America Movil SAB de CV (AMX) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the America Movil second-quarter earnings conference call and webcast. 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 for today, Ms. Daniela Lecuona, Investor Relations Officer. Please proceed.

Good morning, everyone, thank you for joining us today to discuss our second-quarter results conference call. We have on the line Mr. Daniel Hajj, our CEO; Mr. Carlos Garcia Moreno, Chief Financial Officer; Mr. Oscar Van Hauske, Chief Operating Officer; and also Mr. Carlos Robles Miaja, Chief Financial Officer of Telemex. I am going to pass on the call to Daniel.

Good morning. Welcome to America Movil's second-quarter of 2015 financial and operating results. Carlos is going to make us a summary of the second-quarter results.

Thank you, Daniel. Good morning, everyone. Well, of course at the start of the second quarter the US economy seemed to have hit a soft patch subsequent to economic data points which haven't been short-lived. The Fed continues to affirm that they expect the first interest rate increase in years to take place in 2015 with market expectations centering in the September month.

Against this backdrop we are seeing a mixed bag of economic indicators throughout Latin America. With Mexico's economy appearing to be gaining momentum (inaudible) sales have exceeded expectations. Brazil is continuing to hold deeper into negative territory. Colombia [a similar blow] to the economy from the drop in oil prices. And the rest of the region experiencing relatively stable or decelerating economic growth.

We ended June with 367 million access lines, 1.4% more than a year before. This figure includes 288 million wireless subscribers, 34 million land lines, 22 million broadband accesses and 21.5 PayTV units. Our wireless subscriber base rose 0.8% year on year while our three RGUs increased 3.7%, (inaudible) important increases in Colombia and in Central America/Caribbean block.

Our wireless subscriber base finished June with 288 million plans after net disconnections of 850,000 subs in the quarter including 739,000 in Brazil; 582,000 in Ecuador; 464,000 in Colombia; and 298,000 in Argentina. On the other hand, Mexico increased with 559,000 net gains; the Central America/Caribbean block with 448 new [tops] and Chile with 151,000 net additions.

Our wireless posted base grew 5% in annual terms, reaching a total of 60 million subscribers. We added 608,000 contract lines in the quarter of which 293,000 came from Mexico. On the (inaudible) platform broadband access increased 5.2%, PayTV access is 3.6% and voice access is 2.8% year on year. Triple play packages represent nearly two-thirds of the net additions of RGUs on the (inaudible) platform.

America Movil consolidated revenues totaled MXN220 billion in second quarter bringing to MXN440 billion pesos the cumulative number through June. EBITDA of MXN68.3 billion, and that is MXN136.3 billion through June, while down 5% year on year as the EBITDA margin declined from 32.6% to 31.1%.

At constant exchange rates service revenues were slightly down in the period, minus 0.5%, while the EBITDA came down by 3.1%. Mobile data revenues continued to be the main engine of revenue growth with 9% followed by PayTV at 8% and (inaudible) data revenues at 7%. (Inaudible) revenues were down on both platforms.

[Average] revenues continue their trend. In Central America and Caribbean they maintained a stable growth rate. In the South American block [they face] a solid decline in expansion. In Europe they are trending up and in Mexico growth rates kept coming down but seem to be stabilizing.

Our operating profits reached MXN36 billion and were up 2.2% from the year earlier quarter. Depreciation and amortization charges were down 11.9% year on year as the prior year Telekom Austria had registered an impairment of (inaudible) investments of EUR340 million.

Our comprehensive financing costs, 11 billion pesos, were down 24% from the year before. Our net profit totaled MXN14 billion and was equivalent to MXN0.21 per share.

In the first half of the year capital expenditures reached MXN70.9 billion and our share buybacks [MXN]23 billion, while net debt was up MXN6.8 billion. This figure reflects the reclassification in May of our investment in KPN from a long-term investment value at cost to an available for sale asset also valued at cost.

