America Movil SAB de CV (AMX) 2010 Q4 法說會逐字稿

Good morning. My name is Michael, and I will be your conference operator today. At this time, I would like to welcome everyone to the AMX 4Q 2010 Conference Call. (Operator instructions).

I would now like to turn the call over to Mr. Andrew Campbell. You may begin your conference.

Great. Thank you very much. Good morning, and good afternoon. This is Andy Campbell from Credit Suisse. I am head of telecom, media, and technology research for Latin America. We have on the line with us today, from Mexico City, Daniel Hajj, CEO; Carlos Garcia-Moreno, CFO; Oscar Von Hauske, Director of Wireline Services; and Daniela Lecuona, Head of Investor Relations.

At this point, I'd like to thank America Movil for allowing us to host the call today, and I'll hand it over to the Company for their opening remarks.

Thank you, Andy. Thank you, everybody, for being on the call. Carlos is going to make, as always, a summary of the fourth quarter 2010 financial results.

Hello. Thanks, Andy, for hosting the call. Good morning, everyone.

The last quarter of 2010 crowned a year of strong economic expansion in South America and (inaudible) economic recovery in North America. It's all about reacceleration of solid growth in much of the region.

As such, we added 8.2 million wireless subscribers in the quarter, nearly 23% more than we did in the year-earlier quarter.

The postpaid additions, at 1.9 million in the quarter, more than doubled (technical difficulties) a year before. In fact, it was obviously the largest number of postpaid net additions we have ever posted. Increasingly, the postpaid segment of the market is about data. And our having significantly expanded our data capabilities over the last three years as we built the (inaudible) platform in the region has given us an edge in the market. These biggest increases in net additions relative to the fourth quarter of 2009 took place in Mexico and Central America, having doubled in the former and tripled in the latter.

All together, we obtained 24 million new clients in the year, substantially more than we had aimed for at the outset. (Inaudible) million subscribers more than at the end of 2009.

Our revenue-generating units on the fixed platform also increased by 12% in the year, to end December with [61.5 million, of which 10 million are TV accesses and 13 million broadband accesses]. Revenue expanded by 6% year on year, with service revenues growing 5.5% in Mexican peso terms. However, this partly reflects the appreciation of the Mexican peso versus practically all other currencies, including the dollar. At constant exchange rates, service revenues actually would have increased 7.1%, driven by mobile data and by pay TV services that expanded 36% and 79%, respectively. Mobile voice revenues would have grown almost 9% and fixed broadband revenues 3.6%, while fixed-line voice revenues would have fallen 6.3%.

It is important to note that, in this strong expansion of revenue that we had all throughout the region, that you should keep in mind that, for the last year or so, we have been reporting under IFRS. And, under IFRS, we are meant to deduct from revenues the commissions that we pay on sales. In this particular quarter, since the postpaid additions were so strong, the commissions that were paid on these sales were obviously a very significant amount that were deducted from revenues. So I just want to clarify this, only because I am sure that we are going to encounter some questions. You just have to keep in mind that service revenues -- the way we report them are net of commissions.

Moving on to EBITDA, it came in at MXN61.2 billion in the quarter. It was 4.8% more than a year before, with the EBITDA margin remaining almost flat, even in the face of more rapid subscriber growth.

Our net profit of MXN24.2 billion would have been nearly MXN3 billion higher in the absence of extraordinary depreciation charges meant to reflect the impact that the (inaudible) technological innovation has on the market values of various types of telecommunications equipment and the need to phase out over a shorter period of time the older technologies.

Our operating cash flow allowed us to fully fund our capital expenditures of MXN81.9 billion and, in addition, to spend MXN66 billion on stock of Telint, Net Servicos, and Carso Global Telecom and an additional MXN35 billion in share buybacks and dividends.

Our net debt came down by MXN10 billion to MXN207 billion today, [with approximately MXN15 billion], equivalent to 0.84 times EBITDA, even despite the sizeable capital outlays in this region.

So, Andy, I will pass it back to you. But, as we have seen, we have very, very strong subscriber and revenue growth. And I think that our EBITDA was quite strong, given the strong rate of subscriber net additions. Thank you.

Great. Thank you, Carlos. Once again, this is Andy Campbell from Credit Suisse, and I would like to start with the first question.

