América Móvil, S.A.B. de C.V. (AMX) Q3 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q3 2013 América Móvil Earnings Conference Call. My name is Jackie, and I will be your operator 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 Ms. Daniela Lecuona. Please proceed.

Good morning, everyone. Thank you for joining us in today's call. We have on the line Daniel Hajj, our CEO; Carlos Garcia Moreno, CFO; Oscar Von Hauske, COO; and Carlos Robles, CFO of Telmex. Daniel?

Yes. Good morning, everyone. Thank you for being in the call. Carlos is going to make a summary of the third quarter results. Carlos José García Moreno Elizondo: Hello, good morning, everyone. Thank you for being on the call. We finished September with 333.4 million accesses, 4.6% more than a year before. Wireless subscribers were up 3.6% to 265 million after 3.1 million [indiscernible] in the quarter. Whereas our fixed-lined RGUs rose 8.6% to 68 million accesses of which 1.4 million were obtained in the third quarter. In wireless, our postpaid base increased 11.3% from the year before, whereas our prepaid base rose by 2.3% reflecting changes in our churn policies throughout the year. In the fixed line platform, PayTV continues to be the more dynamic business line, increasing 17.4%, followed by fixed-broadband accesses that were up 11.9%. Of the 1.4 million RGUs obtained in the quarter, 49% were PayTV clients. Triple-play bundles continue to be the main driver of RGU growth. 51.2% of the net RGU additions were sold in the triple-play bundles. Double-play packet shares accounted for 32.2% of net adds, and only 6.6% were single play additions. It is important to note that the number of triple-play packages outstanding increased 20% from the year before. Brazil contributed with almost 75% additions of fixed-line RGUs. Recently, it launched our first mark-to-market quadruple play product, the Combo Multi. In the purported strength of the U.S. economy in the third quarter, which have led the Fed to call for the tapering of its purchases of long-term securities, seemed very much at odds with the state of the Mexican economy that appears to have grown weaker throughout the year on account of a certain shortfall in government expenditures relative to plan; problems in certain sectors, including housing; and an apparent lack of liquidity throughout the economy that is constraining private sector spending. In South America, notwithstanding the recent drops in commodity prices, economic activity appears to be recovering. Our revenues totaled MXN 194.2 billion in the quarter, and EBITDA came in at MXN 63.3 billion. Revenues were nearly flat relative to the prior year, below 0.7%, and EBITDA was down 5.8% in peso terms. At constant exchange rates, third quarter total revenues were up 7.5% from the year-on-year quarter, and EBITDA nearly flat at minus 0.5%. In South America, service revenues rose 8.9%, the fastest pace in 6 quarters. And in Central America and the Caribbean, 4.9% year-on-year. In Mexico, service revenues decreased 2.1% in the quarter, overturning the 1% rise seen in the second quarter. For the most part, the decline seen in Mexico is attributed to the weak state of the economy. Mobile data and PayTV continue to be the more dynamic business lines with revenues rising 22.4% and 21.7%, respectively, at constant exchange rates, followed by fixed-broadband, whose revenue grew 10.2% year-on-year. Both mobile and fixed line voice revenues were up by 2.2% and 4.6%, respectively. Our comprehensive financing cost stood at MXN 10.8 billion, which includes a foreign exchange loss of MXN 2.9 billion compared to foreign exchange gain of MXN 9 billion a year earlier. All in all, we obtained a net profit of MXN 16.4 billion in the quarter and MXN 57.4 billion in the year through September. It was equivalent to MXN 0.23 per share or $0.35 per ADR. The main driver of the results shown in our net profit relative to the year-earlier quarter was a swing in the foreign exchange position. It was particularly MXN 11 billion, nearly MXN 14 billion. Our net profit was also affected by our share in the losses posted by KPN on the sale of AMX subsidiary which ended up lowering our net income by MXN 1.2 billion. Our net debt stood at MXN 440.2 billion at the end of September. It was up MXN 68 billion from December, which helped finance MXN 174 billion in capital outlays and shareholder distributions. Capital expenditures totaled MXN 79 billion, acquisitions MXN 16.5 billion, including our share of the rights issue by KPN. Share buybacks MXN 58.3 billion and dividend payments of MXN 7.9 billion. We also contributed MXN 12.5 billion to the funding of pension liabilities. Well, with that, I would like to open now the floor for questions. Thank you very much.

