America Movil SAB de CV (AMX) 2011 Q1 法說會逐字稿

Good day and welcome to the AMX first quarter 2011 results conference call. Today's call is being recorded. At this time for opening remarks and introductions, I'd like to turn the call over to Mr. Mauricio Fernandes. Please go ahead, sir.

Thank you, Matt. 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 American Merrill Lynch. We are honored to host this quarter's conference call to discuss America Movil's first quarter 2011 results. I'm in Sao Paulo, Brazil and from America Movil Mexico City we have Senor Hajj, CEO Carlos Garcia-Moreno, CFO, and Daniela Lecuona Torras, 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, Mauricio. Thank you, everybody, for being on the call. As always, Carlos is going to make a summary of the first quarter 2011 financial and operating.

Thank you. Good morning, everyone. Thank you, Mauricio, for hosting the call.

Well, we finished March with the 284 million accesses. That's 12% more than a year before. Wireless subscribers totaled 231 million and fixed-line RGUs, revenue generating units, 53 million, having increased 12% and 15% respectively from March 2010.

If we open up growth in the RGUs, what we have is broadband accesses rose 17% and PayTV accesses 34%. We added 6 million subscribers in the first quarter of the year. 1.1 million came from Brazil, 1.5 million from Mexico, and approximately 750,000 from each of Columbia and the US.

Our Brazilian (inaudible) were 52% higher than the prior year, and those in Mexico 38%. The increasing RGUs that took place in the quarter was of 1.5 million accesses. This increase exceeded by 45% that seen the prior year.

First quarter revenues were up 6.3% from a year before, but that is 7.3% at constant exchange rates to MXN156 billion with nearly two-thirds of them originating the wireless platform. Here you want to remind everyone that the Mexican peso appreciated, which has impacted all of the currencies and that's why at constant exchange rates the rate of growth of our operations, the [revenues] of our operations, is in excess of 7%.

Mobile data revenues continued to be a major source of service revenue growth, expanding by approximately 28% in Latin America and the Caribbean, followed by fixed data revenues that increased 7.5%.

Voice revenues rose 4.3% on the wireless platform, but declined at the same rate on the fixed line one. PayTV services continued to perform well, with 67% service revenue growth.

Our South American operations registered a 9.1% increase in gross service revenues. South America was the only region where our operations offset revenue growth in all product lines.

In Mexico revenues were up 1.7%, with those coming from wireless climbing 5% and those coming from fixed line declining 4.9%. While in the US, Tracfone registered a 43% revenue increase and remained our strongest operation in terms of top line growth.

Airtime traffic in Latam rose 14% year-on-year. With the exception of Chile and Peru, that saw exceptionally high rates of traffic growth, 50% and 28%. (Inaudible) experience was up between 10% and 18% with Mexico at the high end of the range.

Prices per minute of voice came down by an average of 11% in the region, with Mexico, Paraguay, and Chile leading the way, with declines of approximately 15%.

Third quarter EBITDA came in at MXN62 billion, practically flat with respect to the year earlier quarter. And the 10% reduction in Telmex' EBITDA countered the 8.8% increase in the EBITDA of our other operations.

All EBITDA, that is the EBITDA before subscriber acquisition costs, increased in all operations relative to services revenues with two exceptions. Tracfone in the US, which has been moving to a higher volume, lower margin product mix. And Brazil on account of payments of (inaudible) to the purchase of content because of the very rapid growth in PayTV accesses with indirect taxes because we are having to pay more for (inaudible) and (inaudible) on interest structure and clients, and with customer service.

Our late financing costs came down by half from a year before even though net debt paid [on the sliding] peso terms helping drive a 12% increase in the Company's net income to MXN23.5 billion.

Our current flow allowed us to fully fund our capital expenditures, our MXN17 billion, acquire stock of Telmex Internacional and Net Servicos worth MXN1.2 billion, effective to the issuance to shareholders in the amount of MXN12 billion, and reduce our net debt in flow terms by MXN7 billion.

More than half of our EBITDA, which is 53%, more than half our EBITDA was consumed by items with a very strong seasonality, namely taxes and working capital.