My question is really about the post-pay subscriber additions. As you mentioned, it was a record quarter for post-pay net adds. If you could, just elaborate a little bit on the conditions that are driving the postpaid growth and whether or not that's a trend that you think will continue in the future quarters.

Well, Andy, I think we had very good 1.9 million postpaid additions in the quarter was good. I think Brazil was good. Mexico was good. I think, overall, Latin America in the countries, we are focusing a lot on the postpaid subscribers. We are trying to sell more smartphones. We are trying to include data in these plans. So I think it's not only one thing that we are doing. We are increasing our postpaid distribution network. And that's mainly -- And I think we have been doing that for maybe one year or one year and a half. And we're having the results today. I think something that is helping us a lot is that the economies in Latin America are starting to -- We're starting to see good recoveries in the last year, so that helps a lot on the postpaid business.

Mainly in mostly all of the region, we're gaining postpaid in portability where we have portability. I think we are really focusing in these businesses, Andy. And that's why you are seeing good growth on the revenue side.

Well, great. And are the 3G data card subscribers a meaningful contributor to the postpaid additions?

Well, yes, of course. We are selling -- In some countries, we are selling more than in other countries, depending a lot on the fixed broadband competition. But we are selling a lot. We are moving to a limited data service instead of [limited]. I think it's very good for the Company.

And one very important thing that you should know is that we think America Movil has an excellent network. I think people is deciding where they are going to have the data, and they are deciding on the America Movil network to have that data. So that's helping us in postpaid additions.

Great. Thank you, Daniel. At this point, Michael, can we, please, queue for questions.

(Operator instructions). Ric Prentiss, Raymond James.

The question is on Brazil. Obviously, very strong net adds in Brazil. Can you talk a little bit about the ARPU trends in Brazil? I don't know if that was the IFRS item with the postpaid. It seems a little bit lower than we were thinking on year-over-year changes. And then also the margins in Brazil. As you look to 2011, what do you think happens with the margins? Do we get back up, or is it going to continue to stay under some pressure?

I think, in Brazil, we do in postpaid -- we do ten times what we do last year. This IFRS is one of the reasons why ARPU is not -- it's down a little bit, because, as Carlos said, with the [tough] commissions from the revenue and, when you have only in December more than 400,000 postpaid subscribers where there's a lot -- and that's the reason. I make a calculation, and maybe it's around 5%, the growth that we should have if we don't have that [FIRS] issue.

I think, as we are growing -- Other important issue in Brazil is competition. Competition is strong. Promotions are very strong in the market. And that's the other important -- I don't have any doubt that, in the near future, our revenues are going to grow, and our EBITDA is going to recover. But, right now, I think, in Brazil, we are trying to gain market share. Remember that, at the beginning of the year, middle of the year, we were losing market share. We recovered that, and I think we are on track for this year. And, if we get the revenue, the ARPU, I'm sure, that the EBITDA is going to come.

Oscar can talk a little bit on what is happening on the TV side and on the broadband side with Embratel.

As you know, we have in the market the Embratel. That is a satellite TV, DTH. We have been growth pretty good. Last quarter, we are close to have 1.1 million subscribers in Brazil. And I think our product has been very well accepted in the marketplace. And, as well, in Net, the growth that we have in broadband has been really good. We have very good market share. And we intend to build more home passes to Net and be in Brazil to have a better position in the marketplace to deliver triple-play products in Brazil.

So, I think, with Claro, plus Net, that we have 92%, plus in Brazil. I think we are really well supported in Brazil, well positioned in this market.

Great. Thank you.

Tomas Lajous, UBS.

I have two questions. The first one is -- because I'm sure the dividend question is going to come up. But, ahead of that, can you talk a little bit about what your [COFIN] balance is at this point and whether you're going to be able to inherit the sort of $9 billion in COFIN that were held at Carso Global Telecom?

And the second question is -- Daniel, you highlighted the -- how good your network is. Are you going to --? Do you have any plans or are there any opportunities to start offloading mobile data back onto your fixed network via dual-technology devices and/or femtocells? And what are your plans in that respect?

