America Movil SAB de CV (AMX) 2012 Q1 法說會逐字稿

Please stand by, we're about to begin. Good day and welcome to the AMX first quarter 2012 results conference call. Today's conference is being recorded. At this time it is my pleasure to turn the call over to your host, Mr. Mauricio Fernandes. Please go ahead.

Thank you, Anthony. Good morning or good afternoon to everyone. My name is Mauricio Fernandes and I'm the Latin America Telecom and Media Analyst for Bank of America Merrill Lynch. We are honored to host this quarter's conference call to discuss America Movil's first quarter 2012 results.

I'm in Sao Paulo, Brazil, and from America Movil in Mexico we do have Daniel Hajj, CEO; Carlos Garcia Moreno, CFO; Oscar Von Hauske, COO; and Daniela Lecuona, Head of Investor Relations. Daniel, thank you very much for the opportunity of hosting this call; you may now go ahead with your initial remarks. Thank you.

Thank you, Mauricio. Good morning, everyone. Thank you for being in our first quarter of 2012 financial and operating report. And Carlos is going to make us a small summary of the results of this quarter; Carlos.

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

Well we've had world financial markets that have shown a remarkable stabilization in the first quarter following the strong turbulence encountered in much of the second half of the prior year. The economic outlook appears to have improved, and in the first quarter consumer confidence in our region of operation was on the rise with local currencies appreciating in much of the region, particularly in Mexico and Colombia.

We finished March with 306 million accesses, which is 7.7% more than a year before, having added 6.1 million accesses in the quarter. Approximately two-thirds of them, 4.2 million, were wireless subscribers. A significant part of the 1.9 million new RGUs came from Brazil, which has become our largest fixed line operation by accesses with 25.2 million.

Brazil also led the way in terms of wireless subscribers with 1.2 million net adds, followed by Mexico with 1.1 million. We continue to grow well our postpaid base with postpaid net adds of 1 million subs that represented a quarter of our net subscriber gains. As of March we had 35.7 million postpaid subs, 17.8% more than in the year earlier quarter, out of a total of 246 million subs.

As regards our 60 million RGUs, half are telephone lines; 16 million are broadband accesses; and 14 million Pay-TV clients, which are growing at a 33% pace on the year before. We are seeing a significant move towards multiple-play services as our clients seek new services from us with more double and triple-play plans, and even quadruple-play plans, where mobile and fixed services are bundled together.

On our financial results, it is important first to note that we are consolidating the results of Net Servicos from January 1. We're also presenting revenue information in gross terms and not netting out the commissions paid to distributors, which would facilitate comparisons with other operators that also report under IFRS.

And we're now moving to a recognition of EBITDA, that starts out with operating profits as defined under IFRS, and adds back depreciation and amortization charges. IFRS does not make any differentiation between operating and non-operating revenues and costs, which means, among other things, that items like employee profit sharing, which are mandatory by law in Mexico, Peru and Ecuador should be considered a cost in the financial statement.

Our consolidated first quarter revenues increased 12.4% in Mexican peso terms, and wireless revenues increased 15.8% and fixed line revenues have grown 7%. Wireless revenues account for 62.5% of the total.

At constant exchange rates, revenue growth for the period was 8.9% led by mobile data revenues that increased 30.7%, and Pay-TV revenues that were up 25.4%. Fixed line data growth came in at 8.5%. Several subsidiaries posted double-digit revenue growth.

EBITDA came in at MXN68 billion and was 6.3% higher than the year before. Service costs generally rose faster than revenues on account of rapid postpaid subscriber growth, increased content charges and the rolling out and maintenance of larger and more spread out networks. The EBITDA margin declined 2 points to 35.1%.

In addition to the reasons mentioned before, the reduction in the margin also reflects the new conformation of our business lines, with Tracfone in the US having become a higher volume, lower margin business, and with our Pay-TV operations and the content charges that go with them becoming increasingly relevant.

The appreciation of various currencies relative to the US dollar, particularly Mexican peso, led to a foreign exchange gain of MXN19.3 billion that resulted in our posting a comprehensive financing income of MXN5.8 billion.

