31, 2019, we have spent Ps.171 million repurchasing our shares in the open market in 2019, 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, 2018, we had no off-balance sheet arrangements that require disclosure under applicable SEC regulations.

LIQUIDITY AND CAPITAL RESOURCES

CONTRACTUAL OBLIGATIONS

The following table summarizes certain contractual obligations as of December 31, 2018. Many of our obligations are denominated in currencies other than Mexican pesos. 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 included in this annual report.


PAYMENTS DUE BY PERIOD
			LESS THAN
	Total		1 Year		1-3 Years		4-5 Years		After 5 Years
	(in millions of Mexican pesos)

CONTRACTUAL OBLIGATIONS AS OF DECEMBER 31, 2018

Equipment leases, real estate leases and mobile site rentals	Ps.	138,052	Ps.	24,057	Ps.	37,652	Ps.	26,317	Ps.	50,026

Short-term debt		96,230		96,230		—		—		—

Long-term debt		542,692		—		263,402		53,923		225,367

Purchase obligations		225,085		88,234		123,528		13,323		—

Total	Ps.	1,002,059	Ps.	208,521	Ps.	424,582	Ps.	93,563	Ps.	275,393

Other than the amounts in the table above, we had no other outstanding material purchase commitments as of December 31, 2018. 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, 2018 was Ps.638.9 billion, of which Ps.96.2 billion was short-term debt (including the current portion of long- term debt), compared to Ps.697.9 billion as of December 31, 2017.

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, 2018, we had net debt of Ps.568.2 billion, compared to Ps.614.5 billion as of December 31, 2017. Without taking into account the effects of derivative financial instruments that we use to manage our interest rate and currency risk, approximately 88.7% of our indebtedness at December 31, 2018 was denominated in currencies other than Mexican pesos (approximately 34.6% of such non-Mexican peso debt in U.S. dollars and 65.4% in other currencies), and approximately 5.9% 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 29.3% of our net debt as of December 31, 2018 was denominated in Mexican pesos.

The weighted average cost of all our third-party debt at December 31, 2018 (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, 2018 are summarized in the table below. The majority of our consolidated indebtedness is owed by América Móvil and most of the remaining debt is owed by Telekom Austria, in which we own a 51% interest. See also note 14 to our audited consolidated financial statements included in this annual report.


DEBT
(millions of Mexican pesos)

SENIOR NOTES

DENOMINATED IN U.S. DOLLARS

América Móvil 5.000% Senior Notes due 2019	Ps.	14,762

Telmex 5.500% Senior Notes due 2019		7,428

América Móvil 5.000% Senior Notes due 2020		41,823

América Móvil 3.125% Senior Notes due 2022		31,493

América Móvil 6.375% Senior Notes due 2035		19,315

América Móvil 6.125% Senior Notes due 2037		7,267

América Móvil 6.125% Senior Notes due 2040		39,366

América Móvil 4.375% Senior Notes due 2042		22,635

Total	Ps.	184,089

DENOMINATED IN MEXICAN PESOS

América Móvil 6.000% Senior Notes due 2019	Ps.	10,000

América Móvil 8.600% Domestic Senior Notes due 2020		7,000

América Móvil 6.450% Senior Notes due 2022		22,500

América Móvil 7.125% Senior Notes due 2024		11,000

América Móvil 0.000% Domestic Senior Notes due 2025		4,629

América Móvil 8.460% Senior Notes due 2036		7,872

Telmex 8.360% Domestic Senior Notes due 2037		5,000

Total	Ps.	68,001

DENOMINATED IN EURO

América Móvil 4.125% Senior Notes due 2019	Ps.	22,559

América Móvil B.V. 0.000% Exchangeable Bonds due 2020		64,108

América Móvil 3.000% Senior Notes due 2021		22,558

TKA 3.125% Senior Notes due 2021		17,569

TKA 4.000% Senior Notes due 2022		18,028

América Móvil 4.750% Senior Notes due 2022		16,919

TKA 3.500% Senior Notes due 2023		7,132

América Móvil 3.259% Senior Notes due 2023		16,919

América Móvil 1.500% Senior Notes due 2024		19,175

TKA 1.500% Senior Notes due 2026		16,919

América Móvil 2.125% Senior Notes due 2028		14,663

Total	Ps.	236,549

DENOMINATED IN POUND STERLING

América Móvil 5.000% Senior Notes due 2026	Ps.	12,551

América Móvil 5.750% Senior Notes due 2030		16,316

América Móvil 4.948% Senior Notes due 2033		7,530

América Móvil 4.375% Senior Notes due 2041		18,826

Total	Ps.	55,223

LIQUIDITY AND CAPITAL RESOURCES


DEBT
(millions of Mexican pesos)

DENOMINATED IN JAPANESE YEN

América Móvil 2.950% Senior Notes due 2039	Ps.	2,335

Total	Ps.	2,335

DENOMINATED IN CHILEAN PESOS

América Móvil 3.961% Senior Notes due 2035	Ps.	3,905

Total	Ps.	3,905

DENOMINATED IN BRAZILIAN REAIS

Claro Brasil 102.400% of CDI Domestic Senior Notes due 2019	Ps.	5,080

Claro Brasil 103.250% of CDI Domestic Senior Notes due 2019		1,829

Claro Brasil 103.900% of CDI Domestic Senior Notes due 2019		5,080

Claro Brasil 102.900% of CDI Domestic Senior Notes due 2020		7,619

Claro Brasil 104.000% of CDI Domestic Senior Notes due 2021		5,587

Claro Brasil 104.250% of CDI Domestic Senior Notes due 2021		7,696

Total	Ps.	32,891

HYBRID NOTES

DENOMINATED IN EURO:

