America Movil SAB de CV (AMX) 2010 Q1 法說會逐字稿

Good day, everyone, and welcome to the AMX First Quarter 2010 Results. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Mauricio Fernandes, Senior Latin America Telecom Analyst. Please go ahead, sir.

Thank you, Ben. Good morning or good afternoon to everyone. My name is Mauricio Fernandes and I'm the Latin America Telecom and Media Analyst for Bank of America-Merrill Lynch. We are honored to host this quarter's conference call to discuss America Movil's first quarter 2010 results. I'm in Sao Paulo, Brazil, and from America Movil in Mexico City, we have Daniel Hajj, CEO, Carlos Garcia Moreno, CFO, and Daniela Lecuona, Head of Investor Relations.

Daniel, Carlos, and Daniela, thank you very much for the opportunity. Daniel and Carlos, you may now go ahead with your initial remarks. Thank you.

Thank you, Mauricio. Good morning, everybody. Thank you for being on the call. As always, Carlos is going to present a summary of the results. Carlos, please?

Hello, good morning, everyone. Mauricio, thanks for hosting the call. The economic recovery and the application available in American currency, basically, the US dollar, shall bring about a reacceleration of consumer spending and subscriber growth. All of these, together with the continued interest in data services, we saw very strong top-line growth and in several countries, significant EBITDA margin expansion.

Before going into the numbers, it's important to note that the financial figures for the first quarter, both 2010 and 2009, have been presented for the first time on the International Financial Reporting Standards, IFRS. Mexican companies are obliged to move towards IFRS and we decided to have this move coincide with the beginning of our new fiscal year. We have handed over to [Debolta] financial information for the full year 2009 in IFRS and you may all consult information with -- at the website of Debolta.

The main change regarding the income statement has to do with revenues, which are now presented net of commissions paid to distributors and because of royalty programs. Compared to Mexican GAAP, this means that the revenues we used come down, although EBITDA is very much unaffected. This leads to higher EBITDA margins on the IFRS and on the Mexican GAAP.

Our net additions totaled 5.5 million subscribers. They were 41% greater than a year before. Mexico, Brazil, and TracFone in the US each contributed more than a 1 million net adds, with Argentina, Colombia, and Peru each bringing in approximately 400,000 [calls]. In relative terms, TracFone was the most dynamic of our subsidiaries, having increased its subscriber base 31% from a year before. At the end of March, we had 210 million lines of which 206 million are wired.

Third quarter revenues, just shy of MXN100 billion under IFRS, were up 9.8% year-on-year, with data revenues driving service revenue growth. The share of service revenues went up nearly 5 points from the year earlier quarter to 21.3%. On the Mexican GAAP, revenues would have increased 9.1% and service revenues, 8.4%. It's important to note that at constant exchange rate, revenue growth would have been a 4 percentage points higher, both as regards to total revenues and as regards to service revenues. And as regards, backing to service revenues, in respective of [Quahiga] from the Mexican GAAP under the IFRS.

EBITDA reached MXN42.3 billion, which represents a 12.4% increase in annual terms under IFRS, which was virtually identical to the one of them using Mexican GAAP, which was 12.5%. The EBITDA margin increased 1 percentage point to 42.8%. On the Mexican GAAP, it would have increased 1.2 percentage points to 41.7%. So again, in terms of the increase of the EBITDA margin, it was practically identical on the Mexican GAAP than on the IFRS. If anything, it was even higher on the Mexican GAAP.

Our operating profits were up 11% on the prior year to MXN29 billion, while our financing costs were down 38% on foreign exchange gains and a lower average level of net debt. Together, they help us come up with a net profit before taxes of MXN27 billion in the quarter, which exceeded by 18% that of the year earlier quarter. Our net income, MXN16.9 billion, was up 2% from a year before, had greater tax provisions, including those associated with a higher corporate tax rate in Mexico, but also to do with exceptional tax losses and tax credits that took place last year and so far, we're increasing the profit before tax at mentionable level.

Our net debt, MXN266 billion at the end of March, MXN17 billion less than at the close of 2009. We directed MXN5.4 billion to capital expenditures and a similar amount to share buyback. In March, both Moody's and [southern posts] grade America Movil great ratings to A2 and A minus respectively, based on today amongst the highest within the telecom sector globally. There is only 2 MVPs that have higher -- marginally higher state ratings than America Movil today.