As such, these shares are now included in the cash and securities item line, with a current cost of MXN39.5 billion, which is deducted from gross debt to come up with the net debt figure.

It must be noted that at the end of June the carrying cost is lower than the market value of the shares which was MXN51.4 billion. Our net debt to EBITDA ratio stood at 1.77 times EBITDA at the end of June.

Thank you and with this I'm going to pass the floor back to Daniel so we can open the Q&A session.

Okay, Alex, we are ready to take the first question.

(Operator Instructions). Amir Rozwadowski, Barclays.

I was wondering if we might be able to discuss some of the new initiatives that you folks announced yesterday. Specifically sort of the offering in which they are will be an elimination of roaming fees with traveling to the US.

I was wondering how we should think about the potential impact if this was a significant revenue generation tool for you folks. Or do we think that this probably helps to grow the customer base? Would love to hear your thoughts around that.

Well, I think that what we announced yesterday was a very good plan, is that we are eliminating the borders between Mexico and US in the telecoms. No long distance to US and no roaming when you are there.

We have income -- we have some revenues coming from those segments, but I think (technical difficulty) charging for that it is the MXN50 is a very low charge. But I think it is going to be so interesting for the people that we are going to have a lot of people joining to this plan.

And I think it is going to be good at the end of the day, not immediately because not everybody is going to subscribe immediately. The ones that not subscribe are going to stay the way they are. So I don't feel that we are going to -- maybe in the future we can add revenue depending on the amount of people that we have on the subscription.

Thank you very much. Should we expect a near-term impact to revenue associated with? I Am just trying to assess sort of how much revenues you folks have been earning from roaming fees that were traveling abroad.

I don't have the number exactly here, but I think at the beginning maybe we can have an impact. But in the medium and long-term I don't think we are going to have an impact, maybe we are going to have an increase on revenue.

In the other side is going to be very important to have this plan because it makes us very competitive in the market. So people I think the elasticity they are going to use more minutes, more data in the US.

Maybe they are going to have more minutes and more here the border of Mexico; a lot of people traveling to the US. So there could be a lot of people using more and more these type of services. Remember we have in Mexico the best network. So I think people will join this new plan.

Thank you very much. And then if I may, just one follow-up on the investment side. There is a commitment for you folks to add an additional MXN6 billion of investment over the next few years sort of regionally. How should we think about this relative to sort of strategic initiatives for upgrading your networks?

Where do you expect sort of that investment to flow through and what type of returns do you expect? And then I guess lastly, any update on the Telesites spinoff would be most helpful. Thank you very much.

Yes, on the announcement yesterday about the MXN6 billion, I think the MXN6 billion are for three years in Mexico and I think it is more or less what we have been investing in the last years in Mexico. So we have been investing MXN10 billion in the last five years, I think we are going to invest MXN6 billion in the next three years.

So it is more or less the same, it is going to be on capacity (technical difficulty) data, more fiber, well that is more or less the strategy that we have been having for the last years and it's what we think we are going to do in the next three years, no. On the Telesites, Carlos can talk a little bit about all the processes of Telesites.

(Inaudible), we expect it to take place in August or September, but certainly in the third quarter. And it is -- we are basically just awaiting some regulatory approvals I think basically everything you said, the shareholder approval was already obtained a couple of months ago. So I think everything is ready to go in terms of the actual spinoff of America Movil.

Remember that the spinoff of the tower company itself or the operating tower company already took place back in January. So the tower company [obviously makes] (inaudible) has been in business since early January. They are the ones that have been conducting all of the maintenance and the construction of the towers as a specific separate entity.

Thank you very much for taking the questions.

Ric Prentiss, Raymond James.

One follow-up call or question on the no borders offer. In the document last night it talks about leading the integration of the US in the Mexican marketplaces. Will TracFone be able to offer any similar type products on the US side?

Yes. We are going to do this in Mexico and shortly we are going to announce some programs in TracFone that will allow that the people from TracFone will [grow] also in Mexico. So there are going to be new plans that we are going to announce in maybe a couple of months.

