America Movil SAB de CV (AMX) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2013 America Movil Earnings Conference Call. My name is Jackie, and I will be your operator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Ms. Daniela Lecuona. Please, proceed.

Good morning, everyone. Thank you for joining us in today's call. We have on the line Daniel Hajj, our CEO; Carlos Garcia Moreno, CFO; Oscar Von Hauske, COO; and Carlos Robles, CFO Telmex.

Yes. Good morning, everyone. Thank you for being in the call. Carlos is going to make a summary of the third quarter results.

Hello. Good morning, everyone. Thank you for being in the call.

Well, we finished September with 333.4 million accesses, 4.6% more than a year before. Wireless subscribers were up 3.6% to 265 million after 3.1 million net adds in the quarter, whereas our fixed line RGUs rose 8.6% to 68 million accesses, of which 1.4 million were obtained in the third quarter.

In wireless, our postpaid base increased 11.3% from the year before, whereas our prepaid base rose by 2.3%, reflecting changes in our (inaudible) policy throughout the year.

In the fixed line platform, PayTV continued to be really the more dynamic business line, increasing 17.4%, followed by fixed broadband accesses that were up 11.9%. Of the 1.4 million RGUs obtained in the quarter, 49% were PayTV clients.

Triple-play bundles continued to be the main driver of RGU growth. 61.2% of the net RGU additions were sold on the triple-play bundles. Double-play packages accounted for 32.2% of net adds, and only 6.6% were single-play additions. It is important to note that the number of triple-play packages outstanding increased 20% from the year before.

Brazil contributed with almost 71% of the net additions of fixed line RGUs. Recently, it launched our first mass market quadruple-play product, the Combo Multi.

The (inaudible) strength of the US economy in the third quarter, which had (inaudible) long-term securities, feels very much at odds with the state of the Mexican economy that appears to have grown weaker throughout the year on account of a certain shortfall in government expenditures relative to plan, problems in certain sectors, including housing, and an apparent lack of liquidity throughout the economy that is constraining private sector spending.

In South America, notwithstanding the recent [drops] commodity prices, economic activity appears to be recovering.

Our revenues totaled MXN194.2 billion in the quarter, and EBITDA came in at MXN63.3 billion. Revenues were nearly flat relative to the prior year, up 0.7%, and EBITDA was down 5.8% in peso terms. At constant exchange rates, third quarter total revenues were up 7.5% on the year-earlier quarter and EBITDA nearly flat at minus 0.5%.

In South America, service revenues rose 8.9%, the fastest pace in six quarters and, in Central America and the Caribbean, 4.9% year on year. In Mexico, service revenues decreased 2.1% in the quarter, overturning the 1% rise seen in the second quarter. For the most part, the decline seen in Mexico is attributed to the weak state of the economy.

Mobile data and PayTV continue to be the more dynamic business lines, with revenues rising 22.4% and 21.7%, respectively, at constant exchange rates, followed by fixed-broadband, whose revenues grew 10.2% year on year. Both mobile and fixed-line voice revenues were up by 2.2% and 4.6%, respectively.

Our comprehensive financing cost stood at MXN10.8 billion, which includes a foreign exchange loss of MXN2.9 billion, compared to a foreign exchange gain of MXN9 billion a year earlier.

All in all, we obtained a net profit of MXN16.4 billion in the quarter and MXN57.4 billion in the year through September. It was equivalent to MXN0.23 per share or $0.35 per ADR. The main driver of the reduction in our net profit relative to the year-earlier quarter was the swing in the foreign exchange position. It was practically MXN11 billion -- [really], MXN14 billion. Our net profit was also affected by our share in the loss posted by KPN on the sale of its German subsidiary, which ended up lowering our net income by MXN1.2 billion.

Our net debt stood at MXN440.2 billion at the end of September. It was up MXN68.0 billion from December, which helped us finance MXN174 billion in capital outlays and shareholder distributions.

Capital expenditures totaled MXN79 billion, acquisitions MXN16.5 billion, including our share of the rights issue by KPN, share buybacks MXN58.3 billion, and dividend payments of MXN7.9 billion. We also contributed MXN12.5 billion to the funding of pension liabilities.

Well, with that, I would like to open now the floor for questions. Thank you very much.

(Operator Instructions). Vera Rossi, Goldman Sachs.

