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América Móvil sells Tracfone to Verizon

América Móvil announced on Monday that it had entered into a contract with Verizon Communications Inc. (Verizon) for the sale of 100% of its subsidiary Tracfone Wireless, Inc. (Tracfone), the largest virtual operator of prepaid mobile services in the United States, which serves 21 million subscribers.

The agreed sale price is $ 6.25 billion, of which half will be paid in cash and the other in Verizon shares.

Additionally, after the closing of the operation, Verizon has been obliged to pay América Móvil: up to 500 million dollars if Tracfone continues to meet certain operating goals (earn-out) for a maximum period of 24 months after the closing of the operation, calculated and paid semi-annually and 150 million dollars deferred within two years after the closing of the operation.

The EBITDA generated by Tracfone corresponding to fiscal year 2020 and until the closing date of the operation corresponds to América Móvil. The closing of this acquisition is subject to certain common conditions for this type of operation, including obtaining government authorizations.

América Móvil in the United States

The number of prepaid wireless subscribers of América Móvil decreased 3.7% in 2019 year-on-year, to approximately 20.9 million total wireless subscribers in the United States.

Segment operating income for 2019 increased 1.7% from 2018. Adjusted segment operating income for 2019 increased 1.6% from 2018.

This increase in operating income for the América Móvil segment primarily reflects increased use of voice and mobile data as the customer mix continued to shift towards its heavy-duty Tracfone brands.

Likewise, the segment’s operating profit for 2019 increased 11.4% compared to 2018. The segment’s adjusted operating profit for 2019 increased 6.0%, year-on-year.

Segment operating margin was 1.9% in 2019, compared to 1.7% in 2018. Adjusted segment operating margin was 7.1% in 2019, compared to 6.8% in 2018. This increase in the operating margin of the segment for 2019 mainly reflects better controls over trade, operating and administrative costs.

 

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