[Operator Instructions] And your first question comes from the line of Vera Rossi with Goldman Sachs.

I want to ask a couple of questions about Brazil. First, could you talk about if there is any region in the Brazil in which AMX is growing faster or the growth is basically throughout the country? And in wireless, specifically, we have seen consistent improvement in revenue growth in the last quarters, and if we should continue to see this trend going forward?

Vera, I think in Brazil, we have been seeing in all the regions, mostly all the regions good growth. Very competitive also in all the regions. And I think the way we have been operating, executing on our plans, everything that we have been doing in Brazil has been well. And I think we could see this trend in the next quarters. I think Brazil is starting to -- we are starting to see growth in our base in Brazil. And we're feeling comfortable the way the company is developing there. In wireless and also in fixed, we have been investing a lot in the heavy investments that we have been doing in the last 3 years they cost to do that. I think the last survey of Anatel, they cost in wireless has the best quality company in Brazil. So all of that is taking us to increase our revenues.

And a follow-up question, what is the level of CapEx you expect in Brazil this year and next? Carlos José García Moreno Elizondo: We haven't finished our budgets still, until now. We're reviewing that. I think maybe in the next call we can talk a little bit about what's going to be our investment the next year. Now we are reviewing in detail what -- there's a lot that we have been already doing in Brazil.

And your next question comes from the line of Brandon Park.[ph]

I'm calling to see, is América Móvil still interested in investing in Europe? And maybe elaborate why or why not?

Yes. We still are open to any good investment, and even if it is in Europe or in Latin America or in any place that looks and makes sense for América Móvil. So we're open, and we're open to see any investment that we could do.

Maybe just a follow-up. Do you think you might be investing in either Latin America or Europe with maybe a partner, such as like another company like AT&T or someone else?

At this time, we haven't had any talks with them about doing something together in Latin America or in Europe. So at this time, we don't have anything on this matter.

And your next question comes from the line of Andrew Campbell with Crédit Suisse.

My first question is about the weakness that you mentioned in the Mexican economy during the quarter. And I was wondering if you're looking at this as kind of a one-off because of the weather issues during the quarter. And if you are already seeing perhaps a bit of a better dynamic in the fourth quarter, or do you think this is something that we should expect to continue for a time? And then my second question is about the pension contributions that you mentioned. If you could just give us an update on where things stand on the funding basis, if now the pension plans are fully funded or if there are some additional contributions expected?

I think on the -- we have very bad weather in some states of Mexico. And while that creates that -- we have some reduction on the consumption and on the way people talk there. But I think, really the issue was the weak economy that we have in Mexico. Carlos can develop a little bit more on that. And on the pension funds, I think $900 million were for --getting to the Telmex pension fund. And something, the rest, we'll put it in the Puerto Rico pension fund. I think Puerto Rico is more or less funded and Telmex is around 85% -- 80% to 85% funded. So that's where we stand on the pension liability. Well, Carlos can talk a little bit what he feels about the economy and the next quarters on the economy on Mexico. Carlos José García Moreno Elizondo: Okay, Andrew. As I said before, I think, the Mexican economy has grown weaker. It has been partly a function of very significant pullback in government spending that took place probably since the end of last year, but it has continued for the most part. And now really, as you know, we got cuts on issues in the housing sector, in particular. That has somehow trickled down to the rest of the economy. So there is a perception that there's not much liquidity. People are not spending much. I think private sector consumer spending does feel a bit subdued. And that's something that is -- you can tell that it's very different this place that we're seeing now in the rest of the region. So again, I would take this, it's a weak economy. Probably it will be accelerating hopefully in the last quarter. But it has been weaker than expected. I think, everybody knows that. At the beginning of the year, we had growth expectations of -- in excess of 3%. I think the latest report that I have seen have the growth for the year come down to about 1.2%, 1.1%. So there's been a significant de-rating of growth expectations for the country.

