América Móvil, S.A.B. de C.V. (AMX) Q2 2016 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the América Móvil Second Quarter 2016 Conference Call and Webcast. My name is Sam, and I will be the operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. As a reminder, this call is being recorded for replay purposes. I would like now to hand the call over to Daniela Lecuona, the Investor Relations Officer for the company. Daniela, please begin.

Thank you, Sam. Thank you, everyone, for joining us this morning. We are here to discuss our second quarter financial and operating results and we have on the line Mr. Daniel Hajj, Chief Executive Officer; Mr. Carlos García-Moreno, Chief Financial Officer; Mr. Óscar von Hauske, Chief Operating Officer; and also Mr. Carlos Robles, Chief Financial Officer of Telmex. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Good morning. Thank you for being in the América Móvil second quarter of 2016 conference call and Carlos is going to make a summary of the results. Carlos José García Moreno Elizondo - Chief Financial Officer: Thank you, Daniel. Good morning, everyone. The second quarter saw a recovery of several currencies vis-à-vis the dollar. The likelihood of new interest rate increases by the Fed appeared to wane. Some indicators pointed towards stabilization of the main financial and economic viables in China, which had previously been a matter of concern for the international market. In Latin America, both the Brazilian Real and the Colombian Peso continued their comeback but the Mexican Peso weakened further. We ended June with 364 million access lines, 0.9% less than a year before, after net disconnections of 1.5 million prepaid subs in the quarter, most of them in Brazil. This figure includes 283 million wireless subscribers, 34 million landlines and 26 million broadband accesses as well as 22 million PayTV units. On the mobile platform, the postpaid base was up 5.9% and the prepaid one was down 4.2%. On the fixed line platform, RGUs were up 3.6% year-on-year, driven by broadband accesses that rose 8.9%. Other than in prepaid, we are seeing good growth in the all business lines. Second quarter revenues rose 6.1% from the year-earlier quarter to MXN 233 billion, with service revenues increasing 3.2%, reflecting the appreciation of several currencies vis-à-vis the Mexican Peso. At constant exchange rates, service revenues were down 2.1% year on year. Substantially all our operations maintained their growth trends in local currency terms. In Mexico, however, we saw a step down in revenues, brought about mostly by more aggressive commercial plans in the prepaid segment, as a greater part of our subscribers moved towards unlimited call plans. The South American block and the Caribbean both presented a slight improvement in revenue growth trends from the prior quarter with Central America maintaining a steady one. EBITDA of MXN 61 billion declined 10.7% in Mexican peso terms relative to the prior year, 13.2% at constant exchange rate, bringing about a 29% reduction in operating profits that in turn led to 55% decrease in provisions for income and deferred taxes in relation to the year-earlier quarter. We obtained a net profit of MXN 7.7 billion in second quarters which was down 45% from the year before. Our net debt stood at MXN 608 billion. In dollar terms our net debt declined by $1.7 billion at nominal exchange rates and by 1.2 billion in flow terms. In dollar terms our gross debt actually came down by nearly $2 billion, $1.9, in the first six months at nominal exchange rates and by $1.5 billion at constant exchange rates. Our net debt to EBITDA ratio was practically unchanged in the quarter at 2.1 times. Our cash flow from operations, the distributions obtained from our shareholdings, particularly those in KPN and the unwinding of currency swaps allowed us to finance capital expenditures amounting to MXN 57 billion, share buybacks of MXN 5.2 billion and acquisitions of equity interests of MXN 3.4 billion. In addition, as mentioned before, they allowed us to further reduce our net debt. Well, with this, I would like to turn the floor back to Daniel and may be the operator can begin the Q&A session. Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Thank you, Carlos. Let's start with the Q&A, please.

Certainly. We do have several questions. The first question comes from Amir Rozwadowski. Please go ahead. You're now live on the call.

