America Movil SAB de CV (AMX) 2010 Q3 法說會逐字稿

Welcome and thank you for standing by for today's conference. Your lines have been placed in listen-only mode until the question and answer portion of today's conference. And we do ask that you limit your question to one, if there is opportunity you may re-queue for another question. Today's conference is being recorded, if you have any objections please disconnect at this time. And now I'd like to turn the call over to Mr. Andre Baggio. Thank you, sir. You may begin.

Good morning, everyone. This is Andre Baggio, JPMorgan, Telecom and Media Analyst for Latin America. Today we are hosting America Movil's Third Quarter 2010 Conference Call. With us today, we have America Movil's CEO, Mr. Daniel Hajj, America Movil Wireline Business Director, [Austin van Holski], America Movil's CFO, Carlos Garcia Moreno and America Movil IR Manager, Daniela Lecuona. With that introduction, I will ask Daniel to begin his presentation, which will be followed by Q&A. Thanks.

Good morning, Andre. Good morning, everyone. Today we will be presenting you the results of America Movil for the third quarter of 2010. As you know, we completed the acquisition of substantially all the shares of Carso Global Telecom in June, which gave us the control of both Telmex and Telmex International. We are consolidating both companies in America Movil beginning July 1st. The results are all presented under international financial reporting standards.

The new America Movil and integrated company is practically all the countries -- is practically in all the countries where we operate. It's growing well, as expected, with broadband services, wireless and wireline, leading the way as regards revenues and access is expanding very much across the board. Our integrated company is financially strong, with a net debt to EBITDA ratio of 0.8 times at the end of September and a free cash flow of MXN83 billion in the nine months to September, even after capital expenditures that topped MXN50 billion year-to-date.

We are investing heavily and will continue to do so in the development of our new generation broadband networks, both in the fixed and the mobile platforms. We will continue to expand their coverage and do our best to help drive higher broadband penetration levels in the region.

In the first quarter in which we have been running all the new fixed line operations, we have focused on the integration of our mobile and fixed line networks as well as the IT and putting together our commercial offerings. We have designed the new functional relationships and responsibilities among our employees and have established a road map that should lead us to the full integration of the operations. I will now cede the floor to Carlos Garcia Moreno, who will give you more details regarding our third quarter results.

Thank you, Daniel. Good morning, everyone. I would first like to thank JPMorgan for hosting this conference call. As Daniel pointed out, America Movil is firing on all cylinders, with accesses expanding 11.5% year-on-year to 267 million, practically at the same pace on both the mobile and the fixed line platforms, with wireless subscribers reaching 217 million and fixed line accesses, 50 million.

Net subscriber additions were substantially higher, the return 0.6% in the third quarter compared to the year earlier quarter, resulting in 5.5 million new subscribers. Nearly a fourth of the new additions were postpaid subscribers. On the fixed line front, we added 2.1 million accesses, mostly in broadband and PayTV. Altogether, accesses were up 7.6 million in the quarter.

Consolidated third quarter revenues were up on a pro-forma basis, 5.3% from a year before, MXN153.6 billion. Wireless service revenues at MXN83.5 billion represented approximately 60% of our service revenues. Except for fixed line voice, revenues were up in all business lines. The median rate of growth was 8.3% in wireless voice, it was 7.8% in wireline data, 36.4% in wireless data and 46% in PayTV services.

The share of data in wireless services revenues reached 22% and in the fixed line space, broadband and PayTV services continued to achieve a strong momentum. We generated MXN63 billion in EBITDA in the quarter, 6% more than a year before. The EBITDA margin 41.1% was slightly higher than the one reached then on a pro forma basis.

Operating profits were up 3.9% year-on-year to MXN41.1 billion. As part of the expansion in EBITDA, it was offset by higher depreciation charges. They were up 10.3%. We are in the process of revising the depreciation of schedules for various telecom equipment and refactoring the rate of technology [call us for lessons] and the corresponding impact on the market value.

Our financial costs reflect the net interest payments on our debt, MXN3.7 billion, as well as foreign exchange losses of MXN128 million on our underlying net debt position and MXN3.7 billion of other financial expenses. The latter figure includes the changes in the market value for currency and interest rate hedges as well as ongoing non-interest expenses such as commissions paid to banks and financing.

We are running a mostly balanced [product] position, with more short positions in euros and Chilean pesos and (inaudible). On the income tax side, we gave rise to a MXN4.1 billion tax credit, corresponding to the booking of a tax asset in Brazil, associated with tax losses that we have in that country. We have been trading these assets, reflecting the likelihood that we will be able to compensate the tax losses against future taxable income.