We registered a net profit of MXN32.6 billion; that was 37.5% higher than the one we registered the prior year. Our net profit per share rose to MXN0.42 from MXN0.30 the year before, a 43.3% increase, which already reflects the impact of a 4.1% reduction in the average number of AMX shares outstanding, given our buybacks.

Our net debt stood at MXN318 billion at the end of March, down from MXN332 billion in December, and was equivalent to 1.2 times EBITDA. Approximately one-fourth of the reduction, MXN3.8 billion, was in flow terms. The difference was due to the appreciation vis-a-vis the dollar or various currencies, particularly Mexican peso again.

Our capital expenditures totaled MXN24.2 billion. We acquired in the quarter Telmex shares in the amount of MXN7.3 billion and bought back MXN6.9 billion of AMX shares, for a total of nearly MXN15 billion if we include all the smaller acquisitions. So the buybacks and the acquisitions, in this case of Telmex stock and other smaller companies, like DLA, they all had a bearing in final net debt to EBITDA ratio.

So with that I would want to pass it back to Mauricio for the Q&A session. Thank you very much.

Thank you, Carlos; thank you very much. As participants line up for Q&A I'll kick off asking two questions. First, wireless ARPU is up year on year across almost all AMX markets; the exception being Brazil given the multiple SIM card issue in the country. But this is notable particularly in Mexico given the MTR cut in May last year. Wireless data seems to be the driver behind this, so what in your view is the outlook for ARPU in the coming quarters? That's question one.

And two, can you please update us on the status of the integration among Claro, Embratel and NET in Brazil, be it from a network standpoint or from a brand or product standpoint? And when should we expect to see more bundled products and cost synergies?

Starting with the first question in terms -- on the ARPU, I think you are looking very good ARPUs all around Latin America. What is happening is that data ARPUs and data traffic is growing; we have 31% data traffic growing year on year. And we are -- it's very good how does the ARPU on voice is doing. ARPU on voice is maintaining, and still people is still using. We have reductions on pricing all around Latin America, but still people are using a lot of voice.

So what is happening a little bit in Brazil is that, what you are saying, competition is tough in Brazil. The SIM card only has been really driving market really competitive.

And the other thing is we haven't had the network for data like my competitors in Brazil have. So we have been working for the last two/three years making a good network -- good data network. And we're getting to the point where we can be a little bit more aggressive and more competitive in the market in terms of data in Brazil. So we -- I think that's where we are going to drive ARPU a little bit higher in Brazil. So that's what I can tell you about ARPUs.

And in the status among the integration, I think the integration that we have been having in Brazil has been -- we have been doing in stages. First we start to do between Claro and Embratel; since this quarter we're going to do another stage, integrating also NET. We're doing that on the networks, on the -- Oscar can talk a little bit what we're doing on the networks, what we're doing on the IT.

And of course in the future you could see more integration on the commercial side. So you are going to see more products of NET in the Claro stores; you're going to see more Claro products on the NET distribution channel, so you're going to start to see stage by stage.

Oscar can talk a little bit about what we're doing on the networks, on the IT and all the integration in Brazil.

As Daniel was saying, we have two main projects of integration. One is in IT, and this will include the CRM and the billing from the three companies; Claro, NET and Embratel.

We already defined -- we already have the blueprint to go ahead in the IT integration; we already choose other platforms that we are going to use. But it's a very large project and it will take around 16 months to have all integrated. But we are doing some integration not fully to go to the market with a triple-play and quadruple-play offering in the marketplace. So that's the IT part.

On the network side, as well we already have a blueprint and a road map to achieve the integration. By the end of this project what we will have is a unified backbone -- all the backbone MPLS, all IP, so by the end of the project we will have differing kinds of access. It could be mobile, it could be HFC networks, or it could be enterprise, unified just in one single backbone.

And this project has different stages of integration, but it will take us around 18 months to have a full integrated backbone and the IT projects.

Perfect, thank you, Daniel and Oscar. So, Anthony, we may now open the call to Q&A, thank you.

