America Movil SAB de CV (AMX) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2015 America Movil conference call. My name is Alex 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 conference over to your host, Ms. Daniela Lecuona, Investor Relations Officer. Please proceed, ma'am.

Good morning, everyone. Thank you for joining us this morning to discuss our first-quarter 2015 financial and operating results. 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 also with us Mr. Carlos Robles, Chief Financial Officer from Telmex.

Daniel, please go ahead.

Good morning. Welcome to the call. And Carlos, the CFO, is going to make a small summary of the results.

Thank you. Good morning, everyone. In the first quarter of the year, we saw some strong job growth indicators in the US that buoyed expectations of a more rapid economic expansion in that country and possibly also in the rest of the world. It is helped along by quantitative easing in Europe and by oil prices that remain depressed worldwide.

There appeared to be a good chance that economic activity would pick up in the industrialized world. Whereas such improvement would potentially benefit Latin American countries, it will also lead to greater financial volatility in anticipation of interest rates being raised in the US, which in turn could negatively affect the region.

We ended March with 368 million access lines after net additions of 125,000 in the quarter. This figure includes 289 million wireless subscribers, 34.5 million landlines, 22.3 million broadband accesses, and 21.6 million PayTV units.

Brazil was our largest and fastest growing operation. We finished March with 108.3 million access lines and that's 5.8% more than the year before. We added 197,000 wireless subs, having disconnected prepaid lines in some countries, mainly Ecuador and Peru, that were not meeting traffic standards.

By the postpaid segment, we had made gains of 592,000 clients in the quarter, including 273,000 in Mexico. That's our second-best showing ever. And 240,000 in Brazil. Central America as a block was our fastest-growing region in postpaid, with 15.3%, with Brazil and Mexico expanding the postpaid subscribers at an 8.8% and 7.2% rate, respectively.

However, our postpaid base increased 4.6% year on year to 60.1 million subscribers. That's already including Telekom Austria. Brazil is now almost as large as Mexico in terms of wireless subscribers. Colombia contributes 10% of our subs, followed by TracFone in the US, with 8.9%.

Our operations in the Argentinean block represent approximately 7.6%, while those of Europe and Central America each one account for 7%.

At the end of March, we had 78.3 million RGUs after disconnecting 674,000 broadband accesses in Mexico in the last quarter, as we revised our disconnections policy. On a year-to-year comparison, our RGU base increased by 4.6%, with PayTV units expanding 7%, broadband accesses rising 5%, and fixed-lines growing 3%.

Our consolidated revenues were up 3.1% in peso terms from a year before to MXN220 billion, with service revenues rising 0.6% while our EBITDA declined to 2.1% relative to the prior year to MXN68.2 billion. As our consolidated EBITDA margin came down to 31%.

At constant exchange rates, service revenue rose 1% and EBITDA fell 2% -- 2.1%. The deceleration observed by service revenues reflect, among other things, the impact of the various regulatory measures implemented in Mexico, including the elimination of termination charges for calls that terminate on our networks and of national and roaming and long distance charges -- the latter was from January 1 of this year -- on both the mobile and fixed-line platforms.

In Latin America, data revenues increased 14.9% for the mobile platform and 10.8% on the fixed one at constant exchange rates, with PayTV revenues climbing 9.9% and voice revenue down 10% in both the mobile and fixed-line platforms. Most of that had to do with the impact in Mexico.

The South American block continued to be the main driver of service revenue growth, at 4.6% year on year at constant exchange rates, followed by Central America and the Caribbean, with 3.8%. Whereas in Mexico, they were down 6% on account of the measure mentioned above.

In the US -- and I am trying to differentiate now Latin America from the other regions -- in the US, service revenue rose 7.3% and in Europe, they were flat at constant exchange.

Our operating profit was down 6.6% from the prior year to MXN37.7 billion after taking into account depreciation and amortization charges that rose 1.6%. By the way, most of the growth in depreciation and amortization charges happened in Brazil and that has to do with the increased levels of investment that we have had in that country.

