America Movil SAB de CV (AMX) 2004 Q1 法說會逐字稿

[Audio quality poor in opening remarks.]

Good day, ladies and gentlemen, and welcome to the First Quarter 2004 American Movil Conference Call. My name is Michelle and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session toward the end of this conference. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Ms. Vera Rossi of Latin America Telecom Analyst. Ms. Rossi, you may proceed.

Thank you. Good morning for those of you in the U.S. and good afternoon to all of you in Europe. I am Vera Rossi, Latin America Telecom Analyst for Morgan Stanley. I would like to tank everyone for calling in this morning. Speaking on behalf of America Movil today will be Daniel Aboumrad, Chief Executive Officer Director, and Carlos Moreno, Chief Financial Officer. Daniel and Carlos, you have [indiscernible] a very strong, solid quarter. We look forward to your [indiscernible] remarks and we will follow with a Q&A session. Please go ahead.

Thank you, Vera. I’m going to – Carlos is going to make a small summary of the financial results (indiscernible).

Hello, everyone. First of all I’d like to start by thanking Morgan Stanley for hosting this conference call today. As Vera points out, American Movil had another strong quarter in the first quarter of 2004. This was a quarter that was sidetracked (phonetic) by very rapid subscriber growth across the board, practically all of the operations that we have in Latin America and interests (phonetic) rapid growth in terms of subscribers and several of them also (indiscernible).

All in all, America Movil added 2.9 subscribers in the quarter. We are seeing practically all of the subsidiaries, with the exception of (indiscernible) a subscriber base increase by 10 percent or more in the quarter, quarter on quarter. So this was fairly fast pace of growth. Indicators of Telcel although in relative terms, given our (indiscernible) it’s not nearly as high. In absolute terms, we had a very, very strong quarter. we had 1.1 million net subscriber additions. Of course we’ve been followed by Brazil (indiscernible) operations, gained approximately 6,000 subscribers and we had also very good close in Colombia with (indiscernible) 2000 subscribers. (Indiscernible) in the U.S. had nearly 400,000 new subscribers, and even the operations like Argentina which we had only been managing for a short period of time have experienced (indiscernible). They increased their subscriber base by nearly 15 percent quarter on quarter.

Ecuador has been a fast growing company for some time continues to grow (indiscernible) with 3000 subscribers (indiscernible). So we are seeing this has to do to some extent with – including economic conditions in the region. We had most of the countries in Latin America are in condition of stability that has them on a good booking (phonetic) of renewed growth and as the international environment improves, we expect that this will also include – including macro economic conditions will be solid (phonetic) (indiscernible) in the benefit of the operation that we have recently.

In terms of revenues to date (phonetic) I mentioned earlier, we have seen also revenue growth. Mexico, Ecuador, U.S. they all had retro growth (phonetic) of nearly 10 percent quarter on quarter (indiscernible) which is also very, very strong. And this has led, in some cases, to continued (indiscernible). I think that Telcel is (indiscernible) the operations in Telcel have been improving significantly. We’ve managed to hold on to nearly (indiscernible) EBITDA margin in spite of this accelerate growth. We have seen an improvement in ARPU. In fact prepaid ARPU have been rising quarter on quarter for the last eight quarters. I think that is something that is being noteworthy. (indiscernible) mentioned that beginning at the last quarter of this year, we expect to introduce “push-to-talk” service in Mexico. We have (indiscernible) in focusing in delivering greater array of services and this quarter we have already introduced the blackberry services in Mexico. And GSM services are also (indiscernible) fast. SMS (phonetic) services are also showing very, very rapid growth. So all in all, the operation in Mexico is a good combination of voice and data net phone (phonetic).

Going on to other countries, (indiscernible) America Movil Company, we ended up the quarter with nearly 28 billion pesos. (indiscernible) year on year of revenues. EBITDA ended the quarter at nearly 10 billion pesos (indiscernible) which was about 45 percent more than the previous year. I think that what we are seeing is that the fast pace of growth has a slow impact on EBITDA margins and that is something that has to do essentially with our subscriber application costs rather than a (indiscernible) function of the (indiscernible) of new subscribers that we have in them.

The cash flow with company has been very, very strong. We are mentioning in the report that the net debt fell by almost $100 million in first quarter in spite of the company having purchased (indiscernible) nearly $260 million we spent on the repurchase of shares and this is on top of the amounts paid on dividends were nearly $20 million and the amounts paid for 50% stake in Nicaragua (phonetic) was $50 million. So, at the end of the day we were able to not only pay for shares that we bought and the interest in Enitel and we also saw a reduction in (indiscernible).