At the end of March, our net debt totaled MXN211 billion and that's $17.7 billion. And was equivalent to 0.35 times EBITDA or (inaudible).

We are currently closing two medium terms syndicated bank facilities for $4 billion. They will be closed today.

On other topics, we were notified a few weeks ago by Cofeco in Mexico of a fine to be levied on Telcel in the amount of MXN12 billion. This fine is appealable before Cofeco itself. Telcel has 30 business days to present its case. Eventually the fine, if we appeal, it can be taken to the courts. The Company believes the fine to is illegal and arbitrary.

Well, thank you very much. This is the summary. I will pass the call back to you, Mauricio.

Thank you very much, Carlos. As participants line up for Q&A, I'll kick off, just asking two questions. First, how do you see the competitive environment in Mexico going forward on the back of the acquisition of a stake in user sale by Televisa? And secondly, on the AMX results, how do you see the year-on-year declining margins and whether you see upside to current levels of and if possible by when that would be great. Thank you.

Well, Mauricio, the first question, I think in Mexico has a lot of competition with our four competitors in the market, it's Telcel, Nextel, Telefonica, and then Iusacell and Unifon. What you are going to see with the acquisition of Televisa in Iusacell is that one of these four competitors is going to have more money to invest, is going to be stronger, and there is going to be other -- more competition in the market. So I think that's the way we're seeing things.

We have a lot of competition in Mexico. Prices are down around 15% year-on-year, we have a very competitive price when you compare it outside Mexico, when you compare it with (technical difficulty), when you compare with Asia or with Latin America, Mexico has a very competitive price. And what we still have not a very high penetration. We still are in the 85% penetration in Mexico, so with this acquisition I think Iusacell is going to have a lot more money to invest and we're going to have more competition. That's the way I see this acquisition.

In terms of the margins, what -- I'm going to repeat a little bit what Carlos said. First all except Tracfone and Brazil, I think all the companies has a better marginal increase in revenues and increase in margin. The core EBIDTA of all the companies has been growing. I think we feel very comfortable on the operation in each country. We have been growing not only in wireless, we have been growing also in TV and in broadband in almost all the countries. We have been growing more on (inaudible) space. The (inaudible) space has been accelerated, it's more costly. And except Tracfone, because in Tracfone what we are seeing is that we're moving to a trade talk plan and we think more volume instead of more margins, but at the end I think that's a good model for us and we feel very comfortable with that model.

And then you see Brazil. Still in Brazil I think the growth is very important. We're looking for the growth in Brazil and the main focus as we have been seeing is for the last year we are going to still grow a lot in Brazil and we want to prepare the growth in Brazil.

But we are -- where we're investing in Brazil, we're investing in distribution, we're still investing a lot in advertising, we're trying to position our brand collateral better and we're going to still invest in the positioning of our brand. We're investing more on the customer centers, call centers, and all related to the customer care services. And also what Carlos is saying in Brazil we're growing a lot in TV and the cost of content has been very important.

So those are the segments where we are having and increasing the cost in Brazil. Otherwise, I think we feel very happy on the production in Brazil. I think we're coming on track in the wireless business. We're starting to gain market share, we are gaining market share in postpaid. We're getting good customers. On TV we feel very comfortable, we are developing our business in TV and in broadband also.

So I think that's mainly what is happening. Otherwise, all the other operations they are doing very good, Mauricio.

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

(Operator instructions) Tomas Lajous, UBS.

I guess one thing if you could clarify, or actually two things. The first one is in the Cofeco fine, and how this is related to the Cofeco rulings on termination? What do you expect of this? And operations and any interplay with pay television permits for (inaudible). This seems to all be related, and if you could comment on all of them, that would be fantastic.

And the other thing is that you seem to be having some issues with mobile data services in Brazil and Mexico, and in Mexico with voice as well. Can you offload mobile data into the fixed network to release capacity? And if so, when would you expect to start? When should we expect to start seeing that?

The first question on the interconnection rates, I think the position that we have on the interconnection rates is we have been lowering interconnection rates for the last five or six years, every year we have been reducing the price of the interconnection rate. We are not again reducing -- reduce the interconnection. I think it's clear that the government wants to reduce the interconnection at a faster pace. What we think here is that it will reduce it at a faster pace. Maybe what it going to happen is that we're going to have a lack of investments in the sector. We hope we don't have that, but we are not against the reduction of the interconnection.

