América Móvil, S.A.B. de C.V. (AMX) Q3 2018 Earnings Report, Transcript and Summary

Good morning. My name is Lisa and I'll be your conference operator today. At this time, I would like to welcome everyone to the América Móvil's Third Quarter 2018 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question-and-answer session. [Operator Instructions] Thank you. Now I'll turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today on our third quarter 2018 conference call. We have today on the line Mr. Daniel Hajj, Chief Executive Officer; Mr. Carlos García Moreno, Chief Financial Officer; and Mr. Oscar Von Hauske, Chief Operating Officer.

Good morning. Carlos as always is going to give us a summary of the third quarter 2018 financial and operating report. Carlos García Moreno Elizondo: Thank you, good morning everyone. Well, the continued expansion of the U.S. economy through the summer with strong job creation even in the face of historically high levels of employment ended up pushing 10 year U.S. Treasury yields decisively above 3% bringing about a new bout of dollar strength that affected emerging markets in general including several of the currencies in the regions where we operate, more importantly in Argentina and Brazil. This effect was partially offset by the reduced political uncertainty in some countries with their currencies appreciating versus the dollar as the Presidential elections were left behind, this is particularly in case of Mexico and Colombia and already partly through half way in Brazil. In this context, we gained 1.1 million postpaid subscribers in the third quarter including 472,000 in Brazil, 184,000 in Mexico and 100,000 in Colombia. Altogether, even after net disconnections of 7000 prepaid clients, we ended up with traffic [ph] up 9000 net gains of mobile clients as compared to our net loss of 73,000 clients in the prior quarter. This is important because I think most analysts were estimating our reduction of net-adds for the quarter. This goes to show the importance of our ongoing commercial effort. In fact, if we look at gross subscriber adds so as to correct for prepaid disconnections, they were up 2.9% based on the earlier quarter, with Brazil and Austria offsetting the fastest growth 7.9% and 9.7% respectively. This again is the rate of growth of gross subscriber additions. On the fixed-line platform, broadband continued to be the fastest growing segment at 6.2% year-on-year after adding 284,000 new accesses in the quarter including 205,000 in Brazil and 93,000 in Central America. In Brazil, with numbers from [indiscernible] through August, we've been increasing market share over the last several quarters practically across the broad in the fixed-line platform. Mobile postpaid is our fastest growing segment with 7.6% followed by fixed broadband at 4.7%. The declines in PayTV access just kind of leveled off. Mobile prepaid subscribers have continued to come down and we have gone ahead with disconnects most notable in Brazil. Revenues were up 2.1% year-on-year in Mexican peso terms and were just shy of 250 billion pesos, whereas EBITDA came in at really 1.8 billion pesos and was 7.7% higher than a year before. Compared to the prior year, the Mexican peso appreciated sharply 15% versus the Brazilian real, but depreciated moderately around 5%, 6% versus the dollar, the euro, and the Colombian peso, all of which had an impact on the Mexican peso value of the respective operations. At constant exchange rates, service revenues were up 3.4% year-on-year. This was their best performance in five quarters. Service revenue growth improved practically across the board, while EBITDA increased 8.6% not including the release of certain provisions in Brazil the legal proceedings offset with taxes, fueling the latter EBITDA increased by 13%. Postpaid mobile revenues led the way with an 8.6% increase followed by prepaid revenues of 7.7% and by fee growth and revenues at 6.2% as you can see in the chart. So the main business lines are growing in the neighborhood of 87% year-over-year. In the mobile space service revenue shot up in Brazil and Mexico 10.5% and 9.5% respectively, with mobile ARPUs rising 13% in Brazil, 11% in the U.S., and 8% in Mexico, regained more postpaid clients and in the U.S. more straight [indiscernible] subscribers. Our EBITDA margins were 28.8%, including 2 percentage points from a year before. Approximately 1 point of the margin is related to the [indiscernible] provisions in Brazil. Substantially all of our operations posted increases in the EBITDA margins in the period. Our operating profit increased 23.4% to 35.3 billion pesos. Together with a comprehensive financing income net cost of 3.3 billion pesos, mostly driven by foreign exchange gains, but also the release of provisions in Brazil, this brought about a net profit of 18.6 billion pesos for the period. Through September we funded our capital expenditures of 91.7 billion pesos, reduced by 14 billion pesos our net debt, paid out net dividends and share buybacks in the amount of 10.4 billion pesos and contributed 15.6 billion pesos to our pension funds. Our net debt stood at 584 billion pesos at the end of September, down 45 billion pesos from December. Relative to our last 12 months EBITDA, our net debt stood at 2.0 times. The lower leverage ratio we have attained in at least two years. So since that we continued to gain traction in reducing our leverage ratios and I think that we are very much on track to deliver – to get to our target of net debt to EBITDA of one and a half times in the next few quarters. Well, with this, I would like to pass the floor back to Daniel and we will begin the Q&A session.