At MXN23.4 billion our third quarter net profits were 8.8% higher than those of the year before. They were equivalent to MXN0.58 per share that is 3.7% higher than a year before in peso terms and 7.4% in dollar terms. Our consolidated net debt pro-forma has come down by MXN33.3 billion per year, MXN184.2 billion. Even after allowing for MXN22.3 billion in distributions to shareholders and for a 29% -- MXN29 billion cash investment in Telmex international stock. In capital expenditures in plant equipment and spectrum totaled MXN50 billion in the nine months of September.

We have been amortizing early and will continue to do so through the end of this year, most of our debt obligations with original maturities through 2013. We expect to close 2010 with a 9.4 year average life of debt. With this, I would like to pass it back to Andre, so that we can begin the question and answer session. Thank you.

Thank you. I -- as we line up, I will start with two questions. The first one regards the impressive growth of America Movil in the US. Is it possible that the strong growth can go on for a while? And what do the network operators think about this success of the America Movil? Do they feel threatened somehow?

Well, I think Tracfone is doing excellent. We -- with the product, Straight Talk. We are growing very fast, higher revenues, good ARPUs. I think still, this type of products are in the low penetration in the US, so I think we can still grow very good for some time.

I don't think the big operators feel threatened by TracFone because we are a reseller, we buy their minutes and its part of their networks. So I think they were happy that some -- with some of them, we run the prepaid business with TracFone. So I don't think they feel so threatened against TracFone.

Okay. And a second point, what is the impact of the 3G [option] so far in Mexico. Did you say that and now you have a more spectrum to it, so that you can offer more data products or better data products? And what -- is there any impact so far from Telefonica into your structure, now that Telefonica has more spectrum itself?

I think more spectrum means -- I think it's very important, because more spectrum means you have more capacity to do more products, more voice, but much more data products. I'm happy that everybody gets spectrum. I think my competitors are investing to do data services, more data services, 3G services. And we have the capacity to use that spectrum to do more and more speed and capacity. So I think spectrum should be auctioned in all Latin America, in all the world, so that we can have more and better data services.

Okay. So I guess now we can go to the Q&A.

Thank you.

Thank you. (Operator Instructions). And we'll now move to our first question, from Tomas Lajous, UBS. Your line is open, sir.

Daniel, Carlos, thank you, thank you very much for the call. I guess my question is on the debt and capital structure. You have pointed out in the comments and in the press release that you will be taking out the maturities through 2013. I assume that this will be rolled over rather than just paid out, if you can confirm that, that would be great.

And does this mean, on the one hand, that you are wiping out the debt at Telmex and Carso Global Telecom? And on the other, given that that is likely going to be reduced at the subsidiary, Telmex, why does it make sense to keep Telmex listed rather than folding it into AMX, like has been done with the other subsidiaries.

Well, the cash position of the Company, considering cash position, is high. As you know, we did a number of financings in the second quarter in particular. But [Caske notes] very good terms for the -- for longer date of financing. That's why we intended to utilize for those budgets to take out some of the shorter debt that is prepaid. Okay?

So it -- rather than wait until the last minute to refinance at [the] end obligation, what we've done is we refinanced a little bit in the [bank] and we've taken ten-year and, in some cases even longer dated money in very attractive terms. So the answer, the quick answer, is, yes, we will be paying down the debt with the existing profits that we have today in cash and as you know, we are looking, basically, at the -- from the point of view of our consolidated position. Now on the other hand, I didn't get your second -- your last question, Tomas.

Whether the, in once you've recharged for the debt, why it makes sense to keep Telmex separately listed and leaking cash flow and dividends?

This is not something that we have even begun to discuss. I think there hasn't been any change as -- or any discussions so far regarding the dividend policies and other such things. So -- but as you know, from the point of view of the rating agencies and the debt markets. All of this is now seen as a consolidated entity.

Okay. Thank you. Thank you. Thank you very much, Carlos. Thank you, Daniel.

Thank you.

The next question from Michel Morin with Barclays Capital. Your line is open.

Thank you and good morning, everyone. I just wanted to focus on Brazil. A few issues there, first, there was a big discrepancy or a big difference between your service revenue growth and your total revenue growth in that country. So I was wondering, specifically on the mobile side, I was wondering if you could explain kind of what has happened. Are equipment sales really down that significantly?

And also, you've had more success in the mobile space there with net additions and even post-paid net additions in recent months and certainly in the quarter. So I was wondering kind of what has changed? And it also seems like you were able to do that without having any impact on margin. So your mobile margin, I don't know if you can give us a little bit of color as to where that was?