Great. And then in Brazil you mentioned that you had lost 112,000 PayTV on the DTH. Can you talk a little bit about the triple play strategy in Brazil and how video is fitting into that?

Yes, as you mentioned, we disconnect in the satellite-TV platform. As you see, given the economic (inaudible) low end (technical difficulty) we have been decreasing a little bit the figures on triple play.

But around 70% of our net adds goes to triple play offer in the market. So we expect that we will continue to grow on the triple play and mobile play offering through Net Servicios. I think we had a very great product in broadband and as well in PayTV offering with a triple play in Net Servicios.

Great, thank you.

Vera Rossi, Goldman Sachs.

Talking about Brazil what are the reasons for the slowdown in revenue growth this quarter? It is higher competition or is it the macro environment? And the second question is, are you seeing weakness on prepaid ARPUs as well? Thank you.

I think, Vera, that the economic slowdown in Brazil is hitting everybody. I think there is going to be more competition because of that. But I think the real issue is that the economic slowdown is hitting revenues in the prepaid, is hitting some sales for the new TV customers and that is more or less what is happening in Brazil.

But, Vera, but it isn't really all that much because if you look at the numbers, first quarter we were growing 5% service revenues and second quarter we were growing 4% service revenues. And remember that in our case we are also carrying the reduction of interconnection rate.

But when you adjust for that and look at net revenues, actually net revenues are doing better than what we are showing here because the expenditures on a [definition], they are faster than the revenues that we had on interconnection.

But anyway -- but just looking at growth revenues, we went from 4% first quarter to 5% -- I mean from 5% to 4% in the second one. And if you look at the -- with the exception of voice that came down just a bit more in the second quarter than the first, mobile data is actually better. We were growing 34% in the second quarter, 30% in the first quarter.

Fixed broadband is roughly similar, it is about 11% in both quarters. And PayTV is slightly lower from 9% to 8%. So I think all throughout -- I don't really see, as you point out, like anything that is a marked slowdown, something that we should consider (inaudible).

And other -- just other comment. In all the fixed products, it is fixed broadband and TV, we are gaining market share in Brazil. So I think that is something more related to the economic situation.

Okay, and just one additional question about Brazil. The improvement in EBITDA margins that we saw of 200 basis points on a year-over-year basis, this new level of like 27.5%, is this the new level we should be considering or thinking going forward?

Well, it is what we are working for and -- Vera, and that is our budget. We feel we can sustain that for the next quarters and we hope we can do it. It is going to depend a lot more on economic situation, it's going to depend also on how aggressive will be the market in the next months in the future. But we are aiming to maintain that 27%.

Okay, thank you.

Rodrigo Villanueva, Merrill Lynch.

I have a couple of questions. The first one is related to wireless data revenue growth in Mexico. We saw a considerable slowdown to 2.9% year on year. I was wondering what is behind this and if you are already implementing any measure to try to accelerate wireless data growth. That would be my first question.

Well, wireless data, we have been growing a little bit less this month that -- this quarter then last quarters. People is using more, we are growing in volume. But the thing here is that we are being more aggressive in the market. We are adapting all our plans to the reality of the market. And I think data is a very important product for us and we want to be competitive there.

So volumes are going higher, prices are going lower and that is really the reason why you are seeing a slowdown in the revenue of data. But I feel it's like -- it's going to be like the voice, no, you need to give better prices, people are starting to use more and then you are going to see the increase on the revenue again.

So that is what we are looking. We have been having promotions, new plans in the market with more data is to adapt and to adjust of what we are seeing here in the market.

Understood and very clear. And my second question is related to Telesites. Carlos mentioned that it has been operating a separate entities since January. So I wanted to ask you if a management team for that company has already been assigned by the Board or when should we expect to hear more in this respect?

Yes, as Carlos says we have been working as a separate company since January. This company has people who it?s working with. So this team would go out when we have the spinoff, these people would go with the company.

