Good morning. My name is Tiffany, and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Movil Fourth 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 a question-and-answer session. [Operator Instructions] Thank you. Now I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.

Thank you. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter 2018 financial and operating results. We have today on the line, Mr. Daniel Hajj, our CEO; Mr. Carlos Garcia-Moreno, CFO; and also Mr. Oscar Von Hauske, our Chief Operating Officer.

Thank you, Daniela. Thank you everyone for being on the call. I will pass to Carlos to make us the summary of the fourth quarter results.

Thank you, Daniel. Good morning everyone. In the fourth quarter and amid continued economic expansion in the U.S. and strong employment gains, renewed fears about impending interest rate increases by the fed surfaced again leading to a significant depreciation of equities and other financial assets and to the strengthening of the dollar against most currencies. Other than the Brazilian real, that recovered by nearly 5% from its election-driven lows, all other currencies in Latin America were down versus the U.S. dollar with the Colombian pesos falling on average 6.4% from the prior year quarter and in Mexican pesos 4.1%. In the fourth quarter, we saw greater commercial dynamism in Mexico, Brazil, Colombia, the Argentina block, the U.S., Dominican Republic to name a few. With prepaid additions surging quarter-over-quarter as you can see in the chart in all of these comp, say, Brazil and postpaid jumping in Brazil. So you have to look at the chart in Mexico we went from 100,000 prepaid net additions in third quarter, 550,000 in the fourth quarter. In Colombia, we went from negative 35,000 in the third to roughly 400,000 in the fourth quarter. And these figures which are quite remarkable on a sequential basis are also very strong if you compare them with the year earlier quarter. That’s for instance in the case of Mexico net adds are up roughly 65%, in the case of Colombia they were up 150%. And in the case of postpaid, the performance -- the star performance was Brazil. They added 1.2 million subs in the last quarter, which compares to about 900,000 than they had a year before. So they have very strong sequential growth of net additions, but also very important if you compare them to the results of the year before. Altogether we added 1.4 –…

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

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

Thank you. Good morning, Daniel, Carlos and Daniela. My first question is related to Mexico. We saw Mexico ARPU increasing strongly, 6% year-on-year at MXN 150. So I was wondering, if it's reasonable to assume that it will keep growing in 2019, particularly supported by the strong data usage that we are seeing and also particularly considering that as you were mentioning prepaid has been recovering in a significant way? That will be my first question. Thank you.

Good morning, Rodrigo. Yes, I think we have a good increase in revenue in Telcel during the year. I think maybe three years ago, when we start, we were at this ARPU when we have this big promotions in Mexico and that with big reductions from prices, we reduced may be to MXN 120, something like that and again, we are at MXN 150. So we have been doing good in the commercial. Even what Carlos is saying in the fourth quarter, we grew like more than 60%, our prepared net adds. Postpaid has been growing very good during the year. And just what I can tell you, Rodrigo, is that we're still investing a lot in our network, we have the best quality, we have the best capacity. 4.5G has been very successful for us in Mexico. And I think that's the reason why people is preferring to be with Telcel. Our number portability is growing again. So I think, we are getting good subscribers and good revenue for them and they are using a lot our service. So I don't know if we can grow more than MXN 150, because, well, there is a – the high-end subscribers already have a package, promotions has been increasing but I think all overall in Mexico in Telcel, we're doing very good.

Understood, Daniel. Thank you very much. And my second question is related to the PayTV license in Mexico. I was wondering if you could give us an update on discussions of this process, and when would you expect to get approval for this?

Well on the PayTV, we have submitted a request and it is on the revision of – with IFT with IFETEL. So we don't know more than that. And also, we have another thing is the functional separation. In the functional separation, where in due process there are certain targets that we have to be met during the year, during 2019. These targets are public. You can see all these targets, and we have to be ready by March of 2020. And as you know, there is still a series of legal proceedings initiated by us, and other appellate challenging IFETEL decision to separate the company. So those are the two processes that we have with IFETEL is the PayTV and the functional separation and that's where we are right now.

Perfect. Thank you very much, Daniel.

Thank you, Rodrigo.

