América Móvil, S.A.B. de C.V. (AMX) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2013 América Móvil Conference -- Earnings Conference Call. My name is Jackie, and I will be your operator 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, Investor Relations Officer. Please proceed.

Thank you, Jackie. Good morning, everyone. Thank you for joining us in this call to discuss fourth quarter results. We have this morning on the line, Daniel Hajj, CEO; Carlos Garcia Moreno, CFO; Oscar Von Hauske, COO; and Carlos Robles, COO of Telmex. I'm going to turn the call to Daniel.

Gracias, Daniela. Good morning, everyone. Thank you for being in the fourth quarter financial and operating report -- results. Carlos is going to make a summary of the results. Carlos José García Moreno Elizondo: Thank you. Hello, everyone. Good morning. The fourth quarter saw signs of a firming-up of economic activity in the U.S., and of what may be an incipient recovery of the domestic market in Mexico, with the FED's decision in December to begin to taper its purchases of long-term securities seen by the market as confirmation of the underlying strength of the U.S. economy. In the fourth quarter, we added 4.8 million wireless clients and 1.2 million revenue-generating units to finish December with 339 million accesses. That is 4.2% more than a year before. This figure includes 270 million wireless subscribers and 69 million RGUs. Year-on-year, accesses of our fixed-line division increased 8.2%, whereas our wireless subscriber base rose 3.2%. We added 1.3 million new wireless subscribers in Brazil, 1 million in Mexico, 616,000 in the U.S. and 614,000 in Colombia. In relative terms, our fastest-growing operations were those in Central America. I think it's important to highlight that in most markets, we continue to see stronger growth of our postpaid subscriber base than that of the prepaid. We continue to make in-growth [ph] in the postpaid segment of the market practically across the board. As regards our financials, fourth quarter revenue rose 3.1% from the year-earlier quarter to which MXN 204 billion. At constant exchange rates, total revenues were up 7.8% and service revenues, 5.4%. Leading the way were PayTV sales. That increased 21.8% from the year before followed by mobile data revenues at 18.9%. Those coming from fixed post -- posted a smaller decline in more than a year falling 3%, while the one stemming from fixed data continue to cover close to 10% growth rate. This is important because the drug that we had been facing for quite some time from the fixed-line post business has become smaller and smaller. It's diminished, and it's now something that is almost negligible. At 7.8% year-on-year, at constant exchange rates, service revenue growth in the South American block remained strong. We continue to see very strong service revenue growth in South American block. Although it moderated somewhat from the prior quarter, mostly on account of the deceleration that we -- that took place in Colombia. But service revenue growth remains stable at 4.1% in Central America and the Caribbean. And in Mexico, it picked up from minus 2.1% in the third quarter to minus 0.6% in the fourth, possibly reflecting the beginning of an economic recovery in the country. Fourth quarter EBITDA came in at MXN 63.5 billion. In peso terms, it was up 1.4% from the prior year, but at constant exchange rates, it grows 5.7%. This was, by the way, the best result in terms of constant exchange rates for EBITDA growth in the last 12 quarters. For operating profits, with depreciation and amortization charges roughly flat year-on-year, they increased 2.3% in peso terms and 5.8% at constant exchange rates. The strong EBITDA performance came about in spite of a significant increase in the cost of equipment compared to the prior year. At 15.4%, it outpaced by almost 4x the rate of increase of total costs and expenses, reflecting mostly the increased participation of smartphones in this sale of devices. Our comprehensive financing cost reached MXN 17.8 billion, resulting from a net interest expense on our debt of MXN 6.6 billion; other financial expenses, including commissions on financial services, interest on unfunded pension obligations and the net impact of financial derivatives in the amount of MXN 1.0 billion; and a foreign exchange loss of MXN 10.2 billion. The latter amount arose from the impact on our net debt and payables position of the depreciation of various local currencies versus the dollar and the euro, but also of certain local currencies against each other, in particular, the real versus the peso. Our net profit for the quarter came in at MXN 17.2 billion. It was 15.7% higher than in the year-earlier quarter and represented earnings per share of MXN 0.24 or USD 0.37 per ADR. Earnings per share were up 23.7% from a year before, partly reflecting the impact of our share buybacks. Our net debt ended the year at MXN 442 billion, having risen MXN 70 billion in the year. Our net borrowings helped cover capital outlays and shareholder distributions in the amount of MXN 244 billion, including MXN 129.6 billion in CapEx, MXN 15.4 billion in investments in interests of various companies, MXN 12.9 billion in the funding of pension liabilities and MXN 86.5 billion in distributions to our shareholders, of which MXN 70.7 billion corresponded to share buybacks. I think that with this, I would like to finish this presentation, and I would like to open the floor for questions. Thank you very much.

