America Movil SAB de CV (AMX) 2003 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Please continue to hold, your conference should begin momentarily.

Ladies and gentlemen, thank you for standing by. Please continue to hold, your conference should begin shortly.

Ladies and gentlemen, thank you for standing by. Good morning, good afternoon and good evening, and welcome to today's American Movil first-quarter 2003 results conference call. Now, at this point, all phone lines are muted or in a listen only mode. However, later in the conference, there will be opportunities for questions and instructions will be given at that time. Should you require assistance during today's conference you may reach an AT&T operator by pressing zero then star on your phone keypad. And as a reminder, today's call is being recorded.

Well, with that being said, here with our opening remarks is our host, Morgan Stanley's Latin America Telco analyst, Miss Vera Rossi. Please go-ahead ma'am.

Good morning everyone, this is the Vera Rossi from Morgan Stanley. First, I wanted to thank everyone for participating in the call. I'm here today with American Movil management team, Carlos Garcia Minos, CFO of American Movil to discuss the first-quarter 03 results. Now I will turn the call over to Mr. Carlos Garcia Minos. Carlos?

Thank you Vera, good morning everyone. I'd like to first thank Morgan Stanley for hosting the call. Well, I guess some of you have already been able to take a look at the release that we sent yesterday. I think that what is clear is that we have had a very solid quarter. We have got very good operating results. We are having very good financial results. I will talk too on some of the many (inaudible) that we have across the operations because I think this is important. And then I will go on to approach upon some of the very latest developments, including some news in the Mexican tax regime that became effective I think became effective as of today. In the case of the savings revenues, you will see that (inaudible) typically in the first quarter it's not (inaudible) the strongest one, so we are seeing quarter to quarter increases on certain revenues and practically all of the operations. We are seeing EBITDA margins going up. Also, practically across the board I think the -- and we're seeing a strong subscriber growth.

We are the only company however that is coming out with the higher-than-expected numbers, given the seasonality of the first-quarter revenue to the fourth quarter, many companies came out with these higher numbers in the first-quarter than this, and the last quarter was (inaudible) which have got from the beginning (inaudible) of the last quarter of last year have had a very strong performance in terms of subscriber and going forward.

So all in all we are seeing solid operating results. We are seeing some important results in churn that I guess we can touch upon that in the question and answer session, but certainly in the case of (inaudible) they've been noteworthy and not unexpected. Regards the pricings options that we have in Mexico, and this is interesting to note, that the increasing (inaudible) even after the fact that we had brought about significant reduction in the price (inaudible) of the first time in the prefix cards that (inaudible) on that basis. This is something that was brought about at the beginning of the year and which had led many people to speculate on whether these would cost a reduction not revenues to (inaudible) numbers are out and we had quite a good elasticity (inaudible) we are seeing that (inaudible) was by no means affected by this reduction in prices.

As regards the financial (inaudible) I think it is important basically to highlight that the net debt of the company has come down again in the quarter by some 1300 million pesos. If you were to scrape out the effects of (inaudible) movements because there was a certain to devaluation on the peso, particular in the quarter, you will see that these results show not net debt even the (inaudible) was even larger.

Now, also it is important to bear in mind that the net debt results showing 1300 million pesos take place even after the incorporation of (inaudible) which had a purchase price including the debt of someone on the $100 million. Regarding cap ex, I think it is a couple of things are important to mention. One is that we are not changing the guidance for the year. I think we remain with the target of approximately $1.1 billion equivalent for all of American Movil this year. But the second thing to note is that the actual expenses (inaudible) with the cap ex will really be more backloaded to the extent that the type of contract that we have entered with vendors are all of tense in nature, which essentially means that our obligations to pay for the (inaudible) really takes place towards you know after the completion of the project. But what we are seeing is that in this first-quarter and generally in the first half of the year for (inaudible) we should not expect to be seeing much more money spent on capital expenditures because they will effectively be (inaudible) more towards the end of the year.