Thank you, Carlos. We can start with the Q&A session.

[Operator Instructions] And our first question comes from the line of Matthew Niknam from Deutsche Bank. Your line is open.

Hey guys, thank you for taking the question. Just two if I could, one on Mexico you're seeing churn stabilize, there is solid ARPU growth. Any updates that you can share on the competitive landscape in Mexico? And then secondly, Carlos on the point on leverage now at 2 turns, you're talking about getting to 1.5 turns in the next couple of quarters, is that sort of the timing we should look at in terms of a potential acceleration in the rate of shareholder returns once you get to the 1.5 turn target? Thanks. Carlos García Moreno Elizondo: Thanks, starting with Mexico, I think all of our results in Mexico are very good. Talking a little bit about the wireless in Telcel, I think everything that we have been doing on the network remember that we launched 4.5G and we are investing a lot in our network have been very successful. I think people are using more and more data and that's the reason why ARPUs are going up. So we – this quarter we are more or less in the highest level of service revenue, like the same service revenue that we had two years ago, two and a half years ago. So all overall Mexico is doing very good. We are also working very hard on the digital transformation improving the coverage, improving capacity and the market as you know is very competitive, still where competitors are in some things are doing very aggressive promotions, but I think we feel comfortable and with everything that we have been doing here in Telcel quality, coverage, capacity, the digital transformations, our stores, our dealers, I think we feel very, very, we have very good support to maintain what we have been achieving. Okay, and overall on the leverage you have to repeat, I didn’t say the next two quarters, I said the next few quarter, but yes, the expectation is that in some time soon getting the volume probably as soon as the middle of next year. It depends on the exchange rates, so it is very difficult to say exactly when. But we don’t really have any [indiscernible] area of any significance that we're looking at. So that means that once that we get to our leverage ratio, we basically don’t have it any other way out for our cash other than shareholder distributions which is the question. So yes, once we hit our target and in the absence of M&A which we will be looking at then we will have to speed up shareholder distributions.

Got it, thank you. Carlos García Moreno Elizondo: Thank you.

Our next question comes from the line of Leonardo Olmos from Santander. Your line is open.

Hi good morning everyone. My question is on 5G. Last week we saw some statements on about $1 billion in Dominican Republic, being the first one in Mexico to launch 5G and in Brazil for telecom [ph] Claro is there advantage for 5G test this week. So my question is regarding 5G. Regardless of things are beginning in 2019 or to end of 2021 how do you see it impacting the long-term guideline of $8 billion CapEx can it be sustained or can it be fitted into that $8 billion or should we expect in those years some type of increase in CapEx? Carlos García Moreno Elizondo: I think what we said in Dominican Republic and everything that we have been doing and what we're going to do it doesn’t change a lot of the guidance that we have in CapEx. I think we can sustain our $8 billion or $8.5 billion in CapEx for the years and we're going to launch 5G when we feel it is the right time to do it. We are doing a lot of things to launch 5G so we are not - the networks are not this way so you wait until you decide to launch 5G now. We are bid to licensing our network right now using Fiber-to-the-Node more and more fiber all around Latin America. So, all these things that we are doing right now are preparing to launch 5G. So that's not something that we are going to do and then we are going to spend more and more money and the CapEx that we're spending right now. Part of this CapEx is to we do that for Dominic and more and more of these technologies that we're doing so, we are not thinking to change the CapEx. Okay? We are buying some frequencies in some countries or we are just everyday improving our networks to do 5G in the future.

Very good. And on the other side, on the side of opportunities also on future can you mention, sorry Brazil management mentioned about IoT, Internet of Things and opportunities in the sense the fee fixed verticals, specifically other business, so how do you see the B2B opportunities for America Movil, either in Brazil or as a whole with 4.5G or 5G do you see the mix changes more to B2B?

