America Movil SAB de CV (AMX) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the America Movil third quarter 2014 earnings conference call. My name is Jackie, and I'll be your coordinator for today. (Operator Instructions)

I would now like to turn the conference over to Ms. Daniela Lecuona, Investor Relations Officer. Please proceed, ma'am.

Good morning, everyone. Thank you for joining us in this conference call. We have today on the line Mr. Daniel Hajj, Chief Executive Officer; Mr. Carlos Garcia Moreno, Chief Financial Officer; Mr. Oscar Von Hauske, Chief Operating Officer; and Mr. Carlos Robles, Chief Financial Officer of Telmex.

I'm going to leave you with Daniel.

Good morning. Thank you for being in the third quarter of 2000 (sic) operating results, and Carlos is going to make a summary of the results.

Thank you, Daniel. Good morning, everyone.

Well, in the third quarter, the US and Mexican economies continued to gain momentum, but a number of countries in the world, including in Europe and in Latin America, experienced bouts of renewed economic weakness, giving rise to important currency realignments and continued reductions in long-term interest rates.

In the quarter, we added 1.5 million accesses, including 1.4 million fixed RGUs, to end September with 364.4 million accesses, 1.8% more than a year before. This figure includes 286.8 million wireless subs, 34 million landlines, 22.2 million broadband accesses, and 21.4 million PayTV units. Telekom Austria contributed a total of 24. million (sic - see press release, "24.3 million") accesses.

Our postpaid subscriber base continued to grow rapidly, as was the case with our PayTV and broadband accesses. They were up 5.6%, 12.2%, and 8.5%, respectively, relative to the year-earlier quarter.

Our third quarter revenues totaled MXN221 billion, 13.7% more than in the year-earlier quarter, reflecting among other things the consolidation in our financial results of Telekom Austria from July 1. The year-to-year comparison results in a 4% revenue increase in peso terms if the 2013 results are adjusted pro forma.

At constant exchange rates, our consolidated service revenues increased 4.7% in the quarter, pro forma. They were led by mobile data services, that have maintained a stable rate of growth of around 15% over the last several quarters, and by PayTV revenues which have observed high, albeit declining, rates of growth. They were at 15.2% (sic - see press release, "14.7%") in the quarter.

The trends show the continued acceleration of fixed-data revenues -- to 11.5% in the quarter, from 9.3% in the fourth quarter of 2013 -- and gradual recovery of fixed-voice revenues, with mobile-voice revenues maintaining their decline, mostly on account of regulatory measures introduced in Mexico.

At MXN69.2 billion, third quarter EBITDA was roughly flat relative to the prior year, 0.4% in Mexican peso terms after the consolidation of Telekom Austria, and the EBITDA margin came down by 1.2 percentage points, to 31%. At constant exchange rates, EBITDA rose 6.3%, substantially more than the 4.6% that would have been posted the prior quarter had Telekom Austria been already incorporated in our financial results.

Our operating profits declined 5.5% year on year, to MXN37.6 billion, essentially on account of higher depreciation and amortization charges.

We registered a comprehensive (technical difficulty) that was 12% smaller than that of the year-earlier quarter.

Our net profit for the quarter totaled MXN10.1 billion. The reduction in our net profit relative to that of the year before -- it fell by 39.3% year on year -- essentially had to do with a similar increase in the income and deferred taxes line item. The profits before taxes, net income before taxes, was fairly similar this year than last year.

Our cash flow allowed us to cover capital expenditures in the amount of MXN82 billion, fund MXN34 billion in shareholder distributions, and contribute MXN15.9 billion to our pension funds. In addition to the above, we were able to reduce our net debt by MXN30.7 billion, to MXN490.6 billion at the end of September. Our net debt represented at the end of September 1.63 times EBITDA. Again, this is after the consolidation of Telekom Austria.

So, with that, I will pass the floor back to Daniel. Thank you.

So, we can start with the questions.

(Operator Instructions) Vera Rossi, Goldman Sachs.

I have a question about Mexico. Could you talk about the wireless business and what is causing the weakness, if it's related to the macro? Or, how much is related to the macro and how much is related to the change in regulations?

And on the fixed-line business, what is causing the change in revenue trend from a decline to a growth?

