América Móvil, S.A.B. de C.V. (AMX) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the América Móvil First Quarter Conference Call and Webcast. My name is Lacey, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Daniela. Please proceed.

Good morning. Welcome, everyone, to the call. With us today on the line, Daniel Hajj, Chief Executive Officer; Carlos García Moreno, Chief Financial Officer; Oscar Von Hauske, Chief Operating Officer; and Carlos Robles, Chief Financial Officer of Telmex. Daniel?

Yes. Good morning, everybody. Thank you for joining América Móvil's first quarter of 2013 financial and operating report. And Carlos García Moreno is going to make us a summary of the results. Carlos José García Moreno Elizondo: Okay. Thank you, Daniel. Good morning, everyone. The global economy continued to face strong headwinds in the first quarter of the year, with expected economic growth for 2013 worsening even further in Europe and China. In Latin America, several countries saw their economies weaken more in the face of softer commodity prices. In spite of the above, access growth remained relatively strong. In relative terms, and before considering subscriber disconnections in Colombia arising from a change in our commercial policy, net new access lines exceeded by 8.3% those obtained in the first quarter of 2012. We ended March with 328.2 million access lines. Our wireless subscriber base improved 6.9% year-on-year, even after getting the effect of the Colombian disconnections, while fixed-RGUs were up 9.5%, with fixed-line accesses in South America climbing 18.3% year-on-year. We added 1.4 million wireless subscribers in the first quarter after disconnections of 2.7 million in Colombia, as a result of changes in our reporting policy. Brazil added 1.1 million clients and Mexico 854,000. Net adds in the U.S., 839,000, more than doubled those of last year. Postpaid net additions for the period were 1.1 million, 12.7% more than in the year-earlier quarter, with Brazil gaining 347,000 postpaid clients, 78% more than in 2012, and Mexico, 223,000, more than 1/4 of its total net adds. We added 1.1 million RGUs in the first quarter, including 753,000 PayTV subscriptions and 568,000 broadband accesses. The growth of the fixed-line platform was led by the offerings of triple-play packages. 56% of net RGU adds, excluding Mexico where we cannot yet provide PayTV, were sold under such bundles. Again, 56% of net additions of RGUs, 56% were driven by triple-play bundles. In Brazil, our largest fixed-line operation, we ended March with 29.7 million RGUs, 18.7% more than a year before. PayTV and broadband were the main drivers of growth, reflecting increases of 24% and 22.7%, respectively. Our first quarter revenues totaled MXN 193 billion. They were slightly higher than those of the prior year in Mexican peso terms. As has been the case in prior quarters, the peso continued to gain ground vis-à-vis the U.S. dollar and other Latam currencies, with the result that when translated into pesos, the rate of growth of the revenues of our international operations falls below their rate of growth in local currency terms. On average, the peso appreciated 2.8% versus the dollar, 16% versus the real, almost 19% versus the Argentinean peso and 2% versus the Colombian peso compared to the year-earlier quarter. Correcting for this, our revenues increased by 6.1% year-on-year, at constant exchange rates, with service revenues growing 4.6%, led by mobile data and by PayTV, whose revenues expanded 25.6% and 20.6%, respectively, net of FX movement. Fixed-data revenues accelerated to 6.6% after a one-off decline in Mexico in the prior quarter, while fixed-line voice recovered somewhat, declining at a lower pace, 5.9%, than it had the prior quarter, only have been 7.2%. From a regional perspective, service-revenue growth remained at the same pace in Mexico than it had in the fourth quarter. It was minus 1.6%. It decelerated in South America, along with the local economies, to 5%, and it accelerated in the U.S. where it rose to 32.4%. As regards EBITDA, it totaled MXN 63.8 billion and was down 6.8% in peso terms, while our operating profit came in at MXN 38.7 billion and was down 10% from the year before. At constant exchange rates, EBITDA improved from the prior quarter, declining 1.4% year-on-year, less than the 3.7% rate of the preceding quarter. In Colombia, we had an extraordinary charge that will be fully recovered in the next several months. That accounted for the MXN 179 billion [ph], nearly 10% [ph] of EBITDA of their release. We posted a MXN 1.4 billion comprehensive financial income, with foreign exchange gains of MXN 17.4 billion, more than offsetting our net interest payments and other financial expenses. Foreign exchange gains arose mostly from the appreciation of the peso versus the dollar and of the dollar versus the euro. Our net profit for the quarter totaled MXN 26.9 billion, up nearly 80% from the preceding one, although down from the year-earlier quarter, partly on account of the lower operating profits and partly on account of the even larger foreign exchange gains that we had then. Our net profit represented MXN 0.36 per share and USD 0.56 per ADR. Net debt totaled MXN 364 billion at the end of March, down MXN 8.2 billion from the end of 2012, even after current funded capital outlays of MXN 36.5 billion. Net debt was equivalent to 1.42x EBITDA, last 12 months, and gross debt to 1.56x EBITDA. Capital expenditures of MXN 20.4 billion and share buybacks of MXN 16 billion made up the main components of capital outlays. The major investments we are undertaking to deploy fast networks, 4G, fiber-optics, et cetera, will provide us with an unparalleled capacity to provide data services throughout the region in the coming years. We will be well positioned to take advantage of what we expect will be a rapid uptake of smartphones and tablets, by both postpaid clients and the mass market, as prices of these devices continue to decline. So with this, I would like to pass it back to Daniela and maybe we can open the call for questions. Thank you very much.

