Earnings Call: Q3 2019

Oct 16, 2019

You for joining us today to discuss our 3rd quarter financial and operating results. We have on the line Mr. Daniel Hajj, CEO Mr. Carlos Garcia Moreno, CFO and Mr. Oscar Von Hauske, COO. Thank you, Daniela. Welcome everyone to America Movil 3rd quarter of 2019 financial and operating report. And I'm going to transfer to Carlos to make a summary of the results. Well, thank you, Daniel. Good morning, everyone. Well, notwithstanding relatively strong economic reports in the U. S. Throughout the Q3, as the global economy continued to slow down, the concern that the country would follow brought about a major drop in U. S. Interest rates in the period, with the Fed reducing the risk hand rates twice and 10 year pressure yields falling to levels close to their all time lows. In Latin America, several central banks, Brazil, Mexico, Chile, introduced new interest rate reductions as well as those countries were also experiencing a significant economic deceleration. We ended September with 278,000,000 wireless subscribers. We're adding 1,600,000 postpaid subscribers in the quarter, of which 928,000 came from Brazil, 215,000 from Mexico and 159,000 from Austria and disconnecting 837,000 prepaid shops, 900,000 in Brazil. As for fixed RGUs, at the end of the quarter, they totaled $84,000,000 after net disconnections of 259,000 IDUs, resulting from 208,000 new broadband accesses and the disconnection of 247,000 wire lines 190,000 pay TV units. Mobile postpaid and fixed broadband remained the main drivers of access growth at 7.8% and 5.6% year on year, respectively, with mobile prepaid and pay to bill units declining 3.5% and 2.5%. Fixed gross accesses were down slightly, 0.2% from a year before. We posted solid revenue growth in the quarter with our revenues reaching MXN 248,000,000. Mexican peso terms were slightly higher year on year, 0.2%, in spite of the depreciation of various currencies, particularly Colombia and Argentina pesos vis a vis the Mexican peso, all of this in the quarter. At constant exchange rates, revenue growth remains solid, with service revenues expanding 2.5%, slightly faster than in the prior quarter. I'm talking all of this is excluding Argentina in these calculations because the accounting in Argentina expects no nominal tender but an inflation adjusted terms. Several countries posted the best service revenue growth rates in over a year. On the IFRS 16, our fair call EBITDA came in at Ps. 78,200,000,000 was equivalent to 31.7 percent of revenues. Organically and at constant exchange rates, our EBITDA expanded 3%. However, adjusting for the booking last year of an extraordinary revenue item deriving from a legal proceeding in Brazil and for restructuring charges in Austria associated with its program of early retirement for employees, EBITDA increased 7.2% over the year earlier quarter. At 4.6%, mobile service revenues were the driver of revenue growth, with revenues expanding 11% in Brazil, 8.2% in Mexico, 4.7% in both Colombia and in Europe. The Dominican Republic and Central America also registered strong performance. As for fixed line service revenues, they declined 1.2%, principally because of the reduction of fixed board revenues. Postpaid revenues continued to accelerate, increasing at a pace of 5.8%, while prepaid revenues are achieving greater dynamism in several markets, including Mexico and Colombia, mainly on account of greater data consumption. Revenues from fixed broadband services and corporate networks increased 5.7% and 6.7%, respectively, while pay TV revenues, although still down 3.3% on a yearly basis, stabilized in the 3rd quarter, posting a 2% sequential increase. So from the 2nd to the 3rd quarter, they increased 2%. In some countries, Colombia being an important example, the FishLink platform is growing well on all three business lines, voice, broadband and pay TV. In Mexico, prepaid revenues kept growing at more than 10%, while postpaid revenues stayed close to 6%, as they have for quite some time now. On the fixed line platform, data services, including retail and corporates, grew 2.7%, with both revenues continuing to decline on a yearly basis. All in all, EBITDA showed up 7.6% in Mexico from the year before, reflecting greater operating leverage and good cost control. In Brazil, postpaid revenues accelerated to a 13.5% pace, followed this time by prepaid revenues of 4.8%, while the fixed broadband revenues decelerated to 6.6%, and pay TV and broadband revenues improved slightly on a sequential basis. EBITDA was up 7.6% in Brazil. In Colombia, EBITDA increased 12.8% as fixed broadband revenues accelerated to a 13.6% pace and prepaid revenues continued to recover, expanding 4.6% from the year before. In the case of CracFone, service revenue growth remains slightly positive as it has for several quarters, but EBITDA growth stayed close to 10% on a yearly basis. In addition to the ones that I just mentioned, Mexico, Brazil, Colombia and Trifon, EBITDA expansion was