(Operator Instructions). Walter Piecyk, BTIG.

Just a follow-up to Mauricio's question on the ARPU. It looks like first quarter last year number was restated higher. I don't know, Carlos, if you could talk about what revenue might have been reclassed into that?

I think all the numbers that appear here were basically -- no, [it all conform]. There was really no additional change (multiple speakers).

Okay, because when you look at the press release from one year ago, that ARPU in Mexico was MXN160 and now it's MXN169, so I'm just -- so there was no change; maybe there is a different classification now?

No, I don't know what (inaudible), but there really wasn't any change within the (inaudible). You can call us back afterwards [and we can] (multiple speakers).

Okay, that's fine. So just more conceptually then, that ARPU growth that we're seeing now, which is a change from recent years, should that also start to stabilize the margins -- the EBITDA margins in Mexico?

What we said about the EBITDA margins in Mexico is that -- well, talking about only the wireless, we said that we're going to maintain that above 50%, and it's more or less what we're having. What is happening really in Mexico is that people are starting to use a lot of data; they are starting to have more plans -- data plans. We're selling a lot more smartphones, and that really is what is driving the traffic.

And going back to your question, I think -- there's no change at all, only the ones that I mentioned before at the outset of the call. What I said is we are now presenting revenues that are not netting out the commissions paid to the distributors, but they are [new] revenues in gross terms. So we basically changed, for purposes of comparison, all the numbers for the prior year.

Right, and there was still growth anyway, even with that restatement, or changing how you're presenting that ARPU, so we're --

Yes.

And then just the last question, Daniel, on the smartphones that you referenced. That's obviously helping to drive the ARPU. As you penetrate the base further, how do you make those smartphones affordable for the broader customer bases that you have throughout Latin America?

Well, I think prices of the smartphones have been going down, and that's the way we can make them affordable. Three years ago you shouldn't find any smartphone for less than $500, and today you are finding smartphones for $200, or a little bit less. So I think --

But, Daniel, what about the very popular smartphones that cost more than $500? Can they -- how do you get broad adoption there, because there's kind of an assumption that those expensive phones will be -- yes, sorry.

The people that -- you are still selling the high-end phones to the high-end people, and then you are selling -- people is starting in the prepaid part -- in the prepaid segment, I think people is starting to buy not phones of $80, but, yes, they are starting to buy phones of $150 or $200. And a good surprise is that in prepaid they are starting to use data. So they are consuming a little bit more, so that's really the reason of these [moves].

But what about $500 or $600 phones, because the theory globally is that those $500 or $600 phones, like the iPhone, will generate the highest revenue and have the lowest churn. Can you get those phones -- can those prepaid bases afford those $500 or $600 phones? Is there a way to get those phones in those people's hands?

No, no, no, of course not, but I don't think the iPhone is only on the $500 phone. No, you have iPhone 3 are much less than $500 phones, and the iPhone 4 it's higher than the iPhone 4S; it's higher. And you have with different types of phones, even with the 3G as you have with 8 gigabits, with 16 gigabits. So those types of handsets have been also going down. So even you are -- you can find -- check the stores, but you can find iPhones at much lower prices than $500.

Like the Legacy models.

3G, yes.

Pablo [Balaho] at GBM.

I got a question regarding the anti-trust vote on Monday, that's going to take place, regarding the fine. If it turns out negative, what other resources do you have for this fine?

Well, I think on that issue we'd prefer to wait until what's going to be the decision of Copeco. And it's going to be on Monday, the decision, so let's wait and see what is going to happen. And when we know what's going to happen then we're going to take which decision we're going to do. But I think what we should do is wait until what's going to happen on Monday.

Okay, thank you very much.

Michel Morin, Morgan Stanley.

I have a question on Pay-TV. I think if we look at your very good performance in Brazil, especially with the satellite offering that you launched maybe three years ago, it has just turned EBITDA positive it seems towards the end of last year. So it had a negative impact on margin; it looks like that's starting to improve.

What do you think could be the ultimate profitability of that business in terms of EBITDA margins, longer term?