Well, if you want, I can start with that question, Tomas. I think what I'm saying about the network -- I think it's -- what we do by merging Telmex International and Claro, really, one of the big gains that we're having is that we are going to have only one network for all the technologies-- all the different wireless, TV, video, broadband. So, of course, we're going to use Wi-Fi for Claro. And the investments are going to be much more profitable when you do one network for all these different services. So I don't have any doubt that that's working. We are really advanced. We have only six -- We have been only six months working with that, and we're seeing all the advances that -- in the network.

I don't know, Oscar. You want to add something?

I totally agree. We are moving to a single network, all IP. And we are making the evolution from all technologies -- [SDS] technologies to carry the Ethernet in the backbone. So we will have a very stable (inaudible) network not only in Brazil. We are doing it in other countries. And, of course, this fixed and mobile conversion will be delivered with a unified and single, all-IP network in the region.

We have a lot of fiber all around the country. We have lots miles. We have the backhaul. We're constructing a (inaudible) cable. We have some satellites. So I think we are well support in our region by our network.

With regard COFIN, Tomas, what we generated last year for COFIN was MXN86 billion. That's the amount that would be distributable. But we haven't carried the COFIN from Carso Global. We believe that we have some arguments that would point to that that would be the case. But this is not something that has been completely cleared by everyone. So we need to continue to check this with the authorities. At this point, I do not have an answer for you. The only thing that I can tell you is that the [FIN] that generated we don't have any doubt about is MXN86 billion.

And have you used any of that today, Carlos, or did you use some of that ahead of time? Did you use some of that in 2010, or is that what you have available now?

No. That's what we have available now.

What you generate last year is what you are going to use this year. That MXN86 billion that we generate last year is what we can use this year.

There may be an additional MXN5 billion or MXN6 billion of an amount that we did not exhaust before. But, yes, that's more or less what we have --

Do you think you're going to --? Are you going to try and use that much COFIN?

It always boils down, as you know very well, Tomas, to what are the uses of cash. So, to the extent that we engage in acquisitions, there will be less cash left for distributions. To the extent that we do not engage in acquisitions and we distribute the full amount that we can, as we did in '08 and in '09, then, obviously, we will be just getting the full amount by way of share buybacks and dividends. It really boils down to -- are there any alternative uses for cash? And, if so, to what extent do they cut on the amount of our distributable.

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

James Rivett, Citi.

I've got two questions, if I can. The first is on just your Mexican mobile business. Clearly, no signs in the fourth quarter that you're seeing any impact of Telefonica's 3G launch. But I was just wondering whether you could give us an update on where that stands today and whether you're seeing any changes in the pricing environment.

My second question was just on, more generally, in terms of smartphones. Can you give us an update on where you think smartphones are currently costing -- what they're currently costing to you and to the consumer? I'm just trying to work out how much of the mass market you can target through this. Thank you.

Well, the first question is on the 3G and Telefonica. I don't know exactly. I know that they win the auction. They win some license in maybe -- I think were in September -- August/September, something like that. And, well, they need to do a network. I don't know if they already have the network.

What I can tell you is that we have more like about 500 cities in Mexico with our 3G network. We have a good backhaul. And we're very strong there. We are investing for maybe three to four years on that network. So I'm feeling very comfortable on our side. That does not mean that the other ones are going to invest and that we're going to have more competition. But we have very good coverage, good -- a strong network in terms of data.

The smartphones? Well, you're seeing that the smartphones -- there's a lot of smartphones, smartphones with Android software, with Windows software, with special software from each brand -- Samsung, LG. And that depends a lot the price of the smartphones. So I have no doubt that the price of the 3G handsets are going to reduce a lot. We have been seeing that there are a lot of handsets at very good prices today. And I'm sure that in the near future we're going to see, day by day, better prices, James.

Your question is if we're going to make these smartphones available for the mass market? I'm sure that we -- They are not going to be at $30 to $40, but maybe you are going to find at the $150. Every year -- Every day, you are going to see more competition in 3G -- better prices, more applications. So I don't have any doubt on that.

Perfect. Do you think we see a sub-$100 smartphone this year? Do you think that's a realistic possibility?

Yes. I think -- I'm not so sure. But, maybe, yes, we can find it at the end of the year. It is depending a lot on the competition. But the future phones with good operating systems, I'm sure that we're going to have. Android system or Apple system or Windows systems -- I don't think we're going to get to those prices. But the other operating systems, I think, we can get to $100 to $120 maybe -- but close the $100, of course.