very strong also in Peru, best in even that in Colombia, growing nearly 15% year on year. We've raised operating profit of Ps. 38,000,000,000, up 7.3 percent and comprehensive financing costs of 12% of ARS 12,000,000,000, resulting mostly from foreign exchange losses derived from the depreciation of the Colombian and Argentinean pesos relative to the dollar and the impact on accounts payable to suppliers and others. After this, we obtained a net profit of ARS 13,000,000,000 in the period equated to $0.35 per share or $0.20 per year. Our cash flow, together with net financing of ARS 15,900,000,000 through September, allow us to fully cover capital expenditures of ARS 100,000,000,000 fund shareholder distributions of ARS 12,000,000,000 pay $6,000,000,000 in acquisitions for Telefonica Guatemala and amortized pension obligations in the amount of ARS 17,000,000,000. This is in the 9 months to September. At the end of September, our net debt stood at Ps. 673,000,000,000, including Ps. 120,000,000,000 in capitalized lease obligations per IFRS 16. Our net debt to EBITDA, last for most, was 1.92x, using for consistency the methodology prior to IFRS 16, the one that we had until last year. So this is the one that we will continue to focus on to measure the progress that we are making towards our goal of 1.5x by the end of 2020. Okay? With that, I would like to pass the floor back to Anil. And we can open Q and A. Yes, we're going to start with the Q and A. Thank you, Carlos. Thank you, Your first question comes from the line of Rodrigo Valanabra from Merrill. Your line is open. Yes. Thank you. Good morning, Daniel, Carlos, Oscar, Daniela. I have a couple of questions. The first couple on Mexico and then one in Brazil, if I may. Regarding Mexico, we saw again an ARPU of ARPU of ARS 152 increasing by almost 7% year on year and by around 3% quarter on quarter. I have the impression that this comes mostly due to higher usage. However, considering that your peers are raising prices aggressively in Mexico, is this something that you would consider doing as well? That would be the first question. Thank you. Hi, Rodrigo. As you said, ARPU in Mexico is growing 7%. And mainly, we have a very good revenues on prepaid. Prepaid revenues growth around 10% to 11%. So the growth in service revenue in prepaid was very good. And I don't see really increase on prices. I think the increase of prices of the competition was mainly around April or May. And the last months, we don't see any increase in prices. From for the Q4 that it's more or less the Christmas season, we are not seeing any increase prices at this moment, maybe in some handsets, new handsets or something like that. But we are not planning to raise any prices for the Christmas promotions these next 2, 3 months, Rodrigo. Understood. Thank you. Thank you very much, Daniela. And my second question is regarding fixed broadband service revenue in Mexico. We saw a decline of 2% during the quarter. However, we also see that broadband subscribers continue to increase by almost 4%. So I was wondering if you could elaborate a little bit more on the reason behind the revenue decline. Great. Just only to add a little bit more on the first question. I think people in Mexico is consuming more. We're giving a very good network. We are giving 4.5 gs to all of our customers. I think a lot of prepaid customers are moving to smartphones and these smartphones are consuming more data and also is something that is helping us to move the ARPU in prepaid and the service revenues in prepaid to grow more than 10%. Just to add to what Daniel Javier Graciela, Rodrigo. The sequential increase in consumption of data services in Mexico were nearly 15%. The Q2 to the Q3, we increased by nearly 15% the data usage per client. So prepaid customers are moving to feature phones and these feature phones are consuming a lot more data. In the fixed side, I think competition is strong. As we said at the beginning of the year, Telmex is investing more, is doing more fiber to the node, fiber to the tube, fiber to the home. So we are really investing all around Mexico in the peak side. And the reason why revenues decreased 2% and subscribers increased is because of all these competition, our customers are moving a little bit down. So if they used to have a plan of MXN 400, they are moving to a plan of MXN 350 because they are having better speeds and better speeds and everything there. So we are trying to give them a very good quality and we're investing to increase our service and our quality and our speed in the fixed side, obviously. Understood. And finally, regarding Brazil, if I may, could you please share with us your thoughts on competitive dynamics, particularly in wireless? Also in Brazil, we have seen your competitors, particularly the leading company postpaid increasing prices by around 6 times over the last 12 months. So I was wondering if you expect to follow them in terms of price increases or if you expect to grow ARPU only by increased