America Movil SAB de CV (AMX) 2017 Q2 法說會逐字稿

Good morning, and welcome to the América Móvil Second Quarter 2017 Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Daniela Lecuona, Head of Investor Relation. Please, go ahead.

Thank you. Good morning, everyone. Thank you for joining us this morning. We are going to be discussing our second quarter results. And we have on the line; Mr. Daniel Hajj, CEO; Mr. Carlos García Moreno, CFO; Mr. Oscar Von Hauske, COO; and also from Telmex, Mr. Carlos Robles, CFO.

Thanks, Daniela. And thank you, everyone, for being in the call. And I want to pass to Carlos to make a summary of the América Móvil second quarter of 2017 financial and operating report.

Thank you, Daniel. Good morning, everyone. Well as it's customary, we have a web presentation today for those who want to see the slides show that accompanies this presentation.

In the second quarter, financial volatility in Latin America became more subdued in line with the separation of the global market. With all economic growth and most likely improving back. The U.S. economy continued to hold up, and those of the European Union and China showed clear signs of strength. The appreciation of the Mexican peso versus the dollar observed in the first quarter continued in the second one. For the Brazilian real, the Colombian peso and the Argentinian peso depreciated versus the dollar and (inaudible) the peso as well. The first one most -- mostly on account of new political pressure that's in Brazil and the other ones in Colombia and Argentina reflecting for the most part a worsening of their balance of payments position.

In the second quarter our wireless subscriber base increased by 215,000 subscribers, having added 565,000 postpaid subs, including 166,000 in Mexico and 124,000 in Brazil, and disconnected 350,000 prepaid subs.

On the fixed-line platform, we obtained 209,000 new broadband accesses in quarter, most of them in Central America, Colombia and Brazil. Our postpaid base was up 5% -- 5.1% with Chile is increasing 17.8%, Brazil is 10%, Colombia 7.7% and Mexico is 6.4%. Broadband accesses were up 5.7% year-on-year.

Our second quarter revenues rose 6.9% from the year-earlier quarter to nearly 250 billion pesos, with service revenues climbing 8.1%. EBITDA was up 13.7% year-on-year to 69.4 billion pesos. The increase in peso terms reflects the appreciation relative to the prior quarter of the Mexican peso vis-à-vis most of its other operating currencies, as I mentioned before.

At constant exchange rates, it's important that constant exchange rates -- service revenues were up 4.2% year-on-year, their best performance in 10 quarters and EBITDA shot up 10.4%, marking its strongest climb in the last 5 years. In several instances, as the revenue base has been rebuilt the impact on EBITDA has been proportionately greater.

Service revenue growth was driven by mobile data revenues, which were up 21.8% with fixed growth and revenues increasing 7.5%. Mexico and the South American block, particularly Colombia, Argentina, Chile, and Peru were the main forces behind the strong expansion of service revenues. All operations, save one, presented ARPU increases relative to year-earlier quarter.

Our service revenues were denominated in 20 different currencies with the Brazilian real accounting for 25%, the Mexican peso for 22% and the dollar for 21% or nearly 27% and the currency effects of dollar are considered. The Euro accounts for nearly 10% of our revenues.

The EBITDA margin stood at 27.8%, up 0.7 percentage points from the prior quarter and up 1.7 percentage points from the year-earlier quarter. EBITDA margins increased sequentially in practically all of our operations, I think with only 2 exceptions, but the EBITDA margins were up even though the second quarter seems resistant to be weaker than the first quarter because of the stronger sales that we have for modern day, in particular. Substantially all of our operations observed sequential increases in EBITDA with very significant moves in Peru, 14%; Chile, 11% and Argentina, 7.5%. In Europe, Mexico and Colombia with quarter-over-quarter rise was 5.8%, 2.7% and 1.9%, respectively. So that means in all major operations we had sequential increases in EBITDA, absolute terms.