In the same month and taking advantage of very strong conditions, integrated markets, America Movil issued $4 billion in five and 10-year notes and 10-year bonds -- it was all in the US market. Previously, we had issued bonds for an additional $1.4 billion, equivalent mostly in the Mexican market.

Well, with that, Mauricio, I would like to pass it back to you and maybe we can start the Q&A session. Thank you all.

Sure. Thank you, Carlos. As participants line up for Q&A, I'll just kick off with asking two questions. First, in Mexico, the ARPU was once again quite solid, as you said, and up 3% year-on-year, while this time subscriber net additions have actually picked up. Could you or Daniel comment on the outlook for Mexico and what you expect for these metrics?

And then, the second question is on the US market. Revenue growth there was quite impressive at 60% year-on-year and the ARPU went up 11%. Can you comment on the main drivers behind this performance and what you would expect for subscriber growth in ARPU there going forward? Thank you.

Mauricio, on Mexico, I think ARPU has been very strong, solid. And I think there are three main reasons. The first one is you could see that we're focusing on high-end subscribers. Our postpaid subscribers are growing at a very good pace and we're focusing a lot of our strategy in the postpaid subscribers. The second point would be data. We are growing on postpaid, but we are growing also in our own base of postpaid. We are selling new things to our customers, mainly those things are data and data plans for all these customers. And the third thing is, I think, Mexico economy is recovering a little bit and that help us to have a better margin -- sorry, a better ARPU.

On the second question, talking a little bit about the US, we have different programs in the US. We have the TracFone program. We have the Net10 program and then, we have this straight -- SafeLink program and then the Straight Talk. The first three -- the TracFone, the Net10, and the SafeLink are programs that the ARPU could be around $10 to $15, maybe $8.00, all in different plans.

And the Straight Talk plan is a plan that you have $30 or $40 ARPU. So, that's mainly the reason why our revenues are growing so strong. We have a very good quarter in the Straight Talk plan and that's the reason why we have a 60% increase in revenue growth. That's mainly what is happening.

Okay. Thank you very much, Daniel. Ben, we may now open the call to Q&A. Thank you.

Thank you. (Operator Instructions).

We will take our first question from Miguel Garcia with Deutsche Bank.

Thank you. Good morning. My first question is regarding your guidance for net adds for the year. You had mentioned before, I think, that it was MXN13 million. And just with this, the first quarter you have reached 42% of that guidance. I wanted to see if you wanted to give an updated guidance for net adds and also if this strong growth in subscribers could have an impact on CapEx.

So, I also wanted to see what would be your guidance for CapEx or your maintaining it. And lastly, if you could give us the percentage of revenues in Mexico that comes from data and also if that's actually the highest -- the market that -- where data has been more successful. Thank you.

Well, the first -- we haven't been changing -- we have a very strong quarter this quarter -- more than 5 million subscribers. But we haven't changed our guidance on the subscriber growth. We're going to review that, but at this moment we are not having any change on the guidance on the subscriber. On the CapEx, we have been investing not this year. We have been investing for the last five years very strongly. So, I don't think there's going to be any change on what we need to invest if we have 1 million or 2 million more. We have been investing on capacity. We have a very good coverage. We have 3G and we have been investing a lot on data.

In the results, you could see that we have been rolling our international transport network. We have 95% of that network already done. So, we have been investing that for a lot -- maybe the last years we have been investing very strongly on that. So, I don't think we need anymore CapEx if we grew 1 or 2 million more subscribers. And the third -- the data in Mexico is -- it's not the highest. We have been doing very good in Mexico and in Mexico, we have 24% of our revenues are data. I think those are the questions, no.

Yes, that's great. Thank you.

I think the highest -- I don't remember exactly, but the highest is Argentina, yes, right now. I don't have the numbers here. If you want, you can ask Daniela, but Argentina is more than 30% and Mexico is 24%.

Great. Thank you.

We will take our next question from Michel Morin with Barclays Capital.