Your next question comes from the line of Walter Piecyk with BTIG. Your line is open.

Yes, hi. This is Joe Galone for Walt. Thanks for taking the question. Based on the commentary and the release, sounds like investments, and in particular, in fiber, will continue this year. And CapEx was up about 10% in 2018 to about $8 billion. What is your target for CapEx for 2019 and how do you plan to deploy it? That's my first question.

Yes, the target would be around $8.5 billion for 2019, more or less what we think we're going to invest. We are putting fiber all around Latin America. We are at Fiber to the Home and rings with fiber and fiber is important for us. So we're putting a lot of fiber. And mainly, it's going to be for increasing our data capacity. We are also investing a lot in IT. So in data capacity, we are doing the new technology that is photonic that – it's a new technology that will give us a lot more capacity at varied cost. So we're doing that in all Latin America. We're investing also a lot in IT, the digital transformation of the company in all the countries. So capacity on wireless, more coverage also on wireless, moving more for 4.5G. So all around this, more or less what we're investing in 2019.

Okay, thanks. And then, Carlos, share repurchase activity appears like it was down again in 2018. And now that the leverage is below 2, would you consider picking up that pace?

Well, I think that what we have said is, we're going to be likely more active distributions once that we get to our target leverage ratios. I think that we're close to getting there at 1.88 in this quarter. I don't know – this quarter, there was a function of exchange rates among other things, but I would say that we still need to do a little bit of delevering before we can think of other things.

Okay, thank you.

Thank you.

Your next question comes from the line of Matthew Niknam with Deutsche Bank. Your line is open.

Hey, guys. Thank you for taking the question. Just to go back to Brazil and Mexico, I think for both regions, you talked about aggressive holiday promotions with large allotments of data and airtime. Was this typical holiday seasonality? Or is this something that's continued into the first quarter? And then secondly, as a follow-up, I think in the past, you've talked about targeting roughly 2 percentage points of margin expansion in both Mexico and Brazil. How should we think about that sort of pacing? Should we expect that to continue in 2019? Thank you.

I think the promotions are due to the Christmas promotions. I think always been reducing the first quarter of the next year. So – and it's going the same way for this year. So about last year, the promotions were high and still I think we do intelligent promotions because as you see, let's say in Mexico and in Brazil, the growth in wireless was good. If you compare with our competitors, our growth was also very good in the fourth quarter. So the promotions that we have been doing are intelligent promotions. In terms of the EBITDA margin, as you see in Brazil, since 2016, we have been growing like 1.5 points per year, 2016 to 2017, 2017 to 2018, and I think, 2018 to 2019. So I think it could be also 1.5 points what – around 1.5 points what we can grow in EBITDA margin in Brazil. And in Mexico, I think it could be the same. We think we can grow, depend a lot on the promotions, depend a lot on the aggressiveness of the markets, but I think we can grow our EBITDA also.

Thank you. And just a follow-up on Mexico. I just want to clarify a comment in response to a prior question. So ARPU you think maybe would stabilize around the MXN 150 level?

Yes. I think it will stabilize at MXN 150, depend a lot on how the growth that we’re going to have on the prepaid markets. So the prepaid is starting to grow again. You know that the prepaid is less ARPU than the postpaid. And if prepaid starts to grow again, I think that – smartphone is growing a lot. Data is consuming a lot and also it’s going to depend on the promotions that we do in the market.

Thank you.

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

Hi everyone, thanks for taking the question. So my first question is on capital allocation. You mentioned that the leveraging is still your top priority. But do you see further M&A in the short term following your Guatemala and El Salvador deal announcement? Or do you think that cash distribution should be the most natural way for capital allocation after you meet your targets? And then, my follow-up question would be on the CapEx. Given the recent investments that you made to upgrade your mobile networks, is it fair to assume that 5G is not going to require disruptive CapEx for 2020 and beyond? And what’s going to be your strategy on 5G? Thank you.