On the following charts, Mexico, Columbia, Chile and Peru, those people that are watching the presentation can see the acceleration of the EBITDA growth that has come about with the recovery in revenues. Our operating profit increased almost 21% from the year-earlier quarter to 31.2 billion pesos. After our of comprehensive financing cost of 13 billion pesos, it helped bring about a net profit of 14 billion pesos in the second quarter, which was 86% higher than that of the year-earlier quarter.

We continued our efforts to reduce our leverage with our net debt reduction of 27 billion pesos in cash flow terms in second quarter. Our outstanding debt has come down from 630 million pesos in December to 550 billion pesos in June, which is 12.5% decrease, which reflects first and foremost our debt reduction efforts, but also the appreciation of the Mexican peso vs, other currencies in the period. Our net debt-to-EBITDA ratio stood at 1.9x at the end of June, after accounting for our derivatives position and the equity credit of our hybrid bonds.

Our capital expenditures totaled 51 billion pesos in the first half of the year, whereas our acquisitions reached 3.6 billion pesos. After adjusting for dividends received from KPN, net shareholder distributions totaled 734 million pesos in the period, mostly by way of share buybacks.

Our cash flow from operations was almost entirely consumed by our capital expenditures and our net debt amortizations.

With that, I would like to pass the floor back to Daniel and Q&A session begin. Thank you very much.

Thank you, Carlos. I think we can start with the Q&A, please.

(Operator Instructions) Our first question comes from Amir Rozwadowski, Barclays.

I was wondering if we could dial-in a bit more in terms of the competitive landscape with respect to your Mexican wireless business. When we look at sort of ARPU trajectory, it seems as though ARPU continues to improve at least relative to our expectations. Could you provide a bit more color in terms of how you see the competitive landscape shaking out when it comes to competitive pressures? And then maybe a quick follow-up, we've all seen some of the news with respect to the litigation, and it comes to the constitutionality or legality of the interconnection questions around competitive interconnection fees and so forth. Any thoughts in terms of sort of your positioning, what type of benefits that could accrue to the business or should be the case work in your favor? Any color along those lines would be helpful.

On the -- in the 0 interconnection rate, I just want to tell you that since 2014, we filed some amparos injunctions against the certain articles of then recently not telecom and broadcasting law. Seems we strongly believe that such articles including those related to the so called 0 interconnection rate interfere with the constitutional reform of 2013. We understand Telcel amparo's filing 2014 are set to be resolved shortly. Also at this point, there is not a specific day announced by the Supreme Court. Once resolved, we will communicate the outcome of soft challenges and the depth of the resolutions. So that's more or less what I can say about that. There is nothing else that we can talk at this moment.

On the landscape of Mexico, what -- Amir, what -- my view is, I think to start on that, I want to tell you that the rates are very low in Mexico. As we know, in prepaid and in postpaid, in all 2016, we have been reducing all the rates. So the rates today are very low in Mexico. I think, since the last 3, 4 months, things are a little bit more stable. No more reductions on rates even still some of our competitors are subsidizing still a lot -- some of the handsets. But what is very important is that in my view, the networks are very important and the customer care centers and all over, it's not only in Mexico all about rate, it's important the service that you give to the customer. And at this point, I think Telcel is the superior brand, very good recognition, very good distribution, good quality. So I think that our customers are well satisfied with our service. And it's what we have been seeing for the last few years. People is preparing to stay with Telcel than moving to other companies. Data is improving a lot, i.e. the rate of data is growing very fast. A lot of prepaids are moving to smartphones. So they are starting to use more and more data and with the network, the coverage and everything that we're having, as the people is staying and happy with the services. It's more or less what I can see. Still, as I told you, since the beginning, the rates are too low in Mexico, are very low in Mexico. So I think the lowest in by far in Latin America.

Other thing that I -- in my view about that interconnection and 0 rate, what doesn't make any sense for me is that the interconnection today in Mexico is 2x higher than the average price that we see in the market. So it doesn't make any sense that the interconnection that we're paying is more or less 2x higher than the average price that we see in the market. So well those are my comments. And let's see what does the Supreme Court is going to decide.

