America Movil SAB de CV (AMX) 2002 Q2 法說會逐字稿

Thank you for holding. All participants will be in a listen only mode until the question and answer session of today's conference. This conference is being recorded. If anyone has any objections, you may disconnect at this time. and now I would now like to turn the call over to Mr. Brennan [phonetic]. Sir, you may again.

Good morning and, and welcome to the American Movil second quarter 2002 conference call. With me today is Daniel Ashe [phonetic], the CEO of America Movil, and Carlos Garcia Moreno, the CFO. and with that I'm going to pass it over now to Carlos Garcia Moreno and Daniel Ashe.

Good morning, everybody. I'm Daniel Ashe. I'm going to pass the call to Carlos. He's going to make a small summary of the report.

Hello, everyone. Good morning. Thanks for hosting this call today. We have a good, a very good second quarter. As you see in the report, we had a good subscriber growth in most of the operations. Overall total subscribers reached 28 to 29 monthly after one and a half million subscribesser in the second quarter. In the case of tell tell, it remains well within the target that we had set for the year over 3 and I and million that we had mentioned in the earlier guidance. As regards to our revenues of the company, they were up 10 percent in the quarter in the case of tell tell in particular we had very good revenue growth of almost 7 percent quarter on quarter, which, by the way, was instrumental in helping [inaudible] of the prepaid which was quite important. It was something we had discussed in earlier calls. EBITDA amounted to 4.9 billion pesos for the quarter. The already we have two [inaudible] the improvement in margins that took place naturally. We have an extraordinary effect of the resumption of the tax reserve that had been created in the first quarter. I think I would like just to mention here for the record that without the liquidation of the reserve, the quarter EBITDA wound up being 4.9 billion pace he is would have been 4.765 billion pesos. In the case of tell tell, the EBITDA would have been, without the tax, 3.686. 6 to let everybody know the effect of the tax reserve liquidation of the tax amounted to 4 billion - 1.4 million pesos valued at June prices. So this means that the tell tell EBITDA, without the tax, would have been 37.6 percent in the first quarter and 38.3 percent in the second quarter and, in fact, that is something that can be easily deducted when one looks at the figures that come out for the two, for the first half of the year together, the numbers we are showing here for the first half of the year show that tell tell's EBITDA was 37.9 percent for the period. That makes an average or better of [inaudible] EBITDA rising from 37.6 in the first quarter to 38.3 percent in the second quarter in the absence of the tax. Paragraph paraoperating profits were up 33 percent in the quarter and mid cap really some of the losses upset some of the losses we had [inaudible] 10 percent. Overall regarding the position of BCI, we expect to close later on today the acquisition so that it would mean making a payment of roughly $146 million today. The increasing America Movil's net debt that took place in the quarter reflects almost exclusively the funding that has been made to Telecom America for reductions in debt of Telecom America. So where we have not yet consolidated Telecom America, we will begin to do so from July, and that means that in the consolidated entity, all of the new net debts that America Movil would be less net debt in tell so they would effectively wash. We've created great things happen fully [inaudible] by Standard and Poors. In the case of movies, they have effectively said that they are reviewing the [inaudible] ratings which today is [Inaudible] one notch higher than the Mexican government. We believe that our worst case scenario would be a downward of one notch to be double A two which would be the same rating we had four months ago. and and that is the worst case scenario. We do not by any means stand a probability to that event. and finally, I think it's important to highlight that we have [inaudible] new financings during the second quarter in the Mexican market we raised two.two, $225 million equivalent of midterm notes, and just lately in July we have secured new financings for almost $900 million which essentially will allow us to meet more than meet all obligations we have in the next several months. It is also important to highlight that from a cash flow perspective the company will be cash positive in the second half of the year. I think in terms that is very, very important. We will be cash positive second half of the year and from then on we expect to see continued results until net debt. In other words, I think that net debt for the consolidated entity America Movil telecom has [inaudible]. and it will be going down from this point onwards. That is our expectation, so those would be the things that I would like to highlight and maybe open the call to questions.

Okay. Thank you, before I open for questions, could I just ask you, are you changing your guidance now for the end of the year subscriber numbers for Mexico? Do you think your end subscriber numbers would be higher than in addition to the three-and-a-half million?