And well, at the end of the day I don't know if the new Board or the new people will change some of the management or add other people, but the base and the people who is working today I think they would be out. There is a team working in Telesites at this moment and that would be a spinoff with a company.

Got it, thank you.

Kevin Smithen, Macquarie.

Some discussion of a potential capital increase at Telekom Austria. Can you discuss what you think the capital requirements are there and what your commitment would be? And then expansion opportunities for you with Telekom Austria into Eastern Europe, Central Europe. What is out there that is interesting and what is the timing like would it be on transactions in Europe?

Well, I mean we undertook this capital increase at the end of last year, it was EUR1 billion. The capital increase was meant to stabilize the Company finances. The Company has since been ratified an investment grade rating. They were under negative outlooks. So they are now at stable ratings.

This Company has sufficient equity today I think to manage its day-to-day operations adequately. I don't think that it would need any more capital. But I think the question always would be, if there is any kind of an expansion would they be able to do it on their own.

I think there is nothing that is being considered at this point, but also the questions around Telekom Austria. their finances are perfectly well as they are today for the expansion -- organic expansion, it is in their existing footprint.

Just to be clear, there is no current plans for a rights offering at Telekom Austria and there is no short-term M&A plan. So unless something changes on the expansion front there won't be a rights offering?

Yes, exactly.

Okay, thank you.

Andrei Sabah, Credit Suisse.

Take the next question, Alex, please.

The next question, please.

Alejandro Gallostra, BBVA.

My question is related to the satellite you recently want. How much did it cost? And how this will impact your CapEx? And if you will eventually be able to use it in Mexico to offer PayTV services eventually maybe?

Well, this -- we launched the satellite I think was --

Yesterday.

-- day before yesterday, day before yesterday. It was a very successful launch. The satellite is going to help us to give more HD channels for all our satellite business that we have all around Latin America.

So that is the purpose of this satellite to have more capacity and to have -- maybe we can use it also in the data services in Latin America. But the reason, the purpose of this is to give more HD channels or more channels more capacity to our TV business.

That would also cover Mexico I guess eventually in the future once you get the utilization for PayTV?

I think the satellite covers all Latin America including Mexico and part of the US, that is the orbit that we have. And yes, if we could have in the future a license or a permission to do that we can use the satellite.

Okay, that is great. And then second if I may, the numbers in Colombia have been perhaps a bit discouraging in the past few quarters but only driven by (inaudible) changes. I was wondering if you could perhaps explain what is going on there and then give us your view about the outlook over the next -- for the next few quarters.

And if you -- do you think that this type of regulation could eventually be applied in Mexico or not and if this could have a similar impact [at home] in Mexico?

What is happening in Colombia is that people is starting to change a little bit to renew their -- there is no contracts, no more contracts in Colombia and they renew them with a lower ARPU, they are being careful to renew or they in the postpaid side to renew -- reducing the rent of the plan.

So it is what we are looking that is happening in Colombia. In the prepaid side we are starting to see better revenues there, so -- and the other important thing in Colombia, it's a very competitive market. So we have been reducing prices, giving more data, giving more minutes.

So that is all overall what is happening in Colombia. But I think that next quarter we are still going to see a little bit of that. But I am sure that in the next year everything is going to stabilize and we are going to starting to grow faster and data than decreasing that we are having on voice today.

We are having a decrease on voice and data revenues are not growing at the pace that we want. And I think in the next year we are going to see less decrease on voice and higher increases on data and that will give us -- and that will stabilize more the market.

(Inaudible) Daniel is saying in Colombia the only thing that came down was voice revenues on the mobile side. All other business segments, voice and fixed, data, mobile and fixed and PayTV, all of them are growing very well.

In fact, data revenues are accelerating and they are now -- the two platforms together, they are growing approximately 15%, a bit more than 15%. PayTV is also accelerating, it is growing 17% year on year.