usage. Thank you. Well, I'm not so agree with what you are saying because they deliver higher prices, but then in the other side, they give a lot of promotion. So I don't think they really, really are increasing prices. So in Brazil, we have been investing. We have a very good 4.5 gs networks, very good speeds. Our coverage has been increasing. We're moving and transforming everything to digital. We're giving very good service to our all our customers. So I think we have a very, very good proposal in wireless in Brazil. And that's why we're growing more than like 11% our service revenue there, mostly in postpaid. We also are giving combos there. So we have a good fixed TV and we're giving that combo there. So everything is working fine in Brazil. And I really don't think that prices has been increase of our competitors. So let's see what is going to happen in Q4. But we what we are really, really focusing is on giving the best service to our customer and that means quality, coverage, speed and giving a very post sales service to all of them. So our brand, Claro brand has been improving a lot and the perception of the people there is very good also. So we are doing a very good job in the prepaid side in Brazil. Also, the same as Mexico, people is consuming a lot. They are doubling the megabytes of use also in Brazil. So if you give speed, you give good network, they have a very good phone, I'm sure people is going to spend more. Thank you very much, Daniel. Your next question comes from the line of Alejandro Galaspra from BBVA. Your line is open. Hi, good morning. Thank you very much for regarding the corporate segment in Mexico, which is growing double digits and becoming more relevant. And I was wondering if you could give us more color about how much it contributes to Mexican revenues and what is the strategy there to increase market share? Sorry, Sandro. We couldn't hear you very well. Can you speak a little bit more slowly or because it's not so clear your voice? Absolutely. My first question is regarding the corporate segment in Mexico, which is growing at double digits and becoming more relevant. And I was wondering if you could give us more color about how much this segment contributes to the overall Mexican revenues? And what is your strategy in this corporate segment to increase market share? Well, I you are right. Our corporate segment is doing very good in Mexico. We have doing excellent in that segment and delivering more to all the big corporates, small and medium businesses also. And we are focusing a lot on that and we are delivering good revenues cloud. We have cloud. Oscar can explain a little bit all the services that we're giving to these customers. Sure. What is mainly on the enterprise. We used to have data connectivity. So we are moving from just connectivity to solutions. So we are bringing new services as security, as cloud services and some vertical integrations for the retail market or the finance market. So we are complementing the connectivity with solutions. We believe that we need to integrate more around machine learning and big data and data lakes to integrate a full offering to the enterprise market. So we have a good market share on data connectivity. So we are leveraged from that connectivity to bring new solutions and services to this market. And as well in the small business, we are offering cloud services for all the small business and the penetration that we've been having there is quite good. Thank you. Thank you, Oscar. And any possibility that you give us an idea of how much this segment contributes to the Mexican revenues? We don't have it here, but Daniela can I don't know if Daniela can give it to you later, but I don't have it right now? And my second question, if I may, we have seen now a few quarters, several quarters with an effective tax rate above 40%. What is the reason behind this? And if this is reasonable and if it is reasonable to expect that the tax rate will eventually come down again to mid-30s? I think the statutory average of the tax rate is in the neighborhood of 32%. We have 30% in most countries. But in some of the bigger ones, like Colombia and Brazil, the tax rate is 34. So our base is roughly, say, 3% where we start. Then when you are it's basically 3 different major items. 