On Mexico, I think it's both. Let's say, on regulation, in the third quarter of 2013 we have around $100 million in revenues on interconnection. This, we just have around $20 million to $23 million. So, the reduction, it's high. So, that means that part of the decline on the revenue is on interconnection.

Other things that we used to have, not in this quarter but last quarter, was also roaming rates that we also decline, and that we starting to get higher and recuperating the revenues on the roaming.

And also a little bit, we have on the economic side.

We are seeing also a decline on growth on the postpaid side. We are having less growth on postpaid.

But I think in the next year we can get better in terms of revenue. We feel that all the interconnection rate and the roaming rates we can do it with more data. So, we are still growing in smartphones, and at a lower rate that we used to do it, but we feel that next year we can start to accelerate that.

In the fixed side, Carlos can talk a little bit.

In the fixed side, what I can tell you is that it's basically two revenues that are growing. The first one, it's data revenues coming from big companies, enterprises, SMEs, and also internet. They are growing at a good pace.

And secondly, it's the "other" revenues, built up mainly of the sales in Telmex stores and also of new products that we are introducing through IT, like IT solutions.

So, these are basically the drivers that are beginning to enhance the growth of revenues.

Okay. Thank you.

[Andre Sava], Credit Suisse.

Mr. Sava, your line is open. Will you please check your mute feature?

We can take the next one, then, Jackie.

Ric Prentiss, Raymond James.

One quick question and then a more difficult question. In the quarter, the "other" cost and expense increased significantly, to almost MXN6 billion, what has been typically more, maybe, MXN2.5 billion. Can you tell us a little bit about what was in there and is that a recurring item?

And then, the second question is on the asset sale and tower spin-out. Can you update us on the timing and the process of both those events?

The first question, we don't understand. It's on America Movil? It's on Mexico? Where is the --?

I'm sorry. Sure. On consolidated results, where you report the (technical difficulty) details on cost of service, cost of equipment, SG&A. And there's a line called "other" cost and expenses, that in third quarter of 2014 was almost MXN6 billion. It looks like maybe an out-of-period item?

Yes, it's the impairment that take on Telekom Austria. That's the impairment that we took when we bought the shares on Telekom Austria. We decide to take the cost.

That's a one-time item. Okay.

And then, as far as --.

The next question is on the tower sales. The tower sales are on the process of spinning off. So, we have a process and some authorizations to do that, and we are moving on the right direction. So, we feel that in the first quarter, maybe at the beginning of the second quarter, of next year we feel we can have done all the spinoff.

And on the asset sales, well, we still have our strategy. We're moving ahead, and that's where we are. As I told last time, we are not on a hurry. We are prepared to do things on the right direction. We are not on a hurry to do the sale, but we're moving. We're trying to move as fast as possible. It's not an easy sale. So, we have to move a lot of things. And that's where we are at this stage.

Okay. So, that looks like a 2015 event, as well, then?

Yes, we think so. Yes. Yes.

Very good. Thank you.

Michel Morin, Morgan Stanley.

I was wondering, you talk about the regulatory impacts so far in the third quarter. Can you help us quantify the risks in 2015 from long distance, given I think that it's an industry-wide event that you'll no longer be able to charge for that?

And then, secondly, it looks like, if we go to Peru -- I know we rarely talk about that market, but it seems to have become more competitive lately. So, I was wondering if you can comment a little bit as to what you see there and how we need to be thinking about that, going forward?

Well, the first question, I don't have exactly the numbers on the long distance. In the wireless, every month is less, because everybody -- we have a lot of plans since the last two or three years that doesn't have any long distance. So, I think the impact is not going to be so high in the wireless.

In the wireline, I don't have the number, specifically, here, but we can give it to you. If you talk to Daniela, we can give it to you exactly the amount that we feel is going to hit us in 2015. It's going to start 1st of January of this year, and there's not going to be any more long distance in the country.

In Peru, I think we're starting to see --. We are not starting; I think all the year we have been a lot more competition. And we are working on that. We are putting --. As you know, we lose a little bit time on the LTE because we don't get the spectrum. So, we have to use our own spectrum that we used to have and put LTE. So, we take us a little bit of time, and we lose a little bit of time on the LTE subscribers and coverage.