Well, our new network of 4.5G I think at the end of the year I probably we are going to have 4.5G in all of the countries where we operate, so the ones that we already got like Mexico, Dominican Republic, Brazil, all those places, I think people are using more and more data. So when we talked on the last question about the ARPUs in Mexico, is because people say the megabytes of use let's say in America Movil are growing around 80%. So people are using more and more data and that is the reason why people are spending and ARPUs are growing. Also it is important, the network in the terms of IoT we think that we're going to do a lot of things in IoT we have a good platform of IoT. We have a good platform for the work details we are doing the cloud and we are doing all these new services and we are being successful. So we are prepared to do all the - I think America Movil today is the company where we are well prepared to be the first ones in our country to do all these services. I think what we need a little bit more is that the country to start to be more digital that we have more e-government or more services in [indiscernible] or more services in other things, but we are prepared for everything. Brazil is doing very well in that scenario, so I think we are in the way to do that.

Great, thank you Daniel.

Thank you.

Our next question comes from the line of Diego Aragao from Goldman Sachs. Your line is open.

Hi good morning, Daniel, Carlos, and Daniela. Thank you for taking my questions. Two questions if I may, the first one is a followup really to your business in Mexico. You mentioned that prepaid revenue grew almost 11% year-on-year while your postpaid expanded by 7% on a yearly basis. So my question is how can – can you share these numbers and how these numbers would compare to the past two quarters? I mean I just want to understand whether or not postpaid and prepaid are accelerating or decelerating on a sequential basis? Thank you.

I think we are accelerating a little bit. We have two quarters also with good growth, first quarter, second quarter are also quarters that we had good growth in revenues in Mexico and this one is also a good one. So, people are using, people are – we are the preferred network for the customers in Mexico and we are selling a lot of data and people are happy with that. We also have the World Cup and people use a lot data because of the World Cup, but I think people are happy with the network that we have. We have a very, very good speed, lot of capacity and very good coverage. So by far, we are the best network in Mexico.

Perfect. So just to make sure that I understood correctly, so this 11% growth in prepaid we should expect the trends to continue going forward right? Carlos García Moreno Elizondo: Yes, we think, we don’t expect the same trend for the fourth quarter and we are growing at a very good pace right now.

Okay, perfect. And my second question is related to Brazil, can you provide further details on the onetime items accounted in the quarter. I just want to understand where our margins are, could eventually benefit from lower provisions in the upcoming quarters? And also if you don’t mind to provide more callers on the PayTV revenue dynamic in Brazil when do you expect for instance to see broadband revenue growth to fully offset the structure headwinds from both long distance and PayTV? Thank you.

I’m going to talk a little bit about the market in Brazil and the results in Brazil, also I can ask something, but what I see is, if you compare our results at quarter year-over-year we are growing I think as we have our EBITDA is growing, our revenues are growing. So we, right now we - I feel that we have the best platform in Brazil. We are modernizing our network. We're working a lot on giving more for LTE as the capacity in more rural areas. So I think we’re working a lot in the conversion network that we said that we’re are working. We are very advanced on that and all overall if you see year-over-year we're gaining market share in postpaid, we are gaining market share in broadband, we are gaining market share in PayTV even that the PayTV is losing and we have these connections in DTH. Our cable TV is also growing. So I think in the commercial side we are doing very well even in the corporate business I think we’re doing also very strong. So in that commercial side in Brazil I feel very comfortable on that. And in terms of the digital transformation that we're looking we’re investing in our stores, we're investing in platforms. We are working in paperless. So we’re trying to improve a lot all this digitals and we are selling more and more digital. So we feel that we are working very hard. I cannot see of course this quarter, we do not have the same growth that we have been having the last quarters in terms of EBITDA, but in year-over-year we are growing in EBITDA and we are doing very good. So if Óscar can talk a little bit more about the networks and a little bit more about a market shares Oscar in Brazil and how you see the market? Óscar Von Hauske Solís: Sure, well, if you look at the total fixed market revenues are decreasing, I mean the total market is increasing 3.4%, we are decreasing less than the market. But if you look at the breakdown of the revenues in fixed broadband we are growing 12% revenues. Of course in cable TV we are steady. I mean the revenues are not growing and we have the impact satellite TV and mainly its coming for the disconnections and the fact of the disconnections is on collection the people could not pay, so we need to disconnect some of the DTH consumer because this probably was really focused on the DT market of the population and as you can see the economy is not very good in the past. So when we look at the economy the trend of economy looks very on the last quarter, so we will respect that we will increase revenues coming from a better economy in the country. And on the corporate market, as the economy eases there is a lot of the price erosion. I mean we do look at the unit approach. We are stating in units, what it has been a lot of price erosions in the marketplace. So that's the – I need to mention in mobile we are getting as well market share so that - we believe there is – this is the right path to grow in revenues and we are working in cost efficiencies, I mean as Daniel mentioned the digital transformation we want to digitalize all the consumer interactions. We are really focused in reduce core expenses like energy, all different sources of our expenses and we are investing in the network. We believe that opportunities is going to bring us a lot of bandwidth in the network and we are still doing the integration of all the networks to have a simple, unique, fine network in Brazil. So we see a good future in Brazil and other - adding something more I think that at the end of this year or beginning of next year, we’re going to modernize all our wireless networks, all of our cell sites that we have over there are going to be modernized and ready to pass on the 5G fiber program. So Fiber-to-the-Node, the new technology, so all of that we are doing and I think at the beginning of next year, we’re going to have more than 90% of our cell sites modernized. So there are a lot of things that we are doing and we’re preparing, this company is not going to be for one quarter, it’s going to be for long-term, the next 20 years, so that right. And in terms of the taxes, Carlos can explain a little bit. Carlos García Moreno Elizondo: In terms of this release of provisions, those were the provisions that have been created in Claro separate from Amarilla net as regards the famous [indiscernible] and where there should have been the part of the base for determination of IT and those taxes. We are glad won the legal proceedings on definitive basis and we are basically having a release of shares from the net basis is equivalent of our platform that million reais in this quarter. This is basically what we are showing here and that is - that explains a significant part of the increasing the margin in Brazil to 35%. So that is basically, the basic for this release of the legal provisions, of the accounting provisions.