1 is Mexico, which has 2 things that I don't think are likely going to change anytime soon. One of them has to do with the way how in Mexico, you may only deduct the real interest rate and not the nominal interest rate from taxes. So that's something that has been always there with us for the last 30 years at least. The another part has to do with some expensing in the payment of pensions or pension people from Telmex, which only roughly half of that may be deducted from taxes. And that's basically the impact of Mexico. And then essentially, the other impact has to do with the use of or the amortization of deferred tax credits that we have basically in Chile and in Brazil. So to the extent that we review those tax credits, that increases the effective tax rate. And so it's a high tax rate but for a good reason because it reduces our cash taxes. Thank you, Carlos. Thank you very much. Thank you. As a reminder, please limit yourself to one question and one follow-up question. Thank you. Your next question comes from the line of Fred Mains from Bradesco. Your line is open. Good morning, everyone. Thanks for the call. I have two quick questions here, mainly related to Brazil. I mean, the number 1, you have been pretty much dominating the net adds on the postpaid segment throughout 2019. I just want to get a better understanding here if most of these net adds come from your own base of prepaid clients, so basically upselling or if you're also gaining a lot of clients from the competition, especially in the pre postpaid? That will be the first one. And then my second question, again in Brazil prepaid revenues were up 5%, very different from what we're seeing from the competition in the last quarters. So just trying to understand if there's something specific that you're seeing from AMX or if you are starting to see an improvement in the macro scenario and then this prepaid revenue, they should improve throughout the next quarters? Thank you. Well, in the first question on postpaid, we have been focusing a lot on postpaid. And I think postpaid is people is looking, as I said, best network, best quality, good speed coverage. So people is looking for that. So we are gaining share. Part of that is we have number portability in a lot of countries. So we are gaining in number portability. So people is coming from other companies to Claro. But also there is a lot of prepaid subscribers that are moving to postpaid to be a postpaid subscriber. So we have both. I don't have exactly the data here, but we're gaining market share by number portability and we are moving the prepaid to postpaid subscribers. In the prepaid, as we said, even that the numbers are disconnecting because we have disconnections in the quarter, I think there are because part of these customers are moving to prepaid to postpaid, sorry. But I think these customers are consuming more. They are moving to a better handset. They are using more data and that's why we have been growing our revenues in the last quarter. If you could see, let's say, let's put an example specifically in Colombia. In Colombia, we have been at the beginning of the year and last year, we have been negative in growth in service revenue in prepaid. And today, we are this quarter, we are growing around 5 percent there. So we are moving as the people is consuming. We are being very giving more distribution and we're making a very good commercial work in all the countries to cover everything in terms of prepaid subscribers also. I don't know Carlos wants to I think in the case of Brazil, and this is important because notwithstanding this migration of prepaid to postpaid and the disconnection of prepaid subscriber that Daniel mentioned, Part of the matter is that prepaid revenues increased nearly 5% quarter over quarter. Given that we have negative subscribers growth in the quarter. We're having much better subscribers. Perfect. Very, very clear Daniel and Carlos. Thank you. Thank you. Your next question comes from the line of Ambray Baghiel from JPMorgan. Your line is open. So we are seeing American Mobile growing away above its peers in Brazil in mobile. So I wonder what the thing that's behind that and you think that's how sustainable is this growth advantage in AMX getting market share? As I said, we are doing very good in Brazil. I think in prepaid and postpaid also and in the fixed side because even in the fixed side that we are not growing, I think we're maintaining or growing a little bit market share there. So but if we are going to talk a little bit about wireless, as the investments that we have been doing during the last 2, 3 years are giving us people and the rebranding that we're having with Claro, what people think the coverage, the way we market our products, all the combos that we're doing with the pigs. So there's a lot the pig conversions that we're having there, it's been very important for us. So our fixed customers wants to have Claro also with them, so we package them. So we are doing a lot of commercial different commercial things. So, people is preferring to have Claro with them. So, and the most important thing, we have a very good network, a very high speed network. We have 4.5 gs all over Brazil. So it's an excellent network and people is using that. They are consuming very good. The megabytes of use has been doubling. So we're in a very good position right now in Brazil in the wireless side. Yes. Andreas, as you know, we invested a lot of money over many years to develop the best fixed line platform in Brazil. And we have basically built a convergent line platform. The you know is the best one by far in Brazil. So I think that what you are seeing is basically the reflection of all of