America Movil SAB de CV (AMX) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the America Movil first-quarter conference call and webcast. My name is Lacie and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Daniela. Please proceed.

Good morning. Welcome, everyone, to the call. We have today on the line Daniel Hajj, Chief Executive Officer; Carlos Garcia Moreno, Chief Financial Officer; Oscar Von Hauske, Chief Operating Officer; and Carlos Robles, Chief Financial Officer of Telmex.

Daniel.

Yes, good morning, everybody. Thank you for being on America Movil's first-quarter 2013 financial and operating report. And Carlos Garcia Moreno is going to make us a summary of the results.

Okay, thank you, Daniel. Good morning, everyone. The euro economy continued to face strong headwinds in the first quarter of the year. We expect economic growth for 2013 worsening even further in Europe and China. In Latin America, several countries' economies weakened more in the state of softer commodity prices.

In spite of the above, active growth remained relatively strong. In relative terms and before considering subscriber disconnections in Colombia arising from our changing our commercial policy, net new access lines exceeded by 8.3% those obtained in the first quarter of 2012. We ended March with 328.2 million access lines. Our wireless subscriber base increased 6.9% year-on-year even after given effect to the Colombian disconnections. While fixed RGUs were up 9.5%, fixed line accesses in South America climbing 18.3% year-on-year.

We added 1.4 million wireless subscribers in the first quarter after disconnections of 2.7 million in Colombia as a result of changes in our reporting policy. Brazil added approximately 1.1 million clients and Mexico 854,000. Net access in the US, 839,000, more than doubled those of last year.

Postpaid net additions for the period were 1.1 million, 12.7% more than in the year-ago quarter with Brazil gaining 347,000 postpaid clients, 78% more than in 2012, and Mexico took around 223,000, more than a fourth of its total net adds.

We added 1.1 million RGUs in the first quarter including 753,000 PayTV subscriptions and 568,000 broadband accesses. The growth of the fixed-line platform were led by the offerings of triple-play packaging. 56% of net RGU adds, excluding Mexico, where we cannot yet provide PayTV, were sold under such bundles. Again, 56% of net additions of RGUs, 56%, were driven by triple-play bundles.

In Brazil, our largest fixed-line operations, we ended March with 29.7 million RGUs, 18.7% more than a year before. PayTV and broadband were the main drivers of growth, reflecting increases of 24% and 22.7%, respectively.

Our first-quarter revenues totaled MXN193 billion. They were slightly higher than those of the prior year in Mexican peso terms. As has been indicated in prior quarters, the peso continued to gain ground vis-a-vis the US dollar and other Latam currencies, with the result that when translated into pesos, the rate of growth of the revenues of our international operations falls below the rate of growth in local currency terms. On average, the peso appreciated 2.8% versus the dollar, 16% versus the real; almost 19% versus the Argentinian peso; and 2% versus the Colombian peso when compared to the year-earlier quarter.

Correcting for this, our revenues increased by 6.1% year on year at constant exchange rates, with service revenues growing 4.6%, led by mobile data and by PayTV, where revenues expanded 25.6% and 20.6% (sic-see press release "19.8%"), respectively, net of FX movement.

Fixed data revenues accelerated to 6.6% after a one-off decline in Mexico in the prior quarter while fixed-line voice recovered somewhat, declining at a lower pace, 5.9%, than it had the prior quarter when we had 7.2%.

From a results perspective, service revenue growth remained at the same pace in Mexico that it had in the fourth quarter, it was minus 1.6%. It decelerated in South America along with the local economy to 5% and it accelerated in the US where it rose to 32.4% (sic -- see press release, "32.3%").

As regards EBITDA it totaled MXN63.8 billion and was down 6.8% in peso terms while our operating profit came in at MXN38.7 billion and was down 10% from the year before. At constant exchange rates, EBITDA improved from the prior quarter, declining 1.4% year on year, less than the 3.7% rate of the preceding quarter.

In Colombia we had an extraordinary charge that will be fully recovered in the next several months that accounted for the [MXN79 billion] nearly [70% of EBITDA --- of earnings].

We posted a MXN1.4 billion comprehensive financial income, with foreign exchange gains of MXN17.4 billion more than offsetting our net interest payments and our financial expenses. The foreign exchange gains arose mostly from the appreciation of the peso versus the dollar and the dollar versus the euro.