The next questions comes from Richard Dineen, UBS.

It is actually Maria Azevedo, on behalf of Richard. You've obviously done a great job reducing leverage, but with CapEx sales around just 10%, we would like to know whether this might rise a little in years to come? Or if you think that 10% is sustainable going forward in your view?

I think what you are saying, the first half is partly reflecting the seasonality in terms of the execution of CapEx, it happens every year, it's not linear. I think the guidance that we have given for the year is the CapEx in the neighborhood of $7.5 billion so you can come up with your numbers. But it's obviously not a 10% of sales number, it's higher than that. But again, don't make too much of the seasonality in the execution of the CapEx plan.

And what we want and I think with this more flexibility that we have in terms of our balance sheet that the things are getting much better. As Carlos said, we are at 1.9x debt-to-EBITDA, so we are returning to the numbers that we like. So we have more flexibility to invest where we see opportunities to have the best networks, to have coverage, to give the best speeds in data. So when we have more flexibility. So we still don't know what we're going to do next years, but we don't have any change for this year, but we have more flexibility and that's good.

Perfect. And then as a follow-up question, if you could please share with us, if you are seeing any developments in the local loop unbundling and opportunities with the MVNOs? That will be very helpful.

Well if the -- in the MVNOs, I think they are 3 or 4 MVNOs, I don't remember exactly as to [where these] 5 MVNOs working here in Mexico with us. And they are fine, we're following the routes that we have with IFETEL. And I think, in terms of the MVNO it's okay. They are growing and well that's more or less what I can say. In terms of the local loop, I don't know if there's some comments...

Also in the local loop unbundling there are about 5 operators that are using it and we are providing those services as it [stated on] on the ruling of IFETEL. So...

Our next questions comes from Walter Piecyk, BTIG.

Daniel, you're seeing a lot of good ARPU growth, presumably from all the data growth that you're seeing. But I was noticing that in Brazil, the ARPU was down 3% sequentially. Is there anything different happening there in Brazil as far as how people are using the product or how pricing has work in the market that might have explained that, that kind sequential decline in the wireless ARPU there?

Yes, I think -- well, let me talk a little bit about Brazil, okay? On Brazil, I think we are doing very well on the fixed-line, as the TV peaks some broadband, I think, we are doing well. We are reducing our growth because the economic situation that is in Brazil, we don't want to grow and then with this economic situation have a expenses or disconnection. So we have been very careful at these moments with the growth of TV and broadband. But still growing and maintaining market share.

In the post -- in the, let's say, wireless side. In the wireless, we are doing very good on [contact]. Contact means the postpaid that doesn't have any limits, we are doing great, we are growing and we are performing very well. Even in prepaid, we are also growing our revenues, we stop decreasing and growing the revenue. So I think all overall, we are performing good. Still in Brazil, as difficult situation on the political side and doesn't help us on the economy of the country. But I think, we are making the investments, we are trying to reduce cost, making all the penalties, it's not from one day to the other one, but we are performing. We are growing our EBITDA from last year more than 1 point. Still a lot of unemployment in Brazil. And the other important issues, if you divide the 2 markets consumer and corporate, I think on consumer we are also doing very good, but on corporate, we are doing good, but the prices on the corporate side has been going down very fast. So with these things, companies try to get the best of that so the competition is very intense and the competition is very intense on all the corporate market. And well that makes the revenues with the same customer are decreasing. But Oscar can help us to make more comments on Brazil. Oscar, I don't know if you have something else.

Sure. As you mentioned, I mean if you look at total market, the total market is shrinking a little bit in the fix work. But when you do the breakdown of the revenues, we are doing pretty well in fixed broadband. We are growing 17% so we have been working on ARPU in order to move.

(technical difficulty)

The next question comes from Alejandro Gallostra, BBVA.

Sorry, sorry, sorry. Now Oscar, something happened here. Yes, you continue Oscar.