those years of investment in developing a convention platform that represents a competitive edge and that is giving us it's not something that is a 1 quarter event. I think we think it's something that is really structural at this point. And other very important thing is convergence what Carlos is saying and the other one is coverage. If you see 2 years ago, we don't have the same coverage as our competitors have. Today, we have a very good coverage. We can match in or be better than our competitors in some places in Brazil. So that give us a very good advantage. So we are working a lot in the network side in the last 2 years. Perfect. And if I may second question, you are now moving towards deleveraging and going to your target. So is it reasonable to assume that next year, we should we could see an increase in distribution from American model? Or do you think that's there's anything like, say, a large M and A or something that could focus the cash flow on something else besides the distribution because probably the deleveraging story is probably going to get over at some point? Well, Andrea, as I mentioned in my presentation earlier, we have the goal of getting to 1.5x net debt to EBITDA by the end of next year. That's the hard goal that we have. And I think everything else is basically subordinated to this objective. So I think what you should be focusing on is how far we can attain our desired leverage ratio. Perfect. Okay. Thanks a lot. Thank you. Thank you. Your next question comes from the line of Diego Agero from Goldman Sachs. Your line is open. Yes. Hi, good morning. Thank you for taking my question. My question is actually about subsidies and in fact about your customer acquisition strategy. We are seeing the level of handset subsidies consistently reducing over the past 2 years. And it's now, if I'm not mistaken, at the lowest level ever. So can you comment about your handset sales strategy? And whether this should be viewed as a major change on your customer acquisition strategy, given that for several years, AMX used aggressive, let's say, handset subsidies to differentiate its offer. Apparently, it's now turning its focus on different services like the cloud or path support or the network quality and the customer experience as you just mentioned during your opening remarks? So thank you. Well, one of the main strategies of America Movil through all Latin America is the cost control and reducing cost and expenses. And subsidies is one of the most important expense in America Movil. So what we have been doing is to be 2 things in the subsidies. 1st, we have built a lot of our acquisition new adds or renewing the plans, we are financing the handset. So with the when you finance the handset, then you don't lose or you don't subsidize the handset. So with interest and the cost and everything it gives you a little bit of more profit than if you do it directly and pay cash. So it's moving a lot to finance the handsets. In the other side, when you finance the working capital gets higher and then you have to be careful with the bad debt. So there's other implications when you finance because there's a lot of money when you start to finance handsets. But it has been a good business for us and people likes to finance the handsets because instead of paying, let's say, dollars 3 or $4 or $500 cash, then they can pay maybe $20 or $30 or $50 per month for the next 24 or 36 months. So it has been good and that is giving us a space to have more profit. In the other side, 5 years ago, everybody subsidized the prepaid in the prepaid side. And today, we are not subsidizing in the prepaid business. So people, if you want to be in the prepaid and we don't have exactly your credit rating then we are not giving you any subsidy or any financing there. So that's mainly what we're doing. And in also we have a big cost control in all the companies and we have a very, very important strategy on reducing and cutting. We're transforming the company to a digital company And doing that, we are saving a lot of costs over there. So let's say to give you an example, our customer care centers, 3 years ago, you have to go there and sign papers and everything is on paper. Today, everything is on digital. We have chat bot to answer questions. So we are moving to that phase and it's been very good on the cost side. Thank you. This was very clear. And if I may, just like a second question regarding like where what is the status on the Nextel acquisition and also on the Telefonica transaction in Central America? And finally, on the PayTV license in Mexico, if you can just quickly comment on those three things, that would be great. Thank you. There is a TV license in Mexico. The acquisition of Nextel, I think, is going well, and we hope that we can close the company maybe on November. So looks like we can close the deal in November. El Salvador is also where we submit all the papers. They are asking for a little bit more of information and we are in good process over