Our net profit for the quarter totaled MXN26.9 billion, up nearly 80% from the precedent one although down from the year-earlier quarter, partly on account of the lower operating profits and partly on account of the even larger foreign exchange gains that we had then.

Our net profit was equivalent to MXN0.36 per share and $0.56 per ADR.

Net debt totaled MXN364 billion at the end of March, down MXN8.2 billion from the end of 2012 even after having funded capital outlays of MXN36.5 billion. Net debt was equivalent to 1.42 times EBITDA the last 12 months and gross debt to 1.56 times EBITDA.

Capital expenditures of MXN20.4 billion and share buybacks of MXN16 billion made up the main components of capital outlays. The many investments we are undertaking to replace our networks, 4G, fiber optics, et cetera, will provide us with enough operating capacity to provide data services throughout the region in the coming years. We will be well positioned to take advantage of what we expect will be a rapid uptake of smartphones and tablets by both postpaid clients and the mass market as prices of the devices continue to decline.

So with this I would like to pass it back to Daniela, and then we can open the call for questions. Thank you very much.

Lacie, we can start with the first question.

(Operator Instructions). Andre Baggio.

Carlos, how do you view the trends that we are seeing in Mexico where it seems that growth is slowing in the mobile business? We may be seeing some slightly better numbers in the fixed line.

Can you repeat this a little? Because we don't hear you.

Sorry. So can you comment on the slowdown on the mobile growth in Mexico?

Well, I think we're starting to see a recovery on March; I hope in the wireless side in [AU tech inquire] we could see a better increase on revenue than what we saw on first quarter. We are starting to sell more and more smartphones and I think it depends a lot on a little bit of slowdown on the economy on Mexico, but we are starting to feel that this quarter is coming better, the revenues in telco. No, that's the only thing I can tell you.

Okay and then --

Also, one important thing is that we had Easter vacation in March this year and last year we had it in April. So we are not comparing exactly apples with apples. So that's also different that we have this quarter in terms of revenue.

Okay. And my final question, what do you expect to gain by integrating nets in Embratel and Claro as described in the recent press release from Embratel?

Well, I think what we're doing really in Brazil is we are making a big effort on integrating the Company. We have been advancing a lot. But on the other side, I think we are being careful not to -- we are doing very well in terms of nets in the commercial side in Embratel. So the integration, I think, we are doing that not -- being very careful to stay the way we are in the commercial areas, okay? So, in terms of the technical, IT, human resources, financing -- everything else we are doing all the integration. We have been advancing a lot. We have been getting more and more synergy. And maybe in 1.5 years, two years we can finalize all the integration of the Company.

But we are really worried not to bother all the commercial areas that might be doing very well. Claro is starting to do much better. As you can see, our good recovery on the first page on Claro, on the pre-paid on Claro. And Embratel is also doing well with the corporate business.

So all the things that we are doing are really focusing on the integration of the IT, technical, finance, purchasing, and all the areas around the commercial.

Thanks a lot for the colors.

Rodrigo Villanueva, Merrill Lynch.

This is Rodrigo Villanueva from Merrill Lynch. I was wondering if you could share with us the alternatives you have considered to face the telco reform in Mexico. Particularly, I'm interested to know if you have thought about divesting assets in order for you not to be considered dominant anymore on the renewed parameters that have been set by the Mexican governments. That would be my first question, thank you.

When you talk about the telecom law in Mexico, there is -- the law has been approved by the Senate yesterday. All the changes must go back to the Congress for final approval, changes made at the Senate last night does not amend material the deal has approved in the Congress a couple of weeks ago. So when the deal is confirmed in the Congress and published by the President, the next step will be to go on to see what are going to be the secondary laws to be prepared and enacted.

So that is more or less the calendar that we have. We are not thinking, okay, if we are going to be a dominant player, but it looks like we're going to be a dominant player in the Company. But what we perceive are going to be the secondary law of what are going to be there with restructurings or regulations that they are going to put to the companies that are going to be dominant. So we need to wait; we need to see what are going to be the secondary laws that they are going to discuss in the next six months. And then we can take a decision. But until today, nothing is clear, so we need to wait to see what is happening.