América Móvil Euro NC10 (Euro Series B) Capital Securities due 2073	Ps.	12,407

Total	Ps.	12,407

DENOMINATED IN POUND STERLING

América Móvil GBP NC7 Capital Securities due 2073	Ps.	13,806

Total	Ps.	13,806

BANK DEBT AND OTHER

DENOMINATED IN U.S. DOLLARS	Ps.	11,699

DENOMINATED IN MEXICAN PESOS	Ps.	4,500

DENOMINATED IN EUROS	Ps.	5,527

DENOMINATED IN CHILEAN PESOS	Ps.	64

DENOMINATED IN BRAZILIAN REAIS	Ps.	27

DENOMINATED IN PERUVIAN SOLES	Ps.	7,899

Total	Ps.	29,716

Total Debt	Ps.	638,922

Less short-term debt and current portion of long-term debt	Ps.	96,230

Total Long-term Debt	Ps.	542,692

EQUITY:

Capital stock	Ps.	96,338

Total retained earnings		237,255

Other comprehensive income (loss) items		(137,598	)

Non-controlling interest		49,877

Total Equity	Ps.	245,872

Total Capitalization (total long-term debt plus equity)	Ps.	788,564

Additional information about certain categories of our indebtedness is provided below:

•

Mexican peso-denominated international notes. Our 8.46% senior notes due 2036 are denominated in Mexican pesos, but all amounts in respect of the notes are payable in U.S. dollars, unless a holder of notes elects to receive payment in Mexican pesos in accordance with specified procedures.

•

Mexican peso-denominated domestic notes. Our domestic senior notes (certificados bursátiles) sold in the Mexican capital markets have varying maturities, ranging from 2019 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. We have outstanding two series of Capital Securities maturing in 2073: one series denominated in euros totaling €550 million, and one series denominated in pound sterling in the amount of £550 million. The Capital Securities are subject to redemption at our option at varying dates beginning in 2023 for the euro-denominated series and beginning in 2020 for the sterling-denominated series. Our hybrid notes are deeply subordinated, and when they were issued, the principal rating agencies stated that they would treat only half of the principal amount as indebtedness for purposes of evaluating our leverage (an analysis referred to as 50.0% equity credit).

•

Bank loans. At December 31, 2018, we had approximately Ps.29.7 billion outstanding under a number of bank facilities bearing interest at fixed and variable rates. We also have two revolving syndicated credit facilities—one for U.S.$2.5 billion expiring in November 2019 and one for the Euro equivalent of U.S.$2.0 billion expiring in May 2021. As long as the facilities are committed, a commitment fee is paid. As of December 31, 2018, these

credit facilities were undrawn. Both facilities include covenants that limit our ability to incur secured debt, to effect a merger in which the surviving entity would not be América Móvil or to sell substantially all of our assets. In addition, both facilities require us to maintain a consolidated ratio of debt to EBITDA not greater than 4.0 to 1.0 and a consolidated ratio of EBITDA to interest expense not less than 2.5 to 1.0. As of the date of this annual report, we are in compliance with these covenants. Telekom Austria also has an undrawn revolving syndicated credit facility for €1.0 billion (the “TKA Facility”) expiring in November 2019. The TKA Facility includes covenants that limit Telekom Austria’s ability to incur secured debt, effect certain mergers or sell substantially all of its assets and our ability to transfer control over, or reduce our share ownership in, Telekom Austria. For more information, see note 14 to our audited consolidated financial statements included in this annual report.

•

Options involving KPN and TKA shares. 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 included in this annual report.

Some of the public securities issued by América Móvil in international and Mexican capital markets are guaranteed by Telcel. As of December 31, 2018, we had, on an unconsolidated basis, unsecured and unsubordinated indebtedness of approximately Ps.509.7 billion (U.S.$25.9 billion), excluding guarantees of subsidiaries’ indebtedness. As of December 31, 2018, our subsidiaries had indebtedness (excluding guarantees of indebtedness of us and our other subsidiaries) of approximately Ps.129.2 billion (U.S.$6.6 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 derivatives to adjust the resulting exchange rate and interest rate exposures. We do not use derivatives to hedge the exchange rate exposures that arise from having operations in different countries.

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, 2018, we had derivatives positions with an aggregate net fair value liability of Ps.11.8 billion, which are described in note 7 to our audited consolidated financial statements. For additional information, see note 2 v) to our audited consolidated financial statements included in this annual report.

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.

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 2018 to Ps.129.1 billion, or 14.4% of our operating costs and expenses. See note 10 to our audited consolidated financial statements included in this annual report.

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 ab) to our audited consolidated financial statements included in this annual report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 years of the reversal of our deferred tax assets and liabilities, and if there will be future taxable profits in those periods to support the recognition of the deferred tax assets. Significant management judgment is required in determining our provisions for income taxes, deferred tax assets and liabilities. The analysis is based on estimates of future taxable income in the jurisdictions in which the group operates and the period over which the deferred tax assets and liabilities will be recoverable or settled. If actual results differ from these estimates, or if we adjust these estimates in future periods, our financial position and results of operations may be materially affected.

We record deferred tax assets based on the amount that we believe is more likely than not to be realized. In assessing the future realization of deferred tax assets, we consider future taxable income and ongoing tax planning strategies. In the event that our estimates of projected future taxable income and benefits from tax planning strategies are lowered, or changes in current tax regulations are enacted that would impose restrictions on the timing or the extent of our ability to utilize the tax benefits of net operating loss carry forwards in the future, an adjustment to the recorded amount of deferred tax assets would be made.