Yes, good morning, everyone. Michel Morin from Barclays. I actually have two questions. First, regarding the international transport network, which you allude to in your press release, can you talk a little bit more about that? Which countries you reach with that, what the real tangible benefits have been already in terms of cost? Because it seems like this is probably a very key driver of some of your cost reductions in a number of countries this quarter and I just wanted to make sure that that's correct and if there might be more ahead in the upcoming quarters.

And then, the second question would be around TracFone. Given how successful you've been with the MVNO business model, there aren't too many success stories globally. And I'm wondering, do you have any ambition, perhaps, to take that business model to other countries globally? Thank you.

Well, on the international transport network, it's a network that we have been doing fiber all around the country and then we connect all the countries. I think we have mainly connect our -- 18 countries. And what we're going to be able to do is to pass our voice and data traffic through all the countries and to the United States. That's mainly the reason. And that is going to be with a much better quality than what we have today. And instead of buying and reselling this type of minutes, we're going to do it through our own networks.

We are doing -- we have some cost savings in each country because we don't have to buy and then sell the minutes and the quality is going to be much better. We have -- we are going to start to use that network. It's maybe 95% done, and I think, at the end of the year, I think we should be using the network maybe completely in all the countries.

So, that's the reason of the network. It's more data and more voice minutes and we're connecting all the countries where we're operating with that. The second is we have been very efficient doing the model on the MVNOs in US TracFone. We don't have any plan at this moment to do it in other countries, but we'll have been very happy the way TracFone has been developing in the US.

Daniel, thank you for that. If I can just follow up on your answer on the ITN. Are you saying that in this particular quarter, in the first quarter, that you have not really seen or realized any savings yet and it's going to happen more towards the end of the year?

I think it's going to happen more at the end of the year, exactly. We have been passing some traffic, but I think we're going to use -- we're starting to use that network.

So -- and is there one country in particular? And specifically, if I look at Brazil where your margins expanded 500 basis points with only 4% service revenue growth, is it all lower subscriber acquisition costs or did the ITN really start to move the needle there for you?

It's mainly acquisition cost and cost control that we have been doing there. So, that's -- I think this network is going to be used more in the future because there's going to be lots more data traffic all around Latin America and a lot more traffic -- voice traffic. So, I think this network is going to be used more and more through the years.

Great. Thank you very much, Daniel.

Thank you.

We'll take our next question from Andrew Campbell with Credit Suisse.

Yes. Good morning. I was hoping that we could go back to the topic of the Brazil EBITDA margin. And if you could just give us a little more color on why the margin was so strong there and if you believe that some of the changes there are sustainable so that this could be a new margin level that we see going forward.

Well, the margin that we have on Brazil was 30%. I think it's sustainable. It's going to depend on the growth that we -- still in Brazil we are looking more for growth than for EBITDA, which I think growth is number one priority in Brazil. We want to have good customers. We're going to grow our revenues. But we're having a good cost control there, so that's mainly what is happening.

I think 30% through the year would be a very good target for us to have. But it's going to depend on two things -- the growth that we have on subscribers and the aggressiveness in the market that depends also on how aggressive our competitors would be there. So, it's something that I cannot tell you exactly, but under these conditions, I think we could get 30% EBITDA margin.

Great. Thank you, Daniel.

Thank you.

Our next question will come from Vera Rossi with Morgan Stanley.

Thank you. My question is about Brazil as well. Brazil is one of the few countries that you didn't have the growth in postpaid higher than prepaid and you only have 7% of your net additions in postpaid. Do you have any churn issues or anything going on that the postpaid base in Brazil is growing slower than the other countries or even less than the average in the market this quarter in Brazil?

Good morning, Vera. I think there are two things. First, we have some, let's say offers or promotions last year that we haven't been so successful because we have some disconnections. So still, you are going to see -- first quarter we don't have a very good number of postpaid subscribers. But we're working on that.

I think we're working a lot on the distribution network for postpaid and we're doing a lot of things. We are really interested in having better growth on Brazil on postpaid and we're working on that, it's true. We don't have a very good first quarter. But -- and we know that. But we are fixing that and I think you are going to see better growth on the next months.

And just a follow-up question. Do you think the quality of the services or the customer service needs to improve in Brazil to get to a better position in postpaid?

You mean on the call centers or do you mean on the quality of the network?

Both, the quality of the network and the call centers.