Our comprehensive financing costs stood at MXN24.2 billion. We incurred foreign exchange losses of MXN17.8 billion, mostly on account of the sharp depreciation of the Brazilian real versus the US dollar, the value of which shot up 21% in the quarter in reai terms.

Foreign exchange losses arose from intercompany loans. The current currency position, vis-a-vis third parties, presented a net gain of MXN7.2 billion.

We obtained a net profit of MXN8.2 billion in the quarter. It was equivalent to MXN0.12 per share or $0.16 per ADR. Our net debt, at MXN536 billion, was up slightly from December and was equivalent to 1.75 times last 12-months EBITDA. Our capital expenditures reached MXN29 billion in the quarter and our share buybacks and dividends MXN11.4 billion.

On April 17, our shareholders approved the spinoff of a new company called Telesites, the assets of which mainly comprise approximately 10,800 towers and other passive infrastructure used by our wireless operations in Mexico.

Telesites will have a net debt of MXN21 billion. We expect the spinoff to take affect by July. And [normally] after the spinoff, the net debt to EBITDA ratio of America Movil will have come down to about [1.68] times EBITDA. So we are continuing to move towards the target of 1.5 times that we would have as our (inaudible).

So with that, I would like to finalize this part of the call and give the call back to Daniel.

Yes, can we start with the questions, please?

(Operator Instructions) Vera Rossi, Goldman Sachs.

I have a question on Mexico and then one on Brazil. First one on Mexico. What are the plans to divest in assets and what type of asset AMX would be considering selling at this point?

And on Brazil, if you can talk about the performance of the fixed-line business, the slowdown we saw this quarter on growth relatively to the other quarters and the reason for the slowdown. If it's changing IT systems or if the weak economy or other reasons behind this slowdown? Thank you.

On Mexico, what we said the last call is that we still -- we are still interested in being not a preponderate player. So at the beginning, we have a plan to divest some assets, but with the new, let's say, view of how is Mexico, the new companies that are coming -- AT&T buying Iusacell, AT&T buying Nextel.

So we are reviewing what would be the interest on how we can reduce our market share. I don't think we are interested anymore in selling access as assets. We don't want to sell frequencies or infrastructure, so we're reviewing exactly how does the market is going to be in Mexico.

And then we're going to take the decision what we are going to sell to reduce our market share and not be a preponderate player. So we are still interested in that, but we are taking really a close look on the market and what will be our alternatives to do that.

In Brazil, I think even with -- Oscar can talk a little bit more deeply -- but we're still, I think, winning market share in the fixed side in TV. We don't have the results on the market of how the market is developing, but I think it's a little bit the weak economy, because we're still gaining market share in Brazil, but Oscar can talk a little bit more about Brazil.

Thank you, Daniel. Yes, you see Net Servicos is still growing pretty well in fixed-line and in broadband as well, and as well in PayTV. We've been reducing the growth in satellite TV. And this is due to the fact that we have strengthened our credit offering in the marketplace because we start to see last year an increase in churn, so we change our policy about contraction of the customers. We are canceling some installation fee.

So we are focused more on [buying] now, not only on growth, as well we want to drive the profitability of the satellite TV. But we believe that June, maybe, we will see a little in trend in satellite TV.

But another one is the corporate market is pretty steady. There is a lot of a rush in prices. There is a lot of competition there, but we are keeping our market share. So we are softening a little bit in prices, but in total, I think we are running pretty well in Brazil.

Okay. A follow-up question about Mexico. Would you expect, Daniel, to make a decision, an announcement, about divesting in assets in Mexico still in 2015?

We don't have a date; difficult to say. We don't want to take any decision until we decide exactly what we want to do. We are interested in divesting and reducing our market share, but we don't know exactly how we want to do it.

So until we don't see really the market in Mexico, then is when we are going to take the decision as to what to do with [stabeta].

We don't have a time. We don't have clarity right now on the market, so we say, we are well prepared to compete as we are today has been a preponderance with the rules that we have as preponderant player we can compete for the long term there, so we don't want to take any decision until we have a clear clarity on the market in Mexico.

(Operator Instructions) Amir Rozwadowski, Barclays.