Today the interconnection, if you review interconnection in Mexico, the interconnection is really competitive to other countries. So that's the way we see that. And that's the way we feel about that.

Carlos is going to talk a little bit about the fine in Cofeco and how we feel about that also.

Tomas, just to have a good understanding of what this means. The fine imposed by Cofeco on Telcel is based on this premise that Mexico and the connection rates are substantially higher than those prevailing in other countries. And the (inaudible) raise was somehow forced by Telcel and our competitors. And that following that, Telcel affected a predatory practice by charging its clients much less than it charged other (inaudible) for the use of its network.

But for one thing, Telcel does not set interconnection rates and the ones prevailing in the period 2005-2010 were defining an agreement among operators that was subscribed by substantially all the operators, including all mobile operators.

As regards interconnection rates, we have been reviewing the available information. And this is public information, so all of you can verify it independently.

Looking at rates in Western Europe, comprised in 17 countries, it appears that in dollar terms prices in Mexico were below the medium prevailing in Western Europe, in each of the years 2006 through 2009, and were only marginally higher in 2010. Throughout this period, the Mexican peso was at times strong and at times weak, but this did not alter the fact that prices were typically lower in Mexico than in Western Europe, which constitutes the core of the OECD congress.

In the US and Canada, even not having the connection rates to the extent that they do not have a calling (inaudible).

Finally, what we have been able to determine from public information is that the average price per minute of voice, based on almost identical relationship in Mexico and interconnection rate in Mexico as in Western Europe. That is to say, the average price per minute of voice on the -- for [build profit] is (inaudible) of interconnection rates in Mexico have been the median in Western Europe.

So at least looking at all this information, that again it's public information. Some of it is contained in the (inaudible) wireless matrix, because at lot of the companies in this region give this information, and if you look at the information in interconnection rates again, maybe it can be obtained, everybody can verify that it -- the same things that we have looked at. So from our perspective, these arguments made by Cofeco are completely baseless.

And one more thing finally, what Cofeco is saying is that we're killing competition, so what you could see is that a lot of these companies had more revenue, increasing market share, and better margins. So I don't think in that case where we are (inaudible) killing the competition. But at the end of the day, we are going to usual legal actions and all remedies to challenge these.

And your other question, Tomas, is on the mobile. I think what you need is we're growing a lot on data traffic in Mexico, in Brazil, and all around Latin America. And the way to do that is to invest. Now we need to invest in to do fiber to the node, to have a good backbone, to of course use in mostly all of the countries we have the fixed network, so we are doing one network. That really is one of the big synergies that we have with the fixed -- with Telmex international to use all the backbone and all their fiber that they have to upload all the data that we have.

So it's very important what we're using, but at the end of the day what you need to do is to invest because there's going to -- we have a lot of data traffic and I think we're going to have more data traffic in the future. So that's the reason why we're going to invest more than $8 billion in CapEx in all the countries to use that for all the data that we are putting -- that all of our subscribers are using. So that's mainly the -- a lot of this CapEx is going to put more data capacity.

Andrew Campbell, Credit Suisse.

Just going back to Brazil and the margin level that we saw in the first quarter, was there anything non-recurring that we should consider in that margin level?

And also, looking at the Embratel numbers, it seemed that most of the margin decline was on the wireless side of the business rather than the fixed line side of the business. And so my question was just whether or not, in light of the investments that you're making in distribution, brand, customer care, as you described, whether or not we should be looking at this as somewhat of a baseline margin now going forward? Or has there been any change really on the medium- and long-term outlook for margins in Brazil?

What I can tell you in Brazil, Andrew, is that our main focus in Brazil today is growth. Okay? We are having a very good growth on postpaid, we're gaining market share on postpaid and we're growing a lot in prepaid. I think we have 1.8 million subscribers. So a lot of that is acquisition cost. A lot of the cost related is acquisition cost. We have around 52% net tax increase year-on-year. So and in terms of postpaid we have seven times more net tax postpaid year-on-year. So it's a lot what we're (inaudible) and you know that the postpaid is a lot more costly at the growth than prepaid.