I think Brazil is very big, we need to do investments, the investments that we already have been planning to do. On the data, data is growing a lot. So, the PCMC cards are growing, so we have to do investments on data there. But I think we have good quality in Brazil. Of course, we can improve the quality always. But I'm feeling comfortable and I think in the future, with everything that we have on Telmex International would make a very big and good synergy with us in Brazil. So, that's something that you are going to see through the next months, Vera.

Okay. Thank you.

Thank you very much.

We will take our next question from Walter Piecyk with BTIG.

Great, thanks. Just two questions. First, in Mexico, the incremental data growth, like the new data that's coming in, in the quarter, what's the mix between data cards and I guess data on the smartphone? And then, the second question is your margins in Mexico I know are positive impacted by IFRS, but you're basically at like 70% margins or close to that.

I would assume that the government can look at these type of financial results and I guess the closest comparable is probably China Mobile that has 70%, 80% market share also in subs and their margins are 50%. Are you concerned that having margins at that very high level could attract incremental regulation? Thanks.

Well, I don't understand exactly your question and the numbers that you give me, but I think we have a lot of --

EBITDA margins?

I think we have a lot of competition in Mexico, so I hope regulators will look on the prices to the end customers that we're really competitive on prices. And they look also on the competition, that we have a lot of competition. And I think in the future, we're going to have more competition instead of looking if we are efficient we do good our work or we don't do good our work. So, I don't think regulators should look if we have good margin or bad -- or low margin. I think regulators should look on if we have good prices to the end customer, that we have very good prices.

We have around $0.05 of a $1.00, you could see that the minutes of use that we have in Mexico are around 200 minutes of use. It's more than a lot of the companies in Europe, let's say. If we compare to the European companies, we have better most than the European companies and we have a very good coverage. We have all new technology, all the 3G networks, so I hope regulators will look on these type of things instead of looking if we are an efficient company or we are not an -- or we run the company in an efficient way or we don't run the company in an efficient way, no.

I agree -- Daniel, I agree with you 100% and I think you should get those returned, especially if you're giving your customers service, but I think [called around] was during the quarter making press statements about new regulations and referencing jail time for companies that don't adhere to on -- or are, I guess, convicted of monopolistic practices.

It seems like the rhetoric is higher and in the same quarter, you're producing these very high margins. Obviously, some of it is based on IFRS, but you don't think there's any incremental risk in 2010? I mean, I know you don't think that you're doing badly, but do you think the risk is the same as it's always been for you guys?

No, I don't think so that way. I don't that we have another risk on that. So --

Okay.

That's my --

I mean, just the data question?

The data question is I don't have the mix between PCMC cards and the data in the phone. We have these two segments of data and we are really interested in both. So, I don't have the mix. If you want, you can talk to Daniela but -- the broadband, the PC cards, are new customers and you could see them as new customers. The data on top of our customers that we have, they are not as new customers. That you could see at new revenue, but they are not as new subscribers or new customers. So, that's the way we account for the subscribers, no.

Yes, the point of the question, I guess, is are you seeing a lot of those existing customers upgrade to those integrated phone, BlackBerrys, or whatever. Or is a lot of this data growth that's occurring more about new PC cards for new customers?

Both.

And Walter, I'm sorry, but we'll have to limit that to the last question.

That's fine. Thank you.

Both, both. You could see in PCMC cards and you could see that in new phones that -- those are the growth that we have in both segments.

Great. Thank you.

Thank you very much.

We will take our next question from Andre Baggio with JPMorgan.

Hi, Daniel and Carlos. I'm interested in going back to Brazil. You're going to be having assets in Embratel which has a very good backbone. In the past, you have been saying that data -- sort of the cost of data expansion has been a big for collateral in Brazil. Can you quantify how much could you gain in terms of integrating Embratel with collateral just because of a backbone, backhaul, and so on?

Well, I think it's going to be very important. It's going to be very important for Embratel to have part of the network of collateral and we're going to have -- and it's going to be very good for collateral to use the backbone and the backhaul from Embratel. Exactly on the amount of money that we're going to get, I don't have these numbers. But because this is going to be a very good investment for the future, it's going to give you a lot of capacity.

