America Movil SAB de CV (AMX) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2014 America Movil earnings conference call. This call --. My name is Gwen, and I'll 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 call over to Ms. Daniela Lecuona, IR Officer. Please proceed.

Good morning, everyone. Thank you for joining us in the call this morning to discuss our first quarter results. We have today on the line Mr. Daniel Hajj, CEO; Mr. Carlos Garcia Moreno, CFO; Mr. Oscar Von Hauske, COO; and also Carlos Robles, CFO from Telmex.

I'm now going to pass on the call to Daniel.

Good morning. Thank you, Daniela. Good morning, everybody. Thank you for being in the call, and Carlos is going to make a summary of the results.

Hello. Good morning, everyone.

Economic activity continued to improve marginally in much of the developed world during the first quarter of the year, whereas in many developing countries, particularly those more dependent on commodity prices, it decelerated somewhat. In Mexico, the economy appears to be making a comeback, continuing with the improved trends that began to take form during the fourth quarter.

We finished March with 343 million accesses, 4.5% more than in the year-earlier quarter. This figure comprises 272 million wireless subscribers and 71 million RGUs. Our fixed RGUs were up 8.2% on a year-on-year basis, with PayTV being the most important driver of growth, and our wireless subscriber base increased 3.5%. PayTV accesses have for the first time exceeded the number of broadband accesses.

In our wireless platform, our postpaid base surged 9% from the year-earlier quarter, with the prepaid base growing 2.6%.

Net additions came in at 2.3 million, including 1.4 million users from the acquisition of Page Plus, after net disconnections of 585,000 subscribers in Mexico, Chile, the Argentinean block, and Puerto Rico. Disconnections were almost entirely in the prepaid market, after a clean-up of 983,000 clients that were not meeting our traffic and consumption requirements.

And we continue to make progress in the postpaid segment of the market, practically across the board. We obtained 769,000 new postpaid clients in the quarter.

On the wire line platform, RGU growth was led by PayTV and broadband, with accesses rising 14.6% and 9.8%, respectively, over the prior year.

We added 1.2 million RGUs in the quarter. More than two-thirds of the quarter's net RGU additions were triple-play bundles. Our triple-play again continued to be the main driver of growth in the wire line platform.

At the end of the quarter, Mexico accounted for 27% of our wireless subscriber base, followed by Brazil, with 25%, and Colombia, with 11%. On the wire line platform, our largest operation is Brazil, with 33.6 million RGUs, or nearly half, 48%, of the total fixed accesses. Mexico accounts for 32% of our total fixed accesses. So, Mexico is 27% of wireless and 32% of the wire line accesses.

Our first quarter revenues were up 1.3% year on year, to MxP195 billion. The volatility of exchange rates ended up understating the strength of the underlying revenue dynamism of our various operations. At constant exchange rates, service revenues posted their second-best performance in the last five quarters, jumping to 6.4%, from 5.4% in the prior quarter. Wireless voice and fixed-data services were the segments whose growth accelerated in the quarter.

The South American block continued very much alongside its past growth trend, with both Central America/Caribbean and the US losing some dynamism. In Mexico, service revenue growth was the highest in the last six quarters, having reverted a 0.6% revenue decline in the fourth quarter and posting instead a 2% service revenue increase. A year before, in the first quarter 2013, Mexico service revenues were falling 1.6% year on year.

Service revenues continue to be driven by data and PayTV, but both revenues have recovered on both platforms. Both on mobile and fixed, we are seeing a recovery of both revenues.

At MxP65 billion, first quarter EBITDA was up 1.7% in peso terms. As with revenues, the currency volatility suggests a more subdued improvement than is the case at constant exchange rates. EBITDA jumped 6.7% year on year, up from 5.7% in the fourth quarter. By this measure, EBITDA had in the first quarter its best showing in the last five quarters.

The above was the case even in spite of the Company's push into postpaid, a segment that typically requires higher subsidies and even more so where smartphones are concerned. Our postpaid base increased 9% year on year, versus 2.6% for prepaid, and the average cost of devices soared 7.4%, at constant exchange rates.

Our operating profits of MxP39 billion were partly offset by a comprehensive financing cost of MxP8.3 billion that represented for the most part net interest payments on our debt. A year before, we registered a comprehensive financing income of MxP1.4 billion that had been brought about by sizable foreign exchange gains, in the amount of MxP17.4 billion. So, this means that the comparison year on year is very much affected by the fact that the first quarter of last year we had very significant FX gains.