Well, I’m going to start with this question. I think a lot of the things that we’re doing and investing today are working for – are pre-5G. So we’re fiber to the node, more fiber during the backbone, photonics, more towers. So all of these things we are already investing in 2018, 2017 and 2019. So we don’t see disrupt CapEx in 2020 with the introduction of 5G. I think the CapEx is going to be more or less the same as it has been in the last years. So that’s in the CapEx and then…

And I think on the M&A side, which we’ve been lately saying with the shareholder distributions, there’s always a little bit that is being done. Even we have this deleveraging package. So, for instance, we have been looking at small things that we have done at least in Europe. There’s a few things that are being done from time to time this year in Latin America. There’s nothing that is very material as an isolated transaction. I think the last two ones that we announced are very significant to the extent that they are in-market consolidation that will tend to improve conditions in the market and that would allow us to very quickly extract synergies from the – from these acquisitions. So I think it’s very much a case-by-case situation, but it’s also something which we are not looking at anything that is value, that is transformational, but it’s simply something that we add to the existing footprint that we have, which basically allows us to improve the efficiency and follow operations in the given market. That’s basically the scope.

Perfect. Thank you very much.

Thank you.

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

Hi, good morning. My question is regarding Telefonica Central America, the two countries you acquired from them, Guatemala and El Salvador. The first thing is regarding revenue share in those countries. Aside from just taking almost 50% of market share, how much revenue share do you think you can get there? And then about effect of synergies that you could discuss with the two operations. Thank you.

I don’t have exactly the specific numbers. What I can tell you that for us to buy these two assets in Central America, it’s very important. It’s in-market consolidation. A lot of synergies. All the market doesn’t have a lot of spectrum all the competitors in Guatemala, so give us the opportunity to get more 4G, give us the opportunity to give more data to expand our 4G coverage and capacity. So I think it’s very important. The spectrum or the license is maybe it’s more than what we have, what we buy. So for us, it’s very important what we get in terms of the spectrum, subscribers and infrastructure because a lot of this infrastructure we’re going to consolidate and use it in the rest of Central America. So I think it’s a very good acquisition that we get with these two companies.

Okay. Quick follow-up on the spectrum theme, Daniel. Is there any opportunities for may be savings since you’re acquiring so much spectrum, especially Guatemala, which is a more scarce asset? Is there any opportunity of saving, maybe reducing towers or any other type of savings from the spectrum side?

Yes, of course. That’s the synergies that we’re talking about, and we’re in the process of doing that. And of course, we’re going to have synergies in towers, synergies in platform, synergies in infrastructure. And with these synergies, we’re going to have more capacity and more coverage. So I think it’s very good in-market consolidation that we – what we get in Guatemala and in El Salvador.

Great. Thank you very much.

Thank you.

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

Hi, good morning, everyone. Thank you so much for taking my questions. First – the first question is regarding the Disney and Fox merger. Even though the...

We can’t hear you very well.

We cannot hear you very well. Can you talk a little bit louder or?

Okay. I’m going to speak up. Yes, I’ll speak up. My first question is regarding the Disney and Fox merger. Even though we’re still waiting for the regulatory approvals in some key markets, how do you think this merger could impact your PayTV business, especially in Brazil? What do you think are the main driving forces behind the increase in the postpaid subscriber base in most of the countries that you operate in?

No, really I don't have any comment on that. So we buy content from all of them, and we – I don't have any comment on that merger.

Okay. And could you please perhaps talk a little bit about the driving forces behind the increase in the postpaid subscriber base in most of the countries that you operate in?

I – what we have been doing and our strategy has been having to have the best networks all around the country, coverage networks, 4.5G moving to 5G in the future, have a lot penetration on the smartphones, and that – it's been very successful for us because a lot of subscribers are coming to our network, number portability has been good. A lot of prepaid are moving to postpaid to get some benefits from that. And I think this year is going to be more or less the same. So people is using more their phone, is using more data. And I don't see any change on the postpaid base for 2019.

So basically, you're not doing anything different, they are just coming in naturally, is that what you say?