Yes. The guidance that we - hello. The guidance that we said earlier was three-and-a-half, between three-and-a-half and today and we're seeing things that we're going to have between 3.five and 4 million subscribers in Mexico for tell tell this year.

So more towards the 4 million subscriber Mark?

Around between 3.five and 4 million is what we're thinking.

You're also increasing your post paid subscribers. Do you think your post paid subscriber numbers will continue to grow?

Yes. At the same rate that we're having for the first six months of the year, I think we're going to have the same growth rate.

Right. Okay. Thank you. We'll open the call now to questions, Operator. 00:08:17

Thank you. At this time we are ready to begin the question and answer session. If you would like to ask a question, you may press star 1 on your touch tone phone. Again, if you'd like to ask a question, press star 1.

Our first question comes from Luis Mann. You may ask your question.

Yes. Hi Carlos. UBS Warburg. I have two questions, if I may. The first question is related to MOU's. You report very solid MOU's growth during the quarter and tell tell even this week and everyone saw. [inaudible] in the economy, and on the other hand there are pools were quite stable increasing 1 percent which was also good, but really lagging in terms of MOU's. So I would like to know if you are getting any kind of special promotion to incentivate both end users from other operators to migrate to your network. and where do you see MOU's for example for prepaid calling in the next quarters and also posted MOU's, if you can give us some guidance there since you are reporting record numbers almost every quarter.

The other question is related to Telecom America. I know you said that almost all the net debt for America Movil increased - is down the extra funding that you gave. Can you give us the precise number for the net debt of Telecom America or just indication, just to track really what happened. and then your guidance for net debt for year-end, it remains around $4 billion. Thank you.

Okay. Regarding the MOU's in tell tell, it's important to [Inaudible] if you look - if you do not look at the blend youery write them down closer to prepaid, you would see that prepaid rose 5 percent and most rose five.9 percent. So they are very similar. I think what we have some differences are in the case of the post paid because in the case of post paid going up 5 percent, but most MOU's are going up by 6.3 percent. So it is really more in the post paid market where you are seeing some reductions in [inaudible].

What we're doing here is, I think the people have some plans, and they are changing to other plans that they are more productive for them, and that's the thing that is happening. People are trying to check that their plans that they are using with the rent plus the minutes are the plans that is convenient for them. Maybe they are moving to better plans and that's why they are using more minutes in the post paid.

Regarding the Telecom America [inaudible], what happens is we have roughly 1$1.9 billion in some debt, net debt and essentially we have reduced that by about $900 million. In fact, all of the debt that was outstanding, banks, all debt that was outstanding other than [inaudible] and some vendor debt [inaudible] everything else has really been paid down in Brazil. So the total debt that remains in Telecom America today is roughly $1 billion, and that is the amount that we would have to add on to our balance sheet of consolidation. That's the only amount that would have to be [inaudible]. The net debt for the year we expect will fall, possibly by some $200 million.

Depending on the buy backs that we have and depending on the minority for purchasing shares that we could have in some of our companies, but I think maybe we come in between 3.8 and $4 billion. We don't reduce the debt because we have buy backs.

Okay. Thank you.

You're welcome.

Thank you. Our next question comes from Andrew [inaudible]. You may ask your question.

Yes. Hi. Good morning. My first question is on Cable Vizion [phonetic]. I thought we might see a gain in the quarter from that divestiture in April. Was there any income statement impact at all? Because it wasn't clear to me if it was. and then the second question is on track phone because I saw that you did EBITDA break even, but really only being EBITDA break even with the business not growing any more, are you thinking on doing anything strategically with that asset, or do you think it's more or less just going to stay in kind of a status quo mode?

What we have to do is we put track phone fund [Inaudible]. That company is not using more cash from America Movil, so it was important to put it in a positive. and I think that from today to the end of the year we are going to see - I don't think we're going to lose more customers, but it's going to depend a lot on the economy, on the economy [inaudible] how the economy develops, but that's the projection that we have. and what we're thinking to do is we're trying to make a good strategy for track phone to see what we're going to do with track fund in the future, maybe to be with somebody or to grow more the company, but with black numbers. So we are in the middle of making the strategy for track fund. The first thing that we have to do in track fund, what to put in EBITDA positive, cash flow positive. Then today we are seeing which opportunities we can have with track fund.

On Cable Vizion, yes, we have a gain. That gain we already reserved that gain, and we reserved that gain that we have in Cable Vizion.