[Operator Instructions] And your first question comes from the line of Michel Morin.

Carlos, I was hoping that you might clarify one thing regarding your margin in Brazil, specifically in the press release that Net Servicos published. There's a mention of a tax -- or sorry, a legal settlement of some sort that was substantial. So I was wondering if you could quantify the benefit that you received from that and just confirm that, that also translated in better EBITDA at the consolidated AMX level? And then secondly, if you can talk a little bit about your CapEx plans for 2014 and including also at Net Servicos because they're also, we saw recently some disclosure that you were looking to invest something of the order of about BRL 5 billion this year? Carlos José García Moreno Elizondo: What you could see in Net Servicos is we have some disputes in copyrights that we settled. And we reversed a provision that we have of BRL 180 million is exactly the amount of money that you could see in Net Servicos. So that's a dispute. We have a provision. And when we settled the dispute, we reversed BRL 180 million on that provision. And in terms of the CapEx...

I think this provision was not all significant in terms of the impact on the total EBITDA. I think what's more important, and we mentioned that in our report, is that in the prior year, we have had some extraordinary expenditures associated with advertising, and there was when we were introducing the Claro brand altogether. And so the base of comparison already was higher, and that helped the increase of EBITDA that we were taking this year. So yes, the settlement that you mentioned, Michel, is a factor, but I think it was a more important factor, the only one that we have already mentioned. And altogether, we can tell you there is an increase, I think, of 29% of EBITDA in Brazil are posted for the quarter. I can assure you that at least 15% of that would have taken place without any one of the extraordinary charges, okay? So that's -- of the extraordinary issues. But we can -- you can work out with Daniela if you want to go to a specific company.

That's very helpful. And then on the CapEx plans?

On the CapEx, I think what we have for this year is more or less the same amount of last year. It's going to be around $9.5 billion to $10 billion, is what we have. And if you want the disclose per country, maybe you can talk with Daniela. But all overall, we're having around $9.5 billion to $10 billion of CapEx. Carlos José García Moreno Elizondo: Which we'll make it the fourth year in a row, but we were spending approximately $10 billion per year.

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

Could you please provide us with an update on the regulatory front in Mexico? Were you happy or not with the draft of the secondary laws that you're seeing at the moment? Carlos José García Moreno Elizondo: Well, the only thing that I can tell you at this moment is that on December 5, we announced that we received a notice from the Federal Telecommunications Institute. And we have provided Ifetel with a respond, technical, economically and legally. Still today, we're waiting for that resolutions. We don't have anything else on that. So I think that the date would be before March 9 is what the due date that they have. But still, we don't have anything at this moment. Nothing else.

Okay, okay. And second question, if you may, perhaps you could give us more color about your strategy in Europe? Because I would say we are seeing mixed signals here. On one hand, you are consolidating your stakes in Telekom Austria and the re-umbrella of América Móvil. On the other hand, you're reducing your stake in KPN. So how should we read this? Carlos José García Moreno Elizondo: Well, we reduced it 2% in the stake on KPN. What we want is to be financially very good in América Móvil. And that's really the reason why we reduced this 2% there. We don't lose any rights that we have if we have more than 20% plus 1%, something like that. So we're still very active. We're very interested in KPN. And we have people working with them, and that's really what -- we sell 2% only to make more strength, the financial situation of América Móvil.

Okay. But, I mean, this -- I mean, would you pursue your strategy in Europe? Or I mean, would you still consider increasing your stakes in Europe, and at the same time, you would feel you still have the ability to eventually consolidate the Brazilian market if the opportunity comes up?