I don't hear you – no, nothing different. Nothing different. So I think difference could be for best because every year, every day, we have a better network, a better quality, more speed. So more coverage. So that will be the only difference than what we had last year. If you could see, let's say, talking a little bit, sorry, about Brazil, well, our footprint in 4G maybe double last year. So we have been investing a lot in 4G. So – and that's what the market is acting and that's what we are giving to giving to the market. So the perception of the brand of Claro, we – right now, Claro is very competitive in the postpaid market in Brazil, and that's why we have more than 1 million net adds in the fourth quarter. So that's very important. We three years ago have a little bit lack of coverage, but we have been putting a lot on fiber to the node, giving more capacity, more speed, 4.5G and that is helping us a lot in Brazil. We have a very, very – I think, we have the best network today in Brazil in terms of quality and that's what the Anatel in the reports is saying.

Thank you, Daniel.

Your next question comes from the line of Ernesto Gonzalez with Morgan Stanley. Your line is open.

Hello. Thanks for taking my question. My first question is, now that you have requested your PayTV in-license – your PayTV license in Mexico, sorry, how soon after approval would you expect to be able to offer triple-play packages in Mexico?

I think we can do it fast. We have the expertise in all the other countries. So we have some commercial agreements with content, we have fiber to a lot of – maybe 6 million houses here in Mexico. So we can do – we can get the service fast if they give us the license, the permission.

Great. Thank you. And just second question. When do you expect to reach your leverage target? Just to have an idea of when we could expect higher shareholder distributions? Thank you.

I think, again, it's always – our leverages are more impacted because of the exchange rates. But at constant exchange rates, I think that we could be here.

Great. Thank you.

Your next question comes from the line of Guilherme Haguiara with Bradesco. Your line is open.

Thank you for taking my question. It is related to the fixed business in Mexico. And when looking at the IFT data, which is still a lot of copper-based network, so we were wondering, just what is your strategy to compete with players that have more of a cable or fiber-based network? And how are investments added towards updating the network? And how to balance that with your leverage targets? Thanks.

Well, in the fixed lines in Mexico, we've been investing through the years. And as Daniel mentioned, we have 6 million home passes ready Fiber to the Home. And in the copper, we've been working to getting closer the fiber to the end user. So we have VDSL technology in the great part of the network. And then, we have ADSL2+ that is pretty close as well with fiber. So I think we've been working to get ready the network to regular handle IPTV in fiber and as well in copper. You see the streaming video needs, let's say, 2 megabits per second to streaming video in IPTV. So I think the network is ready to really to deliver these products.

Okay. Thanks. Thanks. if I may, just have a follow-up on the fixed infrastructure. What is the strategy for the bundled packages you're selling in Mexico considering the current services and the potential authorization for PayTV as well?

Well, we've been reshaping our packages in Mexico. Of course, always focused in delivering the best speed on broadband. What we've been adding in new value-added services, you could see our packages includes Clarovideo, Claro right, security. We have bundled new services in order to make the proposal more oriented in the market. And having PayTV, as you know, we have this pairing, so people paying in different countries. So we don't have a proposal right now. We will wait until we have this commission to go. But we have the experience in another countries for sure, where we will use in Mexico in the marketplace.

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

Good morning. So I have a follow-on question to Rodrigo, which is about the Mexican ARPU. In fact, I saw a deceleration in ARPU that's in the beginning of the year it was growing around 11% and now it's growing about 5%. What explains this deceleration during the year on the ARPU? Is there any accounting or it's just more like a market?

No, no. Nothing to be on the deck. In fact, I think it's a different base. When you are in -- at MXN 120, then you can grow faster than when you are almost in MXN 150. So I think MXN 150, it's a good ARPU for country of Mexico where we have a lot of prepaid subscribers. And people is using, I think, it could grow a little bit more prepaid subscribers start to use more, change for smartphone and use more data. So I think it depends a lot -- it's going to depend a lot on the economy, the economy of the country grow, I think we can grow also our ARPU. So competition also, I don't know exactly what those competition is going to do in the future, difficult to do, difficult to say and to understand. But I think all overall, Mexico is doing fine. We have very, very competitive prices in Mexico. So it's one of the more competitive countries in Latin America and maybe in the world and also it's the prices are very competitive, and I think with -- as I said, with the network, with the coverage, with the capacity, quality that we have, I think we can gain more high-end subscribers that can help us score the ARPU. So I don't know, Carlos, if you want to?