Thank you very much for taking the question. Good morning, folks. I was wondering if we could discuss a bit more about the competitive landscape that you're seeing in the Mexican market right now. It does seem as though that there's been some notable traction with you folks on the postpaid market in terms of the higher-end subscribers. But there clearly seems to be a bit more competition in the prepaid arena. I would love to hear sort of your thought process on where you stand right now vis-à-vis your competitors? How you see the competitive process playing out? Should we expect some more pricing confessions coming to the market or anything along those lines? Thank you very much. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Amir, good morning. Let's talk a little bit about Mexico. Since 2014, we have a new competitor in Mexico and two international and big competitors. We have been in the last two years investing more and having more competition. So that's what is the market landscape in Mexico. So, for the last two years, prices has been going down very fast. We have been having a lot of competition in pricing in prepaid and in postpaid. And we have new plans like unlimited voice, unlimited SMS and with some data. So those are the new pricing plans that we have been having for the last six months. These prices are similar than in other countries. Let's say they have unlimited in U.S. We have unlimited also in voice and SMS in Mexico. But the prices that we have in Mexico are really, really low against what you compare in other countries. So the pricing has been going too long, so too far. The competition – we have competition in Mexico, and we have a lot on reduction on prices. So with these prices, even the competitor that entered in 2014, they have been losing every quarter. They want to gain market share, but they are losing a lot of money in EBITDA. The other competitor has been having big reductions in revenues, also big reductions in EBITDA. So well, that means that the competition is tough, and the prices are being too low, even that the consumption for the people. People is starting with these low prices, people is starting to consume a lot more, maybe six times what they use to consume. So the demand for the telecom services has been very strong also in Mexico. We have – and I think I'm sure that we have the best network, the best capacity and the best coverage in Mexico, so that's very good also for us. So in terms of that people is consuming lot more than what they have been consuming. I think that the in prepaid our revenues, the last two, three weeks has been very stable, much more stable than -- because the people that -- the prepaid people that have the highest ARPUs and they want to change, I think they already changed. We have been having a lot of people moving from their old plans to these new plans and that I think that people who wants to change, they already changed. So that's why we're seeing a more stabilization in our revenues in the last weeks. Okay? And the other thing is that we are making some changes in the offers. Okay? We're moving a little bit their due dates and moving some cards and moving other things. So it's – we're moving also. I think the competition is stabilizing also a little bit more, prices are being stabilizing. And our revenues in prepaid, I'm seeing that they are stabilizing also and more so. That's more or less what you see. The way I see things is natural that the prices in telecom reduced because of technology, because of competition, but these prices has been reduced too far. Okay? So the thing that I see is and what I'm thinking is that in the future the conditions would change. So that's more or less a view of what's happening here in Mexico.

That's very helpful. And if I may one quick follow-up. You'd mentioned that utilization of the network has increased pretty dramatically in terms of overall usage. Do you see an opportunity, particularly as we start to see smartphone penetration grow for you folks to capture some of that incremental usage via pricing? In other words, is there an opportunity to trade some folks up to higher data buckets going forward? I'm just trying to understand where that opportunity set lies for you folks? Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well, the thing is that these data buckets – if you compare these data buckets against the data buckets of last year, you'd see that these new plans have been having a lot more of data that what they used to have last year. So also in postpaid we are having being too aggressive. So penetration is moving. Penetration on the smartphones is growing a lot and I think we have an opportunity that people start to use more, use more data, use more voice, and of course, I see an opportunity because at the end of the day I think that things are going to change. So the conditions are going to change in the future. So as people is starting to use more and more then we have an opportunity in the future company. Smartphone penetration in prepaid is still very low in Mexico. I think we have also a good opportunity in the prepaid market. In postpaid, penetration is high. I think is one of the highest in Latin America. In Latin America, both in prepaid I think we still have a lot of room to go.

Okay. Thank you very much for the incremental color. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Thank you. Carlos José García Moreno Elizondo - Chief Financial Officer: Next question?

I do apologize. We do have a slight technical issue. If you could carry on with the conference and we will return to Q&A session as soon as it's finished. Is that a problem? Because we've lost connection. If you could just continue with the call and I will come back to the Q&A as soon as we resume the technical problem. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Okay. (13:51-15:48) Carlos José García Moreno Elizondo - Chief Financial Officer: Yeah. We are sorry. We are being told by the operator that represent an English telecom company that they have some technical issues and... Daniel Hajj Aboumrad - Chief Executive Officer & Director: Connecting. Carlos José García Moreno Elizondo - Chief Financial Officer: And they will – as soon as they sort them out, we can continue the Q&A. We apologize for this.

That is correct. If you'd like to finish the rest of the conference, as soon as I get the bridge back, I will restart the question-and-answer session for you. Carlos José García Moreno Elizondo - Chief Financial Officer: There's nothing more to – in this call other than the Q&A. So if you want to dial again, I don't know how you would want to do it. But there's nothing more for us to say in this call other than the Q&A.

I do apologize I have lost connection with you. I can hear you, but we can't see anything on the bridge. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Do you want to call us again? Carlos José García Moreno Elizondo - Chief Financial Officer: Do you want to call again?

Just stay with me please. Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Okay.

Andre Baggio, you are now in the queue. Please go ahead.

Hi, good morning everyone. So, Carlos, can you make a comment on the opportunities that you faced like, say, I'm seeing that both wireline data and also prepaid have been growing double digits. So can you talk about the opportunities you face on these specific two areas like the data on wireline and also on PayTV? Carlos José García Moreno Elizondo - Chief Financial Officer: I think – Andre, how are you? Good morning. I think that we are seeing the market generally in Latin America moving from particularly prepaid market – segment of the market, moving from a voice-only market, where voice have become commoditized, to one that will be voice and data. And as the penetration of smartphones increases, the adoption of smartphone devices increases. We are seeing these I think to meet market space and I think it will be very much about the ability of the different carriers to offer the combination of voice and data services that the clients will be demanding. I think that's what you are referring to, right, Andre?