Well, that's -- we talked about that last quarter. I think we are also interested in what is going on, on Brazil. Still, we don't have nothing else in Brazil, only rumors. But we're not doing anything. Maybe there's going to be a consolidation in Brazil. Still, we don't know, but we are interested in participating in that consolidation. And in Europe, the 2 things that we have been talking are Telekom Austria and KPN. And we're still very active and interesting -- helping and developing the operations there. That's the only thing that we're doing at this moment in Europe.

But I should -- would look a little bit stressed if you pursue all these opportunities within the short period of time than you think?

Well, as we always said, we're going to maintain our financial strength. So well, depending on the way we do things are going to be that or the financial situation that it takes both. Carlos José García Moreno Elizondo: I think just to add to what Daniel is saying. I mean, we've been very clear and very consistent all throughout that we intend to hold to our current ratings. Our ratings had to rate the highest in the telecom sector, at least in the working industry. And we value those ratings very much. So we would be abiding by the constraints that they impose on us in terms leverage. We have disclosed this in the past. We know that leveraging something that you can play a little bit with over a certain period of time. But certainly, it's not something -- we are not considering anything that would air us beyond. We're just comfortable and where the rating agencies feel comfortable in terms of our leverage.

[Operator Instructions] and your next question comes from the line of Mauricio Fernandes with Merrill Lynch.

Daniel, speaking of KPN, it seems that the stake that América Móvil owns on KPN has been reduced to 27% at least at the end of the year. I was wondering if that is still the case. And if yes, what's the rationale for -- I know it's a small reduction from nearly 29%, 30% but what's the rationale and the outlook for holding them and order of this stake in KPN?

I'll answer, Mauricio. This is basically claiming the position at the margin. We had a 29% that we went down to 27%, rough numbers. And that's basically something that allowed us to reduce on our net debt at the end of the year. So it's a little bit of cramming. We'll be positioning, just fine-tuning, as Daniela pointed out before, fine-tuning our financials. In terms of overall importance, it's the same to have 27% and to have 29%. Carlos José García Moreno Elizondo: And just to add, one more thing is if we have more than 20%, we have the same rights that we have. So we are not losing any rights. We are not reducing the people that it's helping there. We're not reducing the synergies that we're having with them. So nothing in terms of operation is changing.

Okay, that's very clear. And well, in Europe, Telekom Austria, you were in a relatively similar stake there. And I know this is just a press speculation but -- about eventually increasing the position there. Obviously, I don't expect you to comment on this, but what's the rationale with Telekom Austria? At some point, last year, you tried to buy the rest of KPN. Is the idea to continue to consolidate in Europe? So if you could provide an update on that, that would be great, please.

What I can tell you is that we have very good relation with the government, with the companies, with OIG, that is the other controlling shareholder. We have been working very good. And what we want is to develop Austria and to develop the Eastern countries there. We're helping there. I think we have very good relation with the management. We have very good relation with the people who is managing the company. And we are -- nothing has been changing since the last year with Austria as we have been trying to integrate and making the synergies between the companies. And that's really what you could see all this year.

And your next question comes from the line of Vera Rossi with Goldman Sachs.

I have a couple of questions on Brazil. Is deceleration in your wireless service revenue we saw this quarter sustainable in the next quarter? And what is the -- what are the reasons behind the improvement in ARPU? And is this the pickup in wireless data from contract users?

Well, as we have been saying is we have been investing a lot in the wireless market in Brazil. I think it's starting to pick up for us. I think the trends are good. Every quarter, we have been increasing. This quarter looks better. And we're doing good in voice and both also in data. So all the promotions and the things that we have been doing. The third quarter and the second quarter has been good. We have been increasing in our prepaid base, 10% year -- in the postpaid base, sorry, 10% year-over-year and 20% on data. One of the things that you could see is that the interconnection rates are coming down. So that is hurting also a little bit in the revenues. But the prepaid, postpaid and the data has been improving very well.

And I have a follow-up question on Net Servicos. What is the number of homes passed that you ended 2013? And what is the goal to reach at the end of '14?

By the end of 2013, 19.8 million home-passes. We intend to build this year 1.2 million additional for 2014. So we're going to end this year with more than 21.5 around -- million home passes.

