America Movil SAB de CV (AMX) 2011 Q3 法說會逐字稿

Good morning, my name is Thea, and I will be the conference operator today. At this time, I would like to welcome everyone to the third quarter 2011 earnings' conference call for America Movil AMX. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. (Operator Instructions).

I will now turn the conference over to Miss Vera Rossi. Ma'am, you may begin.

Thank you. Good morning. This is Vera Rossi and on behalf of Barclays Capital, we are pleased to be hosting America Movil third quarter '11 conference call. Speaking today will be Daniel Hajj, CEO of America Movil; Carlos Garcia Moreno, CFO; Oscar Von Hauske, COO; and Daniela Lecuona, IR Manager.

I would like to turn the speaker over to Daniel Hajj. Thank you, Daniel.

Thank you, Vera. Thank you everybody. Thank you for being in the Americas Movil third quarter result. Carlos Garcia Moreno makes a small summary of the results; Carlos?

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

Well, America Movil added 5.5 million wireless subscribers in the third quarter; slightly more than a year before, bringing the total to September to 16.4 million, well above the budget for the period.

Our greater coverage and data capabilities have been instrumental in our being able to expand rapidly our postpaid base. At 22%, it's rate of growth was slightly more than twice that of prepaid. Absolutely all our operations, no exceptions, increased more rapidly the postpaid base and prepaid one.

Fixed line access has increased by [2.1 million] units, or by 13% year on year. With PayTV subs growing 34% (sic - see page 4 of press release). With 12.5 million clients, America Movil has become the second largest PayTV company by client outside the US.

At the end of the month we had 241 million wireless subs, 11% more than a year before. And on the fixed line platform, 56.6 million (sic - see page 4 of press release) revenue generating units. Taken together, we had almost 300 million accesses at the end of September, 12% more than a year before.

Revenues were up nearly 8% from the year earlier recorded, 8.6% at constant exchange rates to MXN167 billion, with Mobile revenues expanding 10.7%, to MXN108 billion, and Fixed Line revenues increasing 3.2% to [MXN60 billion], helped along by PayTV revenues that [post] 58% year on year.

As in the last several quarters Mobile revenues were driven by data revenues, which increased [26%]. The revenue figures reflect the impact of the 70% effective reduction in mobile termination rates that took place in Mexico last May, although part of the impact of this reduction had already been incorporated previously. The third quarter was the first one reflecting the full impact of the change.

Absolutely all our operations registered revenue increases from a year before, with growth rates in Colombia, Chile, Ecuador and Peru in the teens, and that of Argentina above 20%. TracFone's revenues continued to increase rapidly, 35% year on year.

Our South American operations presented strong revenue increases across all product lines, whereas Mexico, Central America and the Caribbean saw solid increases in mobile data revenues, but continued declines in fixed line voice revenues.

EBITDA totaled MXN64 billion and was up 1% year on year, or 1.8%] at constant exchange rates, as costs increased more rapidly than revenues, principally in Mexico and Brazil. This came about as a result of work being done to expand the working capacity of fiber networks, including backbones; metropolitan rings; backhaul; fiber to the node and to the home; and generally all the elements of IP-MPLS networks; of greater maintenance expenditures, including the replacement of copper by fiber; of the accelerated growth of our postpaid base; and in Brazil of the costs associated with the development of PayTV services, including subscriber acquisition costs and the purchase of content.

EBITDA declined 2.7% in Mexico, and approximately 7% in Brazil and the Caribbean, but it expanded approximately 40% in Chile and the US; more than 20% in Peru and Colombia; and between 10% and 20% in Argentina and Ecuador; with Central America's rising 8%.

Operating profit was down 3.3%, basically because of an acceleration in depreciation charges in various countries, to make room for the new investment being undertaken. Hence, depreciation charges increased 9.4%, and now represent [14.2%] of revenues.

