América Móvil, S.A.B. de C.V. (AMX) Q1 2012 Earnings Report, Transcript and Summary

Good day and welcome to the AMX First Quarter 2012 Results Conference Call. Today's conference is being recorded. At this time, it is my pleasure to turn the call over to your host, Mr. Mauricio Fernandes. Please go ahead. Mauricio Fernandes – Bank of America Merrill Lynch: Thank you, (Antony). Good morning or good afternoon to everyone. My name is Mauricio Fernandes and I am the Latin American telecom and media analyst of Bank of America Merrill Lynch. We are honored to host this quarter's conference call to discuss America Movil's first quarter 2012 results. I am in Sao Paulo, Brazil and from America Movil team is Daniel Hajj, CEO; Carlos Garcia Moreno, CFO; Oscar Von Hauske, COO; and Daniela Lecuona, Head of Investor Relations. Daniel, thank you very much for the opportunity of hosting this call. You may now go ahead with your initial remarks. Thank you. Daniel Hajj – Chief Executive Officer: Thank you, Mauricio. Good morning everyone. Thank you for being in our first quarter of 2012 financial and operating report. And Carlos is going to make us more summary of the results of this quarter. Carlos? Carlos Garcia Moreno – Chief Financial Officer: Good morning, everyone. Thank you, Mauricio for hosting the call. Well, we had world financial markets that observed a remarkable stabilization in the first quarter following the strong turbulence encountered in most of the second half of the prior year. The economic outlook appeared to have improved and in the first quarter, consumer confidence in our (indiscernible) operation was on the rise with local currencies appreciating in most of the region, particularly for longer. We finished March with 306 million accesses, which is 7.7% more than a year before having added 6.1 million accesses in the quarter. Approximately, two-thirds of them 4.2 million were wireless subscribers. A significant part of the 1.9 million new RGUs came from Brazil, which has become our largest fixed-line operation by accesses with 25.2 million. Brazil also led the way in terms of wireless subscribers with 1.2 million net adds followed by Mexico with 1.1 million. We continue to grow well our postpaid base with postpaid net adds of 1 million subs that represented a quarter of our net subscriber gains. As of March, we have $35.7 million postpaid subs came in (indiscernible) more than in the year earlier quarter, out of a total of 246 million subs. As regard to our 60 million RGUs, half like telephony lines, 15 million are broadband accesses, and 14 million PayTV clients, which are growing at 33% based on the year before. We are seeing a significant move towards multiple-play services as our clients seek new services from us, with more double and triple-play plans and even quadruple-play plans where mobile and fixed services are bundled together. On our financial results, it is important first to know that we are consolidating the results of net services from January 1. We are also presenting revenue formation in gross terms and not netting out the commissions paid to these TV revenues, which should facilitate comparisons with other operators that also (indiscernible). And we are now moving to a definition of EBITDA that starts out with operating profits as defined on the IFRS and that's depreciation and amortization charges. IFRS does not make any differentiation between operating and non-operating revenues and costs, which (indiscernible) that items like employee profit sharing which are mandatory by Law in Mexico, Peru and Ecuador to be considered the cost in the financial statement. Our consolidated first quarter revenues increased 12.4% in Mexican peso terms and wireless revenues that increased 50.8% and fixed-line revenues that was 7%. Wireless revenues account for 62.5% of the total. At constant exchange rates, revenue growth for the period was 8.9% led by mobile data revenues that increased 30.7% and PayTV revenue does grow up 25.4%. Fixed-line data growth came in at 8.5%. Several subsidiaries posted double-digit revenue growth. EBITDA came in at 68 billion pesos and was 6.3% higher in the year before. Service cost generally rose faster than revenues on account of rapid postpaid subscriber growth, increased content charges and the rolling out and maintenance of larger and more spread-out networks. The EBITDA margin declined 2 points to 35.1%. In addition to the reasons mentioned before, the reduction in the margin also reflects the new conformation of our business lines, with TracFone in the U.S. having become a higher volume, lower margin business, and with our PayTv operations and the content charges recovered them becoming increasingly relevant. The appreciation of various currencies relative to the U.S. dollar, particularly the Mexican peso, led to a foreign exchange gain of 19.3 billion pesos that resulted in our posting a comprehensive financing income of 5.8 billion pesos. We registered a net profit of 2.6 billion peso that was 37.5% higher than the one registered the prior year. Our net profit per share rose to 42 peso cents from 30 the year before, a 43.3% increase which already reflects the impact of our 4.1% reduction in the average number of AMX shares outstanding given our buybacks. Our net debt stood at 318 billion pesos at the end of March, down from 332 billion in December and was equivalent to 1.2 times EBITDA. Approximately, one fourth of the reduction 3.8 billion was in flow terms. The difference was due to appreciation vis-à-vis the dollar of U.S. currency, particularly Mexican peso. Our capital expenditures totaled 24.2 billion pesos. We acquired in the quarter Telmex worth in the month of 7.3 billion pesos and bought back 6.9 billion pesos of AMX shares for a total of nearly 15 billion pesos will include other smaller acquisitions. So, the buybacks and the acquisitions in this case of Telmex stock and another smaller company like the LA, they all had varying in the final net debt to EBITDA ratio. So, with that, I would want to pass it back to Mauricio for the Q&A session. Thank you very much. Mauricio Fernandes – Bank of America Merrill Lynch: Thank you, Carlos. Thank you very much. As participants' lineup for a Q&A, I'll kick off asking two questions. First, well as ARPU is up year-on-year across almost all AMX markets, the exception being Brazil given the multiple SIM card issue in the country, but this is notable particularly in Mexico given the MTR cuts in May last year. Wireless data seems to be the driver behind it. So, what in your view is the outlook for ARPU in coming quarters? That's question one. And two, can you please update us on the status on the integration among Claro in Brazil net, presumably from a network standpoint or from brand or product standpoint and when should we expect to see more bundled products in cost synergies?