And are you -- what are the cities or states that are you focused in this expansion of homes passed? Oscar Von Hauske Solís: Well, we are to add another 7 cities. And as you know, we only focus on the A/B market of the segment of the market. So we are going to add 7 additional cities, and not even in the states. And we see opportunity in the marketplace. Carlos José García Moreno Elizondo: But just to complement what Oscar is saying is, I think that NET has been very successful. In any city that we're getting in, we're having very good reception of the customers. We have very good service, quality of service in the TV, but also in the broadband and... Oscar Von Hauske Solís: Think of triple play, triple play. Carlos José García Moreno Elizondo: We're growing a lot on the triple-play. We are not selling TV. We are selling also broadband and fixed. So that's something that NET has been doing very good -- better.

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

You comment on the economic improvement in Mexico in Q4 which is a pretty decent rebound from a weak third quarter where I think you commented on the impact of a lot of prepaid recharges and so forth. Now, the prospects of 2014 look a lot better than they were in 2013. So I'm just wondering how you see the sensitivity to a better Mexican economy in terms of your fixed and mobile businesses, prepaid versus postpaid, usage spend? That kind of thing would be really helpful. And if I may just squeeze in my follow-up which would be to a previous question on the regulation. Again, you mentioned in your release that you have 55% postpaid share in Mexican mobile. And you've also highlighted your presence for example in fixed-line in areas with no competition. In your dialogue with IFETEL, is that kind of segmentation argument getting any traction at all? Are they at all receptive to that? Anything on that would be really useful as well. Carlos José García Moreno Elizondo: Well, we are providing IFETEL all this data, I think not only in fixed where we don't have any competition. We also have a lot of small towns in Mexico. I can tell you a lot of small towns in Mexico where the only services is Telcel. So I think IFETEL already have all this data. And as I said to you, we respond technically, economically and legally all the notice that we received from the IFETEL. So that's more or less what we have on that.

By our estimates, Richard, we have a presence in approximately 200,000 communities. And more than half of those, there's no competition. But in any event, just to go back to your question on the Mexican economic outlook. A year ago, when we were having the call for the fourth quarter of 2012, I think the surprise that we all were facing was the issue of Mexico because Mexico had, had a very steep decline in economic activity towards the end of 2012. And that ended up having a spillover effect on our revenues. What we are seeing now is just a very slight improvement in Mexico that may or may not reflect an improvement in the economy. If you talk to different people, different sectors, not everybody is seeing this rebound. So it's difficult to say that this is what's happening all throughout. Now having said that, I do believe that as you point out the expectation for growth, economic growth in Mexico over the year is 3.5% to 4%. And if that materializes, we do believe that it will have a very positive impact on our revenues. Our operations have always been there resilient to a state of economic activity. And we believe that we have seen probably the worst, and that there's some upside to be had by economic growth.

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

I wanted to ask you about the growth of the wireless data segment. You have reported 19%. It has been cooling down a bit. And now it's even -- I mean, PayTV is now your highest growing segment, I believe. But you didn't site growth for wireless data in Mexico. I was wondering what kind of growth are you getting there? What are you seeing? And if this is pulling down the overall growth for AMX?

I think -- let me explain the wireless data. Wireless data is growing all overall, but there are some services in data that are going down. SMS is going down, specifically in Mexico. We have been having a reduction of 17% of SMS revenues year-by-year in Mexico. But as we have been growing in the other, let's say, browsing, Facebook, Twitter, all of those services, the growth of data has been good. We have around, in Mexico, around -- I think it's around 10% to 15%, the growth of all data. Yes, 9.5% the growth in data in Mexico in the fourth quarter. So this came with the big waste of SMS that we're having. Also, the Blackberries has been going down, and we are reducing a little bit of revenue in this segment. But the real data that it's browsing, Facebook, Twitter, WhatsApp, this is growing very fast. And although with new -- seasoned that in prepaid, we're growing very fast data. So prepaid is starting to use data. And you could see this year, good growths on prepaid in the data segment.

And your next question comes from the line of Andrés Medina-Mora with GBM. Andrés Medina-Mora: I was wondering as we have seen the growth in the postpaid sector all across the region, have you seen any modification to the amount of subsidy that you have to do? Or should we expect any increase in this area going forward? And also, what is your strategy for the U.S. in the year to come?