ACCRUALS

Accruals are recorded when, at the end of the period, we have a present obligation as a result of past events whose settlement requires an outflow of resources that is considered probable and can be measured reliably. This

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

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

LABOR OBLIGATIONS

We recognize liabilities on our balance sheet and expenses in our statement of comprehensive income 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 included in this annual report. These estimates are determined based on actuarial studies performed by independent experts using the projected unit-credit method.

LOGO

PART III RISK FACTORS

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 higher 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, such as 5G LTE technology.

Competition can lead us to increase advertising and promotional spending and to reduce prices for services and handsets. These developments may lead to lower operating margins, greater choices for customers and increasing movement of customers among competitors, which may make it difficult for us to retain or add new customers. The cost of adding new customers may also continue to increase, reducing profitability even if customer growth continues.

Our ability to compete successfully will depend on our coverage, the quality of our network and service, our rates, customer service, effective marketing, our success in selling double, triple and quadruple play packages and our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including new

services and technologies, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by competitors.

If we are unable to respond to competition and compensate for declining prices by adding new customers, increasing usage and offering new services, our revenues and profitability could decline.

Governmental or regulatory actions could adversely affect our operations

Our operations are subject to extensive government regulation and can be adversely affected by changes in law, regulation or regulatory policy. The licensing, construction, operation, sale, resale and interconnection arrangements of telecommunications systems in Latin America and elsewhere are regulated to varying degrees by government or regulatory authorities. Any of these authorities having jurisdiction over our businesses could adopt or change regulations or take other actions that could adversely affect our operations. In particular, the regulation of prices that operators may charge for their services and environmental matters, including renewable energy and climate change regulation, could have a material adverse effect by reducing our profit margins. See “Regulation” under Part VI for a discussion on the functional separation of Telmex and Telnor wholesale services, “Legal Proceedings” under Part VII and Note 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 implemented reforms to the telecommunications sector that aim to promote more competition and investment by imposing asymmetric regulation upon economic agents deemed “preponderant or dominant.” 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 lower 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 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 and biennial reviews of the asymmetric measures applicable to us have adversely affected the results of our Mexican operations, and we expect that those effects will continue.

We must continue to acquire additional radio spectrum capacity and upgrade our 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 and for the operation and deployment of our networks, including new generation networks such as 5G LTE technology, to offer improved data and value-added services. We obtain most of our radio spectrum through auctions conducted by governments of the countries in which we operate. Participation in spectrum auctions in most of these countries requires prior government authorization, and we may be subject to caps on our ability to acquire additional spectrum. Our inability to acquire additional radio spectrum capacity could affect our ability to compete successfully because it could result in,

RISK FACTORS

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.

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 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 note 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 failures to meet obligations under our concession agreements, imminent danger to national security, internal peace or the national economy, natural disasters and public unrest. See “Regulation” under Part VI of this annual report.

We continue to look for acquisition opportunities, and any future acquisitions and related financing could have a material effect on our business, results of operations and financial condition

We continue to look for investment opportunities in telecommunications and related companies worldwide, including in markets where we are already present, and we often have several possible acquisitions under consideration. Any future acquisitions, and related financing and acquired indebtedness, could have a material effect on our business, results of operations and financial condition, but we cannot provide assurances that we will complete any of them. In addition, we may incur significant costs and expenses as we integrate these companies in our systems, controls and networks.

We are subject to significant litigation

Some of our subsidiaries are subject to significant litigation that, if determined adversely to our interests, may have a material adverse effect on our business, results of operations, financial condition or prospects. Our significant litigation is described in “Regulation” under Part VI and in note 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 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 regulatory requirements 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 compromise or material financial or data loss related to a cybersecurity incident.

RISK FACTORS

However, it is difficult to detect or prevent evolving forms of cybersecurity incidents, and our systems, and those of our third-party service providers and of our customers, are vulnerable to cybersecurity incidents.

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

Failure to achieve proper data governance could lead to data mismanagement

We process large amounts of personally identifiable information of customers and employees and are subject to various compliance, security, privacy, data quality and regulatory requirements. Failure to achieve proper data governance could lead to data mismanagement which in turn could result in data loss, regulatory investigations or sanctions, and cybersecurity risk.

If our churn rate increases, our business could be negatively affected

The cost of acquiring a new subscriber is much higher than the cost of maintaining an existing subscriber. Accordingly, subscriber deactivations, or “churn,” could have a material negative impact on our operating income, even if we are able to obtain one new subscriber for each lost subscriber. A substantial majority of our subscribers are prepaid, and we do not have long-term contracts with them. Our average churn rate on a consolidated basis was 4.2% for the year ended December 31, 2018 and 4.1% for the year ended December 31, 2017. 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.

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

We rely upon various key suppliers to provide us with handsets, network equipment or services, which we need to expand and operate our business. Our key suppliers include Huawei, Ericsson and Alcatel. If these suppliers fail to provide equipment or service to us on a timely basis, we could experience disruptions, which could have an adverse effect on our revenues and results of operations. In addition, we might be unable to satisfy requirements under our concessions.

Government or regulatory actions with respect to certain suppliers may impact us. For example, the government of the United States and Canada, among others, are currently conducting a regulatory review of certain international suppliers of network equipment and technologies to evaluate potential risks. We are currently unable to predict the outcome of such reviews, including any possible restrictions placed on our key suppliers , and as a result we cannot determine their potential impact on our business.