Mauricio, starting with the first question in terms on the ARPU, I think you are looking very good ARPUs all around Latin America. What is happening is that data ARPUs are and data traffic is grown, which is up 31% data traffic growing year-on-year. And we are – it's very good how does the ARPU and voice is doing, ARPU and voice is maintaining and still people is using. We have reductions on pricing all around Latin America, but still people is using a lot the voice. So, what is happening a little bit on Brazil is that what you are saying competition and starts in Brazil, the SIM cards only it has been really driving the market really competitive. And the other thing we haven't had the network for data like my competitors in Brazil has. So, we have been working for the last two, three years making a good network, good data network, and we are getting to the point where we can be a little bit more aggressive on more competitive in the market in terms of data in Brazil. So, we, I think that's where we are going to drive ARPU a little bit higher in Brazil. So, that's what I can tell you about ARPUs. And in the status among the integration, I think the integration that we have been having in Brazil has been, we have been done in stages. At first, we start to do between Claro and Embratel, there seems this quarter we are going to do another stage is the integrating. Also Net, we are doing that on the networks on the – Oscar can talk a little bit what we are doing on the networks, what we are doing on the IT, and of course in the future you could see more integration on the commercial side. So, you are going to see more products of making the Claro stores. We are going to see more Claro products on the net distribution channel, so you are going to start to see stage by stage. Oscar can talk a little bit about what we are doing on the networks on the IT and all the integration on Brazil now?

We have two main projects of integration. One is in unity and this will include the CRM and the billing from the three companies, Claro, Net, and Embratel. We are already defined. We already have the blueprint to go ahead in the IT integration. We already chose all the platforms that we are going to use, but it’s not very large for you, but it will take around 16 months to have all integrated, but we are doing some integration not fully to go to their market with that triple-play and quadruple-play offerings in the marketplace. So, that’s the IT part. On the network side as well we already have a blueprint and a roadmap to achieve the integration. By the end, we will have is a unique, unified backbone at all the backbone MPLS, all-IP. So, by the end of the play, we will have different kinds of access, it could be mobile, it could be HFC networks or it could be enterprise, unified just in one single backbone. And this drive has different stages of integration, but it will take us around 18 months to have a full integrated backbone and the IT projects? Mauricio Fernandes – Bank of America Merrill Lynch: Perfect. Thank you, Daniel and Oscar. So, (Antony), we may now open the call to Q&A. Thank you.

