America Movil SAB de CV (AMX) 2002 Q4 法說會逐字稿

Thank you. Hello everybody. Carlos Garcia Moreno is going to make a small summary of the results of the 2002. Carlos, please.

OK. Hello. Good morning. Well, I think the--I think I've seen we have had another good quarter. I think this really made for the end of quarter four was a fairly good year and there are some things that I, you know, see from the document, one that we are--we've seen improving EBITDA margins practically across the board that we have been able to get to . In Mexico. we've had three quarters in a row with our assets going up in which We've been able to assimilate, integrate the acquisition that we had in Brazil and have been able to finish with very good results, really on track in terms of for revenues, for EBITDA, for subscribers, in spite of what was a difficult microeconomic environment. So I think that on the operational side, we have seen a very, very good year with improvement in all--in the basic profitability returns and we have a company that is growing. We have had fairly good subscriber goals across the board, as well.

I think that one issue that I would like to highlight is the improvement on the overall financial situation in terms--which have been, by the way, 40 percent to the generation of cash flow to the Company and to its policy of sending . So I'd just like to point out that what we acquired last year, the Columbian operation back in February and the Telecom America Corporation which was Brazil from July. That the bad debt that these operations had together with that of America Movil at the end of last year, or of the year 2001, was equivalent to roughly $4 billion. We have been able to reduce the bad debt of the combined entities to $3.5 billion by the end of last year. So there was a bad reduction of $500 million in the bad debt of these combined entities. The only--this is in spite of the fact--this is in spite of the fact that we have made significant acquisitions over the--the Telecom America acquisition itself was . I'm--was the one of and a lot of minority interest, but for a large extent, these were by the sale of . We had the sale of Puerto Rico, we had the sale of and also we have had the purchases of shares and the payments of dividends which together came to be $70 million for last year.

So, besides that, we've had this reduction in bad debt, in spite of having had these applications, which were major acquisitions, and in spite of having share repurchase program points to a very good cash flow in our operations.

The cash flow that we have estimated for the year as a whole is $550 million -- that is the number that we want to tell you -- and manage to have a 450 cash flow -- consolidated cash flow for the year 2002 million dollars, and this is -- in spite, also, of having that, I tell you good cap ex. The final numbers of cap ex for the year came out at $1.1 billion -- it's one thousand one hundred and 15 million dollars -- that was the consolidated cap ex.

Again, we have to remind you that in this case consolidated means, in the case of Columbia, all the year, say the month of January, and in the case of Brazil, only the last six months of the year. That is included in the consolidated cash flow that I have . But, again, you know, it's a strong cash flow in a company that is growing in subscribers, that is improving profitability, and that is well-positioned to continue to grow for the year.

This is really the only thing that I want to emphasize over and above what is already in the document that focuses much more on the actual operations. So, , I think maybe we can go to the question and answer session now.

, are you ready for the Q&A session?

Yes, sir. Ladies and gentlemen, if you have a question at this time, please press the one key on your touchtone telephone. If your question has been answered, or you wish to remove yourself from the queue, please press the pound key. Once again, if you have a question, please press one.

Let me begin the Q&A session. You know, results overall were pretty good. However, given the fact that, you know, American Movil was able to add 3.1 million net subscribers last year in the network, do you think it's still realistic to assume another three million in Mexico this year? And the second part of the question is that -- could you give us an update on, you know, what's happening with any negotiations, if at all, with BCP in Sau Paulo?

Well, the first question, which one is -- I want to be conservative. I think Mexico is gonna grow around four million customers this year. So, my budget would be to grow around 2.5 to three million customers. I think we could get three million customers if the economic situation gets better. But, I want to be conservative, and in my budget I have between 2.5 and three million customers. So, maybe we can get the same that we get this year.

In Brazil, if we're talking with or with Bell South -- what we're doing in Brazil is we are -- we're already purchased the license for Sau Paulo, and . And what worries me today is we are putting a lot of efforts to change to migrate and to put GSM in all the operations that we have. So, that's the main thing that we are doing today; to put GSM infrastructure and to grow the new license that we have.

What we're doing and what I can tell you is that at the end of the day, if there is something that make synergies or makes sense for us to do something, yes, we're going to do it.

It has to be on price. It has to be on synergies. It has to give us a lot of things. So that's mainly what I can tell you in . So, we're focusing in putting GSM in all our operations. And if there is something that makes sense for us, we're going to do it.