Yes, sir. Carlos José García Moreno Elizondo - Chief Financial Officer: So, basically, we are seeing a period in which a competitor – operators will be differentiating themselves by their ability to service market that is requiring both voice and data services. And I think this will lead to very profound changes in the competitive structure of the markets that we're seeing today. I think the market for voice-only clients is a market that is dying and I think that we are going to see a very rapid adoptions, new devices as the price is coming down quite significantly.

Okay. How about a second question. Can you comment a little bit on what's going on in Peru, because each time that I see this country, which is not so big for you, but the margins have been lower and lower and lower? Is it just related to the competition to the new player that is there and could we see the same situation in other markets? Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well in Peru, we have our big reduction on MTR, so hitting most in EBITDA. We are having a lot of – its asymmetric, it was in our favor and today it's changed. So it hit also on the revenues, on the cost and revenues over there. So that's one thing. The second, the market competition is aggressive, prices are going down, big subsidies of our competitor I think, one of the competitor, the new one that it's getting in. In some cases, I don't think they are doing a lot of money because they are putting a lot – or they used to put a lot of subsidy at the beginning. I think they are more rationale today. But I am feeling, in the oversight, we haven't had a good network on 4G, because two years, three years ago we haven't won a spectrum over there. Today, we have a spectrum. Today, we have enough spectrums. We are putting a new 4G network in Peru. And I think, of course, not comparing to last year because last year is doing – but I think you are going to see increases on revenue, better market share in subscribers. And, of course, I hope that the EBITDA will get back and start to recuperate in the next quarters. Okay. So I don't think we're going to go lower than what we have today. And I hope that we can recuperate in the next quarters.

Okay. Thanks a lot. Carlos José García Moreno Elizondo - Chief Financial Officer: And Andre, if you'd like to see – I don't know if the question was only referring to Peru. But if you'd like to see the other one where there is another country that has higher margins today than they had a year ago, Argentina is higher, Chile is higher, Brazil is flat, Colombia is a little bit lower, and most of the other ones Central America is higher. There is a number of countries that have higher EBITDA margins today than they had one year ago.

Okay. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Next question? Carlos José García Moreno Elizondo - Chief Financial Officer: Hello. Next question?

And the next one is coming... Daniel Hajj Aboumrad - Chief Executive Officer & Director: Again, a problem? I think we're facing again problems with the operator. Carlos José García Moreno Elizondo - Chief Financial Officer: We believe that this may be a consequence of Brexit. (23:20-23:40) Daniel Hajj Aboumrad - Chief Executive Officer & Director: Maybe, you can send the questions to Daniela, and we can answer the questions. Send it by mail please to Daniela. (23:45-24:04)

Carlos, if you're hearing and it's still online. Carlos José García Moreno Elizondo - Chief Financial Officer: Yes.

And back again, just to follow-on if I may, the question I had on the other markets is specifically the situation that we found in Peru where it is very aggressive player with a new network -- a 4G network. If that situation could not repeat specifically in Mexico, where you also have a new player very well capitalize with – is investing a lot on the new 4G network so -- which could trend downwards the margins for a quite long time, similar to what we saw in Peru? Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well, it's totally different what's happening in Peru that what is happening in Mexico. In Peru the problem is that they had a good network, because they have their spectrum, they have a 4G network and we haven't had that for the last two years. We have very small amount of a spectrum to running our 4G. In Mexico we have a lot of a spectrum, we have the best network, the best coverage, the best quality by far and that's totally different. I think in Mexico, Telcel is the brand, it's – the preference for all the subscribers in Mexico is Telcel. So I think it's different and it's what we want to do in Peru. We are doing good investment and good network in 4G. We have enough spectrums right now and I think things are going to change in Peru and you're going to see that a subscriber's are going to start to grow again and revenues also. Carlos José García Moreno Elizondo - Chief Financial Officer: I think, Andre, just to follow on what Daniel is saying, we have mentioned here in the report that in the second quarter we acquired the new spectrum in Peru, in the auction that they conducted, cost of something that's MXN 300 million. And then we have also acquired a company that was based in Peru and that essentially what it has is its own spectrum. So a spectrum became our bottleneck and it was something that really did not allow us to compete particularly in data, because we didn't have really the ability to provide, we really the capacity by way of the spectrum. I think this bottleneck is being opened right now and I think that we should be able to follow through with our own investments to stay in the market, no competitive in the market. But again this was – what Peru was a one-off situation. It was exceptional. It was, as Daniel pointed out, we just had the bad luck that two years ago we lost out in an auction and ended up not having the spectrum that we needed for 4G. And this obviously made us have less competitiveness over the last a couple of years. But this has been resolved, and I think that we are going to be much more competitive going forward.