Lacey, we can start with the first question.

[Operator Instructions] And our first question will come from the line of Andre Baggio.

Carlos, how do you view the trends that we are seeing in Mexico, where it seems that growth is slowing in the mobile business and we may be seeing some slightly better numbers in the fixed-line?

Can you repeat it? I didn't -- we didn't hear you.

I'm sorry. So can you comment on the slowdown on the mobile growth in Mexico?

Well, I think we're starting to see a recovery on March. I hope that in the wireless side in second quarter, we could see a better increase on revenue than what we saw on first quarter. We're starting to sell more and more smartphones, and I think it depends a lot on the -- a little bit the slowdown on the economy. On Mexico quarter, we're starting to feel that this quarter is coming better, the revenues in Telcel. No, it's only thing that I can tell you. Also a little bit -- also one important thing is that we start Easter vacation in March this year and last year, we have it in April. So we are not comparing exactly apples with apples, so that's also a difference that we have this quarter, in terms of revenue.

Okay. And my final question, what do you expect to gain by integrating NET, Embratel and Claro, as described in a recent press release from Embratel?

Well, I think what we're doing, really, in Brazil, is we are making a big effort on integrating the company. We have been advancing a lot. But in the other side, I think we are being careful not to -- we're doing very well in terms of NET in the commercial side in Embratel. So the integration, I think, we are doing that, not -- being very careful to stay the way we are in the commercial areas, okay? So in terms of the technical IT, human resources, financing, everything else, we are doing all the integration, we have been advancing a lot, we have been getting more and more synergies. And maybe in 1.5 years, 2 years, we can finalize all the integration of the company. But we are really worried not to bother all the commercial areas that NET is doing very well. Claro is starting to do much better. You could see our good recovery on the postpaid on Claro, on the prepaid on Claro, and Embratel is also doing well with the corporate business. So all the things that we're doing are really focusing on the integration of the IT, technical, finance, purchasing and all the areas around the commercial.

And our next question will come from the line of Rodrigo Villanueva with Merrill Lynch.

This is Rodrigo Villanueva from Merrill Lynch. I was wondering if you could share with us the alternatives you have considered to face the telco reform in Mexico. Particularly, I'm interested to know if you have thought about divesting assets in order for you not to be considered dominant anymore on the revenue parameters to be set by the Mexican government. That will be my first question.