And then I think, also, on Embratel, it seems that you've done very well margin front, but the growth rate there has slowed. So I'm wondering if you can give us a little bit of a sense of what you think the outlook might be for the top line on the fixed line side in Brazil. Thank you.

Well, as regards the structure of revenues, equipment revenues did come down year-on-year. That partly reflects the appreciation of the currency compared to where it was a year ago. And it partly reflects a reduction in the price per country. So when you factor everything together, you see that net service revenues, in Brazil and the mobile side, were growing 4.5%, basically driven by data revenues, but were off 25%.

And also what you say is true. I think the last months, we have been growing faster. This last -- this quarter, I think we grew market share and we changed some things in the Company, we do some adjustments in the wireless side and we think that Brazil, in the -- has an economic -- has a very good economic situation. It's still penetrations are low, so we want to grow subscribers and revenues in Brazil. So that's mainly what we're doing, Oscar can explain us a little bit what's happening on Embratel.

Sure. As you know, in Embratel, when we started long distance wireless, 70% of the revenues. It's a market that is not growing. It's even decreasing a little bit, 2%, due to different factors, mobile substitution. But we are growing pretty well in local telephony and in data, in enterprise data and as well in PayTV, with our product, Via Embratel. So we were growing at the pace of 9% and now we are at 6%. But we do believe that with local and enterprise markets and the PayTV market, we will increase our growth for the next months.

I think --

I can tell you that we're very happy, the way that we're integrating the companies in Brazil. I think with Embratel plus Claro, plus the Net Servicos, the synergies that we could do with Net Servicos, I think we are a very complete telecom player in Brazil and that is going to give us a good advantage in the market.

And on that topic, Daniel, have you -- how much have you accomplished already in terms of extracting synergies in that country?

No, I think we're extracting synergies in the network. The network is very important, but it's coming, okay? It's not what we have today, but it's coming. Because we are doing one network. We are saving a lot of CapEx. We are expanding a lot of rings, local rings, long distance rings.

So you could do a lot more with the same amount of money if you do things together. So that's mainly what we are doing. We are doing, commercially. We are also integrating some plans with some things. And also, in the -- financially, it's also helping us. So I am very happy, the way that we're integrating. I think there's a -- still a long run to finish that integration. But the first step, we are doing good.

Thank you very much.

Yes, on the network, we expanded the reach of the network. We are going to a single network, all IP, with the next generation networks. That will help us to handle all the data traffic for different access. It could be wireline, it could be wireless, but just to give a sense, we used to have 150 POPs, data POPs. We are expanding to 3,200 POPs, with increase of rich mobile and as well the wireline.

And it put us in another segment of the market, not only enterprise, but we are going to be focused as well on the medium-sized enterprise. We did reach and we did these new networks. Another thing is that this will allow us to reduce our third-party leasing that we have a huge cost that we pay this line. So with this expansion, we will -- we have the opportunity to reduce these costs and it will help us to increase profitability.

Okay.

Thank you.

Next question from Andy Campbell, Credit Suisse. Your line is open.

Yes. Thank you. Good morning. My question is on mobile data growth. You still saw a very nice growth rate of 27% year-on-year, but this was a bit of a slowdown to the rates you had in the second quarter. And I was wondering if you believe that you're approaching some level of markets saturation? If there's a smaller market opportunity perhaps? Or if there was anything in particular in the third quarter, perhaps, some change in the promotional plans or less competition? Or greater competition that led to the slowdown in the quarter?

Hello, Andy. Well, as I pointed out in the summary at the beginning, the median rate of growth of data revenues was 36%. Okay? So part of what you have when you look at the consolidated revenues of 27% increased partly showed the appreciation of the peso, vis-a-vis other currencies. But if you look at the pace at which we are willing to expanding locally, the average has been 36% and that is not bad particularly different from what we had before.

I think that we are likely going to continue to see very strong growth in these segments of the market. Again, remember that today, the most data is being consumed by a still relatively small proportion of our subscriber base. But this proportion will be increasing as more postpaids move over to 3G devices and smartphones. And eventually, this will go all the way to the prepaid market as well. So I think that there is plenty of growth [ahead] and this segment of the market.

I think data is just beginning. You could see much cheaper and better handsets and that will allow us that big part of our base would jump to this type of handsets and then would start using data. So we -- I -- there is very small amount of our customers using data and I think it would grow really strongly in the next quarters, years, okay?

Great. Thank you.

Thank you.

The next question from James Rivett, Citi. Your line is open.

Good morning, guys. Congratulations on the results. I just wanted to get an update on your views on the mobile termination rate cuts, likely in both Brazil and Mexico, over the coming 12 months. Whether anything has changed there? Thank you.