Our ability to pay dividends and repay debt depends on our subsidiaries’ ability to pay dividends and make other transfers to us

We are a holding company with no significant assets, other than the shares of our subsidiaries and our holdings of cash and cash equivalents. Our ability to pay dividends and repay debt depends on the continued transfer to us of dividends and other income from our subsidiaries. The ability of our subsidiaries to pay dividends and make other transfers to us may be limited by various regulatory, contractual and legal constraints that affect them.

We may fail to realize the benefits anticipated from acquisitions, divestments and significant investments we make from time to time

The business growth opportunities, revenue benefits, cost savings and other benefits we anticipated to result from our acquisitions, divestments and significant investments may not be achieved as expected, or may be delayed. Our

divestments may also adversely affect our prospects. For example, we may be unable to fully implement our business plans and strategies for the combined businesses due to regulatory limitations, and we may face regulatory restrictions in our provision of combined services in some of the countries in which we operate. To the extent that we incur higher integration costs or achieve lower revenue benefits or fewer cost savings than expected, or if we are required to recognize impairments of acquired assets, investments or goodwill, our results of operations and financial condition may suffer.

A downgrade of Mexico’s credit rating could affect us

Credit rating agencies regularly evaluate Mexico and its sovereign rating based on various factors including macroeconomic trends, tax and budgetary conditions and indebtedness metrics. If Mexico’s sovereign credit rating is downgraded by credit rating agencies, the rating of our securities may also be downgraded, which could negatively affect our financing costs and the market price of our securities.

RISKS RELATING TO THE TELECOMMUNICATIONS INDUSTRY GENERALLY

Changes in the telecommunications industry could affect our future financial performance

The telecommunications industry continues to experience significant changes as new technologies are developed that offer subscribers an array of choices for their communications needs. These changes include, among others, regulatory changes, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products 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.

RISK FACTORS

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, daughters and grandchildren (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. 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.

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.

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 seek remedies against us or our directors or controlling shareholders than it would be for shareholders of a company incorporated in another jurisdiction, such as the Delaware.

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

Our bylaws provide that holders of L Shares are not permitted to vote, except on such limited matters as, among others, the transformation or merger of América Móvil or the cancellation of registration of the L Shares with the 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.

RISK FACTORS

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 undergone 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, including hyperinflation;

•

changes in currency values;

•

exchange controls or restrictions on expatriation of earnings;

•

high domestic interest rates;

•

price controls;

•

changes in governmental economic, tax, labor or other policies;

•

imposition of trade barriers;

•

changes in law or regulation; and

•

overall political, social and economic instability.

Adverse economic, political and social conditions in Latin America, the United States, the Caribbean or in Europe may inhibit demand for telecommunication services and create uncertainty regarding our operating environment or may affect our ability to renew our licenses and concessions, to maintain or increase our market share or profitability and may have an adverse impact on future acquisitions, which could have a material adverse effect on our company. In addition, the perception of risk in the countries in which we operate may have a negative effect on the trading price of our shares and ADSs and may restrict our access to international financial markets.

In various countries where we operate, for example, elections took 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. Mexican elections in July 2018 resulted in a new president and in a new Congress with a majority of members in both houses representing a different political party from the parties that have been in power in the past. We cannot predict what changes in policy the Mexican administration may adopt, or their impact on our operations. Additionally, in Mexico, economic conditions are strongly impacted by those of the United States. There is continuing uncertainty regarding U.S. policies with respect to matters of importance to Mexico and its economy, particularly with respect to trade and migration.

Possible replacement of the LIBOR benchmark interest rate may have an impact on our business

On July 27, 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phase out LIBOR as a benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Potential changes, or uncertainty related to such potential changes may adversely affect the market for loans with LIBOR-indexed interest rates. When LIBOR ceases to exist, we may need to amend the credit and loan agreements with our lenders that utilize LIBOR as a factor in determining the interest rate based on a new standard that is established, if any. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions,

significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have an adverse effect on our business, results of operations and financial condition.

Changes in exchange rates could adversely affect our financial condition and results of operations

We are affected by fluctuations in the value of the currencies in which we conduct operations compared to the currencies in which our indebtedness is denominated. Such changes result in exchange losses or gains on our net indebtedness and accounts payable. In 2018, we reported net foreign exchange losses of Ps.7.3 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 reais 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.

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, 2019.


SERIES	NUMBER OF SHARES (MILLIONS)		PERCENT OF CAPITAL			COMBINED A SHARES AND AA SHARES⁽¹⁾

L Shares (no par value)		44,883		68.0	%		—

AA Shares (no par value)		20,602		31.2	%		97.5	%

A Shares (no par value)		539		0.8	%		2.5	%

Total⁽²⁾		66,024		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. 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, 2019. 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—Shareholders’ Equity” under this Part IV and “Management—Share Ownership of Directors and Senior Management” under Part V of this annual report.


SHAREHOLDER	SHARES OWNED (MILLIONS)		PERCENT OF CLASS⁽¹⁾

AA SHARES:

Family Trust⁽²⁾		10,894		52.9%

Inversora Carso⁽³⁾		4,381		21.3%

Carlos Slim Helú		1,879		9.1%

L SHARES:

Inversora Carso⁽³⁾		6,020		13.4%

Family Trust⁽²⁾		5,998		13.4%

Carlos Slim Helú		3,072		6.8%

BlackRock, Inc.⁽⁴⁾		2,918		6.5%

⁽¹⁾ Percentage figures are based on the number of shares outstanding as of March 31, 2019.

⁽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, 2019, 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 7,077 registered holders with addresses in the United States. As of such date, 35.9% 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 3,450 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 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.