Thank you very much.

Thank you. Do you want the next question?

Our first question comes from Whitney Johnson of Merrill Lynch. You may proceed.

Yes, Daniel and Carlos, I have three questions. The first is, your depreciation was down significantly in the quarter even though your went up significantly. Can you just talk us through why that was?

We want to give the information your questions first ?

Sure. That's my first question. The second one was that your accounts receivable was up pretty significantly in the quarter even though you have a pretty large prepaid subscriber base. So, if you could just talk us through why accounts receivable went up.

And then the last question is with regard to traffic. It shot up a lot in the fourth quarter. Can you just talk us through what your capacity utilization is currently on your TDMA network and if you'll have to spend more in order to manage the traffic? The incremental traffic?

Well, in terms of the traffic in TDMA what we're doing -- what we have we had some promotions in December that increased our traffic.

We have around 40 to 50 percent capacity -- still capacity in TDMA. So, I don't think that I'm going to have to buy more TDMA infrastructure in the future. So, we -- you know that we reduced the price because of the tax, also, in January.

So, we still let the promotions go on in January. Plus more promotions in the card. So, I don't think we're going to have any problem on the TDMA.

We only are putting TDMA only the small cell site that we don't get in the year 2002. But we are not putting anymore in first capacity.

OK.

And on the -- location. But one thing that is important. In the case of the impression that we have not there was a change in the currency -- the function of currency there because there was a fear of a situation.

So, eventually, we moved from the Argentina pesos to the dollar. And that eventually brought about a significant reduction in the value of the that put a corresponding. So, that was a factor.

In the case of accounts receivable, I think the main change is really very much because we have a lot of traffic. We have a lot of traffic. And so some of this would fall in that category. You know?

OK. And one last question for you. What was your total disconnections for Telcell during the fourth quarter?

I don't have the number. I don't have the number here, but if you want I can give it to you later.

OK. Very good. Thank you.

Thank you. Our next question comes from of Morgan Stanley. You may proceed.

Thank you. Hi, Carlos, hi Daniel. My question--I have one question on Mexico and then on Brazil. I saw that the turn, it's above four percent on Telcel and I would like to know what AMX is going to do to lower this turn in 2003. So what are the major measures that the Company's taking? And my second question is about Brazil. I realize that Brazil presented the highest reduction in margins so it grew more, but the margins went down much more than the other companies. So I just wonder what is happening with the competitive environment there, especially in Rio de Janeiro when we see that has been very aggressive. Thank you.

Well, the turning in Telcel grow, I think my view is that the next year we're going to reduce that turn. It grows because first, the economic situation in Mexico. Second because we grow a lot, we have big, big growth at the beginning of the year so you have more of these connections when you have good, good growth. And what we're going to do is we're putting in place a loyalty--we already have some loyalty programs, but we're going to have better loyalty programs. Our big turn is more in prepaid than in postpaid. I think we have a very good turn in postpaid, so in prepaid these where we're working a lot so we're working in the promotions, we're working in more loyalty programs and we're being more careful in which are the new customers that we are getting inside our base.

And in Brazil, we have--our margins were reduced because in Brazil you know that October, November, more November and December, it's more or less 40 percent of the growth in Brazil. So we make our promotions, we grew--we're happy with the growth that we have in , I mean, all the other places, and that's why we have the reductions. has been aggressive--has been less aggressive since the beginning. Since the beginning you know that they've said that for 29 years they are going to have the weekends for free. I think they are not--they are not so happy with that promotion, so they are aggressive but they are more rational today.

I see. And what the margins do you expect for Brazil in 2003? And also, what is the level of turn are you expecting for Telcel for 2003?

It's difficult to say the level. I think the--you should expect better turn, lower turn in Telcel than what we have this year. And in Brazil, Brazil it's--remember we are putting new--we're putting three new areas, OK? So with these three new areas I think we're going to have a little bit more expenses than what we used to have because those are new areas that we're going to start putting the operations. But my feeling is to have the same--with those things to have the same margins that we have today. A little bit lower or the same margins that we have today. This year--last year's.

Ok, and I just have one more question on Telcel about the as a follow-up question of the previous question. I realize that your pre-paid use, they went up 10 percent in the quarter. What was the reduction in price that you had to get this 10 percent increase in use? I'm just trying to calculate if there is an elasticity ratio that I can use for Mexico.

