Earnings Call: Q2 2020

Jul 15, 2020

Morning. My name is Mariama, and I will be your conference operator today. At this time, I would like to welcome everyone to the America Movil Second Quarter 2020 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. Now I will turn the call over to Ms. Daniela Laquana, Head of Investor Relations. Good morning, everyone. Thank you for joining us today to discuss America Movil's Q2 2020 financial and operating results. We have today on the line Mr. Daniel Paz, CEO Mr. Carlos Garcia Moreno, CFO and Mr. Jose Monjausque, COO. Thank you, Daniela. Thank you everyone for being in the Q2 2020 financial and operating report. And Carlos Garcia Moreno is going to make a summary of the results. Thank you. Thank you, Angel. Good morning, everyone. Well, towards the end of the Q1, the financial markets will disarray as the enrollment numbers in the U. S. Collapsed, threatening to worsen the economic contraction stemming from lockdown measures and that controlling the spread of the COVID-nineteen virus, Infero Reserve announced a huge monitoring of the tariff expansion program. This decisive action will also stabilize the financial market, allowing for new issuance of securities throughout the 2nd quarter and quell the steady amount for U. S. Dollars that have resulted in its appreciation vis a vis practically all other currencies. Since then, substantially all Latin American currencies began to recover with the notable exception of the Brazilian real, which declined an additional 12.8 percent versus the dollar. Our revenue rates in Mexican peso, the Colombian peso, the Chilean peso, all of which have dropped sharply in the Q1 ended up appreciating 3%, 7.9% and 0.1%, respectively, in the Q2, in which practically all our region of operation was under lockdown. The component measures adopted throughout our region of operation had an important impact on our commercial activities, partly on account of the closure of shops and customer care centers and partly because they generally curtailed the mobility of population and hence altogether, we lost slightly more than 5,000,000 subscribers, as contracted in the postpaid segment with most operations seeing a reduction in the postpaid base, notable exceptions of Colombia and Telecom Austria. And we got $4,600,000 disconnections in the prepaid segment, in which all our producers will expect net disconnections for crack point in the U. S. And Colombia, both of which are slightly more than 200,000 clients each. Prepay disconnections were more important in Mexico, 1,700,000 subs Peru, 1,000,000 and Ecuador and Guatemala are approximately 450,000 each. In contrast, on the fixed line segment, we gained 450,000 new broadband clients with every operation holding and increasing clients, except for Telecom Austria. There were, however, disconnections of board lines and Pay TV services, particularly in Brazil, which accounted for 190,000 Pay TV disconnections. We ended June with a total of 38,500,000 access lines, which includes 277,000,000 wireless subscribers and 81,000,000 fixed line IDUs. Please note that our Colombia operation managed to increase FX lines in North East and West part of this quarter. Our 2nd quarter revenues totaled ARS 252,000,000,000, up slightly from the year earlier quarter 0.6%. In spite of equipment revenues falling 37%, our service revenues increased 6.5% in Mexican peso terms. On account for the most part of the depreciation for reporting currency versus the dollar and the euro over the year, which was approximately 15%. For crack plant in the U. S. And Puerto Rico, all our operations saw marked reductions in the equipment sales as a result of the confinement restrictions, but also because of our more restrictive conditions for Cancunas in most operations. At constant exchange rates, excluding Argentina, given its hyperinflationary accounting methodology, service revenues were up 0.8%, with orders generated on the mobile platform rising 2.3% and those coming the decline in 1.7%. The deceleration in service revenue growth from plus 5 percent in the Q1 to plus 0.8 percent in the 2nd resulted from the direct impact of the confinement measures put in place throughout the region and its economic rollout. At 2.3%, mobile service revenue growth slowed down sharply from the fastest sales in the Q1, 8.4%. Brazil and Colombia were top performance in terms of mobile revenues with increases of 8.8% and 4.8% respectively. On the Freight Line platform, the impact of COVID was more limited with the pace of the China revenues going from -0.7% in the first quarter to minus 1.7% in the 2nd quarter, mostly on account of falling pay TV revenues. In Colombia, fixed line revenues actually accelerated to 9.9%, up from 9.5% the prior quarter. The deceleration in mobile service revenue growth was practically identical in prepaid and in postpaid with revenues observing an improving trend as confinement restrictions began to be lifted. In prepaid, revenues were affected by the lockdown measures as clients sometimes found it difficult to affect the charges as most shops were ordered shut, including our own customer care centers. The impact on revenues have fared more strongly in countries where prepaid services are