When you mix everything, it's going to give you a lot of capacity on data and this is going to help you to grow on all the PC cards or data in the phone or anything that you -- I think, everybody knows that the data -- let's say, in Brazil data is growing 45% year-on-year. So and I think we could grow more. So, we have to do the investments in the network to make the synergies with Embratel and that will allow us to increase our revenues.

Okay. And then, second is that in the income statement, we see that income taxes were at the higher rate that we were expected -- some 38%. Can we expect this rate to go back to the usual levels, maybe close to 30% for the whole year?

I think that the statutory rate is around 29%, the average turn into 30%. So, that's the one that we should be trending towards. I think, as I mentioned at the end of the call, there were some exceptional tax losses and tax credits that we were able to take advantage of at the beginning of last year. And that's why the comparison year-on-year seems so different. We have to make up provisions for things have been taken advantage of at a consolidate level that we needed to provision now at the individual level and that's the kind of thing that led to these big numbers, no. But we should be moving toward something that is possible close to that rate.

Okay. Thanks a lot.

Thank you.

We will take our next question from James Rivett with Citi.

Good morning, guys. I've got two questions if I can. The first is trying to work out the margin expansion that you've seen this year -- or sort of year-on-year. How much of -- can you just tell us what is the rough margin that you make on mobile data when compared to sort of voice, just so that we can try and work out how that increase is helping?

And my second question is a little bit technical. It's on Mexico. If I take your ARPU number and times it by the average number of subscribers, you get to an implied revenue number. And then, you have this sort of other revenue, which seems to have grown materially, like 22% year-on-year. Can you talk to us about what's in that or what's not included within the ARPU number that could be driving that? Thank you.

Well, on the -- I mean, I don't really -- I mean, I read your piece, James, and I didn't really understand it and I still have not been able to understand it.

It's probably me.

Well -- or me. But the fact of the matter is that I don't -- I mean, the service revenues are only comprised of what you have, what you're seeing the actual. There's really no other revenues that you are mentioning here. So, I don't know where we will look, but maybe as I suggested that last time we talked, maybe we want to -- you might want to talk over with Daniela.

Obviously, you know that total revenues are made up of heavy revenues, large equipment revenues. And equipment revenues is -- I tell you that we do not reveal on a per country basis, but that we have on a consolidated basis. And maybe you can infer it from there. But again, when we have such a little -- I think it would be better to call -- and before we call, both Daniela and I will be happy to do that.

That's fine. That's what I'm going to do.

Thank you.

And in the --

Yes, the other question was -- sorry?

Mobile data. How are the EBIT margins or the -- and the free cash flow margins on mobile data compared to the voice product, just to see how the outlook can continue and grow?

I don't have exactly the number again, but I can tell you that data has less margin than voice, of course. I don't have exactly -- because at the end of the day, they are going to be in the same networks. Everything is going to be IP, it's going to be on the same network. So, it's going to be very difficult. Of course, voice is much -- it's a higher margin than data, but I don't have exactly what's the difference on the margin, on the cost.

Okay. Thank you.

Thank you very much.

We will take our next question from Ric Prentiss with Raymond James.

Thanks. Good morning. I have two questions, if I may. First is maybe just an update on the auction situation in Mexico. You were talking about the competitive landscape and it is competitive. So the regulators, I think, would view that interestingly. Update just maybe on what the status of the auctions are. Are they still looking like May, June timeframe to submit and finish?

And then, my second question is back to the United States. Obviously, very strong results with TracFone, particularly Straight Talk. Our channel checks here in the United States, it looked like you were so successful they might have run out of phones somewhat during the quarter. Can you talk about the opportunity to continue to grow Straight Talk? Are there any supply problems and any interest in taking ownership of a network or spectrum as you become so successful?

Well, the first question about Mexico, I think, my understanding is that it's going to be on May, June. They are going to auction 1.7, 2.1 plus -- spectrum, plus the 1.9 spectrum. And I think still they are -- the rules are not defined yet or maybe they are defined, but they are not giving us the details. It looks like we're going to have more competition, but I think we are well prepared for the competition. On the US, we were very successful on TracFone. We have a little bit of shortage of some equipment, but we are already in good shape and we don't have any problem to still grow the Straight Talk, but it has been very successful in the US.