And your next question comes from the line of Richard Dineen with HSBC.

A couple of questions, if I may. If you could maybe give us a bit more detail about the enterprise agreement with AT&T for Latin America that you announced in September. How does that work? What sort of customers is it for? Is it to recover revenue share or something? And secondly, if I may just to follow up on KPN. Just maybe a little bit of insight as to why the negotiations with the foundation broke down. Was it price? Was it other demands that they were trying to impose upon you? And I guess, I'm just trying to understand why was it such an issue? Was this a one-off with the Netherlands, with this company, or is it something that might be more typical across Europe? And would that sort of affect possible other investments in the region?

On the AT&T, Oscar, can you explain a little bit what was the alliance of what we do with AT&T? Oscar Von Hauske Solís: Sure. We did an alliance with AT&T to serve multinational accounts all across Latin America, mainly for VPN problems, data problems and voice problems. It's an alliance to go to the market together with these enterprise and multinational accounts like Procter & Gamble, GM, et cetera. And while we are using this leverage our last mind that we have in Latin America and as well leverage from the last mind in the U.S. that AT&T has. We did see this process to go to the market, and that's it. It's more like a commercial alliance with AT&T.

And on KPN, I think what happened on KPN is we have been having talks, a lot of talks with them. We make that offer. The offer was at a certain price. The price was EUR 2.40. And we have been discussing and the way we can operate. And at the end of the day, in that offer that we do, there were some issues, some things that we need to have that what we wanted to have more than the 50% of the company. And then the foundation came in, and with that, we cannot accomplish what we're asking they offer. And that's why we do not proceed with that offer. That's really what happened. Management wants a higher price. And we think, as we have been always very disciplined on that, that the price that we have been paying was fair. And we decided not to increase the price. And as we don't increase the price, then with the foundation in sight, we cannot accomplish what we said that we're going to do with the offer. So that's what happens with KPN. But that does not mean anything in the rest of Europe or in Latin America. So that is specifically what's happened with KPN. And really, the reason is we think that EUR 2.40 was a fair price, and the foundation does not think that way, so we cannot proceed with the offer. We have always a good reputation. That's why we think and we really think that the price of EUR 2.40 was a fair price. And well, they don't let really the shareholders to decide if that was a good price or it wasn't a good price. So at the end of the day, that was what happened. Carlos José García Moreno Elizondo: It's not something that you encounter commonly in market, in economy environment to have a free market.

Yes, right. Maybe just super quick follow-up. Just could explain the relationship with AT&T? Is that a revenue share? How do you get paid out, out of that relationship?

It's just a commercial agreement. We provide, last mind, they provide to us last mind. That's it. I mean, it's not revenue share.[ph]

I think, at the end of the day what is happening is, all the investments in Latin America to carry these big customers, we're going to do it. And if they're going to be used by AT&T, and in U.S., they are going to do all the investment, and we're going to use those investment. That's more or less, that's the commercial agreement that we have with them.

And your next question comes from the line of Mauricio Fernandes with Merrill Lynch.

Daniel, could you please give us a sense of the ARPU in Mexico? So in wireless, it was down by approximately 2% versus the second quarter. Was anything specifically -- I know Carlos mentioned the economy. Anything more than that as to working days or pricing that came down? That's question one. And the second maybe for Carlos is whether the fiscal reform is going to bring any relevant changes to América Móvil, either just in Mexico or on a consolidated basis?