But today, we have the biggest nine cities on LTE, and we feel comfortable. Still the market is competitive. There's a new competition there called Viettel, that he start maybe two months ago. And that's where we are at this stage, but we're doing the right things in Peru. We are having good coverage on LTE. We have a good coverage on 3G. And we feel that next year would be a better year for Peru.

Daniel, thank you for that. Just to clarify on the long distance front, in your 2013 filings you had MXN13.7 billion, which is about 5% of the revenues in Mexico. But what was -- I guess the question really is, is all of that at risk? Or, are you capable or do you feel confident you can retain some of that revenue by changing pricing plans?

I think, let's say, in the prepaid, all the prepaid that we have, I think people is going to not use the long distance, but they are going to start to make more calls. So, we're going to do it through our local calls or data or other things. I think all the prepaid side I think we are going to recuperate.

The postpaid side, I think, as I told you, every month we are doing less. I think from last year September to this year September, we're reducing in the wireless side maybe 50% or 60% our long distance. So, the reduction, it's been going every year, because we're launching new plans with long distance. So, as people is changing their plan or moving or renewing the plan, then they are renewing (technical difficulty) long distance. So, in the wireless it's not going to hit us so hard.

But in the wireline, I still don't know. I don't have the numbers here. But I think we can give you the numbers at this time what's going to be the hit on next year. And I'm sure if they are not going to use long distance, people is going to start to use other services. I'm sure that we can -- not at the short term, but maybe in the long term, they are going to start to use that.

And in fact, Michel, if you look at what --. These measures have already been introduced in other regions, including in Europe. And what you can see -- you can talk to your European analysts -- is that for the most part, the reduction in long distance rates or the elimination of long distance rates that was introduced there was basically made up by elasticity.

So, what Daniel is saying is basically people end up consuming, [meaning more] traffic. They will now call it local because they will not call it long distance. But in the end, there's more consumption, and people keep on spending more or less the same.

So, again, there's hard data already available for similar measures that were introduced in Europe, and I'm sure your fellow analysts in Morgan Stanley can probably give you some information on that.

Thank you.

Richard Dineen, UBS.

Daniel, just regarding the potential sale of Mexican assets, IFETEL has commented that a buyer must demonstrate more than just financial independence. I'm just wondering how you interpret that comment? I guess I'm not so familiar with the breakup provision in the new telecom law. But just to get an understanding of the rules on that particular point, can IFETEL basically vet the character of a potential purchaser? Because obviously, I think that would have a significant impact on valuation. Any comments on that would be great.

I think there are some rules that we need to accomplish on the sale, rules from the IFETEL and also some policies that our Board give us. What we think and the decision of selling the asset was to be out of the preponderant, not being a preponderant player and have the convergences [we allow] to give PayTV and to do a fair price. That's what our Board decide and that's what we are looking for.

And in the other side, we need to accomplish some of the rules that IFETEL has that it's in the law. So, we need to show that this new competition and that this new competitor is going to create effective competition. So, effective competition. And I think that's what we're working on, and that's what we need to show the IFETEL that that's going to be. I'm sure with a new competitor or new company with good assets, it's going to be new competition.

So, what we need to do is to show the IFETEL and make IFETEL feel comfortable that we are going to accomplish the rules and the policies that are on the law. So, that's mainly what we are working on. That's why we are not on a hurry. And as you see, we can live with being preponderant, but the decision is to sell the assets, and we're going to do it, and that's our strategy, and we're working on that.

Okay. Thank you very much for that. If I may just squeeze in a quick question, on Austria? The market there in Telekom Austria is obviously doing a lot better than in the past. You've got some tailwinds like consolidation and price rises. In light of that, I'm just wondering if you could comment on your appetite for Europe and how it affects your thinking about uses of cash and, let's say, maybe windfall cash from a potential sale of Mexican assets? That would be fantastic, any color on that.

One thing that we are seeing in Telekom Austria is there's been quite a significant improvement, already very noticeable [early] in the main country, in Austria. I think some of the international operations are doing better.