And then secondly, if you were to get a Pay-TV license in Mexico tomorrow, what would be the next steps you'd be taking? And likewise, what kind of long-term profitability do you think you would be able to achieve in a market like Mexico? Thank you.

I think my -- Oscar can talk a little bit more about that, but my only comment here is that in Brazil and in all the other places I think we can get to the EBITDAs like other companies -- satellite companies would have in other places. We know that Brazil is a little bit more competitive, more complex, a little bit more taxes, but if you take out this, we should be on the -- similar to other companies.

And here in Telmex, what technologies they give us the Pay-TV, what technology we're going to use. Oscar, why don't you tell them a little bit, or Carlos --?

What we could do is we could offer through different technologies, for example IPTV, which has already been stated in a couple of countries in which we have presence. And in terms of the market, what we're seeing that could happen would be that there would be a more extensive portfolio for the market which, basically, would benefit customers in terms of more diverse offering plus better prices.

Right, and is fair to say in Mexico then that it would be the same kind of approach that you've taken in Brazil, where you would also be using satellite as well as IPTV? And should be anticipate increased CapEx and maybe some spending as well as you roll-out those services?

I think in Mexico it's going to depend a lot on what's going to be the authorization. If they give us the authorization it's going to be depending what's the authorization that they could give us. What I can tell you is that we have all the technologies working all around Latin America. We have satellite in some countries and we --

And IPTV and we have a stream in video as well.

And a stream in video, and IPTV and cable. So we use all the technologies; we know how to use them. And depending on what would be the authorization in Mexico, that's going to be the decision and the definition how we're going to use it.

Perfect, thank you very much.

Richard Dineen, HSBC.

This is Sean Glickenhaus. I was hoping you could talk a little bit about your elimination of the unlimited mobile data plan in Mexico. I understand the long-term rationale, but if you could go a little bit behind the basis for that; also customer reactions, and perhaps potential or timing to do the same in other countries. Thank you.

I think we have limited plans in almost all around Latin America. And what we do is -- at this moment it's not going to make any difference to the customer, because let's say the average of the customer is using the 500 megabits, so we cut to 1 gigabit. So there's not going to be any difference today.

But what we don't want is that people are starting to use the phone as a router, and they're starting to use those phones as a router and then start to abuse the system. So that's mainly why we do it. I don't think any of our good customers -- it's going to make any difference for them at this moment. So that's really the rationale.

Is it possible to roll this out in Brazil now or not really because of the laws prohibiting --?

No, it doesn't have anything to do with the law in Brazil; it has to do with the market and the competition and all of what is happening today in Brazil. Still they have unlimited and the competition, it's doing unlimited. Let's say, in US it's almost everybody is limited, and with high caps. What we do in Mexico is limited with high caps. So, well, that's different terms of ways to commercialize the data.

But I think all the customers -- we don't have any comment or complaints by any of our customers, because we give them much more than what they use.

Okay, great. Thank you very much.

Thank you.

Rizwan Ali, Deutsche Bank.

My question is regarding Brazilian margins and cost improvements. Oscar mentioned that it'll be another 18 months before you get all the different -- start using one unified network. Should we then expect improvement in margin and cost savings coming from these synergies over the next 18 months? Is that reasonable?

And my next question was about sub growth. There appears to be, in Brazil, a change of strategy; you're focusing a lot more on postpaid, and therefore you're not adding as many subscribers. How successful has that strategy been in the first three months of this year?

About the cost improvement, yes, we are doing the project to get some cost savings. Mainly it's improvement of quality and customer services, but the project will bring us cost savings due to the integration of the different platforms than we already have.

And also I think a little bit of what Oscar is saying, also the costs are going to be in the future of the CapEx -- future spending of CapEx, okay. So when you have one network then all the companies are going to use the same network, so you are going to put less CapEx in the future than what you --

Less maintenance.

Less maintenance and then some less other things. Scale is very important.

Will there be any obvious improvement or notable improvement in margin that we can expect over the next 18 months in Brazil?