Well, I think what you could see in Mexico is because of the weak economy, we have a reduction in our ARPU of around 6% in Mexico. Also, what is happening is that a very competitive market. So you have to do better plans, more usage and prices have been down like 13% year-over-year. So still, we have very competitive prices in Mexico, but still going down. So that's mainly, I think when the economy starts to recover, I think we can see a better ARPU. I think it has been a lot related with that, and also with the competitive market and the reduction on prices that we have been having. So that's mainly what you could see in Mexico. Fourth quarter is also a big quarter for the wireless side. So hope that the economy will recover a little bit. But let's see, let's see. Carlos can talk a little bit about the fiscal reform. Carlos José García Moreno Elizondo: We're on -- I don't know if you were asking about reforms in terms of impact on América Móvil or generally the effects of the tax reform, Mauricio? I hope you can clarify.

Sorry, the tax reform...

And, Mauricio, just remember that 80% of the market in Mexico is prepaid. So in prepaid, people is adjusting every day what they can use. So as Carlos was saying, we don't have -- we don't feel that there's a lot of liquidity in the market, where it's been difficult for the people to use more the phone. So that's where we stand. 80% of our customers in Mexico are prepaid or are in the prepaid segment, okay. Carlos José García Moreno Elizondo: We don't know on the fiscal reforms, the final details, how it's going to end up. But generally, at least on the exercise that we have done so far, Mauricio, we do not expect to have any major impact on América Móvil at this point. But again, this has to do-- it's contingent upon seeing the very last word to come out. Certainly, on the basis of the main tenets, we do not expect to have any major impact on América Móvil.

And your next question comes from the line of Alejandro Gallostra with BBVA.

My question is really to Colombia. How are you feeling about all the symmetries being applied in that country and then -- because mobiles have been quite volatile lately? Is it entirely do you do to specific values seen in September or you also relate to the segmented circulation?

We don't hear you very well. You are talking about the Colombia?

Colombia. The impact on the revenue.

Well, in Colombia, what have been happening in Colombia. You can compare quarter-over-quarter. And quarter-over-quarter, the ARPU doesn't look good. But if you look at year-over-year, the ARPU was growing 7.8%, and I think it's good. So I think what we could not do is to compare quarter-over-quarter because quarter-over-quarter, it's a lot on seasonality, different promotions, Mother's day in some, other ones not. So, if you compare what -- if you compare in year-over-year, you can see 7.8% more on ARPU and 7.6% more in revenue per minute. So data is soft 17%. Data plans have been increasing a lot. People is using a lot the data in Colombia. So I think all, overall, Colombia is doing well.

But what is driving the volatility margins? Is it specifically in this quality or entirely due to the technical failures that you mentioned in your press release by September? Or is it also related to the asymmetries being postpaid regulator?

Yes, asymmetries have some impact on that. I don't remember exactly how much, but Daniel can tell you. But they have something in asymmetries. Also as we're selling more and more smartphones, then the soft CDs are also impacting a little bit the EBITDA. That's more or less what you could see in Colombia. It's soft CDs on big handsets, on high-end handsets and smartphones, and a little bit the interconnection rates, the asymmetry in interconnection rates.

Okay, and my second question is regarding the upcoming broadcasting licensing in Mexico. How serious are you considering about participating in these upcoming auctions? And then should you ever decide to participate, would you decide to go alone or would you seek a partner that could the know-how to this business?

Well, we still doesn't have a plan. What we have been saying is that we're going to participate if the government is okay on that. So until today, we're discussing what we want to participate. And we still doesn't have a strategy if we're going to go alone or we're going to go with someone. So that's mainly what I can tell you.

And your next question comes from the line of Michel Morin with Morgan Stanley.

So 2 questions. The first, Carlos, in Brazil, margins continue to trend down. I know, in the past, you've talked about how you extend certain costs related to network expansions. So I'm wondering if that's still a source of pressure, or if you can parse out for us what is driving those margins lower. And are we getting to a point where we might see a turnaround in that trend at some point soon? And then secondly, just to follow up on the KPN question earlier. I guess the question that everyone is asking is what comes next, given everything that's happened in the last few months. I think, initially, you had said you would take your time, you're happy with the minority stake, and then you launched the offer, perhaps surprising some people. Now the offer's no longer on the table. I mean, are you happy remaining as a 30% shareholder, even though you no longer have the management? I think you had an agreement with the management. So if you can update us on kind of what your thinking is, what your plans are with that investment, that will be great.