This is, by the way, (indiscernible) a change that I think is important that let you know the position that we have in COMPUSA. We used to have COMPUSA (indiscernible) subsidiaries (indiscernible). We have now following (indiscernible) in our shares from COMPUSA (indiscernible) holding that to pay that at the end of last year. We are holding that (indiscernible). We are now owners of (indiscernible) and we have defined them as “available for sale.” Okay. In that context, we are now required to book them potentially as a market (indiscernible) which (indiscernible) position of cash and temporary investment. So we have had a reduction in business in subsidiaries. Again, as stated(indiscernible) COMPUSA and we have (indiscernible). But without including these effects, we have seen, as I mentioned before, an increase in – a decrease of nearly $100 million.

Regarding the overall financial position of the company, net debt is now 1.1 times EBITDA per month. (indiscernible) position and we have already completed with refinancing of all of the obligations that were coming in the year and substantially, all the obligations that we’re coming into next year. So, in so doing, we were able to secure very good conditions – the interest rates and (indiscernible) we have been able to (indiscernible) and actually grew (indiscernible).

Let’s say that regarding the other operations, what we are seeing is a good situation in Brazil. I think that in Brazil we have already seen raise in the EBITDA margin. That has been important (indiscernible) last quarter of last year. As you recall, there were a number of extraordinary costs and expenses that were initiated toward the end of last year and that (indiscernible) gradually toward this year. But, we have seen again, an improvement there.

And with regard to the other operations, I think the (indiscernible) going very, very strong. But, I’d like to leave it here, Vera, and then we can get the Operator’s help for questions and answers.

Thank you, Carlos. I would like to start with two questions and then I will turn it over to the other analysts. The first question is about your net additions in Mexico, what are you expecting for this year after this strong growth in the first quarter? And also, the second question, it’s about ARPUs. We have seen ARPUs consistently going up in Mexico and I would like to know that if you can replicate this positive experience to the other countries in Latin America, and what are the major factors that will drive elasticity above one? Like how does this increase in ARPUs in the other countries and what countries do you believe will have the highest applied potential in ARPUs. Thank you.

Vera, what we’re doing today is we’re reviewing our budget. The first quarter in Mexico and in all the operations in Latin America were very good, so what we’re reviewing is, again, what we expect for this year. In Mexico what I think our first budget was between two and a half and three million subscribers. I think that the new budget – we don’t have it right now, but what we can see is that the new budget would be around three and a half to four million subscribers a year. So that’s mainly what we expect for this year. In terms of ARPU, the ARPU as you see for maybe around 12 months I think is improving in Mexico. What we’re trying to – the economic situation in the country is helping us a little bit right now and the other thing that you’re going to see is that we’re making some promotions and we’re trying to make that our customers use more the phone. This also – the other thing that also is helping us is that we’re being very careful with the new customers that we’re acquiring in Del Sol. With good new customers, growing the economy of Mexico, plus the promotions that we’re making, we’re going to see EBITDA around 15 (phonetic). We’re trying to do that in Latin America and I hope that we can replicate this issue all around the country – all around the other countries.

And what will be the countries do you believe you have the highest applied potential in terms of ARPU growth at the current level?

That’s difficult to say, but I think Ecuador, I think we’re going to improve a little bit. I think Brazil, we think we can improve also a little bit. Depending a lot on the subscribers that we acquire. When you acquire a lot of subscribers, then those subscribers will take a little bit of time to use their phone as we want to, but the very important issue, Vera is that we’re acquiring good subscribers. I feel that in all the regions in all the companies we’re acquiring good subscribers – subscribers that are going to give us good ARPU in the future.

Okay. And thank you, Daniel. Michelle, we can open now for Q&A. Hello?

Hello? Vera?

Yes, one second, Daniel. Hello, Operator?

Thank you. Yes, ma’am.

Yes, we can open now for Q&A.

(CALLER INSTRUCTIONS). The first question, ma’am, comes from Miguel Garcia.

Good morning. My first question is about this “push-to-talk” initiative to compete against Nextel. How do you – how aggressive do you plan to be in the corporate segment we expect the compares to be –to have a stronger position there because of the quality of their service? So how much do you plan to spend and how aggressive do you expect to be – do you expect to enter that (indiscernible) any stronger? And the second question is about the capex and spectrum and do you expect to need additional spectrum soon in most of the country because of their high globe in usage in most of the countries? Also in terms of new customers per unit (phonetic) and in capex if you expect to increase these items?