And as I'm saying, we have other costs related on that. So we are having customer care call centers. It'd very important. We are giving and we're trying to give I think that for us the -- to give a better service to our customers is going to be very important in the future. You have to take care of your customers differently, no? When you have a lot of prepaid, it's very easy, it's a lot of voice and you don't have to do a lot. But when you're starting to use smart phones, and you're starting to use data, then you have to take care more about there's a lot more questions in the customer care centers, in the call centers, so we're investing in that.

The other thing to really important is related to our brand, okay? Brand it's being -- we're investing a lot. I think the Claro brand is very good, but we want to still invest and to position very good our Claro brand in Brazil. So we are investing a lot more than what we have been invest last year, so there's another place where we have increase in cost, it's in our advertising brand.

So those are more or less. The other thing is you are saying not in the mobile, but more in the TV is the content. Now we used to have -- I think we grow in Brazil in one year maybe 700,000 customers in PayTV, no? And when in PayTV the business as you reach more and more customers then you are allowed to have better price on the content. And we hope that at the end of this year we can reach some levels that we can have their pricing on the content.

So I think more or less is what we're having, but for me the most important thing is that we're growing 7 times the postpaid customers, the net add postpaid customers year-on-year, and postpaid is much more costly than the prepaid customer and that's where we are having the big increasing cost that we're having last year.

And as I told you, Brazil we're looking for growth. I think the economies in Brazil in doing very well. The market is growing a lot, so that's something that we're looking for growth in Brazil.

And here too as -- to (inaudible) anything in the case of Brazil on the (inaudible) platform, the procurement of content is linked to a very reputable business. And just to put it in perspective, (inaudible) Brazil, which is a product that is, it's a DTH product that is being sold by (inaudible), has moved from 400,000 clients a year ago to 1.4 million clients today. And it's growing very, very rapidly. We expect it to continue to grow very, very rapidly and (inaudible) wins, a lot of synergies with what we have been doing with Net Servicos.

So it's something that you need to keep in mind. The old America Movil -- in the old America Movil TV was not important, but these days in Brazil certainly it has been growing very rapidly.

And all overall, is that we have Claro that I think is developing good. I'm feeling very comfortable on the operations. We have Embratel that is a Company also doing excellent. We have the satellite business, we have Net Servicos, so the group in Brazil I think, America Movil in Brazil is really well supported, it's in a very good position to compete against any competitor that we have there.

So I'm feeling really comfortable on our operations in Brazil, no? But still we have a lot of work to do. Still we have to take advantage of the growth of the market, and we have a lot of things to do, but their position that America Movil has in Brazil, I think it's in very good terms, no?

Andre Baggio, JPMorgan.

I just want to clarify one thing on this recent decision to lower interconnection rates. This decision was taken by Cofeco and you can appeal to the Supreme Court. Is this correct?

On the interconnection rate, the way it works is you have an agreement, then when the agreement is finished, you never shape the agreement with your counterpart, okay? If you don't get on an agreement with your counterpart, then Cofeco gets in. Cofetel -- sorry, Cofetel gets in and decides for an interconnection rate spot. You can appeal that if you are not -- if you decide that the way Cofetel decides the cost of the interconnection rate was right. And that's the way it works in Mexico.

It doesn't have to do anything with the Cofeco, no?

So now you can appeal to the courts, correct?

Well, we have an appeal for maybe 2006 with (inaudible) extending 2006. We don't get on an agreement on that and we have been having a dispute in the courts since 2006.

So that's two different things, Andre. On the one hand is the fine of Cofeco that I mentioned. And on the other is our solution by Cofetel of a dispute on the connection rate with, I think it was with Avantel and, excuse me, [Letra], which basically set the interconnection rates with this Company to MXN0.39. Okay? And I think yesterday we were notified of a similar resolution on the part of Cofetel, okay?

So it's two separate things. One is the definition of interconnection rates in dispute by Cofetel and they have been -- they have ruled in two or three cases recently MXN0.39 per minute, that's all we should have. And then separate from this is the fine put by Cofeco on the grounds that supposedly the interconnection rates were too high in Mexico.