I want to ask a couple of questions about Brazil. First, could you talk about if there is any region in Brazil in which AMX is growing faster. Or the growth is basically throughout the country?

And, in wireless specifically, we have seen a consistent improvement in revenue growth in the last quarters. And if we should continue to see this trend going forward. Thank you.

I think, in Brazil, we have been seeing in all the regions -- mostly all the regions good growth. Very competitive also in all the regions. And I think the way we have been operating, executing, and our plans -- everything that we have been doing in Brazil has been well. And I think we could see this trend in the next quarters. I think Brazil is starting to -- we are starting to see growth in our base in Brazil. And we're feeling comfortable the way the Company is developing there.

In wireless and also in fixed, we have been investing a lot. The heavy investments that we have been doing in the last three years take us to do that. I think the last survey of Anatel take us in wireless as the best quality company in Brazil.

So all of that is taking us to increase our revenues.

Thank you, Daniel.

And a follow-up question. What is the level of CapEx you expect in Brazil this year and next?

We haven't finished our budget still until now. We're reviewing that. I think maybe in the next call, we can talk a little bit about what's going to be our investment the next year. Now we are reviewing in detail. But there's a lot that we have been already doing in Brazil.

Okay. Thank you.

(Inaudible).

I'm calling to see -- is America Movil still interested in investing in Europe? And maybe elaborate why or why not. Thank you.

We still are open to any good investment and even if it's in Europe or in Latin America or in any place that looks and makes sense for America Movil. So we are open, and we're open to see any good investment that we could do.

Maybe just a follow-up. Do you think you might be investing in either Latin America or Europe with maybe a partner, such as, like, another company like AT&T or someone else? Thank you.

Well, at this time, we haven't had any talks with them about doing something together in Latin America or in Europe. So, at this time, we don't have anything on this matter.

Thank you very much.

Andrew Campbell, Credit Suisse.

My first question is about the weakness that you mentioned in the Mexican economy during the quarter. And I was wondering if you're looking at this as kind of a one-off because of the weather issues during the quarter and if you're already seeing, perhaps, a bit of a better dynamic in the fourth quarter. Or do you think this is something that we should expect to continue for a time.

And, then, my second question is about the pension contributions that you mentioned. If you could just give us an update on where things stand on the funding basis -- if now the pension plans are fully funded or if there are some additional contributions expected. Thank you.

I think we had very bad weather in some states of Mexico. And, well, that creates -- we have some reduction on the consumption and on the way people talk there. But I think, really, the issue was the weak economy that we have in Mexico.

Carlos can develop a little bit more on that.

And, on the pension funds, I think $900 million were for -- relating to the Telmex pension fund. And something -- the rest we put it in the Puerto Rico pension fund. I think Puerto Rico is more or less funded, and Telmex is around 80% to 85% funded. So that's where we stand on the pension liabilities.

But Carlos can talk a little bit what he feels about the economy and the next quarters on the economy of Mexico.

Okay, Andy, as I said before, I think the Mexican economy has grown weaker. It has been partly a function of the significant pullback in government spending that took place, obviously, at the end of last year, but it has continued for the most part. And, obviously, as you know, we have had some issues in the housing sector in particular that have somehow trickled down to the rest of the economy.

So there is a perception that there's not much liquidity. People are not spending much. I think private sector consumer spending does feel a bit subdued. And that's something that is -- you can tell that is very different with the case that we are seeing now in the rest of the region.

So, again, we -- I would take this -- it's a weak economy. Probably, it will be accelerating, hopefully, in the last quarter. But it has been weaker than expected. I think that's -- everybody knows that, at the beginning of the year, we had growth expectations of in excess of 3%. I think the latest report that I have seen had the growth for the year come down to about 1.2% or 1.1%. So there's been a significant de-rating of the growth expectations for the country.

Okay. Thank you.

Richard Dineen, HSBC.

A couple of questions, if I may. If you could maybe give us a bit more detail about the enterprise agreement with AT&T for Latin America that you announced in September -- how does that work? What sort of customers is it for? Is it kind of a revenue share or something?

And, secondly, if I may, just to follow up on KPN, just maybe a little bit of insight as to why the negotiations with the foundation broke down. Was it price? Was it other demands that they were trying to impose upon you? And I guess I'm just trying to understand why it was such an issue. Was this a one-off with The Netherlands with this company? Or is it something that might be more typical across Europe? And would that sort of affect possible other investments in the region? Sorry. Long question. Yes. Thanks.