Thank you. (Operator Instructions) And we’ll go first to Walter Piecyk at BTIG. Please go ahead. Walter Piecyk – BTIG: Great, thanks. Just a follow-up to Mauricio's questions on the ARPU, it looks like first quarter last year number was restated higher, I don’t know, Carlos if you could talk about what revenue might have been re-classed into that?

I think all the number that appears here. There was really no additional change. Walter Piecyk – BTIG: Okay. When you just look at the press release from a year ago that ARPU in Mexico was 160 pesos and now its 169, so I am just sort of was you know change maybe there is just a different classification now?

I don’t know, but there really wasn’t any change (indiscernible). Walter Piecyk – BTIG: Okay, that’s fine. So, just more conceptually than that ARPU growth that we are seeing now which is kind of a change from recent years? Should that also start to stabilize the margins, the EBITDA margins in Mexico?

What we said about the EBITDA margins in Mexico is that well, talking about only the wireless we said that we are going to maintain that about 50%. And it’s more led what we are having. What is happening really Mexico is that people really starting to use a lot data. They are starting to have more plans, data plans. We are selling lot more smartphones and that’s really what is driving the traffic now.

And Walter, going back to your question, no, I think, I mean there is no changes other than the ones that I mentioned before at the outset of the course. What I said is we have, we are now presenting revenues that are not netting out the commissions spread to the distributors, but they are revenues in gross terms. So, we basically change for purposes of comparison already numbers for the (indiscernible). Walter Piecyk – BTIG: Right. And there was still growth anyway even with that restatement or the changing how you are presenting that ARPU?

That's… Walter Piecyk – BTIG: Just a last question on this Daniel on the smartphone for your reference and that's obviously helping to drive the ARPU. As you penetrate the base further, how do you make those smartphones affordable for the broader customer basis that you have throughout Latin America?

Well, I think prices of the smartphones, has been going down and that’s the way we can make them affordable. Three years ago, you shouldn't find any smartphone for less than $500 and today you are finding smartphones for $200 or a little bit less. And also I think... Walter Piecyk – BTIG: What about the – but Daniel, what about the very popular smartphones that cross more than $500, can they – how do you get brought it in there, because there is kind of an assumption that those expenses will be, yeah, but then start….

The people that you are still selling the high-end phones to the high end people, and then you are selling people is starting in the prepaid part in the prepaid segment. I think people is starting to write not phones of $80, but yes, they are starting to write phones of $150 or $200 and would surprise us that in prepaid they are starting to use data. So, we are consuming a little bit more so that’s really the reason... Walter Piecyk – BTIG: But what about $500 or $600 phone because the theory globally is that those $500 or $600 phones like the iPhone will generate the highest revenue and have the lowest churn. Can you get those phones? Can those prepaid bases of four of those $500 or $600 phones? Is there a way to get those phones in those people's hands?

No, no, no of course not, but I don’t think the iPhone is only on the $500 phone nor you have iPhone to be much less than $500 phone, then the iPhone 4 it's higher than the iPhone 4S. It's higher so and you have with different type of, no different type of phones even with 3G as you will have with 8-gig with 16-gig. So, those type of handsets has been going down, so you can find character of the storage book. You campaign iPhones at much lower price on $500. Walter Piecyk – BTIG: Might be you left the legacy models?

Yes, yes. Great, thank you.

And we'll take our next question from (indiscernible) at GBM. Please go ahead.

Hi, good morning. Thank you for your other call. I got question regarding the antitrust board in Monday. This kind of takes place regarding to find. If it turns out negative who are their resources you have for this time?

Well, I think on that issue will prefer to wait until what's going to be the decision at (indiscernible) and it's going be on Monday, their decisions are let's wait and see what is going to happen and when we know what's going to happen then we are going to take which decision we're going do now, but I think what should do is wait until what is going to happen on Monday.

Okay, thank you very much.

Thank you.

And we'll take our next question from Michel Morin at Morgan Stanley. Michel Morin – Morgan Stanley: Thank you. Good morning. I had question PayTV I think if we look at your very good performance in Brazil, especially with the satellite offering that you launched maybe three years ago. It has just turned EBITDA positive it seems towards the end of last year. So, it had a negative impact on margin and looks like that’s starting to improve. What do you think could be the ultimate profitability of that business in terms of EBITDA margins longer term? And then secondly if you were to get a PayTV license in Mexico tomorrow, what would be kind of the next steps you'd be taking and likewise what kind of long-term profitability do you think you should – you would be able to achieve in a market like Mexico? Thank you.