Finally, I wanted to touch upon be latest developments. Well, one of them is that today we have amortization of 1.75 billion pesos (inaudible) Mexico. The loan already has been paid so -- and this has reduced, as of today, the level of short-term debt to approximately 12 percent of the total debt of the company so we have a very comfortable situation from the point of view of the maturity profile of the debt. And at the same time we have managed to review again the net debt to (inaudible) numbers for that (inaudible) I would say below the 1.44 balance that we are assuring in the report.

So the last thing had to do with the (inaudible) on taxes. There was a release in the official policy on the government here today, which essentially items of tax exchange on the excise taxes that related on telecom Wireless revenues at the beginning of the year. This government policy is essentially calling for an exception in the case of the (inaudible) for those (inaudible) that may have a rental payment that most 350 pesos per month that has an implied cost (inaudible) of that most 3 pesos per minute, which have at least within the rental payments 100 minutes of their time are located to the subscriber. So this is important and it (inaudible) leading off to a revised board, the variations that we had on the text research that we establish that the beginning of last quarter and to revise again but our options are both on the legal fronts and in the commercial fronts in terms of (inaudible) or not (inaudible) but will now clearly remind off tax to the subscribers. So I'm afraid that we will not have much information on (inaudible) position yet. This is very recent venues, but it is clear that the provisions for taxes will be reduced from this point onwards. This is important to note that this exemption will take effect from -- well I think that is from today. The day after the policy is published so it would mean that as of today, the exception takes hold. (inaudible) the basic (inaudible) that we want to highlight from this report and I will pass it back to Vera.

OK, thank you Carlos. I would like to ask questions before I opened for Q&A. My first question Carlos is on Tel Sell Mexico. As you mention, we saw a significant reduction in turn this quarter. What do you expect to see in the next quarters, in terms of turn rate for Tell Sell?

OK, Vera. What we have -- let me (inaudible) the whole issue of (inaudible) we have mention this (inaudible) what we have (inaudible) to change one prepaid one postpaid. The channel we have in postpaid, have been very stable and that is one that we are quite comfortable with. The one that we have one prepaid, went out to a large extent due to their rapid growth that we had in the past and this is something that I have clarified in the past as being a certain kind of a loss factor that we have had, but that is connected with there is a very rapid growth. (inaudible) my have to do with some promotions that may not have had all the positive impact that we wanted in terms of repaying the clients and so one but the effect of the matter is that we were all the belief that this is connections with (inaudible) you know at some point after -- you know, especially following the failure of (inaudible) and this is in fact what is happening. If you were to look at these connections, they have been trading off essentially I would say from the second quarter of last year very much following what happened with (inaudible) 6 to 9 months before that. They reached a peak in October, November and they have been turning down since then OK? Now (inaudible) came down to zero you always have a certain churn in this case (inaudible) but I think that the (inaudible) has been done already in terms of you know (inaudible) distributors looking at the types of promotions that we're offering you know making sure that we end up keeping the plans that have been connected to begin with. I think we are reasonably comfort that we can maintain the turn rates or less at these levels. You might see in the short-term possibly like with options churn if the trends we are seeing today continue to hold for the second quarter and I would expect that you know we should be comfortable with the turn rate more or less in this range.

OK, my second question is on telecom America's in Brazil. One is on minutes of use. We saw a decline of approximately like 10 percent sequentially in minutes of use for Brazil and I just want to note is this decline linked to the increase in rates of 22 percent we had earlier this year in Brazil?

Yes, Vera, in fact, it seems to be -- I was discovering with (inaudible) exactly this point. Because (inaudible) telling me that we're not having any issue with outgoing costs excluding being with incoming minutes. So yes there seems to have been certainly with (inaudible) company but I think this is a more general problem especially the certain reaction from subscribers to the price increases that took place the early on the last quarter, no?

I see. And my second question on telecom America's is about the subscriber growth. I realize that on ATO in Rio de Janeiro was the only company which presented negative net ads, while the other subsidiaries presented positive net ads. This reduction in subscriber on ATO has something to do with more competition or was the cleanup of subscriber base.