No. What -- when you talk about the telecom law in Mexico, there is a -- the bill, the law has been approved by the Senate yesterday. All the changes must go back to the Congress for final approval. Changes made at Senate last night does not amend material, the bill, as approved in the Congress a couple of weeks ago. So when the bill is confirmed in the Congress, and published by the President, the next step will be to go and to see what are going to be the secondary laws to be prepared and enacted. So that's more or less the calendar that we have. We are not thinking, okay, if we are going to be a dominant player. It looks like we're going to be a dominant player in the company, but what we need to see is what are going to be the secondary laws or what are going to be the restrictions or regulations that they are going to put to the company that are going to be dominant. So we need to wait. We need to see what are going to be the secondary laws that they are going to discuss in the next 6 months, and then we can take a decision. But until today, nothing is clear, so we need to wait to see what's happening. A lot of companies in the world are working as dominant, so let's see what are going to be those secondary laws.

Daniel, and my second question is related to a potential joint venture with Globo. Recent news reports suggest that there have been talks between AMX and Globo to acquire TV networks across Latam. So I was wondering if this is something that you are really considering. And I was also wondering if you would be willing to participate in the auctions for the 2 new broadcasters in Mexico.

Well, on the auctions for the TV, we're still discussing what to do. We don't have anything, still yet -- any decisions still yet. On the Globo side, we haven't been discussing it with Globo, but we have all the options, are open for us, so that's the only thing that I can tell you. We don't have any decided yet, and we are open to see any alternative in that.

And our next question will come from the line of Michel Morin with Morgan Stanley.

Carlos, I was wondering if you could clarify or remind us of how you think about the leverage that you're willing to take on, especially in the context of you having accelerated the buybacks during the first quarter? Carlos José García Moreno Elizondo: You know what, Michel, I noted that in one of your notes, you mentioned that we were having to go back to the 1x net debt-to-EBITDA. Well, when we had the conference call last year to discuss the investment that we have made in Europe, we said that we intended to remain at the levels that we had current, which is what we can maintain. I thought that our ratings if they stay at the current levels, would be very negative. So that, basically, it's very clear. We said the business, approximately 1.5x gross debt-to-EBITDA, and that's where we intend to keep it. So basically, the share buybacks that we have seen in other years have been simply a distribution of the cash flow the company generates over to its shareholders. As you know, whenever we have not spent our cash flow on acquisitions, we've always returned it to our shareholders, mostly by way of share buybacks. And this is what have -- what we have been so far. It's not unusual.

So Carlos, just to follow up on that. If the target is 1.5, does that mean that you would -- gross debt-to-EBITDA, does that mean that you would be willing to actually temporarily go in excess of that when there's a need to do so, for example, because of the KPN rights offering coming up? Or because, for example, you want to continue the aggressive buybacks? How do we think about the 1.5? Is it a ceiling? Or is it a new target average? Carlos José García Moreno Elizondo: Again, Michel, what we said in the call, and I'm repeating it again just for clarity, we tend to abide by the restrictions placed on us by the rating agencies, such that we stick to our current credit ratings, okay? And the rating agencies, they all have different leverage targets and they have different ratings on us. But the tightest rating that we have, which is the [indiscernible] that we have, in terms of leverage, comes from Moody's. And what Moody's says is that we are not to have -- grow debt-to-EBITDA of more than 1.5x over an extended period of time. That's what it says. So it's not like you cannot go beyond that for 1 day. You always have some flexibility. But the -- although these ratings agencies are perfectly aware of our business plans and what our expectations and they, basically adjust accordingly. So -- and throughout the year, as -- we will cover [indiscernible] that is way more than what we need to cover the impairments of the new KPN shares that we will be subscribing. Okay? So yes, if you look at the rating agencies, they have the ratings on América Móvil and they have their leverage guidance, they have their conditions. I think it is both taking a look at exactly what it is that they say. The only thing that we can tell you is we would be abiding by the limitations they put on us, because we do intend to keep our current ratings.