Okay. Perfect, this was very helpful. Thank you. Carlos García Moreno Elizondo: Thank you.

Our next question comes from the line of Alejandro Gallostra from BBVA. Your line is open.

Hi, good morning and kudos on the new line. Thank you very much for taking my questions. First, were you seeing a remarkable strengthening in the margins of your Mexican operations, so I was wondering how much of your traffic has already been migrated to VoLTE and what are your expectations for 2019 or the next few years and the type of efficiencies that you obtained from these migrations?

I think voice on LTE, I don’t remember exactly the number of customers, but we have been migrating that since the beginning of this year. We have our network ready and we have a good quality. We don’t want to launch before because what we want is to have the best quality there and I don’t remember exactly, Daniela can give you the number later because I don’t have it, but we have been working with VoLTE, depends a lot on the number of handsets that has that technology. So that does not depend only on what we want, also on what handsets has that technology. Remember that deeper inside the U.S. we are selling also handsets for $100 or $80 handsets they are adopting to have that technology. So depends on a lot on the number of handsets that has that technology.

Thank you, Daniel. But is this one of the drivers behind the improvement in margins and do you think this will continue to help you in the years to come?

No, I don’t think that is, I cannot say that in Mexico there is only one thing that we are doing that is increasing the margins. I think you need to see Mexico all overall. We are as I said working very fast and investing a lot in our networks. We were the first one in 4.5G, we have the best throughput, the best quality, the best coverage in data, in 4G, also we have the best. By far we have the best in our customer care centers we have the best services. We have been digitalized all of that. We have a very good network of distributors to both retailers. So all overall we feel very comfortable in Mexico and I cannot say that this is only thing. We are competitive in the market, also the market has been also aggressive. You know that in Mexico we have one of the lowest prices in the world not in Latin America but in the world. As I said last time, I don’t have the measure today, but we are much lower than what the U.S. is selling over there. So it’s a very competitive market and well we are competing there and with very good quality is what I said. People are choosing our network. Some people are leaving and then is returning with us because all of the things that we are saying. So that is - they are testing all the networks and then they are returning with us and that is what you could see all these years.

Okay, Daniel and because of these things that you are implementing, do you still see room for further margin improvements, not only in Mexico but also across the region, are you really confident that you will be able to keep implementing your margins?

I don’t know in the short-term and we can improve margins as we have been improving the margins in the last two years. And of course I think in the long-term work on the increased margins, but I cannot say tomorrow no. The next quarter is very important quarter in terms of sales. It is the Christmas sales and when you sell more then you have more expenses, but I think we are looking to increase our margins in 2020, 2021. So we are not looking only short term, we are looking long-term.

Okay, thank you, Daniel. My second question, it seems that competition from OTT players is intensifying with Netflix showing a good performance especially outside the U.S. and for example Roku getting authorization for selling in Mexico, so I would appreciate if you could give us more color on the performance of Clarovideo platform, what your strategy is and how do you plan to compete in the OTT?