Thank you very much for taking the question. Just a follow-up in thinking about the dynamics in Mexico, if I may. Certainly, it seems absent some of the changes to the regulatory environment in long distance, but you are seeing fairly healthy growth with respect to mobile data.

How do you expect those trends to play out over the mid to longer term, particularly given some of the shift in dynamics when it comes to competition and the desire to reduce your position? It does seem as though there is a stronger trend with respect to mobile data adoption and you folks are benefiting from that.

I am just trying to understand the different moving pieces between competition, reducing position, and this underlying secular growth? Thanks very much.

Well, I think in Mexico, data is growing [30%] and in wireless, data and fixed is growing 8.8%. So we are doing well. In all around Latin America, you are seeing that you have less minutes of use and more data as the usage.

In Mexico we are not changing anything. We are investing in 4G. We are giving more coverage. We are swapping with smartphones, LTE smartphones, putting Fiber-to-the-Node, having the best network, let's say, the state-of-the-art network, in Mexico for data.

And we don't have any change of that. We're going to give a very good data service to our customers and it's what we are investing for. So that will be very important.

Still a lot of the prepaid subscribers doesn't have data. They are in the really low segment of the market. They are only consuming as the voice with still phones that doesn't broadband, big speed.

So I think those subscribers are going to still use, but we are moving very fast. All the subscribers that have the possibility to spend a little bit more to use data, no?

Thank you. And then in terms of a follow-up question, looking at the TracFone business in the US, we have seen the competitive landscape shift a little bit, where traditional postpaid customers and prepaid customers are blending a little bit more here.

How do you think about that business strategically going forward in this new era where there really isn't many contracts on traditional postpaid? Thank you.

Well, I think that our MVNO TracFone is a very -- it is a very good company, being very successful in the United States. We have 26 million customers there. The competition is increasing as to you see more aggressiveness in the competition there.

You see that we don't have a good growth in this quarter, but it's mainly to a brand that we have that it is a program of the government called Lifeline and our brand called SafeLink that -- because you have to decide on the houses, you cannot have two of these programs. So some people decide to stay with one company and the other one and that's where, in this quarter, we have to disconnect some of these subscribers.

But all overall, we are doing good. Straight Talk and Total Wireless, our new brand, is growing. They are growing well. So we are happy, but we feel that the market is going to be more competitive, but we are well prepared in the prepaid business to compete there.

Rodrigo Villanueva, Merrill Lynch.

I was wondering if you could share with us the terms and pricing of the infrastructure sharing agreements that you recently published? That would be my first question.

Well, on that question Telcel is going to rent to Telesites. We have prices in Mexico, because we also rent to other companies and we have prices in Latin America.

So the prices and the agreements that we are going to have with Telesites are the same prices that we have with the other competitors. So our prices that are market prices in Mexico and in Latin America. And very important -- Telesites is going to rent at the same prices to all the other competitors.

So at the prices that Telesites are renting to Telcel are the same prices that Telesites are going to rent to any other company that wants to rent their tower. So it's a market price what we are having and Telesites is going to give the same prices to the other ones.

Thank you very much, Daniel. My second question would be related to the MVNO company that you created. I was wondering if you could share with us what's the reasoning behind the creation of this new company?

Well, we have a new brand called Alo. It's a low segment brand, and there are going to be a lot of MVNOs in the market in Mexico. And we want to pass to the competition and to see how these new brands are in the market are behaving in the market. And really at this time, that's really the reason why we create Alo to go to really the low segment of the market.

So we are not -- this brand is not for the medium- or high-end subscribers, it's more for the low-end subscribers. Now prepaid, we have a special conditions in this brand or special prices in this brand that we doesn't have in the other ones for the low segment, so that we are testing. There is going to be a lot of brands, so we want to see how those -- these new brands are behaving.

Richard Dineen, UBS.

Maybe just a little follow-up on Telesites, the spinoff there, which looks really interesting. Firstly, just wondering how advanced you are in setting up the commercial operation for Telesites. Is there a CEO or manager? Is there a sales force? Does that need to be built? Just wondering how long it might take to get things up to full speed.