No, I think that there wasn't anything exceptional from the point of view of cleanups, as you call them, all the subscriber base. I don't think that (inaudible) so I think that what you are seeing with effectively (inaudible) by (inaudible) competitive situation in Rio. In Rio, now we have for competitors. It's not only three, it's now four. And obviously there has been some very shady advertising on the part of the latest two competitors, but if you were to look at what happened last year, you know, the last year first quarter made up for eight years or something like 18,000 subscribers only so the difference between first quarter of last year to first quarter this year in terms of net additions is something like 40,000 (inaudible) which doesn't seem to be that large. Now this situation is much more associated with the prepaid sector than with the postpaid. If you look at the postpaid, we haven't seen any change in turn without being able to maintain and grow our R2s in postpaid. So we are comfortable there. I think that the questions he will be you know or have been the case since last year that we are generating revenues and it is still to the same what kind of revenues the other companies are generating with their subscribers.

OK, thank you Carlos. Brett, now we can open for Q&A the call.

Certainly and thank you, Miss Rossi. Well, ladies and gentlemen, as you just heard, if you do have any questions or comments we invite you to queue up at this time. Just press the one on your phone keypad. You will hear a tone indicating that you've been placed in queue and you may remove yourself from the queue by pressing the pound key. Now ladies and gentlemen if you try to queue up before hearing this announcement we ask that you would re-queue at this time by pressing the one on your touch-tone phone. Immediately showing a number of responses. First in queue is Patrick Grennan (ph) with Smith Barney. Please go ahead.

Good morning Carlos. I have a couple of questions. First is about your cap ex numbers and your strategy within Brazil. First of all on your cap ex numbers instead of 1.1 billion of cap ex, (inaudible) to cap ex in the first quarter was low but the net debt number didn't drop very much. Is that because of an increase in your working capital or what is happening with your working capital movement?

(inaudible)

The net debt number didn't drop the 4th quarter and first quarter.

What number?

The net debt.

Oh yes. I mentioned it at the beginning about -- what I was saying is that the net debt reduction of 1300 million pesos was only 700 million pesos because if you would take into account the FX movements, we are talking here about pesos and we had a valuation of the pesos but it was not immaterial in the first quarter. So if you were to strip out the net foreign exchange change, then we would see that we ended up with a much larger reduction in net debt. That's why I mentioned it at the outset. And also the other things that you have to take into consideration here is that these numbers already include the incorporation of (inaudible) which is 100 million. So in other words we have reduced net debt by 700 million pesos after adding up the equivalent of $100 million for (inaudible) and after adding up a certain amount of pesos on account of the FX devaluations.

OK, what is your target number for net debt at the end of this year?

The target number for net debt?

Yes.

Well, (inaudible) and target number for Castro for the year.

If you have that, too, that the ...

I think it really very much depends on what kind of contractions we do either in the year. I think that there has been, you know, -- we need to see whether we are going to be closing BSE for instance (inaudible) if it closes possibly next month (inaudible) and addition may be of net debt of close to 180 million and we have to see whether there is any other acquisitions, only to the extent that there aren't any you should see a very significant reduction in net debt. It has already -- I think it's important to note that the net debt which came to be somewhat higher than two times relative to the last 12 months EBITA, it is now at levels as of the end of March, a 1.44. It is today somewhat less than that and I think that you know where as we have expected at some point at the end of last year that we should get to about 130 or 140 of net debt to EBITA up by the end of the year I think we are already there.

Right, OK. And then just a second question is on the build out in St. Paulo. How is that going? And when will you be ready to launch GSM service in Brazil?

I think that we should be able to launch in September.

September. Well that launch happened in St. Paulo first or will it happen in Rio first?

I think it will -- it should happen simultaneously.

Simultaneously in both? OK great. OK, thank you.

Thank you Patrick.

And thank you very much is the Grennan. Next in queue is Nicholas Lippman with Bank Invest please go ahead.

Nicholas Lippman, Bank Invest: (inaudible) I didn't press.

Very good sir. And we'll move on to Stefan Peters with Axico.

Stefan Peters, Axico: Good morning Carlos. Stephan Peters in Axico in Mexico. Congratulations with this great quarter. I have a question on Track Phone in the United States, as you told already and we saw in the press release there was a significant decrease in subscriber growth, which seems to be that there has been a change in strategy compared to last year, which was more I thought the strategy (inaudible) on rent ability, what could we expect for track from this year? Are you continuously targeting more subscriber groups or are you happy with the current subscribers and would you (inaudible) again more on rent ability?