I think, first I can talk a little bit more about that, but my only the comment here is that in Brazil and the not other place, I think we can get to the EBITDA like other company, starter like company would have in other places. We know that Brazil is a little bit more competitive, more complex, a little bit more taxes, but if you take out these, we should be on the media, similar to other companies. And here in Telmex, what technology if they give out us the PayTV, what technology we are going to use is the Oscar way, don’t you tell them a little bit or Carlos.

Yes. What we could do is we could offer through different technologies, for example, IPTV, which has already been stated in a couple of countries and which we have present and in terms of the market where we are seeing that could happen would be that that would be more extent portfolio for the market, which basically would benefit customers in terms of more diverse offering plus better prices, no. Michel Morin – Morgan Stanley: Right. And is it fair to say to in Mexico then that it would be the same kind of approach that you have taken in Brazil or you would also be using satellite as well as IPTV and should we anticipate increased CapEx and may be some spending as well as you rollout the services?

I think the Mexico is going to depend a lot on what's going to be the authorization, they give us the authorization is going to be depending what the authorization that they could give us, what we – I can't tell you is that we had all the technologies were small around in Latin America, we have satellite in some countries (indiscernible) in other countries.

We have a streaming video as well.

On the streaming video on IP-TV and cable so, we use all the technologies we know how to use them, and depending on what would be the authorization in Mexico that's one of the decision and the definition how what – how we are going to use it, know. Michel Morin – Morgan Stanley: Perfect, thank you very much.

And we'll go next to Richard Dineen at HSBC. Richard Dineen – HSBC: Hi, how are you guys? I was hoping if you could talk a little bit about your elimination of the unlimited mobile data plans in Mexico. I understand the long-term rationale, but if you go little bit behind the business for that also customer reactions and perhaps potential or timing to do the same in other countries, thank you.

I think we have a limited plant in almost all around Latin America and what we do is it doesn't – it's not make – at this moment it's not going to make any dependence to the customer because, let's say, the average of the customer is using is the 500 mega so, we kept to one giga, so, there is not going to be any difference to-date. But we don't wanted that people is starting to give the phone at router and they're starting to use those phones that's router and then started to abuse of the system so, that's mainly why we do it, I don't think any of our good customers are is going to make any difference them at this moment.

So, that's really the rationale. Richard Dineen – HSBC: Is it possible to role this out in Brazil now or not really because of a loss forbidding?

No, it doesn’t have anything to do with a lot in Brazil. It has to be with the market and the competition and now what is happening to that in Brazil is still they have a limited and the competition is doing unlimited, let's say, in U.S. it's almost everybody is limited and with high caps what we do in Mexico is limited, we high caps so well, that's different terms of ways to commercializes the data, what I think all the customers, we don't have any comment on compliance by any of our customers because we give them much more them what they use. Richard Dineen – HSBC: Thank you very much.

Thank you.

And we'll go next to Rizwan Ali at Deutsche Bank. Please go ahead. Rizwan Ali – Deutsche Bank: Good morning. My question was regarding Brazilian margins and cost improvements, I also mentioned that will be another 18 months before we get all the different start using one unified network. Should we then expect improvement in margin and cost savings coming from the synergies over the next 18 months is that reasonable? And my next question was about sub-growth that appears to be in Brazil a change of strategy, you are focusing lot more on postpaid and therefore you are not having any subscribers, how successful how that charged to be in the first three months of this year.

Okay, all of the cost improvement, yes, we are doing deploy to get some cost savings mainly it's improvement of quality and customer services, but prior will bring us cost savings due to the integration of the different platforms that we already have. Rizwan Ali – Deutsche Bank: And also adding a little bit of what was (indiscernible) saying also the cost are going to be in the future of the CapEx future is spending of CapEx. Okay so, when you have one network then all the three companies are going to use the same network so, you're going to put less CapEx in the future than what you…

Less maintenance. Rizwan Ali – Deutsche Bank: Less maintenance and less other things know the scale very important. And the second question.