And then, secondly, you have maybe -- I don't know the precise number -- but maybe 30,000, 35,000 other towers in Latin America. Just wondering if you see Telesites a little bit like a proof-of-concept exercise that might ultimately lead to other tower transactions? Or is this just very specific to Mexico, given the regulatory situation there? That would be fantastic. Thanks very much.

Well, on the Telesites, when we do the spinoff, we spinoff the towers. And some people -- also some people that work in that business on the tower business in Telcel, we're going to spinoff that people.

So part of the people is going to be spinoff are the ones that are running the company. So the company is not going without people, so it is going with some people.

The other: who is going to be the managers of the company? Well, the managers are going to be the General Assembly of Telesites is the one who is going decide for who is going to be the manager. So there is not going to be any managers from America Movil, so it's going to be totally transparent and nobody from America Movil is going to manage the Telesites -- not in the Board, not in the management.

The other question was related to? We have -- I don't have the number, but we have -- remember that we have around 60,000 towers in Latin America. We are only -- the decision right now is only in Mexico, and we don't have anything as to any discussion. We're not even thinking about doing anything else in the rest of Latin America at this moment.

So right now, we are only spinning the Mexican towers and that's what we have right now.

Kevin Smithen, Macquarie.

With the changes to long distance at the beginning of this year, do you now feel like you are feeling the full impact of the telecom reforms on your EBITDA or (technical difficulty) from here?

And I guess from a cost standpoint, now that you know what the impact to revenue and margins will be, what can you do on the cost side still in Mexico? And when -- how will that flow through the P&L over the next two years?

I think the regulatory changes will start, I think, in April or May with -- as they declare us as preponderant players with some specific regulations, like the roaming, that we cannot charge anymore roaming.

Then in August, the law, we have the law, and there is another regulations, like the interconnection rates going down to zero and other things. And on January, we have the long distance now it starts not charging any more long distance in Mexico.

At this time, these three steps, we are accomplished with everything. And I think it is going to take some time for the Company and for the market to instead of selling long distance, sell other services and mostly in prepaid.

When people have and the elasticity in prepaid, I think it is going to come faster than in postpaid, but at this time, there is not going to be any more rules that are coming.

I think we are accomplished with everything that the [Ithica] is putting to America Movil, so we have accomplished all the rules, every detail of the rules were accomplished. And well, still the comparison, it is going to take a little bit of time, because every rule entering a different end timing, but there is not going to be any more rules on that.

I think data still is going to take a lot of this. You're going to see that less minutes, more data, and I hope that data will take what we will lose on the long distance and other services.

We are also making a big effort on cost and control the expenses, so it's what we are doing here in Mexico. But very important -- we are still investing a lot. We want to have the best technology, the best infrastructure, and we are focusing a lot on that.

And then -- and just on TracFone in the last week, we have seen Google officially enter the market as an MVNO. We have seen Comcast's deal fall apart.

When you think about some of these potential new entrants into the wireless landscape in the US, are there opportunities for partnerships with your TracFone business? And how do you think about TracFone in the evolving telecom landscape in the US?

Opportunities for our TracFone business I think there is going to be a lot and we're open to see any opportunities on TracFone. At this moment, we are working, we still feel that we have a good advantages in the market. We know how to operate prepaid. We have a very good brand. We have good distribution.

So we are working with a lot of carriers, but we're not only working with one carrier, so we are well diversified in US. As you are saying, there is going to be more competition and there is going to be opportunities, of course.

And we are open to opportunities and we're going to see all the opportunities that we have, but still the strategy is to grow the business and expand more our pre-paid business in the US.

Andrew Campbell, Credit Suisse.

I wanted to go back to the topic of the Telesites spinoff once again. My question is on the mechanics of the spinoff with regards to the ADR holders.

I realize that it may not be 100% defined, but do you have an idea how the ADR holders are likely to be compensated? If you believe it is likely to be an over-the-counter distribution, if it's likely to be cash? Any additional thoughts on that would be much appreciated.