And I'd like to point it out, again, if you look at the service revenue growth line and you adjust for currency variations so that you look at it at constant exchange rates, you will see that the service revenue growth rate in Telekom Austria is accelerating very, very sharply right now, which basically means that for us in the nominal figures denominated in euros, you probably do not see a lot of improvement. The fact of the matter is that the organic growth is already proceeding there at very good pace, in spite of the fact that the economies, not all of them are doing all that great just yet.

So, we do believe that the company is in a good position to continue and develop a strong turnaround, that we should be able to see (technical difficulty). It's already beginning, and I think it can gain momentum. And we just had our first board meeting this week with the company and we are very enthusiastic about the prospect it has, even in the short term.

And as to the development of any new expansion plans, [already] as you know we have committed with the Austrian government that we will utilize Telekom Austria as the base, the platform, to expand throughout Europe -- to central and eastern Europe. Telekom Austria is [thus] very likely to proceed with its capital raise later in the year if the markets are in stable condition. So, I think the company should also be a bit stronger.

But it's important also to bear in mind that in central and eastern Europe, as was the case in Latin America, there is not that many assets that you can buy. There's a lot that needs to be built, and you need to invest more so that the -- you need to invest more to build an integrated platform, fixed and mobile, and that's something that we've done in Latin America. We've invested, and we are reaping now the rewards in many countries, namely Brazil and Mexico. But I think that that's something that we are also going to see in central and eastern Europe through Telekom Austria.

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

Mauricio Fernandes, Merrill Lynch.

In Mexico, Carlos or Daniel, the cost savings were significant. I think you have alluded to that in the first question, but could you be a bit more specific into what exactly were the efforts and how you think they are -- how sustainable they are?

And the second question is on Colombia. You also have regulatory headwinds, and I was wondering if you could apply the same medicine as a way to recover profitability there?

Talking a little bit about on Mexico, we have been doing big efforts on the cost control, the expenses, big efforts on that. I think you could see this quarter mainly a big effort on subsidies. We are reducing the level of subsidies in Mexico, and that is what is helping us. A big part is in terms of subsidies.

And our idea is -- not only in Mexico; in other countries, also -- to work a lot on subsidies. It's going to depend on how the market and the competition are. But I think all over all in the long term nobody wants to subsidize. So, no companies wants to have that strategy on subsidies.

So, that's something that we're working on, and we think we can moderate more our subsidies. We're never going to cut them, but we're going to moderate them, the subsidies.

Other thing also is that in Mexico because of the slowdown of the economy you see less postpaid subscribers this quarter. So, we have less subsidies also there.

So, those three things are more or less what are helping us on reducing the costs in Mexico.

If we can do it for all the next year? Well, I think we're working on that. We don't know exactly how is going to be the market in the next year, but our strategy is -- not only in Mexico; all over all Latin America -- to work a lot on cost, expenses, and subsidies.

And also, we're working on growing the revenue. This quarter and this year, because all the regulation, we have some reductions in the revenues in Mexico -- interconnections, roaming. But I think that we're still growing at a good pace all the data we're putting. More postpaid people is using. We have a very good network and growing a lot the LTE network, good coverage. And people is starting to use every day more and more data.

So, in the other side is not only cutting costs; it's also moving ahead on revenues and revenues on data. So, that's what we're having on Mexico.

In Colombia, we have one special thing this quarter, in terms of the EBITDA, because when we win the spectrum to do LTE, we have to sell -- not to sell. We have to give 300,000 tablets to a lot of --. There's specific policies to give and to whom you need to give those tablets. And we finish this quarter that. That's why you see that, the slowdown on the EBITDA, the reduction on the EBITDA, because we have a big cost on giving all the tablets there.

But I think we can return to the levels of EBITDA that we used to have (technical difficulty).

Competition is high, also. What is hitting us a little bit on revenues is that we're reducing the prices. In prepaid, we're reducing prices. We want to be more and more competitive there.

And also, we have a slowdown in the postpaid side, because remember that you cannot make contracts. There's a new law that you cannot make contracts in the postpaid. So, as we are not going to make contracts, nobody is subsidizing the handsets, and then, we have a slowdown on that.

But I think Colombia, next year you are going to see. We are working on that. We are being a little bit more competitive. We are trying to do a lot more investing, a lot more in data. In data, we are not doing very good. We are growing at a low pace. And I think next year we can have higher rates of growth on that.

