Thank you for joining us today to discuss our first quarter 2019 financial and operating report. We have today on the line Mr. Daniel Hajj, our CEO; Mr. Carlos García Moreno, our CFO; and Mr. Oscar Von Hauske, our COO.
Good morning. Carlos is going to make a summary of the results. Carlos?
Thank you, Daniel. Good morning, everyone. Before going into the summary of the quarter, I'd just like to make sure that we're all on the same page in terms of the accounting changes that have been enacted, that have been implemented in this quarter. One that is completely new is the IFRS 16, that we will talk a little bit more about it throughout the presentation, which has been implemented beginning on January 1st. The other one that is present all throughout the report, although not always mentioned, is the IFRS 15. This is the standard that was implemented regarding mostly service revenues, the allocation between service and equipment revenues. This we were presenting on a consolidated basis all of last year. Beginning this year, we are presenting it on a per country basis as well.
All of the numbers, all of the figures are comparable from the point of view of revenues in 2019 to 2018. This is relevant for things like ARPU, okay? You cannot consider anymore the ARPU figure that we had in the past. For changes and the new levels, you have to look at the present numbers in this report. Anyway, the first quarter of 2019 ended up with a reduction in U.S. long-term interest rates as it became apparent that the Federal Reserve would not be able to continue increasing interest rates throughout the year, as it had signaled late in 2018 and in the first months of 2019. The world economy appeared to be slowing down.
During this period, the value of the US dollar versus the main Latin American countries was fairly stable, not different at the end of the quarter than it had been at its beginning. Our wireless subscriber base ended March with 277.4 million subscribers, including 1.4 million that came from the acquisition of Telefónica Guatemala. We added in the quarter 1.3 million postpaid subscribers organically, plus 159,000 through the acquisition of Telefónica's assets. Growth was particularly strong in Brazil, where we added 972,000 subs. Mexico came with 201,000 and Austria with 96,000. In Brazil, we have consistently, even to April, been the main operator in growth in the postpaid part of the market. On the fixed platform, we connected 487,000 broadband accesses, including 74,000 in Brazil, bringing the total to 30.2 million, which is 5.6% more than a year before.
Pay TV units, 21.04 thousand, were down 0.9%, affected by disconnections of DTH services in Brazil. Mobile postpaid and fixed broadband were the main drivers of access growth at 6.4% and 5.6% year-on-year respectively, with mobile prepaid declining 4.1%, mostly in Brazil. We had significant disconnections in Brazil. Both fixed voice and pay TV almost flat from a year before. Our revenues totaled MXN 246 billion in the quarter and were 3.1% lower than a year before in Mexican peso terms, reflecting the depreciation of most of our operating currencies versus the Mexican peso, with the US dollar being the main exception. On average, the Brazilian real fell 11.7%, the Chilean peso 7.5%, the Colombian peso 6.6%, and the euro 5.3% versus the Mexican peso in the first quarter. This is first quarter of 2019 vis-à-vis first quarter of 2018.
This basically means that most of the international operations of América Móvil, when expressed in peso terms, ended up showing a decline, again, because the currencies of those operations declined in value vis-à-vis the Mexican peso. EBITDA came in at MXN 75 billion in the quarter under the new IFRS 16 standard, by which most lease payments are not deducted anymore from the operating cash flow and instead are capitalized as new debt, coupled with rights of use of assets. Under this accounting convention, the EBITDA margin for the quarter was 30.6%. Under the prior reporting methodology, EBITDA would have declined 5.6% year-on-year in Mexican peso terms. Again, as with the case of the revenues, it's mostly to do with the change of value of the currencies vis-à-vis the Mexican peso.
At constant exchange rates, service revenues were up 2.5%, in line with the trend of the first half of last year, and EBITDA 2.6%, which represents a deceleration from the level seen in the last quarter. In this deceleration of EBITDA, two factors are important, and I think it's important to highlight them. One is restructuring costs in Telekom Austria associated with plans to incentivize early retirement of employees, and that represents one-time compensation costs. They were important, and in this particular quarter, they amounted to roughly MXN 500 million. We also had one-off charges in Telmex, mostly to do with the loss of a dispute with another operator and the payment of a fine to the regulator. All of these together, between Telekom Austria and Telmex, we are talking about roughly MXN 1 billion in one-off charges.