And then my second question is on 4G spectrum auctions, because I recall that there is some markets where you are likely to have outflows this year to buy spectrum. I think Argentina, Ecuador, Puerto Rico. So could you maybe just give an update on if there are any significant outlays for spectrum coming up. Thank you.

Well, on the Telesites, we are having --

In the formation.

In the formation segment, we have all the information. And until we don't have the -- and we don't operate the ADRs, we're not going to see -- we are not going to know exactly what will be the taxes. But you can review the information, the statement, and see if there is something still missing there, and -- but until we don't put to operate the ADRs, it is not going to be.

The second is I think in Argentina, they already sold the license last year. In Ecuador, we buy some license also last year, and we're putting 4G in all these countries.

We are investing in Argentina. We are investing in Ecuador, and we are investing in 4G in the new technology in all the countries that we have the opportunity to do that.

So we have big rollout in 4G, and we're moving a lot of our subscribers from 2G to 3G and a lot from 3G to 4G. We have much more affordable handsets in 4G, so the prices are much more affordable for all the people in Latin America. So the rollout is there and we're moving very fast, very fast to the subscribers to have more broadband in wireless.

Michel Morin, Morgan Stanley.

So first on Mexico, fixed-line business, you were down sequentially 8%. And obviously, we know long distance impacted. But I am just wondering if you can give us a little bit more color here, because I think on the last conference call, you had really downplayed the downside risks here of suggesting that there would be elasticity and maybe an ability to change pricing to offset the blow. So were things worse with the impact? Worse than you had anticipated?

And then related to that, you did a write-off of some broadband subscribers in Mexico. And I was hoping that maybe you can give us a little bit more granularity on that. What would have been the performance in broadband if you were to exclude this change in policy and was the change only in Mexico? Thank you.

First, the second -- first, I am going to answer you a second question. The disconnection of the broadband that we have in the fixed, it was not a disconnection. It was a new policy that we have. We are reducing to 60 days as the policy in that.

So if you could see even the revenues in broadband are going up a little bit or the same, so these disconnections that we are having is not hurting the revenue. So it's only a policy, a new policy that we are doing in Mexico.

And the other thing, well, there's a lot of competition Mexico. We have new plans and everything is going the way we think. We have a new plan called [333] plan that we are adding a lot of more things in our plans, and we are being okay the way as these plans are behaving.

And the market is competitive in pre-pay. The market is competitive in wireless and the market is competitive also in the fixed.

So in Mexico is a lot of competition. Even the market -- the competition in this market is not only for the last year, no. We have been having a lot of years competing in Mexico. The price per minute in Mexico in wireless is around [MXN]0.02, so 17% less last year, but you could see it's one of the lowest prices around the world.

So Mexico has been competitive for the last years. And I think it's going to be more competitive in the future. So I don't know if Carlos want to add something.

I think, Michel, basically, we have had this question before in other Company calls, where we have said that were a number of countries, particularly in Europe, that have already gone through the same process where they had eliminated national long distance charges, where the effect of this was effectively compensated by elasticity.

That's what we have said before. We have asked you to look at your -- to talk to your telecom analysts in Europe, because I think that they are very much aware of this.

And if not, we can refer you to our telecom analysts that follow this in other banks. But in any event, I think it's important to note that we did not by any means imply that the elasticity effect happened all in one quarter.

And this has been exactly one quarter since the measures were implemented. So I do not know that anybody else in the market had any expectation the quarter elasticity effect we are likely going to have from this was expected to happen in one quarter. Thank you.

Carlos Legarreta, GBM.

Thank you for taking the question. Basically I would like to know your outlook for competition in Colombia and your expectations on margins going forward. Thank you.

Colombia has been a very competitive market. Colombia and Peru, it's a lot of competition there. And [always] exciting to compete there, so the prices are going down very fast.

In Peru, even a lot of subsidies are coming, so we're going to compete there and the market is more aggressive. We are going to be aggressive. And I don't know for how long we're going to have this competition in Colombia to be a more -- to establish us a little bit more.

Let's say in Colombia, we have the price per minute is going down 20% in Colombia in pesos, so it is staying one year. So it's been tough, the competition, but we are prepared to compete and we're going to compete in those countries.