Yes. On KPN, what we -- I want to have my open options. As they -- what I said is I'm happy today with the 29%, yes, but I want to have open my alternatives. And if we feel that the company is doing good, and we feel that, that 29% is a good investment, then we can stay there. And if not, then we don't have taken any decision on that, and we're not going to take it until we decide really what we want to do with that. So we don't have any sharing on that, and we're going to take our time to take a decision on what we do with the investment on KPN. And on Brazil, Carlos? Carlos José García Moreno Elizondo: Well, on Brazil, as you point out, we have been -- the main thing, I think, affected partly. That'd be very rapid expansion that we have had of the network. As you know, we've been investing very heavily in Brazil over the last 2 years, 3 with this one. And that means that, in essence, there's a lot of spillover effects into OpEx from the very substantial investment program that we have today. In addition to that, as you know, we've been growing very, very fast [indiscernible]. And we have significantly increased the number of homes passed. We have -- over the last year or so, we have built more than 2 million homes passed in Brazil for NET. We have entered new regions, which means that you have to put in place new distribution capability. You will need to hire more people. It's not only about the network, but it's also about the commercial effort. But it's proving to be extremely productive. We've been taking significant share of market. And there, you can see, the PayTV revenues continue to be very solid in Brazil. We're making the case earlier today that roughly 60% of the RGU growth in Brazil was with triple play. PayTV is the main important -- the more important catalyst in this effort, and we are not sparing money to continue with that effort. Altogether, Brazil accounted for nearly 75% -- as I mentioned earlier, nearly 75% of the new IDU [ph] additions in the quarter, which were quite substantial. And this is all very much on the back of PayTV. So the last thing to keep in mind, I think, is that you structurally have a different EBITDA margin for different business lines. And PayTV's margin is, by nature, lower, because in order to provide the service, you first to have -- to provide -- to acquire the content. And as it is the case, that revenues in Brazil are probably growing fast in PayTV than in other segments, in other business lines. It is the case that PayTV has increased its share of total revenues. And that means that the structural EBITDA margin will be coming down. So that's also something to consider when you are making comparison with last year, for instance, with sometime before, because that's obviously a very significant impact. The experience in the share of PayTV within the total revenues and within the total EBITDA has increased and will continue to increase significantly in Brazil.

And -- but something to add as the first question that Vera asked also is, in my feeling, it -- with the all the investments that we have been having, revenues are starting to come, revenues are increasing. And I'm sure that in the future, with those revenues that are coming, it's -- I'm sure that EBITDA, it's also going to increase. So the investments, first, the revenues and, second, the EBITDA. I'm sure that in the next years, EBITDA would be much better than it is today. Carlos José García Moreno Elizondo: Only one last comment here. If you look at service revenues in Brazil, they increased 8.7%, 8.7% in the quarter. That's the fastest rate that we've seen in 2 years, and I think it's probably faster of any operator in Brazil. So as Daniel said, we are happy about top line growth. Obviously, it comes a little bit at the cost of EBITDA, at least, in terms of margins. So obviously, this is not -- nothing new. But we expect margins, eventually, will be going back up, obviously, on the lever of higher revenues.

Carlos, just to help us a little bit understand that the PayTV mix shift impact on margin. Because when Net Servicos was separately listed, its margins were typically in the mid- to high-20s, and I think most satellite TV operators have margins in the low 20s. So I'm just wondering, to what extent that is still being a major dilutive factor, or are you -- is it because that the house -- the homes passed expansion that's really depressed the Net Servicos margin temporarily? And on the homes passed, did you say 2 million in the last 2 years?