Based on the elasticity -- on what we're doing in November and December is the pre-paid cards of 200 and 500 pesos, we put a promotion there. We don't used to sell a lot of those cards, and in November and December we started to sell we started to sell more of those cards. So, I think there's some elasticity. And with the new tax that we have in Mexico, we decided to reduce our pre-paid prices to, more or less, 17 percent. And I think traffic is becoming better than what we used to have, but it's too early to tell you exactly what is gonna happen. But, the first 20 or 30 days of -- the first 25 days of January, I'm happy with the evolution of the traffic. It's what I can tell you. But, we're gonna see that at the beginning the first quarter. We need to have, more or less, three months to understand what is happening, though.

OK.

It's too early to say something.

So, but, if the -- we should expect more higher increasing in the first quarter, as well, because you had one promotion because you had one promotion, and then another promotion.

Yes, because we had promotions in the 200 and 500 cards, OK? And in January, we still have that cards in promotion. We left those cards in the same promotion, plus, the 100-peso cards -- that to not to pay the tax, OK? We reduced the price.

OK. Thank you very much.

Thank you, .

Thank you. Our next question comes from of Citigroup. You may proceed.

Hi, Daniel. Carlos from Citigroup.

I have a follow-up question on question. Regarding your migration to GSM -- you have 500,000 customers now -- are they signing contracts for long-term to keep them in your network? I'm just concerned about having the same technology the second half of the year. It's gonna be easier for them to .

Well, the prospect customers, they are signing the contract as we have in with our prospect customers. The pre-paid, they don't sign any contract now, so ...

So, how long are these contracts? I mean, do they have ...

Well, depending -- it's between 12 months to 24 months. It's depending on the price you pay for the phone is the contract that you get -- between 12, 18 or 24 months.

OK.

And then, what will be very interesting is that at the telephone getting at the middle of the year with GSM, but I think at the middle of the year we're gonna get very good coverage in GSM. Today with 71 cities, and maybe at the middle of the year we're gonna get around 140 or 150 cities in GSM.

So, I think we still have a little bit of advantage against . At the middle of the year, then when time passes, then they are gonna have better coverage, and then it's gonna be different, no? But, in the next five to six months, I think we still have a little bit of advantage.

And regarding your pre-paid customers, what is the plan? When do you plan to migrate them to the GSM network?

I'm not migrating anybody. The people who wants to move to GSM, and the who want to have data services or some services that we have in GSM, they are migrating.

But, when are you going to offer the prepay?

Still, is very important. So, the that we have in TDMA, we have in more than 100,000 pounds in TDMA. So, coverage looks to be important in Mexico in wireless in Mexico it looks to be very important.

And on the prepaid side, I'm not migrating anything. I think that people are just going to migrate because every day they are better phones, cheaper phones, nicer phones in GSM. So, that's going to make them move to the GSM platform.

But I feel have lots of capacity in TDMA and then migration -- I'm not so -- I don't want to migrate very quickly of my customers. If they want to migrate, they are going to migrate.

Right. And regarding Brazil, are you ...

You've got to understand that coverage is very important in Mexico. Very important. So, I don't want to migrate them if they want to have coverage in some small towns -- ranch, weekend places that they want. And then until we cover good coverage, then I'm going to start to migrate them.

OK. And moving to Brazil, are you subsidizing handsets in Brazil? I'm also concerned about the decline in the EBITDA. I understand that were significantly higher in the fourth quarter, but the reduction on EBITDA was also very high on the margin.

I also would like to understand how you're booking the costs of acquisition, because the handsets are in dollars? And I'd like to understand a little bit more how you book the cost of it?

All the subsidy that we make, it's an expense. So, everything that we subsidize, we do it on expense immediately. So, we don't amortize anything. That's why we book -- we have also less -- we have a less margin, because remember that the fluctuation of the Real was very tight in the last quarter.

So, you buy handset $15.00 and then you have to sell it in Reals. So, that was also one of the things that we have. Why we the margins.

Did you increase subsidies in the fourth quarter?

No, we don't increase subsidies. But, depending on the dollar, if the Real gets to , well, yes we increase a little bit of subsidy. And then the Real gets to and then the subsidy was the same.

So, that's where we get -- we cannot move our promotions every day. So, what we decide is we take like another and we decide that's what we're going to do this year -- this quarter. And that's what we get.

How much are you going to spend on GSM in the three regions in Brazil? And in the cap ex ...