Do you know roughly how much was the gain?

I don't have it here, but if you can talk to Carlos, we can give it to you.

Okay. Thank you very much.

Thank you. Our next question comes from Vera Rossi [phonetic]. You may ask your question.

Hi. Hi, everyone. I have some questions and my [inaudible]. My first question is about [inaudible]. I just want to know if you already have submitted [inaudible] environment? and also my second question is on the new rules, the new SEC rules [inaudible], what is America Movil's opinion and what do you think are the major benefits for Telecom America [inaudible] and what are the major risks as well? Thank you.

Hi, good morning. Telamar starts maybe two months ago, we are seeing a more competition. Telemar OE starts only in Rio de Janeiro. We don't have any more competition in the other three regions where we operate, and definitively we saw more competition. There are a lot of advertising and it's a good company, but we're competing and I think we can see a little bit reductions on the gross action in A T L, but we're competing and we feel comfortable what we're doing in Brazil. [inaudible] I think we are making [inaudible] the new rules early this week and as you said, and we are making [inaudible] but I think those rules are much better of what we have - of what the government offered months ago, and I think probably we are thinking to move to S and P. They are good things for us. Maybe the enter connection rate, we don't have a lot of long distance, so they are good things, maybe there are bad things, but in total I think they are very good rules for the company that we operate in Brazil.

I have a follow-up question on the telemar OE competition. Have you seen increase in the commissions to the dealers or anything in the market [inaudible] or it's just like on your gross the impact at this point?

No, I think it's in the gross side. If you see Telecom America why they lose a little bit the second quarter against the first quarter, it's because first we have more growth in the second quarter than in the first quarter and second is because they changed rate, the real gets 285. So we purchased the concepts in dollars, so we have to make more subsidies. But that's the only case [inaudible]. We are saying because of the EBITDA, if that's why we have less EBITDA. But today they have lots of other typing, but we are not moving the commissions to this right now.

Okay. And I just have one more question on Telecom America. I realize that they are chews choosing local currency. They went down like by 8 percent. It's like a lower usage. What is creating this reduction in local currency [inaudible] for Telecom America.

Well, remember, that we're growing and as you grow you have to have customers that they don't consume the same amount of money that - the first one. [Inaudible] the market that we're having and that's why they are reducing a little bit.

Also remember, Vera, that a lot of the in the case of prepaid subscribers a lot of traffic generated is from in coming calls and typically with the case new subscribers and prepaid it takes time for people to know the numbers and takes time for people to start generating the traffic we will eventually have. That is something that we have [inaudible] so the increase in revenues we're seeing is some of the revenues from some of the subscribers we obtained in different quarters ago that we're realizing now.

I've seen like some similar companies in Brazil complaining about Telamar because Telamar is blocking some lines like call 6 to mow bio and impacting the traffic of some companies that are in the Telamar concession area. So I just wanted to know if this decision made by Telamar of blocking the 6 to mobile calls is impacting your usage as well. That was my -

I don't have that. I'm going to check that, but I don't have any notice about that, Vera.

Okay. Thank you.

Thank you, Vera.

Thank you. Our next question comes from Jose Ramirez. You may ask your question.

Hi. Two questions here. First off, at the beginning of the year we had EBITDA margin guidance for tell tell in the neighborhood of 35 to 36 percent. Now, the combination of better than the natural improvement in EBITDA margin with I guess not paying the telecom tax were already at 38.3 percent for the quarter normalized. What is the guidance or the new guidance where you guys feel comfortable that tell tell will end up by the end of this year and also if you can give that number for AMS. That's my first question. I have a few others.

In the case of tell tell, I think we expect that the average for the year should be roughly what we said in the first half of the year. Remember that the last quarter tends to be one [inaudible] which tends to the second margin [inaudible] take into account. But we think that 38 percent for the year is something that would be [inaudible].

Remember the October and November and December we have a good sales team in tell at the, so that's reduce our EBITDA. Then the other thing is that we have more competition and we have to make more advertising. the cost of selling is going to be a little bit higher because more competitors in Mexico, but that's the only thing that what we see why the EBITDA of tell tell is maintaining around 38 percent.

The second question is in regards to capex. I believe that capex budget for this year is in the neighborhood of about 1.4 billion consolidated. What would be the number in 2003?