So, I'm comfortable that you're going to see a better Colombia country on 2015.

Okay. Thank you, Daniel.

Sunil Rajgopal, HSBC.

I had a question on Brazilian market. A few months back, everyone thought that the stars were aligning in terms of consolidation, but a lot has changed over the last three months, particularly with the smallest competitor in mobile, that is [Oi]. How do you see things developing for Brazil? Do you think the consolidation prospect is still alive? And are you still interested in participating for the same?

As you know, we have been having been confronted with this question for a bit more than a year now, and what we have said always is that we see this as a prospect that poses several challenges on several fronts, including financial, but that we would be open to consider it. If, as you say, the stars were to align themselves, then we would be keen on participating in something.

But the fact of the matter is that we have always said there is very significant challenges to be overcome, but we would interested in exploring the possibility if the stars were to be aligning themselves, as you put it.

Sure. Thank you, Carlos.

Kevin Smithen, Macquarie.

Can we just get an update on some of the cross-selling opportunities between NET and Claro in Brazil? It really looks like since you've completed that integration that you're benefiting -- strong net adds on both sides of the business. And really just talk about some of the macro headwinds there and obviously some of the opportunities now that you've completed the integration? And what is your outlook on the Brazil business over the next 12 months?

Well, I think --. We just returned from Brazil. We're happy still. If you see on the economy, there is still a slowdown, elections, and there's a lot of happening there. But I think in 2015 we're going to see a much better economy, I hope. And that's in terms of the country.

But in the Company as itself, I think we have the best platform in Brazil. We're doing very well on the TV, cable, corporate, and we are gaining momentum in the mobile. So, we already -- we're finishing the consolidation of the three companies. So, at the next year we're going to see only one company in Brazil. We have the authorization, and we're working on that.

And the integration is working on the right path. We are saving. You are seeing maybe two points of EBITDA more, with good growth this year than last year. And I hope we can have also a better EBITDA next year. Our budget is to have a better margin next year. We're still working on that, but I feel comfortable on the way we are -- the company, the Claro companies, in Brazil are doing -- Claro, NET, Embratel. They are really working in a good way.

Rodrigo Villanueva, Merrill Lynch.

I have a question regarding the broadcasting auctions to be held early next year. News reports have not mentioned AMX as a bidder. So, I was wondering if you're not really participating here? And in case you're not participating (technical difficulty)? That's my first question.

The process of the TV broadcast starts, I think, one month ago. As you can see, we are not in. So, we decide not to participate in that auction. So, we are not going to be -- America Movil is not going to participate in the TV broadcast auctions.

And on the advertising side, we have a company -- we just bought two years ago a company -- and we're selling advertising all around Mexico, some of the advertising. And we're starting to do that in America Movil through the rest of the country. So, we're working. We're interested in doing and selling some advertising.

But in the TV broadcast in Mexico, we are not going to participate.

Got it. Thank you very much, Daniel. And I was wondering if could elaborate a little bit regarding your stake in KPN? What shall we expect you to do with it, going forward?

Well, the decision today, the decision is to reduce our stake to 20%-plus, 20%-something. We still have two board members with that stake, and we're working with the company, helping them. We have good relation.

Still does not know if we are going to -- what we are going to do with that. Still we are right now comfortable with a 20% stake in KPN, and we're not on a hurry to make any decision. So, we're waiting and see -- let's see what is going to happen next year and let us have that discussion on what to do with the KPN stake.

Perfect. Thank you very much.

Will Milner, Arete Research.

I just had a question on Brazil, again, and I know you guys don't normally split your CapEx, your investments, between your operations, but it would be quite helpful just in terms of the decent mobile performance and growth coming from the NET business to just outline how much you've invested this year, what the investment plan is for NET and for Claro next year, and whether we should be thinking that CapEx in that market is going to continue at a pretty high level or whether it's likely to fall next year?

We have different segments on the decision on the CapEx. I think one is some requirements that we have to do there, because we win some auctions, (technical difficulty) auctions. So, we have to cover some cities. So, that's part of the CapEx.