A lot of companies in the world are working as dominant, so let's see and what are going to be those secondary laws.

Thank you very much, Daniel. And then my second question is related to a potential joint venture with Global. Recent news reports suggest that there have been talks between AMX and Global to acquired TV networks across [time]. So I was wondering if this is something that you are already considering. And I was also wondering if you'd be willing to participate in the auctions for the two new broadcasters in Mexico. Thank you.

Well, on the options for the TV, we're still discussing what to do. We don't have anything yet, any decisions still yet. On the Global side, we haven't been discussing it with Global. But we have all the options are open for us. That's the only thing that I can tell you. We don't have any decided yet. And we are open to see any alternative in that.

Okay, thank you very much, Daniel.

Thank you.

Michael [Moran], Morgan Stanley.

Carlos, I was wondering if you could clarify or remind us of how you think about the leverage that you're willing to take on, especially in the context of you having accelerated the buybacks during the first quarter. Thank you.

I noted that in one of your notes you mentioned that we were having to go back to the one time net debt to EBITDA. When we had the conference call last year to discuss the investment that we had made in Europe, we said that we intended to remain at the levels that we had gotten with what we could maintain such data, we are waiting, if we stayed at the current levels, that would be very negative.

So that is basically -- it's very clear, we said this is approximately 1.5 times growth at EBITDA and that's where we intend to keep it.

So basically, the share buybacks that we have seen of in other years have been simply distribution of the cash of the Company generates over to shareholders. As you know, whenever we have not spent our cash flow on acquisitions. It is always returned it to our shareholders, mostly by way of share buybacks. And this has what we have done so far. It's not unusual.

So Carlos, just to follow up on that, if the target is 1.5, does that mean that you would gross that to EBITDA? Does that mean that you would be willing to actually temporarily go in excess of that when there's a need to do so? For example, because of the KPN rights offering coming up? Or because for example you want to continue the aggressive buybacks? How do we think about the 1.5 -- is it a ceiling or is it a new target average?

Again, Michael, what we said in the call and I am saying it again just for clarity, we intend to abide by these restrictions -- by the agencies such that we stick to our current credit ratings. Okay? And the rating agencies, they all have different leverage targets and they have different ratings from them.

But the tightest rating that we have, which is the indication that we have in terms of leverage comes from Moody's. And what Moody's says are that we are not to have gross debt to EBITDA of more than 1.5 times over an extended period of time. That's what it says.

So it's not like you cannot go beyond that for one day. You always have some flexibility. But obviously, the rating agencies are perfectly aware of our business plans and what are our expectations. And they basically adjust accordingly. So, and throughout the year we [recover] our costs over the year that is way more than what we need to cover the finance of the new KPN shares that we will be subscribing. Okay?

So, yes, if you look at the rating agencies they have the ratings on America Movil and they have their leverage guidance. They have their conditions. I think it is both taking a look at exactly what it is that they say. The only thing that we can tell you is we would be abiding by the limitations they put on us because we really intend to keep our rating.

Andrew Campbell, Credit Suisse.

My question is on the results in Central America during the quarter. You have a very strong EBITDA margin there, higher than what has been typical over the past few quarters. And I was wondering if there is any special reason for that and if you believe that these higher levels of margins are reasonable going forward. Thank you.

Yes, what you could see in terms of America are mainly two things. First, in Honduras we are integrating the Company that we bought last year. The company was with a negative EBITDA, the company that we bought. So we have been integrating the company and we have been successfully doing that.

The other one is in Costa Rica. You know that it was a greenfield and we start [paying] money but the company has been doing good. We are having good revenue. Still growing a lot, in terms of smartphones and those types of handsets. But I think what you are seeing in Central America is mainly good work on integrating the company and making a very good integration in Honduras, also.

So you could see that the 16% year-on-year growth in [EBITDA] has been very good. And also the Caribbean it has also been better. The Puerto Rican asset is growing, again, the revenue. So we are mainly doing in all of our operations, we are doing good in Central America.

Great, thank you, Daniel.

Thank you.

Walter Piecyk, BTIG.

Carlos, I wanted first to go back to your prepared comments. I had a hard time understanding some of it. Did you say that there was a one-time charge that was in the quarter? I may have missed that.