Well, remember that we have our Clarovideo and we’re selling our Clarovideo this over the top platform we're selling all over Latin America, but also in some countries we are selling, I think Netflix is also as you are saying Netflix is a compliment for us. So in Brazil we are going to start selling also Netflix and a lot of our customers have Netflix. We have, Oscar can explain a little bit, but in Clarovideo we have all the services that we can sell in HBO and FOX with… Oscar Von Hauske Solís: Yes, yes, yes we include that we call add-ons in Clarovideo. So we have HBO, we have FOX Plus, we have Crackle and we have Nickelodeon is for kids, so we are selling adding to our Clarovideo, these that we call add-ons that are different providers of streaming over the top. So we are bundling all these providers within our Clarovideo platform. So I think it is important all over the top and I think we are bundling our services with over the top.

Yes to get to the customers all the alternatives together in that so that is important.

Could you just explain us where the economics is…

Alejandro, I’m sorry we have to move to the next question, please everyone try to limit your questions to two per person.

Thank you. All right, I will get back in the queue. Thank you.

Thank you.

[Operator Instructions] Our next question comes from the line of Rodrigo Villanueva from Merrill Lynch. Your line is open.

Thank you, good morning Daniel, Carlos, Daniela. My first question is related to Mexico, I was wondering if you could share with us your thoughts on the court ruling in Mexico that order to sell to compensate other carriers for anti-compete processes and is there any potential amounts that you could share with us? And the second question is related to the U.S., I think you have just to have around 3 million subscribers that are still using SafeLink and I was wondering if you could tell us if you expect to reconnect all these subscribers at some point in the future? Thank you.

The first question, Rodrigo it is very much linked from one of our competitors that the [indiscernible] from all proceedings related to interconnection disputes, it is based on our solution from the competition permission that has been revoked by the court for the benefit of the sales. So we believe there are no basis for damages and the ruling does not provide specific amount. So we don’t know about them and we have appealed the ruling and we will initiate additional procedures given certain irregularities that we have detected on such procedures. So that is at this time is the only thing that - the only comment that we have on that. And on the second question is on platform, what was your question on platform?

Sure. Thank you, Daniel. So basically it seems to me that you have been disconnecting your SafeLink subscribers, but you still have around 3 million, the question is if you expect to keep disconnecting the subscribers or probably migrating them to other brands?

In SafeLink, we have two different subscribers, they are subscribers that are consuming a little bit more than the other ones. So maybe part of the subscribers are disconnecting the ones that are, the lowest ARPU are the ones that are disconnecting. We are still selling SafeLink, so we are not un-selling the sales of SafeLink, but we have been more cautious on where we sell, how we sell, and the subsidies that we are putting there. We are trying to be profitable since the beginning. So we are focusing in the states, in SafeLink that are the highest ARPU, so that is where we are focusing and well, we have been seeing that we have a lot of these connections of these customers but in the other side we have been very successful. It is very successful with our other brands. So if we talk a little bit about platform, I think this year platform has been very good because all overall we are not achieving exactly the same EBITDA as last year, but we are growing a lot. So we have a good base of growing. If you take out straight top I think we are going to and I quote, we are going to end our year having a little bit of gains in some subscribers. So we are thinking that for next year we can sell more. So in platform and we are still with that, we are having very good EBITDA margins. Oscar Von Hauske Solís: And Rodrigo, yes to add to that, as I mentioned at the beginning ARPUs in the U.S. growth is close to 11% and that is basically a reflection of what Daniel is saying. We have been gaining a lot of new script clients that are very ARPU clients. They are on average probably $40, $45 per client and we have disconnected, continuing to disconnect some of the SafeLink clients. So net-net we have been getting an improvement in ARPU where I think is quite remarkable.

And sorry, not only straight top, we have also good add-on for the mobile in Wal-Mart family, so we have some brands of high ARPUs that we have been growing very good there Rodrigo. Oscar Von Hauske Solís: And also one thing that across the road so what I mentioned is the ARPU, if you look at rate of growth of streaming revenues, 1.5% year-on-year which is better than what we have had for at least five or six quarters. It was already positive last quarter but today it continues to affiliate and we are expecting a good quarter in the fourth one. And likewise in the case of [indiscernible], all of the last five quarters I think or six EBITDA was still significant growth, now it is growing 3.2%. Okay, so it is again recovering, so positive growth on revenues, positive growth on EBITDA and we expect this to continue going forward.

Thank you very much. Oscar Von Hauske Solís: Thank you.

Our next question comes from the line of Arturo Langa from Itaú BBA. Your line is open.