Sure. Only one thing. I mean, if you look at ARPU in Mexico for the full year 2018 over 2017, the increase was 8% exactly, okay? By the fourth quarter of 2018, it was 5.7%. But this basically means that this deceleration of ARPU growth is, to some extent, related to the change in the subscriber mix, because we've been looking at how fast we are growing postpaid and how fast we are growing prepaid, which is the first slide that I showed today, you will see that we are seeing increasingly a change in the mix of subscribers. So that also has an effect on the ARPU, which is the average of our base. So as Daniel said, always there's that tendency to -- at least to decelerate when you get to a certain level, but on top of that, I think that we have this expansion of prepaid revenues and prepaid clients. I think that it's very relevant to look at the growth of prepaid revenues, which I mentioned at the beginning of the call, have been growing for the first time in various quarters, maybe we're growing faster even in postpaid revenues in Mexico, okay? So I think there's a lot to be said about these. I think there's a lot to be said about continued adoption of smartphones by prepaid. We've already seen a very significant surge in the adoption of prepaids in Mexico. But I think that we are still yet to see -- we still are yet to see part of the increase in the adoption of smart devices by prepaid, which is important for the point -- from the point of view with the clients and our interest in prepaid clients.

And talking a little bit about the ARPU, I think you all saw very good news from Brazil. I think in Brazil, we have been able to grow our ARPU to BRL 17.5 in fourth quarter of last year, we have BRL 15.8. So we have been growing. We think we are really focusing in good subscribers and subscribers that consume, who spend and that will help us the growth in the ARPU. Now all around I think, all overall, we have been growing our ARPU in Mexico, Brazil and other countries.

Thanks a lot. Second question would be, let’s say, we saw in Brazil for the first time in few quarters positive quarter-over-quarter growth in wireline. So – you’ve reported the quarter-over-quarter declines we have seen. What’s behind this improvement in the wireline revenues that we saw in Brazil? Is it DTH, which is performing better or having a more – less pressure? What is going on?

Remember Andre, when that percentage – the chart from Brazil, I know you got to see the chart. But you see that we show on the one side the service revenues on the right, okay, which are postpaid, prepaid and broadband, fixed-broadband, they were all exhibiting positive growth year-on-year and they’re all showing very significant upward trends. And then, lastly we have a decline with fixed-voice, which has a lot to do with long distance revenues that are being wiped out by technology workup and other things. So they’ve been declining steadily, so the rate of decline has not increased. But the one that has also been a drag on revenues on the fixed-line side was PayTV and that seems to have slightly less. That seems to be turning up that’s what appears in the last quarter. So yes, I think we see three business lines that are growing well, postpaid, prepaid and fixed- broadband. And then, we see two that are a drag, but one of them likely to remain on track, which is fixed-voice. But the other one, PayTV probably becoming a positive contributor to growth down the road.

And just a request, if someone can end us the presentation, because, unfortunately, we have not received the presentation, so it was harder to follow.

Okay, sure. We’ll have it sent to you. But I think you can download it directly from the webcast. It’s already in the webcast Andre.

[Operator Instructions]. Your next question comes from the line of Julio Arciniegas with Royal Bank of Canada. Your line is open.

Hi, good morning. Thanks for taking my question. In Colombia, we’re seeing that some of your competitors actually they are pushing postpaid products. Have you seen higher demand for postpaid products in this market? So basically, can we see in the future prepaid to postpaid migration process in Colombia as the one that we saw in Brazil? That was my first question. And my second question is regarding Brazil FTTH. Some other competitors, of course, they’re increasing their FTTH footprint. Can you give us some color on how the company is facing the competition against FTTH players? Are you upgrading your cable network to FTTH when your competitors deploy FTTH in your footprint? Thank you.

Well, if you see the – in Brazil, they segment the broadband into markets, high-speed broadband that is – it's a product that is more than 34 megabits per second. And if you look at our market share in that market, we have 54% of market share. So – and we are competing against the companies that are building Fiber to the Home. So I think with DOCSIS 2.1, we have a good product to compete in that market. So we have a good market share in ultra broadband, as I call, in Brazil. So, up to now, we feel that the technology that we have to defend ourselves against the fiber. But the new competitors, the ones that are growing is called the small competitors that are outside of our footprint. So they are selling broadband to radios, some of them as well with fiber. And they are growing pretty good in the marketplace. So – and when you look their combination, we're still having a good market share in fixed-broadband. And in ultra-broadband, we have 52% of market share.