Note 6 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 reported by Banco de México, as published in the Official Gazette, for each of the respective payment dates.



Payment Date	Pesos Per Share		Dollar Per Share

November 12, 2018	Ps. 0.16	U.S.$	0.0080

July 16, 2018	Ps. 0.16	U.S.$	0.0085

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

We have offered our shareholders the option to receive a scrip dividend in the form of either cash, Series L shares or a combination thereof and may continue to do so in the future.

On April 9, 2019, our shareholders approved a cash dividend of Ps.0.35 per share, of which Ps.0.18 per share is payable on July 15, 2019 and Ps.0.17 is payable on November 11, 2019.

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:



Security	Stock Exchange	Ticker Symbol

L Shares	Mexican Stock Exchange—Mexico City	AMXL

L Share ADSs	New York Stock Exchange—New York	AMX

A Shares	Mexican Stock Exchange—Mexico City	AMXA

A Share ADSs	New York Stock Exchange—New York	AMOV

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 nonMexican 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 elected at a special meeting of L Shares. A special meeting of the L Shares must be held each year for the election of directors.

BYLAWS

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

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

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

A shareholder is required to deposit its shares with a custodian in order to attend a shareholders’ meeting. A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’

meetings. A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with procedures provided for in the deposit agreements. However, a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.

Dividend Rights

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

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

Preemptive Rights

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

Limitations on Share Ownership

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

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

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

Restrictions on Certain Transfers

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

Restrictions on Deregistration in Mexico

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

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

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

The voluntary cancellation of the registration shall be subject to (i) the prior authorization of the CNBV and (ii) the authorization of not less than 95.0% of the outstanding capital stock in a general extraordinary shareholders’ meeting.

Tender Offer Requirement

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

Other Provisions

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

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

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

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

BYLAWS

American Depositary Shares

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

ADS holders are required to pay the Depositary amounts in respect of expenses incurred by the Depositary or its agents on behalf of ADS holders, including expenses arising from (i) taxes or other governmental charges, (ii) registration fees payable to us that may be applicable to the transfer of shares upon deposits to or withdrawals from the ADS program, (iii) cable, telex and facsimile transmission, (iv) conversion of foreign currency into U.S. dollars, (v) compliance with exchange control regulations and other regulatory requirements or (vi) servicing of the ADSs or the shares underlying ADSs. The Depositary may decide in its sole discretion to seek payment either by billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

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


DEPOSITARY SERVICE		FEE PAYABLE BY ADS HOLDERS

Issuance and delivery of ADSs, including in connection with share distributions, purchase rights, sales and stock splits		Up to U.S.$5.00 per 100 ADSs (or a fraction thereof)

Cash distributions		Up to U.S.$5.00 per 100 ADSs (or a fraction thereof)

Surrender, withdrawal or cancellation		Up to U.S.$5.00 per 100 ADSs (or a fraction thereof)

Share distributions other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares)		Up to U.S.$5.00 per 100 ADSs (or a fraction thereof)

ADS services		Up to U.S.$5.00 per 100 ADSs (or a fraction thereof) held on the applicable record date(s) established by the Depositary

Payments by the Depositary

The Depositary reimburses us for certain expenses we incur in connection with the ADR program, subject to a ceiling agreed between us and the Depositary from time to time. These reimbursable expenses currently include legal and accounting fees, listing fees, investor relations expenses and fees payable to service providers for the distribution of material to ADS holders. During the year ended December 31, 2018, the Depositary reimbursed us a total of U.S.$2.1 million for reimbursable expenses.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER

AND AFFILIATED PURCHASERS

We periodically repurchase our L Shares and A Shares on the open market using funds authorized by our shareholders specifically for the repurchase of L Shares and A Shares by us at our discretion. In the annual ordinary shareholders’ meeting held on April 9, 2019, our shareholders authorized an allocation of Ps.3.0 billion to repurchase L Shares and A Shares from April 2019 to April 2020.

The following tables set out information concerning purchases of our L Shares and A Shares by us and our affiliated purchasers in 2018. We did not repurchase our L Shares or A Shares other than through the share repurchase program.


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

January 2018		4,300,000		Ps. 16.82		4,300,000	Ps.	2,186,861,427

February 2018		1,318,000		17.26		1,318,000		2,162,900,627

March 2018		—		—		—		2,162,900,627

April 2018		—		—		—		2,162,900,627

May 2018		2,560,156		16.14		2,560,156		2,958,688,268

June 2018		2,080,000		15.49		2,080,000		2,926,474,720

July 2018		3,210,000		16.15		3,210,000		2,874,640,889

August 2018		2,680,000		15.86		2,680,000		2,832,132,042

September 2018		2,081,508		15.45		2,081,508		2,799,978,412

October 2018		7,880,400		14.46		7,880,400		2,686,010,961

November 2018		4,988,725		13.09		4,988,725		2,620,438,367

December 2018		2,918,607		13.94		2,918,607		2,579,763,369
Total		34,017,396				34,017,396

⁽¹⁾ This includes purchases by us and our affiliated purchasers in 2018. ⁽²⁾ This is the approximate peso amount available at the end of the period for purchases of both L Shares and A Shares pursuant to our share repurchase program.