Hi, thank you very much for taking my questions. I just have one brief question. Could you please give us some color on the strategy you plan to follow in the wireless market in Brazil and I ask this because it looks like competition is heating up with more aggressive offers, and I just wanted to understand how you think about positioning the brand, positioning the network, where do you try to differentiate yourself versus V1 [ph] and team, and if you could just provide some color on that it would be very helpful for us? Thank you.

Well, the first thing that I can tell you is that, this year and last year we have been improving a lot of our coverage. So we are growing a lot our coverage, our 4G coverage, our data coverage is that we have been growing a lot our coverage, and we also are giving a lot more speed and the quality. If you check the quality with the regulators you are going to see that the quality of our networks is the best one. So we have been improving a lot the quality all over, so we are not going to compete only with price. We are competing with price and we are going to be as accretive as the market demands, but on the other side we are giving very, very, very, good quality of the network. In the other side what we are also doing is we are not only selling wireless also we're selling combos now, we are selling wireless, a lot of broadband, or we're selling to our subscribers of PayTV, our postpaid service. So we are doing these combos and we have been very successful. So if you are saying we are only going to compete with price, no we are going to be competitive and we are going to be competitive as the market demands, to be competitive both in the other side we are going to try to give something else to our customers in terms of quality, coverage, speed and combos and all of those things.

Thank you and if just on that point, are you comfortable with the market share that you could currently have in Brazil or do you think this could increase a little bit? Carlos García Moreno Elizondo: We have been increasing our markets share in Brazil and I think we can increase a little bit more, so market share is important, also ARPUs are important, and so I cannot say if we want more, if there is - we have been increasing in mobile our market share around 1.5 points in service revenues, so we really don't care about the market share in subscribers. We care about revenue, so market share in revenue is the important part for us.

Okay, thank you very much Daniel, thank you for taking my questions.

Thank you.

Our next question comes from the line of Daniel Federle from Credit Suisse. Your line is open.

Thank you. Good morning everyone. My first question is regarding EBITDA margin in Brazil, we see that the recurring EBITDA margin expansion was not that strong as we saw in the past two quarters, so my first question is, there any cost pressure that is affecting margins in the third quarter in Brazil any specific points? That's the first question. And if I may to use my second question to brief clarification, the first one it was said that the company is not looking at any significant M&A. The question is, could you consider that the client is not interested in Nextel in Brazil? And the second clarification is the guidance for $8 billion to $8.5 billion in CapEx, that includes expecting acquisitions or it doesn’t include expect from acquisition? Thank you.

The first one is $8 billion to $8.5 billion in CapEx. It includes in our budget includes a spectrum and let's see what are going to be the prices for the Spectrum, but for us is including the Specturm. So we can increase a little bit depending on the prices, but we think that today it’s - that's our view and our vision is not that the government shouldn't sell the spectrum at the high prices, but they should expect big investments in the country, so that that will be the best thing to do in the spectrum side. In the EBITDA in Brazil, as I told you, of course we have less growth that what we have been doing in the first and the second quarter, but we have a good growth against last year. So I’m not worried about first and second quarter, so I'm not looking at the EBITDA and the margins. I think that will recuperate. I'm sure that our growth will recuperate in the future, but what we're looking is, we have more, we're doing important, commercial efforts in Brazil. We have a little bit more of budget also in Brazil, so I'm not really looking if in the short-term I'm looking in the long term and what we're doing in Brazil in the long term is we're consolidating our platforms, we’re consolidating our networks. We're investing a lot to modernize the networks. We are improving our commercial distribution and our digital transformation and that requires a little bit of at the short term more and more a little bit more of expenses, but I think I’m feeling very comfortable in Brazil. And if Brazil starts to grow as a country again, then you’re going to see that we are going to be well prepared to take part of this growth in the future, so that's more or less and Carlos wants to add also. Carlos García Moreno Elizondo: Sure you supported in [indiscernible] I think it’s if you see mobile service revenues they were nearly at the same pace as last quarter. I think they are the fastest of any operator in Brazil today. There will be one of the – the second best in the last 10 quarters I think nearly identical to last quarter. On the fixed-line side, you see heavy revenue has been declining for quite some time, but this is the best showing in the last three quarters. So you seem to see, you begin to see digitalization and stabilization of the decline of fixed mobile revenues. So yes, they are still down, they are down 3.2%, they were down 4.5% two quarters ago. So that's I think something that is also important. On the cost side, I don't think that there's anything that we can report now, maybe if there's something we can discuss it with you and mail a letter, but at present we don't really have anything identified. Carlos García Moreno Elizondo: All of then what I mentioned at the beginning which is that growth has been doing very well, that year-on-year the growth out in Brazil are up nearly 9%, the limit was 8% to 9% and that this is an effort there is also – this is sequentially, by the way it I sequentially, so there's an increase sequentially, I am just saying this every prior year, so the commercial effort on growing and is growing on a very strong basis.