(inaudible) that the function is still very much on profitability. I just think that there's been some important changes, in fact, have to do you know with the bringing out (inaudible) products in the market. At least (inaudible) new products that they've offered, which have essentially been quite successful in terms of maintaining people connected so that there's been a significant reduction in exchange rate. This is very important that we look at that the (inaudible) profitability (inaudible) very many of the analysts and investors here have pointed out is closely linked to (inaudible) so they've been able to give products on the one hand and to better customer retention programs on the other hand to going about reductions in change and therefore increase profitability (inaudible) which makes it interesting if they want to keep them going been better. As I point out earlier, they've had a good run from more or less the middle of the second -- all the last quarter of last year. This is going to continue in the first quarter of this year to the point that (inaudible) was the only company within the group that has higher number of net assets in the first quarter than the last quarter and yes, it did bring about a certain impact on (inaudible) that you're pointing out. But this impact is probably you know (inaudible) you know that (inaudible) has come down from being a company that used to have a significant EBITA loss to one that is now has been breakeven for the last two quarters, so I think that they are in the position that they can afford to maintain a certain growth.

What should we expect Carlos for full year EBITA (inaudible) and also subscribers by the end of this year.

I think what you should expect for EBITA up position for all of the year should be similar to what we have for last year. OK? But I think that we can achieve that while at the same time growing the better base (inaudible) the subscriber base I mean.

So you are not expecting let's say any significant EBITA for this year?

No, I don't believe that we are expecting any significant EBITA for the year. I think we're expecting significant subscribers.

Did you have any follow-up's Mr. Peters?

No, that's all thank you.

You're very welcome sir, thank you. And next we go to Damien Fraser with UBS. Please go ahead.

Carlos, also congratulations on great results. I have a question on the postpaid exemption that was published in yesterday's official Gazette. If the basic rent is 350 pesos or less, but the customers bill comes to more than 350 pesos because he makes extra calls, not in the plan, with the whole bill be exempt from the tax or none of the bill or just be basic monthly rent be exempt? And then the second and sort of related question is want percentage of your postpaid bills are bills and basic rent a less than 350 month?

I think a little bit the plans, Damien, and thanks for your comments, but I think the situation would be one, as I was (inaudible) if you have a plan in a way to is clear but the rent payment and what is the time per minute that will be allocated with the package, if you make sure, if we make sure, that it doesn't go beyond the three pesos per minute, which I think that we can do, I think that we can ensure that we maintain the exemption and I wouldn't have to deal with that situation, what you might crossover the three pesos per minute threshold (inaudible) so you know I would expect that you know that some of the plans may be revised in light of the information, as I mentioned before, this is something that we just published yesterday in the morning and we are in the process of the adjusting this information and seeing what we will do with this. The second question was what?

Well, it's related and following what you just said, the implication of what you're saying is that in your view as a matter of practical sort of consequence the vast majority of postpaid bills will be exempt from this account.

No, I don't know if the vast majority of postpaid bills, all postpaid revenues, I do not know. I'm sure that certainly this would affect that the very least a full for because remember that not everybody plays the same rent. Not everybody gets the same handsets and not everybody gets you know the same set of -- bundle all their time. Initially, this as to do with the overall consumption, so they can I'm only saying that there will be a portion of the postpaid, not 100 percent by any means but there will be a portion of the postpaid revenues that at the very least would be a third. I do not know how high disproportion can be but at the very least would be one third. That, we believe, as of today, would effectively be exempt.

Thank you very much. That's very helpful.

Thank you Damien.

And next we go to the line of Daniel Enriques with Goldman Sachs. Please go ahead.

Hi, thank you. Carl, is a question about still on the tax. You mentioned in the press release that if you excluded the new tax reserve you're doing, you're EBITA margin would be 42.3 percent versus 40.4 percent reported, so around to percent. You think with this new tax resolution, how much improvement you would have out of this to percent? Is it like 0.5 or 1 percent? Do you have any sense of what would be the impact on the margin? That would be my first question. And the second question is if you could give us an update on your GSM rollouts, how many clients are there, how is the deployment going? Thank you.