And our next question will come from the line of Andrew Campbell with Crédit Suisse.

My question is on the results in Central America during the quarter. You have a very strong EBITDA margin there, higher than what's been typical over the past few quarters. And I was wondering if there's any special reason for that and if you believe that these higher levels of margins are reasonable going forward.

Yes, what you could see in Central America are mainly 2 things. First, in Honduras, we are integrating the company that we bought last year, the company was with a negative EBITDA, the company that we bought. So we have been integrating the company and we have been successfully doing that. The other one is in Costa Rica. You know that it was a greenfield, and we start, we spend money. Both the companies have been doing good. We're having good revenue, still growing a lot in terms of smartphones and those type of handsets. But I think what you are seeing in Central America is mainly good work on integrating the company and making a very good integration in Honduras also. So you could see that the 16% [ph] year-on-year growth in EBITDA, it's been very good. And there are also the Caribbean, it's also been better. The Puerto Rican asset is growing again the revenue. So we are mainly doing, in all of our operations, we are doing good in Central America.

And our next question will come from the line of Walter Piecyk with BTIG.

Carlos, I just wanted to first go back to that -- to your prepared comments. I had a hard time understanding some of it. Did you say that there was a one-time charge that was in the quarter? I may have missed that. Carlos José García Moreno Elizondo: In Colombia, there's -- it acts like a tax. It has to do with the [indiscernible] structured from our corporate level and the ownership level, and so there's a tax that is paid to Colombia, we will be able to get back in coming months. And this charge is approximately equivalent of 2% of revenue.

3 points. Carlos José García Moreno Elizondo: And 3 points of EBITDA.

3? 1, 2, 3% of revenue? Carlos José García Moreno Elizondo: 3% of revenue, that's -- it's MXN 79 billion [ph].

Okay. And then just going back to the questions on leverage and the 1.5 and Moody, and that was a good explanation, thank you. But does that mean that if you were to go out and make a large investment in -- or acquisition, that that would be obviously an indication that your leverage would be over 1.5x on a gross basis for an extended period of time, and as a result end in a downgrade? So does that basically restrict you from making any large investments or acquisitions until such time that you can actually pay down some of your debt? Carlos José García Moreno Elizondo: I think, clearly, and that was a little bit the message when we had the conference call last year. The message was, there are clear limitations on the point of leverage from what we can do. So obviously, after your leverage goes down and all depending on whatever you might want to acquire, there may be options. But they're depending on current levels, whatever you might be acquiring these. But certainly, leverage takes into consideration and for us, the decision has been we do want to hold on to our credit rating. They have the top credit ratings in the sector. We value that. They have given us very good access to funding in the market at extremely good rates, and we think that in this age and times, having good credit ratings is something that is very, very valuable. So we do intend to be careful with our management of the capital base of the company.

Okay. And then just one final question on the operations. Do you have any sense of what your EBITDA margins would look like in markets like Mexico and Brazil, if you excluded the subsidies that you're paying for your move to smartphones? Because I know you've referenced data growth and how you're more willing to maybe subsidize on smartphones to get some more data growth. Any way of knowing how much margins would be lifted without those extra subsidies?

I think -- we don't have the numbers right now here, but clearly, we can check and see exactly, in Mexico and in Brazil, what are the costs or the soft extra subsidies that we are doing by selling smartphones and feature phones. So we have that very clear.

And our next question will come from the line of Richard Dineen with HSBC.

Yes, could you perhaps give some details of your new commercial policy in Colombia that led to the 2.7 million net disconnections? What's the time period to be considered inactive? And is this just a 1-quarter event, or is this something that may last over a number of quarters? And maybe just, as a kind of follow-up to that, what is the current inactivity definition in Mexico, and might you be kind of considering a subscriber cleanup in that market, too?