It's difficult to say, but I think - we need to make the budget for next year, but we're seeing a good cash flow for the next year. I don't see more than 1.1 billion in total America Movil in capex for next year. So I think that's mainly what we're thinking to have a rough revision that we make in all the companies, including moving Colombia and Ecuador to GSM, including some of the things that we're thinking to do. That's what we think we're going to have for next year. So I think we're going to have a good cash flow for the next year.

Of course including Brazil.

In terms of related to the capex number, it seems that you're going to be making a savings of 4 or $500 million plus some free cash flow that is going to be coming up, it's going to free up about five to $600 million next year. Is the plan to use that to reduce debt which in case you [inaudible] 2002 or 2003, or should it be used for further acquisitions?

I think, Jose, I don't know - the numbers that you say, I need to check if that's what we think we're going to have for next year. But what we're thinking today is that we need to consolidate everything that we have and everything that we purchase to date. So we want what Carlos says that we're going to have the high level debt is going to be today using the high level. So I think everything in the next month is going to go down, depending, as I said, in share buy back and some of the things that we have, but we're going to reduce, definitely we want to reduce the debt.

Last question. In terms of what is happening with your contract which is quite positive quite frankly, do you think that the market for contracts is growing or do you think you're taking market share from your competitors?

It's difficult - I think, I think personally what is happening is that part of my prepaid - part, we think we're going to get, a small part we're going to get from our competitors. The other I think what is happening is that our prepaid customers that are consuming a lot, they are moving to a new plan that we call the mixed plan, that what is happening is they pay a rent and when they finish that minutes that we include in that rent, then they put - they are allowed to put a prepaid card. So it's half post paid and half prepaid. So they pay me a rent, but when they finish the minutes included, they move to a prepaid. So that's why a lot of our prepaid customers are moving to a post paid card.

Thanks a lot.

Thank you, Jose.

Our next question comes from Deniseial owe. You may ask your question.

Yes, good morning. Two quick questions. One is [inaudible]. If I'm understanding the press release correctly, in fact, you do not expect there to be any [inaudible] or the legality of it, I just want to understand exactly if tell tell does not appear likely to make any kind of [Inaudible]. and my second question if you could briefly comment on this year's roll out and give us a quick update on what's happening there in Mexico. Thank you.

The first question, Denise, hi, no, we're not going to be making these payments again. This is what we have determined based on the payment of [inaudible]. There's been [inaudible]. With these types of affairs, and we're comfortable that we have [inaudible] one that we need not pay any more on this account. So that's essentially the response. On the second question, can you repeat the second question, please?

The same project, what we have, Denise, is in Mexico, at the end of June we already have 33 cities working in GSM, and last week - no, sorry, at the beginning of this week, Mexico City starts to work in Mexico. So I think we have almost 33 big cities working today and for the end of the year we're going to see growth on the subscriber base in GSM. The roll out in GSM has been very successful and we see growth since this month to the end of the year in GSM.

Would it be safe to say, then, that [inaudible]?

Yeah, not more than that, but we grow on the coverage. I think we're going to have more suck describessers on subscribesser on GSM. But today we have the 33 big cities, okay.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Whitney Johnson. You may ask your question.

Yes. On the rating agencies, Carlos, what are the couple one or two ratios that the rating agencies are on? Is it debt to EBITDA? and if it is debt to EBITDA or interest coverage, what numbers or ratios do you need to keep in order to keep the rating agencies happy?

Hi. No, the issue with them, they don't have an issue with [inaudible]. As far as Alcatel there is no issue with debt EBITDA, there is no issue with coverage. The debt EBITDA is about two times which is not by any means putting - but it's still investment grade in the industry. Not a high ratio and interest coverage that we have is better than [inaudible]. So very high even compared to most of the companies [inaudible] the kind of rate that we have. I think the [Inaudible] they have appears to be more from liquidity, okay. I guess they are looking as much at having difficulties particularly on the security side. So I guess that they just have some concern about that. and that's what they are [inaudible] good cash position. We talked to them and as you have seen in our report, we have a very significant amount of new financing. We have short term debt will be taken care of out of these. and from then on we think that the [inaudible] will be sufficient to cover all [Inaudible] even if we did not bring more funding in any more financing. So we think that we are reasonably - we think that we are in very good position in terms of liquidity, that we have a sufficient money account cash in financing that [inaudible] eventually to meet all our obligations. Without having to come back to market [inaudible] and for about a year, and from then on the [inaudible] will be more than sufficient to cover the schedule. So any^way, that is potentially the only thing that we are - that I think that they would be processing on. I guess they have to do some reassessment of our situation. But as I say, I think that we have an idea what the [inaudible] and we do not believe by any means that that is definitely something [Inaudible].