I do apologize. This is Sam, the operator. We have the connection resolved now. So if you would like to commence to Q&A again, I can start that for you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Okay.

Yes. Please go ahead, Sam.

Okay. Andre Baggio, you are still live on the call. So please go ahead with your question.

I'm done.

Andre has already stated his question.

I'm done. Thank you.

Can we go to the next one, please?

The next question comes from the line of Walter Piecyk. Walter, please go ahead. You're now live on the call. Carlos José García Moreno Elizondo - Chief Financial Officer: Hello.

Take the next one. Carlos José García Moreno Elizondo - Chief Financial Officer: Well, the next one?

I have Walter's questions here. Walter Piecyk from BTIG. The question is please provide more color on prepaid usage. Tell us of (27:57) in Mexico on the popularity of unlimited, and then comment on whether this means CapEx can still come down 25% this year and what the outlook would be for the next year on CapEx? Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well, in Mexico, I think, in prepaid, as I said, customers that are changing from the old plans to these new unlimited plans are moving. And they have five times to six times more usage in voice. Also, they have more usage in data. But we are prepared that with this spectrum that we have – with this newer spectrum that we have in the beginning of this year, we are able to do so. We are investing. And overall I don't know in Mexico, but overall we are still trying to do our MXN 8 billion CapEx that we estimate and not only in Mexico and other countries are growing a lot their usage in data and in voice. And we're going to still have. All the big investments that we do in the last three years are going to make us and be able to do all these new plans and all these new data and unlimited voice that we are doing all around Latin America. The next one?

The next one question comes from the line of Alejandro Gallostra. Please go ahead. You're now live on the call.

Hi. Good morning Daniel and Carlos. My first question is regarding your leverage. You have plans to further – to further deleveraging your balance sheet and do have any net debt target in mind? Daniel Hajj Aboumrad - Chief Executive Officer & Director: Hey. Well hello, Alejandro. Well, shown here I think in the first six months of the year, our gross debt came down by nearly $2 billion in nominal terms. We have some important bond maturities that are taking place in September, that amount to close to $3 billion. I think for the most part we should be able to pay that down from our – what – the cash position we built and the cash flow that we are going to have in here to then. So I do expect that, in nominal terms, for the full year, probably gross debt is going to be coming down, at least MXN 4 billion and maybe between MXN 4 billion and 5 billion, the gross debt. In terms of net debt we are probably looking at roughly MXN 1.5 billion reduction, MXN 2.5 billion, MXN 3 billion reduction in net debt for the year. So, yes, I think that we are continuing with this deleveraging. It's important we have maintained our ratings that you know are top ratings in telecom sectors. And we intend to hold onto them. So we have – we are acting quickly here to make sure that the leverage position stays within the guidelines that we have seen with the rating agencies.

Okay, great. Thank you very much. And my second question is regarding the favorable ruling from IFETEL when it comes to Telmex broadcasting UnoTV through the Internet. Do you have plans to becoming more aggressive in streaming as a result of this? Or is your strategy in Mexico going to change as a result of these favorable ruling from IFETEL? Daniel Hajj Aboumrad - Chief Executive Officer & Director: No. I think what we have been doing is exactly what we are going to do. And there's no new plans that we're going to do with this new decision – with this decision on the Ifetel. So we have our plans, our strategy and on the streaming and we are going to do exactly the same of what we are doing right now.

Okay. Thank you very much. Carlos José García Moreno Elizondo - Chief Financial Officer: Thank you.