more prevalent, including Mexico and the Dominican Republic. In postpaid, revenue growth slowed down as clients switched to lower cost plans in anticipation of the economic difficulties they were to face. In various cases, small and medium tariff enterprises that have to close under the confinement restrictions, so to discontinue the service or reduce its cost even if that represented at more linear availability of data services. We tried to stay close to our clients and help them find class better suited for them given the economic difficulties that many were undergoing and to ensure also that they will stay current in the payments. In percentage points, the decline in potash growth rates was steepest in Ecuador and Panama. Equipment sales plummeted early in the crisis, bottoming in April as you can see in the chart, but trending back rapidly during the remainder of the quarter. Fixed broadband services continue to lead the way within the group with revenues increasing 7.3 percent, very much in line with the pace in the prior 2 quarters. With only one exception, all our operations posted fixed total revenue increases in the quarter. Our less mature fixed line operations, including those in Ecuador, Peru, Argentina and Costa Rica, all performed well with the pace of growth picking up speed. 2nd quarter EBITDA totaled ARS 2,600,000,000, which was up 5.9% in Mexican peso terms, with the EBITDA margin climbing 1.7 percent response to 32.9%. At constant exchange rates, it increased 3.3%, reflecting by the impact of new commercial arrangements by CriteOne in the U. S. That brought about reductions in net group work to be applied from January 1. Our operating profit jumped 10.5 percent to MXN 40,900,000,000 and help bring about a net profit of MXN 20,000,000,000 in the second quarter after allowing for financing costs of MXN 11,000,000,000, which were 6.3% lower than in the year earlier quarter. Our net profit equivalent to 0.30 peso cents per share and $0.56 per ABR was up 40% from the same quarter last year. At the end of June, our net debt totaled MXN755,000,000,000, up from MXN677,000,000,000 at the close of 2019, which reflects among all things an increasing the values of total and vis a vis Mexican peso. It stood at the 1.39x EBITDA under our prior methodology of EBITDA. In cash flow terms, our net debt came down by ARS 8,300,000,000 in the 6 months to June. In addition to the above, our cash flow allowed us to cover capital expenditures in the amount of ARS 63,000,000,000 and to devote ARS 6,200,000,000 to fund labor related obligations. In Mexico, service revenues came down 2.1%, mostly on accounts of mobile service revenues up from a 10% growth pace in the Q1 to minus 2.5% in the 2nd quarter, with steel client service revenue showing a very large decline quarter over quarter. In Brazil, postpaid revenues proved to be very resilient, observing an 11.8% increase from the year earlier quarter. Although down from the rhythm of the Q1, it was nonetheless quite a remarkable pace. Feebles and revenues stayed on trend, reflecting practically the same pace of growth in the 1st and second quarters. All the above, we have bring about an outstanding jump in EBITDA, which was up 10.7% year on year with EBITDA margin reaching 40%, which we decided to have in Brazil. Finally, Northern Colombia, it was the only operation to grow net adds on all business lines. And in addition, we managed to present the increasing revenues on both the mobile and fixed line platforms at 4.8% and 9.9% respectively. With this, thank you very much for waiting to the call, and I will pass the floor back to Daniel Hajj. Thank you. Thank you, Carlos. And we're going to start with the Q and A. Your first question comes from Walter Piecyk with LightShed. Your line is open. Thanks. Just a question on the obviously the very strong performance of margins of TracFone in the United States. You talked about a repricing going back to January. So I assume that the margin was benefit from some catch up from the Q1. So when we think about Q3, where you don't have that kind of the benefit of the Q1, what should the margins look like in that U. S. Business? And can you talk a little bit more about kind of which carriers gave you that benefit? Or is it across the board based on the competition that's in the market? Well, I think we have a very strong quarter in TracFone, not only in the carrier costs. I think we have also a very strong performance in sales in net adds. I think we have more than 200,000 net adds in the quarter. So I think with all the what the U. S. Is giving, our prepaid market is growing good and we have a very good quarter. We have discussions and revisions with our cost carriers, the cost of service and we have a reduction in the cost of the service And we have been negotiating that through all this year, at the beginning of this year and starting from 1st January. So we finish in the 2nd quarter, but start in Q1. So I think you are going to see also benefits in 3rd Q4 as you are saying also. So we're working with all of them, reviewing with all of them and well that's mainly what I can say. So Daniel, did the margin was the margin helped from some catch up credits from kind of backdating the pricing