Sure. Rizwan Ali – Deutsche Bank: When will be, I mean will there be any like obvious improvement or notable improvement in margin that we can expect over the next 18 months in Brazil?

I think you're not going to see big jump on the margin I think it's going to be day-by-day it's going to depend a lot also on the competitiveness of the market that's all depends a lot of thing it's of course we are going to have savings what we don't know these savings are going to be directly day-by-day to the P&L or there is going to be more competition or there is going to be market changed a lot so and today what I really talk on competitive market that's with the SIM cards with all of those type of things, facility coming really, really aggressive know. And your second question. Rizwan Ali – Deutsche Bank: Yeah, I mean regarding sub-court we are seeing bit of a deceleration in your subscriber growth or at least market share of net adds in the first quarter and I'm assuming that's your strategy to focus more on postpaid. But the question is I mean are you getting lot more of the postpaid subscriber that you wanted.

No, I think that we're getting as much as postpaid subscribers but we also are interested in the prepaid subscribers. I think everyday we are having more penetration. So, while the gross would be at less and less every quarter and the growth. What I think all the markets are interested for us. We have very loyal at the customers, our customers have been resolved they are changing. They are renewing with all the postpaid and the prepaid subscribers. So, of course everyday you need to give them more things and more services and that's what they're going to. What you could see is the reason is very important checking number portability. I think number portability all around Latin American has been good for us positive for us that means that we have a better network, a better coverage and the customer will be sizing for our products and our networks, and that's really key for us in each country and means a lot it means that we have a preference of the customers.

Thank you very much.

And we'll take our next question from Vera Rossi at Barclays. Please go ahead. Vera Rossi – Barclays: Thank you. My question is about 4G when do you expect to launch 4G in Latin America specifically in Mexico and you should need to acquire more spectrum to launch 4G.

Well, first hi, Vera, how are you? Vera Rossi – Barclays: Thank you.

And I think 4G we are going to have the 4G in some cities small amount of cities maybe five cities or four cities at the end of the year we're going to start to give 4G. We saw we already have spectrum to 4G, we talked about it last year. And in Mexico and for the rest of Latin America, they are coming at auction of a spectrum and one day you start to do that, then we're going to start to launch that. What it's very important that what we have been doing and investing the last two years is doing more on the backhaul fiber to the not a lot of the investments. So, to put 4G in our network is going to be much more easy because we have been advancing a lot at all these investments. So, 4G is more on the radio side more than on the backbone, backhaul and that's all is going to be when Mexico is going to be at the end of the year and the rest of also Puerto Rico, but we have also when the launch may be in third quarter and then as we can have the spectrum then we are going to launch in the (indiscernible). Vera Rossi – Barclays: Okay, thank you.

And we'll go next to James Ratzer at New Street Research. James Ratzer – New Street Research: Yes, hello, I had two questions please. The first one is on Mexico your data revenue growth of 34% was particularly impressive. So, can you give us some more details behind that for example how much is coming from SMS, how much from non-SMS, and then particularly how many smartphones if you now sold and what growth you're seeing in smartphones year-on-year to essentially took the base? And the second question as also was on EBITDA down 3.7% year-over-year. Do you think that's the peak rate of decline once we now start to lack some of the termination rate cuts stood have been in place. Thank you.

I think what (indiscernible) in Mexico was the termination rate, but other thing that could be also impacting a little bit our result that we are selling much more postpaid than prepaid. We are increasing our postpaid, we are increasing our sales on smartphones, and that gives you a little bit more on subsidy so that would be something then we have new as not in method for another (indiscernible) we have new services that needs more content as that would give you a little bit less than the margin not what – our first question is very interesting, I think what you are going to see I don't have the detailed numbers of what you are asking, what the trend is to sell more smartphones, the smartphones are getting cheaper and people are starting to using postpaid and in prepaid more services, is still we have a little bit of growth on SMS, what we are growing more on broadcasting, we are growing more in other services and I think that's mainly the big increase on data is more on the broadband, sorry not broadcast, broadband and on those type of services. Prices of data that will be coming down so, we've had better prices to our clients, that means that they are using more and more so, that's going to be the trend for the next three years. James Ratzer – New Street Research: What percentage of your postpaid base are on smartphones at the moment, please?