Thank you. Could you comment on the Nextel point if when the… Oscar Von Hauske Solís: We’re always open to - as all the opportunities and the, when Carlos said that we don't have a mayor, what Carlos if you want to add? Carlos García Moreno Elizondo: No, I think what I said is correct, I mean we're not looking at anything of any significant in M&A and I don't think there is anything else to say anything.

And open to all [indiscernible] in Latin America or in Europe in the sense of Telecom house we are [indiscernible].

Perfect, thank you very much.

Our next question comes from the line of Andre Baggio from JPMorgan. Your line is open.

Hi, good morning. My question is one more of a follow up on the competition like, in essence you have been doing a great job in Mexico, so that's referred to trends that in couple years ago. So is it a function of orders not being aggressive on prices and the function of you are reducing again that we charge for the prepaid cards is, so can you give a little bit more color on what's going on in Mexico that's back of this strong performance.

I don't understand the question.

If your GDP - difference in competition. Carlos García Moreno Elizondo: I don't think there have been a lot of even new promotions. I think in the market in Mexico we have been having new promotions, even that we have more cannibalized market in terms because the prices are too low. We've still having in some new promotions some new things so the market is still very competitive, and I think I've been telling that during the call, I think some of the things that customers prefer from us or from Telcel is because of our coverage, quality, capacity, customer care centers, the digital transformation that we're doing that the people are happy when they go to a Telcel centre and you attend him very fast, very good, so All lines that we have been doing a lot on all lines, but mostly is our network that its superior than all the other networks in country.

And Andre just to add to that, I think we have continued to invest in the network as you know and it was in the fixed and the mobile, and as you know we are obliged to give capacity even to our network competitors. So it is the case that all our competitors today have access to the network. They are roaming on our network and this strategy is also helping us. So we are investing a lot. We are making sure that the network is available almost everywhere and that we have sufficient capacity and I think we are also having – we are growing as a consequence of that.

Perfect, and the second question I have is that we do have a new administration in Mexico, so do you think that you could have a better chance of applying into a PayTV license now that with the new government or do you think that the new government is going to make any change that is meaningful for your business?

As you know Telmex has formally requested regulators for many years elimination of their restriction providing it's concession and I think it's time for the regulators to take steps for promoting competition in a really concentrated that TV market. So that's the way we feel, that's the way we think and I hope that the regulators will take that step and decide to give us the TV, so that's our view.

Sorry, so in essence, I have understood that you have to formally apply for something, so it's just in the hands of the government, it is not in the hands of America Movil the next step?

I think it’s on the hands of the government right now.

Perfect.

On the regulator, yes.

Yes, in regulator I know. Okay thanks a lot.

Thanks.

Our next question comes from the line of Maria Azevedo from UBS. Your line is open.

Hi thank you for taking the question. The first question would be on your FTTA strategy in Brazil and overall geographical expansion plans if you can comment a little bit on that? And with more visibility on the macro and political side would you consider intensifying your fiber rollout and even considering a potential M&A of regional fiber players? And then the second question, if I can circle back on the competitive environment in Brazil you recently added more data and you are rating at do you believe that the market is moving towards an unlimited data plan environment? Thank you very much. Oscar Von Hauske Solís: Yes, well about fiber-to-the-home, as you know within AMS we have cable companies mainly when you look at Brazil, Colombia, we are really a cable company. So we are using 3.5 and we reached a very, very good high speed for fixed broadband. And in all the new cities that we are doing, we are using fiber-to-the-home. We are using GPON technology. In Mexico we already have home passes with GPON, as well in Puerto Rico, Dominican, Argentina and in Peru. So the focus is to cover really the ABC Plus market with fiber and the rest with cable of copper. So we have a program from the next two or three years to really achieve that we will cover the ABC plus market with a very high technology fiber-to-the-home and to upgrade all the networks to DOCSIS 3.1. All the countries in the backbone, their network is already available to deliver 3.1, so we are ready to really have good speeds. In Brazil, as you know in the segment of ultra broadband we have a very good market share, we have 50 or something market share. So I think the network is ready to do that. And to be honest what we do is to make the economic balance to really move to fiber-to-the-home and to use as much as we can upgrading the copper network. So this is the strategy that we are following within the mix.