All together, we obtained a net profit of MxP13.9 billion in the quarter, equivalent to MxP0.20 per share or $0.30 per ADR.

In the quarter, our net debt fell slightly, to MxP440 billion, from MxP442 billion at the end of last year.

Our cash flow allowed us to fund capital expenditures of MxP19 billion and reduce our net debt by MxP2.2 billion.

Our share buybacks totaled MxP12.6 billion, and our acquisition of ownership interests, MxP1.4 billion.

In addition to all of this, our cash flow allowed us to fund in the amount of MxP4.1 billion our pension liabilities.

So, with that, I would like to open up now the call for Q&A.

Thank you very much.

(Operator Instructions) Vera Rossi, Goldman Sachs.

My question is about Brazil. Do you see a reaction from your competitors to improve client retention in fixed line? Or, they are too behind in network infrastructure, so they are not able to offer the same products that NET Servicos and Embratel are offering?

Well, as you know, the triple-play has been really successful in Brazil. So, we don't see any change within the quarter. As you know, we are not only offering now triple-play products; we moved to what we call combo-multi. That is a quadruple-play offering. We believe that will be really successful on the marketplace, as well.

To add something, we have been investing a lot in Brazil in the last years, and I think our network, the cable network, and also the wireless network has been in better shape than in the other ones. And that is why we have been gaining momentum in Brazil.

Also, the integrations of the Company has been very successful, has been very successful there, and that's also how we are doing that quadruple-play. So, we are offering to all our fixed customers our wireless product, and it has been very successful.

Okay. And one question about Colombia, what does it need to happen in Colombia for us to see an acceleration in wireless service revenue?

There are two things that are happening in Colombia. First, remember that we have a reduction on the interconnection rate. So, in that reduction, it hit us in the revenues.

The second thing that we have been seeing this quarter is that there is new quality measures that the regulator has been put. So, this -- every time there's a dropped call, you have to give compensate to the customer, and that has been hitting to all -- it's not only for Claro; it's for all the market.

So, that is what we have been seeing this first quarter.

But I think Colombia has been improving, and I'm sure that at the end of the year we're going to see some improvement. Data has been growing fast. The problem is that SMS has been reducing. So, that's why you don't see big growth on data. But with data, as smartphones, browsing has been successful and is growing very good also.

Okay.

Richard Dineen, HSBC.

Thanks very much for taking the question; a couple if I may. Just one on Mexico, where you're improving your customer mix. You're getting significant postpaid adds and a prepaid net loss. Just wondering why the minutes of use declined, actually increased sequentially? We might have expected that to improve with more postpaid in the mix. Is there a change in the commercial offerings or something else that's driving that?

And then, secondly, just on Europe, if I may, just wondering why you trimmed your position in KPN? Is that just kind of portfolio housekeeping? I guess we're weeks away from a regulatory decision in Germany that could see consolidation in that market, and that's delivered a lot of benefits in Austria. I'm just wondering why you would trim your position if that could potentially enhance the value of your KPN stake, if we get a positive decision in Germany?

The first question in Mexico, yes, the MOUs has been reducing a little bit. They have been reduced more in postpaid than in prepaid, but the postpaid is because we have been more aggressive in our plans and we have been giving more minutes in our postpaid subscribers.

And in prepaid, what is happening? Prepaids has been growing very good in the data. So, what we are seeing is that people is using more data and less minutes in our prepaid base. So, that's more or less what is happening.

And also, is that maybe last year we have been having more promotions that what we had this year.

So, these three things are the ones that are making that our MOU has been reduced a little bit. It's more in postpaid. Postpaid has been -- we have been more aggressive in postpaid than in prepaid, more data using. They are using more data than voice.

I can tell you that more or less our data is growing around 200 -- data revenues in prepaid are growing around 200% this quarter against last year. And there, it is the promotion, that we have a little bit less promotion that what we used to have last year.

So, those are the things.

And in the KPN, Carlos, what --?

Well, [as you fully know], Richard, I think what we have done with KPN is partly, in your words, a healthy management of the portfolio. I think one thing that is important is for us it may have started just as a little bit more of housekeeping and also I think a little bit the position.