Thank you, Miguel. First, if “push-to-talk,” I think we are strong right now in the corporate segment and the “push-to-talk” is going to give us a new service that we don’t have today. And of course, we already have customers and good share of the market on the corporate side. So, with this new, with the “push-to-talk” we are going to give to our customers a new service and I think we’re going to be strong there. We’re already strong and the only thing that we’re going to give us is a new – like a new application for our corporate customers. So that’s mainly what we are going to do with the “push-to-talk”.

On terms of capex, we’re growing more of what we expecting to grow so I think we’re going to review also our budget for the capex of this year and I think we’re going to put a little bit more. We’re making other revisions right now about subscribers and capex and everything. We’re getting more subscribers and our subscribers are using more of what we’re expecting so that drives more minutes in the network and that’s what we’re going to – so we’re going to put more infrastructure. And in terms of the spectrum, you know that in Mexico are coming what the government is saying is that there’s going to be new options for inspection. We don’t have to date the rules already. But we expect that the rules are coming soon, maybe in the next month. In other places, in Brazil, I think we are okay. In – and in other places I think they are coming but in the short term I don’t feel that we have a problem on the spectrum in other countries.

Okay, Daniel. Thanks a lot.

Okay.

Your next question, sir, comes from Andrew Campbell.

Yes, hi. I was wondering if, in terms of your net assets, if you could provide any clarity on what the breakdown was between GSM and TBMA additions, or if not, perhaps you could give us a rough idea of how many of your total subscribers in Mexico are GSM subscribers? And in the second question is just with regards to Brazil and the topic of Spectrum if you will be taking a look at the Spectrum for Minas Gerais (phonetic) that’s coming up here for sale next month? Thank you very much.

Thank you, Andrew. On the GSM, I think – the growth that we’re having today is on GSM in Mexico, I think we have around five million customers of GSM here in Mexico, about our total subscribers. On Brazil, I think it’s around 5.5, not five million, 5.5 million of subscribers at the end of March of GSM. So, what you can see is that the growth is going through the GSM network. Then in Brazil, we are making our analysis and we’re making our numbers to see if we’re going to participate in the auction of Minas Gerais. And it’s not already decided if we’re going to participate or we’re not going to participate.

Okay. Thanks so much.

Thank you, Andrew.

Your next question comes from Patrick Grenham.

Good morning. Could you just talk about the usage and dynamics in Mexico, especially on the price crusher in Brazil. It seems as if the cost – the costs in Brazil are not falling and we had a lot of advertising costs in the third and fourth quarter of last year. And how do you see the cost reductions coming through in Brazil over the course of this year? That’ll be the very first question. The second question is, the underlying traffic growth of Mexico seems to be very strong. Is that something you can – we can expect for the rest of the year – that we’d see more – further acceleration in the traffic? And your guidance for this year’s additions must have been – would have to go up, yeah?

Is the guidance of the additions in Mexico?

Yeah.

It’s around – we use to expect 2.5 to 3 million subscribers and the additions what we are expecting is from 3.5 to 4 million just in Mexico.

Even that’s conservative, no?

Well, the second and the third quarter are not so good. The first is very good because we have – January’s always very good. And the Easter vacations came in April, not in March. So the first quarter, I think is – the first quarter was very good and the fourth quarter is going to be also very good. Then we need to know exactly what’s going to happen on the third and second quarter. Second quarter we have Easter vacation and then in the third we’re going to – everybody’s coming to schools, everybody spend a lot of money in the schools and everybody’s returning to school. So, let’s see how the economy – if the economy is becoming better and better then where we can expect better subscriber – net adds. If the economy is not so good, then we expect a little bit less of net adds.

Right. Right. Okay. On the traffic for this year?

I think the traffic is really related also with the economy, but I feel that the traffic per subscriber is going to maintain or go up – I think in prepaid where it’s coming up. In postpaid, I think we’re going to have more competition and maybe the minutes of use in postpaid are going to go but they are – we are going to maintain more less is what we’re expecting in postpaid incorporated in the consumer market of postpaid. In prepaid, I think it’s coming up. We’re getting new and good subscribers in prepaid and that’s why we’re having good ARPUs and good (indiscernible).

Okay.