So I think that once we see this stabilization of voice revenues in mobile you are going to see the underlying growth that we are having in other business manifest itself.

Okay, that is great. Thank you, Carlos. Do you think that as you provided CapEx guidance for Mexico you could do the same for Colombia and Brazil for the next three years maybe?

No, I don't have it here, I don't know if you could talk to Daniela and let's see. But I don't think we are having that number for that next year (inaudible).

Okay, thank you very much.

Richard Dineen, UBS.

Can you perhaps give us some more detail on Ecuador? It looks like that has been a tough market for a couple of quarters. You have had the disconnects this quarter, but the release also mentions some aggressive air time promotions and higher subscriber acquisition costs.

I guess we think of Ecuador really as a two player market with Telefonica. So perhaps we don't expect to see such aggressive competition. So maybe if you can just help us understand what is going on in that market, that would be really helpful. Thank you very much.

What you could see in Ecuador is we are being more in our (technical difficulty). We are being more strict on accounting customers and that is what we are looking. We are putting LTEs or we think that the data is going to grow in the next years.

And of course Ecuador is a two -- no, it is not a two player market; there is a new third player who has already LTE and is giving the data, so it is not a two player market, it is a three player market. And I feel comfortable in the future you are going to see more growth in data and reducing the minutes of -- the decrease in minutes of use.

So that is what you are seeing in all overall, including talking a little bit about Peru. You could see that the market has been very aggressive also. We have been reducing our EBITDA because we want to be also aggressive in the subscriber acquisition that we are having there.

And in Ecuador also we are having a decrease on the interconnection rate. So those are the two things that are hitting us in Peru. So Peru is a market very competitive and we have got interconnection as their rate decreasing.

Ecuador I feel that we are going to stabilize in the next -- also in the next months. Next year I will see much better growth on data, we are going to have all our LTE platform working. So the growth is going to be better. So these two countries I think next year will see much better results than what we are seeing today.

Thank you, Daniel, yes that is really helpful. Thanks for also the background on Peru. So I guess our takeaway from Ecuador is that this is really more driven by the new entrant rather than Telefonica, this is more a sort of anticipating a new player in the market wanting to retain customers and be more competitive if that is the right way to think about this.

Yes, yes, it is a new entrant that already has LTE that is giving a lot of data to the customers and it is putting a lot of -- some pressure to the prices. So that is more or less what we are seeing in Ecuador. Being more strict in all our policy, our churn policy -- that is what we are seeing in Ecuador, no.

Many thanks indeed.

Carlos Legarreta, GBM.

Just getting back to Brazil, but if I may on the more corporate site. I know you are restructuring the Company under the Claro corporate umbrella. And I don't know if you can talk about how that is going to help going forward and if there are any specific plans to rebrand the (inaudible) or Embratel or something like that (inaudible). Thank you.

No, we are still working on the -- with the three brands. It is -- Embratel is more in the corporate side, Net has a very good brand on the TV broadband and fixed. And Claro as we are doing in the wireless. So we are not thinking to rebrand anything at this moment.

Okay, thank you. And just a brief follow-up if I may. I guess this will be answered by Oscar. In terms of the plans that you guys are offering across South America, basically the social networks and messaging apps that do not consume data, I am just a little worried that this be detrimental for your revenues going forward.

How much -- I mean, if you could explain what the strategy behind this -- if it is a short-term offering in order to attract clients or to retain customers? And is it going to change in the future? I mean that will be also helpful. Thank you.

There are promotions that we are giving in all Latin America and the promotions are (multiple speakers) in some markets because of the competition that we have in some markets. So that is more or less you could see that in Brazil. We are not the only one who is giving social networks as a promotion.

So I don't think they are going to end forever. But at this moment the market and the conditions of the market are -- and we went to be competitive in the market so that is the reason why we are doing that.

Sounds good, thank you.

Walter Piecyk, BTIG.