Perfect. Thank you very much.

Michel Morin, Barclays Capital.

I just wanted to focus a little bit on one of the points in the press release. You mentioned that there was the change in accounting at Embratel, which caused the net income to be down MXN542 million. I just wanted to clarify. You say it's not material in the fourth quarter. But, when we look at Embratel's results, the margins were very low in the fourth quarter. So I'm wondering -- Was there at least a portion of that that was attributable to the fourth quarter?

And then, secondly, I wanted to just follow up on the earlier question around Brazilian ARPU. I think the focus, or the way that I'm looking at it, is on a year-on-year basis. And as far as I understand, both this quarter and last year's quarter were on the same accounting basis. So the 15% decline is apples to apples, and that is a worsening of the trend from the 11% in the third quarter, which I found surprising, given the strong performance in postpaid. So is there anything else going on in terms of your pricing that might be impacting ARPU in the Brazilian market? Thank you.

(technical difficulties)

Carlos, I don't know if you heard my question. It's Michel Morin from Barclays. Let me reiterate the question. It was two questions -- on Embratel and, also, on ARPU in Brazil.

On Embratel, you flagged MXN542 million of capitalized labor costs. But you say it wasn't in the fourth quarter. So I'm wondering why Embratel's margins were so low. Was there at least a portion of that that hit in the fourth quarter?

And then, secondly, the Brazil ARPU question from earlier -- as far as I understand, the year-ago figures were also expressed in IFRS. So IFRS really should not be a factor when looking at the decline of 15% on a year-on-year basis. And that's worse than the 11% decline you reported in the third quarter. So I'm just wondering if you can elaborate a little bit more on what's happening in terms of pricing in the market that might be causing that worsening of the ARPU trends on a year-on-year basis. Thank you.

On the second question, I think it's very important because the commissions last year we have ten times less postpaid subscribers. So, when you have ten times more subscribers on the postpaid, keep you a lot -- I give you the figures. The figures will be around 5% increase on revenue if we take out the IFRS. In local GAAP, we will have around 5% revenue increase.

Just to put what Daniel is saying in perspective, Michel, commissions year on year went up 83%.

Okay.

It's not minor. As Daniel said, it's ten times more net additions in postpaid in Brazil the last quarter this year than the prior year, and that really has an impact on commissions. So that's basically what explains the ARPU situation.

And, then, the other part -- you were saying about the capitalization of labor costs.

Yes, the MXN542 million that you flagged in the release.

We're saying that it was an impact for the year. We're not saying that it's an issue only of Embratel. And we are not saying that it has much of an impact on the quarter. We're just saying that it is a consequence of standardizing the accounting policy that we have across all companies. That's all. We're not saying it's impacted the last quarter. We're just wanting everybody to be aware that we have conducted a full standardization of the accounting policies of the Company, and that it has had an impact on net income for the year of the MXN500-and something million that you just pointed out.

So, when I look at your Embratel results, which were reported separately last night and I see that the margin was down year on year and it was the weakest of the year, is that entirely due to subscriber acquisition costs on DTH, which was very strong?

I think that, in the case of Embratel, they are reflecting in the quarter what we had already begun to reflect in the prior quarter. So, in the case of the individual companies, they are only enacting in this quarter the accounting changes that we call for from the beginning of the second half of the year.

Okay. Got it. So there --

In that case, they are reflecting it in this quarter. In America Movil's case, it has been throughout the second half.

Perfect. Very clear. Thank you very much.

Martin Lara, Itau.

What is the guidance in terms of net additions for this year for both the fixed line and wireless business? That's the first question.

And the second question is -- are you going to delist Telmex Mexico at some point, or do you think that it will continue as a publicly traded company?

Well, I think that's a good question for Telmex at this moment. I don't think they are planning to delist the company. They are still trading. A big part of their shares are trading in the market. So I don't think we are -- they are planning to delist the company. We are not buying anymore Telmex shares at this moment.

And the first question?

The guidance in terms of net additions for this year.

I think, in terms of wireless subscribers, we think that would be around -- penetrations are high in some countries. We have around 130% penetration in Argentina, a little bit more on -- a little bit more on Uruguay. I think what we -- We think, in wireless, it would be around 16 million to 17 million wireless subscribers what we think we could do this year.