I think we have been having a strategy on growing our postpaid business the last 2 years. It's not a new strategy. We have been growing in 2012 and in 2013. We have been growing more postpaid than prepaid in terms of percentages. And that would be -- it's very difficult to say if we're going to have more subsidies or less because the markets are different, the competition is different and we have different marketing plans in each of the countries. So what -- we are really focused on the postpaid plans. And we have been having a lot of new smartphones, new prices of the smartphones. So there's a lot to add to all of this segment of the market. In U.S, where strategies, the same strategies because we're still growing a profitable growth. We have 2 or 3 good plans. We have our SafeLink plan. We have the Straight Talk that we have been growing. We have very good ARPU so we are really happy the way TracFone is evolving in U.S.

One thing, Andrés, just to add to what Daniel said quickly, it's important to take a look at the numbers. This improvement that we had in EBITDA took place even in spite of the fact, and I mentioned this in my presentation in spite of the fact that the cost of equipment rose significantly this year. And this is, again, because of the introduction of smartphones and tablets that we're increasingly the selling. If you look at a country-by-country, you will see that in places like Mexico, Brazil, Colombia, Chile, you're going to see a very significant increase in equipment cost. And by that, I mean, a multiple of the average of cost and expense that we have in each country, okay? We're growing 3x, 4x, more rapidly cost of equipment than total cost on expenses. So the EBITDA that we have is already after factoring in these increases in the cost of smartphones.

And your next question comes from the line of Marcelo Santos with JPMorgan.

I just wanted to just understand a little bit better the FX loss that happened in the quarter. So when you see that Mexican peso versus the U.S. dollar and the euro, there's no change versus the end of the third quarter, and that we saw the real devaluing against the peso. I'd like to understand a little bit better, how this created this loss? Carlos José García Moreno Elizondo: Well, you have a debt in different countries. And for the purpose of computing the FX valuations, you have to factor in the impact on the local currency of each country of a depreciation, say, vis-à-vis' the dollar, vis-à-vis' the euro depending on how you have your original liabilities. And to the extent that there may be intercompany transaction, that also had to be factored in. So sometimes, if it's in transaction between countries, you may end up having the local currencies be the one that are determining the FX impact of the have FX. In the case of the real versus peso, which we are highlighting in the report, I think the depreciation end-to-end, from September to December is something that is close to 7%. And if you look at the depreciation, year-on-year, it's about 10%. So there's been a very significant depreciation of the real vis-à-vis the peso, and that affects -- that can affect the liabilities of that maybe in Brazil of transactions either in pesos or in dollars.

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

One question on Mexican fixed-line, could you just give us an update on how many homes passed with fiber? And also, in the very strong fixed-line growth, could you just split that between, say, residential revenues, perhaps, business and wholesale, so we can get a better feel for the trends?

You're speaking about the homes passed of fiber -- what we fiber -- including fiber to the home and fiber to the node. We are basically deploying these technologies in the A and B segments in the country, in the main cities in the country so that we can sustain better products and services for our market. And in terms of the residential, the division between residential, commercial and I don't have this numbers at this moment, but I can tell you that the fixed amount in the corporate side, the main drivers, the data, is among half between the Internet and corporate revenues. But all overall, what we are doing is we're increasing the bandwidth in the residential market and in the corporate market. And I think that has been very good news for all of our customers. They are having better bandwidth and better service all around Mexico.

Can I be very European and ask a follow-on question about Brazil wireless trends? Did anything unusual happen in the way you reported or recorded the MTR drag between the third and fourth quarter? Carlos José García Moreno Elizondo: Nothing different has been the way we are reporting. I think it's a good trend. So I hope we can sustain that trend for all this year, but it's a very good trend for us. We have been doing much better. I think in terms of revenues, on data and voice, has been good. The only thing that it's going down, and still this year in 2014 is going down again, is the interconnection rates that is hurting us in Brazil. But the rest has been having a very good trend.

And your next question comes from the line of Soomit Datta with New Street Research.