So when they're analyzing the liquidity, are they looking at anything specifically, is it a certain ratio they're analyzing?

I don't know that they have a certain ratio. I think the issue, Denise, on liquidity is that they needed to understand what were - when we met with them [inaudible]; as I said they were comfortable on the credit side. But then they said but you have all this debt in Telecom America. The debt has been paid in Telecom America. [Inaudible] all of that has been paid down there. and we have refinance in better conditions, not only interest rates, but also [inaudible] the and on top of that we have obtained that much more money. So I think that that was basically the question initially. They said we were content with your liquidity position, but now to what extent will Telecom America deviate from resources away from America Movil and therefore [inaudible] ability of making the payments [Inaudible] and I think that's actually the - [inaudible]. Now, the other thing that's important as opposed to very many companies that do not have very many funding alternatives, you know, in America Movil we have the possibility of funding the international markets, you know, buying the international bank and debt markets. We have also the possibility of funding the domestic, the Mexican bank and capital market. We are doing that. But we are also have the possibility of funding in other places. For instance, we are setting up an empty program in Colombia which has a very good institutional market for debt. [inaudible] pension fund plans in Latin America. and we have been asked by the Brazilian bank to whom we paid the monies that were owed, that they also would want to develop a relationship with us and that they would want to be lending to us. So we have a propose to operations [inaudible]. I think that we have a great availability of alternatives that we would definitely be tapping.

Okay. One other question. To what extent have you evaluated the merger of America Movil and Antel? No, we haven't been able to evaluated that.

You haven't. All right. Thank you very much.

Thank you. Good day.

Thank you.

Thank you. Our next question is from [inaudible]. You may ask your question.

Thank you. Good morning, gentlemen. My first question would be on the volume side. I mean, we saw very good growth in MOU AMS.

Sorry, where?

We saw good growth in minutes of use, 6 percent you were mentioning, and we also saw weak volumes in tell mix this quarter. I was wondering if you're seeing any sort of conversion from mixed line to Movil and would this mean you're gaining some sort of market share from tell mix?

No. What I explain is we have in first place better MOU's but they are slow [inaudible] and it's because the people are looking for better plans. If you have a plan with $30 plus some minutes and you use more than that, then they are moving to a new plan and that's something that we are doing with our customers because what we want is our customer have the best plan so they can use as much as possible to be productive for them. That's what we're looking and that's request we're seeing more minutes of use in our prospect land.

Okay.

and I think if I may add to what he said, that is something I spoke with some of you before. We're working two different things here in tell tell. You have only one kind, you know, sort of like spending on phone usage which is something that is very much linked with the economic title in Mexico. So when the economy is down, people tend to spend list and when the economy is up. But then on the other hand we have very strong subscriber group which is something that tell sets us apart from tell mix. If we were like tell mix, even though we're not a very high growth of lines or subscribers, maybe we would have a weaker situation of revenues. But since we have subscriber growth, that is really something that is driving revenues. I think that's the important thing we will have overall.

Okay. and my second question would be in terms of could you elaborate a little bit on what your hedging strategy is for America Movil and also for Telecom America?

I think what we, you know, hedging essentially defining what is the optimum debt mix that you want to have. We do not believe that the optimal debt mix is 100 percent local currency because in this region of the world interest rates tend to be very high, so we believe that it will always be appropriate to have a certain amount of dollars effectively, given that some of that does represent very, very low rates of interest. So I think that all in all we will have a mix over time in which local currency debt will, roughly 10 percent almost half of the total base, and [inaudible] dollars will represent the other half. I think again the actual percentages may change depending on how we see based on different countries. In Brazil now which is part of the question, I think that we will end up mostly with bad debt. I think it's mentioned to you - we have now about 61 percent [inaudible] debt in that state outstanding and we expect that that debt will actually go up closer to 80, 85 percent.