Yes, And you talk about to increase our data in Brazil and if we're going to do unlimited data, well we don’t know if we are going to reach the unlimited data in our plans, but right now I think the plans are very strong plans and giving a lot of data, so very competitive plans what we have.

Perfect, thank you very much.

Thank you.

Our next question comes from the line of Cesar Medina from Morgan Stanley. Your line is open.

Hi, thanks for taking my call. I had two questions, the first one was, what are the trends that you're seeing in your own market share of broadband in Mexico? And then second, what should we expect for the margins in the U.S., I mean 7.1% I mean it is a bit lower relative to the improvement that we saw in the second quarter, so I appreciate your comments on both questions? Thank you.

No, if we talk about U.S., I think you have to check the year compare against last year, this year we are growing more than what we have been growing last year. So you need to check EBITDA plus the growth that we have in our subscribers. So I think we are reducing our EBITDA a little bit, but we are growing our subscribers. I think taking out SafeLink, we hope that we can be positive in net adds this year, so that's the reason of why our EBITDA is a little bit. In this quarter our EBITDA is even a little bit higher than what we have last year’s quarter in platform. So all overall, I think this year, totally this year, platform is going to grow much more than what we have been growing last year. Carlos García Moreno Elizondo: And I think you have to consider that platform’s EBITDA is very seasonal. So if you look at for instance in the second quarter, the second quarter EBITDA were down 22% year-on-year, but in this quarter EBITDA is up 3%, 3.2% year-on-year, so those are very big change from minus 22 to plus 3 from one quarter to the other. Okay? And this is basically because of seasonality you have to correct for that.

And in Mexico broadband? Carlos García Moreno Elizondo: Well, you know, in Mexico it is as well as I mentioned mobile is a very competitive environment. So we already did reshape our offering in the marketplace to deliver more bandwidth, more speed than our competitors, and we are adding on all the Clarovideo over the top offering in order to compensate in a way that we don’t have PayTV, so I think is the way that we see the competition. So the network is really prepared, so we have good proportion of the network with fiber-to-the-home and as well we operate on the network through VDSL to deliver more speed and we are getting closer to fiber in order to really have overall speed all across the network. So that is the environment that we see and then we are setting off these new products in order to be competitive in the marketplace.

So relative to the question that was asked before, would you assume that if you get a PayTV license eventually you’re going to get more market share on the broadband side, broadband and do you see sales on the commercial? Carlos García Moreno Elizondo: Well, we have all the elements to be competitive in that shape. Right?

Sure, okay, thank you. Carlos García Moreno Elizondo: Thanks.

Thanks

And due to time constraints, our final question today will come from the line of Mauricio Fernandes from Merrill Lynch. Your line is open.

Thank you. Good morning Daniel, Carlos, Daniela. Just a followup and apologize for repetitive subjects of Brazil margins, but to Carlos' point revenues were actually up sequentially in the quarter during this year and still the pace of EBITDA margins, ex-EBITDA margin itself was down in the third quarter. So it must be cost related and it doesn’t look like even though with a little tougher competitive dynamics, it doesn’t look like competitive dynamics were not based on Carlos' comments. So is there anything that, is there any cost item, is there anything that has already been achieved that is no longer available that would stop or make the EBITDA margin expansion less than before than what we were seeing in the last couple of quarters? Thank you.

No, I don’t think there is nothing specific on that sense. And as I told you Mauricio, I think we cannot see quarter-over-quarter. I think what we are doing in Brazil is want to be successful and you’re going to see better growths in the future quarters. So I don’t - we are growing 10% our mobile revenues. We are growing a lot our broadband. In TV, we are losing less than the market, all overall the market. So we - in revenues we are doing okay and specific some costs that we have no, I don’t know if we have something specific in this quarter, but I think if you see all over year-over-year, we are doing okay. Carlos García Moreno Elizondo: I haven’t identified specifically anything Mauricio about [indiscernible], but we will let you know. Oscar Von Hauske Solís: No and the growth in…

Certain drivers there, also some important things is the growth on subscribers, we're growing more Mauricio in Brazil, we are spending a little bit more on the commercial side, so that’s the only thing that we can see at this moment.

Okay, thank you.

Thank you very much.

I will now turn the call over to Mr. Hajj.

Thank you everybody for being in the call. Thank you Carlos, Oscar, and Daniela. Oscar Von Hauske Solís: Thank you all. Thank you, good bye

This concludes today’s conference call. You may now disconnect.