We go next to Andres Medina Mora, GBM.

I just have two questions if I may. The first one is regarding these interconnection fees, while you are on trial or in court, which is the fee that is actually being paid?

And the second one, it seems like you've been really successful on Via-Embratel. Are you considering expanding this solution through Latin America? Thank you.

On the Via-Embratel, Oscar Von Hauske can talk. I think we have been very successful on Via-Embratel in Brazil. And we're doing the satellite business, we're doing that also in other countries. So Oscar can talk a little bit about that.

Sure. We are offering satellite TV services in 11 countries of the 18 countries that we have. And it's just (inaudible) as well in Chile, we've been really successful in PayTV. And as well in Peru and Central America. We already have 2.3 million PayTV customers under the satellite technology. As you know, as well we're offering PayTV through HFC networks and we have like 9 million customers through HFC networks. So we are using the same model that we are doing in Brazil in the other countries.

And on the fee, I think with [extent] they have been paying us a lot of different interconnection rates. And they have been paying us MXN0.60 and then MXN0.40, and then MXN0.80 (inaudible). In these four or five years that we have fighting for this interconnection, they have been paying us a lot of different rates.

Grey Powell, Wells Fargo.

I just had a couple of quick ones. Can you quantify the impact that increased selling and marketing and handset promotions had on margin trends in Mexico? And then just how should we think of margin trends in Mexico going forward? Should they sort of remain in this low 50% range?

Yes, I think we are -- we think that in (inaudible) sales in the wireless side of America Movil, we think that we can maintain for this year over 50% margins that we have. Unless there's a big reduction on the interconnection rate or something like that, I think there's no problem to maintain our 50% margins in Mexico, no? Even that we should spend more on advertising or even that we grow more on the postpaid side I think, or even that we have to invest a lot in data.

I think the other thing that will happen is that we have been growing a lot with the smart phones. The smart phones you need to give more subsidies, more (inaudible). But we can maintain our 50% margin.

Ric Prentiss, Raymond James.

Can you talk a little about ARPU in Mexico and what you're seeing as far as elasticity? And then a second question, in the United States there's been a lot of discussions about fourth generation LTE. A lot of networks being rolled out and in 2011 and 2012. A major competitor today was talking about they think there'll be an explosion of LTE handsets in the United States in 2013 or 2104. As you look in Latin America, a lot of growth potential just on 3G, but when do you think 4G will come down to your markets? And when do you need Spectrum?

Well, I think we have Spectrum in some markets. In Mexico we have Spectrum for 4G, in Brazil we have Spectrum for 4G. And we are evaluating the 4G technology, deciding who's going to be our vendor, where we're going to invest. But I think in 2012 we could be ready to launch 4G technology in some countries, depending on the availability of Spectrum that we have in each of the countries. I think in some countries there still we're going to see some options of Spectrum. Let's say I think in Columbia we're going to see some options at the end of this year. And in Brazil we have, in Mexico we also have, no?

In terms of the ARPU, I think we have a reduction of ARPU because we have a reduction of 2.7% because we have a reduction of our price per minute of 15%. And our (inaudible) only grow 8%. So it's why you are seeing the ARPU reduce a little bit.

And in the other side, also in Mexico, we have a very good net adds that it's 38% more than what we had last year. So with increase of net adds plus the reduction on prices, that's what we're not compensating totally the ARPU. And also we have a little bit the compensation that we have in Mexico City, the minutes that we gave to our customers because the interference problems that we have in Mexico. But I think ARPU should maintain that. We are growing a lot on data, but the price per minute has been reduced by 15%. So that's really the reason of the reduction of the ARPU.

Rizwan Ali, Deutsche Bank.

Two questions. One is does Cofetel have the ability or authority to change the interconnection agreement you have between American Movil, Telefonica, and Telmex?

And the second question is when do you start bundling of services with Net Servicos in Brazil? Just (inaudible) Televisa is not doing it (inaudible).

I'm going to answer the question about Net Servicos. (Inaudible) As you know, in Net Servicos we have really been really successful on the triple play that is voice, data, and video through just one single offering. Around 50% of the customers already have triple play. So now we are working with Claro which kind of offering we could do together. But to be honest, we see the markets not ready to go ahead with this proposal. And we will see these maybe on the second half of the year, something like that.