We obtained a net profit of MXN18.7 billion in the quarter. It was down 21% from the year before, on account of foreign exchange losses resulting from the sharp depreciation of various currencies vis-a-vis the US dollar, and the fact that a portion of our net debt is exposed to dollars and other hard currencies. It is to be noted that approximately 12.5% of our revenues are dollar-based, with nearly 4% more coming from countries whose currency is pegged to the dollar.

Accounting-wise, exchange rate depreciations generate foreign exchange losses on the dollar exposure on the debt side, but do not generate the corresponding FX gains on the expected stream of dollar-based revenues.

Year to date, our comprehensive financing costs, including FX losses, were up 3% from year before, whereas our net profit was up 0.8%.

Our cash flow helped us finance most the MXN135 billion in capital outlays and shareholder distributions in the first nine months of the year. These include capital expenditures of MXN73 billion; the purchase of minority interests in the aggregate amount of MXN5 billion; and share buybacks and dividends totaling MXN56 billion.

Our net debt increased MXN40 billion in the period to MXN247 billion.

Over the last two months, we've placed bonds denominated in various currencies in the aggregate amount of $5.1 billion equivalent. We are, today, fully funded for the payment of the tender shares that will be tendered in the offer that will be expiring next 11 -- November 11.

So with this, I will pass it on -- back to Vera for the Q&A session. Thank you.

(Operator Instructions).

Okay, so while we compile the Q&A, I would like to ask two questions about Brazil. So my first question is, could you talk about the changes in strategy and products after AMX launched the combos with the three companies together, Claro, Net Servicos and Embratel?

And where do you see your EBITDA margins going in Brazil in the next quarters?

Thank you, Vera. I think on the first question, I think it's too soon to know what -- how we're doing on the launch of the combos with Claro, Net and Embratel. I think it's the right strategy and I think it's going to be very successful, but it's too soon. I think we have, maybe, two, three weeks that we announced that, and then a little bit less that we start to operate that.

So with the new laws that appear in Brazil, we are allowed to take the control of Net, so that allows us to give those combos. And I think that's going to be very successful in the next year; I think that's the right strategy.

We have a great opportunities in PayTV. We have great opportunities in data, still open at (inaudible) there. Oscar, can talk a little bit more on TV. But I think Brazil has been very successful.

The other question on EBITDA margins in Brazil, I think if you look Brazil, Vera, maybe 10 years ago, we don't have anything in Brazil. And today, we're going to start to consolidate Net, Embratel, Claro. We are going to have a Company more -- $17 billion, maybe we're going to have those revenues next year.

So what we are doing today in Brazil, we are integrating the networks. We're integrating the commercial areas. We are taking advantage. And Brazil has been a country that has been growing a lot, and I think we are focusing on that. So margins are very important, but what I said the last call, and next year is going to be also a year where we need to develop more Brazil.

We're gaining; we are gaining a lot of revenues. We are growing 7% in Claro and in Embratel, maybe more than 20% in NET. So we still are going to look for the revenues, and I think, with all the integration that we're doing, you are going to see that the EBITDA should grow. But it's really related to the level of growth that we're going to have next year.

I don't know, Oscar, if you want to talk a little bit about content and TV?

No, as you said, I think it's still -- PayTV and broadband penetration are still low in Brazil. So this double-play, triple-play and combos we are offering on the marketplace, I think will be the way to increase penetration in Brazil. So the penetration is still low. And there is room for opportunity for us with the combined Company.

I have a follow-up question. Do you think we will see the acceleration in wireless revenues in Brazil in growth in wireless revenues at some point, similar to what we saw in Colombia this quarter?

Yes, I think we are really focusing on postpaid, and those postpaid have the smartphones. Those smartphones are going to have more data and they're going to use more data. We are putting -- to have more revenues, Vera, you don't have only to sell, you have to put infrastructure. And we're putting a lot of infrastructure in Brazil, so that's going to allow us to sell more, have good quality, and I think to have the preference of our customers. So I'm sure that revenues in Brazil are going to grow.