Sure. Thank you. Well, the question on GSM, we have now the 150, good coverage. The number of subscribers I don't have it here with me, but I'm sure that it's more than what we've had at the end of last year. And in regards to the effect of the taxes, yes, you are pointing out that the impact on (inaudible) was about approximately 2 percent. If, as I was mentioning today (inaudible) if we have let's say one third of that at least exempt that would already mean an additional .7 or so all of EBITA margin that we will be accruing from today. Remember that this tax exemption is effective as of today.

OK, OK thank you.

Thank you.

And next we'll go to the line of Pedro Gonzalez with (inaudible) please go ahead.

Yes, Carlos, good morning and congratulations on the results. Just one question to follow-up on Brazil. Could you give us an indication of your expected (inaudible) subscriber growth or can we just sort of foresee that this first quarter is an indication of more intense competition throughout Brazil and again if you could give some indication of your sense of subscriber growth and potential margins for year-end, perhaps without including BSE.

(inaudible) thank you. I remember mentioning today that we are seeing (inaudible) competition. We have a new entrants. We have new you know for competitors in a region that already has possibly the highest penetration rate (inaudible) for the 35 percent. I think one thing that is important and I forgot to mention it to Vera, is that when you look at the new competitors, they don't have turns or what ever is (inaudible), whereas we already have to maintain (inaudible) we are still sending in terms of attracting new subscribers but there is always a certain number that (inaudible) (inaudible) so you'll start seeing the competition (inaudible) whatever (inaudible) life think you will see more stable numbers, in terms of how we are doing dividing of the market amongst ourselves. I would say that were fairly comfortable all in all in that the industry will continue to consolidate (inaudible) I think that we are comfortable that the economy in Brazil will be in relatively good shape, which always is important in terms of maintaining sales and revenues. And we expect that we will be at least very much on track with the (inaudible) that we had for this year. So we still (inaudible) that is making us -- nothing unexpected at this point, as I mentioned before. We intend to have launching of our GSM services in the next few months. This new GSM services will make (inaudible) providers that we have and we're ready have in Mexico to met groups, PVM (inaudible) networks, which is today is standard in the field and we will have the new GSM networks which will also be on the new standard, so in terms of being able to move on virtually anywhere in the country you have to be (inaudible) or you have to have GSM and we have both of them. In the case of margins, I don't expect to see any change certainly to the sort of standard when we launched the new services. I think that we should expect to maintain a strong margin in the second quarter, also the third. And to the extent that we started launching the new operations, (inaudible) operate today obviously we will have a little bit of an impact on margins, but that is again not unexpected. Regarding -- I'd say that that's basically what we have for that (inaudible)

Thank you Carlos.

Thank you.

And thank you, Mr. Gonzalez. Let's go to UBS Warburg's Judy Lyn for our next question. Please go ahead.

Hi, it's Judy Flynn actually. I just had one fast question on what you're expecting for the annual tax rate for this year. For the full year.

The effective tax rate?

Yes, for the full year.

The effective tax rate, as you know, it's a function very much determined by the relative results of each one of the companies where we operate. Remember that for (inaudible) purposes you cannot consolidate the different countries so you have to pay taxes on each country's operations. But I do not believe I have to use a number for you at this point. I think it will be lower than what we had last year, probably in the range of 30 percent, 30 percent, that's what I would have as an effective tax rate. Again, this will change to the extent that there is changes in the currencies or one thing -- and will change to the extent that we have different relative performances of the different countries.

OK, great. Thank you very much.

Thank you Judy.

And thank you, Miss Flynn. Next we go to the line of Oscar Herrera with IBM Amro Bank. Please go ahead.

Buenos Dias Carlos. Good morning and again congratulations for your results. I have a couple of questions. One has to do with how you see the new competitive environment in Columbia vis-à-vis the acquisition that you just made of Cel Caravi and along that when you guys expect to have the GSM roll out in the country. Perhaps you can answer that one and then I'll ask a second question.