In Colombia, there is -- it acts like a tax that has to do with (inaudible) structured from our corporate level and at the ownership level. And so there is a tax that is paid to Colombia we would be able to get back in coming months. And this charge is approximately the equivalent of 3% of revenue.

3 --? 1, 2, 3% of revenue?

3% of revenue -- MXN79 billion.

Okay. And then just going back to the questions on leverage and the 1.5 in Moody's. That was a good explanation, thank you. But does that mean that -- if you were to go out and make a large investment or acquisition, that that would be obviously an indication that your leverage would be over 1.5 times on a gross basis for an extended period of time? And as a result and in a downgrade. But so does that basically restrict you from making any large investments or acquisitions until such time that you can actually pay down some of your debt?

I think clearly and that was a little bit the message when we had the conference call last year, the message was there are clear limitations from the leverage from what we can do, no? So obviously after your leverage goes down and all depending on whatever you might want to acquire, there may be options. But they are depending on current level, whatever you would be acquiring is.

But certainly leverage takes into consideration and for us, the decision has been we do want to hold onto (inaudible). They are the top credit ratings in the sector. We value that. They have given us very good access to funding in the markets at extremely good rates. And we think that in these days and times having good credit ratings is something that is very, very valuable.

So we do intend to be careful with our management of the capital base of the Company.

Okay, thank you. And then just one final question on the operations. Do you have any sense of what your EBITDA margins would look like in markets like Mexico and Brazil if you excluded the subsidies that you are paying for your move to smartphones? Because I know you've referenced data growth and how you're more willing to maybe subsidize on smartphones to get some more data growth. Any way of knowing how much margins would be lifted without those extra subsidies? Thank you.

We don't have the number right now here, but clearly we can check and see exactly in Mexico and in Brazil what are the costs or the extra subsidies that we are doing by selling the smartphones and future phones. So we have that very clear.

Okay, thanks, Daniel.

Dan Kiakowski, UBS.

(technical difficulty)

Richard Dineen, HSBC.

Thanks very much. Could you perhaps give some details of your new commercial policy in Colombia that led to the 2.7 million net disconnections? What is the time period to be considered inactive? Is this just a one-quarter event or is this something that may last over a number of quarters?

And maybe just as a follow-up to that, what is the current inactivity definition in Mexico? And might you be considering a subscriber cleanup in that market, too? Thanks.

Well, in Colombia, what we do is we reduce one month from the calendar. And I don't remember exactly but maybe it is going to be in 60 days what we have and it is what the [cards last]. So I think that is the right policy to do. And that will increase our ARPU. And that is what we are doing.

In Mexico, I think we do that maybe it was a couple of quarters ago. So we just do that maybe last year, I don't remember exactly which quarter, but we are trying to standardize all our calendars that we have in Latin America, including the US so I think in December of 2011 we did something. I'm not sure if we are in the same dates as Colombia or we need to do something else, but what we're trying to do is try to standardize all of the calendars and all through Latin America including US (technical difficulty).

That's very hopeful, thank you. Maybe just a second question if I may, just the CapEx numbers seem to be quite low in the first quarter, 10%, 11% of sales. Obviously as we've discussed, the buyback was pretty aggressive in the first quarter. Was the CapEx number, is that more of a seasonal tactical issue? Or is any part of that CapEx is that to do with more the uncertainty over the medium term with the regulatory situation in Mexico, in Colombia, maybe the risk of regulation getting even tougher in Argentina, maybe even Ecuador? Just wondering philosophically what is the thinking at the moment.

Only one -- just one thing on your previous question, the thing that we want to do with these calendars and the reduction is just to reflect the customer, the clients that are really consuming. So that is what we are trying to reflect to the market, it is to do that. It is one time. We cut that 30 days and we just reflects the clients that are consuming. So the next question.

And CapEx, there hasn't been any change on our CapEx so the numbers you are seeing in the quarter basically has to do with deliveries. As you know, we are accruing the CapEx based on when we actually would see the equipment and become obliged to pay because we have already been presented with an invoice.

So that is really something that is -- it's very much -- I wouldn't even say fee income, we have to do with the types of works we are doing. But yes, I think it is a little bit more than what would be the average for the quarter and throughout the year. Now we are talking about $10 billion of CapEx. And what was accrued in the first quarter was much smaller then what will be the quarterly average.