Well as I mentioned, I mean we do look at the total fixed market, it's shrinking. So when you make the breakdown of the revenues, we are doing pretty well in fixed broadband. I mean, we are going more than 2 GHz, we are growing like a 17% accumulative fixed revenues. In PayTV, we have been having a lot of disconnection mainly the satellite TV in the low end of the market. But we've been working in increasing the ARPU in all the platforms in PayTV. The main impact that we have is what Daniel mentioned, we have a lot of price erosion in the enterprise market, given the economic situation. And secondly, (inaudible) traffic has been decreasing very importantly. So when you add all, the market is shrinking in Brazil. But the way that we are approaching the market is to improve the ARPU in all the products. And in the enterprise market, we are complementing the offering with IT services in order to compensate the price erosion that we are suffering in Brazil.

And thank you, Oscar. And just to finalize your specific question, I think the ARPU in Brazil is growing from the second quarter of 2016, that we have BRL 13 to second quarter of 2017 to BRL 15. So the ARPU in Brazil is growing 9.1% year-over-year. So I don't know why is that mentioned that it's reducing, the ARPU is growing in Brazil.

Yes. I think, I was mentioning sequentially, not year-over-year, but that's fine. But just one other question for Carlos. The debt leverage of the company is now below 2. And if you look at the share repurchase you guys did in 2013, in '14 and '15 very high. It obviously, slowed down in the last 4 quarters or so. Would you anticipate now that your leverages is at that level? And your operations are performing so well that maybe we see some more share repurchase going forward?

We certainly think that operating, that possibility is up for next year. I think that we are still set on getting to 1.5x net debt-to-EBITDA, I think it's something -- that is something that we should be able to achieve in the next 3 quarters or so. And I think once we are able to that, I think we are open to further uses of our cash.

Our next question comes from Alejandro Gallostra, BBVA.

Carlos, you just mentioned, that you have leverage target of 1.5x net debt-to-EBITDA for the next 3 to 4 quarters, it's that correct?

No, the target is 1.5x net debt-to-EBITDA, I expect that we should be able to get to that target within the next 3 or 4 quarters.

Within the 3 or 4 quarters. Good. And I was wondering if you have a plan to you to hedge your debt or interest expenses at the current FX rates? Or if we should expect profits to reverse if the Mexican peso depreciates again?

Well, I think you cannot be expecting for the currency to depreciate. So [appreciate] I think that tend to do some rebalancing of our procedures over time, as the mix of our revenues changes. I think as you just saw in the presentation that América Móvil has very [much] denominated in 20 different currencies. And the most important ones, 50% of our revenues are pesos and the reals, okay? So we have another 50%, that is mostly dollars in U.S. And -- so our debt exposure very much reflects this kind of revenue mix that we have. And that's quite what we aim to have.

Okay. So I understand you are not engaging in significant currency hedging at this time?

We do rebalancing of procedures from time to time, yes.

Okay. And my second question is actually -- because I would you like to have a better understanding of the driving forces behind the strong ARPUs. Is it simply the exponential growth that we are seeing in wireless data, perhaps linked to highest smartphone penetration? Or maybe the implementation of shorter expiration times in prepaid cards as well as the strategy that you recently implemented in Mexico?

Well, what we are trying to do all overall, in all Latin America is to try to drive the customer to have a more data, more minutes at higher ARPU storage. What we are doing, focusing a lot on the postpaid segment. Driving promotions from the postpaid side and in the other way, in the prepaid, yes, what we are doing is, we -- recently we don't do anything, but at the beginning of the year, we got some dates on the prepaid cards in Mexico and well that's also part that is helping to drive ARPU higher. But our goal is not making some promotion, driving the customer to get a better plan and spend a little bit more, but having much better -- a lot more data, more minutes and other value-added services is what we are trying to do all around Latin America.

So Daniel, are you also lowering the expiration times in prepaid cards in rest of Latin America?

No, we are not. As I remember, in this quarter, we don't reduce any expiration date in the rest of Latin America. No.