I think -- you're not going to see a big jump on the margin; I think it's going to be day by day. It's going to depend a lot also on the competitiveness of the market, so depends a lot of things.

Of course, we're going to have savings, but we don't know if these savings are going to be directly day by day to the P&L, or there's going to be more competition, or there's going to be -- markets change a lot. And today Brazil is a really tough and competitive market, with the SIM cards, with all of those types of things. Brazil is becoming really, really aggressive.

And your second question?

Regarding sub growth. We have seen a bait of a deceleration in your subscriber growth, or at least market share of net adds in the first quarter, and I'm assuming that's your strategy to focus more on postpaid. But the question is are you getting a lot more of the postpaid subscribers that you wanted?

No, I think we're getting as much as postpaid subscribers, but we also are interested in the prepaid subscribers. I think every day we are having more penetration, so -- well, the growth should be less and less every quarter -- the growth. But I think all the markets are interesting for us.

We have very loyal customers. Our customers have been with us -- they have been changing; they are renewing with us -- the postpaid and the prepaid subscribers. So, of course, every day you need to give them more things, and more services, and that's what they are going to do.

What you could see, Rizwan, and it's very important, checking number portability. I think number portability all around Latin America has been good for us -- positive for us. That means that we have a better network, a better coverage, and that the customer is deciding for our products and our networks. And that's really key for us in each country, and means a lot. It means that we have the preference of the customers.

Thank you very much.

Thank you.

Vera Rossi, Barclays.

My question is about 4G. When do you expect to launch 4G in Latin America, specifically Mexico; and if you need to acquire more spectrum to launch 4G.

First, hi, Vera, how are you? I think 4G -- we're going to have 4G in some cities -- a small amount of cities, maybe five cities or four cities at the end of the year we're going to start to give 4G. We already have spectrum to do 4G; we just bought it last year in Mexico. And for the rest of Latin America they are coming, the auctions of the spectrum, and when they start to do that then we're going to start to launch that.

It's very important that what we have been doing and investing the last two years is doing more on the backhaul fiber to the node; a lot of investment. So put 4G in our networks is going to be much more easy, because we have been advancing a lot all this investment. So 4G is more on the radio side more than on the backbone/backhaul.

So it's going to be -- Mexico is going to be at the end of the year, and the rest of -- also Puerto Rico we are also going to launch maybe in third quarter. And then as we can have the spectrum then we're going to launch in the other countries.

Okay, thank you.

James Ratzer, New Street Research.

I have two questions please. The first one was on Mexico. Your data revenue growth of 34% was particularly impressive. So I was wondering if you give us some more details behind that, for example, how much is coming from SMS? How much from non-SMS? And, in particular, how many smartphones have you now sold? And what growth are you seeing in smartphones year on year as a percentage of the base?

And then the second question was also on Mexico, was on EBITDA, down 3.7% year on year. Do you think that's a peak rate of decline once we now start to lap some of the termination rate cuts that have been in place?

I think what hit us very hard in Mexico was the termination rate. But other things that could be also impacting a little bit our result is that we're selling much more postpaid than prepaid. We're increasing our postpaid. We're increasing our sales on smartphones, and that gives you a little bit more on subsidies. So that would be something.

Then we had new -- not in Mexico, but in other countries we have new services that need more content and that would give you a little bit less than -- the margins.

But your first question is very interesting. I think what you are going to see -- I don't have the detailed numbers of what you're asking, but the trend is to sell more smartphones. The smartphones are getting cheaper. And people are starting to use in postpaid and in prepaid more services.

Still we have a little bit of growth of SMS, but we're growing more on broadcasting; we're growing more in other services; and I think that's mainly the big increase on data. It's more on the broadcasting -- broadband -- sorry not broadcast, broadband and those type of services.

The prices of data are coming down, so we have better prices to our clients. And that means that they are using more and more. So that's going to be the trend for the next three years, more cost conversion

What percentage of your postpaid data is on smartphones at the moment please?

25% maybe, 25%. I'm not so sure but you can talk to Carols and Daniela, but it could be very close to 25%.

Okay, thank you very much.

[Gil Alexander, Darfil Associates].