I think the cap ex for all Brazil -- not only for the three regions -- it's going to be for the next two years it's going to be $450 million more or less to put GSM in all the regions that we have. That are the four actual regions -- the Rio de Janeiro, Sao Paulo, Port Alegre and -- and plus the three new areas that we just got.

And Mexico?

Mexico -- I think what we're going to get is a cap ex of $1.1 million -- billion. And I think Mexico is going to get around for this year $450 to $500 million.

OK. Thank you.

Thank you.

Thank you. Our next question comes from Georgina Ferro of JP Morgan Chase. You may proceed.

Good morning. Could you give us a sense of the cash flow level you're expecting for this year? And I wanted to know, in Mexico what are you seeing on the Telefonica side? Are you seeing a stronger presence in the market? Are they being more aggressive? And what can we expect for, you know, for this year from their side? Thank you.

Well, in the cash flow, what I could tell you is that we expect maybe about $2.3 billion. And then the cap ex is going to be around 1.1, then if you--then you have to do what we--if we buy something like Celcaribe that we're buying Celcaribe today, plus the the taxes, plus if we do some repurchase of--that's more or less what we're going to have on the cash flow. And in Mexico with Telefonica, what I think is Telefonica is a very good company, it's a company. They are huge, they are big, they know how to operate wireless and yes, they--I think they--one of the priorities is going to be Mexico, but I think we have some advantages against them. Still, we still have some advantages in Mexico against them and I see--I see--I see them as a very good competitor, but I'm still happy about how the development of Telcel in Mexico, how we're doing, what are the things that Telcel has in .

Thank you.

Thank you. Our next question comes from Patrick of Salomon Smith Barney. You may proceed, sior.

Hi, this is Marcus on the behalf of Patrick . I just wanted to--we just wanted a question on how many of the GSM subscribers of the 500 thousand last quarter were postpaid, please?

I don't have that number here. I don't think--let me see if I find that and between the call I can tell you.

OK, great. Thank you very much.

Thank you.

Thank you, sir. Our next question comes from Mauricio Fernandez of Merrill Lynch. You may proceed, sir.

Good morning. Just a quick question still on the GSM, the 500 you have on GSM, if you have the number of how many were new subscribers, how many were migrating from your TDMA network to GSM? And still on that, if you would consider those who migrated from TDMA to GSM as turn when you calculate that you are 4.1 percent turn in the quarter. Thanks.

Yes, I--it's difficult to know because some of the customers migrate with the same number, so if they integrate with the same number we know that they are migrating. But other ones, they change number and it's difficult for us and if they change the number, then it's turn because we can sell TDMA and we get a new GSM. I don't have exactly the number here, but at the beginning a lot of them were moving with a new number, and today they are still--I think they are going--everyday they are staying with the number, more and more are staying with the same number. In prepaid, they are changing the number. In post paid they are staying with the number.

Is there any reason why they are changing the number? Because if they can stay with a number, there shouldn't be any reason why they would change it, right?

Well, because some of them they don't find they like their contract, so they prefer to pay the penalty and to move to a GSM and to get a new of GSM, or the new device or a new -- there's a new, nice promising GSM, so a lot of people wants to move to have a new phone.

OK, thanks. And just one more question, actually, going through to Brazil. We see that, you know, it was the Christmas season, so the margin should have come down. And, the thing is that you have grown a lot -- the , but it's at the expense of lower margin. So, the sense that we got is that the more you spend -- the more you grow the more you spend. If you don't spend, you don't grow. The question is whether -- if it's worthwhile being in Brazil or not that it would -- to know that your view on that.

What I explained a few minutes ago is that it's difficult to maintain. The fourth quarter is a great quarter for the growth in Brazil. So, the problem that we have in terms of subsidies that in October and November and December, the real is a lot -- very volatile. So, when you make a promotion, you cannot make a promotion assuming that the real is gonna be today at one price, and the other day at the other price and the other day at the other price. So, what you have to get is to get an average, and with that average you have to sell. So, in December, maybe we got to subsidize more the . We don't get -- we don't have better prices than what we used to have months ago. But, we have more subsidy because the real gets until , so we have to pay that in dollars. So, that's mainly why we have the reduction on the margins.

OK. Thank you.

Thank you, sir. Our next question comes from of UBS Warburg. You may proceed.

My questions have actually already been answered. Thank you very much.

Thank you, ma'am. Our next question comes from Juan Sanabria of Goldman Sachs. You may proceed, sir.