Okay, thanks very much for your comments. Appreciated. Thanks.

Soomit Datta, New Street Research.

A couple of questions, please. First of all, just on some of the prepared comments in the press release, you're talking about how a number of the fixed lines are not economic. I think you talk about 1.3 million land line not being economic. Is it --

Could you talk a little bit higher? We don't hear you well. Can you talk a little bit louder, please?

Sorry, is that a little better? Hopefully you can hear me.

Yes.

Okay, sorry about that. Just going back to the comments you make in the press release about how a number of the fixed lines, the Telmex lines are not economic because they are in rural areas. Is it at all possible to think about the mobile business in the same way, Telcell? Is it sensible to think about parts of the Telcell business by geography which are not profitable? Or is it not really sensible in that sense?

And that's the first question, thanks.

The question is -- we didn't hear you so well, but if you're asking that in the fixed lines in the rural areas we are not being profitable and you are asking that is in the wireless lines also in the rural areas where we are not profitable? The question is we have a model, in some areas the payback is longer but everywhere where we are staying, that has to be profitable. Depending in some places and some different services are much better, the return is faster and the other ones are longer.

So until -- we don't know what are going to be the new rules, then we cannot know exactly what is going to be the model that we are going to use to do those areas.

So we need to wait until if there is going to be profitable, then we are going to still investing and if something is not profitable, well, then in those places we are not or in those services we are not going to invest. It all depends on that.

But I think it is important to highlight that the sales coverage was by design, it was not by obligation. It was what [can tell did] because it was a business model that we wanted to implement. A business model which has distinguished itself from its competitors. But the one that has the greater coverage.

So you have to -- when you look at that, it's more difficult to say that there is a given region that is less profitable, because effectively it is all part of the same business model, having coverage everywhere.

Now to the extent that the rules of the game change, then we the business model may be redirected.

Okay. And then just a quick follow-up on that. To the best of your knowledge, with the reform initiative talking about dominance and market share, are those market shares being talked about on a nationwide basis for a state-by-state basis, or a municipality basis? Do you have an understanding as to what region would be discussed?

I think this is still in the making. We don't really have yet these definitive secondary regulation, but being the profit is at present is the basic framework on which all the secondary regulations will be revised. And I think that until that happens we really won't have any more certainty in terms of how this will be managed. So I think we will really need some time before we can answer your questions like we want --.

And what we understand from what we have been hearing is that all these regulations are going to be for increasing the investment, grow the market, grow the telecommunications sector, invest more on broadband, invest more on everything. So we need to wait what are going to be the secondary laws to understand what's going to happen.

Okay. And can I just ask a couple of questions unrelated to the reform. Just on Mexico, I think you normally give a data revenue growth number for the quarter. You have done for the other markets you didn't give one this quarter. I just wonder if you have that date of revenue growth number please, for the mobile business.

And then secondly, could you be maybe just talk a little bit more about the deal in the US with Walmart? I think you've got a distribution agreement which kicked in from the beginning of Q1. Could you talk a little bit about how much that is perhaps contributing to the growth in track phone? Thank you.

We really don't hear you very well, we have a bad connection with you, so we don't hear your questions, very difficult to hear your questions. Can you repeat them again?

Yes, can you repeat?

Sorry. Do you have a data revenue growth number for Mexican wireless, please? Is the first question. Data revenue growth number.

And then secondly, just interested in how the Walmart distribution arrangement in the US is going and how much that distribution is contributing to track phone growth.

Well, I think you talk it, the Walmart distribution is very important. But also it is important all the products that we are launching. So if we have a good product [loss], good distribution network like Walmart, then that is why we are so successful in the market.

So we are really happy the way [track] phone is developing and we are growing maybe more than what we had been expected, no? We have a good cooperation between Walmart and us and we also have very good products to offer it to the market. So that is mainly what we have --.

Okay, thank you.

Next question.

(Operator Instructions). Dan Kiakowski, UBS.

I've got two questions on Brazil. We saw an important sequential drop in terms of churn and also an improvement sequentially in margins in Brazil. Do you think this is a turning point for churn and for margins in Brazil?

Well, I think what you could see in Brazil is that we are really improving. We have a very good post paid increase in the postpaid subscribers. And the churn has been lower. So we are happy the way Brazil is developing. We have a lot of challenges still. We need to do more coverage. We are launching 4G networks.