Okay. On the AT&T, Oscar, can you explain a little bit what was the alliance of what we do with AT&T?

Sure. We did an alliance with AT&T to serve multinational accounts all across Latin America, mainly for VPN products, data products, and voice products. It's an alliance to go to the market together with this enterprise on multinational accounts like Procter & Gamble, GM, et cetera. And we are using the leverage our (inaudible) that we have in Latin America and, as well, leverage from the (inaudible) in the US that AT&T has. And we did a seamless process to go to the market. And it's more like a commercial alliance with AT&T.

And, on KPN, I think what happened on KPN is we have been having talks -- a lot of talks with them. We make that offer. The offer was at a certain price. The price was EUR2.40 per share. And we have been discussing the way we can operate.

And, at the end of the day, in that offer that we do, there were some issues and some things that we need to have that -- what we want is to have more than the 50% of the company. And then the foundation came in. And, with that, we cannot accomplish what we asked in the offer. And that's why we do not proceed with that offer. That's really what happened.

Management wants a higher price, and we think, as we have been always very disciplined on that, that the price that we have been paying was fair. And we decided not to increase the price. And, as we don't increase the price, then, with the foundation inside, we cannot accomplish what we said that we're going to do with the offer. So that's what happens with KPN.

But that does not mean anything in the rest of Europe or in Latin America. So that is specifically what happened with KPN. And, really, the reason is we think that EUR2.40 per share was a fair price, and the foundation does not think that way. So we cannot proceed with the offer.

We have always a good reputation as [acquirer]. We really think that the price of EUR2.40 per share was a fair price. And, well, they don't let, really, the shareholders to decide if that was a good price or it wasn't a good price. So, at the end of the day, that was what happened.

It is something that you encounter commonly in economies that are meant to have a free market.

Right. Thanks for the comments.

Maybe just a super quick follow-up. Could you explain the relationship with AT&T? Is that a revenue share? How do you get paid out of that relationship?

It's just a commercial agreement. We provide (inaudible). They provide to us (inaudible). That's it. I mean, it's not --

I think, at the end of the day, what is happening is all the investments in Latin America to carry these big customers we are going to do it, and they are going to be used by AT&T. And, in the US, they are going to do all the investments, and we are going to use those [invest]. That's more or less -- that's the commercial agreement that we have with them.

Okay. That's understood. Thank you, guys.

Mauricio Fernandes, Merrill Lynch.

Daniel, could you, please, give us a sense of the ARPU in Mexico? In wireless, it was down by approximately 2% versus the second quarter. Was there anything specifically -- ? I know Carlos mentioned the economy. Anything more than that as to working days or pricing that came down? That's question one.

And the second, maybe for Carlos, is whether the fiscal reform is going to bring any relevant changes to America Movil either just in Mexico or on a consolidated basis. Thank you.

I think what you could see in Mexico is, because of the weak economy, we have a reduction in our ARPU of around 6% in Mexico.

Also, what is happening is that -- a very competitive market. So you have to better plans, more usage. And prices have been down like 13% year over year. So still with very competitive prices in Mexico, but still going down.

So that's mainly -- I think when the economy starts to recover, I think we can see a better ARPU. I think it has been a lot related with that and also with the competitive market and the reduction on prices that we have been having. So that's mainly what you could see in Mexico.

Fourth quarter is also -- it's a big quarter for the wireless side. So hope that the economy will recover a little bit. But let's see.

Carlos can talk a little bit about the fiscal reform.

I don't know if you were asking about the reform in terms of its effect on America Movil or generally the effects of the tax reform, Mauricio. I don't know if you can clarify.

Sorry. The tax reform. Thank you.

And, Mauricio, just remember that 80% of the market in Mexico is prepaid. So, in prepaid, people is adjusting every day what they can use. So, as Carlos was saying, we don't feel that there is a lot of liquidity in the market. Well, it's been difficult for the people to use more the phone. So that's where we stand. 80% of our customers in Mexico are prepaid -- are in the prepaid segment.

We don't know on the fiscal reform the final details -- how they're going to end up. But, generally, at least on the exercise that we have done so far, Mauricio, we do not expect to have any negative impact on America Movil at this point. But, again, this has to do -- it's contingent upon seeing the very last words that come out. Certainly, on the basis of the main tenets, we do not expect to have any major impact on America Movil.