Could I ask a question on Colombia, please? The growth are, I think -- on the wireless business service revenues was kind of close to 0. One of your competitors, Millicom reported sort of greater than 20% growth yesterday. So that they seem to be picking up a bit, you seem to be losing a little bit. You referenced the 70% interconnection cut, I think, is one of the factors in that slowdown. But could you maybe break down a little bit how much was interconnect and maybe talk a little bit about the competitive landscape? And moving into this year, do you think you can return that business to growth again? Carlos José García Moreno Elizondo: It's a very good question. As you'll say, the interconnection rates are hurting us in Colombia, but I think it's not the only thing that is hurting us. I think we need to be a little bit more -- the market has been very aggressive and we need to return to be aggressive in the market. And that's what we're planning to do this year. We're not going to do crazy things. We want to be very intelligent to see what are the things that we are interested in the marketing side. And -- but we are working on that. And I think that we can put Colombia again on moving to the right trend to a good direction. So yes, interconnection is hurting us a lot. What we need to do, look more in the commercial side. And that's what we're doing. We are starting to put LTE network. And I think that's also something that is going to help us to gain better subscribers in Colombia. But still, a lot of work to do this year.

And if I might ask a quick follow-up on Colombia. I mean, there has been some speculation of regulatory intervention. That sounds quite sort of severe in terms of splitting up the business or limiting kind of market share to relatively low levels. Have you got any insights on where we are in that process?

No, we don't have any insights there. I don't think that's the right thing to do as a government move. So for the country. And we haven't -- hear anything on that.

And your next question comes from the line of Maria Azevedo with UBS.

Daniel and Carlos, could you please share with us your views on the Chilean market, the competitive environment there, the 4G rollout and your expectations on the proposed regulatory reform?

Again, we don't hear you very well. Can you repeat your question, please?

Sure. Could you please share with us your views on the Chilean market, the competitive environment there, the 4G rollout and your expectations on the proposed reform, regulatory reform, please?

Well, on the Chilean markets, we just have 20% market share. So we still need to grow a little bit our share of market in fixed, in wireless, in TV. So we're working there. So I think we can improve our EBITDA this year. We need to improve the EBITDA this year. But we are more focused on gaining a little bit more of volume, of economy of scale, of market share there. So that's what we want to do, and that's the strategy in Chile. And we have been doing that for the last 2, 3 years. And it has been good. We have been growing the business. We have very good competitors there. Telefónica and Intel are top competitors. So we need to do a very good job to embrace our share in a profitable way. So that's more or less the strategy that we have in Chile.

And also as a follow-up question, could you please expand a little further on your views of a possible end market consolidation in Brazil, the timing of a potential bid or any indication if the government is supportive of such a move?

Well, I think the only thing that we have today are rumors. So there is nothing more to comment than that. We don't have any talks with the government at this moment. And the only thing that we have been hearing is what everybody's hearing, that maybe there's a company that would be for sale, and that the alternatives would be that Brazil will be consolidated or that a new entrant will go to Brazil. So those are the 2 alternatives. And we are waiting and looking closely what are the developments on that side. So that's the only thing that I can tell you. Nothing else to say.

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

Just a couple of high-level questions. First, you mentioned how your CapEx has been around $10 billion for the last several years. Can you break that down into buckets as far as what you think the spending in 2014 will be focused on? Is it fiber, PayTV, data centers, 4G, just kind of give us a thought of where you're emphasizing the capital spending? Carlos José García Moreno Elizondo: There's a lot. First, capacity, no? We're growing a lot on data, in wireless. So we need a lot more capacity on data. At the fiber to the node, of course, we have been improving a lot, but we have to make more fiber to the node. We have already, Oscar can talk a little bit about where data centers and the cloud compute that we are having. So we have been well advanced on that. I think this year, we're also going to -- we're going to inaugurate our submarine cable, that it's -- we're putting another satellite this year. Home passes, there's home passes that we're going to do. And a lot of this CapEx is CapEx that if you sell, you are going to put CapEx, putting the boxes and everything in the cost of stock. If we are having the revenues and the customers that we think we could have, then the CapEx would go to 10 billion. But if we don't have the subscribers or we are -- the economies are not developing the way we think they are going to develop, then we have -- we are going to put less CapEx because we don't have to buy the boxes to put it in the house of every customer that we have. But all overall, there's not something in the CapEx that we have. Specifically, it's all around. What we want to be very, very cautious is to have enough capacity and the best quality of the networks all around Latin America. It's where we're investing more capacity. So Oscar can talk a little bit more about the cloud and the data center that we just finished. We are finishing some of them. Oscar Von Hauske Solís: Yes. If you look at the true American model, we have 16 data centers in different countries. We start as providing hosting facilities for the enterprise customers. But now we move to the cloud. We already developed cloud in Mexico, Colombia, Argentina and Brazil. We are selling in the market 2 kind of products. One is software as a services. So we include different solutions mainly for small business. And this is a small size of revenue, but it's growing pretty well. And it has been very well-recepted in the marketplace. And the second product that we sell is in [indiscernible] as a services. We sell virtual service that is growing pretty well. And it's tied to our telecommunication business. And secondly, we are making virtual data centers of that offering in the marketplace. So we want to move from just connectivity to a value-added company through these data centers. So we already have both at 4 countries. And we are going to connect in the second part of the year, the rest of the countries to these hosts through these clouds.

