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Ahead of the Curve

Mar 1, 2012

Carlos Garcia Moreno has proven himself to be one of the most skillful operators in the global capital markets, helping transform América Móvil into a truly global telecom.

by Paul Kilby

For anyone involved in LatAm capital markets, Carlos Garcia Moreno has been an ever-present figure over the years, first as funding manager for Pemex, then as head of external financing at Mexico's public credit department and today as the CFO of telecom América Móvil (AMX).

Over the last year or so, América Móvil has proven that it can stand against its global peers, in good part thanks to Garcia Moreno's efforts to convey this story to the markets, and his ability to diversify the company's investor base as its funding needs have grown.

Over the last 18 months, it has not only tapped dollar bonds in standard blue-chip fashion - in size and with several tranches - but also in Swiss francs, Chilean and Mexican pesos, euros, sterling, yen and most recently in renminbi - the region's first ever Dim Sum bond.

"Last year was a special year," says Cynthia Powell, managing director of fixed-income syndicate at BTG Pactual. "América Móvil was out there issuing successfully in what felt like every possible market, often at times when the markets were largely closed."

In some ways the company came full cycle last year when it finally absorbed the fixed-line giant Telmex that gave birth to it in the first place.

"The challenge has been to tell América Móvil's new story, which is already 10 years old, and how it was going to change its profile by becoming an integrated telecom and much larger in the process," Garcia Moreno tells LatinFinance. "The first thing was to make sure that everyone understood from the beginning that this was a transformational change."

Garcia Moreno has been sounding this theme for several years now, but it has been increasingly resonating among investor bases that are either seeking diversification away from their home markets, such as Asian accounts, or among Europeans who increasingly see value in solid EM names that aren't associated with the turmoil in their own countries.

Under Garcia Moreno's watch, AMX has transformed itself from being a relatively obscure mobile spin-off of the larger fixed-line provider Telmex, controlled by Mexican billionaire Carlos Slim Helú, into being a global telecom giant known by a wide group of buyside accounts.

The company now has a solid A2/A rating as rating agencies recognized not only the diversity of its funding base but also the diversification of its revenue streams which come from a wide variety of countries, reducing the regulatory risks it faces in Mexico.

Garcia Moreno is a CFO who understands his markets and knows how to get the best out of the buyside that continues to lap up the company's issues whenever its comes to market, say bankers who know him.

Sometimes talked about in hush tones among bankers who compete fiercely for mandates from the expansionary América Móvil, Garcia Moreno commands broad respect, arguably mixed with a tinge of fear given his reputation for being a hard-nosed negotiator.

Throwing Out the Rule Book

Never one to accept conventional wisdom, the CFO of América Móvil has often thrown out the rule book when it comes to funding, and is forever challenging bankers' and the buyside's assumptions on where AMX should price.

There is the story about how Garcia Moreno earlier in his career as CFO at América Móvil took the local buyside to task in 2005, when he disputed pension funds' (Afores) views over where the relatively new mobile phone company should price in the domestic market.

By going instead to the Europeso market, the company called upon a competing foreign investor base and won the argument against Afores after it printed a 10-year inside its local curve.

"He was able to immediately shave 50-60 basis points off his curve," remembers Alberto Ardura, head of Latin America DCM at Deutsche Bank, "achieving overnight an important repricing of América Móvil's peso yield curve."

As the company's funding needs have grown, Garcia Moreno has gone on to apply such methods elsewhere, easing pressures in its core dollar market by showing US investors that the company had easy access to funding in euros, sterling and many other currencies.

Indeed, few, if any, Latin American borrowers have had such an ubiquitous presence across the capital markets, including sovereigns. All this is thanks to Garcia Moreno's ability to look above the parapet during times of crisis and spot market trends which AMX has often taken a lead on.

He has a wealth of experience having been in leadership roles over the past 20 years during which time Mexico has passed through its fair share of crises. He was associate director of finance at Pemex in the early 1990s when Mexico was hit by its peso crisis and became head of public credit later that decade.

"He is a very seasoned CFO," Ardura says. "He knows how the market dynamics work, as he has held several important positions during the years, and has gone through many crises."

Long-Term View

Taking the company on the road in Europe in 2010, at a time when Greece debt woes were causing another bout of risk aversion, is just one example of Garcia Moreno's foresight as he looked to position the company against global telecom names, including well-established European credits like France Telecom, Spain's Telefónica and Deutsche Telekom.

He first tested the waters in the Swiss franc market and then finally printed debut euro and sterling trades at a time when many had written this market off as a viable financing option.

"They were probably the only issuer conducting roadshows [in Europe] at the time," Ardura says. "He promised investors he would look to build a yield curve in the euro and sterling markets, and he delivered coming back to both markets the next year."

In his position since 2001 when América Móvil was first spun off from fixed-line telecom Telmex, Garcia Moreno has been at the helm of a company that is soon expected to generate revenues north of $50 billion in part thanks to its integration with Telmex.

"We came to realize that if you truly want to be in data service, you cannot do it unless you have a fixed-line platform that supports it," says Garcia Moreno, explaining the reasoning behind bringing the two companies together. "You are now seeing a convergence in which fixed and mobile are becoming the same network. It is a unified network that may be accessed from fixed or wireless."

Creating Something New

The estimated $4.58 billion price tag for the last part of the transaction involving the purchase of Telmex shares it didn't already own, and a similar operation for Brazilian cable operator Net Serviços, sparked a series of capital market forays, making América Móvil one of the most active corporate borrowers out of the region over the past year or so.

Garcia Moreno estimates roughly that the entire Telmex transaction was valued at around $25 billion, including a $10 billion cash payment for Telmex and Telmex Internacional and the $2.5 billion purchase of the Net Serviços shares the company didn't already own.

"About $12 billion was spent over the 18 months, and it completely changed the profile of América Móvil," Garcia Moreno adds. "The company is now much larger both in terms of revenue and Ebitda."

For the full year 2011, the company reported an Ebitda of about 252.6 billion Mexican pesos ($20 billion) and total revenues of 665.2 billion pesos ($51 billion), a rise of 1.6% and 8.7% over the previous year. Revenues are expected to raise even further once Net is consolidated into the numbers.


This comes on the back of what was arguably one of the largest funding sprees for a corporate out of the region. Ever since the company became the first issuer to tap the local Chilean bond market in 2009, it has raised close to $9 billion in the bond markets alone, in at least seven different currencies.

AMX was also thought to have saved itself a considerable sum in fees after squeezing banks on pricing last year when it conducted an unusual auction system to mandate for a $4 billion loan.

The one-day closed door session in New York was heard to have ruffled a few feathers for the unconventional way it awarded mandates, but for the company the results were more than satisfactory. In April, it priced a $2 billion 3.5-year at Libor plus 50 basis points and a $2 billion equivalent euro-denominated five-year at Euribor plus 60 basis points. Such levels have inspired other companies to try their luck in the bank market as well.

In the immediate future, the company's capital markets activity is likely to wane somewhat now that the Telmex integration is finished. With substantial cash flows, América Móvil has little need to raise funding in the external market, except opportunistically. Last year, for instance, the company funded capex of just under $10 billion entirely with its own cash.

"Going forward, I don't think we will be as active in the market, unless there is something involving an acquisition, and even then it will have to be something with scale for that to happen," he adds. LF



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