Is it something you plan to do in the short term?

Yes, I don't know if we want to do that. Maybe we can have what we are doing a lot is making some packages, okay? Instead of reducing, we give packages to the people in the prepaid with better terms, better conditions, more minutes, more data and to spend a little bit more is what we -- and people is driving to use those packages. So instead of having, let's say a 100 MB for 30 days, maybe you can have 300 MB for 7 days in a package at better price than the other one. So those type of packages are the ones that are driving higher ARPUs.

Our next question comes from Fred Mendes, Bradesco Bank.

I actually have 2 questions. I mean, the number one, looking at back to Brazil, you change the leadership of cloud in Brazil in April and on May you announce an aggressive price strategy -- pricing strategy particularly in the postpaid segment. Just want to understand about what terms of -- in terms of strategy, what can we expect in Brazil? And of course, you priced for the next quarter, that's my first question. And then my second question is, look at the margin of the sale of the equipment it improved versus the average of the last quarter. Also when you look at (inaudible) will present in few countries in terms of EBITDA contribution, we see an increasing sales of equipment and we see improvement in EBITDA margin. So just trying to get a better understanding of the dynamics and then on the same line just want to understand how much of that is a change commercial strategy that you are giving less subsidy? And how much is FX impact consider, of course, the Mexican peso versus the dollar?

The first one is Brazil postpaid, when we get a little bit more aggressive, but it isn't so much aggressive. I think, we are doing some unlimited voice in Brazil in postpaid. There's something that it's coming, we have it in the really higher plans, we'll reduce to some lower rent plans. And I think it's working very good. People likes that. And it's on the reasonable price. This is not that we're dropping the prices down. So these promotions are good promotions, driving higher ARPUs and people is happy with what we are presenting. So for us, I think it has been a very good promotion and people is coming in Brazil. Today, in number portability, we have one of the highest portabilities that have in Brazil at this moment. So people is preparing at this moment these type of plans and what we are -- the promotions that we are putting in the market. So that's one thing.

Second, what you see in the margins, in the subsidies and margins, in all the handsets, smartphones, feature phones, everything. The strategy is, and I think it's going to be all around the world, the strategy is not to subsidize. So we think that subsidies are in prepaid, well you'll never know how long the people is going to stay with you. So it's very difficult to see what would be the subsidy if you don't know how much is going to consume or for how long is going to stay with you. So we are trying to take out as much as possible the subsidies on the prepaid segment. And I think as the market is giving of that possibility, we are doing that. So depends on not on the competition in each country, but our strategy in the next years is to take out subsidies in the prepaid side.

In the postpaid side, you know, where you have a contract, you know what do you -- where you can subsidize, but also the strategy would be to reduce those subsidies in the postpaid side. So that's the strategy on América Móvil. I think that's the right strategy for all the telecom companies because to give big subsidies and these type of prices that we are giving in all Latin America doesn't make any sense. So in terms of margins and subsidies, I think we are going on the right direction. And the last question, I don't get it. Can you ask again?

No Daniel, I think you answered both questions. If you just allow a quick follow-up on the first one about Brazil, you mentioned that portabilities are doing quite well after the change. So can -- is it right to say that it's better at this point, you find your price are quite competitive and you should not see, I guess, any moves -- any more moves -- you offer more data for the same price, you think you're already competitive, you shouldn't see any change in the short term, at least for now?

No. I don't know. I cannot say anything because I don't know what does my competitors are going to do. When you do things internally in the company you can plan for 2, 3, 4, 5 months, 1 year. No, when you have -- but when the market it's open and you don't know what it's going to do, your competitor tomorrow or the other competitor in 2 months or increase (inaudible). Well, I cannot assure you that we are not going to move. But what I can tell you is that we are going to be a competitive and we don't want to grow being not profitable, but we want to be competitive in the postpaid market. Remember something that it's very important, our network today in Brazil is the best network in terms of quality. So we are rank the best network in the quality in Brazil. So we have very good speeds, we have very good data. So the perception on Brazil on our network is very good. We're working a lot on the coverage, I think we're getting there. But in terms of quality, we are doing very good. So we're investing in Brazil and I think Brazil, we feel -- I feel, personally I feel very comfortable on our strategy in Brazil with our management in Brazil with everything that we are doing in Brazil and it's going to take some time to see better and better numbers, okay. So that's my comment on Brazil.