Okay. and one last question. You mentioned that you paid down around $900 million in debt of Telecom America. It had been through America Movil's cash, right, you hadn't refinanced this through America Movil yet?

Yes. Remember in America Movil, it's part cash and part of the cash came from new debt funding, no?

and can you tell me what percentage was cash?

Well, if you look at the balance sheet, you will see that it went up by some amount, the cash actually came down by similar amount. So total net debt increased I think it was 1.6 the previous quarter and now it's something like two.6 bad debt. [inaudible]

3 million dollars more, correct?

Excuse me?

The $300 million does $300 million sound correct in cash?

Let me see. If we have the balance sheet for the first quarter [inaudible] 11.2 billion pesos and now we have cash position of 750 something million pesos, so that's a different of about 600 something million dollars in terms of cash position [inaudible]

Thank you very much.

You're welcome.

Thank you. Your next question comes from Stefan Peters. You may ask your question.

Good morning, Carlos and Daniel. Two questions. First regarding tell tell. It seems that in the first half of the year equipment revenue grew very much, more than 100 percent which is much higher than the growth in subscribers. So I'm wondering whether you are seeing that subscribers are changing rapid handset or what is the reason behind this equipment revenue. and then a second question regarding capex. According to my numbers, during the first half of the year cap exin Brazil was around $900 million. Your guidance at the beginning of the year was for a capex without Brazil, between 1.1 and $1.2 billion. So the first half is almost half of the year almost all the capex budgeted for the whole year. Are you still holding onto this figure of between 1 and $1.2 billion for the whole year? and finally, just to be sure, currently the net debt of Telecom America and its subsidiaries is 1.$0 billion or $1.9 billion?

Well, the first question is in tell tell, the equipment revenues are growing because there is a lot of things. We're selling more handsets that are higher prices so that's why the equipment revenues are growing. and we're taking out the subsidy in the concept and giving more air time. So that's another thing why the subsidy, we're putting more subsidy on the air time and we're not putting more subsidy on the handset. So that's why the equipment revenue is growing. So that's the first question.

The other question is I don't remember, I cannot answer you because I don't have exactly the number what the capex's already done in the first half of this year. But what I have, I can tell you is that we are on track with 1.1, 1.1 and a half billion dollars of capex that we're going to have this year. We're not going to spend more money of what we have today. So that's the question.

And the third question is in Telecom America, we take the company with $1$1.9 billion and the refinancing that we made in June will reduce that to $1 billion debt. So we will do the company around $900 million and what Carlos is saying is that we will do that debt in June, but we are not consolidating until the company and we're going to start consolidating the company in July. So we are going to see the other billion dollars on debt in Telecom America at the third quarter of this year.

As a follow-up question, we should expect a freeze in net debt for the acquisition of 1.0 billion in the third quarter? and also obviously the $366 million that you would have to pay to bell Canada -

Everything, the numbers that we're seeing is that the third quarter were total debt is going to be $4 billion. That's - that includes everything in Telecom America and the payment that we have to make to bell Canada. But that number includes everything, okay?

Okay. That's good. Thank you. Very clear.

Thank you, your next question comes from Pedro Gonzalez. You may ask your question.

Good morning. Just looking at [inaudible] we see some changes for example in how the margins. I wonder if you could give us some just a brief color on each of the [inaudible] and Telecom America, where you see the EPA margin year-end?

We don't hear you very well. Can you repeat it, please?

Yes. My question is regarding to subsidiaries, specific, PacTel has decreasing margins sequentially, and I guess the question is at year-end if you have a sense and can give us some guidance of where these margins would be in the [inaudible] TelWel [phonetic], ConaCell [phonetic], Tel-Tel and also in Brazil's Telecom America.

At the end of the year, it's very difficult. I don't have the projects here, but what I can tell you, we think we can maintain that EBITDA margin that we have, that it's a very good margin. and we think that we can be above 50 percent, 53 percent this year. So the reduction on that is because the long distance, the long distance prices are being dropped in Guatemala and that's why the EBITDA that we have is having a reduction. But we're trying to compensate that with other revenues that we have in Bellu Lara [phonetic] and pay phones, public phones, sorry, a lot of data. So we're trying to recover the losses on the prices on long distance with that revenue. And in QuanaCell [phonetic] and come sell, we have around 30, above 30 percent [inaudible] with these two companies have very good growth this year, it's around 70, 80 percent growth in this year. [Inaudible]. So I think with those growths we should maintain - we are not going to meet EBITDA, but we are going to maintain EBITDA margins that we have.