from the Q1? Or is that really the new margin that you're going to operate at this 15%? No, we're catching what we have in the let's say, we have around $130,000,000 that we put from this in the second quarter and a $65,000,000 from Q1, dollars 65,000,000 from Q2. So that's more or less those are the numbers. And I think we're going to have more or less the same in the 3rd and in the 4th quarter. Your next question comes from the line of Rodrigo Villanueva. Your line is open. Yes, thank you. Hi, good morning. I have three questions, if I may. The first one is, if you could please elaborate a little bit more on the potential alternatives to create value from your towers. Would you be considering a spin off as you did with TeleSides or a Selah Is that transaction? And also, are you considering to do this with the vast majority of the 60,000 towers you currently own? Then I can answer the following questions. Thank you. On the towers, Rodrigo, the only thing I can say and the only thing that we have today is we have we own 60,000 towers in Latin America and in Europe. And we are analyzing the different alternatives to give value to the shareholders, as we said, and to reduce our debt. So we don't know if there's going to be spin off or we're going to sell them. We still does not know exactly if there's going to be in all the countries or only in some of the countries. So we are analyzing. We are today analyzing what is the best thing to do to for all these assets and to give value to our shareholders of these 60,000 towers that we have. Nothing I don't it's not because I don't want to say anything else, it's because we still doesn't have anything. We are really, really analyzing different alternatives on that. Understood, Daniel. Thank you very much. The second question is related to Huawei. We have seen several countries around the world, including Brazil, considering to stop using Huawei equipment for 3 gs networks, this increased pressure from the U. S. Government. Do you think this could be extended to all the Latin markets? And could you please share with us any potential strategic alternatives that could reduce the negative implications for AMX from a potential Huawei ban in that time? Well, we are not hearing anything today, still until today, we are not hearing anything about ban Huawei in the rest of Latin American countries. We have hearing something in Brazil, but nothing formal, okay? So still hearing some news, but nothing formal from the government. So that's the only place where we're hearing something. They are talking about 5 gs. So still we haven't had and we haven't take a decision in 5 gs. So all 4 gs, 3 gs, there is nothing that's everything, it's okay. So still we don't know what to do. There is another vendors there. There is Samsung also, Nokia, Ericsson. So still a lot of competition. So if there's a ban on Huawei, we still have other vendors that we can use. So I think Huawei is an excellent technology, but still we don't know if there's going to be something in the other LatAm countries. Understood. Thank you very much. In the Europe sorry, in Austria, we're using Nokia. So I don't think there's a problem there. So in Europe, we are in 5 gs, the only country where we already because we're making testings and we're doing something in 5 gs, but the only decision that we already take is Nokia in Austria. So there's no problem over there. Understood. Thank you very much. And the final one is regarding operating performance in Colombia. As Carlos mentioned, it was pretty strong, particularly considering the COVID crisis. And I was wondering if this has to do with Telefonica's lack of willingness to invest in LATAM, excluding Brazil. And you would expect the competitive environment to change now in Colombia, considering that Novartis acquired the operations of Alamtell? Thank you very much. Well, I think we have been doing big improvements in Colombia through the last 2 years. Colombia has been improved not only in one segment, we're improving in postpaid, we're improving in prepaid, in corporate customers, in peaks, in broadband, in TV. It's the only country where we grow in TV also. So we have been improving a lot through the last year, 2 years, maybe 2 years starting to work very hard. And the last year we have been improving. We changed a lot our organization. We have been investing good over there. So I don't think it's only one thing. I think we're making a lot. We do know that we have the option in the beginning of the year. We win some frequencies and we're going to have a new competitor that is warm. And well, with new competitors, maybe it's going to change a little bit. It's going to be more competition in the prepaid and postpaid in the mobile side. I'm sure it's going to be more competition, but I think we are prepared. We had a very good brand. We have good distribution. We have very quality capacity. So we are prepared to compete in Colombia, Rodrigo. Your next question comes from the line of Alejandro Galastra from BBVA. Your line is open. Hi, good morning Daniel, Carlos, Daniela. Thank you for the call. My first question is related to the mobile business. You mentioned deceleration in mobile revenue growth. There was similar in both