In Telekom Austria, by the way, in the section of Telekom Austria and in the reporting of the company itself, it is very clearly highlighted what these so-called restructuring costs are. We will continue to see them from time to time. The company, Telekom Austria, has a line item that is adjusted EBITDA, or they are in their EBITDA, adjusted for these restructuring costs. Mobile service revenues continue very much along their trend, and fixed service revenues, although down from the prior quarter, appear to be improving. Board by fixed broadband revenues that were up 9.9%, and postpaid mobile revenues that increased 6.8%. Fixed broadband revenues have accelerated significantly and are outpacing all other revenue units, including postpaid mobile. Only pay-TV revenues declined, minus 3%, continuing the trend seen throughout most of the last two years.
In the South American block, service revenue growth, 3.8%, remained in line with that of the prior quarter. In Central America, it grows from 0.5% in the fourth quarter to 4.2% in the first one, basically to do with the incorporation of Telefónica's former operation in Guatemala from February 2019. Service revenue growth decelerated in both Mexico and the U.S. to 1.6% in Mexico and to 0.6% in the U.S. In our operations in Europe, North, and Eastern European countries, service revenue growth picked up to 2.9% from -1.1% the prior quarter. In Mexico, service revenue growth was stable in both postpaid and fixed broadband at 6.9% and 1.0%, decelerating in prepaid to 4.7%. Fixed voice revenues continued the trend lower, declining 8.2% year-on-year, which includes, as I mentioned before, some one-off charges that are appearing in this quarter.
In Brazil, service revenue growth was also stable in postpaid and fixed broadband at 9.2% and 14.5% respectively, and improving in prepaid, that was almost flat year-on-year. Fixed voice and pay-TV revenues continued their decline at roughly the same pace they have seen the last few quarters. With comparable figures, the consolidated EBITDA margin was slightly down at 0.3% from the year earlier quarter. No, this is 0.7. EBITDA margin was up 2.9% in the Caribbean and roughly 1% in Peru, Colombia, and Brazil, with Ecuador improving 0.5 percentage points and declining slightly in Mexico, 0.3 percentage points in Central America. Our operating profit reached MXN 35 billion under the same IFRS 16 standard, while our comprehensive financing cost totaled MXN 1.2 billion.
Both the line items reflect changes under the new methodology, including the allocation of the former rental payments as greater depreciation costs coming from the new rights of use that were created as assets in the balance sheet, and greater interest costs. That is the interest component associated with the former rental payment. We obtained a net profit of MXN 19 billion in the quarter, which was 3.6% higher than the one observed the year-earlier quarter. Our net debt ended March at MXN 703 billion, which includes now MXN 116 billion in former lease payments that were capitalized under IFRS 16, as you can see in the chart. In the first quarter, our capital expenditures totaled MXN 28 billion and were partly funded by new debt. We paid MXN 6.3 billion for Telefónica's operation in Guatemala and contributed MXN 5.9 billion to our pension funds.
The main changes in our income statement were brought about by the introduction of IFRS 16, are summarized in the following table. There are now new depreciation. As you can see, the amount of cost and expense is reduced by MXN 7.1 billion. We have now greater EBITDA by the same amount, and there are now new depreciation charges of MXN 5.9 billion and incremental financing costs of MXN 2.1 billion, all of which result in a reduction of net income of MXN 782 million. Here is the bridge between the prior methodology, which is IAS 17, to the new accounting standard, which is IFRS 16, okay?
This is summarized in the table right before you. The new leverage metrics would be 2.27 times, which is if we were to annualize the first quarter EBITDA, which is the only one that we have under IFRS 16, or it would be 2.08 times if a new metric is introduced, which is one that is now used very much in the industry, which is called EBITDAAL, EBITDA after leases, which means that the change in accounting standard brings an increase in the leverage metric of approximately 0.2 times. Using our previous methodology and considering the EBITDA of the prior 12 months, not only this quarter annualized but the last 12 months, the metric was 1.95 times, as shown in the chart. Okay, we've increased slightly from 1.88 at the end of last year to 1.95 in the first quarter.
Basically to do with the seasonality of our cash flow, which tends to require more working capital in the first quarter, and which tends to give it back in the next quarters, and in particular in the fourth quarter. Okay? Using the prior methodology, as you can see, the net debt to EBITDA ended up reaching 1.95 times. With this, I would like to give the floor back to Daniel, and maybe you can begin the Q&A session. Thank you all.
Thank you, Carlos.
We're ready to take the first question.
Okay. At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. As a reminder, we ask that you please limit yourself to one question and one follow-up question. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Rodrigo Villanueva with Merrill Lynch. Your line is open.