Yes. On Brazil, I think what is happening, I think they are talking about the reduction -- 10% reduction thing in two years, something like that, where we haven't had something clear. But it's what everybody's talking there. And here in Mexico, I think we are talking to the fixed lines and to other wireless operators to decide what's going to be the interconnection rate. If we don't agree on that interconnection rate, then the authority, [Cofetel], will come and put some rates.

But at this time, we are just having talks with all the other telecom companies and where the decision -- what you -- maybe what you are reading in the press is something that it's only from Axtel and Telefonica. It's not something that is on Telcel, okay? So that's the decision on the interconnection between Axtel and Telefonica.

Let's see what -- how those -- these talks are going to end. I'm not sure what is going to happen. I'm not sure if we can decide between us what would be the interconnection. And if we don't decide between the companies, then the regulator would come and decide what would be the regulator.

But one thing that is very important, I think the traffic between -- I think the traffic between Telcel to Telcel has been growing very, very fast. So the amount of money and the interconnection rate has been coming down a lot since the last three or four years. So that's something -- of course it's a big amount of money, but I think that's something that has been reduced as they are a lot from the last years, okay?

Perfect. And just a follow-up. When do we expect to get the Mexican ruling? How long -- sorry, your Mexican negotiations? How long would you expect that to take?

I think -- I don't know, but the interconnection contracts finished on the end of December. So if we don't finish from here to December, we are going to end with no contract as I don't know exactly. I have to check with my legal people what's going to happen if we don't have a contract. But it's finished on December, okay?

Perfect. Thank you.

You're welcome. Thank you very much.

The next question from Fernando Remis, GBM Global. Your line is open.

Good morning, Daniel and Carlos. Thanks for taking my question. Judging from the better revenue growth and relatively flat ARPUs along the -- in many regions, it appears that voice tariffs have continued to decline. So my question is if you expect these tariffs to ever stabilize? And secondly, you stated that the main synergies as a result of a recent transaction with Carso Telecom is in CapEx. And I wanted to see if you would give me your expectation on the run rate CapEx of the combined companies. Thank you very much.

I think it's still voice in mobile. It's still growing in some countries, more than in the other ones. But I think prices are going down. Prices have been going down very fast, even with that, most has been growing. You could see that in almost all the countries, most has been up. So it's what you are going to see in the future. Prices going down, most going up.

Let's say our -- the prices in Mexico, Argentina, Chile, Colombia, Peru and the Caribbean, the prices have been stable. In other countries, it has been down. But I -- you -- what you are going to see is that more competition, price is down, more minutes of use. But I don't think that the revenues in voice are going to be down. I think they are going to be more or less stable.

In fact, if you look at the aggregate for America Movil, the minutes of use in the aggregate, it's the quality, the core company went up nearly 18%, but projects per minute came down practically the same amount, okay? So that's going to be the same trend down the road. But you are going to keep on expanding MOUs, which is what Daniel was saying. I think the traffic still is going to continue to grow significantly. And it is going to be driven by continued price decline.

But you can see that there is no reduction in -- yes there is no reduction on revenues in mobile voice. Still, we're growing. Because we have good growth in customers. I can tell you that the media in voice mobile, in revenues, is 8.3%. The media.

And our next question from Will Milner, Arete Research. Your line is open.

Thanks a lot. Good morning.

I just wanted to have a quick recap, really, on the balance sheet. You've got -- it's been mentioned already, US$14 billion of cash on the balance sheet. I think even after Telmex minority dividends, you're going to generate north of US$9 billion of cash annually. I know you mentioned early debt redemptions, but I just wonder if you could update on your views on shareholder returns, your preference for dividends versus buy-backs and what are sort of realistic level of leverage for those -- in large businesses going forward? Thanks.

Well, again, what -- we've always tried to return to our shareholders all that we can return on the -- given our pre-tax limitations. You know we may not receive it in excess of the profits that we have already paid taxes on in Mexico, okay? So that's kind of the limitation that we have long term, if you look at the last three years, in each one of those three years, America Movil returned in excess of MXN50 billion, which was basically the full amount that we had available.

I think at present, we will continue to follow this. We have always had a mix of buy-backs and dividends and sometimes extraordinary dividends. That is very much determined by things like the price of the shares in the market. Sometimes we tend to accelerate distribution by way of buy-backs. Sometimes we have resorted more to extraordinary dividends.

So I'd say that we haven't really had any change in position here. We have been growing our ordinary dividends alongside net income for some time. And we will continue to do so. Certainly the balance sheet has not been a constraint, as you already pointed out. We used to want to have a target leverage ratio of not more than one time net debt to EBITDA. We're now at 0.8. So the balance sheet is not a limitation. It's really on the side of what is -- what we may distribute, even the profits that we are generating and paying taxes on in Mexico.