At the higher levels that they are growing at this point?

Yes, I think so, yes.

Okay. Thank you very much.

You are talking about wireless?

Yes.

Wireless I think, yes.

Okay. Thank you very much. So, Thea, can you start the Q&A roster?

Yes, ma'am. Tomas Lajous, UBS.

The first question is related to your expense portion of capital investment. Apples to apples, if this weren't expense, and if it was capitalized, what would your margin have looked like overall? What would it have looked like in Brazil specifically? That'll be my first question.

Hello?

(Technical difficulties).

Vera?

Yes.

Sorry, we made a mistake and we disconnected the phone.

Okay. So you want the question to be repeated?

Yes, please.

So, I'll shoot with both questions. So the first question is, if you were capitalizing instead of expensing the portion of capital investments that you run through your expense line, what would your margin have been overall? What would it have been in Brazil and Mexico specifically? I know you talked about, in the press release, how this was a big impact to your costs, the accelerated investment in fiber, and so on.

And the second question is, I guess, the question that always comes up; your net debt is at 1 times net debt to EBITDA. You've been very successful in finding opportunities in fixed income markets to take on more debt. Are you going to stick to your leverage policy, or could we see a situation where you take leverage up further and enhance distribution to shareholders?

I will come back on the second question. As you say, we have, for a long time, maintained a leverage policy of 1 times net debt to EBITDA; that's basically where we have been, at or around 1 times net debt to EBITDA. I think that's where we're going to end up of the year, even after paying for Telmex.

And we are not expecting -- although we have grown from the point of view of the rating agencies, the Company's position is not expected to change. I think that we have been very clear that we intend to maintain a policy of financially conservative as we have had it up until now.

And regarding the expenses, I cannot give you all the details. I can tell you that, in Brazil, they are regularly related to these -- it's equivalent of about 3 points of EBITDA. But, again, it's you have to remember that from when we took over Tel Inc., Televisa Internacional, there were some accounting differences in terms of the policies that we used to have. And we have now made sure that we are all conforming to the same policy.

So partly what you are seeing now is comparing a year where you are expensing everything, which is now, with another year where some things were not being expensed. So we have now completely unified criteria in all major operations, Telmex, Telemex Internacional and the original America Movil. And that explains part of the difference.

So, then there's a lot of work that is being done, as I was referring before, that is not the label that go directly into the works which is typically capitalized, but it is all the type of labor expenses that have to do in the [regulatory] works, like the supervisory charges is one example. And we are expensing all of that.

We recognize that we are maybe more conservative that several of our peers in the sector. But that's the way that we have always done things. We are more financially conservative, as you said, on the net debt to EBITDA side, but we're also more conservative on the accounting aspects.

It helps us a lot on the fiscal side.

Going forward, do you expect your capital investments to remain around MXN8 billion/MXN8.5 billion, or could that number change?

I think that we haven't changed. I think that we are looking at keeping it flat for the next three years or so.

We said that we're to invest around $25 billion in 2011, '12 and '13, and I think that's more or less what we think we are going to do.

Thank you very much.

Thank you.

Thank you, Thomas.

Andrew Campbell, Credit Suisse.

In light of the announcement yesterday from Anatel about the glide path for mobile termination rates, I was wondering if you could make a comment about what the impact would be on the Brazilian operations, perhaps some sense of what the overall EBITDA impact would be.

I think my comment -- they just do it yesterday, but I think my comment on the reduction on the interconnection rate is that I think that Brazil has been doing gradually. I think that's the right way to do those things.

I think that make us plan, that makes us still invest a lot. And I think that's the right way to reduce the interconnection rates, to have, like, a view for the next two, three years to understand what we're going to have to plan. And I think they were a little bit high, I think. I think it's correct, the way.