That's now 25% may be, 25%, I'm not so sure, but you can talk to Carlos on that. This would be very close to 25%. James Ratzer – New Street Research: Okay, thank you very much.

Thank you.

And we'll go next to Gil Alexandre at Darphil Associates. Gil Alexandre – Darphil Associates: Good morning, nice quarter. Could you give us an idea of your capital expenditures this year and could this be a year of peak expenditures over the next two years.

Hello, I think the continued peak in terms of the CapEx I think it is a CapEx about last year. If you look at a group together including with net CapEx for last year was between $10.5 billion and $11 billion I think but we are looking at for this year is $9 billion to $9.5 billion. So, we are reducing CapEx in absolute terms in the coming down relative to sales. So, the peak year where last year relative to sales, we are going to be saying, I think rest of the flattish about $9 billion this year and probably the next couple of years as well. Gil Alexandre – Darphil Associates: And I was just wondering is there possibly that you driven in growth rates over the next two years or do you have a dividend payout rate in your mind or how do you feel towards dividend payouts over the next two years.

Again, I don't think that we are looking at changing the financial management of the company, we got the managing to maintain a certain leverage ratio, which has been typically closed to one-time net debt EBITDA, I think that, but we have very any amounts in the favor of that we saw and the strength in acquisitions basically truly about the shareholders, but we had on every single year and the divisions are we have an ordinary dividend, we'll have share buybacks and sometime to tell we may end the short extraordinary dividend. So, that’s have not change that’s basically how we look at. I think the question is really, but we need to stay at one times net debt EBITDA, but that’s all on that, I think that there is no change really no correction. Gil Alexandre – Darphil Associates: Thank you very much.

Thank you very much.

And we'll go next to Ric Prentiss at Raymond James. Ric Prentiss – Raymond James: Thank you. Couple of questions on 3G and 4G if I could, on 3G, can I talk to us a little bit about the different operating systems you're seeing for smartphones and the success you had and looking for with Android or Blackberry or Apple and you're seeing anything as for as devices particularly lower price devices from Nokia and Microsoft?

On the different operating systems as you know Android has been a growing a lot and it's not different and what is happening in all around the world. Apple has been doing very good also, Blackberry in Latin America is still doing good I think that operating system is doing good, the Blackberry cap has been important, its big issue for Latin America and keeps in Latin America. And I'm happy to have new operating systems is going to be Windows, its being well supported by the Nokia phones and I hope they could be a good operating system and we had for us and we have open systems and a lot of them will be the best into cut. Ric Prentiss – Raymond James: It seems like the prices for those cost to curious like your software dropping. Have you gotten down to the $100 price point or could we be going below that level next year for really good smartphones?

I think, I hope yes, its what we want and I think they don’t have – you have different operating inside, let's say, inside Android you have different segments of value on Android with more themes implied the operating system with the Android with less things and I call it that in the next year's we can have a Android or Apple or Windows or Blackberry less than $100 I hope it could happen. Ric Prentiss – Raymond James: Great, thank you.

And for us we would be very important because we have big rates of prepaid subscribers and you will give them an affordable phone then they're going get it and then they're going to start reduced data. So, that's something that for us would be very important. Ric Prentiss – Raymond James: Good, it helps drive a lot of revenue in the next couple of years.

Yes, I'm sure. Ric Prentiss – Raymond James: Thank you.

Thank you.

And we'll go next to Matthew Campbell with Goldman Sachs. Matthew Campbell – Goldman Sachs: Yes, thank you. I have a quick question. Looking at the integration of (indiscernible) in Brazil and drive our growth that has been. You considered any transactions to reduce the interest expense on the data it seems like there. You could say several million dollars at that level in cash. Yes, we would sure, if you finance at America Movil type spread is posting that type spread.

That will be – if you work certainly there and now met we also consolidating a step and its step we have to remind incentive whether we manage, the rest if I made all that's sold, you can see where I believe have many differences in the greater fonts, funding of our subsidiary.