Nice quarter. Could you give us an idea of your capital expenditures this year? And could this be a year of peak expenditures over the next three years?

I think that we have seen the peak in terms of CapEx. I think the peak for CapEx was last year. If you look at the Group together, including with NET, CapEx for last year was between $10.5 billion and $11 billion. I think what we are looking at for this year is somewhere in the level of $9 billion to $9.5 billion. So we are reducing CapEx in absolute terms and it's coming down relative to sales.

So the peak year was last year relative to sales. We are going to be staying, I think, relatively flattish at about $9 billion this year and probably the next couple of years as well.

And I was just wondering, is there a possibility that your dividend growth rates over the next two years could (inaudible). Or do you have a dividend payout rate in your mind? Or how do you feel towards dividend payouts over the next few years?

Again, I don't think that we're looking at changing the financial management of the Company, in the sense that we have been managing to maintain a certain leverage ratio, which has been typically close to 1 times net debt to EBITDA.

I think that we have said is any amounts in [favor] that we have and that are not spent in acquisitions are, basically, distributed back to shareholders. That's what we have done every single year. And the distribution, we have an ordinary dividend. We have share buybacks. And from time to time we may even resort to extraordinary dividend.

So that has not changed. That's basically how we look at things. I think the question is really whether we need to stay at 1 times net debt to EBITDA. But other than that, I think that there's really no change really in our criteria.

Thank you very much.

Thank you very much.

Ric Prentiss, Raymond James.

A couple of questions on 3G and 4G if I could. On 3G, can you talk to us a little bit about the different operating systems you're seeing for smartphones and the success you've had in looking forward with android or Blackberry or Apple? Are you seeing anything yet, as far as devices, particularly lower price devices, from Nokia and Microsoft.

Well, on the different operating systems, as you know, Android has been growing a lot. It's not different than what is happening in all around the world. Apple, it has been doing very good also. BlackBerry in Latin America is still doing good. I think their operating system is doing good. The BlackBerry Chat it has been important; it's a big issue for the Latin American kids in Latin America.

And I'm happy to have a new operating system, that is going to be Windows being well supported by the Nokia phones and I hope they have been -- they could be a good operating system. They -- and, we have -- for us, as we have open systems and a lot of them will be the best thing to have.

And it seems like the prices for those cost to carriers like yourself are dropping. Have we gotten down to the $100 price point, or could we be going below that level next year for really good smartphone?

I think -- I hope, yes. It's what we want and I think they don't have the -- you have different operating -- let's say, inside Android, you have different segments of that. You have an Android with more things inside the operating system. We have Android with less things and I hope that in the next years, we can have an Android or an Apple or a Windows or a BlackBerry less than $100. I hope we could have that.

And, for us, would be very important, because we have a big base of prepaid subscribers and if we give them an affordable phone, then they are going to get it and then they are going to start to use data. So that's something that, for us, would be very important.

And could help drive a lot of revenue in the next couple of years.

Yes, yes, I'm sure.

Thank you.

Matthew Campbell, Goldman Sachs

I have a quick question. Looking at the integration of Net Servicos in Brazil and the driver of growth that it's been, have you considered any transactions to reduce the interest expense on the debt? It seems like there, you could save several million dollars at that level in cash if you were to finance at America Movil-type spread as opposed to NET-type spreads.

Actually, we're consolidating now the Net. We're also consolidating its debt and its debt will have to be managed in the same way that we manage the rest of America Movil debt. So you can see, we don't really have any differences in the rates of funds or funding of our subsidiaries.

And adding a little bit more. In my view, I think if you see us as a Group in Brazil, we have been doing excellent. NET blossomed. Embratel plus B. Embratel, it's the satellite business that the new name is Claro TV, plus Claro in the wireless I think, we are doing very good as one Company there and we feel very, very comfortable the way we're growing and the way we're doing things in Brazil.

I think you should start to see us a whole Group. We have all the services in Brazil. We have all the services in Brazil. Of course, we need to do some adjustments in some places like in the data, in the wireless, let's say. But, all over all, I think our Group in Brazil has been doing really good, extremely good. And we have a very good view for the next years in Brazil.