Any desire to take ownership of a network or a spectrum or is it a MVNO relationship --?

No, no. I think the way we're doing business in US has been very profitable for us. We have been growing. We have been doing very good on prepaid. We could say that we are like experts on the prepaid because we have 17 countries in Latin America running prepaid platforms. And we're going to do and still do exactly what we are doing at this moment, no.

Great. Thank you.

We will take our next question from Chris King with Stifel Nicolaus.

Good morning. Thank you. Two quick questions for you. First, just to follow up on the US. I just was wondering if you could talk a little bit about margins. They're obviously down a little bit year-over-year. I would assume that most of that is certainly related to Straight Talk. At what point do you feel that you will have enough scale there to really begin to drive EBITDA margins forward a little bit? And then secondly, just real quickly, I was wondering if you were willing to provide any guidance related to potential synergies related to the Telmex and Telmex International transactions? Thank you.

Well, in the US, the program -- the Straight Talk program for us, it's going to be profitable. This program is profitable. You think that the EBITDA is being a little bit lower than last year because of the amount of subscribers that we are getting. Straight talk is a higher ARPU, then we have to have a better timeset.

Then, we have to have a little bit more on subsidies there. But this program, as a standalone program, is going to be successful. We already have a big base of subscribers, so we should be profitable this year unless the growth of Straight Talk should be higher than what we expect. So, that's really what we're looking and that's really where we're deciding what to do.

Your other question? The synergies with Telmex and Telmex International, I think we have been making our job. We have been looking for a lot of synergies. We don't have exactly the number of the savings, but mainly the synergies with Telmex and Telmex International are going to be on CapEx and the way we're going to invest on the networks in the future. We are not going to take out people. I think on purchasing we could have a lot of synergies. We could have a lot of synergies in content, we could have a lot of synergies. But the main, main, main synergy is going to be on the CapEx, on the investments on the networks in the next years.

Thank you.

We will take our next question from [Kenneth Berlin] with State Street Global Advisors.

Yes. Good morning. Thank you for taking my questions. Two questions. First, can you please outline your priorities as you see them with your strong cash flow generation? And then, second question is do you expect to be in the capital markets, specifically the debt capital markets in 2010? And more specifically, do you have any plans for further dollar-denominated issuance for the remainder of 2010? Thank you.

Well, I think that the priorities today, as has always been the case, is we have to look at the immediate potential commitments. Right now, I think the first have -- potential commitment that we have to face is the tender offer for the Telmex International stock to the extent that a portion of that may be tendered for cash. I think that we need to have the cash at hand. I think on that, it's basically seeing to it that the company, probably the new integrated companies, ones that we completely have position, have a smooth amortization profile. We like to have a comparable maturity profile of our debt.

And so that's, I think, an important thing. Other than that, whatever [discussion] we have, I typically distribute out to shareholders to the extent that it's not for acquisitions. That hasn't changed at all. I'd say that we don't really have any plan to go back to the US market at this stage. But we are always opportunistic and if we see a good opportunity sometimes, we add on it. But at this stage, we do not really have any plans of going back to the US market.

Hello?

We will take our next question from [Fernando Remis] with [GBM Global].

Good morning. Thank you for the question. I noticed that your equipment revenues jumped to 15% year-on-year during the quarter, whereas your equipment costs jumped only 3%. And my question is, is this related only to a result of better effects or a result of customer mix of your net adds or if it's more a deliberate decision to reduce your subsidy? And my second question is if you expect voice crisis in Brazil and Colombia to keep declining at the pace we saw during the quarter? Thank you.

Well, I -- the first question is on subsidy. I think we have been careful. The FX exchange rate help us a little bit this quarter, but the mix is not helping. The mix is, in the other side is opposite because we are doing postpaid customers and postpaid customers requires more subsidy. And your third option that you said that it's on taking care about the subsidies, we're doing that.

So, the FX exchange rate help us and we're taking care on the subsidies. And in Brazil and Colombia, well, it's going to depend on the competition. I think we have very good prices all around Latin America and good malls, good prices and let's see. It depends a lot on the competition, but we could be ready to be as aggressive as the market requires that, no.

Very well. Thank you, Daniel.

Thank you.

We will take our next question from Andres Coello with BBVA.