And having a little bit more, I think you my view, I think if you see us as a group in Brazil, we have been doing excellent net loss, but I tell lost beyond, but I tell that it's the supply chain, we make that's the new name is collateral that they lost Carlo (indiscernible) I think we are doing very good as a one company there and we feel very, very comfortable that we're growing and the way we are doing things in Brazil. I think you should start to seem off as a whole group. We have all the services in Brazil of course, we need to boost some adjustments in some places like in the data in the wireless, let's say, but all overall I think our group in Brazil has been doing has been doing really good, extremely good and we have a very good view for the next year in Brazil. Matthew Campbell – Goldman Sachs: I agree, I was just wondering if the – if there is cost savings to had at that level using your capital structure a little more – little differently and financing differently those mail concerned with.

What that says, know. Matthew Campbell – Goldman Sachs: Yeah, I agree, thank you.

Thank you.

And we will take our next question from Fernando Remis at GBM Global. Fernando Remis – GBM Global: Good morning, thank you for taking my question. It seems that pressure in voice tariff seeing some countries namely Columbia and Argentina has slowdown where in Mexico voice territory have continue to post all the declines, even without the kind of interconnection rate. So, my question is if there is anything is structurally different of course this markets may be in regulation when they come better in landscape that make you think that the trends we are seeing should remained or do you think that voice station in Mexico could start stabilizing going forward. Thank you.

It's difficult to answer, you don't know what going to be the competition in the next months or so as competition increases then prices to be lower and we have a huge competition in Mexico and we are well prepared to compete, we have a good network to compete, we have a good name, a good brand, and good distribution network so, it's going to depend a lot on that our most growth to 250 million of usage it's a lot and now we are revenue may not be great in Mexico 18%, so, I think is what we are seeing that and still with that we are still missing and also increase on ARPU, so, what will happen in Mexico. Fernando Remis – GBM Global: So, (indiscernible) if I'm correct that the different landscape differentiating in terms of tariffs between let's say Columbia and Mexico is mainly a provision of the different competitive landscapes you would say.

No, no, it's also you are seeing exactly the same level I give you the numbers of Mexico let me give you the numbers of Columbia, we have been reducing the price 5% what Columbia was the lowest price in Latin America. So, we are starting with deal also reducing prices in Columbia. And Argentina different because we've a little bit of inflation there so, both all around we are reducing prices we are being aggressive in Argentina, we are with a lot of giving good soft CDs to the smartphones so, people will get smartphones and start reduce data. So, they are using a lot of SMS there, what we want they use it more in Argentina so, more broadband so, that's more and more or less what we have been in Columbia. We have 16% increase on energy from 216 to 230. So, it's big in Mexico from 235% to 250% increase of all around I think those are the same trends that. Fernando Remis – GBM Global: Correct, thank you very much for the answer.

Thank you.

(Operator Instructions) We'll go next to (indiscernible). Please go ahead.

Hi, good morning guys. On the Brazilian performance, we had a very good week from the net resources and from the Brazil combination there. And my question is PayTV market is still under penetrated, there is still some opportunity. Do you guys expect to go need to be great new license so to woken up that name of the speed to other regions and that's reach is good could go or in Brazil or whatever. And how do you see there was the potential competition that you may have for example for more which is try now to keen to get out of revenue not sure then they have setting the investor day that they tend to be aggressive in the PayTV business, that's my first question.

Well, on the first questions that if we’re going to ask for a new licensing and new CDs just with HFC networks that within our region in cable networks for net services and the other part is that as you know we owned the satellite as lot as well in Brazil about two months ago. So, we’re going to expand our capabilities on the satellite as you know the market is moving pretty rapidly to high definition on the offering in PayTV, new satellite PayTV. And the competition is already very, very possible in Brazil there is a very large competitor over there. The Sky is in the market or in Telefonica another guys so, we, what we are preparing our self is to have the right distribution network left in nationwide for satellite TV services. As you mentioned the PayTV penetration is still very low, but when you breakout the penetration at the different region. So, we are focus on the region that we see there is more opportunity as well. And another thing that we need to work around is the cost of the content it’s becoming a major cost for us. So, we are planning to merge to integrate to get a new deal to get exclusivity in some kind of content so, it’s another source of that we need to be profitable in the PayTV business.

And the competition (indiscernible).