Well, in Colombia, what we do is we reduce 1 month from the calendar and I don't remember exactly, but maybe it's going to be in 60 days. It's what we have and it's what the cards have. So I think that's the right policy to do, and that will increase our ARPU and that's what we're doing. In Mexico, I think we do that maybe at -- it was a couple of quarters ago, so we chose to do that maybe last year. I don't remember exactly in which quarter. But we are trying to standardize all our calendars that we have in Latin America, including the U.S. So -- and I think in December of 2011, we do something. I'm not sure if we are in the same date as Colombia or we need to do something else, but what we're trying to do is to try to standardize all the calendars and -- all through Latin America, including voice [ph] and TracFone.

That's very helpful. Maybe just a second question, if I may. Just the CapEx numbers seem to be quite low in the first quarter, sort of 10%, 11% of sales. Obviously, as we've discussed, the buyback was pretty aggressive in the first quarter. Was the CapEx number, is that more of a sort seasonal tactical issue? Or is any part of that CapEx, is that to do with more of the uncertainty over the medium-term with the regulatory situation in Mexico and Colombia, maybe the risk of regulation getting even tougher in Argentina, maybe even Ecuador? Just wondering sort of philosophically, what's the sort of thinking at the moment.

Yes, only one -- just one thing on your previous questioning. The thing that we want to do with these calendars and the reduction is just to reflect the costing by the clients that are really consuming. So that's what we are trying to reflect to the market, it's to do that. It's one-time, with cost about 30 days on which are to reflect the clients that are consuming. So -- and the next question? Carlos José García Moreno Elizondo: And CapEx, I mean, there hasn't been any change on our CapEx, so the number that you are seeing in the quarter basically has to do with deliveries. As you know, we are accruing the CapEx based on when we -- actually, we see the equipment and become obliged to pay because we have already been presented with an invoice. So that is really something that is -- it's very much, I wouldn't even say [indiscernible], I mean. So you don't have to do with the [indiscernible]. But, yes, I think it is a little bit lower than what would be the average for the quarter all throughout the year. We're talking about $10 billion of CapEx and actually, what was accrued in the first quarter was much smaller than what will be the quarterly average.

Our next question will come from the line of Soomit Datta with New Street Research.

A couple of questions, please. First of all, just on some of the prepared comments in the press release, you're talking about how a number of the fixed-lines are not economic. I think you talk about 1.3 million landlines not being economic? Is it...

It's just a little bit higher. We don't hear you well. Can you talk a little bit louder, please?

Yes, yes, sorry, is that any better? Hopefully, you can hear me. Okay, sorry about that. Yes, just going back to the comments you make in the press release about how a number of the fixed-lines, the Telmex lines are not economic because they're in rural areas. Is it at all possible to think about the mobile business in the same way? Telcel, is it sort of sensible to think about parts of the Telcel business by geography, which are not profitable? Or is it kind of not really sensible to look at it in that sense? And that's the first question.

So the question is on -- we don't hear you so well, but if you're asking that in the fixed-lines in the rural areas, we're not being that profitable, and you're asking that is in the wireless lines, also in the rural areas, we're not profitable? The question is we have a model. In some areas, the payback is longer, but everywhere where we, say, invest has to be profitable, depending in some places, and some different services are much better. The return is faster and the other ones are longer. So until we don't know what are going to be the new rules, then we cannot know exactly what is going to be the model that we're going to use to do those areas. So we need to wait until see and if there's going to be profitable, then we're going to still invest in, and if something is not profitable, well, that -- then in those places, we are not only in those services, we are not going to invest. It all depends on that. Carlos José García Moreno Elizondo: But I think it's important to highlight that Telcel's coverage was by design, it was not by obligation. It was what [indiscernible], because it was the business model that we wanted to implement. The business model, in which Telcel distinguished itself from its competitor, by being the one that has the greater coverage. So you have to -- when you look at that, it's more difficult to say that there's a given region that is less profitable. Because effectively, it was all a part of the same business model, having coverage everywhere. Now to the extent that the rules of the game change, then the business model may be evaluated.

