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 América Móvil second quarter 2020 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speakers have marked, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Now I will turn the call over to Miss Daniela Lecuona, Head of Investor Relations. Good morning, everyone. Thank you for joining us today to discuss América Móvil's second quarter 2020 financial and operating results. We have today on the line Mr. Daniel Hajj, CEO, Mr. Carlos García Moreno, CFO, and Mr. Oscar González, COO. Thank you, Daniela. Thank you everyone for being in the second quarter 2020 financial and operating report. Carlos García Moreno is going to make a summary of the results. Thank you. Thank you, Daniel. Good morning, everyone. Well, towards the end of the first quarter, the financial markets in disarray as employment numbers in the U.S. collapsed, threatening to worsen the economic contractions pending from lockdown measures aimed at controlling the spread of the COVID-19 virus. The Federal Reserve announced a huge monetary quantitative expansion program. This decisive action not only stabilized the financial market, allowing for new issuance of securities throughout the second quarter, and quell the excess demand for U.S. dollars that had 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 4.6% versus the dollar. At any rate, the Mexican peso, the Colombian peso, and the Chilean peso, all of which had dropped sharply in the first quarter, ended up appreciating 3%, 7.9%, and 4.1% respectively in the second quarter, in which practically all our region of operation was under lockdown. The confinement 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 trade centers, and partly because they generally curtailed the mobility of population and hence, altogether, we lost slightly more than 5 million subscribers, 500,000 in the postpaid segment, with most operations seeing a reduction in the postpaid base, notable exceptions of Colombia and Telekom Austria. We had 4.6 million disconnections in the prepaid segment, in which all our operations registered net disconnections, except for TracFone in the U.S. and Colombia, both of which added slightly more than 200,000 clients each. Prepaid disconnections were more important in Mexico, 1.7 million subs, Peru 1 million, and Ecuador and Guatemala at approximately 450,000 each. In contrast, on the fixed line segment, we gained 450,000 new broadband clients with every operation posting an increase in clients except for Telekom Austria. There were, however, disconnections of voice lines from P2P services, particularly in Brazil, which accounted for 190,000 P2P disconnections out. We end the June with a total of 358.5 million access lines, which includes 277 million wireless subscribers and 81 million fixed line IDUs. It is of note that our Colombia operation managed to increase access lines notwithstanding poor Q1. Our second quarter revenues total MXN 252 billion, up slightly from the earlier quarter, 0.6%. In spite of equipment revenues falling 37%, our service revenues increased 6.5% in MXN 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%. Except for TracFone in the U.S. and Puerto Rico, all our operations saw marked reductions in their equipment sales as a result of the confinement restrictions, but also because of our more restrictive conditions for contract renewals in most operations. At constant exchange rates, excluding Argentina, given its hyperinflationary accounting methodology, service revenues were up 0.8%, with those generated on the mobile platform rising 2.3% and those coming from the fixed line declining 1.7%. The deceleration in service revenue growth, from +5% in the first quarter to +0.8% in the second, resulted from the direct impact of the confinement measures put in place throughout the region and its economic fallout. At 2.3%, mobile service revenue growth slowed down sharply from the past pace observed in the first quarter, 8.4%. Brazil and Colombia were top performers in terms of mobile revenues, with increases of 8.8% and 4.8%, respectively. On the fixed-line platform, the impact of COVID-19 was more limited, with the pace of decline of revenues going from -0.7% in the first quarter to -1.7% in the second quarter, mostly on account of falling inaudible revenues. In Colombia, fixed-line revenues actually accelerated to 9.9%, up from 9.5% the prior quarter. The acceleration 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 effect inaudible charges, as most shops were ordered shut, including our own customer care centers. The impact on revenues was felt 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-sized enterprises that had to close under the confinement restrictions, chose to discontinue service or reduce its cost, even if that represented a more limited availability of data services. We tried to stay close to our clients and help them find plans better suited for them given the economic difficulties that many were undergoing. To ensure also that they would stay current in their payments. In percentage points, the decline in postpaid 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. Climbing back rapidly during the remainder of the quarter. Fixed mobile services continued to lead the way within the group, with revenues increasing 7.3%, very much in line with the pace in the prior two quarters. With only one exception, all our operations posted fixed mobile 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. Second quarter EBITDA totaled MXN 2.6 billion. It was up 5.9% in Mexican peso terms, with the EBITDA margin climbing 1.7 percentage points to 32.9%. At constant exchange rates, it increased 3.3%, reflecting in part the impact of new commercial arrangements by TracFone in the U.S. that brought about reductions in network