there. And the pay TV license in Mexico as we discussed in the past in October 2018, we request a licensed America Movil request in the IPT license to provide pay TV services in Mexico. To this date, we have provide all the additional information they have request for the analysis. So the application complies with all current regulations and the approval for the applications continue to be pending. And as you can see and as shown by the data published by the ESET, the Mexican pay TV market is highly concentrated. There is limited choices of the service for consumers and prices has been consistently increasing since the telecom reform back in 2013. So in addition, pay TV is the only market of the telecom sector where there has been non regulatory intervention to promote competition. So I think it is because all of these reasons why we believe the entrance of America Movil to the pay TV market will be in the best interest for the consumers. So that's what we have. We don't have any else to comment on this topic. In the other side, what you could see all around the world is that streaming is growing a lot. So if you have a broadband and then streaming, streaming is growing a lot. So you in the next years, you are going to see a big increase in streaming broadband in the with all the consumers. So streaming is going to grow in the next years a lot in while it's growing around the world and it's going to grow in Latin America. That's super helpful. Thank you very much. Thanks. Your next question comes from the line of Carlos Leggate from GBM. Your line is open. Hi, thank you. Good morning. Very quickly, on Colombia, I saw very good results. Both wireless service revenue and QuickLabel revenues seem to be accelerating. I was wondering if you could give us more color on this regard. Thank you. Well, I think Colombia has been the results of Colombia in the Q3 has been extremely good. We have been growing in quarters we have been growing since the beginning of the year in postpaid and we have been growing also in the big side. But this quarter, we have been also growing in the prepaid. So all our lines has been growing, and I can give you a little bit of data here. But in Colombia, postpaid is growing 4.8%, prepaid 4.64%. So it's a very good recovery of the prepaid side. Broadband, 13.6 percent fixed voice, 5.9 percent TV, 6%. So all overall in the peak side, 8.9%. So we have been doing good in Colombia, also investing a lot in the network, also investing a lot in the digital side, in the transformation, the company to give a very good service to all our customers. And we have very good content, very good speeds in the broadband side. In the we have been making convergence and giving the combo to all our customers. So we're doing a good job in Colombia. Just again to add to what Daniel has said. If you look at prepaid revenues in Colombia, which have been not doing particularly well for a long time, they were up nearly 8% quarter over quarter. And this is driven in the aggregate in Colombia, MOUs increased by 7.4%, again quarter over quarter and 31% year over year MOUs, whereas data per client increased 81% year over year and 20% quarter over quarter. So we are it's the same strategy as we're seeing in Brazil and in Mexico. It's a more for more kind of strategy. We are driving greater spending by having people consume more data and in this case even also more voice. That's very helpful. And if I may, the follow-up. It's more on the strategic side. As you guys have probably noticed, there seems to be a trend across larger operators that are perhaps moving to divest or spin off their assets such as towers, fiber, data centers, etcetera. Do you think AMX will join this trend? Or did you still see these assets as part of your core strategy? Thank you. Well, we do that 3 years ago. No, more 4 years ago with tele sites in Mexico, we've been off the towers. It was more for a regulatory to give what the regulators wanted to give access to this to all the competitors who will spin off the towers with great tele sites. And today, everybody can use the towers in Mexico and whether that's and you are seeing what is happening here in Mexico. So it's not a problem of access, access they have been. In the strategic side, we are not thinking at this moment to spin off any other tower or to spin off data centers or to or fiber. I think we are in a very good position financially and we're trying to get the target for next year. And so we don't have any pressure to spin off any of our important assets at this moment. Thank you very much. Your next question comes from the line of Juan Pablo Alba from Credit Suisse. Your line is open. Hello, good morning. Thank you for taking the question. Just a small update in terms of how you see the macro slowdown in Mexico. And do you think if results could have been even better if the macro scenario was a little bit better in Mexico? Thank you. Well, it's interesting question, but what I can tell you is that in Brazil, hotel, things