And on the question is if the interconnections goes to MXN0.39, what's going to happen with our agreement between Telefonica and Telmex I think is what you're asking. I don't know exactly what those Telmex is going to decide because if the reduction goes to the end customer, then I think all the rates are going down and maybe Telmex wants to reduce to be competitive.

If the reduction don't goes directly to them, customer maybe, we are not going to move that. It's an agreement of most favored nations now. Telmex can decide if they want to have the same price as the other ones. But that's a decision of Telmex.

Walter Piecyk with PTIG.

Daniel, at your investor meetings, I think probably for the past two years at least, when you've talked about smart phones you've always profiled BlackBerrys and talked about their low usage and how that was good for your network. I think [Remist] spoke last week about how sales of BlackBerrys were maybe disappointing in Latin America. Can you talk about the type of products in smart phones that people are adopting in Latin America?

Well, they are moving really fast to smart phones, really fast. And if they are going to move faster as we have better prices in Latin America of the smart phones. So I think you are going to see a big switch from a normal phone to a smart phone. In all Latin America they are starting to use more data. Not only moving to a smart phone, they are starting to use more Internet, they are using more content in the phone. They are using also email. So there's a lot of things that people is adopting and you're going to be surprised the speed to switch from a normal phone to one smart phone.

But Daniel, are you finding that these customers are going to be adopting --

We are having very good prices on smart phones. The smart phones maybe at the beginning of last year they were around $450, $500. Today you can find some handsets at $200, $180. And I think at the end of the year we're going to find cheaper smart phones and with a very good operating system. So that's very important and if they have a good operating system then they are going to use more and more data. So that's the way that the market is moving.

James Rivett, Citigroup.

Just a quick question if I can. Given the declines that we've seen in the dollar, do we assume that your CapEx forecasts need to move for this year? Or are you basically just going to take that saving that you've got and buy more equipment? Thank you.

Certainly. I think if we can buy more things, we'll do that. As (inaudible) saying, I think this move towards data is happening very, very fast and we can do with all the (inaudible) we can. (Inaudible) we can someday.

Can I just ask you a quick follow-up? I'm sorry to keep coming back to this Brazil question. I wonder whether you could give us some sort of timeline? You've seen fantastic subscriber growth over the last sort of two quarters, but your revenue growth in that market in mobile is still lagging behind your competitors. When do you think we see this pick up to sort of the level that your competitors are at, sort of 10% plus? Are we thinking is it one quarter, is it three quarters? Sort of give us some sort of help there. Thank you.

I mean it's been ramping up and I don't know. I remember that number one, not everybody has the same thing on the wireless revenues. So you can see that different competitors are working different things on these revenues. And secondly you have to consider and we have said it often enough, that we are doing IFRS and that means that in a way IFRS at least we are netting out the commissions paid to the distributors from the serviced revenues, okay? Which is not what is being done by the competitors. So okay, let's try to see if we can compare apples to apples.

I think that we are growing not only in line with the market, we're growing probably better than the market. And as Daniel pointed out, I think that we have been having a lot of success in expanding our prospect base. And that obviously comes with a bonus in terms of revenue growth down the road.

So that's something for you to determine when you're going to be seeing that. But I think what I would like here to highlight again is what has already been said before. The field it's marketing reduction came about because of two things. One, which was obviously the cost of growing its subscriber acquisition cost essentially. That's number one.

And then number two, on the structural part, what we would call core EBITDA, it had two significant effects. One, which was the procurement of content, which we have already explained why PayTV's not something that was all that important in your model probably, James, it's something that you need to take more into account down the road. So here we have the procurement of content, that's a structural thing.

And then on the other hand we have what Daniel was saying about publicity. We are now spending a bit more on the brand and we -- that is the two single most important things that had an impact in the first quarter and that's it. So those are not things that concern us. I think in the end, as Daniel said before, I think what we -- we are comfortable with the actual state of the operations in Brazil. I think that they are doing very well. They are going according to plan and I don't think we need to add anything more to that.

Gil Alexander, Darfil Associates.