In the cost in Brazil, I think what we need to do in Brazil, Patrick, is the costs are not being reduced because the growth has been good in the first quarter. I think the growth is going to be maintained in the third – second, third and fourth quarters and what we need to do is to grow the revenues and as we grow the revenues and we maintain the cost and control the cost then the cost are going to be down. So that’s what we’re expecting in Brazil this year.

Okay, so you have to go into the costs rather than absolute reduction?

Yeah, we think it’s up more or less a good cost, a fixed cost, with a good fixed cost, and the cost that are growing today are the costs that are related with the growth. So, it’s a little bit on the brand, it’s a little bit on the revenue and subsidies – of the commissions, so that’s how the costs that we’re growing right now. But, as we’re growing the revenue the fixed costs are going to stay as they are now.

Okay. Okay. Great. Thank you.

No, thank you very much.

Your next question comes from Rizwan Ali of Bear Stern.

My question was regarding the “push-to-talk.” I mean you are planning to introduce it in Mexico. Do you plan to introduce “push-to-talk” anywhere else in the region? And also, if you could tell us about potential expansion in Chile?

In Chile we don’t have nothing right now. We’re not talking without – we’re not talking with anybody there and we’re not planning to go into Chile at this moment. In “push-to-talk” we’re going to launch in all around Latin America. It’s not going to be as soon as Mexico, but we’re going to – I think Mexico is going to be the first country and then we’re going to go to the other countries all around Latin America. We are expecting to have “push-to-talk” all around Latin America.

And the last thing is, in Mexico, do you know approximately – I mean, did you gain market share in the first quarter this year?

In the first quarter of this year I don’t know. I don’t know the numbers of my competitors. Only Telefonica has been paying the net additions that they have we don’t know nothing – we don’t know the numbers of Nextel, Unifon and Usabel (phonetic), so, I really don’t know if we gained markets. But what, what, what, what you can really see in Mexico City is that good prepaid customers are – we’re getting good prepaid and postpaid customers. So it’s something that we’re very happy with. We’re taking care of about the subsidies, about the (indiscernible) on the activations, and that is giving us better and more use and ARPUs for our costs.

Thank you very much.

Your next question, sir, comes from Drake Johnstone of Davenport & Company.

Good morning. The question I have for you all – you all indicated in Brazil that – that you basically had found out that most of the net additions in the – I think there in fourth quarter in 2003 – and the question I have for you, do you see in 2004 a stable level of additions each quarter or do you also see some growth weighted toward the second half of the year?

Brazil is more cyclical than other countries. In Mother’s Day it’s a huge promotion for Brazil and it’s in May and then Christmas is mainly, I think, 40 percent of the sales in that country. So those are the two I think second quarter is good because Mother’s Day and then fourth quarter on Christmas. That’s more or less what we’ll have been through the year in Brazil. So those are the two big promotions that we have in the year.

So it appears that you’d expect better subscriber growth second quarter than the first quarter in Brazil.

We’re expecting better – a little bit better just in Brazil on the second and the first quarter. I hope. Depending on the Mother’s Day campaign and the growth that Brazil is going to have on those days. I think it should be better than first quarter.

In Brazil, are you expecting your margins by year end to get up somewhere in the mid-teens to 20 percent range as far as operating cash flow?

It’s depending a lot on the growth. I think that the margins are (indiscernible) the last time. My fixed costs are going maintain that and on the other costs like subsidies, commissions, a little bit of advertising, those things are going to depend on the growth on each month. So, I don’t know if really – because Brazil – at the beginning, we think that the market is what’s going to grow around 10 million customers, but the new expectations are that it’s going to grow more than that. So depending really on the growth of that, it’s what we’re going to do – what we’re going to have. But I think we expect to have better -- a little bit of better margins on the third quarter.

Thank you.

No problem.

Your next question, sir, comes from Gene Charles Lombardi of JP Morgan.

Yes, good morning. I have questions related to the ARPU in Brazil. Can you give us an idea of how much BCP has in ARPU if possible?

I don’t – I’m sorry, but I don’t have it right here, but if you can talk to Leonel, of course, I can give it to you the ARPU.

Okay. Because, I guess you had three months consolidation of BCP in the first quarter versus just one month in the fourth quarter. And presumably, BCP has a higher ARPU so that would have boosted your ARPU. How much of this unusual impact did you see any (indiscernible) yesterday reported sharp drops in ARPU on postpaid – in prepaid in Brazil sequentially, and basically, mostly blamed it on seasonality. How much, if you were to look at apples to apples comparison do you see an ARPU drop from fourth to first quarter?