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

January 2018		130,382		Ps. 17.07		130,382	Ps.	2,186,861,427

February 2018		74,987		16.22		74,987		2,162,900,627

March 2018		—		—		—		2,162,900,627

April 2018		—		—		—		2,162,900,627

May 2018		—		—		—		2,958,688,268

June 2018		—		—		—		2,926,474,720

July 2018		—		—		—		2,874,640,889

August 2018		—		—		—		2,832,132,042

September 2018		—		—		—		2,799,978,412

October 2018		—		—		—		2,686,010,961

November 2018		20,248		13.65		20,248		2,620,438,367

December 2018		—		—		—		2,579,763,369
Total	225,617				225,617

⁽¹⁾ This includes purchases by us and our affiliated purchasers in 2018. ⁽²⁾ This is the approximate peso amount available at the end of the period for purchases of both L Shares and A Shares pursuant to our share repurchase program.

TAXATION OF SHARES AND ADSS

The following summary contains a description of certain Mexican federal and U.S. federal income tax consequences of the acquisition, ownership and disposition of L Shares, A Shares, L Share ADSs or A Share ADSs, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, hold or sell shares or ADSs.

This discussion does not constitute, and should not be considered as, legal or tax advice to holders. The discussion is for general information purposes only and is based upon the federal tax laws of Mexico (including the Mexican Income Tax Law (Ley del Impuesto sobre la Renta) and the United States in effect on the date of this annual report, including the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion and the protocols thereto between the United States and Mexico currently in force (together, the “Tax Treaty”) and the agreement between the United States and Mexico concerning the exchange of information with respect to tax matters. The Tax Treaty is subject to change, and such changes may have retroactive effects. Holders of shares or ADSs should consult their own tax advisors as to the Mexican, U.S. or other tax consequences of the purchase, ownership and disposition of shares or ADSs, including, in particular, the effect of any foreign, state or local tax laws.

MEXICAN TAX CONSIDERATIONS

The following is a general summary of the principal consequences under the Mexican Income Tax Law and the rules and regulations thereunder, as currently in effect, of an investment in shares or ADSs by a holder that is not a resident of Mexico and that will not hold shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a permanent establishment in Mexico (a “nonresident holder”).

For purposes of Mexican taxation, the definition of residence is highly technical and residence arises in several situations. Generally, an individual is a resident of Mexico if he or she has established his or her home or center of vital interests in Mexico, and a corporation is considered a resident if it has its place of effective management in Mexico. However, any determination of residence should take into account the particular situation of each person or legal entity.

If a legal entity or an individual is deemed to have a permanent establishment in Mexico for Mexican tax purposes, all income attributable to that permanent establishment will be subject to Mexican income taxes, in accordance with applicable tax laws.

This summary does not purport to be a comprehensive description of all the Mexican tax considerations that may be relevant to a decision to purchase, own or dispose of the shares. In particular, this summary (i) does not describe any tax consequences arising under the laws of any state, locality, municipality or taxing jurisdiction other than certain federal laws of Mexico and (ii) does not address all of the Mexican tax consequences that may be applicable to specific holders of the shares, including a holder:

•

whose shares were not acquired through the Mexican Stock Exchange or other markets authorized by the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) or the Mexican Federal Tax Code;

•

of shares or ADSs that control us;

•

that holds 10.0% or more of our shares;

•

that is part of a group of persons for purposes of Mexican law that controls us (or holds 10.0% or more of our shares); or

•

that is a resident of Mexico or is a corporation resident in a tax haven (as defined by the Mexican Income Tax Law).

Tax Treaties

Provisions of the Tax Treaty that may affect the taxation of certain U.S. holders (as defined below) are summarized below.

The Mexican Income Tax Law has established procedural requirements for a nonresident holder to be entitled to benefits under any of the tax treaties to which Mexico is a party, including on dispositions and dividends. These procedural requirements include, among others, the obligation to (i) prove tax treaty residence, (ii) file tax calculations made by an authorized certified public accountant or an informational tax statement, as the case may be, and (iii) appoint representatives in Mexico for taxation purposes. Parties related to the issuer may be subject to additional procedural requirements.

Payment of Dividends

Dividends, either in cash or in kind, paid with respect to L Shares, A Shares, L Share ADSs or A Share ADSs will generally be subject to a 10.0% Mexican withholding tax (provided that no Mexican withholding tax will apply to distributions of net taxable profits generated before 2014).

Taxation of Dispositions

The tax rate on income realized by a nonresident holder from a disposition of shares through the Mexican Stock Exchange is generally 10.0%, which is applied to the net gain realized on the disposition. This tax is payable through withholding made by intermediaries. However, such withholding does not apply to a nonresident holder who certifies that the holder is resident in a country with which Mexico has entered into an income tax treaty.

The sale or other transfer or disposition of shares not carried out through the Mexican Stock Exchange and not held in the form of ADSs will be subject to a 25% tax rate in Mexico, which is applicable to the gross proceeds realized from the sale. Alternatively, a nonresident holder may, subject to certain requirements, elect to pay taxes on the net gain realized from the sale of shares at a rate of 35%.

The sale or disposition of ADSs through securities exchanges or markets recognized under the Mexican federal tax code (which includes the NYSE) by nonresidents who are residents of a country with which Mexico has entered into an income tax treaty is not subject to income tax in Mexico under the current tax rules. The tax treatment of such transfer of ADSs by nonresidents who are also not residents of a country with which Mexico has entered into an income tax treaty is not clear under the current Mexican tax rules.

Pursuant to the Tax Treaty, gains realized by a U.S. resident that is eligible to receive benefits pursuant to the Tax Treaty from the sale or other disposition of shares or ADSs, even if the sale or disposition is not carried out under the circumstances described in the preceding paragraphs, will not be subject to Mexican income tax, provided that the gains are not attributable to a permanent establishment or a fixed base in Mexico, and further provided that such U.S. holder owned less than 25% of the shares representing our capital stock (including ADSs), directly or indirectly, during

the 12-month period preceding such disposition. U.S. residents should consult their own tax advisors as to their possible eligibility under the Tax Treaty.