The next question from Rizwan Ali, Deutsche Bank. Your line is open.

Good morning. My question is regarding the CapEx. The CapEx for the quarter and so far this first three quarters has been running a little ahead of our forecast. So I'm just wondering if you could give us some guidance as to what the consolidated CapEx would be for this year?

And the second question is related to Embratel. Your revenues have slowed down, but margins have increased. And should this be the -- should we expect this kind of trend to continue? This is a conscious decision to grow the business a little less and improve margins?

If you want to talk about Embratel?

No, no, no. It's -- Embratel, as I mentioned, we've been investing to grow in local as well as Via Embratel. And our product that always has the enterprise market. But we have the opportunity to work in cost reductions and I think that we mentioned in the past that we pay a lot of lease lines to connect the enterprise markets. So the expansion of the network that we've been having with the Claro and the -- we make analysis that if it's profitable, it is to build than to lease. So we've been working on that cost.

We will still be working on trying to reduce the costs of within Embratel. And the CapEx I think our idea is to as data is growing very fast and we think we have a good opportunity on doing more households -- touch more households to do more DPH, to do more coverage in wireless and lots more data in wireless.

And in broad band I think we want to invest. I think the investment for this year is mainly around US$6 billion is what we think. All the total of the three companies combined maybe next year the same. And I think that will give us a very strong capacity and capability to grow our business in the next years.

I think there's still a lot of room on the broadband penetration, a lot of room on PayTV, a lot of room on wireless data services so we want to be prepared to do all of those services. That's our business and we want to be well prepared to do that. We want the best technologies and to be all around in all the countries.

Thank you very much.

Next question from Richard Dineen, HSBC. Your line is open.

Thank's very much for taking the question. A question about Telmex and Telcel. Telmex obviously continues to struggle falling revenues and margins and just given the antitrust restrictions on operational integration of Telmax and Telcel which would prevent synergies.

What's the opportunity for these assets? Can we expect that relationship to develop into something more than just pure financial consolidation that it is today? I appreciate Telmex generates good cash but on the flip side it's obviously a major drag on your growth. So any thoughts on that would be appreciated. Thank you.

I think what we are doing a little bit more than -- not a little bit we're doing more than what we're doing. We have to be careful because there's still Telmex has a lot of minority investors so we have to do the things in arms' strength are the market conditions.

But even as market conditions we're doing investments together and we are doing a lot of things together so that -- I don't think we are only doing financially integrations. We are doing also network integrations. Of course different here than in other countries because we have to have the market prices and those things but even with that it's very good for us to do that.

Thank you very much indeed.

Next question from James Ratzer, New Street Research. Your line is open.

Yes good morning I had a question regarding the businesses that used to make up the old Telmex International. Sir the nine months you reported 11% revenue growth in those businesses down from 15% at the first half. That would seem to imply a very sharp slowdown in the third quarter. You've shown that Embratel slowed slightly. So I was wondering if you could talk a little bit about what happened in the other businesses excluding Embratel. Has there been a sharp slowdown there? Are there any one-off effects in the third quarter? Thank you.

We don't get your question. Can you repeat it again?

One moment please.

Thank you.

Can you repeat the question?

One moment please.

Can you repeat the question?

One moment please.

What we could do if you don't find the question again -- what we -- they can call us because we need to understand exactly what's the question and how they are doing their numbers. I think we have intercompany revenues that we have to take out and without that we can -- if we take out the intercompany's revenues then let's see we can talk with you personally. If you can talk directly to Daniela please.

Thank you for clarification on that sir. Next question from Gil Alexander, Darfil Associates. Your line is open.

Good morning as you look at this integration could you give us an idea over the next year of the cost of putting the two companies together. And then as you look at the combination over two years could you give us an idea of lower capital expenditures that you might have over two years because you have the two companies together? And the savings of putting the two companies together over two years after the integration costs?

Well one thing that I'm sure we're going to do is we're not going to reduce the CapEx. I think with the same CapEx we're going to do lot's more things that we used to do if we were alone. So we are not planning on reducing CapEx. What we're planning is that with the same CapEx or a little bit more if we need it we're going to do lot's more things in all the countries.

I think the question also the issue of synergies that we have explained in some of the previous calls. Basically we do not see that there is much overlap on the operating expenses side or then regards lease and the rental of different types and there I think that we'll be making important progress certainly into next year as we will be able to eliminate some of the lease that we have to pay rent from today.