costs to be applied from January 1st. Our operating profit jumped 10.5% to MXN 40.9 billion and helped bring about a net profit of MXN 20 billion in the second quarter after allowing for financing costs of MXN 11 billion, which were 6.3% lower than in the year-earlier quarter. Our net profit, equivalent to MXN 0.30 per share and $0.36 per ADR, was up 40% from the same quarter last year. At the end of June, our net debt totaled MXN 765 billion, up from MXN 677 billion at the close of 2019, which reflects among other things, an increase in the values of dollar and euro-denominated debts vis-a-vis the Mexican peso. It stood at 1.39 times EBITDA under our prior methodology of EBITDA. In cash flow terms, our net debt came down by MXN 8.3 billion in the six months to June. In addition to the above, our cash flow allowed us to cover capital expenditures in the amount of MXN 63 billion and to devote MXN 6.2 billion to fund labor related obligations. In Mexico, service revenues came down 2.1%, mostly on account of mobile service revenues that fell from a 10% growth pace in the first quarter to minus 2.5% in the second quarter, with fixed-line service revenues showing a very slight 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 first quarter, it was nonetheless quite a remarkable pace. Fixed-mobile revenues stayed on trend, presenting practically the same pace of growth in the first and second quarters. All the above helped bring about an outstanding jump in EBITDA, which was up 10.7% year-on-year, with EBITDA margin reaching 40%, which is the highest it has been in Brazil. Finally, a note on Colombia. It was the only operation to grow net ads on all business lines, and in addition, it managed to present increasing revenues on both the mobile and fixed-line platforms at 4.8% and 9.9% respectively. With this, thank you very much for listening to the call, and I will now control back to Daniel Hajj. Thank you. Thank you, Carlos. We're going to start with the Q&A. At this time, I would like to remind everyone, in order to ask a question, please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Walter Piecyk with LightShed. Your line is open. Thanks. Just a question on the obviously very strong performance of margins of TracFone in the U.S. You talked about a repricing going back to January. I assume that the margin was benefits from some catch-up from the first quarter. When we think about Q3, where you don't have the kind of the benefit of the first quarter, what should the margins look like in that U.S. business? Can you talk a little bit more about kind of which carriers gave you that benefit? 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. 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. We have been negotiating that through all this year, at the beginning of this year, and starting from 1st of January. We finish in the second quarter, but start in first quarter. I think you are going to see also benefits in third and fourth quarter, as you are saying also. We're working with all of them, reviewing with all of them, and, well, that's mainly what I can say. Daniel, was the margin helped from some catch-up credits from kind of backdating the pricing from the first quarter? Or is that really the new margin that you're going to operate at, this 15%? We're catching what we have. Let's say we have around $130 million that we put from this in the second quarter, and $65 million from first quarter, $65 million from second quarter. Those are the numbers. I think we're going to have more or less the same in the third and in the fourth quarter. Great. Thank you. Thank you. 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 spinoff as you did with Telesites, or is selling that transaction? Also, are you considering to do this with the vast majority of the 60,000 towers you currently own? I can ask the following questions. Thank you. On the towers, Rodrigo, the only thing I can say, the only thing that we have today is we own 60,000 towers in Latin America and in Europe. We are analyzing the different alternatives to give value to the shareholders, as we said, and to reduce our debt. We don't know if there's going to be spin-off or we're going to sell them. We still do not know exactly if there's going to be in all the countries or only in some of the countries. We are analyzing. We are today analyzing what is the best thing to do for all these assets, and to give value to our shareholders of these 60,000 towers that we have. It's not because I don't want to say anything else, it's because we still don't have anything. We are 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 5G networks due to increased pressure from the U.S. government. Do you think this could be extended to other Latin markets? Could you please share with us any potential strategic alternatives that could reduce the negative implications for AMX from a potential Huawei ban in Latin? 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. Still hearing some news, but nothing formal from the government. That's the only place where we're hearing something. They are talking about 5G, so still we haven't had, and we haven't take a decision in 5G. All 4G, 3G, there's nothing, that's everything is okay. Still we don't know what to do. There's another vendors there. There's Samsung also Nokia, Ericsson, so still a lot of competition. If there's a ban on Huawei, we still have other vendors that we can use. I think Huawei is an excellent technology, but still we don't know if there's going to be something in the other Latin countries. Understood. Thank you very much. Sorry, in Austria, we're using Nokia, so I don't think there's a problem there. In Europe, we are in 5G. It's the only country where we already, because we're making testings and we're doing something in 