The next question comes from Michael Morand from the American Mobile Company . Michael (32:28), please go ahead. You're now live on the call. Michel Morin - Morgan Stanley & Co. LLC: Hi, it's Michel Morin at Morgan Stanley. So I was wondering if we could dive in a little bit more into Mexico and if you could, by any chance, break out the prepaid and postpaid revenue growth trends. It seems from what you're describing that the impact has really been on prepaid, so it would be helpful to get a little bit of granularity there? And then in Brazil, both of your major competitors, Vivo and TIM have flagged that they've experienced positive portability metrics over the last several months. So I was wondering if that's consistent with what you're seeing. And if so, what would explain that situation for you in that market? Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Starting with Brazil, the numbers that I have – hi Michel. First hello. On Brazil, our number portability, on June, we have plus 8000 number portability on gainings. Year-to-date we have 41,000 on postpaid. Those are numbers from postpaid. And on prepaid, we are losing a little bit. I don't know exactly how much. But on prepaid we're winning 41,000 postpaid (33:50) in number portability. I think the total numbers on postpaid we're gaining this year more than 600,000 postpaid, and I think was one of the biggest for us. So, in postpaid we are doing good. In prepaid, we still need to adjust some things, but we are focusing a lot on the postpaid sector and we are doing very well with our strategy on the combo we are offering to our cable subscribers as we have a very good distribution network for our postpaid. So we are being looking very deeply on all the postpaid business in Brazil and we're doing good. In Mexico, what was your question again, Michel, please? Michel Morin - Morgan Stanley & Co. LLC: Just because when you talked about the relative weakness year-to-date you flagged the unlimited plans on prepaid. So I am wondering if your revenue growth on postpaid has been trending maybe more favorably. If you could share with us the trends for both postpaid and prepaid revenue growth as one of your competitors did for the second quarter that would be helpful. Thank you. Carlos José García Moreno Elizondo - Chief Financial Officer: I don't have right now the number right here with me. Let me find it. But I do know that in postpaid we are having positive service revenue growth. It's slightly less than the pace of growth of the postpaid subscriber base, Michel. So that means that there is some ARPU dilution in the process, but service revenue growth is positive on the postpaid segment. So what you are saying is correct. Basically, all of the service revenue decrease is taking place on the prepaid side. And as I was mentioning before with Andre, I mean this is, I think a moment in which we are going to see the last parts of our market that is voice-only and I will be morphing fairly rapidly into our voice and data. And we believe that the ability of operators to provide voice and data will be key to the competitiveness going forward. Daniel Hajj Aboumrad - Chief Executive Officer & Director: And just to add more to one more thing to Carlos, Michel. In my view, I think we have been too aggressive in the promotions in prepaid and in postpaid. I think we are – if you compare prices against U.S. on plans or prepaid plans or unlimited plans in prepaid and on postpaid, the deeper in that high. So if you compare, please check in the Internet prices here to prices in U.S, so the prices are really low here in Mexico and my view is that things are going to change. I don't know if they are going to change tomorrow, what things has to change in the future, so that's how I see it. Michel Morin - Morgan Stanley & Co. LLC: Yeah. That is very helpful, Daniel. And if I can just follow-up on that, when you say we have been too aggressive, are you referring really too we as the industry or we América Móvil, you see as your company? Daniel Hajj Aboumrad - Chief Executive Officer & Director: No, in Mexico, we as the industry has been very aggressive, not us, all the industry. We don't start with the promotions. I think the promotions, one of the competitors start with those promotions in November of last year or maybe as the – a little bit earlier. So with these big promotions, so when they are not promotions and they are plans that they are going to stay, well, everybody has to follow that, no? And need to what we have been doing and I think it hasn't being good for anybody. Well, you could see one of our competitors seems they get in in the market they are losing money. They don't have any profits since they start, I don't know if that's their plan or not, I don't care what they have been losing every quarters since they start, and then the other has been – if you see the last results, well, the revenues and EBITDA has been going down very possible. So that's the market is not off, and I think in the future things has going to change, no? I don't know where and how, but things are going to change. Michel Morin - Morgan Stanley & Co. LLC: Thank you very much, Daniel. Carlos José García Moreno Elizondo - Chief Financial Officer: Thank you, Michel.

The next question comes from Carlos de Legarreta. Carlos, please go ahead. You're now live on the call. Carlos A. de Legarreta Diaz - GBM Grupo Bursátil Mexicano SAB de CV Casa de Bolsa: Yes, thank you. I was wondering if you could give us more information, I mean, I was looking at the CapEx figure that the performance discloses, and I believe this is 45% larger year-over-year for the first semester of the year, and I'm just curious what it is related to? It seems that that is not in line with the reduction, but you're mentioning on the country's whole for CapEx? That's the first question please. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well, I don't have the disclose of the CapEx of each company of each country, but I can tell you that all overall what we are going to do is to – we have the budget of $8 billion on CapEx loss that frequencies that we bought is what we're thinking, it could be a little bit higher, it could be a little bit lower. What that surrounded strategy that we have a – I don't know in Mexico how much is the mix, how much is per mix, how much is per sell all overall day, the networks are the same. So, they are doing more or less the same CapEx. So, I don't see any change on the numbers. I don't know exactly what is the number that you see, but Carlos is here, can talk a little bit about that. Carlos Robles no? Carlos Fernando Robles Miaja - Chief Financial Officer, Teléfonos de México SAB de CV: Yes, just to mentioned one thing, it basically a matter of seasonality in the sense that at the end of the year, we'll be with a target of the MXN 8 million that we have as América Móvil that's a reduction also in settlements this year, and it's basically a matter of seasonality that we are making to strengthen further the network or our customers. Carlos A. de Legarreta Diaz - GBM Grupo Bursátil Mexicano SAB de CV Casa de Bolsa: Okay, perfect. That's helpful. Thank you. And if I may just the follow-up, I don't know if your disclosing the fear that you got for the sale of taking the (40:53) or if you could talk about a little bit about that? Thank you. Carlos José García Moreno Elizondo - Chief Financial Officer: Well, as reported, we have sold part of our stake, it's in the nature of transaction that the sum of which allowed us to sell 7.8% of our stake and that is providing us I think, there was an average price of about MXN 5.21, I think it was, so maybe you can compute that. I don't have the exact proceeds here with me. But... Carlos A. de Legarreta Diaz - GBM Grupo Bursátil Mexicano SAB de CV Casa de Bolsa: Okay, thank you. Carlos José García Moreno Elizondo - Chief Financial Officer: Thank you.