(inaudible) with Cel Caravi, you know, we not only providing the nationwide coverage now, which was very important, but we you know it's not only providing service to the new clients but also being able to provide other services to our existing clients, which at times we're not able to perform efficiently when they were traveling to the region of the country that we did not cover. I suppose the acquisition of Cel Carvi has these two merits: on the one hand, yes, we are acquiring and you (inaudible), and we are acquiring new subscribers but yes also on the other hand we have a better setting. We are going to be able to better serve the existing clients that we have (inaudible). As is the case with (inaudible) and as you are pointing out, we have embarked in a program to establish a GSM network also in Columbia. As is the case with Brazil, this is also going to be a turnkey project. It has already been commissioned, the vendor in this particular case is Nokia and yes we should expect to have the GSM network up and running later in the year, probably also in the last quarter.

OK, will thanks a lot. And the second question I had is what is your expectation in terms of EBITA margin for (inaudible) itself? Now of course I appreciate that different subsidiaries behave differently and this may be you know some difficult question to answer, but I wonder if you had an expectation for American Movil itself.

Excuse me, you're asking for the EBITA margin for ...

That's right for year-end, if you have any kind of expectation.

Well, we have the expectation that it's going to be overly -- at least a couple of points better than what we had last year. (inaudible)

Thanks.

And thank you Mr. Herrera. Next in queue is Alberto Rodriguez, with GBM. Please go ahead. And Mr. Rodriguez, your line is open. And if you are speaking, we can't hear you. Please check your mute key. And we have no response. We'll move on to Whitney Johnson with Merrill Lynch. Please go ahead.

Hi Carlos, a couple of questions for you. The first is the R2, it was up significantly versus our expectations. Can you just talk us through how much of that was related to charging of nonpaying subscribers versus how much related to the price elasticity of demand. And is the 165 R2 sustainable in your view?

Excuse me, (inaudible) a you referring to (inaudible)

Yes I am.

Well, in the case of (inaudible) I think (inaudible) important is to consider the following: on the one hand, we had a very good sale of prepaid cards in the last quarter of last year. And as you know the uses of some of those cards really is spilling out of it into the first quarter this year, OK? So there is a lot of users do not necessarily linked to the actual purchase of cards (inaudible), OK? Now, the other thing that is clear is that the effective price that you have, that you receive for revenues is also very much a function of how you, in fact, how to demand from prepaid cards to be distributed between the 500 and the 200 and the 100 Pesos cards. So what we are seeing is that while there has been some you know -- we have these (inaudible) cards but the fact of the matter is that has also been a shift in other factors that have to some extent helped to compensate for the reduction in (inaudible) price. So I think that that is basically what you would have to take into consideration.

And you have any follow-up's, Miss Johnson?

Yes I did. So Carlos then, you're saying that you think a lot of the R2 for the first quarter was related to cards that was sold in the fourth quarter. Can you just give us an update on ...

No-no, that's not what I said. Let me say it again. What I said is there's two different things that one needs to consider. One is part of the cards that were being utilized in the first quarter, certainly January early February, have to do with cards that (inaudible) back in December. And remember that what we record as revenues and for (inaudible) is really the actual consumption of the airtime on those cards, OK? So what I'm saying is that part of the usage or he has to do with cards that were not acquired in this quarter, OK? Now secondly, you have different effective pricing per minute in different cards. So the overall price -- the weighted average price per minute that you have ultimately is a function of (inaudible) different cards. OK? And this changes over time, no? This changes over time. We have had significant changes last quarter. Last quarter 02 and we have (inaudible) very significant changes the first quarter of 03. So what I'm saying is that (inaudible) you have to look at various components of the demand.

OK, on a separate topic, the net growth was actually much better than expected, practically in line with 4Q. Can you talk about the dynamics of that growth? Is it just related to lower churn or are you actually taking share from your competitors?