And, in fixed line?

Fixed line? I don't have it here. But you can talk to Daniela. You have it, Oscar, here? No. I don't know. You can talk to Daniela, and she can -- 5 million accesses. What Oscar is telling me is around 5 million accesses. That means fixed, broadband, and television, DTH, and cable for this year is more or less what we think we could have.

And most of those 5 million should be in pay TV?

I don't think so. I think there's going to be a lot of broadband, some of voice in Brazil, and, we hope, a lot on TV also.

Okay. Thank you very much, Daniel.

James Ratzer, New Street.

I had two questions, please. The first one was just regarding the impact now of lapping the tax increase that came in last year. Obviously, you're able to pass that on to consumers quite successfully. Does that give you more confidence about your pricing for 2011? And, potentially -- Your Mexican revenues on mobile that are 10% at the moment. Growth could maybe step up to as high as 14% going into early 2011. That's my first question.

The second one -- I was wondering if you can just give us an update on what you see happening on the MTR reductions in Brazil -- kind of timing and likely magnitude of that. Thank you.

Well, I think, for this year, we don't have any MTR reduction in Brazil. I don't have any news on that. At this moment, we are not seeing any reduction on the interconnections in Brazil. We don't know exactly where the regulators are going to decide. But, at this moment, we don't have anything there.

And the first question? Sorry. Because we don't hear you very well. Can you repeat it?

Yes, certainly. I was asking about the fact that you are now at a 12-month anniversary of the VAT and telecoms tax that came in in January 2010. Given that that is no longer going to be a drag on your year-on-year comparables in the Mexican mobile business, do you think, in early 2011, we can see your growth rates in Mexico step up by around 3 to 4 points and then maybe growth in Mexico can start getting towards 13% to 14% revenue growth?

What you are saying is that the tax that we have last year -- that it's 1% more -- I don't think that hurt us a lot. We already have 10% revenue growth in Mexico. And, well, to maintain that 10% will be very good. Remember that we have big base in Mexico. And we're moving a lot to focus more on postpaid. We're moving to sell more smartphones, to do more data. So I think, if we could have 8% to 10% revenue growth, it would be very good. I don't think we can go to 14%. And I don't think, also, that the tax that we have last year would impact on the growth of the revenues. We already have that tax. The tax is there. So people is paying 1% more in taxes. So you are not going to eliminate this year this tax.

Okay. Thank you very much.

[Grey Powell], Wells Fargo.

Just a couple. How should we think about ARPU trends in Mexico? Obviously, you saw a good improvement there in Q4. If subscriber growth continues to improve, could that pressure ARPU in Mexico going forward?

I think the important issue here is data. As we grow in data, I think we can sustain or maintain the ARPU. And, as we are saying, we have a good network. We have capacities. So what we need to do is to sell more smartphones and to sell more data, to sell more data in prepaid also. So I think that's going to give us the increase on revenues in Mexico. It's where we are thinking we can have the increase in Mexico and not only in the big cities. I think, in the big cities, you have fixed broadband, wireless, a lot of competition. I think we have a good advantage in the small towns and small cities, where we can give a lot more data. So that's where we're focusing.

Got it. And, then, just along the same lines, wireless data looks to be at about 23% of wireless service revenue. Can you just talk about how that varies among your stronger countries and where you see data revenue growing over, say, the next two or three years?

I think data -- it varies a lot when you have more SMS because SMS is inside of the revenue. But, when you are talking about browsing and applications, I think all the countries are more or less in the same range. They value not so different. Where we can get on the data side? Well, I think there are some countries that have 40% of the revenues or 45% of the revenues in data. So I think we could get there. I don't know when, but we could get there and have 45% of our revenues on data.

If you look at America Movil as a whole, the consolidated, today, a little bit less than 23% is coming from data. So 23% of service revenues is coming from data.

And the other thing that is interesting is you have countries like Argentina, where data is already -- about one-third of service revenues is coming from data. And then you have some other countries that are -- that still have less than 20% coming from data.

By an example, in Ecuador, we sell a lot of SMS. So it's the big part of the data is SMS. I think we need to improve on browsing and internet and applications. In other countries, it's more on the browsing and the applications. But, overall, we are focusing there, and I don't think we have a problem reaching 40% to 45% of our revenues being data.