The other part of the CapEx is where we saw we have [opportunities]. We still see good opportunities on the TV, on the fixed, on the broadband. So, we're deciding today what is going to be the CapEx for next year, taking and evaluating what are the opportunities there.

So, we still don't know exactly what is going to be. We think it could be more or less the same amount of this year, the CapEx. Still we need to negotiate the pricing and a lot of things. So, it's too [early] to decide what's going to be what's the number on CapEx for Brazil for next year.

But I think still Brazil is an opportunity country. It still has a lot of growth to give, and we want to participate in that growth. So, we're not looking Brazil at a short term; we're investing in Brazil and we feel that in the long term Brazil is going to be a very good and profitable country.

If you consider it, since we acquired the interest in [Telmex International Interlink] and then in NET back in 2010, as you recall America Movil embarked on a very major investment program. It was to be at least five years, at $10 billion per year. We are coming to the end of the fourth year. So, we've already invested nearly $40 billion in Latin America since 2011.

And what I can tell you is that beyond going into the actual specifics of the investment funds that were allocated to Brazil, what I can tell you is what we achieved so far. And what we have achieved so far is in the case of NET Servicios, it's a company that has doubled -- doubled -- the numbers of homes passed since the end of 2010, from 10 million to roughly 20 million right now. We have more than doubled -- more than doubled -- the total fiber optic network that we have in the country, but very specifically, a very significant part of what we have built has been in the metropolitan areas. We have metropolitan rings. We have fiber to the tower. So, we have really built a top-of-the-line network all throughout Brazil.

I'd like -- Oscar can give you a bit more of the details in terms of how we are building the network there.

Well, as you said, we've been building all these metropolitan rings to get access not only to NET. In Brazil, we have a single network that serves all the markets -- (technical difficulty), enterprise, and mobile. So, we already -- all the investments are all IP and unique network to handles all the traffics from the different platforms.

So, as you mentioned, we already have 20 million home passes through NET with cable that allow us to have a triple-play offer, very compelling and very competitive in the marketplace.

In the case of Embratel, we have a good proposition in VPNs and data connectivity to enterprise. We developed four data centers, as well, through Brazil in order to get into Cloud services.

As you know, we have a satellite company, Star One. We recently launched one satellite one year ago. And we will launch two another satellites: one, 2015, and another one, 2016.

And these satellites, the 2015 satellite that we are going to launch, we will serve to us to integrate all the satellite TV platforms just in one satellite and bring us a lot of capacity to have high-definition channels and as well 4K channels through this satellite. The second one satellite, we will use to replace third-party satellites that we are leasing now, to deliver backhaul for mobile in the rural areas. So, that will save us some costs, and we will operate at cost level these new satellites.

I think if you add all --. And as well, we are operating right now the new AMX-1, a submarine cable. This submarine cable start in Rio de Janeiro, goes to Fortaleza, and then goes all the way to Miami and Jacksonville. It's a 17,600-kilometer submarine cable that give us the capacity we believe for the next 20 years to have enough capacity to handle the growth on data in all the platforms, fixed and mobile platforms.

So, I think we have --. And we connect through this cable all the countries -- Colombia, Peru. And we close the ring through terrestrial fiber. So, we will have all the redundancy all across the continent. And it's a great asset we feel that will bring better quality to our broadband and internet connection and cost savings, because now we are leasing a lot of capacity to get to the US.

So, I think that is the right combination on assets on Brazil.

And only to add one more thing about what Oscar is saying, as we have one network and doing the fiber, doing the rings, what we're doing on that is we are giving a lot more broadband on the wireless side for all the small towns. So, we are growing a lot on connecting small towns and giving them broadband.

So, we feel that next year also you're going to see a lot more on wireless and data in Brazil. The growth on that is going to be good, because all the backbone and networks that we're doing -- connecting more cell sites, giving more 3G, giving more LTE, putting more smartphones -- and that's going to give us better revenue and better data in Brazil.

So, as I told you since the beginning, I feel very comfortable. I feel we have the best platform in Brazil at this moment, and we need to take advantage of that.

So, as I was saying, after four years and nearly $40 billion invested already in the ground, and to build the fastest and more robust networks in Latin America, that we're seeing evidence of that obviously in Brazil. We're seeing the evidence of that in Mexico. And obviously a lot of the postpaid clients are flocking over to our network. Our postpaid clients like it, and nobody is [providing faster] data networks.