And as regards capital expenditures which we think if we're going to have a more synergy as Daniel points out all things equal we would have been able to reduce capital expenditures by having the two together as opposed to having them independent. But we do not intend to reduce the total level of CapEx because we think that we need to invest more in development of the network.

So basically what you would say it's not an issue of two years. I think it's an issue of getting more done faster over a long period of time that is where the commitment of the CapEx is going to be.

I thank you.

Thank you.

Next question from Mauricio Fernandes, Bank of America. Your line is open.

Thank you good morning. The one -- I just want to come back to Michelle's question on the integration of the three companies. I want to understand -- I know it's hard to see how much of the integration has already been completed although I understand that it's just the beginning. But I wanted to know from Daniel or Carlos or Oscar whether there've been any additional --any non-recurring costs associated with integration of all the countries during this quarter? Thank you.

I don't think we have any non-recurring costs that we have been saving. The two companies has been working on a very efficient way so we don't have anything. I think that the important savings are going to be as we said on networks, on IT and on selling more because our commercial offer. I think that mainly where we see the big -- the good things on the integration.

I think the integration is starting we have been already working as an integrated company but all these things that I have been telling you are going to get all through the next two years. Let's say the next two year we're going to have a much better commercial offer. We're going to have a single network. We're going to have an IT solution for all the companies so that's mainly what we're working and investing for.

Thank you Daniel and I just one more follow-up on the mobile termination rates. As you still negotiate them through the end of the year perhaps getting to a final negotiation, a final number, can you tell us how much -- I know that this is now being -- as an integrated company it's hard to really have a final number maybe but can you tell us of the Amex wireless in Mexico how much of the revenues come from fixed line companies as mobile termination --

I don't have it here but you can talk to Daniela. I don't have any problem to tell you exactly. It has been coming down a lot. But I don't have exactly the number.

That's okay, thank you Daniel.

I think it's less than 10%. I'm sure that it's less than 10%. I don't know if it's 8% or something like that or 6%. I don't have the number but it's less than 10% of our revenues. It's the net interconnection.

The next question is from Taras Shumelda, American Century. Your line is open.

Hi I have a purely more an accounting question. Looking at your Q2 2009 results that were reported on a pro-forma basis after Q2 2010, in other words the IAS results and then the Q2 2009 results that were reported before the accounting change, the accounting change seems to have added about 80 to 90 bases points to EBITDA margin. Is that accurate and if we were to think about just for reporting purposes about the Q3 numbers have they been reported under the old accounting standards? Would there also have been a similar magnitude there? Thank you.

I think what we presented here are under the common standards for IFRS so the comparisons that you can have are based in today's methodology. We are not doing the accounting any more based on the old methodology. We haven't done that for America Movil for three quarters already. So I don't know that I can give you that answer just yet. But I think that the numbers in the report are all comparable because they are all on the IFRS.

And what you are saying is right because you can -- you under this new -- under this standard you reduce a little bit the revenues and that's why you increase the EBITDA the margin of the EBITDA. It's what -- I understanding what you are saying is that our EBITDA grows 0.9 points so it's -- and that's really because the revenues under this standard get reduced a little bit and that's mainly -- all of them are in the same standard. All the data that we presented in the results are in the same standard.

Thank you. Am I allowed to ask one more question or is this it?

Yes, yes, yes.

The other one is in Mexico on mobile side in the net adds that were incredibly strong. Can you give us a little more granularity as to what drove them and when we think about your net adds going forward should we now be thinking about a higher pace or is it more of a one quarter occurrence? Thank you.

No I think what is happening is that you are comparing again the last quarter -- against this quarter of last year and remember that last year we have a very bad economic situation and that's really -- but I think we can have this around one million, I hope next quarter or fourth quarter we will have more than one million net subscribers because there's Christmas and Christmas is very important.

But I think the economic situation in Mexico is getting better and I will think that we could have a good growth in the next quarter. We're focusing a lot on post-paid. Post-paid has been growing very good and it's also because we have the best network in Mexico so people is preferring to be with Telcel network than in other networks.

Portability -- number portability has been doing very good for us. We have been gaining a lot of customers in portability so I think that's not only -- that's means good network, good economic situation, good customer care, good branding I think in Mexico we're doing a very good job.

Thank you.

Thank you very much.

Andres Medina Mora, GBM. Your line is open.

Thank you my question is regarding your view for ARPUs in Brazil and Mexico particularly Mexico where post-paid has been growing so fast.

Yes the ARPUs are stable and when you have good growth of customers and your ARPUs are stable it means I think there are good news because all this new customers are going to start to consume in the future.

