América Móvil, S.A.B. de C.V. (AMX) Q3 2019 Earnings Report, Transcript and Summary

Good morning. My name is Marcella and I will be your conference operator today. At this time, I would like to welcome everyone to the América Móvil third quarter 2019 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]. I would now like to 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 to discuss our third quarter financial and operating results. We have on the line Mr. Daniel Hajj, CEO, Mr. Carlos García Moreno, CFO and Mr. Oscar Von Hauske, COO.

Thank you Daniela. Welcome everyone to América Móvil's third quarter of 2019 financial and operating report. And I am going to transfer to Carlos to make a summary of the results. Carlos García Moreno: Thank you Daniel. Good morning everyone. Well, notwithstanding relatively strong economic reports in the U.S. throughout the third quarter, as the global economy continued to slow down, the concern that the country would follow brought about a major drop in U.S. interest rates in the period with the Fed reducing the refund rates twice and 10-year treasury yields falling to levels close to their all-time lows. In Latin America, several central banks, Brazil, Mexico, Chile introduced new interest rate reductions as well as those countries were also experiencing a significant economic deceleration. We ended September with 278 million wireless subscribers, adding 1.6 million postpaid subscribers in the quarter, of which 928,000 came from Brazil, 215,000 from Mexico ad 159,000 from Austria and disconnecting 827,000 prepaid subs, 905,000 in Brazil. As for fixed-RGUs, at the end of the quarter they totaled 84 million after net disconnections of 229,000 RGUs, resulting from 208,000 new broadband accesses and the disconnection of 247,000 wire-lines and 190,000 PayTV units. Mobile postpaid and fixed-broadband remain the main drivers of access growth at 7.8% and 5.6% year-on-year respectively, with mobile prepaid and PayTV units declining 3.5% and 2.5%. Fixed-voice accesses were down slightly, 0.2%, from a year before. We posted solid revenue growth in the quarter with our revenues reaching MXN248 billion pesos. In Mexican peso terms, they were likely higher year-on-year, 0.2%, in spite of the depreciation of various currencies, particularly the Colombian and Argentinean pesos vis-à-vis the Mexican peso, all of this in the quarter. At constant exchange rates, revenue growth remains solid with service revenues expanding 2.5%, slightly faster than in the prior quarter. I am talking, all of this is excluding Argentina in these calculations because the accounting of Argentina is not in normal terms but in inflation-adjusted terms. Several countries posted their best-ever revenue rates in over a year. Under IFRS16, our third quarter EBITDA came in at MXN78.2 million. It was equivalent to 31.7% of revenues. Organically and at constant exchange rates, our EBITDA expanded 3%. However, adjusting for the booking last year of an extraordinary revenue item deriving from a legal proceeding in Brazil and for restructuring charges in Austria associated with its program of early retirement for employees, EBITDA increased 7.2% over the year earlier quarter. At 4.6%, mobile service revenues were the driver of revenue growth with revenues expanding 11% in Brazil, 8.2% in Mexico, 4.7% in both Colombia and in Europe. The Dominican Republic and Central America also registered strong performance. As for fixed-line service revenues, they declined 1.2%, principally because of the reduction of fixed-voice revenues. Postpaid revenues continued to accelerate increasing at a pace of 5.8% while prepaid revenues are exhibiting greater dynamism in several markets, including Mexico and Colombia, mainly on account of greater data consumption. Revenues from fixed-broadband services and corporate networks increased 5.7% and 6.7% respectively while PayTV revenues, although still down 3.3% on a yearly basis, stabilized in the third quarter, posting a 2% sequential increase. So from the second to the third quarter, they increased 2%. In some countries, Colombia being an important example, the fixed-line platform is growing well on all-three business lines, voice, broadband and PayTV. In Mexico, prepaid revenues kept up growing at more than 10% while postpaid revenues stayed close to 6% as they have for quite some time now. On the fixed-line platform, data services including retail and corporate, grew 2.7%, with voice revenues continuing to decline on a year-over-year basis. All-in-all, EBITDA shot up 7.6% in Mexico from the year before reflecting greater operating leverage and good cost control. In Brazil, postpaid revenues accelerated to a 13.5% pace, followed this time by prepaid revenues of 4.8% while its broadband revenues decelerated to 6.6% and PayTV and voice revenues improved slightly on a sequential basis. EBITDA was up 7.6% in Brazil. In Colombia, EBITDA increased 12.8% as fixed broadband revenues accelerated to a 13.6% pace and prepaid revenues continued to recover, expanding 4.6% from the year before. In the case of platform, service revenue growth remains slightly positive as it has for several quarters but EBITDA growth stayed close to 10% on a yearly basis. In addition to the one that I just mentioned, Mexico, Brazil, Colombia and platform, EBITDA expansion was very strong also in Peru, besting even that in Colombia, growing nearly 15% year-on-year. We raised our operating profit to MXN38 billion, up 7.3% and comprehensive financing cost of 12% of MXN12 billion, resulting mostly from foreign exchange losses derived from the depreciation of the Colombian and Argentina peso relative to the dollar and the impact on accounts payable to suppliers and others. After this, we obtained a net profit of MXN13 billion in the period, equivalent to MXN0.20 per share or $0.20 per ADR. Our cash flow, together with net financing of MXN15.9 billion through September allowed us to fully cover capital expenditures of MXN100 billion, fund shareholder distributions of MXN12 billion, pay MXN6 billion in acquisitions for Telefonica Guatemala and amortize pension obligations in the amount of MXN17 billion, basically nine months to September. At the end of September, our net debt stood at MXN673 billion, including MXN112 billion in capitalized lease obligations per IFRS 16. Our net debt to EBITDA, last twelve months, was 1.92 times, using for consistency the methodology prior to IFRS 16, the one we had until last year. So this is the one that we will continue to focus on to measure the progress that we are making towards our goal of 1.5 times by the end of 2020. Okay. With that, I would like to pass the call back to Daniel. I am sorry, open Q&A.