Hey, Daniel, before you ultimately spin off Telesite can you start to negotiate secondary tenants for those sites, again, prior to the spinoff? Obviously AT&T looks like they are going to invest a lot of money into the market. I am just curious whether you can start those negotiations now.

The tower Company or (inaudible), that is the Company that exists since January. They signed a master lease agreement with Telcel and so Telcel has been paying them rent for the various sites under this umbrella agreement. And this agreement was basically approved by the regulator because it is meant to be the same agreement that all operators can subscribe.

I think it is for the regulator to announce what agreements have been signed or what have not been signed. As you know, there was a requirement on America Movil having been found to be so-called preponderant to make sure that this infrastructure, passive infrastructure can be shared.

So the way of doing so is basically by providing this agreement to other parties. And again, as I said, I think it would be (inaudible) to specify exactly who what other players have already subscribed (inaudible).

Or are interested.

Or in the process.

Okay, thank you, that is helpful. Carlos, as part of that kind of spinoff and that it sounds like it is obviously the regulators are involved.

When it is a separate company and everything and Telcel thinks about their network plans over the next three years, is there an expectation that Telcel will be looking at other -- when they are looking to add cell sites as you grow with capacity and build out your LTE will you be using other tower assets in the market? Or will your growth continue to be internal and only using these Telesites that are getting spun out?

For one thing the team that is in (inaudible) is the team or the operating team is the one that was previously in Telcel. So they are very experienced people both in maintaining tower but in particular in constructing towers.

Telcel had over the years built roughly 15,000 towers, okay. So they will have this advantage of being an experienced team that can get things done and they will be an option for Telcel to work with.

It is the case, however, that Telcel in the past has [already] worked with other tower companies because obviously they need to optimize and there is really no point in building something when you have already some other tower available.

So it will be for Telcel to optimize the overall spending. But certainly to the extent that they need to define construction of towers, certainly Telesat be an option that can get them going for them.

Thank you, that is helpful. And then just one question on Brazil. Can you just give us just a big picture view on your thoughts in the market? I know there had been some questions about it earlier but specifically TIM Brazil has been investing more in the network there and to try and return to growth. Telefonica has obviously already invested.

Where -- I know you don't disclose this separately, but can you give us a sense of where your capital investment is in Brazil this year compared to prior years? And whether consolidation is effectively off the table at this point or whether that still is a potential option? Thank you.

Well, if you see the breakdown of CapEx as we have been saying through the conference call, data growth has been picking up in all of the platforms -- mobile, fixed or whatever. So we have been upgrading the network, we've been doing integration across the different networks that we have.

As you know, we acquired Net Servicios, Claro and Embratel, so we are (inaudible) in order to bring some savings in the world of data. We are doing as well -- we review the construction of home passes in Net Servicios. Last year we did it like MXN2.5 million, we expect to do less than 1 million this year.

So mainly it's variable CapEx that goes to triple play connections, modernization of the mobile network getting to 4G and fiber to the radio stations. But I think we are in the same path that we did last year. Operating the network variable (inaudible) is a revenue driven CapEx and mainly goes to that kind of investments.

Thank you. And then just any thoughts on consolidation there? Thanks.

What about the consolidation in Brazil.

Consolidation, we are not talking about consolidation right now with anybody. So right now we feel we have a very good platform. And unless there is something clear where we can be interested in we are not doing nothing at this moment, no.

Okay, thank you.

[Jonathan Dan], Royal Bank of Canada.

Hi there, I had two questions. The first one, could you just go back to the Brazil TV growth. Because if I look at the change in revenue generating units, then I get -- you added 138 wireline, 144 broadband.

But then if you -- then the missing number is 112 and you said that you disconnected satellite-TV. Does that mean that you are not growing cable TV customers, so you are just -- the actual sort of original net TV base is not growing or is it just the way the RGUs are calculated?

You are totally right. I mean on satellite-TV, as we mentioned before, we have some disconnection in the low end of the market. And in cable and in PayTV, given this low level with the economy, the net adds has been reducing through the quarters. And you are totally right.