Great. And in Mexico -- or in Brazil, there's been a lot of talk about tower sales by Tim. Any thoughts about if Brazil does move towards consolidation, how strategic or not the towers might be Brazil? Oscar Von Hauske Solís: Well, there's a lot of towers in Brazil. So if Tim are going to sell their towers, I think there are going to be more available towers for everybody. So I don't think the towers are going to be an issue in Brazil for good or for bad thing. I don't think that, that was -- are something that will help or will not help in Brazil. So there's no -- there's enough towers in Brazil that you could put your service.

And your next question comes from the line of Bruno Mendonca with Santander.

It's actually Valder. Recently report, it seems that integration of the assets down here is beginning to make a difference and it's beginning to move the needle. My question to you is where do you believe that this integration is bearing the largest fruit? Is it on the cost side, is it on the finance, on the fiscal side, is this on the dynamics of how you play the top line game? That's my first question. And how far are you from reaping the benefits that you believe that this integration can give to you? How much homeworks you need to be done? That's my first question.

Well, there's a lot of questions. But what we have been doing, we're integrating all the companies in Brazil. We are -- the first move that we do is integrating the infrastructure in Brazil. And in the infrastructure, you could get more capacity, less costs, less CapEx. And that's where you could see the integration in terms of all the infrastructure in Brazil. Also, we are doing the integration in the commercial side. In the commercial side, you are seeing that we are selling almost double, triple, combos. NET is starting to sell. Wireless and the wireless side is starting to sell you the satellite business. So you could see a lot more integration on the commercial side. And the last thing is on the integration of the IT, all the staff, call centers, data centers, all of those things, customer care centers. All of those things also will create a benefit in terms of costs and expenses, and also will give us a much better service to all of our customers. So that's mainly what we have been doing. It's not easy. We have been advance a lot, but I can tell you that still long way to go in Brazil. So we are starting to have the benefits of all the integration. And I still -- I think you could see benefits in the next 2 years. Okay?

Okay. And my second question comes about the 4G auction. What are your views on that? Is it feasible to have this auction in August? Do you believe there's going to be demand? Or is the demand pretty much dependent on what could be the potential outcome of a potential consolidation in the country? What's your view on this 700-megahertz auction?

It's very interesting. It's difficult to say anything. I think everybody needs the 700 megahertz. It's going to depend a lot on what are going to be the conditions for the auction to see if there is going to be a lot of participants or not. Well, everybody's being very careful about the financial situation of all the companies. So of course, the 700 megahertz are very important, but we need to see what will be the conditions to get there. And if in the condition, we -- what the amount of CapEx and the new, let's say, towns that we need to serve or if there is not going to be any condition on coverage for these auctions, we still don't know. We don't have clear. I think the government hasn't released any clear definition on those frequencies. So let's wait to see what is going to happen.

And your next question comes from the line of Juan López [ph] with BTG Pactual.

My first question is regarding the tax rate during the fourth quarter. It seems you had a 12.6% tax rate. Could you please comment on that, what -- how did you have this low tax payment? Carlos José García Moreno Elizondo: We have had some tax benefits for the year on account of mayor [ph] it's not only one thing. And we basically that -- taking advantage of the opportunity toward the end of the year to take advantage of those. So we don't think there's anything more to report there.

Are those more likely to repeat in 2014, right? Carlos José García Moreno Elizondo: Say again?

Are those likely to repeat any kind of benefit... Carlos José García Moreno Elizondo: No, I think they were one-off adjustments, yes.