We are going to start with the Q&A. Thank you Carlos. Carlos García Moreno: Thank you Daniel.

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

Yes. Thank you. Good morning Daniel, Carlos, Oscar, Daniela. I have a couple of questions, the first couple on Mexico and then one in Brazil, if I may. Regarding Mexico, we saw again an ARPU of MXN152 increasing by almost 7% year-on-year and by around 3% quarter-on-quarter. I have the impression that these comes mostly due to higher usage. However, considering that your peers are raising prices aggressively in Mexico, is this something that you would consider doing as well? That would be the first question. Thank you.

Hi Rodrigo. As you said, the ARPU in Mexico is growing 7% and mainly we have a very good revenues from prepaid, prepaid revenues growth around 10% to 11.4%. So the growth in service revenue in prepaid was very good. And I don't see really increase on prices. I think the increase of prices of the competition was mainly around April or May. And the last months, we don't see any increase in prices. For the fourth quarter, it's more or less the Christmas season. We are not seeing any increase on prices at this moment, maybe in some handsets, new handsets or something like that. But we are not planning to raise any prices for the Christmas promotions these next two, three months, Rodrigo.

Understood. Thank you very much, Daniel. And my second question is regarding fixed-broadband service revenue in Mexico. We saw decline of 2% during the quarter. However we also see that broadband subscribers continued to increase by almost 4%. So I was wondering if you could elaborate a little bit more on the reason behind the revenue decline?

Just only to add a little bit more on the first question. I think people in Mexico are consuming more. We are giving a very good network. We are giving 4.5G to all of our customers. I think a lot of prepaid customers are moving to smartphones and these smartphones are consuming more data and also is something that is helping us to move the ARPU in prepaid and the service revenues in prepaid to grow more than 10%.

Just to add to the question, Rodrigo. The sequential increase in consumption of data services in Mexico was nearly 15%. The second quarter to the third quarter, we increased by nearly 15% the data usage per client.