Okay. Thank you, Carlos. Thank you, Daniel.

Alejandro Gallostra, BBVA.

My question is related to Colombia. How are you feeling about all the symmetries being applied in that country, because margins have been quite volatile lately? Is it entirely due to specific failures seen in September? Or is it also related to the symmetric regulation?

We don't hear you very well. You are talking about the Colombia? Well, in Colombia, what has been happening in Colombia -- you can compare quarter over quarter. And, quarter over quarter, the ARPU doesn't look good. But, if you look year over year, the ARPU was growing 7.8%. And I think it's good. So I think what we cannot do is to compare quarter over quarter because quarter over quarter -- it's a lot on seasonality, dependent to promotions, [more or less] days in some and other ones not. So, if you compare in year over year, you can see 7.8% more on ARPU and 7.6% more in revenue per minute.

So data is up 17%. Data plans have been increasing a lot. People is using a lot the data in Colombia. So I think, all over all, Colombia is doing well.

But what is driving the volatility in margins? Is this specifically (inaudible) entirely due to the technical failures that you mentioned in your press release in this past September? Or is it also related to the symmetries being imposed by the regulator?

Yes. Symmetries have some impact on that. I don't remember exactly how much, but Daniela can tell you. But these have something in symmetries.

Also, as we are selling more and more smartphones, then the subsidies are also impacting a little bit the EBITDA. That's more or less what you could see in Colombia. It's subsidies on big handsets, on high-end handsets and smartphones and a little bit the interconnection rates, the [asymmetry] in interconnection rates.

Okay. My second question is regarding the upcoming broadcasting licenses seen in Mexico. How serious are you considering about participating in these coming auctions? Should you ever decide to participate, would you decide to go alone, or would you seek a partner to bring the know-how to this business?

Well, we still doesn't have a plan. What we have been saying is that we're going to participate if the government is okay in that. So, until today, we're discussing what we want to participate. And we still doesn't have any strategy if we are going to go alone or we're going to go with someone. So that's mainly what I can tell you.

Okay. Thank you very much.

Michel Morin, Morgan Stanley.

Two questions. The first. Carlos, in Brazil, margins continue to trend down. I know in the past you've talked about how you expense certain costs related to network expansion. So I'm wondering if that's still a source of pressure. Or, if you can, parse out for us what is driving those margins lower. Are we getting to a point where we might see a turnaround in that trend at some point soon?

And then, secondly, just to follow up on the KPN question earlier, I guess the question that everyone is asking is what comes next given everything that's happened in the last few months. I think, initially, you had said you would take your time. You were happy with the minority stake. And then you launched the offer, perhaps surprising some people. Now the offer is no longer on the table. I mean, Are you happy remaining as a 30% shareholder even though you no longer have the management -- I think you had an agreement with the management. So, if you can update us on kind of what your thinking is, what your plans are with that investment, that would be great. Thank you.

On KPN, I want to have my open options. What I said is I am happy today with the 29%. Yes. But I want to have open my alternatives. And, if we feel that the company's doing good and we feel that that 29% is a good investment, then we can stay there. And, if not, then we don't have taken any decision on that. And we're not going to take it until we decide really what we want to do with that. So we don't have any hurry on that, and we're going to take our time to take a decision on what we do with the investment on KPN.

And, on Brazil, Carlos?

Well, on Brazil, I'll just point out we have been -- (inaudible) partly the very rapid expansion that we have had of the network. As you know, we've been investing very heavily in Brazil the last two years or three with this one. And that means that, in essence, there's a lot of spillover effects into OpEx from the very substantial investment program that we have today.

In addition to that, as you know, we've been growing very, very fast (inaudible). And we have significantly increased the number of homes passed. We have -- over the last year or so, we have built more than 2 million homes passed in Brazil for NET. We have entered new regions, which means that you have to put in place new distribution capability. You will need to hire more people. It's not only about the network, but it's also about the commercial effort.

But it's proving to be extremely productive. We've been taking a significant share of market. And, as you can see, the PayTV revenues continue to be very solid in Brazil. I was making the case earlier today that roughly 60% of the RGU growth in Brazil was the triple-play. PayTV is the main important -- the more important catalyst in this effort. And we're not (inaudible) to continue with that effort. Altogether, Brazil accounted for nearly 75%, as I mentioned earlier -- nearly 75% of the new RGU additions in the quarter, which were quite substantial. And this is all very much on the back of PayTV.