Yes, thank you. Good morning, Daniel, Carlos, Daniela. My first question is related to wireless prices in Mexico. I was wondering if now that AT&T decided to raise prices in a significant way from the second quarter of this year, you would be in a position to do the same? If so, if you could please quantify the potential increase, and when would it be effective? Thank you.
Good morning, Rodrigo. Well, I think Mexico, in the wireless side, is becoming a little bit more rational. Prices were very low in the last years, a lot of promotions. I think competitors last year stabilized a little bit some prices and the promotions, and our competitor increased prices in April. We increase also prices in the prepaid segment. We reduce the duration of the card, of the MXN 100 card. It's a very important card for us. We reduce from 17 to 15, and also we increase our low-end plans around 3%-4%. We start on that, and we're going to see how the market behaves. Of course, we're open to do more things. What we want to see is how does the market is behaving and the demand is behaving.
What I can tell you also in Mexico, data usage is going up still. We're growing in data usage. We're putting the network. Our network is giving very good speeds, very good quality. We are very good also in number portability, so we're gaining in number portability. Our ARPUs are still growing. I think all overall, our wireless segment in Mexico is doing very good. We are willing to increase prices as we do it, and we want to see how the market is behaving.
Understood. Thank you very much, Daniel. My second question is related to the recent acquisition of Nextel Brazil. Could you please give us an update on the potential date for the transaction to close? Also, if you could please help us quantify potential synergies, that would be very helpful. Thank you.
Well, I think the process is going. I think that we can close the deal in the fourth quarter of this year. End of third quarter or fourth quarter of this year. What we do, I think it's very important, it's an in-market consolidation. We have not looking for acquisitions, but this acquisition, as the Nextel acquisition, is giving us good subscribers in the main cities in Brazil, in Rio de Janeiro, in São Paulo. Give us a lot of spectrum so we can have a better network, saving some CapEx with more spectrum. They have good people. I think all overall, it's very important for the market to consolidate and thus not have five Instead of having five competitors, to have four competitors. I think all overall is good.
I don't have the numbers specifically on what is going to be the synergies. The synergies are very important in terms of spectrum and the subscribers. We have very good subscribers in the acquisition.
Understood. Thank you, Daniel.
On OPEX, of course, we can reduce the big part of the operating OPEX on. We have the same towers. We can reduce the number of towers. We can reduce a lot of savings, energy. There is a lot of things that we can reduce in the operating side. Makes a lot of sense for América Móvil to do that. We have been doing very good in the wireless side also in Brazil, growing faster than our competitors, growing ARPU, minutes of use data. Our network is the best network in Brazil. I think makes a lot of sense, to do the Nextel deal.
Perfect. Thank you very much.
Thank you.
Your next question comes from Matthew Niknam with Deutsche Bank. Your line is open.
Hey, guys. Thank you for taking the questions. Just two, if I could, maybe to go back to the last question, and maybe just expand on the margin opportunity, both in Mexico and Brazil. I think Mexico, obviously, Carlos, you'd called out some one-time items. Maybe if we sort of look past that, how should we think about the pacing of margin expansion on a comparable basis this year, both in Mexico and Brazil? Secondly, just in terms of leverage, you mentioned sort of you're at 1.95 under the sort of prior methodology. How should we think about leverage targets and where you'd like to get to? Any updates there that you can provide? Thanks.
Well, in Mexico, we said that we want to increase our margin, like one to two points this year, and we are on target. As Carlos said, in Mexico specifically, we have some things on the revenue side. As we talk a little bit about the wireless segment, in the peaks, we are increasing speeds. We're giving unlimited voice in the peak side. It has been more competitive and more aggressive this market, and we're putting lot more network, more fiber to the home. We're investing a lot in the peak side, and I think we're going to get more revenue in the broadband side, in the fixed broadband side in Mexico. We have some one-offs, like some fines and that we have one fine that we have with the IFT that we pay.
There's some legal disputes that we have, another ones that we have that's the one-off that we have. Of course, some extra costs that are increasing. Energy in Mexico is increasing a lot. It's part of the cost that we have been increasing. All overall, I think in the mobile side, we're doing very good and looks like for this year it's gonna be better. In the fixed side, I think it's gonna be a little bit more aggressive, and we're looking for good customers, so for more fixed broadband customers. We're investing a lot on fiber to the home, and that's more or less how we see the market in Mexico.