Okay, and just a quick follow-up on that. To the best of your knowledge, when the -- with the reform initiative talking about dominance and market share, are those market shares being talked about on a kind of nationwide basis or a state-by-state basis or a municipality basis? Do you have an understanding as to what sort of region will be discussed?

I think it's only in the making. We don't really have these yet definitive secondary regulations. What is the profit at present is the basic framework on which all the secondary regulations will be revised. And I think that until that happens we really won't have any more certainty, in terms of how these will be managed. So I think we'll really need some time before we can answer your questions like we want. And what we understand from what we have been hearing, is that all these regulations are going to be for increasing the investments, grow the market, grow the telecommunications sector, invest more on broadband, invest more on everything. So we need to wait what are going to be the secondary laws to understand what's going to happen.

Okay. And can I just ask a couple of questions unrelated to the reforms? Just on Mexico, I think you normally give a data revenue growth number for the quarter. You have done for the other markets. You didn't give one this quarter. I just wondered if you had the data revenue growth number, please, for the mobile business. And then secondly, could you maybe just talk a little bit more about the deal in the U.S. with Wal-Mart. I think you've got a distribution agreement which kicked in from the beginning of Q1. Could you talk a little bit about how much that is? And perhaps, contributing to the growth in TracFone?

We really don't hear you very well. We have a bad connection with you, so we don't hear your question. It's very difficult to hear your question. Can you repeat it?

Yes, sorry. Do you have a data revenue growth number for Mexican wireless, please, is the first question, data revenue growth number? And then secondly, just interested in how the Wal-Mart distribution arrangement in the U.S. is going, and how much that distribution is contributing to TracFone growth.

Well, I think you got it. The Wal-Mart distribution is very important, but also it's important, all the products that we are launching. So if we have a good product launch, a good distribution network like Wal-Mart, then that's why we are so successful in the market. So we're really happy the way TracFone is developing and we are growing maybe more than what we have been expected. We have a good cooperation between Wal-Mart and us, and we also have very good products to offer to the market. So that's mainly what we have [indiscernible].

[Operator Instructions] And our next question is a follow-up question from the line of Dan Kwiatkowski with UBS.

I've got 2 questions on Brazil. We saw an important sequential drop in terms of churn and also an improvement sequentially in margins in Brazil. Do you think this is a turning point for churn and for margins in Brazil?

Well, I think what you could see in Brazil is that we are really improving. And we have a very good cost base increase in the postpaid subscribers and the churn has been lowered, so we are happy the way Brazil is developing. We have a lot of challenges still, we need to do more coverage. We are launching 4G, the 4G networks, so I think it's still a lot to do in Brazil but we're feeling much more comfortable on how the company is developing there. Now you could see the indicators and the ARPU, who has the most churn, subscribers in postpaid, everything is going in the right direction. So -- well, that's mainly what you could see in Brazil right now.

Okay, and the second question is on the -- just to follow up on the NET, Embratel and Claro integration. Have you already garnered all the tax efficiencies associated with that? Or is that a source of synergy still to come? Carlos José García Moreno Elizondo: There's a -- evidently, on the one hand to the extent that you reduce the number of intercompany transactions, which physically accrue a sales tax that cannot be credited back. To that extent, there are certain efficiencies. And then obviously, I think in the different companies, you have different positions or the integration has to be done in a way that you [indiscernible].

I think the consolidation of the company is also helping a lot in the integration of the operation. So everything goes together, so I think it's important to do the integration of the operations, but also the integration of the financial leads of the company.