So the last thing to keep in mind, I think, is that you structurally have a different EBITDA margin for different business lines. And PayTV's margin is, by nature, lower because, in order to provide the service, you first have to acquire the content. And, as it is the case that revenues in Brazil are probably growing faster in PayTV than in other segments, in other business lines, it is the case that PayTV has increased its share of total revenues, and that means that the structural EBITDA margin will be coming down. So that's also something to consider when you are making comparisons with last year, for instance, or with some time before because that's obviously a very significant impact. The difference in the share of PayTV within the total revenues and within the total EBITA has increased and will continue to increase significantly.

And something to add as the first question that Vera asked us is, in my feeling, with all the investments that we have been having, revenues are starting to come. Revenues are increasing. And I'm sure that, in the future, with those revenues that are coming, I'm sure that EBITDA -- it's also going to increase. So the investments -- first the revenues and, second, the EBITDA. I am sure that, in the next years, EBITDA would be much better than it is today.

Only one last comment here. If you look at service revenues in Brazil, they increased 8.7% in the quarter. That's the fastest rate that we've seen in two years. And I think it's probably fastest of any operator in Brazil. So, as Daniel said, we are happy about top line growth. Obviously, it comes a little bit at a cost of EBITDA, at least in terms of margins. Obviously, this is nothing new. But we expect margins eventually will be going back up, obviously on the lever of higher revenues.

Carlos, just help us a little bit understand the PayTV mix shift impact on margin, because, when Net Servicos was separately listed, its margins were typically in the mid to high 20s. And I think most satellite TV operators have margins in the low 20s. So I'm just wondering to what extent that is still being a major dilutive factor. Or are you -- ? Is it because of the homes passed expansion that's really depressed the Net Servicos margin temporarily?

And, on the homes passed, did you say 2 million in the last two years?

The last year.

In the last year.

2 million in the last year. And what I said also (inaudible) Net Servicos before. As you know, Net Servicos was constrained by the concessions. They could not go to other regions. This has changed. Now the company is moving pretty aggressively into completely new regions. So there is, as I said, not only maybe more homes passed in the region you already control and you already have distribution for; you are now having to expand distribution and commercial effort to other regions where you didn't have any passes before.

Right. And the total homes passed now is how much?

19 million home passes.

19 million. Okay. Great. Thank you very much.

(Inaudible), Barclays.

It was a question on CapEx. It seems that the takeaway is that Brazilian CapEx probably goes down. But, now that there's less money coming to Europe, will you look at expanding some of the cable and fiber footprints in other Latin American countries and, I suppose, including perhaps the broadcast licenses in Mexico?

We have been open always to expand our cable and satellite business. And we have been doing that in two ways. The first one is we're growing home passes. Another one is to buy companies. At this stage, what we have been doing is growing home passes and growing our companies in each country. But, if there's a good alternative of doing something on a cable company in some country that makes sense for America Movil, of course, we are open to do something.

And can I ask a follow-on? Do you have a sort of strategy for Chile? It seems, I guess, by far the weakest of the countries.

Yes. We have been focusing in Chile. It's the weakest, of course, in terms of EBITDA. But I think it's growing a lot in terms of revenue. So, in the revenue side, Chile's growing 11.4%. So I think what we need to do -- as it's a small country, what we need is to gain a little bit more of market share to have the size on the company and then look for the profits. And that's what we have been looking. Remember that we start really, really small in Chile. And, today, the size of Chile -- I think we're having a good size. Still a lot of things to do. But you are right. The weakest in terms of profit is Chile, and we're working to increase that.

Thank you.

Ladies and gentlemen, please, limit your questions to one question and one follow-up. Kevin Smithen, Macquarie.com.

Yes. I wondered if you could talk a little bit about consolidation in the Brazilian market. Do you think that there's been any change in regulation and political opposition to this? A couple of your competitors in Europe appear to believe that consolidation is going to be allowed in Brazil next year. Is this an opportunity for you? How do you think about this relative to opportunities in Europe?

I think, if there's a way that Brazil consolidates, I think it's very good for everybody, even for the Brazilian market. Still, Brazil is really, really competitive. And I think a consolidation there would be good for the market and for the competition.