I think for the leverage metrics, I think that we can continue to look at the old numbers or the old NetDebt to EBITDA. We will continue to post the EBITDA under the old methodology and the debt on the old methodology so that we can keep it very clear and very simple. We are not changing our targets of one and a half times NetDebt to EBITDA on the prior methodology. Okay?
Thank you.
Thank you.
Your next question comes from the line of Walter Piecyk with BTIG. Your line is open.
Thanks. My first question is for Carlos García Moreno. I think the CapEx expectation is MXN 8.5 billion for the year. I wonder if that's on target and if you could comment on, as a result, incremental free cash flow, thought process on share repurchase and/or dividends over the course of the year. For Daniel Hajj, in the U.S. market, your margins were down in 2018 and looks like they are down again in the first quarter. When you think about the U.S. strategically, if there's an opportunity to add scale and buy an existing large prepaid customer base to add to TracFone, I am specifically thinking of if Sprint T-Mobile is required to divest their Boost Mobile business for prepaid. Is that something that would be of interest to you?
Alternatively, if you could get a sale of that to T-Mobile or AT&T at a decent EBITDA multiple, which way strategically do you think makes more sense for América Móvil going forward? Thank you.
I am going to start on the U.S. Just to let you know, you said that we reduce our margin this year against last year and last year against 2017. Just on what we do on 2018, we start to grow. 2017, what we decide is check on the growth of the company and the subscribers, and that's the reason why we have a very good EBITDA margin. In 2018, we start to grow, and in 2019 we start growing very good. We have a soft first quarter because the tax return season was softer than expected. That's why we don't grow more. I think in April, we are growing more. We have a budget on EBITDA in U.S. that it's a little bit higher than $600 million, and we are on target on that. We feel that we accomplished that.
This EBITDA is with more growth than what we have last year. I think in TracFone, we are doing good. We are developing the market. Prepaid is doing well. We are better than some of our big carriers in the U.S. They released the numbers, and in TracFone, we are doing good the first quarter. We are good. You said about the remedies on T-Mobile and Sprint. We are open to see what would be the alternatives, and we are happy with this company and how TracFone is evolving.
On the CapEx, we are sticking to our MXN 8.5 billion CapEx for the year. That's the budget. The dividend that was approved by the shareholders assembly in the last several weeks is MXN 0.35 per share. That's already been redefined. I think that other than the M&A transactions that we have discussed so far with Telefónica and Nextel, I think the intent is basically to keep on reducing debt. Okay? We are very clearly going to be tracking our goal of one and a half turn EBITDA continues to be a priority. We are discussing with the rating agencies, we discuss this with fixed income investors in the context of the, we were placing two bond issues in the market a few days ago. I think that we are very much intent on continuing to bring our leverage down.
Just to finish with the TracFone EBITDA. I think that this year we're going to have around the same EBITDA of last year with a better growth than what we had last year. I think we're improving, and this year is going to be an improve on TracFone against last year.
Understood. Daniel, could I just have one quick follow-up on that?
Sure.
Does it ever make sense to be a network owner in Mexico, or are you happy just remaining as an MVNO?
In Mexico? In the U.S.
Oh, I'm sorry, in the U.S. Go ahead.
No, it doesn't make sense for us It's we're happy to be an MVNO. The company is doing very good, and we still want to be an MVNO. Of course, if there's a possibility of buying more subscribers, not a network subscribers, would be good, and we're open to think about it.
Thank you.
Capacity, no, but we don't want to own a network in the U.S.
Understood. Thank you.
Thank you.
Your next question comes from the line of Diego Arregui with Goldman Sachs. Your line is open.
Yes. Thanks. Good morning, Carlos, Daniel, Daniela. Thank you for taking my question. First about Mexico, you mentioned on the release that you had some one-time items impacting EBITDA this quarter. I was wondering if you can quantify the total amount of these items so we can properly calculate the business performance in Mexico. Separately, if you can comment about the overall business performance in the country as numbers in the first quarter implied some deceleration on a sequential basis. This is my first question. Thank you.
Yes. The one-offs that we have, we calculated around MXN 400 million is what we have in Mexico. The one-offs that we have in Mexico are around MXN 400 million, is what we have. To talk a little bit about the develop of the Mexican market, as I said, in the wireless side, looks good. I think looks more rational, the competition. You never know with the competitors. Looks like everybody wants to be a little bit more rational and some price increases of our competition, some price increases from us. Things are going in the right direction, and we still having a good data usage going on, good network in the wireless side, a lot of postpaid. I think we're going to be the leaders by far in adding postpaid customers in Mexico.