We have in fact managed to get some liquidity that will serve us well in the upcoming transaction with Telekom Austria, in terms of helping us fund both the acquisition to the extent that we have to buy shares under the tender offer -- and we can talk about it later -- and it also could help us fund part of our [take] in the capital increase that the [company will be taking] in a few months.

So, that's a little bit what I can say [on that]. It started out really very much as just managing the portfolio, but now it's also provided us some liquidity at a convenient time that can be put to good use in Telekom Austria.

And also, to remember, what we said in the last call is that we want to be flexible, to reduce our ownership in KPN to have more than 20%, so we retain our [membership], the two board members, and some of the rights that we have. So, that's what we're doing.

Right. Understood.

Michel Morin, Morgan Stanley.

A couple of questions. First, I just wanted to touch on the US. You had very solid performance there, margin-wise. And yet, the headlines recently have been of intensifying competition. So, I'm wondering if you could tell us a little bit how you view your position, given this shift in competitive landscape, and whether or not you think you can sustain the level of growth and profitability you've been generating there?

And then, secondly, your postpaid performance, you flagged it as growing faster than prepaid in your press release, but when we look at the absolute net additions during the quarter, they do seem to be a little weak for us. And specifically in Mexico, it seems you had the lowest number of postpaid net adds in many years. So, I'm wondering if you can comment a little bit as to what's driving that? Is it market saturation? Or, are you seeing changes in the competitive landscape in some of those countries?

Well, starting in Mexico, I think that we need to wait until to see how's the quarter, the first quarter, for our competitors, but in my view I think we have a weak economy and that's why we're growing less, and also because there is some saturation in the market.

So, we are also moving some prepaid subscribers to be postpaid subscribers, but remember that we need to have the last six months, a weak economy, and that's maybe why we are growing less. Let's wait until -- and see where our competitor, to see what does the market is growing. So, that's what we need to see.

In the US market, I think we are well positioned. We have an excellent brand; not one brand, three or four very good brands. We are seeing very competitive in terms of postpaid and in prepaid in the US market, AT&T competing with T-Mobile then Verizon.

But we feel comfortable that we can do our budget in US with TracFone. We have good programs and we have a very good brand, very good distribution. And I think we can accomplish that.

We just bought Page Plus. Page Plus is giving us also -- we have more subscribers, more economy of scale, better cost in terms of the carriers. So, that's also why we are growing.

Part, we are a very good niche -- we have a good niche of the market in the prepaid market in US [cell].

That's great. And if I may, just one quick clarification, Carlos? The tax rate was very high. What was happening there?

Part of it is a consequence of transactions that are carried over from the prior year. So, that explains probably about half of the difference between the effective tax rate that we're showing and the statutory tax rate.

If you go back to the fourth quarter, you will see that the effective tax rate in the fourth quarter is actually much lower than the statutory rate. So, again, simply it's partly carrying forward part of the advantages of the -- [related and unutilized] in the fourth quarter and now being [given] back.

Okay.

There is another issue, that it basically had to do with the taxation of profits coming from inflation associated with having debt. In Mexico, as you know, that is -- we are only allowed to deduct the real interest on the debt. And that essentially means that we are taxed the profit that results from having debt in an inflationary environment.

And as it happens, where we do have a little bit more debt than last year, and we also did have a little bit more inflation than last year. So, that (inaudible), in the neighborhood of 6%.

So, those are the two important things, Michel. Nothing much to say other than that.

Adding something about the postpaid, just I want to tell you that in Mexico and in Latin America, we have been gaining in number portability in postpaid. So, that's a very good indicator that we see that we are gaining good subscribers in the market.

So, as I told you, let's wait for the competition, to see how the market is behaving, but in number portability I think we're being gainers there.

That's very helpful. And just to clarify on the tax, Carlos, so if we look at the full year, should we be kind of around historical levels, near the statutory rate, in the low 30%s? There's no change there?

Yes, that's what we would expect. As I said, it will be the statutory rate plus whatever is the component associated with the inflation gains on debt. So, it's around 35%, or thereabouts.

Okay. Perfect.

And one thing, [overly], when you look at the postpaid growth rates, or prepaid for that matter, you have to take into account that you are comparing with that from a higher base in the past. So, you always will expect to see some deceleration in the rate of growth to the extent that you are building up a higher base.