So I think we're being careful on that -- even that prices in Mexico has been coming down really fast. We have, let's say, -- I don't have it last month but this it's around US$0.05 off a dollar the prices that we have in Mexico and those prices are really competitive internationally. So or one of the lowest prices internationally. Prices it has been down maybe 10% to 15% around 10% to 15% so when you have ARPU stable in those conditions I think -- I think are good news.

All right thank you.

Next question from Martin Lara, [Vector Securities]. Your line is open.

Hi good morning I have two questions. Where do you see the wireless net additions in 2011? And the second question is where do you see the wireless penetration rate in Brazil going forward? Because it is reaching 99% right now.

Well the penetration in Brazil could go higher than 100% because we have more than 100% in countries like Argentina or Uruguay or other countries so I don't -- I'm sure that the Mexico and Brazil are going to pass the 100% penetration. And I -- we don't have the budget for the next year. I hope we could give you some numbers in our Investor Day that's it's going to be on the 18th of November. I hope everybody would come and let's see if we finish the budget which numbers we can give you there, no?

Okay but Daniel do you think the wireless penetration rate in Mexico and Brazil can reach 130% in the next few years?

Well maybe yes 120% 130% yes of course.

Okay

If we invest in more in rural areas and get more -- that we can cover all the population of the countries of course, handsets are going down. Prices are going down so there's no reason why we cannot get the 100% plus companies and plus devices like the iPads and all those devices you are going to have maybe two devices with you. So I'm sure you can get 130%. Broadband wireless is going to grow a lot in the next year.

Okay and sorry the last question. The CapEx guidance for 2011, do you have?

No I think it's what I'm saying it's maybe we can get those numbers in the Investor Day.

Okay thank you very much.

Thank you Martin.

Next question from Walter Piecyk, BTIG. Your line is open.

Hello can you hear me?

Yes.

Hey Daniel you had mentioned you thought the economy was getting better in Mexico. I think it's probably an interesting statement given the presence you have with AMX and Telmex. Can you just expand on -- is that something you saw in the third quarter, or is that something you see going forward? Why do you believe that is the first question?

And secondly in Mexico your postpaid is down year-over-year. It's still a decent number I guess 300. Can you just talk about is that postpaid number a result of conversions of prepaid? Is this a new postpaid customers coming from your competitors? If you could talk about postpaid. And then the last -- yes

Sorry in postpaid is everything. In postpaid some prepaid coming to postpaid, new customers, new devices and of course some of the competitors. I don't know exactly which ones but I'm sure that we have in our postpaid the new additions we have a mix of everything.

And on the economic situation the only thing that I can tell you is when you get in Mexico it's the third quarter of 2009, 280,000 subscribers and you get this quarter more than one million subscribers I'm sure the economy in our country is getting better. I think it's not from one month to the other one. I think through the year the economy is getting better and better.

I think voice revenues are growing approximately 5% year-on-year which is quite good. Data revenues are growing close to 30% which is good. Certainly voice is very tentative to give you big growth. We have been saying for quite some time that voice revenues tend to grow along at the pace of or somewhat faster than the pace of [TVP] growth. So that's why we have that vantage point.

And if you look at fixed lines revenue even fixed lines revenue has been actually quite stable the second quarter were somewhat lower than in the third quarter, we're seeing somewhat of a recovery and so it does seem from the vantage point that we have that the economy in Mexico is improving.

Great, that's helpful info. Carlos could you just also discuss whether with your cash you would consider, and this will be my last question, the -- any investments in these 2.5 or 3.5 gig -- or gigahertz networks for broadband access. You've talked about with the Telmex integration obviously you have some wired assets there but does it make sense to look for growth in broadband penetration by deploying networks on 2.5 or 3.5 gig spectrum? Thanks.

Oscar can tell us a little bit about that but I don't think that the technology that we're going to use, Oscar?

Yes you're right. LTE is coming as well there so we are using another spectrum for getting to that. And I think what we are using now is WiFi within the places that we could use it to review the traffic of the spectrum. So I don't see that spectrum. We are working on another spectrum to reach LTE technology so.

There's going to be I think that in the next year there's going -- all the countries are going to start. I saw that all the governments in the countries where we operate really interested in developing broadband services.

So I'm sure that in the next year there are going to be a lot more options on the LTE spectrum to allow us to give more data services to a lot more places. So that's, I think, where we're going to invest in wireless. And in the fixed we're getting households, we're doing DPH, we are doing --

We can combine the technology so of course in Mexico we use [DSL and EDSL], fiber where market's need it. But in the region we are using cable networks [squash] networks but it's a mix of HFC networks.