And, of course, we're interested in participating in that consolidation. Still, nothing concrete to say. Nothing concrete to see. But, of course, we are interested in the consolidation of the Brazilian market.

And you raised some debt at the end of the quarter. With the KPN deal at least on hold for now, how should we think about use of that extra cash? Are you going to save this for KPN? Are you going to save this for TIM Brasil or other opportunities in Latin America? Or should we expect a larger buyback here in the short term?

We're expecting to utilize the proceeds to reduce debt, and that's what we will be doing. Already before the end of this quarter, we will have substantially utilized most of the excess cash for the reduction of debt. We will continue with our share buyback program roughly along the same lines that we have today.

Great. That's helpful. Thank you.

Ric Prentiss, Raymond James.

To kind of follow up on those lines, your leverage is, I think, 1.66. We've seen some other carriers around the world take their leverage up for strategic transactions. As you think about Latin America, particularly Brazil and maybe also eastern Europe and western Europe, where do you see your leverage going? And where are you comfortable operating?

Well, this is a question that has come up repeatedly. And I'd just like to be very, very clear in terms of how we feel. The question is whether we would be open to funding any acquisitions with more debt, effectively. I think the determination that we have in America Movil is that we do not want to go (inaudible) and that we think we have a sizeable cash flow that we can rely on. But, generally, we are not expecting to have to take on any greater leverage relative to the level that we have today.

It is partly, yes, because we would like to hold on to the ratings that we have. But it is also because of the fact that America Movil just happens to be a more conservative company financially. It's always been like that. We do not like to have high leverage. So, beyond the issue of the ratings, I think it is the decision of America Movil not to (inaudible) with more debt.

Potentially, it can go up in the short term. It's not that you have to be exactly this in a given point. But I think the view is that this is something that cannot be higher than where we are (inaudible).

That's very clear. Thanks.

And then my second question is on the mobile data increase in revenue that you were seeing. Can you talk to it on an ARPU basis? What are you seeing as far as the ARPU in a 3G subscriber versus a 2G subscriber?

Well, I don't have exactly right now the number. But a 2G subscriber is mainly a non-smartphone; a 3G subscriber is a smartphone. And, with a smartphone, you use a lot more data, maybe ten times more data than what you use in a 2G phone, and a lot more on minutes. So it's what we are seeing on the trends that we see all around Latin America. So still a long, long way to go in terms of growing our smartphone and our data in the next five years.

For consolidated data, it's 11% year on year, the consolidated data ARPU. So we're growing around 11% year over year our ARPU.

Is it safe to say maybe a 3G subscriber, anecdotally, might be twice as high in ARPU? I'm just trying to frame it in even rough terms.

No. It's not easy to say that because, as the smartphones have becoming cheap, then there's a lot of people who is using lower plans with a smartphone. And then so you cannot compare 2G and 3G alone because also in 3G you have high user people and you have people who is not using that because they are young people or doesn't have the money to use that. So it's not easy to compare 2G and 3G. Average, as I'm saying, well, it's -- I think 3G is using in data ten times or seven times -- seven to ten times more data than the 2G. But, even in the 3G segment, there's a lot of difference between that. So there's probably difference when you have a lower-priced smartphone than the higher-priced smartphone. You use more data. You use more minutes. You use more browsing. You use more everything.

Very good. Thank you.

37% of the current service revenues (technical difficulties).

Will Millner, Arete Research.

Okay. The first question. I guess I just would like to get an update on the telecoms reform proposals in Mexico. I understand the telecoms commissioners -- the new commissioners have been elected, and they have 180 days, I think, to write the secondary laws. I wondered if you had any visibility on what the timing of enactment was and, potentially, what is under debate there. Thanks.

I think that the secondary laws have been -- has to be approved this year. So, next year, we have to have that secondary laws. And then there's a roadmap of some things that IFETEL has. And where everybody is working -- I think they are just getting in the business and working very hard, all the people from IFETEL. So let's see. We don't have any clarity on anything still. They are working on that. And we'll see at the end of the year what's going to be the secondary laws.

Okay. And my follow-up question. On your other European investment in Austria, the experience there looks like it's following a kind of carbon copy of KPN. It's just paid a very large sum for spectrum and looks like it may now need a rights issue. I guess the question is whether your experience in Holland with KPN influences your decision at all in whether to take part in that rights issue and invest more money into that market. Thanks.