the prepaid and postpaid segments. However, I would have expected them to behave differently with postpaid most probably being more expensive. So perhaps you could give us a further explanation of why this was the case in your opinion or maybe provide us with additional breakdown? And then my second question is related to the broadband operations, which have proven to be very resilient this quarter, but the performance has been quite different among countries. And perhaps you could explain the differences in the performance of the drop in operations in Mexico and Brazil, for example? Thank you. Yes. Well, I think prepays and postpaid are different markets and they are behaving different. If you compare, let's say, Mexico and Brazil, I think Mexico, we have more than 50% of our service revenue in prepaid and forty percent on postpaid. So that's why we have been more hit in the revenues because at the beginning April May prepaid people, we have a lot of stores closed. We have in Mexico, difficult to sell over there. And in a lot of countries in April, we give some packages to help people with this pandemic. So let's say an example in Mexico, we give a package called Amigo Contigo that we give free calls for 15 days for free. And there is around 28,000,000 packages that we do in April. And April, May and in June starts to grow a little bit to recuperate in the prepaid side. Different in Brazil, in Brazil only 20%, 25% of our revenues are prepaid and the rest are postpaid. Then what is happening in postpaid? Postpaid is different. People is starting to reduce their plans. If they have a MXN 500 plan, they want to go to a MXN400 plan or reduce their gigs or they are taking we've been careful with their money. So we are seeing some reductions on the rent of their plan. So that's and in the other side what you are going to see is that you are going to have a lot bad debt in the postpaid. So there's going to be people who are going to stay without a job and maybe they are going to cancel and not paying you some of the bills. So that's more or less how we feel it's going to behave prepaid and postpaid all through Latin America. In the broadband, I think all around we're doing good. Telmex do good here to 64,000 in the 3 months, Brazil 100,000 broadband subscribers, Colombia, we also do very good. All overall, we have been growing our net adds of broadband. But Oscar, talk a little bit more on the please. Given the pandemic and pushing the people work off from home, the requirements of bandwidth in the homes has been increasingly very much. So the people in the home is doing taking classes and working from home and a lot of streaming, video and gaming. So that I think that push the product and that's what Daniel mentioned, we are getting these net adds. And not only net adds, our customers are asking for more bandwidth in all the countries. Thank you, Daniel and Oscar. Thank you. Your next question comes from the line of Marcelo Santos from JPMorgan. Your line is open. Hi, good morning. Thanks for taking my question. I have 2. The first, could you please provide some view on how things evolved during the quarter? You mentioned a little bit how like in April May prepaid was lower. So could you expand a bit and talk how prepaid, postpaid, if just so that we could get a feeling for the Q3? This is the first question. The second question would be regarding your appetite for M and A, good color you could provide on that. We have some assets on sale, especially in Brazil. So if you could provide some update on that would be very good. Thank you. Yes. Well, in prepaid and postpaid, I think what you let's talk especially in prepaid. As I said, people are staying home in April May. So the reduction in sales of the prepaid cards were higher than what we're seeing in June July. So as the economies are open and starting to be more open and we have more stores and then the retails are open, we are seeing that prepaid is starting to grow a little bit from what we have seen in April May. So that's all overall in Latin America. Still some countries are opening faster than the other ones. Other ones are opening and then returning to close a little bit. So still we are a little bit uncertain of what when we're going to have all the economy open totally open as we used to have at the beginning of the year. So it's different in all. In the postpaid side, as I said, people is reducing their ARPU, trying to take care about their money, their rent, they don't want to pay. If they don't use it, they are staying at home. So maybe they use more the Wi Fi and that makes them feel that they don't need the X amount of gigs that they have in their plan. So that's why they are reducing a little bit. But I return as what we used to have at the beginning of the year. It's going to take a little bit of time, take time also for the economies to recover, to open, but I think everything is going to reach. If you are talking about Oi, we are aware and we are interested in the assets. So for us, we'll be a good fit. We do Nextel, all the synergies done, I think through the mostly of the synergies done. I think at the end of the year, we're going to have almost all of the synergies done, except for the towers that we need