I hope, with that, we're going to have more traffic; traffic and volume is going to get -- as you reduce the interconnection rate, you can grow a little bit of traffic. So the way they do it, I think it's the right way to do it. There is still room for prices to come down and MoU to go up. So I'm sure it's the right way to do those things.

Okay, because I would imagine that Claro is a net receiver of mobile termination and that Embratel is a net payer. So I'm not sure how kind of its shakes out, if the net effect you expect will end up being negative, or closer to neutral, I'm not sure; just to give a sense of the direction.

We're making the numbers. We still don't know; it was yesterday. But all, overall, Andrew, what I can say is that, with these type of decisions, gradual decisions, volume can go up. And I think that's good for the companies, and that's good also for the customers. So I think that's a good decision.

Thank you.

It helps penetration, grows MoU. There is a lot of things that you could see when you have like a gradually and planned reduction; that's the way.

Other important issue is when you do gradually then when you reduce the price, then volume is going to go up then you have time to put the infrastructure, then quality of the networks are going to be good. I think that's the right way to do the things, Andrew.

Dominic St. George, Nevsky Capital.

I've just got some questions on your postpay and smartphone base. I was just wondering if you could give the percentage of postpay subscribers who are currently subscribed on smartphones; and if you've got any medium to long-term specific postpay and smartphone targets?

And then secondly, if you could just give a number, if possible of the number of iPhones that you currently have within your subscriber base, that'd be great. Thank you.

I'm sorry not to have those numbers here. But what I can tell you is that smartphones are growing at a fast pace. The smartphones are coming down on prices. Android has been doing -- with Samsung, with LG and with some other brands, has been putting a good software with a nice handset at a very good price.

So, I think we are growing at a higher pace than what we used to grow. I don't know exactly what is the rate, but you could see in the numbers that postpaid is growing 20% there, so a lot of that means that smartphones are coming to our network.

So I don't have -- and on the smarts -- and on the iPhones, I don't have exactly the number, but we can give you the number, that's not a problem. You can call Daniela and she can give you the numbers.

Okay, great.

We are just launching the 4S today in Mexico. And I think it has been very successful. And they are becoming the next countries in Latin America.

Sure and then, sorry, just quickly; have you got any specific targets for postpaid or smartphones, say, for 2014 or 2015 that you'd like to see?

No, I don't have it right now, those numbers.

Okay, thanks.

The target is to grow on smartphones, to grow on data. And you're seeing that the rate on data growth has been very good. So that's where we are growing our revenue.

Yes, thanks.

Mauricio Fernandes, Bank of America Merrill Lynch.

Daniel, can you give us some sense for what drove the ARPU increase sequentially in Mexico, given that we still had the effect of the more termination rate cuts in the middle of May? That's question one.

And two, clearly since the launch of Straight Talk in the US with TracFone, ARPU went up a lot and continues to go up and now we can see margins back to double-digit. Are we at a point of seeing an expansion back to around that 15% level we saw before, or you still see room for further penetration in other products, so that we will continue to be around the 10% level? Thank you.

Mauricio, let's start on the Straight Talk. I think Straight Talk has been very successful. And we're growing our EBITDA, because in terms of growth I think the growth in third quarter of 2010 was 30% higher than what we have. Still, we have a very good growth; it's more than 0.5 million subscribers in TracFone, but has been reduced a little bit.

So what's happening in TracFone? What is happening is we have a higher base, more revenue, so they grow -- hit us a little bit less this year than last year. That's why you saw an increase on the EBITDA.

Of course, as the growth can be -- is lower then you are going to see better EBITDA margins. I think what I can tell you about the Straight Talk, it's a very good plan, very successful plan with a very good ARPU also. So, still growing a lot, 0.5 million subscribers, a lot of those are Straight Talk. So we're very happy how the prepaid has been developing in the US and especially with our Straight Talk plan.

In the ARPU in Mexico, if you see the results, the ARPU has been going down very, very little. And it's mainly because the interconnection rates -- what you could see is the ARPU is 6.2% from last year, MXN164 to MXN154. And on quarter on quarter, we have been growing 0.7 -- sorry reducing 0.7%.