So prepaid customers are moving to feature phones on these feature phones are consuming lot more data. In the fixed side, I think competition is strong. As we said at the beginning of the year, Telmex is investing more, is doing more Fiber to the Node, more Fiber to the Curb, Fiber to the Home. So we are really investing all around Mexico in the fixed side. And the reason why revenues decreased 2% and subscribers increased is because of all this competition, our customers are moving little bit down. So if they used to have a plan of MXN400, they are moving to a plan of MXN350 because they are having better service and better speeds and everything there. So we are trying to give them a very good quality and we are investing to increase our service and our quality and our speed in the fixed side, Rodrigo.

Understood. And finally regarding Brazil, if I may. Could you please share with us your thoughts on competitive dynamics, particularly in wireless? Also in Brazil, we have seen your competitors, particularly the leading company in postpaid, increasing prices by around six times over the last 12 months. So I was wondering if you expect to follow them in terms of price increases? Or if you expect to grow ARPU only by increased usage? Thank you.

Well, I am not so agreeing with what you are saying because they deliver higher prices, but then in the other side, they give a lot of promotions. So I don't think they really, really are increasing prices. So in Brazil, we have been investing. We have very good 4.5G network, very good speeds. Our coverage has been increasing. We are moving and transforming everything to digital. We are giving very good service to all our customers. So I think we have a very, very good proposal in wireless in Brazil. And that's why we are growing more than like 11% our service revenue there and mostly in postpaid. But we also are giving combos there. So we have good fixed TV and we are giving the combo there. So everything is working fine in Brazil and I really don't think that prices has been increased of our competitors. So let's see what is going to happen in fourth quarter. But what we are really, really focusing is on giving the best service to our customer and that means quality, coverage, speed and giving a very post-sales service to all of them. So our brand, Claro brand, has been improving a lot and the perception of the people there is very good also. So we are doing a very good job in the prepaid side in Brazil.

Understood.

Also, that the same as Mexico, peoples are consuming a lot. They are doubling the megabytes of use also in Brazil. So if you give speed, you give good network, they have a very good phone. I am sure people is going to spend more.

Thank you very much Daniel.

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

Hi. Good morning. Yes, regarding the corporate segment in Mexico which is growing at double digits and becoming more relevant. And I was wondering if you could give us more color about how much it contributes to Mexican revenues and what is the strategy there to increase market share?

Sorry, Alejandro, we can't hear you very well.

Can you speak a little bit more slowly or because it's not so clear, your voice.

Surely. My first question is regarding the corporate segment in Mexico which is growing at double digit and becoming more relevant. And I was wondering if you could give us more color about how much this segment contributes to the overall Mexican revenues and what is your strategy in this corporate segment to increase market share?

So you are right. Our corporate segment is doing very good in Mexico. We are doing excellent in that segment and delivering more to all the big corporates, small and medium businesses also. And we are focusing a lot on that and we are delivering good revenue flow. We have cloud. Oscar can explain a little bit all the services that we are giving to these customers.

Sure. It's mainly on the enterprise, we used to have a data connectivity. So we are moving from just connectivity to solutions. So we are bringing new services such as security, as cloud services and some vertical integrations for the retail market or the finance market. So we are complementing the connectivity with solutions. We believe that we need to integrate more around machine learning and big data and data lakes to integrate a full offering to the enterprise market. So we have a good market share on data connectivity. So we are leveraging from that connectivity to bring new solutions and services to this market. And as well in a small business, we are offering cloud services for all the small business and the penetration that we been having there is quite good.

Thank you. Thank you Oscar. And any possibility to give us an idea of how much this segment contributes to the Mexican revenues?

We don't have it here but Daniela can give it to you later but they don't have it right now.