Last year.

In the last year.

2 million in the last year. And what I said also, which is different from what you used to have with the Net Servicos before, as you know, Net Servicos were constrained by the concessions. They could not go to other regions. This has changed. And now the company is moving fairly aggressively into completely new regions. So there is, as I said, not only building more homes passed in a region you already control and you already have distribution for, you are now having to expand distribution and commercial effort to other regions where you didn't have any presence before.

Right. And the total homes passed now is how much? Carlos José García Moreno Elizondo: 12 million, no, home passes.

19 million. Carlos José García Moreno Elizondo: 19 million.

19 million. Carlos José García Moreno Elizondo: Homes passes.

19 million. Okay, great.

And your next question comes from the line of Jonathan Dann with Barclays Bank.

It's a question on CapEx. It seems that the takeaways at Brazilian CapEx probably goes down. But now that there's less money coming to Europe, will you look at expanding some of the cable and fiber footprints in other Latin American countries and especially -- including perhaps the broadcast licenses in Mexico?

Yes. We have been always open to expand our cable and satellite business. And we have been doing that in 2 ways. The first one is that we're growing... Carlos José García Moreno Elizondo: Home passes.

Yes, we're growing home passes. And other ones is to buy companies, okay. At this stage, what we have been doing is growing home passes and growing our companies in each country. But if there's a good alternative of doing something on a cable company in some country that make sense for América Móvil, of course, we're open to do something, no?

Can I ask a follow-on? Is it -- do you have a sort of strategy for Chile? It seems, I guess by far, the weakest of the countries.

Yes. What we have been -- we have been focusing in Chile, the weakest, of course, in terms of EBITDA. But I think it's a growing a lot in terms of revenue, okay. So in the revenue side, Chile is growing... Carlos José García Moreno Elizondo: 11.4%.

11.4%. So it's -- I think what we need to do as it's a small country, what we need is to gain a little bit more of market share, to have the size on the company and then look for the profits, okay? And that's what we have been looking. Remember that we start really, really small in Chile. And today, the size of Chile, it's -- I think we were having a good size, still a lot of things to do. But you are right. The weakest in terms of properties is Chile, and we're working to increase that.

[Operator Instructions] And your next question comes from the line of Kevin Smithen with Macquarie.com

Yes. I wondered if you could talk a little bit about consolidation in the Brazilian market. Do you think that there's been any change in regulation and political opposition to this? A couple of your competitors in Europe appear to believe that consolidation is going to be allowed in Brazil next year. Is this an opportunity for you? How do you think about this relative to opportunities in Europe?

I think if there's a way that Brazil consolidates I think it's very good for everybody, even for the Brazilian market. Still, Brazil, it's really, really competitive, and I think a consolidation there will be good for the market and for the competition. And of course, we're interested in participating in that consolidation. Still, nothing concrete to say, nothing concrete to see, but of course, we are interested in the consolidation of the Brazilian market.

And you raised some debt at the end of the quarter. With the KPN deal, at least, on hold for now, how should we think about a use of that extra cash? Are you going to save this for KPN? Are you going to save this for team Brazil or other opportunities in Latin America, or should be expect to buy a larger buyback here in the short term?

We're expecting to utilize the profits, and we do that. And that's what we will be doing already. Before the end of this quarter, we will have substantially utilized most of the excess cash for the reduction of debt. We will continue with our share buyback program, roughly along the same lines that we have today.

And your next question comes from the line of Ric Prentiss with Raymond James.

Yes, a follow-up on those lines. Your leverage is, I think, 1.66. We've seen some other carriers around the world take their leverage up for strategic transactions. As you think about Latin America, particularly in Brazil, maybe also Eastern Europe and Western Europe, where do you see your leverage going, and where are you comfortable operating?