And quarter on quarter it's because this quarter, we have put all the reduction on the interconnection rates. Last quarter, it only hit us maybe half of the quarter. This quarter it has been keeping us all the quarter, so we have that full effect this quarter.

I think in Mexico, we're still gaining good customers. We are maintaining also our high ARPU customers and growing very good in postpaid and in data purchases. So, data ARPU has been growing also, so it's very good that we have been growing on the data ARPU. And we feel that in Mexico we have the best network, the best quality, the best customer care center. So that's really why the customers have been deciding to stay with us and coming from other companies also.

Perfect Daniel. Yes, I would have expected the ARPU to fall more; that's what I meant.

Have you noticed -- I know data has contributed to support the ARPU. Have you noticed any elasticity from voice resulting from the MPR cut? Or do you think the fact the ARPU was mostly flat sequentially was basically despite the MPR data contributing with new revenues?

I think -- it's a short time to show that. But at the end of the day, what I see is that our customers have a budget to expend on telecommunications. So if you reduce the MPR they're going to use that in data or on a PCMC card, or in broadband, or some place. So I think that if you reduce in one side, then they are going to use it in the other side.

It's too short a time to notice that. But in the long run, I think I don't have any doubts that people are going to have no budget to use more in telecommunications.

Perfect, thank you very much.

Thank you.

Richard Dineen, HSBC

This is actually Sean Glickenhaus. I just have a question or actually wondering can we talk a little bit about Colombia. It seems that each quarter, it continues to impress. And the one thing I did notice that seemed quite different is if I back into the voice ARPU, it looked like the voice ARPU -- the voice side actually did well; it looks like it was growing. So maybe you could help me clarify that or let me know what initiatives led to that.

Well, in Colombia, we're doing very well. In Colombia, we're growing at a very fast pace. And ARPU has been coming up, I think, 1.5% year on year.

And in Colombia, what we're doing is we have very good promotions. We're focusing on postpaid. We're focusing also in good prepaid customers, because we used to have very low ARPU prepaid customers. And what we are doing is we are focusing a lot on those customers. We're giving them good promotions, and I think that is helping us a lot.

In the other side, data revenue has been growing 27% year on year. So, all of that has made us do a very good quarter in Colombia.

It sounds like -- so the plan was -- if I understood, the one differentiating factor was you took the lower ARPU customers and, instead of just cutting them, you actually were motivating them to, I guess, increase their usage and that helped, obviously, the voice side as well. Obviously, data's continued to grow strongly. But it also helped the voice side; consequently, your margins also jumped quite a bit.

Yes, exactly; exactly it's what we're doing. We have very low, low ARPU customers and we are making them some promotions. They are spending a little bit more of money on that. So, it's helping us on data. And also voice is growing also in Colombia. So we're doing also very good in voice, not only in data.

Okay, thank you very much.

Thank you.

[Yaz] Patel, HMC Capital.

Specific question on Mexico. So we've seen some pricing moves recently with respect (inaudible) following by Telefonica specifically on the out of network tariffs, a pretty substantial reduction. Can you comment on the impact you're seeing specifically from those moves?

Yes, I think -- my only comment there is that Mexico -- we have tough competition in Mexico but not from today. We have been having tough competition from a long time.

And I think price is not everything to compete with. You need to cover very good customer quality; quality on the service; quality on the network; coverage; distribution and there is a lot of things that -- branding -- there is a lot of things that we have been improving from the last 10 years. So we're feeling very comfortable that the people in Mexico have been deciding for themselves.

We are gaining market share since this year, a little bit, but we are gaining a little bit of market share. We are doing very good on our postpaid customers. So, there is a lot of competition in terms of pricing and a lot of competition in other areas, but we're feeling comfortable right now in Mexico.