to reduce some towers that we already have, extra towers that we already have. But all the rest of the synergies, we have been doing very good. The frequencies that we get are very good also help us to have more capacity. And if we can do with OI to have more customers and capacity also will be good. So we are interested and we're going to participate in the OE auction for the mobile side. Your next question comes from the line of Diego Aregio with Goldman Sachs. Your line is open. Yes, Carlos and Daniela, thank you for taking my question. I guess the first question is still regarding your performance in Brazil. Can you walk us through the main pillars for such a strong performance in mobile? I mean, if we would compound this growth such as like the postpaid mix increase, prepaid recharge, upgrade downgrades you plan, How do year on year growth will be compounded? This is my first question. Thank you. Can you repeat it because I don't hear you very well? Can you talk a little bit louder, please? Yes. Can you hear me? Better, yes. Okay. Yes. So I was wondering if you can walk us through the link pillars for your performance in the Brazilian market, particularly if you can compound the growth, which you have like the postpaid mix in terms of like the prepaid recharge upgrades and downgrade, how your year on year growth was in this quarter, both very helpful. Yes. I think in Brazil, we're doing great. I think we have a great platform. I cannot only talk about mobile platform is great. We have been increasing capacity, doing more coverage. Speed is very important in Brazil and we're moving also and doing a lot of things in the network to give a very good speed 4 gs, 4.5 gs. So we're investing and we're doing very good in Brazil. Also in the fixed platform, we have also a great platform. We have 30,000,000 households passed, a lot of broadband, pay TV, great platform of pay TV. And also we have very good management in strategies for that. So all overall, we are doing good. And in this quarter, we also reduced and not only in Brazil, in all America Movil, we have been increasing and reducing increasing efforts to reduce cost and expenses. So I think that's something that we have been doing very well and help us to gain market share. Let's say, in Brazil, in postpaid in the Q1, I think the revenues were growing 0.15 quarter. I think 2nd quarter is still very good, 8%. I don't remember exactly, but only in the postpaid 11.8%. Sorry? 11.8%. So it's still working and doing very good. We're making our bundles with broadband and TV. So we have a good platform and we're investing there and we're managing very well our company to give more capacity and speed to the customers. So all overall, I don't think there's only one thing. I think all overall, we're doing very good. Okay. Thank you, Daniel. And I guess my second question is related to your margin. If I can just follow-up on this. When I look to the region, there are like several, let's say, moving parts that lead me to believe that margins have some room to expand. For instance, you mentioned easing competition in some of the markets, right? Industry consolidations, even like the rising of infrastructure players in LatAm and lastly, but not least, let's say, digitalization trends. So I would like to hear from you, how do you see these trends impacting American model? And how much do you expect to benefit in terms of margins going forward? Thank you. I think Carlos wants to answer or you want me to? I can tell you a little bit about the margins. I think margins grow in terms of percentage all around Latin America because two things. First, we have less the service revenue was mainly growing and the equipment revenue was reducing a lot. So that's why the margins grow, especially, let's say, in Mexico, the margins grow because equipment revenue were down. The other important thing is that we're, as I said, reducing and making big efforts to reduce cost and expenses, very important. We are moving a lot more to the digitalized oil, our network, our sales. We're trying to do everything digital. So we're working very hard on IT on that and it's also going to reduce expenses. And well, as you said, M and A is in Latin America, well, we're seeing a new competitor in Colombia, Botan in Brazil, maybe if Oi is going to be sold, then sell then there's going to be less competitors in Brazil. So all overall, it's moving in some directions in one country, in other directions in other country. But all overall, I think our margins can go the way we have been having the margins, growing a little bit and growing our EBITDA also. But I don't know, Carlos, if you want to say something else. I don't have anything more to add. I think it's important only to note that the military there were very significant efforts of reducing costs. So some of them are permanent. Anything that has to go with the tariff ratio and simplification, all of that is permanent. Already having been under more of a situation like the one that we are facing, it is more urgent bring about some cost reduction. So we have been very focused on that. Then there are some things that also came down inevitably because of the confinement, marketing expenses and the like, anything that