are going well. In the prepaid side, we're growing 10% our revenue. So we are not seeing any deceleration on the economy, not in our products. And remember, telecom is very resilient sometimes to the economy. But today in Mexico, we are not seeing any deceleration on our products. Thank you very much. And just as a follow-up, just a quick comment. In terms of Peru, just if you could provide a little bit more color on the competitive market over there and if you expect to keep delivering good EBITDA growth over there despite like the tough competitive environment? Thank you. Well, the competition is still very tough. Prices has been going down and that's why you see that our revenue is going down. But we have been putting a lot of pressure on cost control and subsidies as we have been discussing and digitalization, transforming the company to digital to saving costs and that's what we're doing. But in terms of the competition, the commercial competition in Peru, this is still very tough. It's difficult. Prices are very low. And while we are competing, we are upgrading all our networks. We are putting a lot of money on the coverage as we are investing also in the big side and we think that in the future Peru is going to be a little bit more reasonable. The prices will be a little bit more reasonable. Thank you very much. Thank you. Your next question comes from the line of Maria Ezevedo from UBS. Your line is open. Hi, thanks for taking the questions. I have two questions on my side. The first one is on 5 gs. You have the best network and very strong spectrum holdings. Do you think it's fair for us to assume that you are not going to need a CapEx surge to roll out 5 gs networks? Should we expect the same level of CapEx for 2020 2021? So we don't think we're going to raise our CapEx in 2020 2021 because of 5 gs. What we think that we are not on a hurry of putting 5 gs in Latin America. What we're doing right now is to virtualize the network, mass fiber to more fiber to the node and some things that we're going to use in 5 gs when we decide to launch 5 gs. We are definitely the only country where we're going to launch 5 gs soon is Austria. That is going to be on February. But other else, we are only making testings. And as I said, improving the network and make the network ready to decide when we want to launch 5 gs. We are not planning to put more CapEx because of 5 gs. Perfect. Thank you very much, Daniel. And my second question is on Brazil. Do you see room for market repair in a scenario that Brazil goes from 4 to 3 players? And are you interested in participating of any consolidation move or even acquiring more mobile spectrum in the secondary market? Or Nextel was enough in terms of Brazil M and A for your strategy? No. We believe a lot in Brazil. I think and we hope that Brazil will start the good recovery next year. The economy will recover next year. There's a lot of rumors that Oi is for sale. Some of them that some assets are going to be for sale, other that they are going to sell it totally or they're going to mix. We as America Movil, of course, we are interested in doing something with Oi in Brazil, and we are open to discuss anything that will be. We are, I think, with the spectrum of Nextel was going to be a good increase of spectrum for us. But also we are interested But I think that even before any acquisitions, Maria, as you know, the market is consolidating day by day simply because one of the competitors is has been bleeding clients and revenues and EBITDA. So that basically means that the market is concentrating more. Perfect. Thank you very much, Carlos and Carlos. Carlos. Thank you, Maria. Your next question comes from the line of Carlos Fuenguera from BTG. Your line is open. Hi, thank you. Good morning. So my question is kind of a follow-up from the previous question. So after the acquisition of Nextel Brazil, Claro has now like 30 megahertz more expected than Vivo and almost 60 megahertz more than TIM. My question is how important competitively do you think this is going to be in the next quarters, the fact that you have significant more respect from them than the other players? Thank you. Well, I think it's not something that it's for the next quarters. I think to have a spectrum, you are going to have a spectrum and then you have to put network over there and do a lot of investments. And so spectrum is good. It's very good, very important for us, but it's important for the future. And I think TIM and Vivo are going to have there's going to be more options in Brazil for more spectrum, and they are going to have the alternative to buy more. I think what is important in Brazil for us is that we have a good fixed network, a good broadband network, a good TV network and we're doing convergent deliveries all overall. We have our combos and these combos has been very successful. So that's really what has been important for Claro in Brazil to have the convergence and do the compost for all our customers. Even that you