And we're going to be also being very careful on the EBITDA, on the margins, but first we want to compete. And then I think EBITDA is going to go to, let's say, the average that we think it could be. Now for the next months, maybe it is going to be a little bit more tough competition.

That's very helpful, thank you. And if I may, just a final follow-up. If I am not mistaken, this is the end of a five-year plan to invest $10 billion in CapEx. Is there any expectation to adjust that in the future? Thank you.

I think last year is likely going to have been the big year in terms of absolute levels of CapEx. We invested roughly [MXN]1 billion before spectrum and the year the CapEx infrastructure is going to be slightly lower than this year -- than last year.

I think from CapEx to sales ratio, we have seen the peak. And in absolute terms, I think that we have also seen the peak. I think that if you look at where we have spent the money, it has been mostly the deployment of fiber optic all throughout the region. We have increased from slightly less than 300,000 kilometers to roughly 500,000 kilometers our fiber optic networks.

This includes, as Daniel is pointing out, fiber backhaul. It include metropolitan rings. It includes some backbones, and obviously also even the submarine cables that we build that connects all of South America to the US through the Caribbean and Mexico.

So in a way, we have built the highways that needed to be built for data services. Those are done in [gael] for the most part, except in the bigger countries.

And the other area where we spent our funding was the continued expansion of 4G footprint and to the extent of it, also 3G. I think this is more modular. It is mostly electronics. It is something that is not going to be as costly.

So I would say that for the next phase that we are going to be looking at, the next five years, we are going to have less of these highways that I mentioned and it is going to be more local roads by the way of residential accesses. We have been doing Brazil. I think when we looked at net, it had 5 million homes passed. Chile has 20 million homes passed.

I think that that's where we are going to go in the future. We have now the larger part of the infrastructure behind us. Now it's going to be just getting closer access to the clients with top-of-the-line networks, state-of-the-art networks.

Mauricio Fernandes, Merrill Lynch.

Carlos or Daniel, it looks to me with -- on Telesites, that MXN21 billion in net debt they will have, based on the statement provided so far on America Movil in 2014, excluding Telesites, that Telesites would have an EBITDA of approximately MXN2 billion, in which case it would imply a net debt to EBITDA of 10 times for Telesites.

I just wanted to check if that is roughly the number that you are aiming to have at Telesites, at least at the beginning before EBITDA can grow? Thank you.

I don't recall if it's 10 times or whatever, but there is two things to note. One, that our companies, by their nature, tend to be more levered entities. As we look at the various telecompanies that are publicly traded in the US, you will see that they tend to have relatively high leverage ratios.

And that is simply because they have very stable cash flows. They are not subject to market volatility. They are getting paid month in and month out by new clients that happen to see the use of these towers as a strategic part of their business. I mean, cable part of doing business.

So the certainty of these cash flows is very high. And that's why the rating agencies allow them to have a much greater leverage than would be the case, for instance, for our regular telecom operators.

You also have to consider that it is the case that the value that you create with the towers, and what you are mentioning here, that the tower companies typically create at nearly 20 times EBITDA as opposed to 6 times or so for our telecom operators. The reason they create like this is because they also can derive more revenues from all their clients without that having any impact whatsoever on costs.

The maintenance costs of the tower are the same, whether you have one payment or two payments or three payments. And I think the towers have some capacity by which the new tower company will be able to take on new tenants, new clients that will pay them additional revenues at no additional cost.

So that's why you shouldn't focus too much on the leverage on day one, but rather you should focus on how that leverage is expected to evolve over time as the revenue rate increases, as they are getting more tenants on the towers. That's what I would say.

But it's a good business. It's something that is very much liked by some type of debt investors, in particular pension funds. And it's a type of business that, as indicated with some utilities, can do it with higher levels of debt. And it's one in which the expectation is that they will be able to drive good synergies by bringing in new clients to use the towers.

Thank you, Carlos. And one more on regulatory changes in Mexico so far. Is there any way to estimate -- I know given the package, it is difficult to know this, but is there any way to measure how much revenues in Mexico impacted by the transition of domestic long business into local?