So I think there's still a lot to do in Brazil but we are working and much more comfortable on how the Company is developing there. Now you can see the indicators and the ARPU, MO, the churn, subscribers and postpaid. Everything is going in the right direction. So well, that is mainly what you could see in Brazil right now.

Okay. And the second question is on just a follow-up on the net Embratel and Claro integration. Have you already garnered all the tax efficiencies associated with that? Or is that source of synergies still to come?

There is -- on the one hand, to the extent that you reduce the number of the intercompany transactions which typically accrue any sales tax that cannot be credited back. To that extent, there are certain efficiencies.

And then, obviously, I think in different companies you have different proficience or the integration has to be done in a way that you can [sell it] back but --.

I think the consolidation of the Company is also helping a lot the integration of the operations. So everything goes together. So I think it is important to do the integration of the operations but also the integration of the financial leads to the Company.

And specifically, there are no tax loss carried forward in the mobile operations that could be offset by the, say, in Embratel? That's not the idea behind it?

I think the other kind is, as I said, on the one hand you are going to prepare the [life] that you have; on the other hand, you want to generate more efficiencies at the operating level. There is a lot of noise by having disparate operations and you want to bring them under the same umbrella. But costs -- some costs of the -- that I mentioned in direct sales taxes, it allows us to streamline the structure. It will allow us to better manage the comp on an addition perspective. And yes, it is important to maintain whatever tax benefits we can pick up.

Ric Prentiss, Raymond James.

My first question is on the smartphone effort. I think last quarter you mentioned that about 59% of your post-paid base was on smartphones. Can you update us as far as where that is now? And have the prices dropped such that you're seeing the ability to push smartphones into the pre-paid side as well, yet?

I think every day the smartphones are reducing their prices. But in on the other side, new group smartphones are in the high level of prices. So but you could see that the new phones are getting at the high prices but also mid and low prices you're going to see a lot more smartphones and [D2] phones. So of course, you could see that the growth in data in the prepaid space is going well and we expect that in the next year you could see average rates of our prepaid in future phones or in smartphones -- no doubt on that.

Okay. And then obviously, the US has been a bit chaotic with all the mergers and potential mergers. When you think about track phones and how well it's doing there as you pointed out, what does the changing landscape in the United States with different companies merging and the installment plans coming in, at least at T-Mobile, what does that do to track phone?

I don't think it has to do too much right now. I think that we are doing in smartphones is focused on the operations. We are working with a lot of the carriers. We are working with AT&T, with Verizon, T-Mobile, and Sprint.

So we are having regardless of the main carriers, we are having business, we are accessed on them now. So what we need to do in track phones is to focus on the operations and still deliver what we are doing right now. So having and doing very good product. And next is that we have increased data I think it's very important on the track phones is doing well, no?

Okay, thank you.

I think one very important thing is that track phones has been very successful now in handling also data services. And data services are rising, more than doubling year on year. If you look at the rate of growth of revenues of track phones, 32% for the US market is quite respectable. And a lot of the growth in revenues is particularly coming from the data side.

So, it's important to see that there is a lot of pent-up demand for data services in the US from clients that are getting into the game with their cheaper smartphones.

That's great. Thank you.

Will Milner, Arete Research.

Just a couple of questions here on Colombia and the growth outlook there. I think going through the quarter you had changes to your mobile termination rates and also restrictions on your ability to price on net traffic, cheaper than off net. Given we've seen quite a slow down in the first quarter, is it the case that you would expect to see a further slowdown in the second quarter as you see a full-quarter impact of those regulatory changes?

And then also in Colombia just on the EBITDA trends, I think even if we adjust for the 3 percentage point one-off, it still looks as though EBITDA fell in Colombia in the first quarter. And this has obviously been a business growing EBITDA at a relatively fast rate until now.

Would you expect EBITDA for the remainder of the year to continue to shrink, given the regulatory changes? Thanks.

Hello?

Sorry. If you look at the effect, the changes in EBITDA in Colombia there are three factors. One is the part that I mentioned a while ago, that was 3% of revenues. There were two other parts as well. One was the discovery acquisition costs because we are growing now faster in Colombia in both states. And if you look at data revenue growth, that is one of the countries where we are doing better, data revenue is more than 30% in Colombia. And we are going to hold onto this space. So that has -- from distribution costs by way of smartphone.