Thanks for all your color on your EBITDA. When you talk of Mexico and you talk EBITDA of about 50%, are you being a little bit conservative or does it just trend down there to the 50% level?

Well, I think 50% levels are not conservative. I think they are good levels and what we said is depending how aggressive we could be on pricing, how aggressive we could be on growth. Growth is very important on postpaid growth. So depends a lot on that. That's mainly what I think on the 50%.

We have been having from 51%, 53%, 54%. That's more or less what we're having quarter-on-quarter, depending on the growth of the subscriber base now.

I want to thank you. And just one question. When does the two for one stock split take place? And what are your repurchasing plans?

I think the two to one I think it going to take us around 60 days. I think in 60 days we're going to have the split. And what was the other question? About the buybacks? Well, that's -- Carlos can talk a little bit about the policy that we have now.

Buybacks and dividends, as you know have been basically tied to our cash flow. We commit ourselves to our capital structure of not more than 1 times net debt to EBITDA. And given that we basically (inaudible) that we do not use of the money in acquisitions, as that was partly done last year. To the extent that we don't do that, then all the money is available to distribute back to the shareholders.

(Operator instructions) Katie Blacklock, Sloane Robinson.

I just wanted to ask another question on the strategy in Brazil. The postpaid growth has been strong for a couple of quarters now. And I think postpaid's now about 20% of total subscribers. Is the aim to grow that mix even further towards postpaid? Or should we expect the mix to remain at their current kind of levels?

I think in terms of the growth in the market share in Brazil in postpaid, we're gaining market share in postpaid. We're a very important player in the postpaid market in Brazil. If the balance change a little bit it's because we are growing more on the -- we want to grow more on the prepaid. We are not only on the postpaid side, we want to be also on the prepaid side. Both markets are important.

But also the balance is that we are not moving postpaid and do prepaid or do prepaid and less on postpaid. I think what we want is we are really well positioned in the postpaid market and we want to be better positioned in the good prepaid market. And when I'm saying the good prepaid market is not selling only SIM cards that they are not going to have a good revenue in the future. So you don't have big costs, but you don't have good revenues.

So we're also focusing the good part of the prepaid, in the good subscribers on the prepaid market. So that's where we're focusing. And also in the data plan in Brazil. We're really interested to see more data plans in Brazil.

Because I do understand that there's a cost associated with the type of growth we've seen over the last two quarters, but yes it has sort of struck me that the usage trends have been weaker than I would have expected given the increase in postpaid users on the base. So we've seen and we'll use full 2% this quarter and fairly weak growth in the fourth quarter of last year. Is that simply a function of users coming onto the network and taking a while to really ramp up their usage? Or what's happening there in terms of the type of users that you're bringing onto the network?

Well, if you look at MOUs they are down 2% year-on-year. But the number of subscribers in Brazil, if I remember correctly, is about 15% greater than last year. 17% greater to be exact. So I think US levels are perfectly well and this change into postpaid is more recent. It will have more of an impact down the road.

(Operator instructions) Randall Pollock, Vanguard.

Can you comment now that you're growing prepaid where you're going to be -- are you going to be showing content and media on mobile phones? And where are you going to be getting the content from? And cost?

The content in smart phones? Well there's a lot of content in there, no? You can download music, you can -- I think the content in the phones are different then the content in the TV. I don't think in the PayTV it's exactly the same content. You could see that the big content in mobile phones is all the applications that we're selling. It's going to Internet, it's games, a lot of gaming, a lot of music. So I think that the content is different what the people is using in the mobile phones than what they are seeing in the TV. I don't think they're exactly the same content.

Of course, they are going to see some news or some football games, let's say, but I don't think that it's -- the content in the mobile phone is exactly the same as the TV.

Walter Piecyk, PTIG.

I think I got cut off last time. Just on the Brazil, I think in the last month or so you might have reduced your rates specifically with regard to long distance on the wireless side of things. I was just curious whether you plan to make more aggressive rate cuts in Brazil going forward in order to stimulate growth?

And then just a bigger, broader question. In your EBITDA growth on a consolidated basis was -- basically there was no growth this quarter. When you look to returning to growth in future quarters and years, is it really PayTV that's going to drive that growth? Or do you expect some additional margin improvement to occur in wireless across your markets? Thanks.