Things are going very good in the wireless side in the Mexican market. On the fixed, we think there is a good room to grow. There's still a lot of broadband that we have still to grow in the market. In the TV side, prices are too high, I think there's still room to do something in the pay TV market. We're investing in our networks, not only on the wireless, also on the fixed, fiber to the home. I think these things are not one day to the other one, but we're investing, and we're doing good things in the market. We can see in the future a better result in the fixed broadband market. I think the other side also in the fixed side, we have a big reduction on the voice.
On voice we have. The voice is still going down and down, there's no more room to go down in voice. This is finished. That's also some good news. Now you have voice is going down and down, long distance, we don't have any more long distance. Things that are not going good in the right direction are disappearing. In the other side, we have a very good room in the fixed broadband side. That's how I see the Mexican market.
That's excellent. Thank you. Just to clarify, the MXN 400 million is net impact on EBITDA, right?
Yes.
Okay, perfect.
Yes.
Yeah, thank you for that. Second, just a follow-up on the recent deals in Latin. You acquire assets from Telefónica in Central America, announced a deal to buy Nextel in Brazil, I understand you do not want to disclose some synergies numbers, but I was wondering if you can just share what will be the timing for you to reach, let's say, a run rate of the expected synergies for those deals above, let's say, of 100%. Also, would you consider further acquisitions in the Latin region? Thank you.
I think what we do is, we were not, as I said, we were not looking to do some acquisitions. These three acquisitions that we do, specifically Guatemala, El Salvador, and Nextel in Brazil, are in market consolidations, give us a lot of spectrum in all the three acquisitions, and good customers. I think to do all the synergies, well, it takes around 18 months to two years, 24 months. That's more or less the time that takes you to do all the synergies in each of the countries. Guatemala, we already closed in February. We are in the process of doing that. Everything is going well. We hope that El Salvador, we close the deal at the beginning of third quarter. I think we can do that. As I said, in Nextel could be in the fourth quarter.
That's more or less what we have to do. The time that takes is more or less 18-24 months, the time to do, really to do the synergies that we need to do.
Excellent. Thank you.
Thank you. Next question.
Your next question comes from the line of Maria Azevedo with UBS. Your line is open.
Hi, everyone. Thank you for the call. My first question would be on your commercial strategy in Brazil. Following the Nextel acquisition, do you see room to raise prices in that market as well, now that you have a higher postpaid market share? Do you think you can still leverage on your network and spectrum advantage and be a little bit more aggressive to increase data usage and even get a higher postpaid market share?
Well, I don't understand when you talk a little bit about our convergence strategy, our convergence strategy is very clear. We are going to do all the synergies between the fixed and the mobile. We have been doing that for the last three years. The network, commercial, we have packages, the combo package that we have in Brazil. All of these things we start. As with the new spectrum that we could get with the Nextel acquisition, of course, we can have more data, more speed, and also we can save some money in CapEx. Because if you have more spectrum, you don't have to put so much CapEx. There's a lot of things that we could do, we have our convergence strategy going forward and doing very good in Brazil.
Also what we can have is, with more spectrum, of course you get better quality, more speed. I think in Brazil, still, data is going to grow a lot. In all Latin America, data is going to grow a lot, spectrum is important to do that.
Perfect. Thank you. As a follow-up question, I'd like to touch a bit on 5G. Can you please comment on what are your expectations in terms of 5G auctions expected to happen in 2019, and if your CapEx budget is already considering 5G investments for the coming years? Thank you very much.
Well, I think 5G is not. The CapEx that we're putting this year in 2019 has part of 5G. We are doing the.
Fiber
fiber to the node. We are doing the virtualization of the networks. We're buying some spectrum in some countries. All of that we are doing through this year. I think we're going to do some testings countries this year, but I think 5G in América Móvil is going to start to be in 2020. It's not going to be in 2019. Some opportunities on the spectrum for 5G could be in Argentina, Chile, Guatemala, Honduras, Panama, Paraguay, Peru, and Austria, that we just closed the auction. I think it was on February or on March, we closed the auction on Austria. Austria is going forward. I think the country that is more advanced in 5G is going to be Austria, and I think we can get some cities in Austria by the end of 2019 in 5G. That's more or less where we are.
Perfect. Thank you very much.
Thank you.
Your next question comes from the line of Carlos Legarreta with GBM. Your line is open.