I agree, I was just wondering if there's cost savings to be had at that level, using your capital structure a little more -- a little differently and financing differently; that was my only concern, but okay.

It is what Carlos said, no.

Yes, I agree. Thank you.

Fernando Ramos, GBM Global.

It seems that pressure in voice tariffs in some countries, namely Colombia and Argentina, has slowed down, whereas in Mexico voice tariffs have continued to post double-digit declines, even without the client interconnection rate.

So my question is if there is anything structurally different across these markets, maybe in regulation or in the competitive landscape that makes you think that the trends we are seeing should remain, or do you think that voice tariffs in Mexico could start stabilizing going forward? Thank you.

Well, it's a question that's difficult to answer, because you don't know what's going to be the competition in the next months. Or, as competition increases, then prices should be lower. And we have a huge competition in Mexico. We're well prepared to compete. We have a good network to compete. We have a good name, a good brand and good distribution network. So it's going to depend a lot on that.

Our most growth, 250 minutes of use, it's a lot and our revenue per minute decrease in Mexico, 18%. So I think it's what you're seeing that and still, with that, we're still managing a good increase on ARPU. So it's what really is happening in Mexico.

So, Daniel, sorry, if I'm correct, the different landscapes we are seeing in terms of tariffs between Colombia, Argentina and Mexico, is mainly a function of the different competitive landscapes you would say?

No, no, it's also -- you are seeing exactly the same. Let me -- I give you the numbers of Mexico. Let me give you the numbers of Colombia. In Colombia, we have been reducing the price 5%, but Colombia was the lowest price in Latin America. So we're started. We're still also reducing prices in Colombia.

And Argentina is different because we have a little bit of inflation there. So -- but all around, we are reducing prices. We are being aggressive in Argentina where -- with a lot of giving good subsidies to the smartphone, so people can get smartphones and start to use data. So they are using a lot of SMS there, but we want that they use it more in data in Argentina, so more broadband. So that's more or less what we have.

In Colombia, we have 16% increase on MOU, from 216 to 230. So it's big. In Mexico, from 235 to 250, 15% increase. So all around, we are seeing those the same trends as the --

Correct. Thank you very much for your answer, Daniel. Thank you.

Thank you.

(Operator Instructions). Valder Nogueira at Santander.

On the Brazilian performance, we had a very good reading from the Net Servicos and from Embratel, a combination there. My question is the Pay-TV market is still under-penetrated. There is still some opportunity. Do you guys expect the Government to be granting new licenses so to open up that same speed to other regions the Net Servicos could go or Embratel or whatever?

And also, how do you see that with the potential competition that you may have, for example, from Oi, which is trying now to get out of a revenue inertia and they have said in their investor day that they intend to be aggressive in the Pay-TV business? That's my first question.

Well, on the first question, that if we are going to ask for a new license in some new cities, yes, with HFC networks, that will extend our reach in cable networks through Net Servicos.

And the other part is that, as you know, we won the satellite slot as well in Brazil about two months ago, so we are going to expand our capabilities on the satellite. As you know, the market is moving pretty rapidly to high definition on the offering in Pay-TV -- in satellite Pay-TV.

And the competition is already very, very tough in Brazil. There is a very, very large competitors over there. Sky is in the market, Oi, Telefonica and other guys, so what we are preparing ourselves is to have the right distribution networks [to attend] nationwide for satellite TV services.

As you mentioned, the Pay-TV penetration is still very low, but when you break out the penetration, that is different in the different regions. So we are focused on the regions that we see is more opportunity as well.

And another thing that we need to work around is that the cost of the content, it's becoming a major cost for us, so we are trying to merge, to integrate, to get a new deal, to get exclusivity in some kind of content. So it's another source that we need to be profitable in the Pay-TV business.

And the competition with Oi?

Well, Oi, we understand last week that they choose already Microsoft for IPTV. They are going to use the same IPTV that we are using in other countries. They choose Alcatel to make the integration as well. So we know the product, it's a good product, but we feel that we have the functionality to compete with the new IPTV that is coming in the market.