Yes. Good morning, everyone. Two quick questions. First one -- in the report that you recently filed with the SEC, you mentioned that your estimate for the start of the offer was April 7. My question is are you having problems with the Mexican regulators regarding the approval of the offer?

No. No, it take us a little bit more of time to prepare everything. I'm sure, I think mostly of the documentation and everything, it's done. The approvals are mainly done. So, I hope that in May we can launch the -- we can launch the offer.

Okay. By the way, I think it's incredible that after five months from the announcement of the offer, you haven't provided any specific guidance on the synergies. I think --

They were -- five months? We do it in January, so it's February, it's March, and April, no.

Yes, well --

And we -- as we said, we don't have a number specifically on that. We think that it's going to be very good synergies on the CapEx and it will be on the next years, okay? I think the investment that we could do together and the way we can integrate the networks are going to be the majority of the synergies that we could get.

Well, investors are very concerned about this issue, so a more specific number will be -- will be [by then]. Thank you.

Thank you.

We will take our next question from Rizwan Ali with Deutsche Bank.

Good morning. My question is regarding your postpaid growth in Mexico. And obviously, it's very strong and I'm wondering whether these are customers who are your prepaid -- high end prepaid customers that you're converting to postpaid or are these your customers you're coming and taking on board brand new or gaining from other operators? And my second question was regarding the price elasticity in Brazil. It looks like you're not really getting much elasticity as you knock down your tariffs. And I'm wondering whether you think that is the end of the year price decreases or do you think there's further decrease in tariffs to come in Brazil?

On Mexico, Rizwan, we are growing our market share in postpaid. Of course, we have some of these postpaid customer -- prepaid customers moving to the postpaid platform because it would be a better plan savings for them. But that would be only a part of what we are doing. We are doing others in PCMC cards and data and broadband. Another ones they are new customers. So, we have been successful on the number portability in postpaids, so we are growing also in number portability in postpaids. So, there's a mix of everything and I think the strategy that we are doing in Mexico is working.

In Brazil, the -- we haven't had a lot of elasticity maybe. We have a lot of promotions. Maybe it's because also the economy was -- the slowdown of the economy. I hope that this year, as the economy gets better, we can have a recovery on all these promotions that we have been doing, no. I -- we don't want to reduce and to do more promotions on Brazil at this moment, but we need to do what the market needs to have. So, that's where we are. Our main target in Brazil is growth. So, we are being -- going to be aggressive as the market needs to be, there no.

One last question, Daniel, if I may. Regards to the synergies you've talked about. Yes, I mean, in the end, I don't care whether it's been four months or three months, but do you think -- should we expect some number from you in the future, even if it's second half of the year? And lastly, will any of that synergy come from tax impact or consolidation?

What -- I don't -- what's backs impact?

Has any --

Everything -- yes, we have everything of something. We have some tax impact. We have some network. We have some purchasing. We have some content. I don't think, at this moment, we are not going to give any number, but as the offer finish and we have more detail on what we're going to do, maybe we can be more precisely on where are going to be our savings. But at this moment, we don't have a specific number to give to the investors, no.

Very, very helpful. Thank you very much.

Thank you.

We will take our next question from Henry Cobbe with Nevsky.

Hi there. Thanks so much for the call. Just a question on the outgoing spectrum auctions. Is there a kind of a reserve price that we could pencil in for that of how much it will be going for? And secondly, on your debt side, how much of your foreign currency debt is hedged back to pesos?

Well, on the debt side, I think today substantially all of the debt -- net debt is hedged. We never test it 100% because, as you know -- recall, we have some operations that are dollar-based. So, will always have a portion of our debt that is also dollar-based because we [take this portion]. But other than that, I think that today, given the level of exchange rates that we have considered to be better to have full exposure to pesos [in that department].

And your other question?

And on the option that we're going to have, we don't have an amount of money that we think it's -- they're going to be. Remember that it's going to be like an auction for the frequencies, but then you have to pay like an annual fee for each of 10 megahertz. So, that runs in two parts, okay? What you pay and with the option that you have, but in the other side is what you pay every year. So, that's mainly the way the auction is going to run.

But you -- are you able to participate nationwide?

Sorry?

Are you able to participate nationwide?