Yes. Okay. Perfect.

(Operator Instructions) Andrew Campbell, Credit Suisse.

My question is on some of the regulatory changes that have gone into effect, specifically related to the preponderance rulings. If you could just touch on what were some of the more significant changes, and if you have any idea for what the impacts might be?

Well, as you know, we have a new law in the constitution that was last year. In that law, we have been said that America Movil is a preponderant player. And then, we have in 6th of March new regulation for preponderant players from the IFETEL. So, that's what we have today.

Then, what we having also is that there is new secondary laws. That will create more asymmetries in that. But this law is still discussing in the Senate, and we think they are going to pass that soon, but we don't know exactly when and how that new secondary laws are coming.

So, that's more or less what I can tell you, and we hope that all these new laws will develop more the market and develop the telecommunication sector, is what we expect from that.

Okay. And just as a follow-up, I believe that the change in roaming regulations has already gone into effect. If you could just confirm that and perhaps give us an idea whether or not that was formerly a relevant contribution to revenues?

Yes, it's starting 6th of April. It was the law from the IFETEL. And we have two things. First, that we cannot charge anymore roaming, national roaming. That's one thing.

And the other one, we have asymmetry in the interconnection rates. So, instead of MxP0.30, they are going to pay us MxP0.20. So, that's more or less the two things that starting in 6th of April.

And we're going to see what's going to be the result in the second quarter of these two new regulations that we have, symmetry regulations that America Movil has.

Okay. Thank you.

Rodrigo Villanueva, Merrill Lynch.

The operating performance in Brazil was quite strong during the quarter, particularly in terms of margins. So, I was wondering if you could give us more color on this? And if you think that an EBITDA margin at around 26% in this country is sustainable? That would be my first question.

Well, what we have been saying in all the calls is that we have been integrating Brazil, and all the synergies has been -- we have been having a lot of synergies, a lot of integration in two different aspects -- in the commercial, and Oscar told a little bit about what we have been seeing is that we can do quadruple-play at this moment in Brazil. So, it's very good, and we have been very successful on that. And the other one is in cost and expenses; in Cap Ex, also. So, those two things have been good.

Then, the market is also a little bit more rational. Still, you need to do a lot of investments in Brazil to accomplish all the growth that we have been seeing. The growth in data is very, very high in Brazil. And with all these new --. We launched 4G also in some markets in Brazil.

So, America Movil has been investing in the market, and we have been seeing that.

I think we can sustain the 26% EBITDA for this year. I hope we can do that, depending a lot on the market. But all the work that we have been doing in integration and synergies looks like that we can sustain the 26% market share. I don't know exactly if the market is going to be much more aggressive than what is today or the market is going to be like this today. But in cost expenses, integration, I think we can do the 26% EBITDA for the next quarters.

I don't know, Oscar, if you want to add something?

Well, I totally agree. We are working as well on the network integration. It's taking time to review the [lease line and switch] to a unified backbone. So, we are a work in progress with that, and I think that will save some maintenance costs and CapEx saving. So, I agree. I think we could see that 26% EBITDA margin.

And in Brazil, it's taking also a little bit more time that what we want, but we prefer to do that and to be cautious on moving on that direction and be successful on the commercial side. So, NET is doing excellent in the commercial -- excellent name, a lot of new subscribers, very good programming. I think we have one of the best TV or the best TV --.

Satellite TV, as well.

As well as satellite TV, growing a lot. So, I think that's the way to do things in Brazil, and we're happy how Brazil is developing at this moment.

Thank you very much.

A lot of things to do still, but we're happy at this stage.

Okay. Great. And regarding the secondary laws being proposing in Congress, I assume you have participated in some of the hearings that have been taking place. Is there anything that you could share with us on this respect? Do you think it's possible to see changes in the article related to the elimination of interconnection revenues for AMX, or the change in concession title for Telmex to be able to offer pay-television services? Anything on this respect would be very much appreciated.

I think to some weeks ago -- two, three weeks ago -- we have -- all the operators had a chance to go to the Senate -- not to the Congress, to the Senate -- to expose what we think and what we feel about the law. And we do that as Telmex; we do that also as Telcel. And all the other operators also have a chance to do that. And that's more or less what I can tell you.