is more commercial related. Those are temporary reduction. A lot of them come down for some time. But we are seeing, as I said, if you look at EBITDA margins, they increased practically everywhere and that partly has to also with the reduction in equipment revenue that we've had in particular markets, say, for the U. S. And Puerto Rico. And one more thing that I want to add is also it's going to depend a lot on the economies, okay. Let's see how the economies all around Latin America are going to behave. So let's see how does this pandemic is going to result at for till the end of this year and the next one. So it's important that. Your next question comes from the line of Fred Mendez with Bradesco. Your line is open. Hello. Good morning, everyone, and thanks for the call. I have two questions on pretty much the same line here. I just want to get a better understanding of these strong net for Telmex, especially on broadband, 63,000. Just other companies already reported results and then the net adds were also quite strong on the 2nd Q. So my impression here is that the penetration of the service, it is increasing. So just want to confirm with you if this is correct. Instead of more like gaining market share from other places, the size of the market is increasing. And then also if you can give us a breakdown of the net adds, if it's more towards FTTH or if you are still being able to gain clients with copper. This will be my question. Thank you very much. Oscar, you want to answer that? Yes, yes, yes. But yes, you're totally right. I mean, has been an increase on penetration. And we are getting net gains from fiber, as you know, and as well from copper. So I will say half of half coming from fiber and coming from copper. Or you are totally right. What we've been seeing in the market is that the penetration is increasing. Perfect. And if I just if you allow me just for a follow-up, I do understand that close to 25% to 30% of your network today in Mexico, it is already FTTH. Just wondering if you have a it will not be a guidance, but just an estimate of if you plan to continue to aggressively grow this network or if now the main focus would be more towards the leveraging the company instead of deploying CapEx towards FTTH? Thank you. Well, within the situation that we are living, we are focused really on migration of customers and improve the penetration of the network in the next months. Perfect. Thank you very much, Jose. Thank you, Daniel. No, thank you. Thank you. Your next question comes from the line of Maria Azevedo with Santander Bank. Your line is open. Thank you very much, everyone. My first question is a follow-up on the CapEx you just commented. What is the CapEx strategy for 2020? And specifically in Brazil, do you see room to be a little bit more rational and cut the spending this year to the 20% you mentioned on the first call? And the follow-up question would be on 5 gs. You launched the first initiatives in Brazil. Do you think the 5 gs market appear is going to be on consumer mobility? Is there room to charge a premium for 5 gs services? Or do you see it as a substitute to fixed wireless access? How is going to be the 5 gs strategy for the company? Thank you very much. Thank you. On the CapEx, it's we have been reviewing that. I think we are going to reduce the CapEx from the our forecast that we have for this year. Yes, we're going to reduce. Still, we don't know exactly how much we're going to reduce that. We're still reviewing and seeing how does the traffic is going to behave. And also the sales now because part of our CapEx is on CapEx related to the sales of net adds, new customers. So also we're going to see how much that we are not cutting anything there. So we're going to see how much and how that is going to behave. So still we don't know. We are a company that moves fast and we're flexible. So we're going to use and do what is necessary to do, but we think that we can reduce CapEx from the forecast that we have this year. So that's mainly. In 5 gs, I think, yes, we're doing something in Brazil. And 5 gs is going to work. It's a very good question. I hope we can mark up and sell a little bit more at a higher price, the 5 gs than 4 gs and 3 gs. But it's also going to depend a lot on competition and customers. And also 5 gs is going to work for the fixed wireless asset. So that's what the intention is and we're going to do that all around Latin America. So that's what we have. Thank you very much. Just as a quick follow-up. In terms of capital allocation priorities, would you also consider a potential network spin off? And how do you see those network sharing deals happening in LatAm? Thank you. No, we're not considering a network spin off at this moment. We haven't considered anything there. And well, I think in some places makes sense to have a shared network, in other ones doesn't make sense. Maybe in the rural areas where there's going to be a small traffic make a little bit of sense to make shared networks in other places where the growth is and then you have to add capacity doesn't make sense for us. But we are not considering to spin off any part of our network. Your next question comes from the line of Carlos Legerata with GBM. Your line