Well, I mean, these are questions that have come up repeatedly, and I just like to be very, very clear in terms of how we feel. The question is whether we would be open to funding any acquisition with more debt effectively. And I think the determination that we have in América Móvil is that we do not want to grow to debt. And that we think we have a sizable cash flow that we can rely on. And -- but generally, we are not expecting to have to take on any greater leverage. We're lucky to the levers that we have today. It is partly yes, because we would like to hold onto the ratings that we have, but it is also because of the fact that América Móvil happens to be a more conservative company financially. It's always been like that. We do not like to have a high leverage. So beyond the issue of the ratings, I think it is -- the decisions are more not to -- on its close with more debt. Potentially, it can go up in the short term. It's not that you have to be exactly fixed in a given point. But I think the view is that this is something that cannot be higher than who we are on a sustained basis.

That's very clear. And then my second question is on the mobile data increase in revenue that you were seeing. Can you talk to it on an ARPU basis? What are you seeing as far as the ARPU in a 3G subscriber versus a 2G subscriber? Carlos José García Moreno Elizondo: Well, I don't have exactly right now the number. But a 2G subscriber is mainly a non-smartphone. A 3G subscriber is a smartphone. And within a smartphone, you use lot more data, maybe 10x more data than what you're using at 2G phone and a lot more on minutes. So it's what we're seeing and the trends that we see all around Latin America, so still a long, long way to go in terms of growing our smartphone and our data in the next 5 years, no? But consolidated data are -- it's 11% year-on-year, the consolidated data ARPU. So we're growing around 8% -- 11% year-over-year, our ARPU.

Is it safe to say maybe a 3G subscriber anecdotally might be twice as high in ARPU? Just trying to frame it in even rough terms? Carlos José García Moreno Elizondo: No, it's not easy to say that. Because as the smartphones are becoming cheap, then there's a lot people who is using lower plans within a smartphone. And then so you cannot compare 2G and 3G alone. Because also in 3G, you have a high user people and you have a -- people who is not using that. It will be because there are young people or doesn't have the money to use that. So it's not easy to compare 2G and 3G average. As I'm saying, while it's -- I think 3G is using in data 10x or 7x -- 7 to 10x more data than the 2G, but even in the 3G segment, there's a lot of difference between that. So that's totally different when you have a lower smartphone, lower-priced smartphone than the higher-priced smartphone. You use more data, you use more minutes, you use more browsing, you use more everything. 37% of the current service revenues...

Revenues are coming from data, yes.

And your next question comes from the line of Will Milner with Arete Research.

Okay. The first question, I guess, I just would like to get an update on the telecom's reform proposals in Mexico. I know -- I understand the telecoms commission -- there's a new commissioner that's been elected, and they have 180 days, I think, to write the secondary laws. I wondered if you have any visibility on what's the timing of enactment was and potentially what is under debate there.

I think that the secondary laws has been -- has to be approved at this year. So next year, we have to have that secondary laws. And then there's a roadmap of some things that the IFETEL has. And where everybody's working, I think, they are just getting in the business and working very hard. All the people from IFETEL. So let's see, let's see. We don't have any clarity on anything. Still, they are working on that, and we'll see at the end of the year what's going be the secondary laws.

Okay. And my follow-up question. I just -- on your other European investment in Austria, the experience there, it looks like it's following a kind of carbon copy of KPN. It's just paid a very large sum for a spectrum and looks like it may now need a rights issue. I guess the question is whether your experience in Holland with KPN influences your decision at all in whether to take part in that rights issue and invest more money into that market?

Well, I think it's totally different to what you could see in KPN that what you could see in Telekom Austria. They are 2 different companies. Still, I'm not sure what they are going to -- I -- they pay a lot of money for the license, and there's not any decision today on any rights issue. So until -- we don't know that there's have a decision Telekom Austria on doing a rights issue. So -- but what I can tell you, it's different, i.e., the way they operate and the way they do things is very different between Telekom Austria and KPN. So that I'm sure you could see big difference between these 2 companies.

Okay. And maybe if I could just ask that question slightly differently. If -- would you prefer right now to invest more money in, say, Brazilian consolidation than put more money into Europe?