Just a brief second question. You mentioned that these hybrid [inaudible] in Mexico I believe. Do you have a sense of how many subscribers are using this service as post date and you have some people after?

I don't have that number here, but you can call Carlos and he can give it to you. I don't have it.

Thank you.

Leonel. Sorry.

Thank you your next question comes from Luis Mann. You may ask your question.

Hi. This is Luis again. [Inaudible] I was wondering since it's so important to forecast the Tel-Tel numbers, can you give us a kind of big picture of what you called solid or strong MOU's for big big users? Are you going to go back to let's say 2002 levels or are you going to see a marginal growth now on? Just a long term view on that number would be very helpful. And the other question is also related to traffic on Tel-Tel. What is your traffic break^down in terms of what's going to the wire line company, what's going to your own network shall and what is going to other tell groups. Thank you.

I think in the MOU what we think we can have more the EBITDA what we have in the first half of the year. Remember on the last quarter in December we had a lot of subscribers. Maybe that's why the MOU on the [inaudible] are a little bit down. We think on average we can have what we have in the first half of the year.

And the second thing is I don't think that the 6 lines are moving to wireless. In my view, I don't think that anyone that has a fixed line is moving to wireless line. It's what I'm thinking is happening in Mexico. I don't think that's happening.

Okay. Just a follow-up. You said the first half of the year. But you mean first half of '01 or first half of '02? This is where you say the end user will stabilize from now on?

Yes, yes.

Okay. But the question related to -

Sorry. It's because maybe [inaudible] is going to grow the prepaid customers are going to grow, but then we're going to have new prepaid customers and post paid customers and they're not going to be in this amount of minutes. So that's what we think we're going to have.

Yeah, yeah, I know but the size of [inaudible]. That's why I'm asking. Never mind. The question related to traffic is not also the institution, but the question is if your M O users and you'll have a huge traffic, should we expect margins to go up because you don't have any costs on that - those calls or not? I know it's natural call. That's really what I'm thinking of.

No, I don't think my margins are going to go up because remember that we're going to have more competitors. So with more competition then you have to give more minutes free or better rate or more acquisition cost or more advertising. So there's a lot of things that we have to, we have to make to compete. So that's why I don't think - I think the company is going to be more or less [inaudible] where we have to raise the margins.

Finally, just one more question. On your migration plan, do you have already a view on how you would migrate the users [inaudible] what costs we should be working with? Let's say your 2002 target in terms of migration, if you have one. Thank you.

The plan to migrate the customers, we're going to have the new customers in GSM. We're going to offer to the new customers GSM. The actual customers that we have, if they want to move in prepaid, well, they have to buy a handset and then they can move in prepaid. If they want to move from post paid, well, they also - I'm not going to make any big subsidy to move from TVMA to GSM. If the people want to use data, more speed, new things in the handset, new applications, so they are going to move to GSM. If not, they should stay in TVMA and when they finalize their contract, maybe they can move to GSM. But I don't think we're going to put and move and pay lots of money to move the people to GSM. It's not convenient. I have already the networking in TVMA. If they have TVMA they should stay in TVMA, but all the new customers will want to have it in GSM.

Okay. Thank you.

You're welcome.

Thank you. Your next question comes from Jose Ramirez. You may ask your question.

Yes, God morning. Just to be clear, I'm considering the consolidation Telecom America. Do you think you read the DM margins of 36 percent are sustainable in the median term or do you think we could see somewhat lower margins?

Well, the margins that we have on America Movil of 36.4 percent, first half of the year, I think with the consolidation of Telecom America, Telecom America starts around the same. Telecom America starts around 34 cents. Maybe with the consolidation we're going to reduce a little bit, but it's not going to be too much. You can see the results of Telecom America with the consolidation of Telecom America inside America Movil. I don't know exactly what is going to be the number, but I don't think we're going to have a big reduction.

Okay. Thank you.

Thank you. Our next question comes from two. You may ask your question. [inaudible].

Hello, good morning Carlos. My first question is for about the GSM volumes. I only have one brief question, though. I know you have how much will increase [inaudible] your volume for GSM. How many subscribers.