The next question comes from Richard Dineen from UBS. Richard, please go ahead. You are now live on the call.

Thank you very much. Thanks for taking the question. Good morning, Daniel and Carlos. Just interesting commentary on the Brazil competition, maybe if you could just comment on the sort Brazil margin progress, it flattened a little bit this quarter on a sort of year-on-year basis versus some gains previously. I'm just wondering if you're starting to see the synergy benefits from the integration of the three companies. Whether that's slowing down or whether there were other things in the mix this quarter, whether that's cost pressures or other one-offs that seems to slide down that sort of margin progression a little bit? And then secondly, if I may, I understand Ifetel has ordered fixed to mobile termination rate cuts of 30% in Mexico from the 1st of August. Just wondering if you've given any thoughts, how significant that would be on your Mexican revenue or whether that's something that is probably not going to make much of an impact. Any color on the above would be fantastic. Thank you, gentlemen. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Carlos can answer the interconnection, please Carlos. Carlos Fernando Robles Miaja - Chief Financial Officer, Teléfonos de México SAB de CV: Yes, basically as we have doing in previous years and we have been doing for the last 16 years, we have lowered or we have reduced our prices by transferring the benefits of our operational effectiveness and the reduction in the technological cost to our customers. So this year we announced that we were going to reduce the CPP cost for our customers by 30% and by 50% for the next year and then 50% in the following year. At this point it is difficult to know the impact, because at the end it's a matter of elasticity in which traffic might increase and therefore it's difficult to actually have a number above that. But I can tell you, its two things. First is that that our customers will receive directly the 30% reduction occurring on the 1st of August. And secondly, our package customers -- what we are doing it we are further increasing the speed of our Internet services. We are strengthening our packages by value-added services. So that, as you can see just – as in the mobile sector in the fix sector we have very competitive prices and we are giving very break up conditions even compared to international standards. When you compare to the U.S. or any other country in the world.

Right, that's very helpful. So this is sort of a voluntary rate cut rather than something that's which is not interconnection rate? Carlos Fernando Robles Miaja - Chief Financial Officer, Teléfonos de México SAB de CV: Yes, that's right. That's something that Telmex proposed to IFETEL of reducing the CPP tariff.

Right. I get this and that's clear, thank you. Carlos Fernando Robles Miaja - Chief Financial Officer, Teléfonos de México SAB de CV: Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: I mean in Brazil I think the margin reduce 4.5% against last year, but I think we're working hard on the cost and expenses. The integration of the companies are doing, that's what in the other side we have Brazil with exchange rates a little bit higher. So that means a little bit more cost in local currencies. We have some other contingencies on collectables are growing also a lot. So there are new things that we are facing in Brazil because all these economical and political issue. But I personally feel that we're doing very good in Brazil that we still need to fix something's there, but in TV we are very well in broadband we are doing well. In fix we are doing well. In postpaid we are doing well. We need to fix a little bit data on the prepaid that we are looking to see, there is promotions that they are being out of the market. So we think that the data in prepaid needs to grow faster and we are working on that. So, all over all I see Brazil in good shape. I don't know if we're going to end the year with the same margin as we have last year. But we could be very close on that. So we're working to have those numbers. I'm feeling comfortable on Brazil.

That's great. Maybe just to clarify, just in terms of that specific integration of the three businesses Claro, Embratel and NET, how far through that process are you? Is that mainly complete or there are other efficiency gains that you think you can make from that exercise? Carlos José García Moreno Elizondo - Chief Financial Officer: Of course there is more efficiency gains that we need to get more and more in the network, in the IT, in the engineering, in the marketing side also, so there's still a lot of things. So that – I think there's still one year or two years more of efficiencies that we need to do to get in Brazil, okay? So that's something that we need to focus and we're really focusing on that, and I think we are advancing on the right direction in Brazil.