OK, what I was saying (inaudible) if you look at the prefix line, that we have cards quite strong showing in terms of gross ads. I think that gross ads have been quite, you know, has been quite good levels. They've been stable, no? And growing somewhat, quite good levels, and the only thing that has changed really is the connection. Which, as you and I have talked before, seem to be lagging class connections, past (inaudible) we seem to have reached a peak in October, November of last year in terms of these connections and they seem to have been trending down since then and that's why (inaudible) which are remaining stable and an upward trend and relatively on fairly good levels. And these connections which are following past growth and now (inaudible) they have an effect of giving off the net ads in the first quarter. And to the extent that this continues, as I mentioned to Vera, to the extent that this continues in the second quarter, we should expect to see a similar situation to what we saw in the first quarter.

OK, and Carlos just one final question. Cap ex for the quarter, I know that Daniel said it was backloaded, but can you just give us with the number was for the quarter?

The number for cap ex (inaudible) should be very small, probably in the neighborhood of $500 million or so for all of the company. And again, as I mentioned before, you have to bear in mind that a very significant amount of the cap ex that we'll be doing this year is being done on the currency project, which essentially means that there's absolutely no payment obligation on our part until such time as the project are completed. And that's why I was saying that this is going to be very backloaded, OK? So essentially, what you'll see in the -- certainly first two quarters, maybe even the third quarter, is going to be very minimum amounts of cap ex, particularly all of the actual spending on cap ex (inaudible) towards the end.

Great, thank you very much.

Thank you.

And thank you, Miss Johnson. And once again, ladies and gentlemen, to ask a question, just press the one on your touch-tone time and we go to Maricio Fernandez, with Merrill Lynch. Please go ahead.

Thank you. Good morning Carlos. I've a question on Brazil actually on the acquisition. I wanted to ask you what is the status of the negotiations to buy (inaudible) secondly, is there any merit to the speculation that you were looking or interested in Brazil assets? And actually, the final question is I think you mentioned that you will be launching the GSM services December. I guess that's for your current operations, what about the new PCS operations you know for the license you acquired last year? Thanks.

OK, thank you Maricio. OK, as regards to BCP, I said (inaudible) before there are no negotiations. There are no negotiations because at this stage the lenders of BCP are in the process of negotiating in respect with the shareholders of BCP, what would be effectively (inaudible) and possibly a capitalization of part of the debt of the company. But what I have read in the press says that there seems to have been an agreement made in principle with a group of banks. I understand that would be the steering committee of the banks, whereby the lender group would be capitalizing the debt or writing down the debt to a level (inaudible) correctly of $750 million. And it appears that this restructuring would require the approval of all of the existing lenders and I think that that is where the process is at this point. OK? And all this event's telling you is essentially what is public information (inaudible) reading in the press. So at this stage, I don't believe that there's anything that would be happening until such time as this process has been concluded. And I don't really have an idea of when this will be, no? And relating the part we have said that we we'll be an interested tutor for BCP but here we have also said that we cannot and would not wait to see what happens with BCP indefinitely. I think that we are going to hold (inaudible) we have already considered the project we will be going ahead with the GSM services, not only (inaudible) in the system operations but also in the new regions. It is not like you know we have to do this in a staggered manner. I think that we can do it very much in a parlayed manner and really the more time that we take the more we will continue to embark in this developments (inaudible) operation.

OK, so your expectation is that by September you will be launching GSM both the current operations and on your new operations.

That's correct.

OK and also what about the -- you know, the other question I had was on speculation that you would be interested (inaudible) team Brazil assets in Brazil. Any merit to that speculation?

As you yourself have called it, it's mere speculation.

well, are you interested in -- would you be interested in ...

I think that we have established a footprint that we wanted in Brazil, for the most part. And I don't know that we are looking at you know that anything in particular at this stage, other than BCP.

OK, great, thank you.

thank you.

and thank you very much Mr. Fernandez. And with that, Mr. Garcia Minos and Miss Rossi, we have no further questions. Please continue.

OK, I would like to thank American Movil and everyone for participating today in the call. And Carlos, you have any closing remarks?

Not really Vera. Only to thank you and to think all the participants for attending the call.

OK, thank you very much and bye-bye. Thanks.

Thank you bye-bye.

And ladies and gentlemen, that does conclude our results for this quarter. Thank you very much for your participation, as well as for using AT&T's Executive Teleconference Service. You may now disconnect.