5G, but the only decision that we already take is Nokia in Austria. There's no problem over there. Understood. Thank you very much. The final one is regarding operating performance in Colombia. As Carlos mentioned, it was pretty strong, particularly considering the COVID-19 crisis. I was wondering if this has to do with Telefónica's lack of willingness to invest in Latin excluding Brazil, and you would expect the competitive environment to change now in Colombia considering that Novator Partners acquired the operations of Avantel. Thank you very much. Well, I think we have been doing big improvements in Colombia through the last two 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. We have been improving a lot through the last year, two years, maybe two years, starting to work very hard. The last year we have been improving. We change a lot our organization. We have been investing good over there. I don't think it's only one thing. I think we're making a lot. You know that we have the option in the beginning of the year. We win some frequencies, we're going to have a new competitor that is WOM. 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 have a very good brand. We have good distribution. We have very quality capacity. We are prepared to compete in Colombia, Rodrigo. Understood. Thank you. Thank you very much, Daniel. Thank you, Rodrigo. Your next question comes from the line of Alejandro Gallostra from BBVA. Your line is open. Hi, good morning, Daniel, Carlos, Daniela. I think if you recall, my first question is related to the mobile business. You mentioned a deceleration in mobile revenue growth that was similar in both the prepaid and postpaid segments. However, I would have expected them to behave differently with postpaid most probably being more defensive. Perhaps you could give us a further explanation of why this was the case in your opinion or maybe provide us with additional breakdown. The second question is related to the broadband operations, which have proven to be very resilient this quarter. The performance has been quite different among countries. Perhaps you could explain the differences in the performance of the broadband operations in Mexico and Brazil, for example. Thank you. Yes. Well, I think prepaid and postpaid are different markets, and they are behaving different. Well, if you compare, let's say Mexico and Brazil, I think Mexico, we have more than 50% of our service revenue in prepaid and 40% on postpaid. That's why we have been more hit in the revenues, because at the beginning, April and May, prepaid people, we have a lot of stores closed. We have in Mexico, well, all around Latin America, people were not out of their houses, it was different. It's very difficult to sell over there. In a lot of countries in April, we give some packages to help people with this pandemic. Let's say an example in Mexico, we give a package called Amigo Contigo that we give free calls for 15 days for free. There's around 28 million packages that we do in April. 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. What is happening in postpaid? Postpaid is different. People is starting to reduce their plans. If they have a 500 MXN plan, they want to go to a 400 MXN plan or reduce their gigs, or they are being careful with their money. We are seeing some reductions on the rent of their plan. In the other side, what you are going to see is that you are going to have a lot bad debt in the postpaid. 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. 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 three months. Brazil, 100,000 broadband subscribers. Colombia, we also do very good. All overall, we have been growing our net adds of broadband. Oscar, talk a little bit more on that, please. Given the pandemic and the pushing the people work from home, the requirements of bandwidth in the homes has been increasing very much. The people in the home is doing, taking classes and working from home, and a lot of streaming of video and gaming. I think that pushed the product, and that's what Daniel mentioned. We are getting these net adds. Not only net adds, our customers are asking for more bandwidth in all the countries. Thank you, Oscar. Yeah. 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 two. The first, could you please provide some view on how things evolved during the quarter? You mentioned a little bit how, like in April and May, prepaid was lower. Could you expand a bit and talk how prepaid, postpaid, if just so that we could get a feeling maybe up for the third quarter? This is the first question. The second question would be regarding your appetite for M&A. What color you could provide on that? We have some assets on sale, especially in Brazil. If you could provide some update on that, would be very good. Thank you. Well, in prepaid and postpaid, let's talk especially in prepaid. As I said, people staying home in April and May. The reduction in sales of the prepaid cards were higher than what we're seeing in June and July. 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 and May. 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. Still we are a little bit uncertain of when we're going to have all the economy totally open as we used to have at the beginning of the year. It's different in all. In the postpaid side, as I said, people is reducing their output, 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. That's why they are reducing a little bit. 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. I think everything is going to return. If you are talking about Oi, we are aware, and we are interested in the assets. For us it will be a good fit. We do Nextel. All the synergies done, I think mostly of the synergy is 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. 