We don't know exactly where are the laws. In our exposition, we think also that the zero interconnection rate doesn't make any sense, and that we should go faster to the convergence. And that's what we said in the Senate. It was we have been saying publicly.

And, well, let's wait. We feel that the law also brings good things for Mexico, and let's wait. What we need is to wait to see what is going to happen and what is going to be the final secondary laws for the telecom market.

Understood, Daniel. One final question, if I may? CapEx for the first quarter was around 6% lower year on year. I was wondering if your CapEx forecast for the full year continues to be at around $10 billion, plus/minus 5%, or if you have any changes in that respect?

Well, we haven't changed our budget on CapEx, but CapEx can be changed by a lot of factors; let's say, what's the growth that we have been having. So, that depends also on the CapEx. The prices that we have been negotiating; maybe we put the same CapEx with less cost.

And those are more or less the changes that we could have in the CapEx, but still we haven't make any change on what we are going to invest at this moment. So, there's still a lot of things to waiting for, but we haven't make any change on our CapEx budget.

Okay.

(Operator Instructions) Valder Nogueira, Santander.

Last year, (inaudible) has done good, and now it's doing great. Congratulations on that.

And the needle also needs to begin moving on the right direction on Claro. My question here is, what are you doing on Claro that this company is improving? Is it --? Are you being more selective in what you give to the client? Are you being more selective on managing your customer base? Is it just giving out capacity? You are being able to give more capacity than everybody else? Or, other networks are more clogged than yours and that's an opportunity to you? What's the read there?

Well, when you mean Claro, I am assuming that you are saying Claro Brazil?

Claro Brazil, yes.

Because we have Claro almost all around the (multiple speakers). I think we are having a very good quality on the networks. All the networks that we're having, we're having a very good quality. In the fixed network, in the TV, in the satellite TV, in the wireless, we have been having very good quality.

We have good commercial plans.

And we have been looking for good customers.

So, those are the three things that we are looking.

And with all of that, we are making upselling, cross selling and trying to give to all our good customers the rest of our products. So, that's more or less what we are focusing. We don't want a lot of quantity of subscribers; we want quality of the subscribers. And that's more or less what we have done.

What we have invested in the last year is what we are showing at this moment. So, I think for the last three or four years we have been the company that has been the one that have been invested more in Brazil, and it is showing at this moment the results of that.

So, that's what I can tell you.

Okay. Still on that, given that we are actually in the right direction here in Claro Brazil, does it make sense right now to add more capacity coming from 4G auction? What is your view on the 4G auction? Is it time to go now? Is it time to sit down? Or, [it's sturdy], whether this actually can undergo a consolidation before that? What are your views on that?

Well, the 4G auction, we already have an auction on 4G. So, we are putting 4G markets, LTE and 4G markets, already in Brazil. So, when they talk about the 4G auctions, means another auction of [700]-megahertz and we still do not know exactly what is going to be and when those auction is going to take place or at what time it is going to be, this auction.

But at this moment, in Brazil, in Claro, a lot of cities already have LTE with a very good capacity, with very good quality. We have been connected maybe 60% or 70% of our cell sites with fiber, and we are giving a very, very good quality of wireless there. So, we don't need another auction. We don't need a 700-megahertz at this moment, today, to give LTE services in Brazil.

Okay. Crystal clear.

Kevin Smithen, Macquarie.

You mention that prepaid data growth was up 200% year over year. I wondered if you could walk us through the economics of that? What are you paying now for prepaid smartphones? And what is the overall penetration of data among your prepaid subscriber base in Mexico, Brazil, and Colombia? And finally, what kind of prepaid RPU are you getting from data?

The 200% increase in revenues in -- it was in Mexico. I don't have the numbers here of all the other markets.

But what we're trying to do is we're trying to reduce as much as possible our subsidies, to be more profitable doing that, and if we can do that and still sell to our prepaid subscribers a smartphone will be excellent. Smartphones have been reducing the price a lot. We have very, very affordable smartphones at this moment. So, that's why we are growing and people is using that.

So, all the other detail and the numbers, I don't have it with me right here, but you can call Daniela and she can give you more detail on that.

But are you seeing directionally for the customers that have signed up for data a large increase in total prepaid RPU? Or, is it basically just cannibalizing voice?