We are doing -- we're investing a lot. We have a very good network. We have a lot of capacity. Quality, we're improving a lot of our quality. So we are happy the way we are developing all those things.

Okay and one follow up; just in terms of Push to Talk, with respect to some of the moves made in Brazil and some of the upcoming launches that are going to be happening over at WCDMA network by [NHT], can you comment on what you see the state of the play of that market is; and how you see that evolving; and what your response, if any, will be to fill that need?

I think Push to Talk has been developed for a long time now. It starts with the [next then] and then in the wireless side there is a lot of people developing that. I think it's another, let's say, service that we could do and we could be prepared to do that service whenever we need to do that, to give that service.

So there are a lot of services, like the service that we just announced, that's it's mobile banking we have been working for maybe two years in mobile banking. So Push to Talk would be another service that we could launch in the future. It does not have to be in the 4G network. It could also be in the 3G networks.

Okay, thank you.

Walter Piecyk, BTIG.

Daniel, just two questions. Can you give us some sense of the rollout of LTE in all of your networks whether it's Mexico or elsewhere?

And then also, can you give us a sense of what's happening with your Blackberry sales? Thanks a lot.

The first question on LTE, I think we have frequencies right now in Mexico and, I think, in Puerto Rico we are going to have frequencies. I think all the countries are going to launch frequencies in the next year.

What we have been doing, we have been testing LTE. And I think in the next year you could see some cities, not all Mexico, but some cities in Mexico, and also in Puerto Rico, with that. What we're doing is we're preparing our networks with fiber to the node, more links, all the backbone, all the backhaul. So that takes you a lot of time, and we're preparing our networks to be ready when we want, or we need to launch LTE. Then we have not only LTEs, we have all the backbone and the backhaul ready to launch all these services.

Exactly the date, we don't know exactly the date, but I'm sure that we're going to have some networks running next year.

You gave an overall CapEx number of $25 billion. Is there -- can you -- I know you're probably not going to break out wireless as far as expectation, but can you give us a sense on is CapEx going to grow in wireless next year, or be flat, go down? And at what point does LTE play into that? Does that end up growing your CapEx or does that just offset declines in legacy spending?

No, I think it's very difficult to say, or to differentiate what's -- because all the backbone, the backhaul, the fiber, fiber to the home, that's all the same. You are going to use that, the metropolitan rings, all those things you are going to use for wireless and for fixed and for ADS broadband. So it's very difficult to make a difference there.

We're reviewing our CapEx for next year, and what we're saying is it's going to be between $24 billion to $25 billion in three years. We do this number when we don't have Net. So if we're going to incorporate Net in the next year we're going to see how much is the CapEx and the investment on Net. So that's the only reason why we can change a little bit our budget. But, besides that, I think we feel very comfortable with than number.

Is there any spectrum acquisition in that, or is that just the CapEx?

No, that's just the CapEx. (Multiple speakers).

And can you just address the question on phone sales, can you give us a sense of -- not with specific numbers, but how BlackBerrys have been selling as your Android device line has expanded in some of these markets?

I think all of them are selling good. I think BlackBerry is doing also very good in Latin America. And the reason why it's doing good -- iPhone is doing good, Android is doing good, also BlackBerry, because all -- what we were talking is it's we're selling more smartphones.

So what is happening is that all these phones are taking market share from the very cheap phones that we used to have. So still BlackBerry is very strong in Latin America as it is also Android and it is also the iPhone. And I am sure that in the future also Windows, it's going to be also a strong competitor in that market.

Thank you very much.

Thank you.

Michel Morin, Morgan Stanley.

I just wanted to focus on two quick things. First on Colombia; can you talk a little bit about the competitive and regulatory environment? It seems from the Millicom results that they're doing a little bit better in that market now, so just wondering if you've seen any more recent change in trends.

And then there's some regulatory changes that are coming up. I was wondering if you could talk us through what those are, and how you think that might impact you.