I don’t have that number here with me, but what I can tell you is that yes, the BCP (indiscernible) from ARPU. And I think that’s why we’re growing on ARPU this quarter against last quarter. But the numbers exactly, I don’t think we get down as we’re able (phonetic) because the numbers that I see from (indiscernible) it down like 12 percent something like that. I don’t think we have 12 percent decline on ARPU, but if you can talk to Leonel, he can make the numbers and show exactly what are the numbers that we have.

Okay. Just another question, in Mexico and I guess it applies to Brazil, so your revenue for minutes in postpaid are actually higher than they are in prepaid although the, you know, the pricing in the plans are lower, and this success may be that, you know, the postpaid users are not using all the minutes in their plans and that they’re spending plans are maybe not optimal. If that – I mean, especially if since you’re continuing to lower pricing in prepaid and that gap will widen, is that a concern – are you concerned that some maybe lower postpaid subscribers might be tempted to switch to prepaid or some subscribers may be tempted to downgrade their packages in postpaid bill for lower bundles of minutes?

Yes, I think that’s a very good question and what we’re trying to do is that we’re trying to talk to all our postpaid customers and tell them if they are not using all the minutes of their plan maybe to accommodate them in a new plan where they are going to be more efficient. If they are going to use more the minutes or they – or maybe other customers that are using more minutes of what they have in their plan and it’s being a little bit more expensive to them. So we’re trying to do and to talk to them and to put them where it’s more efficient to costly better for them than what they have today and it’s what we’re doing right now.

Are you concerned that this could put some pressure on postpaid ARPUs? But how can you do that without pressure of the ARPUs.

I don’t know but what I tell – like five minutes ago, I think, what we’re going to expect is that in postpaid we’re going to have more minutes of usage but I don’t think we’re going to grow a lot the ARPU because all the customers are going to use more and be more efficient using the phones. So it’s what we’re expecting in the future.

Thank you very much.

Thank you.

your next question, sir, comes from Ali

First of all, congratulations on a great quarter. I have questions related to the “push-to-talk” initiative. The first one is regarding technology. Nextel and some of the analysts have been very dismissive of QSM’s ability to accommodate “push-to-talk.” Obviously, since you’re launching this formally by the end of the year, by the fourth quarter, you must have tested it and been very satisfied with the results. Can you just corroborate on that? The other question I have it when you’re launching this, obviously you’re going to be going against somewhat established competitors, Nextel International, and what are some of the competitive advantages that you can bring against Nextel given your scale, your brand, your home service, sort of advantage in Mexico? Thank you.

What – first, on the “push-to-talk,” on what you’re saying is quality – is what you are talking about. I think what we are going to do is we’re going to launch “push-to-talk” when we have good quality. If it’s not on the fourth quarter and then we need to move a little bit to the first quarter of next year we’re going to do it. But the first thing that we have to do is that we’re going to test it and we’re going to have good – we’re going to launch it with good quality. We don’t expect to launch starting tomorrow and give bad (phonetic) because we are not on an urgency to launch the service of “push-to-talk.” I think that’s something that it’s going to help us with our corporate customers, but it’s something that we don’t need to launch immediately. So when we have a good quality and a good service, then it’s where we’re going to launch it. And then what’s the difference between Nextel and us on “push-to-talk.” Well, I think we’re going to have much better coverage than what they have today and I think we’re going to have other service – I think the phone that Nextel cannot give. So that’s mainly what we’re expecting to have better than Nextel, but Nextel is a very good company and they have very good service and very good – and very good competitors. So, it’s more or less what we’re thinking to have on “push-to-talk.”

Thank you very much.

Your next question, sir, comes from Keith Goodman of Glenhill & Capital.

Hi, how are you? I wanted to talk more about the ARPUs in Mexico. I wanted to know if first you could break out prepaid versus the postpaid. And then I know you were mentioning the prepaid ARPUs were strong and they grew. Can you give us any color on what the postpaid ARPUs get during the quarter?

We’re not giving that disclosure, but what I can tell you is that the prepaid ARPUs grow and mainly the postpaid ARPUs maintained the same. They don’t grow, but they don’t – they maintain the same as they are right now.