And my second question, if I may. We have seen now a few quarters, several quarters with an effective tax rate above 40%. What is the reason behind this? And if it is reasonable to expect that this tax rate will eventually come down again to mid-30s? Carlos García Moreno: Clearly the statutory average of the tax rates is in the level of 32%. We have 30% in most countries. But in some of the bigger ones like Colombia and Brazil, the tax rate is 34%. So our base is roughly 33% where we start. It's basically three different major items. One is Mexico which has things that I don't think are likely going to change anytime soon. One of them has to do with the way how in Mexico you may only deduct the real interest rate and not the nominal interest rate from taxes. So that's something that has been always there with us for the last 30 years at least. Another part has to do with some expensing in the payment of pensions of pension people from Telmex which only roughly half of that maybe deducted from taxes. And that's basically the impact of Mexico. And then essentially the other impact has to do with the use up of the amortization of deferred tax credits that we have basically in Chile and in Brazil. So to the extent that we use those tax credits, that increases the effective tax rate. And so it's a high tax rate but for a good reason because it reduces our cash taxes.

Thank you Carlos. Thank you very much.

All right. Thank you.

[Operator Instructions]. Your next question comes from the line of Fred Mendes from Bradesco. Your line is open.

Good morning everyone. And thanks for the call. I have two quick questions here mainly related to Brazil. The number one, you have been pretty much dominating the net adds on the postpaid side throughout 2019. I just want to get a better understanding here, is most of these net adds comes from your base of prepaid clients, so basically upselling? Or if you are also gaining a lot of clients from the competition, especially in the pure postpaid? That will be the first one. And then my second question, again in Brazil, prepaid revenues were up 5%, very different from what we are seeing from the competition in the last quarters. So just trying to understand if there is something specific that you are seeing from AMX? Or if you are starting to see an improvement in the market scenario? And then this prepaid revenue, they should improve throughout the next quarters. Thank you?

Well, in the first question on postpaid, we have been focusing a lot on postpaid. And I think postpaid, people are looking, as I said, best network, best quality, good speed, coverage. So people are looking for that. So we are gaining share. Part of that is, we have number portability in a lot of countries. So we are gaining in number portability. So people are coming from other companies to Claro. But also there is a lot of prepaid subscribers that are moving to be a postpaid subscriber. So that we have both. I don't have exactly the data here, but that we are gaining market share by number portability and we are moving the prepaid to postpaid subscribers. In the prepaid, as we said, even that the numbers are disconnecting because we have disconnections in the quarter, I think there are, because part of this customers are moving up to postpaid. But I think these customers are consuming more. They are moving to a better handset. So they are using more data. And that's why we have been growing our revenues in the last quarter. If you could see, let's say let's put an example, specifically in Colombia. In Colombia, we have been, say at the beginning of the year and last year, we have being negative in growth in service revenue in prepaid. And today, this quarter, we are growing around 5% there. So we are moving as the people are consuming. We are giving more distribution. And we are making a very good commercial work in all the countries to cover everything in terms of prepaid subscribers also. I don't know if Carlos wants to -- Carlos García Moreno: So I think in the case of Brazil and this is important because notwithstanding this migration of prepaid to postpaid and the disconnection of prepaid subscribers as Daniel mentioned, fact of the matter is that prepaid revenues increased nearly 5% quarter-over-quarter.

Given that we have negative for diverse growth in the quarter. But we are having much better subscribers.

Perfect. Very, very clear, Daniel and Carlos. Thank you.

Thank you.

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

So we are seeing América Móvil growing away above its peers in Brazil in mobile. So I wonder what the thing that is behind that? And how stainable is this growth advantage in AMX getting market share?

As I said, we are doing very good in Brazil. I think in prepaid and postpaid also and in the big size because even in the big size that we are not growing, I think we are maintaining or growing a little bit market share there. So we are going to talk a little bit about wireless as the investments that we have been doing during the last two, three years are giving us people and the rebranding that we are having with Claro, what people think, the coverage, the way we market our products, all the combos that we are doing with the fixed. So there's a lot of the big convergence that were having there, it's being very important for us. So our fixed customers wants to have Carlo also with them. So we package them. So we are doing a lot of different commercial things. So people is preferring to have Claro with them. And the most important thing, we have a very good network, very high speed network. We have 4.5G all over Brazil. So it's an excellent network and people are using that. They are consuming very good. The megabytes of use has been doubling. So we are in a very good position right now in Brazil in the wireless side. Carlos García Moreno: Yes. Andre, as you know, we invested a lot of money over many years to develop the best fixed line platform in Brazil. And we have basically built a convergent platform. Our mobile growth, a lot of the mobile basically runs on the fixed-line platform there, as you know the best one, by far, in the field. So I think that what you are seeing is basically the reflection of all of those years of strong investment in developing a convergent platform that represents a competitive edge and that is giving us, it's not something that is a one-quarter event. I think, we think it's something that is really structural at this point.