Well, I think it's totally different what you could see in KPN that what you could see in Telekom Austria. They are two different companies. Still, I'm not sure what they are going -- they pay a lot of money for the license. And there's not any decision today on any rights issue. So, until -- we don't know that there's -- have a decision, Telekom Austria, on doing a rights issue. But what I can tell you -- it's different the way they operate, and the way they do things is very different between Telekom Austria and KPN. So that -- I'm sure you could see big difference between these two companies.

Okay. Maybe if I could just ask that question slightly differently. Would you prefer right now to invest more money into, say, Brazilian consolidation than put more money into Europe?

Well, depending -- not depending where -- eastern Europe I think is interesting also. Brazil is really interesting. Well, let's see. We're open to all the alternatives. Let's see what's coming and what are our alternatives to do and to invest in other countries.

But, as Carlos said and I said at the beginning, we have been very disciplined in terms of the pricing and in terms of the debt, in terms of the financing. And we're going to do exactly the same way in the future. So that's the only thing that I have a clear view on that. It's that America Movil will be good financially if we decide to grow even more in Europe or even more in Brazil or more in Latin America. That's what we can tell you.

Okay. Thank you.

At this time, we have time for just one more question. Walter Piecyk, BTIG.

Hey, Daniel, I wanted to go back to your answer on KPN because you had mentioned that, if you were very happy that you would keep your stake -- and, if you weren't, I guess you'd consider what you were doing. So I was just curious. Does that exclude the possibility of buying more KPN because, apparently, if you bought more, you could force a mandatory bid. So just that first question on strategy. Thanks.

I'm not saying that we're happy in maintaining the 29%. What I'm saying is that, until today, we don't have any decision on what we're going to do with that 30%. We could be happy staying with that 30%, or that, maybe in the future, we can reduce that percentage. What we want and that the board wants to have open alternatives to do what we feel is the best in the future with the KPN equity that we have -- with the shares that we have of KPN. So that's more or less what we want to have is to have options and alternatives to do what is the best for America Movil in the future. That's what I'm saying.

No. I understand that. And that was helpful. But is one of those options also buying more of KPN?

Well, that's an option. We don't have today any definition, and we don't have any discussion on that option. Until today, what I can tell you is that this option is not an option for us (inaudible). We don't know in the future. It could be an option, yes. The option is to buy more KPN or the option is to sell more KPN. So that's -- or to stay. So there are three options -- to buy, to stay, or to reduce. So that's what we want, and that's what our board wants to have until this day.

Okay. That's very helpful.

And then, for my second question, I just wanted to ask about the US. It looks like you had decent margins, and the ARPU was up sequentially with flat net adds. I'm just curious. Is this -- ? Where is Straight Talk right now as far as that 23 million customers? Is it just a mix shift to Straight Talk? And is your traditional prepaid business in decline? If you looked at AT&T's wholesale numbers, they showed some decline this quarter. If you could, just get us a sense of kind of how that mix shift is changing in the US and which network operators are getting more of your usage. Thank you.

Well, that's an important thing, which is that the service revenues from TracFone -- if you look at the year-on-year comparison, they've come down from 35% you had last quarter and that you've had for some quarters to 18% this one. And that has to do with the fact that TracFone started to consolidate Simple Mobile back in June -- late June of last year. So the year-on-year comparisons typically have the effects of the acquisition. And now it's come down to pure organic growth. So, at present, as I said, we have in purely organic terms -- service revenues are growing 18% for TracFone, which is, I think, quite solid.

Customers' mix of plans have been trending more towards the Straight Talk plans. They're taking a greater share of the overall sales. And this is a plan that they are basically running off three of the four main carriers. I think that hasn't changed. But we do see, as I said, a certain shift more towards the Straight Talk type of plans and less along the lines of the pay as you go type of plans.

And one more thing to add to Carlos' comment is that we are waiting still in US to the approval of the acquisition of Page Plus. So it's another segment of the business that we are waiting for that approval. And, when we get the approval, then we're going to have that acquisition done. And there's another -- there is the SIM cards business that we are going to be in in the US. So I think TracFone is going to be in all the segments of the market.

Thank you, Daniel. Thank you, Carlos.

Ladies and gentlemen, that concludes our question and answer session. I will now like to turn the presentation over to Mr. Daniel Hajj for closing remarks.

I just want to thank everybody for being in the call. And thank you for hosting the call. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. And have a great day.