And then just a follow up. You had mentioned before on Spectrum that you felt as though you guys were satisfied with the amount of Spectrum you had in all of your countries. Now on the Mexican Spectrum margin that’s expected to come out, are you planning on participating in this auction?

Yes, yes. We’re planning to participate and in some regions we’re planning to participate, depending on the conditions and depending on the prices it’s how we’re going to participate.

All right, great. Thank you very much.

Thank you.

Your next question, sir, comes from Beatrice Weisman of Weisman Associates.

Good morning. First question was about subscriber growth. You mentioned earlier in the call that you expected subscriber growth for the year to be between 3.5 to 4 million net adds. You added 2.9 million customers this quarter and later in the call you said that you expect the fourth quarter to be strong. You’re not really sure about the two middle quarters. In order for you to come out with a number between 3.5 to 4, you would have to be flattened down in the two middle quarters.

No, let me clarify you something. When they asked me what’s going to be my – it’s about Mexico Telcel, we’re talking about three and a half or four in Mexico only and we have 2.9 all around America Movil. So, I think that’s the confusion that we have right now.

So what’s your prediction for the growth of net adds for the entire company?

I don’t have it right now. What I said is that we’re reviewing our budget. I think the economies all around Latin America are becoming stronger and what we’re going to see is – I hope to see better growth than what we have in our budget so we’re making that review and the next conference call I can tell you more or less what’s going to be our budget. Mexico we already have done that and our budget is around between three and a half and four million.

And then just quickly on the “push-to-talk,” the new service, where do you expect the pricing to be for the new service and what affect do you think that’ll have on ARPU for ’05?

I don’t have right now. We’re checking. We’re going to make like a fixed plan, including the minutes so we’re going to do the “push-to-talk” like a monthly fee and the minutes of the phone different so we don’t know exactly how we’re going to launch that service. But of course, when we launch it, we’re going to expect to have better ARPU it’s what – we hope to have that. And we’re trying to make the plans to have better ARPUs or maintain our ARPUs that we have already.

Your next question, sir, comes from Rich Peck of American Century.

: Hello. Following up on the “push-to-talk,” I just want to get a little more detail on the technology. From the best of my knowledge, when non-Nextel users introduced “push-to-talk” in the past, there’s been problems with latency. So if you can talk about that, and also, with respect to the handset, how will the handsest that can offer the “push-to-talk” would strip pricing – can be at low handsets and what’s your format those handsets can come in? That’s my first question.

What we’re doing is we’re evaluating a lot of suppliers, okay? And we’re testing all their technologies and we’re doing all the revisions and we’re checking everything of what they’re saying not to pass the latency that they have. The latency maybe would be part of saturation in the network or part of the technology so what we’re going to – as I told you – what we’re going to do is that we’re going to be – we’re going to launch this “push-to-talk” carefully. We’re going to be very sure that we’re going to have a good quality of service and if we can launch slowly because we need to check a lot of things on our network, we’re going to do it and if we have to delay that because still we don’t have a good technology, we’re going to do it. So it’s mainly what we’re thinking to do all around Latin America.

Okay. The follow up question, with respect to Spectrum in Mexico, can you give us an idea of the economics on that and what sort of costs you may need to bid for Spectrum. And one final administrative question, the Tectel (phonetic) sale in Argentina, was that reflected on the balance sheet this quarter or will that be next quarter?

The Tectel sale is going to be – was due through the beginning of April, so it’s not in this quarter results. It’s going to be in the second quarter results. And Spectrum, what you talked to me about Spectrum, then what we have is – we ‘re waiting for the rules when we have the rules, then we can talk a little bit more about that – where we’re going to get in, how much we’re going to buy, what the prices of the megahertz, so we’ don’t know exactly what’s going to be. We’re waiting for that.

When were the rules expected to come out?

The government says that maybe through May, so waiting through May we’re going to expect the rules for the auction.

Okay. Thank you.

Thank you.

Your next question, sir, comes from Whitney Johnson of Merrill Lynch.

Hi. This is Mike Copelman. Couple of questions for you. First of all, margins in Mexico, if we look relative to the fourth quarter we saw an ARPU increase, we had more GSM subs, but there wasn’t a margin expansion. Can you just kind of talk us through what’s going on there? The second question is if you can give us data as a percentage of ARPU and a third is if we can get traffic, or net traffic, in Mexico, what percentage of your total traffic is actually on that and maybe how that’s changed with the introduction of some of your new plans over the last quarter or so?