And then separately, you recently announced an acquisition of DLA, and this is a content business, very different from the rest of your businesses. So I was wondering if you could talk to us about the strategic rationale for that acquisition. Thank you.

Well, starting with DLA, I think -- you have to see America Movil not only as a wireless company. America Movil today is a fixed company; it's a TV also company; we have 12 million -- 12.5 million customers in TV. And what we do with DLA is that -- that's a company who has some OTT platforms.

Oscar can talk a little bit more what DLA do. But they have a content; they have a lot of things that will help us to still develop all this content business that we have. We have, as I said, 12.5 million TV customers, and we're also going to launch some services like streaming services in our networks.

But Oscar, why don't you talk a little bit more about that?

DLA is -- they don't produce too much content, they are an aggregator of content. They have a good relation with the major vendors of content -- of aggregate content. They sell to different carriers all across Latin America for a pay-per-view product. And they have a streaming platform that we tend to use.

We already launched this streaming platform similar to other streaming. And we are offering video through Internet, through using streaming technologies. We have both offering on demand video. And the other one is library; that it could be on limited uses. So that's the rationality that we've analyzed to get DLA.

It's an aggregator. It has a very good streaming platform that we could use to all the broadband subscribers that we already have. And it's a fully integrated platform. The streaming is not only for fixed broadband. It will include, as well, all the wireless streaming through different tablets, iPhones etc. So that's the rationality about DLA.

I think we're very happy with the purchase of DLA. And it makes a lot of sense to have a company like that inside America Movil.

And the other question on Columbia, Columbia has -- let me start with, we have very good rates, very low rates. They are really competitive rates. They have a good penetration, Columbia. They have also -- the interconnection rates are also one of the lowest in Latin America. So I think what does the regulator want?

What the regulator wants is to have more, and develop more, the broadband to do more on the rural areas. And we are a Company that is investing a lot on Columbia. So, I think, the regulators are understanding that what they need is companies who really invest in the company, not companies that says that they are going to invest but, at the end of the day, they don't invest in the company. So I think we have a good relation with the regulators there. They are doing some things that we are not happy with that. We are discussing that, but we have a good relation.

The difference on the interconnection rates, asymmetric interconnection rates, that they said that they are going to do they are part of the things that we are not agree on that. But we are really close to them and discussing this type of decisions. They are not going to do anything better with those type of decisions, and I think they are understanding those things.

Right, and if I can just follow-up on that. In your Columbia segment you include the results of your start-up in Panama. I guess we can't really talk about it as a start-up any more. But I was wondering is Panama still a drag on your overall profitability in Columbia? Where did the improvement in margin come from in Columbia? Was it all -- did Panama help would be the question?

And just like the Greenfield you did in Panama, are there any other countries in Central America that you haven't entered yet that you might consider entering? Thank you.

I don't know why we don't announce that, but Panama is not any more inside of the result of Columbia; it's in Panama. It's already in the result of Central America. So Columbia is only Columbia.

So we are doing good in Panama. We are growing. At this time what you need to do in Panama is to grow your revenues, because you do some investments and then those investments need to have some revenues. And that's what we're focusing in Panama.

We're having another Greenfield in Central America that is one of -- it's Costa Rica. I think Costa Rica we're going to launch next week or the next one. In the next 15 days we're launching in Costa Rica. So that's the only two, let's say, Greenfields that we're having at this moment.

Perfect, thank you very much.

Thank you.

Gil Alexander, Darfell Associates.

Could you give us -- can you quantify for us, in Mexico, how much in dollars, or in currency, how much lower your interconnection rates were for the quarter?

I think it's about 3% of the revenue.

I think it was 70% reduction in peso terms, which means that with the currency depreciation of the peso vis-a-vis the dollar in the period was about 20%. We're really talking about certainly close to 85% reduction in dollar terms.

It goes from MXN0.85 to MXN0.39, and that MXN0.39 means per second, so it goes around to MXN0.30. So it goes around from MXN0.85 to MXN0.30, that's the reduction that we have. And in this quarter we have a full effect on the interconnection.