Okay, got it. Many thanks indeed. Carlos José García Moreno Elizondo - Chief Financial Officer: Thank you.

The next question comes from Maurício Fernandes from Merrill Lynch. Please go ahead. You're now live on the call. Maurício Fernandes - Merrill Lynch SA CVTM: Good morning Carlos or Daniel. In Mexico, could you tell us, and I apologize if you already mentioned it, but what percent did your subscribers particularly prepaid, but overall have migrated to the new pricing plans at the end of the second quarter? I remember you saying half of them had migrated to the new pricing plans at the end of the first quarter? And if you could give us some sense as to what's been the speed of migration path towards doing the quarter or even in July? That will be great. And the second question is in Brazil, there was a decline, a steeper decline in wireless service revenues went down by 11% or 6% in the first quarter, contrary to what we saw happening at the competitor so far who have reported, at the same time you're fixed line revenues accelerated. So, I'm wondering if there was any change in the way you account for wireless or fixed line PayTV revenues particular in the bundled product. Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: I'll refer first in Mexico, what I remember in prepaid, I think postpaid maybe a 20% or 25% of our subscribers are on the unlimited plans, remember that on postpaid they are having some contracts? And in postpaid what we're trying to do is that they don't go down, so we are giving more and more things to the plan to stay or to upgrade the plan. So, this is what we're doing on postpaid. And on the prepaid side, maybe on June we have around 56% of the subscribers moving to the unlimited plan. So, a lot of the subscribers have been moved. What's happening, I think the subscribers and what I said at the beginning of the call, the subscribers that had the highest ARPUs in prepaid are the ones that move faster because they get a lot of gains there. So they are using more of the phone, using more voice, using more data and paying less. So it's what we see at the beginning. So first and second quarter is what you are going to see. The other subscribers that hasn't been changed are the subscribers that has less consumption and those are the customers that has less ARPU subscribers. So these ones maybe it's not convenient for them to move. So it's what you are seeing. I think people is moving less and less to the unlimited plan at the beginning. Maybe January, February, March, April, we have a lot of subscribers moving, but the last two months less subscribers moving. And as I said, the last week we have been stabilizing, we are checking every week how those prepaid revenues are behaving and I think they are stabilizing in the last week. So that's more or less what is happening in Mexico. In Brazil, I don't know, I need to check if they have a different accountability, but I don't think so the way they account for the bundle – for the combos that we are doing in Brazil. What is happening, I think in data, in prepaid, what I said again is postpaid, I think we are doing good, and we want to accelerate postpaid and go deeply on that. On the prepaid side, what you see is on voice we are doing better than the competition. In SMS, we are doing better than the competition. In interconnection, we are doing the same if you compare revenues against revenues. But in data, we are not doing as good as the competition is doing and we have two things. First, in value-added services the content that we have there, last year, we are comparing our last year that we have a lot of revenues, but also we have a lot of uncollectables, okay, because people ask for a lot of services and then they don't pay for that service. So, today, we are being more – we have different policies for these customers. So they have to really commit that they're going to pay for that service, for that content and that's why we have been reduced our revenues in the content, in value-added services. And the other one is in the Internet, in data, and in data what you could see, Mauricio, is that, we are still giving a social networks inclusive in the way included in the ARPU we have social networks included there. So, competition is getting out for that and we're reviewing what to do with the social network. We still don't know what we are going to do, but we are reviewing what would be our strategy in the future. So that's more or less the explanation on what is happening on Brazil, Mauricio. Maurício Fernandes - Merrill Lynch SA CVTM: Thank you very much, Daniel. And just if I could come back to Mexico, even with only about 66% of subscribers seem to have migrated, I think on the quarter, but still revenues are down year-on-year 17%, which would suggest, we could continue to see the revenue decline going forward. But what you're saying is that it seems to have stabilized, in which case the revenue decline that we saw in the second quarter could be slower going forward. Is that right assessment? Daniel Hajj Aboumrad - Chief Executive Officer & Director: Yeah. Look, Mauricio, really these new plan, the unlimited plan, what's happened with the unlimited plan? The unlimited plan hit us with the higher ARPU subscribers because that higher ARPU subscribers, if they put, let's say MXN 150, MXN 200, MXN 250, if they moved to MXN 100 cart what is happening is that they have more service, they have more data and they have unlimited, and they have a lot unlimited voice and data. But the other ones that they are consuming, let's say MXN 50, MXN 30 in the other plans maybe is not too convenient for them and if it's convenient, then they are going to pay the same and use more. So maybe they are going to use more, but we are not going to have a reduction on ARPU, so it's what we are seeing. I don't know if I explained well what is happening, both the lower ARPU subscribers, if they change, we don't have a big hit on ARPU on revenues. They are going to get more-and-more and minutes and more data, but we're going to not get that hit on revenues. So it's what we are seeing in the last weeks, Mauricio. Maurício Fernandes - Merrill Lynch SA CVTM: Okay. Understood. Thank you very much, Daniel. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Thank you, Mauricio.