How many they have in Mexico, around 15,000 or 10,000 around today. We don't push a lot because we don't have Mexico and Mexico City, it's very important to make roaming. We have Guadalajara and Matsre [phonetic]. We did launch Mexico City. So I think, for this quarter, third quarter, we're going to see more growth in GSM.

Do you have some forecasts for the end of this month - to the end of this year to know around how much new subscribers you will have for GSM?

No, I don't have a forecast right now in front of me. I don't remember the number. We have a forecast, but I don't remember the number.

Okay.

Thank you. Our next question comes from Maria. You may ask your question. [knob].

Hi Daniel and Carlos, everybody. [ice to see strong numbers with this market. I have a couple of questions. The first one is regarding the Internet calls. Are you providing discounts for inter-network calls at the moment? America Movil, Tel-Tel customer. When a telephone customer calls another Tel-Tel customer, is there a discount?

I would have those plans, inside our plans. Today I don't - we have a lot of plans and some of the plans we have some discounts and some other plans we have some discounts [inaudible] to hotels, to a local call, to a cellular. So there are a lot of - I think we have around - then we have plans with one rate that there's one rate for everywhere, roaming, national long distance, to fixed line, to other cellular. So there's a lot of plans, yes, but we have different alternatives for our customers.

Is it possible to have a rough idea of what percentage of your revenues are coming from inter-network calls, calls within your own network?

We have it, but we don't disclose those numbers. Because competition. Because I don't remember right now, but we don't disclose those numbers.

Okay. and another question is on the share repurchase. How much have you spent so far this year on share repurchases, how big is the reserve?

See, I think it's around - how much Carlos?

I think it's about 100 million.

And the reserve is 500?

We have outstanding in the reserve is only about 100 million more.

I think the reserve is for 1 billion since last year and overall we have been repurchasing around 750 million, 780 million. So I think we have around $200 million left, something like that. It's $150 million maybe. If you want exact numbers, call Leonel, please.

What is the thought in terms of everybody is looking at net debt to EBITDA and if we believe that the numbers for the second half of the year will be similar to the first half, you have a pretty good ratio below two. But if we add the reserves, what in your mind is [inaudible] for that ratio, two and a half?

What's the reserve? What reserve are you talking about?

For share repurchases.

Well, remember that that reserve we can increase it. We cannot repurchase - the share buy back depends on how the market, what the buys.

The overall net position. [inaudible]. The main concern that we are under.

That's exactly why I'm asking, Carlos, because you use the 3.4 billion maximum on your debt side and you assume similar numbers to the first half in the second half of the year, and adjust for your ownership of Telecom America, you have a ratio of below two. So if you want to increase your reserve for share repurchases, you have that limit. and my question is is two a maximum number or two and a half a number the rating agencies will feel comfortable with?

No, I think the two times is well below the average that you have [inaudible] and the interest coverage, as I said, even more so, okay. We have a fairly low [inaudible]. Overall I think the main priority at this point is to work down our debt level, Maria, and to do it in accordance - in such a way that we can still, you know, take advantage of good share prices.

Yes. The last question is on Comp USA. What is the strategy there? I'm not sure if it was IPO'ed or not. What is the strategy?

Maria, let me tell you. You know that, and everybody knows we were telling the market that Comp USA is not our core business and that is an asset that we're going to sell.

Yes.

I think that today the markets are not in a condition to sell the company. So we are not under big pressure to sell Comp USA and what we decide is we're going to wait until the markets are in better condition and then maybe we're going to sell it or not. But Comp USA is not a core business and we're going to wait to see a seek a fair price for Comp USA and that moment we're going to take make the decision for what to do.

[o more [inaudible].

[o, we've seen - I think Comp USA, I don't have, I don't remember exactly the numbers Comp USA has good numbers and they are cash flow positive right now. But since we have the company, the spin off of Tel-[et, we never put any money on that and just tell everybody that it's not the core business and that we're not going to put money in computer.

Thank you.

You're welcome.

Thank you. Again, if you have a question press star 1. At this time there are no questions.

If there are no more questions, then I thank you, Daniel, thank you, Carlos and we'll end the call there. Thank you.

Thank you, Patrick. You are alone? Patrick?

One moment.

21:21:29 >>UNKNOWN SPEAKER: Thank you.