And then there is a smaller impact, Chile is 1% of revenues, which would be the effect of the interconnection rates. Okay?

So those are the three major components that are coming out with the good impact on EBITDA. Our operated, our domestic charges, we achieve less than 1% of revenue. Part of it is our acquisition costs and then part of it is the slowing rate of (multiple speakers) .

And one thing that I think the margins in Colombia are very good margins still. And what is important for us to understand is with this asymmetric or dominant regulations that we have means that we are going to sell more. And what keeps you a lot on the EBITDA is that saw less in the selling. So you are going to sell less then I don't think that's the EBITDA margin or the EBITDA will be less or will reduce.

So it goes -- the EBITDA also lost -- it is really related to the sales of smartphones, subsidies. So we are going to sell less because we are as a dominant player, then I don't think that the EBITDA is going to be reduced. It could be reduced by other factors, but not specifically by this factor, no?

Okay. And if I could just have a follow-up on Claro in Brazil. You mentioned everything is now moving in the right direction and customer intake has improved. But the mobile service revenues are still falling 4% year over year which suggests that perhaps pricing has deteriorated in the quarter, or not. It would be good to get your comments on that.

And also, I guess, given that the clients that we've seen in the Brazilian mobile business for the last four quarters, would you be prepared to talk about a target for returning to growth in that business?

Well, I think the first thing that you could say in Brazil is that the prices are reducing 27% in the year, so we still have a lot of competition with the market. So even that we are saying that everything is in the right direction, still I said that there's a lot of things that we need to do. Also the interconnection rates are going down. And they're going down again in April. So, I hope that Brazil will be more rational in terms of competition. We don't know that, so we still need to compete.

But I think everything goes in the right direction. And I am sure that we are not only looking out at subscribers, we are also looking on revenue. So it's very important for us that most are growing 16% and traffic is increasing a lot. Data also, it's a good challenge on data. We need to get data a little bit more profitable and growing faster. Especially we see a lot of things that we need to do still in Brazil.

Thank you very much.

Ladies and gentlemen, due to time constraints, we have time for one more question. Mauricio Fernandes, Bank of America Merrill Lynch.

One question regarding the pricing environment in Mexico. So we're still seeing the revenue per minute down from approximately 20% (technical difficulty) paid in the fourth quarter. This is an acceleration from the previous declining revenue per minute. And the good thing is minutes of use have gone up to almost fully offset that.

But I wonder for how long would you expect the revenue per minute to fall and for how long would you expect the MOUs in that case to continue to respond as a result of the price cuts? Thank you.

Well, I think in Mexico what you could see is we have a very, very competitive price and rate in the market. I think one of the lowest in the world in Mexico. So prices and wireless are less than $0.04 -- (multiple speakers) [three dollar cents] so it's really competitive. So I don't know until how far we're going to go there. But about that, the other thing is that data is growing a lot, so something important is that data is growing -- services, value-added services are growing also.

So let's see how prices have been falling 20%, around 20% year over year in Mexico. So I cannot tell you exactly what the competition is going to do in the next, but we are putting infrastructure; we are adding capacity; we are working a lot on the quality of the service; we are working a lot on the distribution. So there's a lot of things -- we have 4G. 4G has been -- LTE and 4G has been very successful in Mexico.

This speeds people -- we have been number portability getting a lot of new customers, new data customers, ones that are referring the Telcell network. So that is mainly what is happening in Mexico, Mauricio.

So what's going to happen in the future? Well, we don't know exactly what the competitors are going to do and how well the market is going to react. But still, we have a lot of competition and Mexico is becoming really one of the lowest countries and pricing in the world.

We are close to the US on the OCB countries. We are the second-lowest of all of them.

Okay, appreciate that, Daniel.

Ladies and gentlemen, this concludes our question-and-answer portion of our call. I would now like to turn the call back over to Daniela for closing comments. Please proceed.

Well, thank you, everyone, for being in the call. And we can take any follow-ups if you wish.

Thank you very much, everybody. And thank you for being in the call. Thank you very much.

Thank you for your participation in today's conference. This concludes your presentation. You may all disconnect. Good day, everyone.