But most operations already have at least 20% of service revenues coming from data.

Got it. That's very helpful. Thank you very much.

Mauricio Fernandes, Bank of America.

It looks like, Carlos and Daniel, you had a great quarter in Colombia. I think Comcel -- not just Comcel but the consolidated EBITDA margin there was expanded year on year, even with the higher subscriber growth. Can you elaborate on what happened there, if there was any nonrecurring benefit that has been taken into consideration or into account this quarter? Or it's as simple the scale contributing to the margin increase? That's question number one.

The second is on the consolidated tax rate. It was a bit lower. Well, if you take the whole year, it was, I think, around 27% and only 14% in the fourth quarter. Why is that the case? What can we expect going forward?

The first question on Colombia, what you are seeing, Mauricio, is that we have been growing. This quarter, the growth on revenue is around 10%. So all the efforts that we have been doing on postpaid data and to increase revenue are there. We are controlling the costs very well. There's no recurring revenue last year. So I think it's only all the work that we have been doing the lay year -- increasing revenues, controlling costs. And that's the growth on the EBITDA side.

In terms of the wireline, I think we need to -- We sell a lot of broadband. We don't sell a lot -- we don't have a good year in terms of TV. But we are also controlling very well the costs. And that's the reason why you are seeing the very good results in Colombia. I think we can sustain that and improve the television subscribers. Even with that, I think the fixed revenues are 8% higher than what we have last year. So, all over all, Colombia is doing very well.

Carlos is going to explain to you about the tax.

About the effective tax rate, Mauricio, we have extraordinary moves in this quarter. Some of them have to do with depreciation , but some of them also have to do with the booking of a deferred tax credit. This deferred tax credit, which is important, was the last installment in a series of credits that we began to put on since the end of 2008. We mentioned it in the release of the last quarter of 2008. This was because carry-forward tax losses that we had in the country -- as soon as the auditors realized that they would be -- it was likely that they would be utilized in the future, that led to the booking -- the recognition from an accounting standpoint by way of a deferred tax credit. So, if you do not have these extraordinary items, the effective tax rate would have been 31% for

Understood. So, I guess that that's what we should expect going forward. Right?

That's what you should expect. Yes. It's close to the statutory tax rate, effective tax rate.

Exactly. Okay. Thank you very much, Carlos.

Richard Dineen, HSBC.

Maybe just continuing on the margin question, just in another geography, Peru, we saw pretty good margin performance there; maybe not so much a case of sort of seasonal surprise, but that business is gaining scale. The margins are now in the 40s. Should we expect them to kind of flatten this year and sort of staying there? That's the first question.

And another one, if I may, just on maybe elaborating a little bit more on pay TV. That segment is growing revenues very, very strongly, 80% there. Maybe just some comment on the mix of that growth -- what is cable, what is satellite. And, if it is indeed things like via Embratel, the satellite platform, what is the opportunity to keep growing that segment? Are there other countries you can enter or add satellite to your cable assets? Thanks very much, guys.

On Peru, I think we have a very good year. We grow from 35% EBITDA margin to 44% EBITDA margin. We're growing in market share. We are growing on postpaid. So I think, all over all, we have a very good year. On Peru, I hope we can still grow the revenues. We have a lot of efficiencies in the Company. I think we already merged the fixed and the wireless there, and I think we could have a very good wireless- wireline year in TV and broadband in 2011. I think, all over all, I'm feeling very comfortable on Peru. If we're going to grow the EBITDA this year, I think, depends a lot on how aggressive we could be in the market in the television side, in the fixed broadband. And the other one is how can we contain costs in the Company. So that's more or less what we have to do.

On the TV side, Oscar can explain to you what -- how we're doing in Brazil.

If you see the mix of cable and DTH, 80% of the pay TV subscribers are cable, and 20% is satellite TV. You see Brazil -- If you see the pay TV penetration, it's still very low. It's around 17% of the households already have pay TV. If you compare that with Argentina, it is 52%, or, even with Mexico, that is 36%. We see a huge opportunity to be in the marketplace to grow. And, as well, in the other countries that we have presence of pay TV -- we have presence in Brazil, Chile, Colombia, Ecuador, Peru, Guatemala, Salvador, Nicaragua, Honduras, and Dominicana with pay TV. And, if you see the pay TV penetration with a section, as I mentioned, in Argentina, it's around [20%, the others]. So we see a huge opportunity in the marketplace to deliver with cable in the A/B market and with satellite in the C/D/E segment of the market.