No. No. No. No. We haven't been seeing that. I think the prepaid it's more related to the economy, to the money that the people have. Some, a part of this prepaid, maybe they are using less voice and more data; other ones are using more on data and maintaining the voice. So, it's more or less what you have been seeing.

So, in the RPU, in the prepaid RPU, you are not seeing big gains, but to maintain that I think it's good.

And also, can you walk us through the timing and the process for the Telekom Austria bid and the capital increase there? How should we think about timing and regulatory approvals?

Well, we are expecting the regulatory approvals to be in place anywhere to next four weeks, eight weeks probably. I think the mandatory tender offer could be launched, and its closing would be subject to having the approvals in place. That's what I can say.

I think the prospectus also has already been filed, and we need to have it cleared by the relevant authorities in Austria. But that's actually -- that shouldn't take all that long.

So, I think the tender offer potentially should be launched in the next two, three weeks, I would expect. It should be outstanding for some time, again [pending] the regulatory approvals.

And we need to see how we go about with the capital raise, potentially for us it will be done in parallel.

So, those are the things that we are looking at in Telekom Austria.

But there's no contingencies on the capital raise on the closing of the transaction first, of the tender?

No. No, the tender is something that is triggered by law, given that there seemed to be a change in control to the extent that you have now a syndicate of partners that have come together and they have 55%. So, this basically leads to the triggering of an automatic tender offer.

The automatic tender offer, we have announced already, would be done at a price at [EUR7.15] per share, and that is simply an automatic transaction that has to be triggered. There's really no contingency there. We don't know how many shares will be tendered in the end, but we have already provided the necessary guarantees to assure the authorities that we can go ahead with the tender.

So, no contingency there.

Great.

Walter Piecyk, BTIG.

The first question, Daniel, is for you. The RPU in Mexico was flat year over year. Obviously, with sales being down, you're seeing the data growth last year was down all year. Do you expect the RPU in Mexico, wireless RPU, to rise throughout the course of the year? That's the first question.

I think that the RPU in the year is going to be the same. In prepaid, RPU is growing 1%, and postpaid RPU -- the market in postpaid has been very aggressive, a lot of promotions, a lot of things. So, that's why we have been having a reduction on the RPU there. And as we were saying, we want to be also -- to play in the postpaid market, and it's what we have been doing all around Latin America.

I don't think we can increase the RPU in Mexico for the rest of the year. Let's see how does the economy react, but depending on that it's going to be important what's going to be the RPU.

Okay. And then, the second question is for Carlos. Carlos, when you look at your debt leverage for the past decade, it's never gone over 2-times. And with this Telekom Austria deal, it looks like you're going to get close to 2-times. Obviously, you can push back in Brazil on the auction for spectrum there. There might be other spectrum opportunities.

I'm just curious if this effectively limits any additional M&A activities that the Company will be involved with, until you de-lever further? Or, if something very interesting pops up anywhere in the world, whether it's Europe, Brazil, or otherwise, whether the Company would be willing to take leverage over 2-times in order to take advantage of an opportunity that may not exist in a year or two?

Well, I think it's important to address the issue of leverage, because I think that there is some confusion, at least based on the analyst report that I read this morning.

We have already discussed this issue with rating agencies. I think both Moody's and S&P and likely also Fitch and LexisNexis are coming out with their own statements. They are basically saying that Telekom Austria has not any bearing on our ratings.

As I was explaining before, we have plenty of liquidity as is right now, partly having to do with our reshuffling of our investment portfolio, as I explained earlier. We have trimmed a little bit our KPN positions. So, [we have gotten] some liquidity out of that.

And, actually, that we don't expect that we need to go to market to fund neither the tender offer nor the capital raise, our stake of the capital raise, that will be required later on. So, we are not looking at any change in the absolute level of leverage of the Company, as we were still in very, very good shape.

We continue to have the top ratings of any company [working in the industry], of the major telecom companies. We value our rating and we intend to hold on to it.

And as I mentioned, we've been in close contact with the rating agencies, and we have been managing our investment portfolio precisely to ensure that we have the liquidity that is required to maintain the ratings and to be able to proceed with our M&A transactions that we will intend.

But Carlos, my concern was not with the rating. I was not concerned, as I guess --. I didn't see these analyst reports, but I guess those people were concerned about what the Telekom Austria deal would do to your ratings. I was more interested in, does that limit your ability to do other transactions? And if there's a very compelling transaction in Brazil or in Europe, can you now not do it because of the Telekom Austria deal?