And with Oi, the question is, well, it's going to be another competitor in the market, but we -- the competition today is --

Well, Sky is already there, so.

It's already there, Sky and there's --

Sky, Telefonica, Oi, GVT.

GVT, so we -- that's not like it's going to be the only competition that we're going to have today. We have a lot of competition, tough competition, so well, I think Oi is going to start to do that and well, we are really prepared to -- we have been doing investments for the last three years on those parts of the market and I think we are well prepared to compete.

Excellent, excellent. And still on that same neck of the woods, we are seeing the price of broadband coming down very fast in Brazil. Either please correct me if I'm wrong, we are also already seeing Net Servicos beginning to create more speed to existing customers, trying to already be prepared for the arrival -- potential arrival of the Italians or even the French through GVT. What's your reading on the broadband market?

Yes, you are right there. You are totally right. We already improved the speed with around half of our customers. We've been duplicating the speed to our customers. We have already offer in the marketplace with 100 megabits if a customer need it; it is a heavy user of Internet. And we are moving our customers to -- let's say, the average is now -- is like 5 megabits in the whole customer base and around 50% of our customers already have 10 megabits or more.

So you are right. The speed is -- we are improving. What we've been doing is to get closer the fiber to our network, so all the nodes in Net Servicos, we are getting closer to the customer to have this kind of speed in all the customers. And another one is the digital TV. That is another trend that is coming that, as well, if we close the fiber, we could deliver as well digital TV.

And adding something of what Oscar is saying, I think if you check exactly what's happening in Brazil, I think Net Servicos has an excellent branding, quality of service. If you say that you receive 40 megabits, you receive what they offer. So I think we have a very, very good product to offer to our customers. If I think we make a survey and the Net Servicos product is one of the best services in Brazil, so --

It's a virtual product.

The virtual product is excellent in Brazil.

Thank you, Oscar. Thank you, [President], for two good data points here. Thank you.

Thank you, Valder.

Will Milner, Arete Research.

A couple of questions from me. Firstly, could you just -- if you're not, I guess, prepared to maybe give us postpaid ARPU, could you just explain how much greater postpaid ARPU is than prepaid ARPU in both Mexico and Brazil? That's my first question.

And secondly, I just want to ask is Spectrum technology neutral in Mexico and Brazil? Could you run LTE in your existing 800 or 1,800 megahertz bands or do you actually need new Spectrum to deploy 4G in Mexico and Brazil? Thanks.

No, I think as what I said is we're going to launch 4G in the license that we buy or that we bought, maybe the spectrum that we bought I think one year or 1.5 years, the auction that we have in Mexico, we bought 20 megabits of spectrum and that's where we're going to launch 4G. In Brazil, I think there are coming auctions in the mid of the year, so that's where we're going to launch the 4G networks.

Still, we have a lot to do in 3G all around Latin America because when you have HSDPA, you have a very good speed. And so, I think we are in the perfect timing to start to launch 4G and to have more 3G in the very small cities in Latin America. So that's what we're doing at this moment. We are trying to do a lot more coverage in 3G and then we're going to launch 4G in the big cities in Latin America; it's our strategy.

Actually, sorry, the question was more a general question. From a regulatory perspective, are you allowed to run different technologies in any spectrum band in Mexico and Brazil?

I don't think we have any restriction to do certain technologies in certain -- license in certain spectrum. I don't think we have that; maybe in one country, as a specific thing. But, all over all, we don't have any restriction to do anything.

Okay. And the postpaid ARPU question?

The postpaid, I don't have the numbers here.

Okay. Thank you.

All right, so now I'd like to turn the call over to Daniel or Carlos for any final remarks. Otherwise, on behalf of Bank of America Merrill Lynch, I would like to thank everyone for dialing in.

Thanks, Mauricio, for hosting the call and thanks, everybody, for being here. Thank you very much. Bye.

Have a very good day, everyone. Thank you.

Thank you.

And this does conclude today's presentation. We thank everyone for their participation.