The next questions come from Rodrigo Villanueva, Merrill Lynch.

My question is related to Columbia. I was wondering if profitability levels of around 40% are sustainable in this country. And what has been driving this?

Well I think, yes. We used to have 40% and I think we're having -- we have a very good cost reductions in taking care about our costs and our expenses in Colombia. Then we are having good growth in the fix side; in TV, broadband and fixed it's growing maybe 6 points of the EBITDA year-over-year. In the wireless side, postpaid is growing also our revenues. Data is growing very good also in prepaid and postpaid. So I think we are there. And I hope we can sustain and still improve what we have right now.

Understood. And I have another question related to Guatemalan, there has been some new reports suggesting that they must've been involved in a corruption case there. Could you be able to elaborate a little bit on this? And what is the reasoning behind this investigation? If the government is the one that is doing so, any additional color would be helpful?

What I can say is that the Guatemala authorities have determining that certain payments made back in 2011 by our Guatemala subsidiary Telgua, did not comply with the Guatemalan laws for burning contributions to political parties. We are conducting right now a review of their circumstances of these payments and we are cooperating with the investigation. Our review is ongoing and at this point, I don't have any further comments on it. So we are reviewing that, and we don't have any more comments.

Our next questions come from Julio Arciniegas, RBC.

Coming back to the ARPU evolution and your service revenue evolution across the board, which actually has been quite good in Mexico and Columbia. Just to have a clear view, is the company increasing the prices following more for more strategy that means that -- or basically does the customer has the optionality to subscribe to this bundles of services? Or just the company is increasing the price to a specific base in exchange of more for more services? And my second question is if you could give us more color on the competitive dynamics in Columbia, how do -- I see that the market is actually quite stable, do we expect this stability to continue going forward?

Well, on the first question, I think, yes. We are doing promotions more for more as the people pays a little bit more and then you get more now, okay. So -- and this is helping all overall. And the thing that is helping us a lot is that people is using more and more data, so it's very important that if you have a good network, if people relies on your network then people use your data and then it's what it's happening. So we are giving promotions as you said more for more, yes we are giving and people is getting those because they need to use more and more data.

In the other side, in prepaid. Well, we are growing our penetration in the smartphones and that is helping us that they drive more data and they pay a little bit more. So that's more or less. Our megabytes of use across América Móvil are growing around 80% year-over-year, so it's a lot. So you are -- almost doubling what they used to have -- that they used to use 1-year ago. So if -- as you could see people is using more and it's more for more are our promotions that we're having. And the other question -- Yes?

So is demand driven? It's not like basically just price increase as demand driven this...

No. Demand driven. Of course, is demand driven. So our price increase I don't think we have any country where competition let us only increase prices and that's all. So I would love to have that, but well unfortunately it's not easy to have a -- and very competitive markets in all Latin America. So it's more for more, of course.

And about Columbia?

Well Columbia, I think as I said, may be 1-year ago, we make some changes in the organization. I think this changes in the organization are helping us. We put a very, very cost control in the company and very focus to grow distribution, to grow customer care, attention our customer, it's a little bit more care centered. So a lot of online also helping us to attend our customers. So we are evolving very well. We are really focusing on Columbia, and I think we can sustain what we achieve at this moment. But remember that in Colombia we are having a lot of things, a lot on the regulatory side, a symmetric interconnection that today is not anymore. But also we have a fiscal reform on January. And -- well that also -- it increased the tax and customer like 3 points from 16 to 19. So -- well that's reduced, even with that, we think we are performing very well.