Hi, good morning.

I had a question as far as what is your net debt guidance for the end of 2003 for the consolidated company. And if you could talk to us about some EBITDA margin guidance, both at the consolidated level and at the level for 2003. Thank you.

What did you -- the first question was the net what?

What was your net debt guidance for the year ended 2003?

That is very difficult. It's a very tough question, because you don't know if we're gonna -- what's gonna be the repurchase program. The only thing that I can tell you is that we're being very careful to stay in the ratings. So, depending on the ratings -- we don't want to lower our ratings, so we're gonna be very careful not to grow our net debt, or to grow our net debt still to be in good shape.

garcia moreno: I think a way of looking at it is that -- you know, to do anything with the excess cash or to pay down debt, that we should get the net debt to EBITDA ratio down from 175 down to about 1.4. That would be the -- 1.0 to 1.4.

So, as Daniel said, it really will depend on what we intend to do in the ...

Yes. What the opportunities we get -- dividends, share buybacks, or other opportunities in other countries.

Great. Thank you.

Thank you, sir. Our next question comes from of . You may proceed.

Good morning, Carlos and Daniel. Congratulations with this other great quarter.

I have a question on the taxes in Mexico. You told already that you lowered the prices of prepaid cards in order to not to pay the taxes. But there are also taxes on postpaid -- on everything which is postpaid as was the case last year.

Last year, as far as I understand, you never paid the taxes. You made a reservation at the beginning of the year, then you changed that. But what is the situation for the year? Do you think that you won't have to pay those taxes? And also regarding last year -- what is the chance that you will have, actually, to pay those taxes?

No, the last year we made like an injunction. Last year there's not a problem. We don't have to pay anything. We make a provision at the middle of the year. We were but with the things that we do, so we don't have to pay anything.

In this year, we're thinking what to do. What we're really still working is to put an injunction there because we're not -- we don't think it's reasonable to pay that tax. And that's what we're doing today.

We're still analyzing a lot of the things. Remember that in the first place, you pay air time. You don't pay long distance. So, we're reviewing everything and we're analyzing everything. But we're going to put an injunction on -- with this new tax.

OK. And as far as I understand, you are not passing now the tax onto customers?

No, we're not passing the tax on the customers. We're still thinking to do something there. We're not so sure what we're going to do. But depending on the injunction, depending how we're going to that tax. And maybe what we have to do is provision that in the results until we get a favorable solution.

But we're still thinking what to do .

And regarding cap ex, you mentioned the number of $1.1 billion for the year 2003 or which 450 to 500 million would go to Telcel. Would you give us the figures for the other subsidiaries, please, for this year?

Oh, it's difficult for me to remember. Carlos, you know that?

I think 100 million for . About 50 million for . About 100 million for Guatemala.

Two hundred and fifty million for Brazil.

And .

Thank you.

Which would include part of the front loading of the cap ex number that for Brazil.

It's dependent, really, a two year cap ex, you know. How depends on how drastically .

OK. Thank you very much.

Thank you, sir. Once again, ladies and gentlemen, if you have a question, please press the one key.

Our next question comes -- is a followup question from . You may proceed, sir.

Hi. I just wanted to, if you can please, repeat the cash flow '03 projection that you mentioned before? I believe you had an EBITDA number projected around 3.3, is it? And then take out the1.1 in cap ex, plus acquisitions and so forth? Is that correct?

Yes, it's 2.3 or less, 1.1 in cap ex and then the rest would be for taxes for buy backs, new purchases, interest, and the rest would be cash flow.

Great. And also, can you give a breakdown of the cap ex for full-year 2002? It was 1.1 billion. do you have the breakdown Telcel and Telecom Americas from that number?

Telcel was approximately $800 million. The...

for this year.

For 2002?

OK, for 2002 Telcel was about $800 million. Yes, $800 million. In the case of--in the case of Guatemala it was roughly 100 million. In the case of Columbia about 83, 85 million. had about 30 million, and about 4.5 million in Argentina.

And in Brazil around 100 million, something like that.

And in Brazil 100 million, but you know that Brazil consolidate ...

... second half of the year so when Brazil--we would not be including here the first . OK?

Great. Thank you very much.

Thank you.

Thank you, sir. Our next question comes from Roger of . You may proceed, sir.