Specifically, there are no sort of tax losses carried forward in the mobile operations that could be offset by the profits in the, say, in Embratel. That's not the idea behind it. Carlos José García Moreno Elizondo: I think the other kind is -- as I said, on the one hand, you're going to prepare the [indiscernible] that you have. On the other hand, you want to generate more efficiency at the operating level. There is a lot of noise by having disparate operations and you want to win them under the same umbrella, that costs -- it costs -- some costs of the one that I mentioned in direct sales taxes, it allows us to streamline the structure. It will allow us to better manage the comps on an addition perspective. And yes, it is important to maintain whatever tax benefits we can pick up.

And our next question will come from the line of Rick Prentiss with Raymond James.

My first question is on the smartphone effort. I think last quarter you mentioned that about 59% of your postpaid base was on smartphones. Can you update us as far as where that is now? And have the prices dropped such that you're seeing the ability to push smartphones into the prepaid side as well yet? Carlos José García Moreno Elizondo: I think every day, the smartphones are reducing their prices, but in the other side, new, good smartphones are in the high level of prices. So what you could see is that new phones are getting at the high prices, but also mid and low prices, you are going to see a lot more smartphones and feature phones. So of course, we -- you could see that the growth in data in the prepaid segment is going well, and we expect that in the next years you could see a good rate of our prepaid in feature phones or in smartphones. No doubt on that.

Okay. And then, obviously, the U.S. has been a bit chaotic with all the mergers and potential mergers. When you think about TracFone and how well it's doing there, as you pointed out, what does the changing landscape in the United States, with different companies merging and the installment plans coming in, at least at T-Mobile, what does that do to TracFone? Carlos José García Moreno Elizondo: Well, I don't think it has to do too much right now. I think what we are doing in TracFone is focus on the operations. We are working with a lot of the carriers. We're working with AT&T, with Verizon, T-Mobile, Sprint, so we're having with all of the main carriers, we're having business, we're accessed on them. So what we need to do in TracFone is to focus on the operation and still deliver what we are doing right now. So having and doing very good product and expertise that we have in prepaid, I think, is very important on what TracFone is doing right now.

I think one important thing is that TracFone has been very successful now in having also data services, and data services are writing -- are more than doubling year-on-year. If you look at the rate of growth of revenues of TracFone, 32% for the U.S. market is quite respectable, and a lot of the growth in revenues is basically coming from the data side. So it's important to see that there's a lot of pent-up demand for data services in the U.S., from clients that are just getting into the game with their cheaper smartphones.

And our next question will come from the line of Will Milner with Arete Research.

Just a couple of questions, really, on Colombia, and the growth outlook there. I think going through the quarter you had changes to your mobile termination rates and also restrictions on your ability to price on-net traffic, cheaper than off-net. I mean, given we've seen quite a slowdown in the first quarter, is it the case that you would expect to see a further slowdown in the second quarter, as you see a full quarter impact of those regulatory changes? And then also on Colombia, just on the EBITDA trends, I think even if we adjust for the 3-percentage point one-off, it still looks as though EBITDA fell in Colombia in the first quarter, and this has obviously been a business growing EBITDA at a relatively fast rate until now. Would you expect EBITDA for the remainder of the year to continue to shrink, given the regulatory changes? Carlos José García Moreno Elizondo: If you look at the effects or the changes in EBITDA in Colombia, there are 3 factors. One, is the fact that I mentioned a little while ago, that was 3% of revenues. There were 2 other factors which were -- one was the subscriber acquisition costs because we are going now faster in Colombian postpaid. And if you look at data revenue growth, that's one of the countries where we are doing better. We are growing data revenues at more than 30% in Colombia, and we're going to hold onto this pace. So that has entailed some clarification costs by way of smartphones. And then there's a smaller impact. Chile is less than 1%, of -- which would be the effect of the asymmetric interconnection rates. Okay? So those are the 3 major components that are coming out with the -- with an impact on EBITDA. But part of this are domestic charges, which is less than 1% of revenue, part of it is subscriber acquisition costs and then part of it will be slowing that back down.