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. If we can do with Oi to have more customers and capacity also will be good. We are interested, and we are going to participate in the Oi auction for the mobile side. Thank you very much. Thank you. Your next question comes from the line of Diego Aragao with Goldman Sachs. Your line is open. Yes. [Foreign language] Daniel, 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? If we would compound this growth, such as like the postpaid ARPU increase, prepaid recharge, upgrade, downgrade to plan, how do you see on your growth would be compounded? This is my first question. Thank you. Can you repeat it? I don't hear you very well. Can you talk a little bit louder, please? Yes. Can you hear me? Better, yes. Okay. Yes. I was wondering if you can walk us through the main pillars for your performance in the Brazilian market, in particular? You can compound the growth that you have, like the postpaid mix, in terms of the prepaid recharge, upgrades and downgrades, how your year-on-year growth, what did in this quarter? That would be very helpful. Yeah. I think in Brazil, we're doing great. I think we have a great platform. I can not only talk about mobile, our 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, 4G, 4.5G. 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 million households passed, a lot of broadband, pay TV, a great platform of pay TV. Also we have very good management in place and good strategies for that. All overall, we are doing good. In this quarter, we also reduce, and not only in Brazil, in all América Móvil, we have been increasing efforts to reduce cost and expenses. 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 first quarter, I think the revenues were growing 15% year-over-year. It was an excellent first quarter. I think second quarter is still very good, 8%, I don't remember exactly, but only in the postpaid. 11.8. Sorry? 11.8%. It's still working and doing very good. We're making our bundles with broadband and TV. We have a good platform, and we're investing there, and we're managing very well our company. Frequencies to give more capacity and speed to the customer. All overall, I don't think there's only one thing. I think all overall, we're doing very good. Okay. Thank you, Daniel. I guess my second question is related to your margins. If I can just follow up on these. When I look to the region, there are 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 consolidation, even the rising of infrastructure players in LatAm. Lastly, but not least, let's say, digitalization trends. What I would like to hear from you, how do you see these trends impacting América Móvil, and how much do you expect to benefit in terms of margins going forward? Thank you. I think Carlos wants to answer, or do you want me to? Excuse me. I could barely hear you. Can you please repeat the question? 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, the service revenue was mainly growing, and the equipment revenue was reducing a lot. 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're moving a lot more to digitize all 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. As you said, M&As in Latin America, well, we're seeing a new competitor in Colombia, in Brazil, maybe Oi is going to be sold, there's going to be less competitors in Brazil. All overall, it's moving in some directions in one country, in other directions in other country. 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. I don't know, Carlos, if you want to say something else? No, Daniel, I think I don't really have anything more to add. I think it's important only to note that Daniel said there were very significant efforts of reducing our costs. Some of them are permanent. Anything directly with digitalization, simplification, all of that is permanent. Obviously, having been under more of a situation like the one that we are facing, it is more urging to bring about some cost reduction. We have been very focused on that. There's 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 reductions. They also came down for some time. We are seeing, as Daniel said, if you look at the EBITDA margins, they increased practically everywhere, and that partly has to do also with the reduction in equipment revenues that we've had, in particular markets outside the U.S. and Puerto Rico. 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. Let's see how this pandemic is going to result till the end of this year and the next one. It's important. That's helpful. Thank you. Thank you. Your next question comes from the line of Fred Mendes 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 adds for Telmex, especially on broadband, 63,000. Other companies already reported results. The net adds were also quite strong on the second Q. My impression here is that the penetration of the service, it is increasing. Just want to confirm with you if this is correct, instead of more like a gaining market share from other players, looks like the size of the market is increasing. Also if you can give us a breakdown of the net add, if it's more towards FTTH, or if you are still being able to gain clients with copper. These would be my questions. Thank you very much. Okay. Oscar, you want to answer that? Yeah. Yeah, you're totally right. There has been an increase on penetration, and we are getting net gains from fiber, as you know, and as well from copper. We sell half and half coming from fiber and coming from copper. You are totally right. What we've been seeing in the market is that the penetration is increasing. Perfect. Thanks, Oscar. If you allow me, just for a follow-up. I do understand that close to 25%-30% of your network today in Mexico, it is already FTTH. Just wondering if you have, it would 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 deleveraging the company instead of deploying capital 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, Oscar. 