And other very important thing is convergence, what Carlos is saying. And the other one is coverage. If you see two years ago, we don't have the same coverage as our competitors has today. We have a very good coverage. We can match or be better than our competitors in some places in Brazil. So that gives us a very good advantage. So we are working a lot in the network side in the last two years.

Perfect. And if I may, a second question. You are now moving towards deleveraging and growing through your targets. So is it reasonable to assume that next year we could see an increase in distribution from América Móvil? do you think that there's anything like say a large M&A or something that could focus the cash flow on something else besides the distributions, because probably the deleveraging story is probably going to get over at some point. Carlos García Moreno: Well, Andre, as I mentioned in my presentation earlier, we have this goal of getting to 1.5 times net debt to EBITDA by the end of next year. That's the hard goal that we have. And I think everything else is basically subordinated to this objective. So I think what we should be focusing on is how far we can obtain our target leverage rates.

Perfect. Okay. Thanks a lot.

Thank you. Carlos García Moreno: Thank you.

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

Yes. Hi. Good morning. Thank you for taking my question. My question is actually about subsidies and in fact about your customer acquisition strategy. We are seeing the level of handset subsidies consistently reducing over the past two years and it's now, if I am not mistaken, at the lowest level ever. So can you comment about your handset sales strategy and whether they should be viewed as a major change on your customer acquisition strategy, given that for several years AMX used aggressive, let's say, handset subsidies to differentiate its offer and apparently it's now turning it's focus on different services like the Claro cloud support or the network quality and the customer experience as you just mentioned during your opening remarks? So thank you.

Well, one of the main strategies of América Móvil through all Latin America is the cost control and reducing cost and expenses and subsidies is one of the most important expense in América Móvil. So what we have been doing is two things in the subsidies. First, we have built a lot of our new adds or renewing the plans, we are financing the handset. So when you finance the handset, then you don't lose or you don't subsidize the handset. So with the interest and the cost and everything, it gives you a little bit of more profit than if you do it directly and pay cash. So it's moving a lot to finance the handsets. On the other side, when you finance, the working capital gets higher and then you have to be careful with the bad debt. So there's other implications when you finance because there's a lot of money when you start to finance handsets. But it has been a good business for us and people like to finance the handsets because instead of paying let's say $300 or $400 or $500 cash, then they can pay maybe $20 or $30 or $50 per month for the next 24 months or 36 months. So it has been good and that is giving us space to have more profit. In the other side, five years ago everybody subsidized in the prepaid side. And today, we are not subsidizing in the prepaid business. And also people if you want to be in the prepaid and we don't have exactly your credit rating, then we are not giving you any subsidy or any financing there. So that's mainly what we are doing and also we have a big cost control in all the companies and we have a very, very important strategy on reducing and cutting. We are transforming the company to a digital company. And doing that, we are saving a lot of cost over there. So let's say, to give you an example, our customer care centers three years ago, you have to go there and sign papers and everything is on paper, today everything is on digital. We have chatbot to answer questions. So we are moving to that phase and it's been very good on the cost side.

Thank you. This was very clear. And if I may just like a second question regarding like what is the status on the Nextel acquisition and also on the Telefonica transaction in Central America? And finally on the PayTV license in Mexico, if you can just quickly comment on those three things, that will be great. Thank you.