Thanks very much, indeed, for your comments, guys. Appreciate it.

Rizwan Ali, Deutsche Bank.

My question is related to churn. Invariably, in most of your markets, probably with the exception of one, churn increased. I was wondering if that's because you're converting a lot of your prepaid customers into postpaid or there was some yearend cleanup with the subscriber base.

I think it's both that we are being very careful on not having subscribers that are not giving us revenue -- so, we are aggressively disconnecting the subscribers that are not active. And the other thing is we are also moving part of the base from prepaid to postpaid. Both are there. So we think that's important.

The other thing that you could see there that we're being very careful is the subsidies. We have been more careful on the subsidies. So, as we have a bigger base and the base is churning, it's very important that you don't have big subsidies on your handsets.

One other question. You're talking about one network to provide all services. But, with that, hopefully, there will be more bundling of services as well. But we haven't seen much bundling of services. Can you tell us where you stand with regards to that?

Again, the question?

The bundling of services. We haven't seen much bundling of services since AMX has bought Telmex and Telmex International. Any plans on that front?

I think we are doing the job on the network, let's say. In Chile, we are offering a triple-play service, a four-play service and, in Peru, the same, in Ecuador, the same -- In Mexico, we are still separate. We are not doing anything together. But we're going to decide when and how we are going to do things, depending on the convenience for us. And, also, that's, I think -- We need to be ready to give these bundled services. But we want to be careful that, in each country -- how to do it. We don't want to reduce revenue only because we want to do a bundling service. So we want to be careful on the way we do it.

Thank you.

Dominic St. George, Nevsky Capital.

My question basically focuses on MOUs, where, in Mexico, price per minute, according to your statement, fell by 13% and MOUs increased by 10%; whereas, in Brazil, price per minute fell by 20%, and MOUs only increased by 2%. I was just wondering if you could give some more color on the success and compare and contrast between each of the markets and sort of why it's working in one and not in the other. Thank you.

You're comparing Mexico and Brazil?

Yes, just in terms of the MOUs, because, obviously, the price per minute -- they're declining in both -- 13% in Mexico and 20% in Brazil; whereas, you're getting some traction in Mexico in terms of the MOUs, but you're not in terms of Brazil. And so I was just wondering why you're getting success in Mexico but not Brazil.

Well, I think you cannot see the reductions as the 20% in Brazil or 13% in Mexico. You have to see what the price per minute in Mexico and price per minute in Brazil. In Mexico, the price per minute is around $0.045. So I think we are really competitive, and we're doing well. That's why I think the reduction is only 13%, because we have reached to a very aggressive pricing. In Brazil, I think the price is around $0.09. So the reduction is going to be faster there. That's the reason why, in one country, we reduce more than in the other country.

But you're estimating that based on the apple number that we have in the report, and those apple numbers are already deducting the commissions again. So, to the extent -- As we said before in the call, these commission were actually quite important in this particular quarter. You are incorporating that effect into your calculation. I think the important is [wait it out]. The next quarter, you are going to see a normalization of commissions, and you are then going to see measures of the real revenues.

Okay. And then, put in another way, then, how much additional growth do you think you can get in terms of the MOUs in each of these respective markets? Should we expect to see sort of that 10% in Mexico continue?

I think yes. I think, of course, as revenues go down, as the economic situation of the country gets better, I think people are going to spend more. And we are going to reduce the price, so they are going to get -- Let's say, in prepaid. In prepaid, if you spend $10, you get some amount of minutes. If you reduce the price there, for $10, you get more minutes, and the people are using that. So it's immediately the reduction on the price and the usage. So I don't have any doubt that, all over all, not only in Mexico, in all the countries you are going to see increase on minutes of use. In some countries, you are going to see faster reduction on prices than in other countries. But I'm sure that, in all the countries, you are going to see the increase of minutes of use and also the increase on data usage.

Fine. Thank you.

One more thing. Remember that, when you're looking at MOUs, it's [climbing]. It happens that the number of clients in Brazil this year went up by 16%, which is twice as fast as it did in Mexico.