That was very helpful detail. Just a quick follow-up and just a clarification. Obviously, $10 billion of CapEx across the Group every year for the last four years, can you say -- just to help comparability -- for example, this year in Brazil how much are you investing in CapEx? How much of that $10 billion is going to Brazil this year?

Like 30% to 35% of that CapEx, it's going to Brazil, more or less.

Okay. Thank you very much.

Gregorio Tomassi, Itau BBA.

Basically, this is about Mexico and regulation that is in process. I have some difficulties in understanding how -- what assets or what's the shape of the assets that AMX could sell, given the fact that as time progresses, regulations are still to come on current AMX. And I'm talking about the old obligations on network sharing that we have talked a little. Basically, unbundling of local [loop obligations] to share networks in the mobile network.

So, my question is when talking to prospective interested parties in any part of AMX, how do you deal with the fact that it's not precise what you would be able to sell in the future, as these regulations progress? Or, if some of these regulations are reversible? That's kind of the dilemna I have when trying to address this prospect.

As I told a few minutes ago, we are in the process on the selling of the assets (technical difficulty) interested companies, big international companies. We are not disclosing what and how we're going to sell. That's what we're discussing at this moment with each one of the companies.

And what I said is what we're discussing and we are working on, what we are doing, is discussing the way we are going to create effective competitiveness in Mexico to present it to IFETEL. So, that's what we're working on and that's the strategy that we have.

So, we are in that process. We are not -- . We don't want to talk more about the process, because we are talking with each of the companies and we don't want to open that. Each of the companies is different. And that's where we are today.

If I may just -- but do you have an assumption that some of the obligations that are about to enter, on sharing of infrastructure and functional separation, could be reversible if you present a suitable plan to IFETEL? Or, no reversibility should be assumed?

Well, it's important. When we present the plan and then the IFETEL approves the plan, then we are not going to be preponderant a player. And then, we're going to decide if we have already some things that -- let's say, long distance. Long distance is not for a preponderant player. Long distance is for everybody. So, long distance is not going to come back. We know that, and that's the way it is.

Other things -- interconnection, zero interconnection -- that could disappear, and that is something that we're going to start move on different way on that. So, that's what we're looking and that's what we're working for. So, that's different.

So, we are preparing on working to accomplish all the secondary laws today. And when we sell, then we're going to see what are the things that we think we don't want to do and that will disappear.

Thanks, Daniel.

Jonathan Dann, Royal Bank of Canada.

I've got just one question. After the tower spinoff and the Mexican asset sale, do you have a target leverage? And then, as a second part of that, with some of these spectrum auctions coming up, is there opportunities to enter some of the Central American countries where you're not yet present?

On leverage, we haven't had any change in policy. As you know, we are now aiming to be at roughly 1.5 times net debt to EBITDA. Without the consolidation of Telekom Austria, we would have been below that already, I think at 1.45, or thereabouts.

So, I think that we are very much on target. Obviously, with Telekom Austria raising capital in the next few days, we're going to be getting even closer to our target of 1.5, and we don't foresee any changes in our leverage target rate. I think that we've been discussing this with rating agencies, and I think that everybody is very much clear in terms of what we intend to do and what we intend to do with the leverage.

On the Central America to do and to get in in other countries, well it depends on the opportunities. Still we are not seeing anything, but depending on the opportunities. I don't think we want to buy anything else in the countries where we are. It doesn't make any sense for us to do something like that. I think we are growing, we are investing.

And in countries where we are not, we're open. We would see, and if it makes sense, we can do it. We're open.

Thank you very much.

Carlos Legarreta, GBM.

Just yesterday, I think, a German publication talked about how you might be interested in acquiring T-Mobile [assets] in the US. I just want to know if you have any comments on this?

No comments on that. So, we are not talking with anybody at this stage. So, I don't have any comment on that.

All right. That's fair. Thank you very much.

That concludes our Q&A session. I would now like to turn the call over to Mr. Daniel Hajj for closing remarks.

Well, just thank everybody for being in the call, and thank Carlos, Oscar, Daniela, and Carlos here. Thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. And have a great day.