Yes, I'd like to touch on the issue of taxes in the fourth quarter. You had taxes and deferred taxes in the fourth quarter 390 million pesos versus 1.2 billion in the third quarter. I'd like to understand--I'd like to understand what happened there. And the second question would be--hello?

Yes.

Yes, the second question would be on the provisions for bad debts. I'd like to know what's the level for provisional bad debt for Telcel and Telecom Americas if you had the higher turn and lower margin in Brazil.

The first question?

The--I'm sorry.

OK, please go on.

The first question is about the...

The tax...

the first question, essentially we have for the only company that pay taxes in Mexico and in Guatemala because we have had a operating loss there for carrying forward some tax losses in . So essentially, the big part of the tax deal is really Mexico and Guatemala. In the case of Mexico, we had already provisioned in the first nine months of the year really all the taxes . We're going to be this year so that's why the last quarter, we've had small segment of taxes as compared to what we had during the first nine months. So that's essentially the issue as regards taxes. The overall tax bill.

And then the second question on Brazil. Can you repeat that again, please?

Yes, I'd like to know the provisions for bad debts. You had the higher turn in Telcel. I'd like to know the provisions for bad debts. What's the level regarding, like, revenues in Telcel and how that's playing out in Brazil as well in Telecom Americas case.

I don't' think--what I'd told you is the bad debt--sorry, the turn in Telcel is more on prepaid than on postpaid. So that does not mean anything on bad debt, OK? So that's something that doesn't--but we have provisions for bad debt and I think we are happy with the provisions. And still on Brazil also we're in the same as in Mexico. We have, like, politic for bad debt and all the companies are making the same prediction. So we are very concerned about .

Last question, it's almost a follow-up on these, that you have some concerns that U.S. economy's not going to, still continue, going to be weak and Mexico therefore, would be also having problems.

How do you see that for the usage in, for business with bad debt in 2003?

Well the predictions we made it every month and we put it in the results, so if you're seeing that we're having more bad debt, then we're going to put it every month. We don't wait until the end of the year to put the provision. So every month, we're seeing how the bad debt and the how provision, and what's the provisions that we have and we increase that or we'll decrease that. So I don't think that's anything that we are, if there is more bad debt, then we'll put more provisions or we put it more in the risk, in the direct expenses every month. So that's the way we do it.

But do you see any pressure coming from this side?

I don't know if there was, if you are saying the economic situation of this year is worse than that, last year, maybe we're going to see a little bit more pressure. If it's the same, then we're going to see more, less the same, and if it's better and we're going to see a little bit of recovery, then I think we're going to get less provisions.

OK, the last question is, can you give us sense of what is going on in terms of tariffs? Are we going to see the same RPU trends in the first quarter, do you feel that prepaid is still recharging at the same level?

Yes, what I tell to verify, that it's very early to know what's going on with a new prices, prices that we have in prepaid, but I'm happy south military increasing in in the prepaid platform. So we have to wait until three, four months, three months, two months, to really understand what is happening. Difficult to see something in 15 to 20 days.

OK. Thank you.

Thank you sir. Our next question comes from of Telefonica. You may proceed.

Hello?

Yes, hello?

Hello?

Hello?

Oh, yes, I wanted to ask you some rumors about your potential interest on the operations in Peru, you know, which some were somehow were - was consistent with the - your potential interest on in Brazil. I was wondering if you still consider this as a potential of a position or investment for this year. That's one - my first question.

And the second one would be what's your forecast for the evolution of the for your corporations for this year?

There's a lot of questions. We're interested in Peru. As I told you, we're interested in all the countries where we are not - we don't have operations today. That's the only thing I'm - we're interested.

And the other question - what is it?

Your forecast about the evolution of the number for this year.

I - we don't have that. The forecast - we never give forecasts for this year, so we don't have the - that number to - right now.

If you want ...

I'm sorry, but I couldn't very well hear your answer to my first question. So, I mean the rumors about your interest in south Peru were kind of strong last year - a few months ago. So, is there for the strength of this rumor?

But I'm very clear what we're interested in every country where we don't have operations. That's the only think that I can tell you, no? In Peru we don't have operations and we would be interested in something.

OK. OK, thank you.

Thank you.

Thank you, sir. Our next question comes from of New York. You may proceed, sir.

Yes, good morning. A brief question on the long distance license that Telcel just got - the question is if you could clarify a little bit about your plans on this business. Is it going to be a service just for Telcel subscribers? Are you planning on spending on more fiber? Or what's sort of the essence of that license?