Our next questions come from Daniel Federle, Crédit Suisse.

Could you please provide us with an update on the functional separation plan in terms of timing? And what -- which are the main points in discussion? And also if you could comment the chances of including the PayTV license in the negotiation would be very good. And the second question is more like a follow-up on a previous question on CapEx. I would like to know if this CapEx reduction has been more concentrated in any specific markets or any specific segments?

On the separation proposal just, but I can tell you is that it's being reviewed currently by the IFT by the IFETEL as a group of representatives of Telmex and also from the IFT have been discussing the different aspects of the separation. Telmex is in the process of providing additional information requested by the IFETEL. So at this moment, we are presenting and providing more information. And we expect the approval process at the IFT to be resolved maybe in the fourth quarter of 2017 or the first one of 2018. So I think that's the timing. I don't have any else -- anything else to say that we are providing more information to them. And that it's going to go to the fourth quarter or to the first quarter of this year. So that's -- on the PayTV license, we haven't talked anything on that, we are talking about the separation. But as I can tell you, we -- I think in Mexico is the only place where there is no -- there is a limitation for that Telcel to give TV and doesn't make any sense and I hope that the IFETEL understand and reveal that and give us the permission give to TV. So that's what I have.

In terms of CapEx, I think and it's very important to remember what we do the last 3 years. I think in '13, '14 and '15 we do a very big CapEx investment, okay. We do more than $30 billion in 3 years, may be $31 billion or $32 billion in 3 years. So that give us the reason to do what we are doing today. So still we feel comfortable with the CapEx. Revenues and data, data is growing a lot. So maybe we are going to need to put a little bit more CapEx in the next year, but we don't know still we feel comfortable with our budget that we have this year. We are not, of course, maybe we are giving a more CapEx to one or other country depending on the demand, depending on the growth of data. So all the countries are important, and we are focusing in all of them. So the big investment that we do years ago, we do it all overall Latin America and that give us the support to do what we are doing right now.

The next question comes from Carlos de Legarreta, GBM.

Just very quickly in the U.S., we saw a very important increase in EBITDA margin, you guys also mentioned without the inorganic growth that would actually been higher. So I just want to understand what is the nature of this and is it sustainable going forward? So that will be the first question, please.

Well on platform, I think us -- we have been talking as the competition is being important in the prepaid segment in the U.S. But I think TracFone is performing well. We are being a little bit more profitable than what we do last year. We are -- at this moment, end of the second -- I think in the third quarter we haven't been so competitive, but right now we are competitive again in the market. We launch new plans with more data and that is giving us to be more competitive in the market. So we feel comfortable on what we are doing in TracFone. We expect a good -- next good -- the next 2 quarters. As we grow more, of course, it goes directly to the profitability, but we feel that we can achieve a better EBITDA than what we do last year. So even if we grow -- we have been doing new agreements with T-Mobile, with Verizon, with everybody, all of our carriers and that give us the possibility to be more competitive in the market.

That's perfect. And the follow-up could be regarding Argentina. What do you make of the merger between you competitor Cablevision and Personal? I mean I know you guys are also will be able to offer PayTV by 2018, but how does these moves affect your outlook for the country going forward?

Well, what we are going to see is we're going to have a pleasured that it's conversion they have a full integrated competitor. And what we are going to do, well we are going to need this -- we are going to have the permission to [give TV] at the beginning of next year and we are preparing the company to do that. So that's at this moment what we can say. And we already have some households, we already have some fix in Argentina with fix-voice and broadband, not entirely with fiber. So we are preparing our network growing a little bit our network to do more and more and to have be able to get in our network to be at the beginning of next year. It's what you could see.

The next question come from Marcelo Santos, JPMorgan.

I just wondered if you could comment a little bit more on the Peru recovery. We see much better margin and there's additions in the prepaid, but postpaid you're seeing some decline. So if you please give a little bit more detail on what's -- what has been the drivers?