Okay. So that 2% sort of diluted down then.

Yes; exactly. You have -- Brazil's subscriber base increased by 16% in the year. In Mexico, it increased by 8%.

Fine. Perfect. It's very clear. Thank you very much.

Stanley Martinez, Legal & General Investment Management.

I just have two. First is on client acquisition and retention costs. As you pursue the postpaid opportunity more robustly, not just in Brazil but in other markets, how should investors think about the near-term tradeoff between margin and top line growth? Would you expect to spend similar to the MXN26 billion on equipment in 2011 as you spent in 2010 and simply ride the declining cost curve down and do more units? Or should we expect an effect in certain markets similar to what we've seen when you've reinvested in network, such as in Claro back in 2005 and 2006 in Brazil? That's my first question.

I think your question is very -- the answer is very difficult because it's going to depend a lot on the promotions and the aggressiveness of each of the competitors in each country. So we don't know if subsidies are going to get bigger in some countries or less in other countries. I think what we're trying to do is to have less subsidies and better rates. I think that's more or less the strategy that we want to have. That's the strategy. Then you have to go country by country and do what you need to do there. So one thing is what we want. The other thing is what your competitors let you do.

So we -- You know we, America Movil, have been -- since the last ten years, we are more on the growth side. We are not -- we also have been very careful on the costs. We want to have better profits. But I think the main idea today is the main strategy is the growth, and that's where we are going. I think Latin America is the region where we want to be, and they have a very good economic situation in the countries. Some countries are growing more; other countries have less penetration, like Brazil, by an example. It only has 85% penetration. So we are deciding on the growth in that country.

Thank you, Daniel. That's very reasonable, and it ties into my second question, which is a bit of a broader, strategic question on M&A. The situation within region for inorganic growth opportunity for AMX really hasn't changed that much in the last several years, aside from a few small operators in Chile and the Caribbean. Of course, in the past, there was Telmex International, which could be the vehicle for pursuing some potential acquisitions out of region. I'm just wondering. If America Movil were to pursue expansion outside of South and Central America, perhaps in eastern Europe or, opportunistically, in another continent, thinking more Africa, would this be funded on America Movil's balance sheet or possibly out of a separate, non-recourse entity, as the latter might provide you some better option value for AMX while those operations are more in growth and investment mode?

Well, I think, first, we need to have -- to see what's going to be the investment, if it's going to be outside, as you said, of Central and South America, if it's going to be in eastern Europe or in Africa. And, if it's under the financial terms that we think -- under the strategy of America Movil, then I think the investment would be in America Movil. If it's not related to America Movil, maybe we could do it outside of America Movil in the Group. But, if it's related to telecommunications, I think we could do it in America Movil. So that's where we're -- my responsibility, our responsibility here is to try to find where could be a good place where we can invest outside. At this moment, we are not finding outside of Latin America any good opportunity, but we are going to be open, as always, to see if there is some opportunities in other regions.

Okay. Thank you very much, Daniel, and well done on good results across the [piece].

Andres Medina Mora, GBM.

My question is regarding dividends and buybacks. Where should we expect (inaudible) for the year? Thanks.

Well, we have been returning, as we said, around MXN4 billion to MXN5 billion on share buybacks and dividends.

I would just reiterate that we have the same policy that we have had for quite some time. We'd like to maintain a capital structure in which our net debt is not -- is less than one times EBITDA. Today, it's at 0.84 or 0.85 times EBITDA, so we are practically there. It's a policy that, given that objective of working capital, we will distribute the cash that we may distribute to the extent that we have not utilized it for acquisitions. I mentioned earlier it in the call as well. So to what extent are we going to distribute, either by way of share buybacks or dividends, it's a function of our capital structure and the alternative uses for the cash that we are generating. In the absence of any alternative uses, we can distribute as much as our COFIN. We mentioned that the COFIN that we have available from last year is MXN86 billion, plus some leftovers from prior years; probably, as much as MXN100 billion. Those are all the parameters I can give you.

Great. This is Andy Campbell. I'm afraid we're out of time. So I would just like to thank Daniel, Carlos, Oscar, Daniela. Thank you, all, for your participation today. And I'll just hand it back if you have any closing remarks.

Thank you, Andy, and thank you, everybody, for the call.

Great. Have a nice day.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.