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 comment. 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? The follow-up question would be on 5G. You launched the first initiatives in Brazil. Do you think the 5G market appeal is going to be on consumer mobility? Is there room to charge a premium for 5G services, and do you see it as a substitute to fixed wireless access? How is it going to be the 5G strategy for the company? Thank you very much. Thank you. On the CapEx, we have been reviewing that. I think we are going to reduce the CapEx from our forecast that we have for this year. Yes, we're going to reduce it. Still, we don't know exactly how much we're going to reduce that. We're still reviewing and seeing how the traffic is going to behave. Also the sales, because part of our CapEx is on CapEx related to the sales of net adds, new customers. Also we're going to see how much. We are not cutting anything there. We're going to see how much and how that is going to behave. Still, we don't know. We are a company that moves fast, and we're flexible. We're going to use and do what is necessary to do. We think that we can reduce CapEx from the forecast that we have this year. That's mainly. In 5G, I think, yes, we're doing something in Brazil, and 5G 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 5G than 4G and 3G. It's also going to depend a lot on competition and customers, and also 5G is going to work for the fixed wireless assets. That's what the intention is, and we're going to do that all around Latin America. That's what we got. 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? 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. Well, I think in some places, it makes sense to have a shared network. In other ones, it doesn't make sense. Maybe in the rural areas where there's going to be small traffic, it makes a little bit of sense to make shared networks. In other places where the growth is, you have to add and add capacity, it doesn't make sense for us. We are not considering to spin off any part of our network. Thank you so much. Thank you. Your next question comes from the line of Carlos Legarreta 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 consequence of the M&A between T-Mobile and Sprint, or what was the origin of this? Thank you. Well, 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. 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. It wasn't related to that, okay? We have been discussing this, and we discuss this every year. Every year we have been discussing new plans, new rates, and that's something that happens this time. Okay? Okay. Thank you. That's very clear. If I may follow up, and 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 had more than 100,000, and Televisa 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. You are right. Okay. That makes sense. Thank you, Oscar. 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. 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. We have been having more uncollectibles than what we used to have. What I don't have country by country, but as I said, we have a very good effort on reducing costs. I don't know if that's clear. I don't have it specifically for country and how much per segment. I don't have it here. It's very clear. Thank you. Thank you. Your next question comes from the line of Valentín Mendoza with Banorte. Your line is open. Hi. Good morning, gentlemen. Thank you very much for taking the questions, and congratulations on the results. I have a couple of them regarding your Mexican operations. The first one has to do, if you could give us an update on the launching of the 5G. 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. Then I have a follow-up, if I may. I think in Mexico 5G is going to be delayed. I think we're going to have some testings, maybe testings at the end of the year, we're not going to have 5G this year. I think we're going to have 5G until next year. All our network is working excellent with all this lockdown, and using also a lot of people using wireless broadband in their home is working excellent. I think 5G is going to be moving to next year. We're going to have some testings at the end of this year, we're going to move 5G 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 regarding the entrance of the two MVNOs in Mexico, Televisa and Walmex, with a very aggressive commercial strategy. You just mentioned also that you're seeing some customers switching to lower-cost plans. I was wondering if you're planning to address this with probably some plans with all-inclusive like they just launched, or what your thoughts on this are? Well, I think if you have two MVNOs, well, it's more competition in the market. We have two MVNOs that you know, but we have been having six MVNOs for the last two years. There's another two that are coming in this quarter, but we already have six or seven MVNOs there. It's more competition, of course, but I think we have the best network. If they're entering with Altán, I think still Altán 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. We have also very competitive plans. We have MXN 199 plan. It's unlimited voice, unlimited data, sorry, unlimited voice, unlimited social networks, SMS unlimited, and with some data. We are also competitive, and of course, more competition is then we're having more competition, but I think we're prepared to compete. Thank you very much. Thank you. Due to time constraints, this was the last question. I will now turn the call back over to Mr. Daniel Hajj for final remarks. I just thank everyone for being in the call. Thank you. This concludes today's conference call. You may now disconnect.