The next question comes from Andrew De Luca from Barclays. Andrew, please go ahead. You're now live on the call.

Hi. Good morning and thank you for taking my question. My question is related to the competitive environment in Colombia and I was wondering, if you could just give us an update on what you've been seeing in the market both on the mobile and the cable side? And then if you could just remind us of what your strategy is for each of those segments within the country. Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well, in Colombia, let's start with fixed. In Colombian fixed, we're doing very well. I think we're growing our revenues, we're growing our subscribers, we're growing TV, we're growing fixed, we're gaining market share, and I feel very comfortable on what we are doing on the fixed side in Colombia. On the wireless side, I think we're turning around that we have been losing some of the subscribers. We have been losing also revenues, because they don't have any more contracts in there. They can change. So if you have any new promotion, the subscribers will change for this new promotion. So that's why we are losing some revenue in Colombia. In the postpaid side, we're starting to grow. This year we are growing 4.7% and I think in the prepaid we're going to start to grow the second quarter. So we do some changes, we do also the new organization there in Brazil, more focused on sales, marketing, customer acquisition, more focused on all the commercial side and it's working. So you could see much better turn around. And I think it's stabilizing and turning around subscribers, and I hope with coming also the revenues.

Great. That's helpful. And just a follow... Daniel Hajj Aboumrad - Chief Executive Officer & Director: It's not immediately, but it's moving on the right direction.

Okay, great. That's very helpful. And just to follow up on the absence of subsidies. Can you just explain what you've been seeing in terms of smartphone penetration in Colombia? Daniel Hajj Aboumrad - Chief Executive Officer & Director: I don't have the numbers here, but what we have been doing in Colombia, we had been financing the handsets. So it's more affordable for there in 24 months, 12 months, 18 months, at small payment. And smartphone penetration is growing. And I don't have the numbers here, what level of penetration we have, but it's also growing the penetration in the smartphones.

Great. That's very helpful. Thank you very much. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Thank you.

The last question comes from Daniel Federle. Daniel from Credit Suisse. Please go ahead. You're now live of the call. Daniel Federle - Credit Suisse (Brasil) SA CTVM: Hello. Good morning, everyone. Thank you for taking my question. My first question is about the fixed line business in Mexico. I was wondering if you could comment a little bit more about the competition in the fixed line business, especially regarding the fixed broadband products? And what is the massive strategy for fibers to the home and fiber to the nodes, and how you see your competitors evolving this segment? And my second question is about the wireless marketing in Mexico, because you mentioned that price are very little in Mexico already, who you think would be the company – which would be the company that increased prices first? AMX could be the first mover in increasing prices or AMX will wait for the competitors to increase price? Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Well, in Mexico, in the wireless side, it's a difficult question, so I think those things – you don't decide on who's going to be the first, or who's going to be the second. I think it has to be overall the market, it's got to have an stabilization of the market. It has to be the conditions, I don't know if we are going to increase prices maybe we can reduce due dates of the cards. We can give more to the customers, we can increase ARPU. So, I don't know. There's a lot of things that you could do. We have been reducing subsidies, I think we're the company that has been reducing more softly in Mexico, so we're doing – in prepaid we have been profitable on selling the handsets here in Mexico. And we're doing a lot of things, and as I told you last time, we think that the conditions will change, I don't know when, but the conditions will change in Mexico. On the Telmex side, on the P&L side, Carlos? Carlos Fernando Robles Miaja - Chief Financial Officer, Teléfonos de México SAB de CV: Speaking about the broadband business in Mexico, what I can tell you is that, it has been – it's a very competitive market, in which basically we are competing with cable operators, and in the market what we are doing our strategy is to – two things: The first one is to have the best network and to further invest in technologies fiber to the home, fiber to the nodes, to be able to provide our customers with better services, more speed, and more value-added services. For example of this is for the SME customers, we have introduce the last month more services, cloud services included in their packages. So, that they can be able to – so that we can even become more competitive. In the – speaking about offers, what I can tell you is that market is – the competitors are also giving more products, but at the end it's in the benefit of our customers no? Daniel Federle - Credit Suisse (Brasil) SA CTVM: Yes, okay. Thank you very much.

I would now like to turn the call over to Mr. Daniel Hajj, for the final remarks. Thank you. Daniel Hajj Aboumrad - Chief Executive Officer & Director: Just thank everybody for being in the call and thank you, again Sam.

Thank you. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a good day. Carlos José García Moreno Elizondo - Chief Financial Officer: Thank you.