But if you look at the revenues, we have been focused on upgrading the PayTV offering and in our revenues we are growing in the Net Servicios revenues 14%. So it is a combination. That you are totally right. I mean when you look at the net adds in cable has been decreasing through the quarters given the slowdown of the economy in Brazil.

Can I ask a follow-on question? I mean with the exception of -- in most countries you have cable, fiber and mobile. I mean do you see yourself pushing triple play, quad play in more countries outside of Brazil? And as part of that, how many fiber homes connected or passed do you actually have in Mexico now?

Well, you know the triple play offering that you see in Brazil we are doing in all the countries that we have cable in operation. I am talking about Colombia, Chile, Peru. And the (inaudible) triple play is pretty similar to Brazil. From the net adds -- around 50% of the net adds goes to with triple play offering --.

(Inaudible - microphone inaccessible).

In Brazil?

Yes.

Oh, yes, in Brazil, yes. But the combination of all of that. So we are offering the same products in all the cable operation. Even in the countries like Central America, Dominican Republic and Puerto Rico there are telco companies, as well we are offering triple play in those locations. So we have the same product offering like in Brazil.

And to add something on Oscar's comments is that we are starting to in all these countries to also offer the fourth play, so we are trying to offer them mobile where we have a house, where we have the fixed, where we have the broadband, where we have the TV and we don't have the wireless, we are offering also wireless there.

So, we are in almost all of the countries, where we have fixed we are offering triple and --.

Quadruple play.

And do you have an update on your domestic Mexican fiber to -- like how many fiber homes past or customers with sort of high-speed broadband or any sort of measure?

We are making a lot of investments to give more speed to all our customers and we are in that process. And mainly some of the investments that we said yesterday in Mexico about the [6 billions] are related to give more data and give more broadband and more speed to all our customers to Mexico, in the fixed and in the wireless, in both platforms. The numbers, I don't have the numbers here but we are moving in that direction.

Sorry to hog the call. Have you guys -- I know you bought in the international cable, but have you thought about an international tracking stock? Because it occurs to me that if you had sort of AMX International it would be an 8 or 9 times EBITDA tracking stock similar to perhaps Liberty LatAm.

We haven't think on that so --.

We'll begin to think about that.

Yes, good idea. Thank you.

Thank you very much.

(Multiple speakers) was mentioning it. I Think in Mexico what we have been doing is we are mixing different kinds of technology, one of them is fiber. But we are getting closer to the fiber to the customer using new technologies of copper like VDSL or vectoring.

So, but what we have been doing is to adapt our network to the bandwidth needs in the marketplace. So we feel that we are doing the right operating of the network to be competitive in the marketplace given the speed that the market is asking for. But we are doing a combination of technologies corporate and fiber.

[Guilme Maricel], Morgan Stanley.

Hi, good morning, guys. Actually it's (inaudible) here. Thanks for taking my question. So the first question on Mexico, can you explain a little bit more about your CapEx for the next three years? I guess it is the $6 billion in place like a decrease from [$7 billion] we have previously. So if you don't mind just to explain. Thanks.

I don't know where we have the -- or when we said the [$7 billion]. But the actual CapEx that we review and that what we reviewed in the last couple of months are [$6 billion], I don't know if that is because we are having a better pricing on the infrastructure or something.

But we are not decreasing anything in Mexico. We are still on what we have been budgeting for the next years is what we said yesterday that we are going to do.

Okay, perfect. So the second question, if I may, it is regarding Peru. You mentioned the 6 -- I guess it's [63% cut] to NPRs. So can you help us to quantify the impact on revenue and also on expenses? Thank you.

I think on revenue we are doing well as in all the other countries the prices has been going down, the volumes has been going out -- up. And we have been very competitive in the market in Peru.