The TV license in Mexico. The acquisition of Nextel I think is going well and we hope that we can close the company maybe on November. So it looks like we can close the deal in November. El Salvador is also where we submit all the papers. They are asking for a little bit more of information. And we are in good process over there. And the PayTV licence in Mexico, as we discussed the past, in October 2018, we request a license, América Móvil request in the IFT license to provide PayTV services in Mexico. To this date, we have provide all the additional information they have request for the analysis. So the application complies with all current regulations and the approval for the applications continue to be pending. And as you can see and as shown by the data published by the IFT, the Mexican PayTV market is highly concentrated. There is limited choices of the service for consumers and prices have been consistently increasing since the telecom reform back in 2013. So in addition, PayTV is the only market of the telecom sector where there has been non-regulatory integration to promote competition. So I think it is because all of these reasons why we believe the entrance of América Móvil to the PayTV market will be in the best interest for the consumers. So that's what we have. We don't have any else to comment on this topic. In the other side, what you could see all around the world is that streaming is growing a lot. So if you have a broadband and then streaming. Streaming is growing a lot. So in the next years, you are going to see a big increase in streaming broadband with all the consumers. So as streaming is going to grow in the next years a lot. That's growing around the world and it's going to grow in Latin America.

That's super helpful. Thank you very much.

Thanks

Your next question comes from the line of Carlos Legarreta from GBM. Your line is open.

Hi. Thank you. Good morning. Basically in Colombia, I saw very good results, both quarter's service revenue, particularly in revenue seem to be accelerating. I was wondering if you could give us more color on this regard. Thank you.

Well, I think the results of Colombia in the third quarter has been extremely good. We have been growing it. We have been growing since the beginning of the year in postpaid and we have been growing also in the fixed side. But this quarter we have been also grown in the prepaid. So all our lines has been growing and I can give you a little bit of data here. In Colombia, postpaid is growing 4.8%, prepaid 4.6%. So it's a very good recovery of the prepaid side. Broadband 13.6%, fixed-voice 5.9%, TV 6%. So all overall, in the fixed side, 8.9%. So we have been doing those in Colombia also investing a lot in the network, also investing a lot in the digital side, in the transformation of the company to give a very good service to all our customers. And we have very good content, very good speeds in the broadband side. We have been making convergence and giving the combo to all our customers. So we are doing a good job in Colombia. Carlos García Moreno: Just again to add to what Daniel has said. If you look at prepaid revenues in Colombia, which have been not doing particularly well for a long time, they were up nearly 8% quarter-over-quarter. And this is driven, in the aggregate in Columbia. MOUs increased by 7.4% again quarter-over-quarter and 31% year-over-year, MOUs, whereas data per client increased 81% year-over-year and 20% quarter-over-quarter. So we have a different strategy by working in the field than in Mexico. It's a more-for-more kind of strategy. We are driving greater spending by having people consume more data. And this is even also more voice.

That's very helpful. Thank you. And if I may, a follow-up. It's more on the strategic side. As you guys have probably noticed, there seems to be a trend across larger operators that are perhaps moving to divest or spin off their assets such as towers, fibers, data centers, et cetera. Do you think AMX will join this trend? Or you could still see these assets as part of your core strategy? Thank you.

Well we did that three years ago. No, more four years ago with Telesites in Mexico. We spin off the towers. It was more for a regulatory to give what the regulators wanted to give access to this to all the competitors who will spin off the towers. We create Telesites. And today everybody can use the towers in Mexico. And you are seeing what is happening here in Mexico. So it's not a problem of access, Access, they have been. In the strategic side, we are not thinking at this moment to spin off any other tower or to spin off data centers or fiber. I think we are in a very good position financially and we are trying to get the target for next year. And so we don't have any pressure to spin off any of our important assets at this moment.

Thank you very much.

Your next question comes from the line of Juan Pablo Alba from Credit Suisse. Your line is open.

Hello. Good morning and thank you for taking the question. Just a small update in terms of how you see the macro slowdown in Mexico. And do you think if results could have been even better if the macro scenario was a little bit better in Mexico? Thank you.

Well, it's an interesting question, but what I can tell you is you can say, things are going well. In the prepaid side, we are growing 10% our revenue. So we are not seeing any deceleration on the economy, not in our products. And remember, telecom is very resilient sometimes to the economy. But today in Mexico, we are not seeing any deceleration on our products.