What we carried - we asked for that license around two years ago as we were the only company that doesn't have a long distance license that we had to resell the long distance. So, they gave us that long distance around one month ago. And what we're going do is we have some restrictions. At the beginning, we have to use only the long distance for our customers for some two years, I think - two or three years. And it's what we're doing. We don't know exactly if we're going to put fiber or we're going to rent links or we're going to rent capacity. We're deciding that and we're making the analysis to see what's more convenient for Telcel. So, that's where we are today.

OK, thank you.

Thank you.

Thank you, sir. Our next question comes from of American Mobile. You may proceed, sir.

Sir, your line is open.

Talk.

You want to make any question, ?

Thank you. We have a follow-up question from Whitney Johnson. You may proceed.

Pardon me if I laughed, that was pretty funny. One--two follow-up questions. The first was on--when you're talking about your 2.3 billion of EBITDA for 2003, what kind of scenario does that incorporate on the Telecom tax? Does that incorporate some impact or does that assume that you're able to overturn it?

That incorporates, I think, part of the--of the tax, not everything, but part of the tax, we're incorporating it.

OK, so 50 percent or?

The tax would apply, like to Telcl the tax it would pay the--in the postpaid, we pay all the taxes. It would be around 2.2 points of and in all American Mobile will be around 1.4 percent--points of our EBITDA margin, the reduction.

OK. And just one last question. You did bring your net debt down significantly in the quarter. I know that that's something that the rating agencies have really been watching. Based on--in order for them to keep your credit outlook as stable, how much play money do you have for making acquisitions?

Well, it's very difficult to that question because if you buy something, then your EBITDA--the way the rating companies do is that there's a between your EBITDA margin and your debt--or your revenues and your debt, so depending what you do with your money, it's what the capacity you have, eh? But I think we still have capacity.

OK. So if you were to go to the rating agencies and say, "We want to buy something and we want to spend." You think you have some availability of cash to do that?

Yes, of course. Of course.

OK. Thank you very much.

Alright, thank you, Whitney.

Thank you. Once again, ladies and gentlemen, if you have a question, please press the 1 key.

I take the last question, no? Would be...

OK. Our last question comes from Maria . You may proceed.

I'm sorry, this is a follow-up question. It's not clear to me the tax issue. You said--you just said the impact on EBITDA would be around two percent on the margin. But at the same time, if you migrate your customers you're now paying more of the five percent on revenues for the spectrum, right?

Yes, yes.

You know, it's not clear to me. The other thing that is not clear is on your migration. It was my understanding that postpaid customers were the ones that you wanted to migrate initially. So most of your 500 thousand, are they postpaid or prepaid?

The first question is I told you and the question that Whitney makes me is that what's the percentage of the tax? And the percentage of the tax that we--that we have the reduction is 2.2 percent. So in EBITDA margins, it doesn't mean anything. Of course, if we move more TDMA to GSM, then we're not going to pay that over tax that we paid in TDMA and then we're going to have some savings. Now it depends also on how many and how fast we move our TDMA to the platform. That's--I'm only saying it's 2.2 points of EBITDA margin reduction with the tax in the postpaid. If--I don't think we're going to pay that. We're going to make that so that's what we're going to do. But maybe we're going to provision that. So...

What is the rate for postpaid now?

What is the what?

The average rate for your postpaid.

I don't have it here.

The 3.5 peso applies for the postpaid as well, right?

No, that's only for the prepaid platforms. The taxes that the 3.5, it's only for the prepaid platform.

OK.

Or I have less than 3.5 in my postpaid...

Yes.

... subscribers, but it's only applies to the prepaid.

So both base have to pay independent of what the rate is?

Yes. It was the losses, yes.

OK. And on the migration, Daniel, most of--of those, of the 500 thousand, are those postpaid most of them, or?

I don't have...

I know you don't have that number now, but what...

If you call me, if you call Carlos or , they can give it to you. I don't have any problem to give that to you, but I don't have that number. But not--it's postpaid plus prepaid. I think we have more prepaid than postpaid today because I think all the postpaid customers needs more coverage than the prepaid customers. So every time that we have more coverage, I--you're going to see that the migration in postpaid between TDMA to GSM is going to be higher.

OK, thank you Daniel.

Thank you very much. And thank you everybody. OK?

Yes, thank you very much, Carlos.

Thank you, .

Thank you, everyone, for being on the call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day. Goodbye.