And one thing that -- I think the markets in Colombia are very good margins still, and what is important for -- to understand is with these asymmetric or dominant regulations that we have, means that we're going to sell more. And what keeps you a lot on the EBITDA is the subsidies and the selling. So if you're going to sell less then I don't think that the EBITDA margin or the EBITDA will be less or will reduce. So it goes, the EBITDA rose a lot. It's really related to the sales of smartphone subsidies. So if we're going to sell less because we are in the -- as a dominant player, then I don't think that the EBITDA is going to be reduced. It could be reduced by other factors, but not specifically by this factor.

Okay, and if I could just have a follow-up on Claro in Brazil. You mentioned everything is now moving in the right direction and customer intake has improved, but the mobile service revenues are still falling 4% year-over-year, which sort of suggests that perhaps pricing has deteriorated in the quarter or not. It would be good to get your comments on that. And also I guess, given the declines you've seen in the Brazilian mobile business for the last 4 quarters, is there -- would you be prepared to talk about a target for returning to growth in that business?

Well, I think, the first thing that you could see in Brazil is that the prices of the -- are reducing 27% in the year. So still we have a lot of competition in the market. So even that we're saying that everything is on the right direction, still I said that there's a lot of things that we need to do. Also, the interconnection rates are going down, and they are going down again in April. So I hope that Brazil will be more rational in terms of competition. We don't know that so we still need to compete. But I think everything goes in the right direction, and I'm sure that we are not only looking about the subscribers, we are also looking on revenues. So it's very important for us that the -- most are growing 16% and the traffic is increasing a lot. Data, also, will -- it's a good challenge on data. We need to put data, a little bit more profitable and growing faster. So there's just still a lot of things that we need to do still in Brazil.

Ladies and gentlemen, due to time constraints, we have time for one more question. And our question will come from the line of Mauricio Fernandes with Bank of America-Merrill Lynch.

One -- question regarding the pricing environment in Mexico. So we're still seeing the revenue per minute down by approximately 20% as -- year-on-year, as opposed to days in the fourth quarter. This is an acceleration from the previous decline in revenue per minute. And the good thing is units of use have gone up to almost fully offset that. But I wonder, for how long would you expect the revenue per minute to fall, and for how long would you expect the MOUs in that case to continue to respond as a result of the price cuts?

Well, I think in Mexico, what you could see is that we have a very, very competitive pricing and rates in the market, I think one of the lowest in the world in Mexico. So prices in wireless are less than $0.04, $0.03, so it's really competitive. So I don't know until -- how far we're going to go there. But prices are there, the other thing is the data is growing a lot. So something important is that data is growing, value-added services are growing also. So well, let's see how has the prices had been falling 20%, around 20% year-over-year in Mexico, so let's -- I cannot tell you exactly what the competition is going to do. In the next quarter, we are putting infrastructure, we are having capacity, we are working a lot on the quality of the service, we are working a lot on the distribution. So there's a lot of things -- we have 4G. 4Gs has been -- LTE and 4Gs have been very successful in Mexico. The speeds people -- we have been, in number portability, we have been getting a lot of new customers. It means that customers want -- are preferring the Telcel network. So that's mainly what is happening in Mexico, Mauricio. So what's going to happen in the future? Well, we don't know exactly what the competitors are going to do and how the market is going to react. But still, we have a lot of competition, and Mexico is becoming, really, one of the lowest countries with -- in pricing in the world. We're close to U.S. On the OCD countries, we are the second lowest of all of them.

Ladies and gentlemen, this concludes our question-and-answer portion of our call. I would now like to turn the call back over to Daniel for closing comments. Please proceed.

Well, thank you, everyone, for being in the call. We can take any follow-ups, if you wish, and...

Thank you very much, everybody, and thank you for being in the call. Thank you very much.

Thank you for your participation in today's conference. This concludes your presentation. You may all disconnect. Good day, everyone.