I understand that but how much did that reduce your revenues?

I think it's around 3%. I need to make exactly the numbers, but it's around 3% what that reduced the revenues.

3% of your revenues?

I think so, more or less.

Integrated revenues, yes.

And can you quantify for us how much your expansion for deploying fiber and new phones that you expense? How much that cost you that would have affected you, because your costs went up quite a bit?

Look, I don't have exactly the numbers that you are saying also, that you are asking, but I really happy to -- if you call Daniela we can make those numbers for you, and give you exactly the amount that we have.

Carlos has been on the interconnection?

On the connection side I think what we can say is that we have not had these reduction in revenues relative to last year. The integrated revenues in Mexico would have grown 3.7% for the integrated revenues, consolidated revenues in Mexico.

And as you look at your Mexican operation, is your EBITDA margin basically at a low point?

Well, we said that what -- in Mexico in the wireless side we're going to be above the [60%] EBITDA. We're still there. I don't know exactly. We haven't made our budget for next year. But we are still above what we're saying. And it's going to depend a lot also on the postpaid and the growth that we have been having for next year.

I want to thank you and good luck.

Thank you very much.

Thank you very much.

Alejandro Gallostra, BBVA Bancomer S.A.

Would you be able to give us an idea of what your current average cost of smartphones in the region? And I would also like to know if you've started to see the benefits of smartphone manufacturers moving to Brazil to avoid import taxes.

That's why it's very difficult, your first question, because, let's say, in Brazil we have a lot of taxes if they don't produce the smartphones there. So I can tell you that we have smartphones from here today $150, good smartphones from $150. So it has been reduced a lot. Still we have smartphones of more than $500. But we already have a smartphones of $150. So, good smartphones with very good software that you can do all the applications, music, social networks, there is a lot of good handsets.

The problem in some countries is that you have to pay some taxes there. So if you don't produce the handsets there. So some of them are being produced, let's say, in Argentina, some of them in Ecuador. We have also some taxes in Brazil. So it's very difficult to tell you exactly the average price.

But do you start seeing the benefits of manufacturers moving to Brazil? Or not yet, because taxes over there are huge?

Yes, but I think the benefit is for the manufacturers, because if one of them goes then we're seeing the benefit because we're having good prices in Brazil. So I think it's a competition more between the manufacturers, because we already have some handsets in Brazil, produced in Brazil that have been -- let's say, without the import taxes that you need to pay.

All right, thank you very much.

Thea, we have time for one more question.

Andres Medina Mora, GBM Research.

I was wondering if given the consolidation of Telmex going forward we should expect any changes in margins in Mexico? And also, regarding the possible consolidation of NET, should we expect any news there soon? Thank you.

I think we already consolidated Telmex, we are consolidating Telmex since last year, so that -- we're consolidating their margins of Telmex already in America Movil.

So, what you are saying is, if we are going to see more integration or some benefit [there], I think yes, I think as we could buy the rights of Telmex we can integrate the 100% and we can do more [integration] in the companies as we are doing in Brazil, mostly on the network side, I think there is going to be a lot of synergies that we could see. IT, there's a lot of synergies that we could do. So, there we can have a good synergy integration in Mexico.

And your other question?

The other question has to do with NET and because of NET, as we mentioned before, we have submitted a request for approval to Anatel so that we can exercise the option that we have to gain the control of the company.

As you know we have 92% economic interest in NET, 49% voting rights. In the past we could not exercise the option because the law precluded that foreign operator from owning a cable asset. The law has changed and we are in the process of doing everything that is needed to exercise the control and proceed to fully integrate the company and consolidate the company with America Movil.

Thank you very much.

And I want to thank everybody for being in the call and Vera from hosting also the call.

Thank you Daniel, Carlos, Oscar and Daniela.

Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference, you may now disconnect.