What I was trying to explain beyond the issue of the ratings is that the leverage is really not being affected by the Telekom Austria deal. So, from that perspective, it is not anything that is a deterrent of any other kind of M&A transactions, and we have explained before.

It indicates that we do have some flexibility if need be. It is not that you cannot go beyond a certain number of leverage one day and then that automatically triggers a ratings reduction. So, what we're saying is we have the flexibility. We have the credibility, I think, with the rating agencies. And I don't believe that the Telekom Austria transaction in any way affects or hinders our ability to engage in M&A transactions as needed.

We will be consolidating Telekom Austria. We will be consolidating, certainly as of the third quarter, if not before. And as a consequence, yes, we're taking on a bit more debt, but we're also taking on revenues and EBITDA.

So, the Company, America Movil, all together will look as a little bit bigger company now.

Thank you very much.

Soomit Datta, New Street Research.

It's Soomit Datta, at New Street. Just to go back, first of all, to the last question on leverage, within that discussion, could you at all give some thoughts on the buyback potential for the remainder of the year?

And then, secondly, could you just help provide a little bit of clarity on Colombia? There's a bit of detail in the press release looking at, I think, revenue taxes equivalent to 2.2% on voice which have come in. Could you confirm are they in place today? So, were they impacting Q1 numbers? And if not, when? And then, could you also confirm are they asymmetric taxes, effectively? Do they impact everybody in the market? Or, is it just your business there?

Talking about Colombia, what happened. We renovate frequently our frequencies in Colombia. And we renovate 40-megahertz in the [HDT] and in 1950-band. So, that's what we renovate for another 15 years -- 10 years. Sorry. Not 15 years, 10 years. So, we renovate that.

And we used to pay 5% of the revenues, different formula, but 5% of the revenues, but you take out, like, equipment revenues and some of those revenues. And we used to pay 5% every quarter on that.

Today, the way we renovate the frequencies, we're going to pay 2.2% plus 0.7%, but it's in a different way. So, we feel that we are going to pay more or less the same that we have been paying for the last year. So, that's more or less what we got on the renovation of the spectrum. So, that's what we have in Colombia.

And on the buybacks, no big changes here, I think, from in terms of how we go about it. As you know, we've always had a capital structure that we intend to hold on to, in terms of net debt to EBITDA. And then, to the extent that our cash flow is not utilized for acquisitions, then the remainder basically distributed to the shareholders, so that we maintain an even net debt to EBITDA structure. [So, that's basically the way we go about it.]

Again, the question would be, is there going to be anything more on acquisitions? Well, certainly, as regards Telekom Austria, it's really not having any impact on our ability to continue to invest in buybacks.

Okay. That's clear.

Andres Medina Mora, GBM.

You mention some opportunities from the new regulation and the secondary laws from the telecom in Mexico. I was wondering if you could walk us through a little bit of what your view is and what the opportunities are for America Movil, probably in the media sector?

The first question is, I think with the new telecom law we are going to have more certainty in all the regulation. So, this law is going to give us certainty for the next 10 to 15 years, and I think that's very good for the sector and that's very good for the develop of the telecommunications in Mexico.

What was the other question?

Just if you were seeing more opportunities in the media sector as well for America Movil, given the new regulation in Mexico?

And also, if you cold walk us through --? I believe there was an investigation with Telmex and DISH, If you could walk us through where that is and if there is any risk at all in that sense?

Well, the Telmex-DISH is a billing and collection contract, and that's what it is. So, that's what we have been saying.

And opportunities, well, what we think and what we hope is that finally we can get the permission to do TV in Telmex, so as to have the convergence and like in almost any place of the world, we can have that convergence. And that would be the benefit for all the population in Mexico. That's the opportunity that we could see here.

Perfect.

And due to time constraints, our last question will be coming from the line of Michael Rogers, with Conning & Company. Please proceed.

My question has actually been asked and answered. So, I am all set. Thank you very much.

And I'll now turn it back over to the speaker for closing remarks.

So, thank you everybody for being in the call, and thank you.

Ladies and gentlemen, thank you for your participation in today's call. This concludes the presentation. You may now disconnect. Have a wonderful day.