And secondly, could you share with us how much of your costs are interconnection today? Thank you. The fixed-line or mobile?

Well, I think the number for long distance in this quarter was around -- last year, we have around [$]200 million of long distance in Telmex and Telcel all overall. In the interconnection, I don't have the number right now, but Daniela can give you the number on how much we have on interconnection. So it's around [$]200 million what we used to have in long distance last year's first quarter.

[Neal Rachcopoff], [HBC].

I am just wondering if you can give me more details about the Brazilian operations weakness in this quarter? When I look at the numbers, I see the minutes of usage have dropped about 34% year on year and the ARPUs are down about 14% year on year. So if you can give more color on that, that would be great. Thank you.

Well, I think what is happening is that in Brazil, the growth on data has been very good, so people is starting to use lots late minutes and a lot more data. We have -- I think it's one of -- in prepaid is one of the countries that has more revenue share on data. It's more than 50% of our share is data at this time. So that's really the reason why the minutes of use are going down.

We have around 30% increase on data, and I think Brazil is one of the most advanced countries on using data in wireless. So I think really that's the reason. Also it's helping a little bit the economic situation in Brazil. Everything is declining a little bit, so the economic situation, the slowdown on the economy is also helping to reduce the minutes. So those are the two main things that we have.

Sure. Thank you.

Valder Nogueira, Santander.

Just a follow-up on the previous question. I understand that the data usage is gaining lots of room. It's outpacing voice. But have you noticed a change in the profile of how clients are topping up, are recharging their funds, because of that? Because not necessarily what you gain on data is more than offsetting the drop in voice.

But is it a matter of the profile of the top up? Because we are seeing some operators in Brazil clearly being benefit by being bolder in data and being able to capture that top up vis-a-vis competitors because of a good data offer. But have you perceived any change in the average top up or in the period that comprises one top up from another?

Well, also something that I forgot to say in the previous question is that 33% of the interconnection rate, the price of the interconnection rate, is down again. So in Brazil, we have been reducing the interconnection rate for the last 3 years, around 30% or 33% every year. So it has been tough.

It used to be the interconnection rate in Brazil used to be maybe 30% of our revenues. Every day is less, but the reduction in interconnection greater.

Other important is that there is a little bit more change, let's say, on the competitiveness of the market. I think some of the competitors are increasing a little bit the price of some voice, the prices on data, the prices on the packages.

So we used to leave them to use all the data they want. Then right now, we are coping and they have to recharge again. So there are more rational competitiveness in the market in Brazil. Prices are going a little bit up, so -- or you have to pay a little bit more for every recharge that you do in prepaid. So there is some changes that we are having in Brazil on the plan and on the competition.

I think one thing that you should consider when you're looking at revenues, it is the reduction in the connection rate [it already] having an impact on revenues. But the interesting thing for us is that the net effect has actually benefited us over time, which is not captured.

If you only look at the revenue part, you would have to look at the net interconnections, because we have a measure we call our own revenues, which is basically our service revenues minus what we pay for the networks, for instance, for interconnection. And on that basis, service revenues in Brazil are growing 8%, okay?

So that basically means that whereas growth, more revenues are coming from because of the interconnection. Net revenues somehow are basically improving, as we are ceasing to pay less. I think the connection, if I remember correctly, interconnection costs that we paid to all operators came down by 38% year on year.

Yes. So you are saying what's more fair to assume would be to take a look at the blend of not only the ARPU evolution, but the evolution of the [IX] revenues minus IX cost -- that evolution. Then blend both. Okay, thanks, Carlos.

Alejandro Gallostra, BBVA.

Morning, Carlos, you provided a very good explanation of why CapEx should come down the end 2015. But I would like to know if you could quantify the [amount] -- if you could give us something more specific of what the amount of CapEx that we should expect over the next five years?

I don't know. I think at this stage, what I would say is that the fixed components of CapEx, which was what we were doing before with our fiber optic and [zone cap] has changed significantly, because I think from here now on, it is going to be probably less than half of what we used to have.