have to have good coverage, good networks all around, We're giving we're leading and Oscar can talk a little bit more. We're leading our ultra broadband in fixed, our ultra broadband market. I think we 49 percent. Like 50% in the ultra broadband. But I don't know, Oscar, if you can explain a little bit more what we're doing in Brazil. Sure. We have all the network, the cable network prepared with DOCSIS. DOCSIS, we could move to DOCSIS 3.1 to get the speeds we could get to 1 gigabit when the market is needed. But secondly, we are building fiber to the home. We opened 62 cities right now with fiber to the home. So we are expanding the fiber footprint, as Daniel mentioned, to be ready for 5 gs, getting closer the fiber to the users. So we did, as Carlos mentioned, through the years since he has mentioned in the fixed to make a robust network, not only in the long haul, in the metropolitan rings in order to have this fiber closer to the users. So I think that's what give us the growth that we're having in Brazil, the convergence. Wonderful. Thank you very much. Thank you. Your next Daniel, you had mentioned that the CapEx is not increasing. Obviously, your EBITDA is increasing. So I guess the question is for Carlos in terms of the 1.5x leverage. Do you expect to get some reduction in the interest that you're paying on your debt, like you're expecting to refinance the debt at 1.5x leverage or otherwise why not use some of that free cash flow now that you've been under 2x leverage for a couple of quarters now to buy some stock or to buy more stock aggressively? Hi, Walter. Well, I think this is the usual discussion we have. As you know, we have a preference for being more conservative financially. I think the mindset in the company is that in this industry where you have such a rapid technological change, your ability to stay in the game and be competitive very much has to do with your ability to continue to invest, and that means that you have to have a lot of dry powder always. It's better to be able to act opportunistically if there's things to be acquired like we're doing now with Nextel and the in market consultation in Central America. And it's important to be able, as I said, to invest when we are about to begin all the efforts regarding 5 gs and the like. So I think we believe it's strategically important for this company to remain, as it always has been, financially strong. We have, as you know, the top credit ratings in the sector. And we believe that, that at the end of the day, this does translate in our being more competitive in the market. Understood. And then so when you do reach 1.5x leverage, should it be our expectation that the company would just maintain that leverage and then use that excess free cash flow for share repurchase and or dividends? That's what we have done in the past, remember? We used to be at in our early days at onetime net debt to EBITDA and all of the excess cash flow was basically distributed back to shareholders. So this time around, we are reducing leverage. But once we get to our desired ratio, we likely will be able to increase distributions. Your next question comes from the line of Ric Perrantes from Raymond James. Your line is open. Thank you for taking my questions. You've mentioned convergence a couple of times and how important that is. Can you talk a little bit about what you see I what are your thoughts on the U. S. With the possibility of DISH becoming a facilities based operator, what that might do to the competitive environment? Thank you. Well, in Puerto Rico, AT and T was also converged today. They are also having some in the U. S, they can do convergence. So in Puerto Rico, I'm sure they can do it. They are going to sell it to Liberty. There's going to be a new competitor over there. So well, that's we need to compete. We're doing our job there With the last year hurricane, we are making all the network again. We are remaking the fixed network in some places. So we are putting good investments over there. And in the wireless side, we are ready. We have been doing that. And in the fixed side, we're still investing for this year and the next one. I think we're going to be well prepared to give good speeds, convergence, TV and give that ultra band that we're needing now. And in the U. S, well, that's something that it has to close. I understand that DISH is going to buy some assets, spectrum and subscribers from T Mobile and Sprint. If they close, they are going to buy this. And as TRACON, TRACON is doing good. And we can have another carrier that can give us the capacity if that's the case on if that close, we have another alternative to have capacity from this. So I think it will be good for us also. Okay. Thank you. Thank you very much. There are no further questions at this time. I would now like to turn the call over to Mr. Daniel Hash for closing remarks. I just thank everyone for being in the call. And thank you, Carlos, Oscar and Daniela. Thank you very much. Thank you. Thank you.