Thank you very much. And just as a follow-up, just a quick comment in terms of Peru. Just if you could provide a little bit more color on the competitive market over there? And if you expect to keep delivering a good EBIDTA growth over there, despite like the tough competitive environment? Thank you.

Well, the competition is still very top. Prices has been going down and that's why you see that our revenue is going down. But we have been putting a lot of pressure on cost control and the services, as we have been discussing and digitalization, transforming the company to digital to saving cost. And that's what we are doing. But in terms of the competition, the commercial competition in Peru is still very tough. It's difficult. Prices are very low. And well, we are competing. We are upgrading all our networks. We are putting a lot of money on the coverage as we are investing also in the fixed side and we think that in the future Peru is going to be a little bit more reasonable. The prices will be a little bit more reasonable.

Thank you very much.

Thank you.

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

Hi. Thanks for taking the questions. I have two questions on my side. The first one is on 5G. You have the best network and very strong spectrum holdings. Do you think it's fair for us to assume that you are not going to need a CapEx surge to rollout 5G networks? Should we expect the same level of CapEx for 2020 and 2021?

So we don't think we are going to raise our CapEx in 2020 and 2021 because of 5G. What we think that we are not in a hurry of putting 5G in Latin America. What we are doing right now is to build to the network much fiber to more fiber to the node and some things that we are going to use in 5G when we decide to launch 5G. We are definitely the only country where we are going to launch 5G soon is Austria, that is going to be on February. But other else, we are only making testings and as I said improving the network and make the network ready to decide when we want to launch 5G. We are not planning to put more CapEx because of 5G

Perfectly. Thank you very much Daniel. And my second question is on Brazil. Do you see room for market repair in a scenario that Brazil goes from four to three players? And are you interested in participating of any consolidation move or even acquiring more mobile spectrum in the secondary market? Or the Nextel was enough in terms of Brazil M&A for your strategy.

No. We believe a lot in Brazil. I think and we hope that Brazil will start a good recovery next year. The economy will recover next year. There's a lot of rumors that Oi is for sale. Some of them that some assets are going to be for sale, other that they are going to sell it totally or they are going to mix. We as América Móvil, of course, we are interested in doing something with Oi in Brazil and we are open to discuss anything that will be. I think with the spectrum of Nextel was going to be a good increase of a spectrum for us. But also we are interested in the mobile side subscribers or infrastructure. We are open to discuss something with the Oi. Carlos García Moreno: But I think that even before any acquisitions, Maria, as you know the market is consolidating day-by-day, simply because one of the competitors has been bleeding clients and revenues and EBITDA So that basically means that the market is concentrating more.

Perfect. Thank you very much, Carlos and Daniel. Carlos García Moreno: Thank you Maria.

Your next question comes from the line of Carlos Sequeira from BTG. Your line is open.

Hi. Thank you. Good morning. So my question is kind of a follow-up from a previous question. So after the acquisition of Nextel Brazil, Claro has now like 30 megahertz more spectrum than Vivo and almost 60 megahertz more than TIM. My question is how important competitively do you think this is going to be in the next quarters, the fact that you have significant more spectrum than the other players? Thank you.

Well, I think it's not something that it's for the next quarters. I think to have a spectrum you are going to have a spectrum and then you have to put network over there and do a lot of investments. And so a spectrum is good, it's very good, very important for us. But it's important for the future. And I think TIM and Vivo are going to have, there's going to be more auctions in Brazil for more spectrum and they are going to have the alternative to buy more. I think what is important in Brazil for us is that we have a good fixed network, a good broadband network, a good TV network and we are doing convergence with this all over all. We have our combos and these combos have been very successful. So that's really what has been important for Claro in Brazil to have the convergence and do the combos for all our customers. Even that you have to have good coverage, good networks all around, we are giving, we are leading and Oscar can take a little bit more. We are leaving our ultrabroadband in fixed, our ultrabroadband market. I think we have --

49.9%.