With that we could deliver a very, very good bandwidth to the customer so we are using now Docsis 2.1 but we have already the networks prepared to move to Docsis 3.0. With that we will have a very good speed for internet broadband services. We are investing in the right technologies now.

Yes thank you.

And next question from Jeff Fan, Scotia Capital. Your line is open.

Thanks very much for taking my question. My question is on Mexico. In your results you mentioned that there were some costs related to integration that impacted your margins. Can you just talk about whether that's just a one quarter thing or whether there may be more costs to come in the future quarters?

Yes.

The second is kind of a related question. It's on Brazil and again it's on the cost side. You saw about 17% growth in your EBITDA in Brazil and about a significant decline or about a 3% decline in costs in Brazil. Can you just talk about what those drivers were that led you to the OpEx decline? Thanks.

I think on Mexico we don't say that we have costs on the integrations and if we say that we don't have any costs on the integrations of the companies. I think in Mexico if you see in wireless we're having the same -- more or less the same EBITDA as last month. And in fixed you already have the release on the Telmex result so you can compare that. So we don't have any costs on the integration. And in Brazil what we're doing is we're saving costs, but the costs could be a lot on tax and the acquisition cost will be part of that. Other ones could be on the networks. Other ones --

Lease lines.

Lease lines that we used to pay and we are not paying any more so --

(inaudible - multiple speakers) investment in networks to reduce the costs of the connection as well. Cost of taxes.

Those are the things that we have been doing for some time and will give us more cost reductions in the future. And I think we can get the last question please.

Thank you, final question from Tomas Lajous, UBS. Your line is open.

Tomas Lajous. My question has been answered thank you. Thank you gentlemen, I don't want to disturb you anymore.

Thank you Tomas.

Would you like to take another question?

Yes.

Thank you Michel Morin, Barclays Capital. Your line is open.

Thank you I was wondering we didn't really talk about Colombia and I was wondering if perhaps you could talk a little bit about what's going on there. There's a very good macro environment there.

And I was a little bit disappointed, not disappointed but it seems like perhaps I would have expected a little bit better out of Colombia. And we saw one of your competitors report good numbers there. So anything you can talk -- you can mention about the trends you're seeing there? And also margins were down a little bit and I'm wondering if that's related to the Panama startup still or if there is anything else going on there? Thank you.

Yes I think you are right. I think in Colombia we're doing good. I think we're growing. The economic situation is doing better and also in Colombia the government is pushing a lot the develop of telecommunications. I think this government is -- this new government is trying to push a lot the develop of telecommunications. So a lot of -- in the wireless side we're doing okay with EBITDA.

We're growing our revenues 9.8%, the wireless revenues. Fixed line revenues are growing 6.3% so EBITDA is growing 7.2% so numbers looks good even with the develop of the Panama that we're investing some money and it's costing us a little bit of money to grow the business there.

Besides that I don't think there's anything in Colombia. The country is doing very good. The economic situation is excellent. The government is pushing a lot the telecommunication sector. They want us to invest. So we're -- we're in a very good mood in Colombia at this moment. And in Panama we've just launched also the DPH. We have wireless and right now we have also the DPH satellite business there. So we started in September and we're doing good.

And if I may just to clarify also one thing that you -- that Carlos I think you said in your prepared remarks. Did you say that there was a tax related adjustment on the balance sheet? I think maybe a valuation allowance that was reversed or something like that. I didn't quite get the details of that.

Well, what I said -- what we have been doing I think this is -- we did a part at the end of '08, part at the end of '09 and now we are going to be doing the last part, which is basically recognizing that we have had a deferred tax asset in Brazil. We had some tax losses that for some time were not given any credit, if you will.

At the time there were (inaudible) referring to some years back, probably five years back when things looked more uncertain in Brazil. But now in conjunction with our auditors we have decided that this tax losses had to be recognized from an accounting standpoint and that gave the right to a deferred tax credit, okay.

And that basically is what we've -- we're [boasting]. As I said this is the third installment. We did one at the end of '08, one at the end of '09 which are detailed in our report in fact and we have this other one.

And what was the amount?

It's MXN4.1 billion.

Great, thank you very much.

Thank you.

Thank you everybody. Thank you Andre. And --

Just a reminder for everyone we're hosting our Investor Day on November 18th, that's in Mexico City, hope you guys can make it. If you wish to register for the Investor Day you can do so by accessing our web page. We are inviting you to meet the new America Movil. We'll have our country managers down in the event. If you have any trouble to register just give me a call.

Thank you. Thank you Andre.

Okay goodbye.

Thank you this does conclude today's conference. You may disconnect at this time. Thank you for your participation.