Well, of course, that’s the margins in Mexico are not growing because the growth has been excellent, so growth – that’s why the margins are mainly maintained in Mexico. So, the only thing that we have is growth. The second, the data percentage, we don’t disclose that and I don’t have it, but what I can tell you is that we’re growing a little – we’re growing month by month giving more data services and my revenues are growing on data as a percentage against voice. Okay? And the third question, I don’t remember the question.

Yeah, on net traffic in Mexico, what percentage of the total traffic was on that?

I don’t have that number also. I think it’s growing, but it’s not growing on – this quarter. I think Telcel is growing because the customers that we have, so every time you have more customers, there are more traffic between your networks – our networks.

Thank you and just the follow up on the margins, do you – growth was slightly down over the fourth quarter and it’s pretty similar in Mexico. If we look just to having just more GSM subs do the structure a concession should allow for some margin expansion of it. Was there an increase in handset subsidies? That wasn’t our impression. There were significant change. But I’m trying to get a feel for what was driving the margins relative to the fourth quarter.

Well, I don’t have that, but I can tell you, what I can tell you is that the margins are really related to the growth. Our costs – big costs are really under control, so that depends a lot, maybe in the last quarter we had some promotions of our handset suppliers or something like that, but that’s mainly what we have. We are not – we’re still being more conservative than our competitors with the subsidies and the price of the handset so I think there’s no big change of what we had last quarter and this quarter.

Okay. Thank you very much.

Your next question, sir, comes from Mamet Patel of Neiman Brothers.

Good morning. I just had a question on your assumption for (indiscernible) in Mexico. The increase in your guidance seem to (indiscernible) in the market (indiscernible) any specific assumptions for changes in market share here, and on a similar note, just a follow up question, what kind of penetration do you think we’ll be preventing over market by the end of this year and what do you think may stabilize that to come forward? Thank you.

Well, what I – I don’t think you’re going to see big changes on the market share through this year. I think one competitor can win a little bit more or the other one, but there’s not going to be big changes. I don’t think we’re going to increase a lot of our share of market or decrease a lot our share of market. Our plans are to maintain more or less the share of market what we have or reduce a little bit the share of market. It’s what I think we’re expecting. The penetration in Mexico at the end of the year will be I think more or less around 35 percent of penetration and what we’re expecting to have for this year.

Okay. Thank you.

Your next question is a follow up question from Miguel Garcia of Bear Sterns.

Thank you for the follow up. I have a very good question. What’s the size of the asset related to the CompUSA holding?

It’s approximately $200 million.

$200 million. Thanks a lot.

Your next question, sir, comes from Maria Donado of CitiGroup Asset Management.

It’s Julia Pinedo. Yeah, I do have a quick question. Your net additions in Mexico, what percentage of those were GSM?

I think 100 percent is – we have turned on – we’re still growing on CVN made but with the trend of CVN Made that we have a big base, I think we’re more or less even and the growth it’s around – oh, in GSM, we – the last conference call we said that we have around 4 million customers – 4.2 million customers. And this end of this quarter we have around 5.4 million customers. So all the growth has been in GSM.

I have a follow up from a previous question. I also surprised about the EBITDA margin because you follow the net additions of GSM then you’re not paying the royalty to the regulator, right? The 10 percent pay you’re paying to Cofidel (phonetic)? So that should allow for margin expansion.

Well, yes, yes. but with the big subscriber growth we have a little bit, but were going to see, we’re going to check exactly what happened in the fourth quarter because maybe we have some discounts or maybe we have some new things that we put on like maybe the yeps (phonetic) that we had – I think maybe we buy – I don’t remember exactly what we have on the fourth quarter of last year, but we can check –

(indiscernible) to the fourth quarter, by your fourth quarter, your had more in additions.

Yes, yes, yes. But what I’m tell you is that maybe in the fourth quarter we get – we win the legal issue with the yeps and that’s why we have an extra – the tax – the yes is the new tax – remember the tax that we just have –

Yeah.

So maybe we win that and we posted – and we booked it in the fourth quarters so that’s why we have a little bit better margins in this, but we can make a review with – and explain exactly what are the difference.

Thanks a lot.

Thank you.

Your next question, sir, is a follow up question from Whitney Johnson of Merrill Lynch.

Hi, just a question for you on your strong subscriber growth in Colombia, Ecuador and Argentina. Can you give us the rationale, not the rationale, but what was the one thing in each market you believe really drove your growth?