I think the variable component, which is what I was referring to, which is the residential accesses. That is one that we're going to play with and it is going to be very much a function of how we see the different markets.

To the extent, like we are having today in the field, that we get traction by doing triple-play and that it makes sense to expand more to residential clients, we will be doing that. And if we see good opportunities, as we have seen in the field, we're not going to be shy about investing in the business.

So I wouldn't want to put a number, only to say that the part that goes to the more ample part of the platform, which is the fiber optic network, that is for the most part already deployed, certainly to bigger countries. And now going to residential addresses going to be very much something that we can play with, we can accelerate it, we can slow it down, depending on how we are seeing the market. Okay?

But again -- so I don't want to give a wrong impression. We will not be shy about CapEx if we see good chances for growth, as we have seen in Brazil and Colombia. And we have seen already in Mexico.

And also, we're not going to be shy in the CapEx if there is new technology or there is technology who can give us better costs and reducing cost and [extra]. So I think we have around 70% of the Fiber-to-the-Node to our cell sites in Latin America.

So we have been advancing a lot to put all the 4G technology there, LTE technology in place. So of course if there is coming, the other technologies in the future, of course we're going to. But the investments for these new technologies we have been putting in place and advancing a lot. A lot of our CapEx is going to data and to all these technologies.

Okay. I understood. So basically, I can just say that the fixed component could be reduced -- I understand everything that you said, but the fixed component could be reduced by 50%. What is the percentage of these fixed components on the overall CapEx?

I don't want to give you now an explanation, but I think the fixed components, I would say was approximately MXN3 billion.

Andre Baggio, JPMorgan.

So I would like to learn a little bit more about the competitive environment in Brazil. I'm already noticing that the environment is improving in the sense that there is one competitor, which is in a weaker position because of financial ravage and that could be helping in a sense to improve the competition.

And what do you think that's America Movil have investments in the country you are going to do a payoff of what you are having, like, say, the best recognition for data, especially in mobile?

I don't hear you the question. We don't hear you very well. Can you repeat it please? What will be what?

Sorry, I look forward to repeat. So the question is actually if the competition is improving in Brazil with a probably weakness of [olives], not so great a situation. And when should we see Claro having the best data network because of the heavy investments that America Movil has been doing?

Well, as you could see in the new measures of Anatel, we are having the best network in Brazil in terms of quality. So all the investments that we are having are saying that we have the best quality and the best perform network in Brazil, so that's very important.

I think that's something that at the end of the day, the customers are going to -- they like that. They need that. So we are working on that. And we are still in our program to integrate all our companies operationally, not only -- we need to still operate and integrate all the companies in the data platforms in all of the -- in IT and other places.

So as you were saying, well, [OE], it is weak, but it's weak on the numbers. But in the market, it is still aggressive as -- and it is been doing good, so I don't know how long they are going to do that. But OE has been competitive in the market and Vivo and [TIMO], so so.

Still the competition is stopping [right here], but I think it's going to more a rational competition, because two or three years ago, it was really the prices and the things that the market has been having are really aggressive. So today, it is a little bit more rational what everybody's -- a lot of competition, but more rational competition.

You know, we have [b-10] delivers, but to carry mobile data, you really need a fixed-line platform. And it's a good fixed-line platform. That's what why we bought Telmex. That's why we bought Telmex Internacional, and that's why we have been investing [$]10 billion per year since 2011.

So obviously what we have invested in Brazil has been big money, and we now have 90% of the towers which have a backbone, for instance. And we have, as I said, a lot of metropolitan rings in all the major cities in Brazil. So that obviously is giving us the edge in terms of the infrastructure.

We are lucky to (technical difficulty) the only player in the market, and that is -- at the end of the day what we have been driving our competitiveness in Brazil. It is the quality of the network. We have the best network in Brazil.

That concludes today's Q&A portion. I would now like to turn the call over to Mr. Daniel Hajj, Chief Executive Officer, for final (technical difficulty). Please proceed.

Thanks, everybody, for being on the call. And thank the host of the call, also. Thank you very much.

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