We're growing and adding something on what Oscar said, part of our investments in cable is to modernize, always give more speed our cable.

And all the news series, we are using Fiber to the Home. So all the new development that we are doing in the new cities, we are using GPON technologies.

Okay. Thank you. And the question regarding the potential prepaid to postpaid migration in Colombia? I think Brazil is impossible. What have you seen?

Yes. I don't think – yes, I don't think there's something special in Colombia. I think all around Latin America, I think all around the world, they are moving from prepaid to postpaid. So they start with the prepaid and then they start to use more. And when they want to add something more applications or more data or other things, they are moving too. So there's a lot of our subscribers from prepaid that are moving to postpaid. So there's nothing special in Colombia, and I think it's similar to what we have been doing in all the other countries.

Okay. Thank you.

Your next question comes from Mauricio Fernandes with Merrill Lynch. Your line is open.

Thank you. Good morning, Daniel, Carlos, Daniela. Quick question on still on Brazil. Everybody is expanding fiber – the telcos, I mean, are expanding fiber. To ask as a comment on the expansion of the smaller players as well. Wouldn't that having very large footprint of cable, what are your plans to basically be able to remain competitive in broadband? Is it to have a fewer homes or fewer customers addressed by node? Is that you plan to deploy Fiber to the Home at the end of day in a combination of cable you have? So I just wanted to hear your thoughts there, please.

Well, as you know, in Brazil, we had these cables that is called HFC. That is hybrid fiber and copper networks. So what we've been doing is using DOCSIS 3.1. So we're breaking up the nodes to get the speed. And if you hear the news about DOCSIS 3.1, you could have 1 gigabit speed per customer. So I think it's a great technology. Of course, you need to upgrade the nodes, as you mentioned. We need to break the nodes. But it's similar that you need to get fiber across the fiber. And another technology that is coming in place, it's called D-CCAP that you could combine HFC networks and as well GPON networks in the same node. So that's a new technology that we are testing. So as we need to get with Fiber to the Home that we don't see in the near term, but there is the new technology that allow us to combine both technologies. And all the new cities that we're doing in Brazil, we are using GPON, we are using Fiber to the Home as well. But we feel that most technologies are very competitive. So we don’t see that one is an advantage. And in one of the – and we've been getting closer the fiber to the node. So we are at 200 meters from the houses, so – with HFC networks. So that's it.

Got it. And one more if I may, Oscar. Have you seen – have you either custom – not from satellite, except, I think it's rather obvious, but from cable, you've seen customer disconnections, maybe due to OTT events, or if you’ve seen customers trade down to lower ARPU or lower packages as a result in the last, say, 12 months?

No. What we've been seeing is that the market is asking for more speed. If you see the average speed 12 months ago in Brazil, it was 28 megahertz and now it's close to 40 megahertz. So what we're seeing the market is that the market is asking for more speed. And I think the situation is video streaming in the houses is my – video uses 70% of the network, so. And it's coming more HD, it's coming – for sure, it's coming more 4K and the requirements will be more forced to higher speeds.

And Mauricio, we're giving more applications on that. We have – now we have Claro. So we have a good bundle and a good package, but, of course, I think there is a little bit of pressure because of a lot more offers and the content that we're having, but we feel very competitive with our product in Brazil. So we are also having

We're having also good packages, lower price packages than what we have today to compete. And well – but we feel very good the quality, our products are excellent and the perception of the people of net is very good also. We have more than 48,000 titles between now and – now our product and Claro TV, and that's also very competitive against that. And in the future, we're going to give also bundle Netflix inside our product. So I think we're really competitive.

Great, thank you all everyone. Thank you.

Thank you.

Thank you. I will leave the call to Mr. Daniel Hajj.

Thank you for being in the call. Thank you Carlos, Daniela, Oscar. Thank you very much, everyone.

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