The reason of the decrease of the EBITDA is that, that we have been reducing prices very fast, we have been giving more soft CDs, we have been growing on the postpaid side. And also the interconnection rates hit us at some point (inaudible). That is more or less what is happening on Peru.

But I think as the -- next year I think we can stabilize all these things. Because I am sure that we are going to grow faster on data and being reducing less on minutes that it is what is happening today.

Okay. And just one more question if I may regarding the DTH in Brazil. I guess we saw some disconnections recently. Can you explain the main reason for those disconnections on the PayTV side?

I think Oscar already said that, but to add a comment on the DTH, I think that DTH had the customers who are more --.

Sensitive.

Sensitive to the economic slowdown. So that is really why you are seeing that are the low end customers, the customers that we are having more on the outside of the country, so on the rural areas. And I think that is the reason why you are seeing a reduction on the DTH in Brazil, no.

Okay, thank you.

Valder Nogueira, Santander.

Two questions. First, we have been seeing recurrently a change in the mix between voice and data, especially on your [mobile] offers throughout Latin America. Is that a target that you guys intend to reach or what is the balance of that you guys believe you can achieve on the percentage that you get from the voice and the percentage that you get from data?

I ask that because that is very important to determine what is your real profitability in each of these units, is there a target. There has been significant change in this mix towards data. Is there a target that you work with? That is the first question.

There is no target to where we are working on. I think the increase on data depends a lot on moving 2G subscribers to 3G and 3G subscribers to 4G. And that is the reason people are starting to use more and more when they have 3G and when they have 4G they use more and more data.

So that is that reason people and young people start to use more data and chat more and talking more. So those are things that are going all around the world. I think our best -- the highest country where we have it is around 50-50 voice and data, it is where we are, 50 on the revenues and voice and 50 on the revenues and data.

So -- but there is no target that -- we don't have any target. So we are going to do more applications, mobile banking, e-commerce, e-advertising, so we are going to add more and more revenue as our customers move from 2G to 3G and (inaudible). So that is the reason no target. So we are moving as the market is moving, no.

That is clear enough. And second question, back on some questions regarding Telesites. You have this master agreement that is submitted to the regulator regarding the prices that Telcel pays to Telesites. How do they differ from the existing prices in the market either on existing tower capacity or due to (inaudible) capacity?

The prices for the sites -- there is already a well established market in Mexico. There is at least a market with roughly some 15,000 towers already owned by other operators, most importantly American Towers. They work with all the operations in Mexico including Telcel. So the market prices for towers are very well established.

They depend, among other things, on location, there is certain regions where they will be more expensive. They will depend also on the nature of the tower. Not all of them can support the same equipment, etc.

So we cannot get too much into the details, only to say that there is a fairly large market, a number of players already there, well establish prices and all of those have been basically seen and acknowledged by the regulator.

Okay, thank you, Carlos.

[Martin Lata], (inaudible) Securities.

I have one question on Mexico. Where do you see the EBITDA margin going forward? Do you think that we could see some improvement in the next few quarters?

We are not giving any detail on our guidance on the EBITDA. But what I can say in Mexico is that there is coming more competition, we are going to compete, we want to invest, we want to have the best network. Today customers are choosing us and we are going to follow that path. So that is more or less the strategy on Mexico.

But one thing, Martin, that is important to consider is Mexico or the telecom sector is going to see much more investment in the next few years than it saw in the past, particularly from the competitors.

So you are going to see a more lively market, it's going to be more energized. You are going to see a lot of growth and that bodes well eventually for margins. So I don't know how we are going to pace ourselves in that regard, but certainly the market has a very bright perspective in the medium-term.

Okay, thank you. And I have another question. Could you please give us an update on the video license in Mexico? What are your plans there?

We still doesn't have anything to comment on that respect at this moment, no. Nothing new.

Okay, thank you very much.

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

And there are no further questions in the queue. I would now like to turn the call over to Mr. Hajj for final remarks.

Okay. No, just say thanks to everybody for being in the call. Thank you.

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