Yes. Let me make you like a small summary of Peru. I think we have -- the last years we have 2 main things. Is we one new company entering the market. They bought Nextel, they get in the market and they been very aggressive. The second one, we lose the auction maybe 3 years ago, the auction of the spectrum in the for -- for the 4G license. So for that time, the competition has been very strong in terms of subsidies. I think they lose a lot of money, the competitor lose a lot of money giving handsets for free. And we haven't been able to give the speeds and the quality of the network because we don't have the spectrum that we need. But in 2016, we buy a company, called Olo, we have the spectrum for 4G, we start to invest. I think the market is much more stable and rational in terms of that. It's also very competitive, but it's more stable. And the good thing is in all those years, we don't lose a lot of market share. So we sustained our revenues, we have the same amount of subscribers that we used to have 3 years ago, more or less. And well what we need to correct is we have to put, all the things that keep us a little bit is some interconnection rates that goes down, that also hit our revenues. So all overall, 2016, we invest, we correct some of the things that we have, we put some cost controls and today, well you could see that Peru is growing 50% EBITDA, growing postpaid, growing in prepaid. So all the things -- the difficult things that we used to have 3 years ago, I think we worked very hard on 2016. 2017 will give us the return on what we have. And I think we can sustain and do better than what we have been doing until today. So with Peru, I don't know exactly what is going to happen with the competition in the next month so it's difficult to say. But the trends that we are having in Peru are very good trends, and I hope we can sustain those trends. So Carlos wants to give you some numbers.

I think you have pointed us to highlight that there is good growth in ARPU. I think ARPU is growing 7.5% year-on-year. And I think that this is, as Daniel said, very much supported by the fact that we have now -- that we're not spectrum constrained anymore. So we are providing more services also in voice, okay? Voice [revenues] have gone up 21% year-on-year, but also in data, okay? The expansion in data per user have been very significant in Peru. So again if you know the countries which have a good net growth, which have invested a lot throughout the years. Then all of a sudden we run into a spectrum constraint, that has gone away. And now we are benefiting from this prospering business and with a good position in the market.

And there is only time for one more question coming from Mr. Diego Aragão, Morgan Stanley.

After the spin-off of your tower business in Mexico, I was wondering if you have any plans to divest from towers in other countries anytime soon?

I mean something that we have been asked repeatedly, this is Telesites spinoff. And one reason for doing the Telesites, the one that we initially have we got into it was a more efficient means of having -- administering your balance sheet, it's a more capital light, modern, and not made a lot of sense. But it -- having done it, we know that it's very difficult to get through all the tax issues, all the legal issues, contacts can be quite cumbersome. So it's -- I think the short answer is something that we are obviously willing to keep on considering because of the advantages from our balance sheet point of view, but it's also something that it's not easy to get done and we have to see what are the other countries that may lend themselves better to this kind of constructions.

Okay. Just quickly actually a follow-up regarding Argentina, what will be a time line for you to provide video service in that market?

Aragão, can you repeat it again? I don't hear.

Yes, I was wondering, how long it will take for you to provide video service in Argentina in 2018?

In generally when we have the permission, I think we can be ready to give TV, okay? So already have fiber to some houses and we have the technology, we do it in other countries. So I think in general, we can start TV one day. We have the right to do it, we can do it.

Okay. Perfect. So I would assume that's probably due to the same case as of Mexico, right? If you get a license in Mexico probably on the very next day you would be able to provide video service as well, right?

Yes. Not on the very next day, but yes, we can provide the video very fast.

This concludes our question-and-answer session. I would like turn the conference back over to Daniel Hajj for any closing remarks.

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

And we just want to remind everyone that we're hosting an Investor Day this year. It's going to be held in Mexico City on October 11. The link to register for the event would be available in the next couple of days. It will be by invitation so if you have not received one, please feel free to contact myself or anyone from the team (inaudible) will be helping us on this. And hope you could join us.

Okay, thank you. I think you will send all the details to them, no? Thank you very much.

Thank you all. Goodbye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.