Like 50% in the ultrabroadband. But I don't know, Oscar if you can explain a little bit more what we are doing in Brazil.

Sure. We have all the network, the cable network prepared with DOCSIS We could move to DOCSIS 3.1 to get the speed. We could get to one gigabit when the markets need it. But secondly, we are building Fiber to the Home. We operate in 62 cities right now with a Fiber to the Home. So we are expanding the fiber footprint, as Daniel mentioned, to be ready for 5G, getting closer the fiber to the user. So with it, as Carlos mentioned, through the years in the fixed to make a robust network, not only in the long haul in the metropolitan rings in order to have these fiber closer to the users.

So I think that's what gave us and the growth that we are having in Brazil, the convergence.

Okay. Wonderful. Thank you very much.

Thank you.

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

Great. Thanks. Daniel, you had mentioned that the CapEx is not increasing. Obviously, your EBIDTA is increasing. So I guess the question is for Carlos in terms of the 1.5 times leverage. Do you expect to get some reduction in the interests that you are paying on your debt? Like you are expecting to refinance the debt at 1.5 times leverage? Or otherwise, why not use some of that free cash flow, now that you have been under two times leverage for a couple of quarters now, to buy some stock or to buy more stock aggressively? Carlos García Moreno: Hi Walter. Well, I think this is the usual discussion we have. As you know, we have a preference for being more conservative financially. I think the mindset in the company is that in this industry where you have such a rapid technological change, your ability to stay in the game and be competitive very much has to do with your ability to continue to invest and that means that you have to have a lot of dry powder always. It's better to be able to act opportunistically if there's things to be acquired like that we are doing now with Nextel and the in-market consolidation in Central America. And it's important to be able, as I said, to invest when we are about to begin all the efforts regarding 5G and the like. So I think we believe it's strategically important for this company to remain as it always have been financially strong. We have as you know the top great ratings in the sector and we believe that at the end of the day this does translate in our being more competitive in the market.

Understood. And then so when you do reach 1.5 times leverage, should it be our expectation that the company would just maintain that leverage and then use that excess free cash flow for share repurchase and/or dividends? Carlos García Moreno: That's what we have done in the past, remember. We used to be, in our early days, at one times net debt to EBITDA and all of the excess cash flow was basically distributed back to shareholders. So this time around, we are reducing leverage, but until we get to our decided ratio, we likely will be able to increase distributions.

Share buybacks or [indiscernible].

Thanks Daniel.

Thank you.

Your next question comes from the line of Ric Prentiss from Raymond James. Your line is open.

Thank you for taking my questions. You have mentioned convergence a couple of times and how important that is. Can you talk a little bit about what you see happening in Puerto Rico as Liberty looks to buy the AT&T properties there? And as a second question, what are your thoughts on the U.S. with the possibility of Dish becoming a facility based operator, what that might do to the competitive environment? Thank you.

Well, in Puerto Rico, AT&T was also converging. They are also having some, in the U.S. they can do convergence or in Puerto Rico, I am sure they can do it. They are going to sell it to Liberty. There's going to be a new competitor over there. So well, that's we need to compete, we are doing our job there with the last year's hurricane, we are making all the network again. We are remaking the fixed network in some places. So we are putting good investments over there. And in the wireless side, we are ready. We have been doing that. And in the fixed side, we are still investing for this year and the next one. I think we are going to be well prepared to give good speeds, convergence, TV and give that ultraband that we were needing. And in the U.S., well that's something that it has to close. I understand that Dish is going to buy some assets, spectrum and subscribers from T-Mobile and Sprint. Obviously, if they close, they are going to buy this. And as TracFone, TracFone is doing good and we can have another carrier that can give us the capacity that's the case on that close. We have another alternative to have capacity from this. So I think it will be good for us also.

Okay. Thank you.

Thank you very much.

There are no further questions at this time. I would now like to turn the call over to Mr. Daniel Hajj for closing remarks.

Just thank everyone for being in the call and thank you Carlos, Oscar and Daniela. Thank you very much. Thank you. Thank you all.