Well, all we understand last week that they choose already Microsoft for IP-TV, they are going to use a same IP-TV that we’re using in other contrast. They choose Alcatel to make the integration as well. So, we know the proverb is a good proverb, but we feel that we have the functionality to compete with the new IP-TV that is coming in the market.

And with all, the question is well, is going to be another competitive market, but we are the competition today.

Well, the Sky is already there, Sky and there is a Sky Telefonica or GBT. GBT, so we adopt not like it’s going to be the only competition that we’re going to have today, we have a lot of competition, tough competition. So, well, I think are you going to start to do that and well, we are really prepared to doing investments for the last three years on those parts of the market and I think we are well prepared to compete.

Excellent, excellent. And Steven on the same lack of the woods, we are seeing the process of broadband coming down very fast in Brazil. Please correct me if I am wrong, we are also already seen extra resource beginning to get more speed to existing customers trying to already be prepared for the drive of potential driver of the Italians or even the French frugality, what’s really on the broadband market?

Yeah, you’re right. You’re totally right, we’re already improved the speed with around half of our customers, we’ve been duplicated in speed to our customers. We have already offering the marketplace with the 100 megabit if our customers needed which is may be used to the internet. And we are moving our customers to, let's say the average is now, is like the five megabit in the whole customer rate base of around 60% of our customers are already have 10 megabits or more. So, you’re right I mean it is, we are improving what we've been doing is to get closer the cyber to our network so, all the notes in (indiscernible) we are getting closer to a customer to have this kind of a speed in all the customers. Another one is that the Digital TV. There is another trend that is coming that as well. If we closed the fiber, we could deliver as well Digital TV.

And adding something of what Oscar is saying, I think if you check exactly what’s happening in Brazil, I think net service is an excellent, excellent branding.

Quality.

Quality of service if you said that you receive for a megabit that you receive that what you receive what they offer so, I think we have a very, very good product to offer to our customers if I think we make a Serbian net service is probably one of the best services in Brazil.

The (indiscernible) product is excellent in Brazil.

Thank you, Oscar. Thank you for two good data points here. Thank you.

Thank you.

There are no questions. And we'll take our final questions from (indiscernible) at REIT Research. Please go ahead.

Thanks, thanks for taking the question. Couple of questions from me. Firstly, could you just if you not I guess prepared maybe give us postpaid – could you just explain how much great postpaid offer is than prepaid offer in both Mexico and Brazil? That's my first question. And secondly I just under – I just want to ask a spectrum technology neutral in Mexico and Brazil. Could you run LTE in your existing 800 or 1800 megahertz spends or do you actually need spectrum to deploy 4G in Mexico and Brazil. Thanks.

No, I think as what I said is 4G we're going launch 4G in the license that we buy that we bought maybe the spectrum that we bought, I think one year or one year and half, the option that we have in Mexico, we bought 20 mega of spectrum and that’s we’re going launch 4G. And in Brazil, I think there are coming auctions in the mid of the year. So, that’s we're going launch the 4G network. Still, we have lot to do in 3G all around Latin America early courses when do you have HSDPA, you have very good speed and also I think we're in the perfect timing to start to launch 4G and to have more 3G in the very small cities in Latin America. So, that’s why we are doing at this moment. We're trying to build lot more coverage in 3G and then we're going launch 4G in the – is the big cities in Latin America, it's our strategy.

Actually sorry that the question was more general question from regulatory perspective or you allow to run different technologies in any spectrum.

I think we have any restriction to do certain technologies in certain license we spent under spectrum. I don’t think we have that maybe in one county and the specific thing what all overall, we don’t have any restriction to the limit.

Okay. And the postpaid of the question.

In the postpaid, they don't have the numbers here.

Okay, thank you.

Thank you.

Alright. So, now I'd like to turn the call over to (indiscernible) Carlos for any final remarks otherwise on behalf of Bank of America, Merrill Lynch. I would like to thank everyone for dialing in. Carlos Garcia Moreno – Chief Financial Officer: Thanks, thanks Mauricio for hosting the call and thank everybody for being here. Thank you very much, bye. Mauricio Fernandes – Bank of America Merrill Lynch: Have a good day everyone. Thank you. Carlos Garcia Moreno – Chief Financial Officer: Thanks.

This does conclude today's presentation. We thank everyone for their participation.