Gains and gross proceeds realized by other nonresident holders that are eligible to receive benefits pursuant to other income tax treaties to which Mexico is a party may be exempt from Mexican income tax, in whole or in part. Non-U.S. holders should consult their own tax advisors as to their possible eligibility under such treaties.

Other Mexican Taxes

A nonresident holder generally will not be liable for estate, inheritance or similar taxes with respect to its holdings of shares or ADSs; provided, however, that gratuitous transfers of shares or ADSs may, in certain circumstances, result in the imposition of a Mexican tax upon the recipient. There are no Mexican stamp, issue registration or similar taxes payable by a nonresident holder with respect to shares or ADSs.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain U.S. federal income tax consequences to U.S. holders (as defined below) of the acquisition, ownership and disposition of shares or ADSs. The summary does not purport to be a comprehensive description of all of the tax consequences of the acquisition, ownership or disposition of shares or ADSs. The summary applies only to U.S. holders that will hold their shares or ADSs as capital assets and does not apply to special classes of U.S. holders, such as dealers in securities or currencies, holders with a functional currency other than the U.S. dollar, holders of 10.0% or more of our shares measured by vote or value (whether held directly or through ADSs or both), tax-exempt organizations, banks, insurance companies or other financial institutions, holders liable for the alternative minimum tax, securities traders electing to account for their investment in their shares or ADSs on a mark-to-market basis, entities that are treated for U.S. federal income tax purposes as partnerships or other pass-through entities or equity holders therein and persons holding their shares or ADSs in a hedging transaction or as part of a straddle or conversion transaction.

TAXATION OF SHARES AND ADSS

For purposes of this discussion, a “U.S. holder” is a holder of shares or ADSs that is:

•

a citizen or resident of the United States of America,

•

a corporation (or other entity taxable as a corporation) organized under the laws of the United States of America or any state thereof or

•

otherwise subject to U.S. federal income taxation on a net income basis with respect to the shares or ADSs.

Each U.S. holder should consult such holder’s own tax advisor concerning the overall tax consequences to it of the ownership or disposition of shares or ADSs that may arise under foreign, state and local laws.

Treatment of ADSs

In general, a U.S. holder of ADSs will be treated as the owner of the shares represented by those ADSs for U.S. federal income tax purposes. Deposits or withdrawals of shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. U.S. holders that withdraw any shares should consult their own tax advisors regarding the treatment of any foreign currency gain or loss on any pesos received in respect of such shares.

Taxation of Distributions

In general, a U.S. holder will treat the gross amount of distributions we pay, without reduction for Mexican withholding tax, as dividend income for U.S. federal income tax purposes to the extent of our current and accumulated earnings and profits. Because we do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions paid to U.S. holders generally will be reported as dividends. In general, the gross amount of any dividends will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the U.S. holder, in the case of shares, or by the depositary, in the case of ADSs.

Dividends will be paid in pesos and will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date that they are received by the U.S. holder, in the case of shares, or

by the depositary, in the case of ADSs (regardless of whether such pesos are in fact converted into U.S. dollars on such date). If such dividends are converted into U.S. dollars on the date of such receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the dividends. U.S. holders should consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received by a U.S. holder or depositary that are converted into U.S. dollars on a date subsequent to receipt. Dividends paid by us will not be eligible for the dividends-received deduction allowed to corporations under the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

The amount of Mexican tax withheld generally will give rise to a foreign tax credit or deduction for U.S. federal income tax purposes. Dividends generally will constitute “passive category income” for purposes of the foreign tax credit (or, in the case of certain U.S. holders, “general category income”). The foreign tax credit rules are complex. U.S. holders should consult their own tax advisors with respect to the implications of those rules for their investments in our shares or ADSs.

Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual with respect to the shares or ADSs will be subject to taxation at reduced rates if the dividends are “qualified dividends.” Dividends paid on the shares or ADSs will be treated as qualified dividends if (i) (A) the shares or ADSs are readily tradable on an established securities market in the United States or (B) we are eligible for the benefits of a comprehensive tax treaty with the United States which the U.S. Treasury determines is satisfactory for purposes of this provision and which includes an exchange of information program, and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The ADSs are listed on the NYSE, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. In addition, the U.S. Treasury has determined that the Tax Treaty meets the requirements for reduced rates of taxation, and we believe we are eligible for the benefits of the Tax Treaty. Based on our audited consolidated financial statements, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to the

2017 and 2018 taxable year. In addition, based on our audited consolidated financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, we do not anticipate becoming a PFIC for the 2019 taxable year. Holders of shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

Distributions of additional shares or ADSs to U.S. holders with respect to their shares or ADSs that are made as part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.

Taxation of Dispositions

A U.S. holder generally will recognize capital gain or loss on the sale or other disposition of the shares or ADSs in an amount equal to the difference between the U.S. holder’s basis in such shares or ADSs (in U.S. dollars) and the amount realized on the disposition (in U.S. dollars, determined at the spot rate on the date of disposition if the amount realized is denominated in a foreign currency). Gain or loss recognized by a U.S. holder on such sale or other disposition generally will be long-term capital gain or loss if, at the time of disposition, the shares or ADSs have been held for more than one year. Long-term capital gain recognized by a U.S. holder that is an individual is taxable at reduced rates. The deductibility of a capital loss is subject to limitations.