Yes, I think we're going to be able to buy some spectrum nationwide.

Okay. And next, just on the depreciation, from the restatements that you put through in the first quarter '09, it looks like depreciation policy may have -- maybe it's a slight different under IFRS -- could you just give us a -- what the annualized number might be?

I think most of the impact that we have on depreciation really has to do with a change in the acceleration in the depreciation of network equipment in Brazil that we began last year. I think this was shown in the last quarter's figures. Very -- as you point out, some element of changes where you have to set a new value for your plant and then keep on depreciating it from there. But what I can tell you is that it is not all that meaningful. The impact of the move IFRS is really not that meaningful in terms of its impact on the financial statement.

Okay. And very lastly, just on the TracFone in the US business, how much of your net adds in the US were on the Straight Talk plan? What was the number of net adds in this quarter?

I don't have the number, but if you talk to Daniela, we can tell you how many subscribers we have on the Straight Talk.

Okay.

I don't have a number right now. It has been successful, but I don't have the numbers.

Okay. That's great. Thank you very much.

Thank you very much.

Ben, we have time for one more question.

One more? Thank you. We will take our last question from James Ratzer with New Street Research.

Yes. Good morning, guys. I have two questions, please. The first one was about the revenue growth in Brazil you mentioned earlier in the call. But focus on growth was a top priority and I was wondering if you could give us a target of what you thought growth might be able to reaccelerate to. And if you do achieve that, is that going to come at the expense of EBITDA margin? So, EBITDA margin could potentially be weaker in the second half of the year?

And the second question -- I was in Mexico, I think it was the first quarter in quite a long time when your price per minute has been falling less than 10% per annum. And I was wondering is this now a change in strategy for you in Mexico, where you're trying to step back from price decreases and we could see a more stable environment in Mexico on pricing? Thank you.

I don't think on Mexico we don't have like a strategy on pricing. I think on Mexico, it depends a lot on the competition. I think Mexico pricing is running at very efficient. We are doing almost $0.05 of a $1.00 in Mexico. So, I think -- I don't think we could sustain the decrease on prices that we have been having, but we have 9.5% decrease year-on-year on price, so it's very good decrease on price. And even if you have that good price in the market, that it's around $0.05 of a $1.00. So, it's an excellent price.

And what I can tell you in Brazil and in Mexico that we have enough capacity to do what the market condition would ask us. If we need to decrease more the price, it's going to mean more minutes and then we're going to do it. We have the capacity to do less price in Mexico and less price in Brazil. So, everything is going to depend on how aggressive is going to be our competitor and how aggressive we need to be to do what the strategy we want to have in each country, no. So, that's mainly the way we operate, no. What I'm trying to say is we are ready to decrease the price as much as the market ask us to do it, okay?

It sounds like you're seeing slightly less maybe competitive pressure at the moment than you have done in the past.

No, no. The reason is that the prices has been -- the level of the prices right now are really competitive. So, I don't think when you are in $0.10 you can decrease the price as when you are in $0.05 of a $1.00. That's a difference.

And then, with regard to the revenue growth in Brazil?

And another thing important is also when the economy is going down, it's less -- it's a little bit more difficult to reduce prices for us and for everybody, no. So, it depends a lot also on the economic conditions that you have in each country. Maybe as they economy recovers, then we can have more competition and then we can have lower prices on everything there, no.

Okay. That's clear on Mexico. Thank you. And then, just sort of a question on the Brazil growth and potential impact on margins, please?

Well, if we do -- our target is to have MXN0.34 EBITDA margin and we're going to try to do that. But if market conditions are different than what we expect, then maybe we can reduce a little bit more. But what we target is to have around MXN0.34 EBITDA margin in Brazil for this year.

And do you think revenue growth can inflect and go back above 4% or maybe even towards kind of mid, high single digit?

I don't think so, but we don't know, no.

Okay. Thank you very much.

Thank you. Thank you, Mauricio, and thank you, everybody.

Thank you, Daniel. Any final remarks?

No. Carlos, no? So thank you, everybody for being in the call. And thank you, Mauricio, for you to host the call.

Thank you. Thank you very much for the opportunity, both you, Daniel, Carlos, and Daniela.

Thank you. Thank you very much.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.