Well, if you saw ex-Telmex, what Carlos said at the beginning of the call, we have 8% EBITDA growth, almost 9% -- 8.8% of EBITDA growth. So we're still growing at the EBITDA. What we have this big reduction is because the Telmex Mexico. But ex-Telmex, we're still growing a lot.

We think that the PayTV business is going to be very profitable in the future, that's why we're investing a lot of money there. And the PayTV is more like a unit to reach a volume of subscribers and when you have that then the cost would be reduced in the content by an example.

I think Telmex is something that we need to focus on. And it's something that we will be looking at down the road. But we think that we -- the trends are -- the downward trend in revenues is not going to continue forever. And that's going to grow to a larger Company to come back in terms of EBITDA at a later point probably this year.

And more on that, going forward we have more applications, mobile banking, e-commerce, advertising. There's a lot of the other businesses that they are coming in the wireless side that's related to data. So there's some other places where you could see that we're going to have growth in the future.

Can you just go back to the Brazil question please? I mean the -- I know it's a little bit more specific, but Brazil's obviously a large market. Any comment on your pricing strategy there? I believe over the past month or so you've gotten a little bit more aggressive on the long distance pricing for the wireless customers there. So is that going to continue? Do you anticipate that getting more aggressive? I think you were charging a fixed rate for a certain number of minutes for long distance. Thanks.

Yes, we have been a little bit more aggressive on the long distance as we're giving some customers the long distance as a local call. There's a trend that we have been seeing in the Brazilian market, and I think it's -- we're getting more traffic doing that. So that trends that are happening in Brazil and I think they're still -- you're going to see more reduction on prices and in a market like Brazil that is so big and so dynamic, you are going to see new promotions on new things in the next couple of months, no?

Most in Brazil are still low, 90 minutes, so there's good room for improvement on that, no?

Mathieu Robilliard with BNP Paribas.

Two questions please. First quickly on Brazil, besides you have you seen other players being a bit more competitive during the Q1 and up to date?

And second, just a more broad question, when you think about your businesses and your targets, do you generally try to focus on market share subscribers or do you look at market share of revenues overall? Thank you.

Well, I think in Brazil, on your first question, we have very good competition in Brazil. All of them are good competitors. And they are big companies with a lot of money. So there we have good competition in Brazil. And we're looking for growth on subscribers. Of course revenue is more important than subscribers, but revenue are not going to grow if you don't grow the subscriber base or you don't sell something else to your customers. So both are very important for us. The growth in subscribers and the growth on revenues.

And I think we can get the last question, Matt.

Jeff Fan, Scotia Capital.

My question is your view on the US market. I guess in the past month, a couple of months ago, AT&T announced that they're interested in T-Mobile, so there may be some consolidation down the road, which may provide you guys with a bigger opportunity perhaps in the prepaid and lower end market. Wondering if you can comment a little bit on the US market now and what criteria you're looking at in whether or not to further invest in that market.

Well, I think we're really happy how Tracfone is developing in the US. Still the merger between AT&T and T-Mobile, if that's going to happen, I don't know exactly what's going to be the benefits for Tracfone. What I see is that today we have a very good product. We're really focused on the prepaid market. Our revenues are growing. The margins have been reduced because we are having more subscribers, higher cost on those subscribers. But we are really happy the way we are doing things in the US. And also we don't have any other plans other than really be growing the prepaid market on the US with Tracfone at this moment.

Do you see a need to own a network to continue to execute on the strategy?

No, no, our strategy has been an (inaudible) and we still want to be an (inaudible). We don't want to -- to have a network in the US you need to invest billions and billions of dollars and I don't think we are in the position today still doing that. The way we are moving on US through Tracfone is a strategy that we want to take.

Thank you, everybody. And thank you, Mauricio, for hosting the call. And I don't know if Mauricio you want to say something?

Yes, thank you very much, Daniel. And on behalf of Bank of America Merrill Lynch I'd like to thank you, Carlos and Daniel for the opportunity of hosting this quarter's call. And have a great day, everyone.

Thank you. Thank you, everybody.

And again, that does conclude today's call. Thank you for your participation.