Gain, if any, realized by a U.S. holder on the sale or other disposition of the shares or ADSs generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, if a Mexican withholding tax is imposed on the sale or disposition of the shares, a U.S. holder that does not receive significant foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such Mexican taxes. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, the shares or ADSs.

Information Reporting and Backup Withholding

Dividends on, and proceeds from the sale or other disposition of, the shares or ADSs paid to a U.S. holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the holder:

•

establishes that it is an exempt recipient, if required, or

•

provides an accurate taxpayer identification number on a properly completed Internal Revenue Service Form W-9 and certifies that no loss of exemption from backup withholding has occurred.

The amount of any backup withholding from a payment to a holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the Internal Revenue Service.

U.S. Tax Consequences for Non-U.S. holders

DISTRIBUTIONS. A holder of shares or ADSs that is, with respect to the United States, a foreign corporation or a nonresident alien individual (a “non-U.S. holder”) will generally not be subject to U.S. federal income or withholding tax on dividends received on shares or ADSs, unless such income is effectively connected with the conduct by the holder of a U.S. trade or business.

DISPOSITIONS. A non-U.S. holder of shares or ADSs will not be subject to U.S. federal income or withholding tax on gain realized on the sale of shares or ADSs, unless:

•

such gain is effectively connected with the conduct by the holder of a U.S. trade or business or

•

in the case of gain realized by an individual holder, the holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met.

INFORMATION REPORTING AND BACKUP WITHHOLDING. Although non-U.S. holders generally are exempt from backup withholding, a non-U.S. holder may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.

LOGO

MANAGEMENT

DIRECTORS

Our Board of Directors has broad authority to manage our company. Our bylaws provide for the Board of Directors to consist of between five and 21 directors and allow for the election of an equal number of alternate directors. Directors need not be shareholders. A majority of our directors and a majority of the alternate directors must be Mexican citizens and elected by Mexican shareholders.

A majority of the holders of the AA Shares and A Shares voting together elect a majority of the directors and alternate directors, provided that any holder or group of holders of at least 10.0% of the total AA Shares and A Shares is entitled to name one director and one alternate director. Two directors and two alternate directors, if any, are elected by a majority vote of the holders of L Shares. Each alternate director may attend meetings of the Board of Directors and vote in the absence of the corresponding director. Directors and alternate directors are elected or reelected at each annual general meeting of shareholders and each annual ordinary special meeting of holders of L Shares, and each serves until a successor is elected and takes office. In accordance with the Mexican Securities Market Law (Ley del Mercado de Valores), the determination as to the independence of our directors is made by our shareholders, though the CNBV may challenge this determination. Pursuant to our bylaws and the Mexican Securities Market Law, at least 25.0% of our directors must be independent. In order to have a quorum for a meeting of

the Board of Directors, a majority of those present must be Mexican nationals.

At the annual general shareholders’ meeting held on April 9, 2019, the current members of the Board of Directors, as well as all current members of the Executive Committee and the Audit and Corporate Practices Committee, were reelected, and the Corporate Secretary and the Corporate Pro Secretary were reappointed, with 14 directors elected by the AA Shares and A Shares voting together and two directors elected by the L Shares.

Our bylaws provide that the members of the Board of Directors are elected for a term of one year. Pursuant to Mexican law, members of the Board continue in their positions after the expiration of their terms for up to an additional 30-day period if new members are not elected. Furthermore, in certain circumstances provided under the Mexican Securities Market Law, the Board of Directors may elect temporary directors who then may be elected or replaced at the shareholders’ meetings.

The names and positions of the members of the Board reelected or elected for the first time at the annual general shareholders’ meeting held on April 9, 2019, their year of birth, and information concerning their committee membership and principal business activities outside América Móvil are set forth below:

Directors elected by holders of Series AA and Series A Shares:


CARLOS SLIM DOMIT Chairman of the Board and the Executive Committee	Born:	1967
	First elected:	2011
	Term expires:	2020
	Principal occupation:	Chairman of the Board of Telmex
	Other directorships:	Chairman of the Board of Grupo Carso, Grupo Sanborns, S.A.B. de C.V. (“Grupo Sanborns”) and U.S. Commercial Corp, S.A. de C.V.
	Business experience:	Chief Executive Officer of Sanborn Hermanos, S.A. de C.V. (“Sanborn Hermanos”)
PATRICK SLIM DOMIT Vice Chairman and Member of the Executive Committee	Born:	1969
	First elected:	2004
	Term expires:	2020
	Principal occupation:	Vice Chairman of our Board of Directors
	Other directorships:	Director of Grupo Carso, Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. (“IDEAL”) and Telmex
	Business experience:	Chief Executive Officer of Grupo Carso and Vice President of Commercial Markets of Telmex
DANIEL HAJJ ABOUMRAD Director and Member of the Executive Committee	Born:	1966
	First elected:	2000
	Term expires:	2020
	Principal occupation:	Chief Executive Officer of América Móvil
	Other directorships:	Director of Grupo Carso and Telmex
	Business experience:	Chief Executive Officer of Compañía Hulera Euzkadi, S.A. de C.V.
CARLOS SLIM HELÚ Director	Born:	1940
	First elected:	2015
	Term expires:	2020
	Principal occupation and Business experience:	Chairman of the Board of Minera Frisco, S.A.B. de C.V. and Carso Infraestructura y Construcción, S.A. de C.V.; Director of IDEAL, Grupo Sanborns and Inmuebles Carso, S.A. de C.V. (“Inmuebles Carso”)

MANAGEMENT

LUIS ALEJANDRO SOBERÓN KURI