Okay. And a second one will be with your talks with rating agencies, how much time do you feel they are willing to wait until you start to bring the growth to EBITDA ratio down? How much time do you feel you could be bringing that up? Carlos José García Moreno Elizondo: The net debt to EBITDA today is, if you take into account that we placed some cap rate debt in the market, that rating agency is considered to be only half debt. You factor that in, we are at approximately 155. So that's very much in line with what the rating agency seek, at least the one that has also under the tightest constraint. So that's -- we were perfectly comfortable with that as we've kind of pointed out throughout this call. We have been very careful doing things, to fine-tune our financial position, including claiming some of our investments. And we are very happy to say that we are exactly where we wanted to be. We have just a little bit more than 1.5x net debt to EBITDA.

That's net debt, right? Carlos José García Moreno Elizondo: Yes, but the growth in net debt should compress most of the time. There's a portion of cash that is considered to be necessary to rating agencies. So that's where we factor into that. We don't have an issue.

Okay. Does it get in sell you something that maybe the rating agency may have suggested to you? Carlos José García Moreno Elizondo: No. No, as we've said, I mean, we have always been very careful with our financial management. And we make sure that we have a credible position with the market and with the rating agencies. And we do the things that are needed. At some point, we played high bridge in September, I think it was. That defers time, but any Latin American issues had placed, had repaired. And the reason was decided that we wanted to make sure that we were protecting our ratings. Now at the end of the year, we decided to cream a little bit, some investments and beat a bunch of other things. And that's how we have ended up with the position that we have today. So you're going to be very clear because I know that some people have voiced some consents, but we are going to be able to hit our leverage targets. I can tell you all whether -- with who we wanted to be.

And at this came, ladies and gentlemen, we have time for one more question. And your next question comes from the line of Lucio Aldworth with Citi.

I've got a couple of follow-ups on a few questions that have already been asked. First of all, I'd like to know, and I do apologize if I missed this, whether AMX has sold more of the KPN in a stake in 2014? And if I'm not mistaken, the next regulatory requirement would be for you guys to report again if your stake falls below 20%. Is that correct? Carlos José García Moreno Elizondo: What I answer is that we sold, I think, 2% from 29% to 27%, is what we have been sold. And what we said is we are flexible because we -- to maintain the rights that we have with KPN and to sustain what we have been doing with the company, we need to have more than 20%, 20.1%. So we can be flexible. Still, we don't know still. We're going to sell more or not, depends a lot on what is happening on the markets. But we want to be flexible, and that's -- but we are really interested in still develop the relation with the KPN management and with the KPN board. So that's -- I think this year, we haven't been selling anything. The sales that we have was last year is what you could see. But I want to be open that we could do and we can be flexible to do whatever we want on that. As I told you, again, more than 20%, 20.1%, we have exactly the same right in the company to still develop what we have been doing there.

Okay. And has there been any sales in 2014 thus far?

No. As I told you, I don't think so. I don't think so. I think we sold everything last year. I'm not so sure, but I don't think so.

Okay. Just a quick follow-up on Michel Morin's question on that, if you don't mind. I just wanted to make sure that I've got the numbers right. And adjusted EBITDA in Brazil then would have been somewhere close to 22% rather than 24% in the first quarter. If this is correct, where do you think margins would settle for the Brazilian consolidated business considering deferred competition with GDP now coming to Sao Paulo and pretty much everyone else are building fiber and launching IPTV in the fiber-based broadband products in Brazil as well?

Tell you what, Lucio, you know that we never provide guidance on EBITDA margins. Carlos José García Moreno Elizondo: And -- but what I can tell you, Lucio, on Brazil is that I think we have -- as I told you, we have a very good company. NET is developing very well. The perception of our brand there is excellent. The trends on the wireless side are also looking good. We are developing very good. We are growing in data. We are growing in voice. We are reducing the revenues on the interconnection. That's, I think, for everyone in Brazil. But all overall, the business looks very good. So I cannot tell you, as Carlos is saying, we don't provide EBITDA margin. But I think depending a lot on the economy of Brazil, the way those economy is going to evolve this year, I think also in the integration of the companies, it's going to depend a lot what you could see in 2014 in Brazil.

And at this time, ladies and gentlemen, I would like to hand the call over to Mr. Dan Hajj for closing remarks.

Just to say, thank you for the call, and thank you, everyone, for being here. Bye-bye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.