Well, depending, no, depending where, as Eastern Europe, I think, it's interesting also. Brazil is really interesting. Well, let's see, let's see. I -- we're not -- we're open to all the alternatives. Let's see what's coming and what are our alternatives to do and to invest in other countries. But as Carlos said and I said at the beginning, we have been very disciplined in terms of the pricing, in terms of the debt, in terms of the financing. And we're going to do exactly the same way in the future. So that's the only thing that I have a view, a clear view on that, is that América Móvil will be good financially if we decide to grow even more in Europe or even more in Brazil or more in Latin America, no? That's what I -- we can tell you.

At this time, we have time for just one more question. And your next question comes from the line of Walter Piecyk with BTIG.

Daniel, I wanted to go back to your answer on KPN, because you had mentioned that if you're very happy, that you would keep your stake. And if you weren't, I guess you'd consider what you were doing. So I was just curious, does that exclude the possibility of buying more KPN? Because apparently, if you just bought more, you could force a mandatory bid. So just that first question on strategy.

I'm not saying that we're happy in maintaining the 29%. I -- what I'm saying is that, until today, we don't have any decision on what we're going to do with that 30%, that we could be happy staying with that 30% or that maybe, in the future, we can reduce that percent. That's -- that what we want and the board wants to have open alternatives to do what we feel is the best in the future with the KPN equity that we have, with the shares that we have of KPN. So that's, more or less what we want to have. It's to have options and alternatives to do what is the best for América Móvil in the future. That's what I'm saying, no?

No, I understand that. That was helpful. But if -- but is one of those options also buying more of KPN?

Well, that's an option. We don't have, today, any definition and we don't have any discussion on that option. We don't -- we are -- until today, what I can tell you that this option is not an option for us, but we don't know in the future, no? So it could be an option, yes. But we -- see? The option is to buy more KPN or the option is to sell more KPN. So that's to do or to take. So there are 3 options, to buy, to stay or to reduce. So that's what we want and that's what our board wants to have until this day.

Okay, that's very helpful. And then for my second question, I just wanted to ask about the U.S. It looks like you had decent margins in the ARPU. It was up sequentially with flat net adds. I'm just curious, is this -- where is Straight Talk right now, as far as that 23 million customers? Is it just a mix shift to Straight Talk, and is your traditional prepaid business in decline? Because I -- if you look at AT&T's wholesale numbers, they showed some decline this quarter. If you could just give us a sense of kind of how that mix shift is changing in the U.S. and which network operators are getting more of your usage? Carlos José García Moreno Elizondo: Well, the -- in preference, I think, there's an important thing, which is that the service revenues from a platform. If you look at the year-on-year comparison, they've come down from 35% that you had last quarter, and you have had for some quarters, to 18% this one. And that has to do with the fact that platform starts to consolidate a simple mobile back in June, late June of last year. So the year-on-year comparisons typically have the effects of the acquisition, and now it's come down to pure organic growth. So at present, as I said, just on purely organic sense, service revenues are growing 18% for platform, which is, I think, quite solid. The customer's mix of plans have been trending more toward the Straight Talk plans. They've taken a greater share of the overall sales. And in -- this is a plan that they are basically running off 3 of the 4 main carriers. I think that hasn't changed. But we do see, as I said, a second shift more towards the Straight Talk type of plans and unless -- or along the lines of the payer result that of plans.

And one more thing to add to Carlos' comment is that we are waiting, still, in U.S. to the approval of the acquisition of Page Plus. So it's another segment of the business that we are waiting for that approval. And when we get the approval, then we're going to have that acquisition done. And there's another that it's the SIM cards business that we are going to be in the U.S. So I think TracFone is going to be in all the segments of the market.

Ladies and gentlemen, that concludes your question-and-answer session. I will now like to turn the presentation over to Mr. Daniel Hajj for closing remarks.

I just want to thank everybody for being in the call, and I thank you for holding as well. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.