Well, I think in Argentina we need – what you’re seeing is that the market has been down for almost three years, I think, or two and a half years, so right now the market is coming and that’s why you are seeing – and the other side in CTI, I don’t think that the owners are trying to grow. So, the owners want to – the previous owners – their strategy was to grow. So when you start to make more distributions and to start growing the company, that’s – and the economy are getting better, so that’s why you’re seeing a good growth in Argentina. Then in the other side in Argentina, we’re growing through GSM. We’re putting more coverage, we don’t have very good coverage in CVN (phonetic). So those are a lot of things that better distribution network, a little bit more of advertising, so there’s a lot of things that are being related to Argentina.

In Colombia, I think the economy is being better and also the penetration is not so good in Colombia, so I think mainly we’re penetrating more the company, so that – remember that I don’t remember that it was on the third or fourth quarter where we cut some customers – I think it was in the fourth quarter, we take out some customers that we don’t have any – they don’t have any usage, okay? And that’s why the growth was also good in the fourth quarter, but when you cut some – or disconnect some customers, then that’s why you don’t see good growth in Colombia and you are seeing good growth in this quarter. But mainly we’re growing fourth quarter and this quarter more or less the same as – if you take out the disconnection. Closeouts and taking out the disconnections. Only closeouts.

Okay and just one final questions. With regard to the margin in the first quarter, with ARPU up you would have expected the margin to expand as Mario Kenya (phonetic) just mentioned. And so I guess, our services are telling us that your hand at subsidies didn’t really increase. So can you give us an idea of what the margin in Mexico would have been in fourth quarter had you not had the ups reversal so we can get an idea of what kind of expansion there was in the first quarter vis á vis, 4Q 03?

This really is a very difficult question. I don’t know exactly what I’m going to expect on the fourth quarter of this year on the margins of Telcel. Depending a lot on the revenue growth, depending a lot on the competition, depending a lot on the subsidies on the price on the handsets, on the advertising that we need to do. I think it’s difficult to do that, but I expect to grow or increase my margins or to maintain my margins. I don’t think we’re going to reduce the margins of EBITDA.

Well, if we reserve the yeps fund of 4Q of last year, what would the margin have been?

Oh, I don’t have it, but I can tell you no problem.

Okay, terrific. Thank you.

Thank you.

Your next question, sir, comes from Eric Ang of ING.

Yes, hi. Good morning all. I apologize if this is has been asked already, but the COMPUSA shares, could you tell us what the value of those were?

Yes, it was approximately $200 million.

Okay. And in terms of the refinancing of the debt, could you just put a little color on what was the extension of the current average life of that debt after the refinancing versus what it was before?

Before the refinancing for the most part the average life of maybe a couple of years. After refinancing the average life is closer to five.

Okay. Thank you.

Welcome.

Your next question, sir, comes from Guy Rossi, of Info Americas.

Hello, good morning. (Indiscernible) the regular (indiscernible) system in Mexico for wholesale services forces Telmex to offer one price for their type of services. And as a result, Telcel pays higher rates than (indiscernible) for wholesales services because they can only buy it from Telmex. How is the acquisition of (indiscernible) by Telmex would benefit the bottom line of Claro take into consideration debt not shown in the Mexican scenario, having a fixed (indiscernible) - doesn’t necessarily guarantee the mobile operation cheaper services, and cross ups of these are not permitted.

Well, I don’t think – I think you have to ask Telmex because at the end of the day, we have today business Claro and in Brazil and with other ones and I think we’re going to still have that. So I don’t know exactly how those purchase of Telmex to (Indiscernible) is going to benefit Claro. I don’t think there’s going to be a big benefit for Claro.

Okay. Thank you.

Your next question, sir, comes from Andre Basio of JP Morgan.

Good afternoon. (Indiscernible) if Telmex acquires them.

No, we don’t have anything right now. We don’t have anything right now.

Okay, thank you.

Thank you very much.

We have time for one more question. Okay, I’m showing no more questions in the cue at this time.

Okay. Carlos, Daniel, you want to do any closing remarks?

No, Vera, just to thank everyone for being in the call.

Thank you everybody for being in the call.

We’ll be available for questions that were asked here (indiscernible) have to contact Leonel or myself.

Okay, thank you Daniel and Carlos, and congratulations on the strong results.

Thank you, Vera. Thank you, everybody.

Bye.

Thank you for your participation in today’s conference. This concludes the presentation, you may now disconnect. Good day. 1