is open. Hi, thank you. Good morning. Sorry to go back to the U. S. Please. I just want to understand this new agreement, was it perhaps a result of perhaps a consequence of the M and A between T Mobile and Sprint or what was the origin of this? Thank you. I don't think it's related to something special. I think this reduction in cost is related to the market in the U. S. And that our carriers want us to be more aggressive sometimes in the market to have better plans and to react faster to that. So that's mainly what we have. Maybe I don't know if T Mobile and Sprint merger will help us to do this. I don't know, but it wasn't related to that, okay? We have been discussing this, and we discuss this every year. So every year, we have been discussing new plans, new rates, and that's something that happens this time. Okay. Thank you. That's very clear. And if I may have a follow-up then perhaps for Oscar. Just the broadband additions of 64,000 don't seem to be a great number given that the past quarter you guys have more than 100,000 and Telerisa reported over 250,000 quarterly additions. Do you think maybe there's a difference in the churn policy that could explain this such large difference between the numbers between you guys and the competition? Yes. We changed a little bit the policy of our own collection in order to liberate network. So you are right. Okay. That makes sense. Thank you, Oscar. Thank you. Thank you. Thank you. Thank you. Your next question comes from the line of Ernesto Gonzalez with Morgan Stanley. Your line is open. Hi. Thank you so much for the call. Just one follow-up on the margin expansion. I don't know if you could give us more color on what is the percentage that comes from lower equipment sales, how much comes from cost savings and on cost savings. How much should we expect to be structural and how much from temporary items? Thank you. Yes. I don't have it here. I think what we have been having is good negotiations on CapEx. We have been having also reduction on cost of, let's say, sales, reduction of cost of marketing, reduction of cost of all overall, all the cost and expenses related to the operations. We have increased our cost in the bad debt. So in we have been having more on collectibles than what we used to have. So what I don't have country by country, but as I said, we have a very good effort on reducing costs. So I don't know if that's clear. So I don't have it specifically for country and how much per segment. I don't have it here. That's very clear. Thank you. Thank you. Your next question comes from the line of Valentin Mendoza with Benoit. Your line is open. Hi, good morning gentlemen. Thank you very much for taking my questions and congratulations on the results. I have a couple of them regarding your Mexican operations. The first one has to do with you could give us an update on the launching of the 5 gs. We've seen some headlines that you're ready to launch it in Brazil, but I just wanted to know what are the plans up to date for Mexico. And then I have a follow-up, if I may. I think in Mexico, 5 gs is going to be delayed. I think we're going to have some testings, maybe testings at the end of the year, but we're not going to have 5 gs this year. I it's we're going to have 5 gs until next year. All our network is working excellent and giving every with all these lockdown and using also a lot of people using broadband, wireless broadband in their home is working excellent. So I think 5 gs is going to be moving to next year. We're going to have some testings at the end of this year, but we're going to move 5 gs to till the next year in Mexico. Thank you very much. My follow-up question has to do with your thoughts. If you could share with us your thoughts on regarding the entrance of the 2 MVNOs in Mexico, Pellevisa and Walmex with a very aggressive commercial strategy. Did you just mention also that you're seeing some customers switching to lower cost plans? And I was wondering if you're planning to address this with probably some plans all inclusive like they just launched or what's your thoughts on this side? Well, I think if you have 2 MVNOs, well, it's more competition in the market. But we have 2 MVNOs that you know, but we have been having 6 MVNOs for the last 2 years. So there's another 2 that are coming in this quarter, but we already have like 6 or 7 MVNOs there. It's more competition, of course, but I think we have the best network. If they're entering with Alton, I think still Altan doesn't have the coverage that you need for a mobile service. Maybe they have a good service in their home, but when you go out and move, then I don't think that's the best service. So we have also very competitive plans. We have a MXN 199 plan, on limited voice, unlimited data sorry, unlimited voice, unlimited social networks, SMS unlimited and with some data. So we are also competitive and of course more competition then we're having more competition and but I think we're prepared to compete. Due to time constraints, this was the last question. I will now turn the call back over to Mr. Daniel Hash for final remarks. I'll just thank everyone for being in the call. Thank you. This concludes today's conference call. You may now disconnect.