Hi. Thank you. Good morning. Just two very brief questions. Just the first one, on the first quarter, you mentioned a fine of MXN 2.5 billion, I believe, was disclosed. I want to know what the status of that is, please.
No, what we said is that we have one-offs in Mexico at around MXN 400 million, okay? Not bill. It's MXN 400 million, one-offs in Mexico, okay? For the first quarter.
No, I'm sorry. That's very clear. On the fourth quarter, there was a disclosure of a fine that was imposed of around MXN 2.5 billion, if I recall correctly. I understand it hasn't been paid. You guys are still disputing it.
Yeah.
I would like to know the status.
It's being contested in court. Yeah. Yes. It's what we have in the fourth quarter, and it's a fine, and it's being contested in court. That's nothing related to this.
Okay. That's very clear. Thank you.
Yeah.
Just the follow-up, if I may, just in Mexico, I'm still trying to make sense of the slowdown in wireless service revenue growth. You guys are, like you said, still growing ARPU, improving the mix of postpaid versus prepaid. How can we understand what's making or explain this deceleration?
Well, remember that we, I think in 2016, we have a big reduction on revenue because of the big promotions that we have. Every year we have been growing, we cannot grow at the same pace as the last year because we came from another base of revenues. This base is 2018, we have a good growth, and still 2019 is higher than what we have in 2018. If you are comparing against fourth quarter, remember that the Christmas promotions are very important, the growth in revenues, people have more money and people spend more. What I can tell you is that people is using data. It's still consuming more and more, and as promotions get more stable and we don't have to do big promotions in the market, I think revenues can grow faster.
Okay.
I think there's something to be said, Carlos, about changing the accounting standard to IFRS 15. It becomes difficult to look at year-on-year comparisons because then you end up with different bases. I think that may be creating a little bit of noise. We have the numbers, we can look at the actual trends on a common basis of absolute numbers. Looking at growth rates becomes very difficult. Maybe we can later share with you what it looks like in absolute terms that we can have a better idea of the real trend that we are having.
I think a lot of the prepaid subscribers are going to use more and more.
Data
More data and convert to a postpaid or use more in the prepaid side. Still in Mexico and in the rest of Latin American countries, I think we still have a lot to do in that. People is going to use more data, and if we're available to charge for that data with reasonable promotions, the revenues has to go up, the ARPU has to go up. Still there's a lot. As I said before, still fixed broadband is still a long way to go. There's still a lot of subscribers that needs that fixed broadband service. Still, I think that a lot of the prepaid subscribers are going to need more and more data. If we have these reasonable promotions, we have a good revenue growth.
Thank you very much. Just very quickly, given that there's more money in the pockets of some citizens in Mexico, have you seen an increase in the take-up or the average recharge in prepaid?
I don't have the numbers here, yes, I think there's going to be more money in Mexico. It's going to be really eventually it's going to impact our prepaid subscribers. They're talking a lot about giving money to the old people, to the young people, I think that will make more spending in the prepaid side. I'm sure that eventually we could have more people using more and spending more in the prepaid side.
That's great. Thank you very much.
Thank you.
Your next question comes from the line of Ernesto Gonzalez with Morgan Stanley. Your line is open.
Hi. Thank you for taking my question. I just have, well, two quick questions. The first one is, a moment ago, you mentioned that this year's EBITDA in the U.S. should be similar to last year, but with higher growth. The similar EBITDA, do you mean EBITDA margins or is it in absolute terms?
No, I'm talking about absolute terms. Our budget is to grow more, to have a little bit more than MXN 600 million in EBITDA, and I think we are going to have that EBITDA this year.
Very clear. Thank you.
I'm sure that we're going to grow more than what we have, to have better numbers in terms of customers this year than last year.
Great. Thank you. Just my second question, if we could talk a bit about mobile service revenue trends in Brazil. We've seen a slowdown in year-over-year growth. Could you please tell us what you're seeing in the market? Thank you.
Well, if we talk a little bit about Brazil, I think the economic situation in Brazil is going a little bit more slow than what everybody's expecting. The recovery in Brazil is taking a little bit more time on what everybody is expecting, and that's also related to this. We're strong. I think we are being the leaders in net adds, the leaders in service revenue in the wireless segment. I think we have a very good network. We have good promotions. I think our brand is getting better and very good image in our brands. I think all the work that we have been doing for the last three years is getting better. We have been doing good investments in the network, in 4G, in 4.5G. We have the best speeds in the market.
We are very competitive, not only in price, we are competitive in everything there. Also we have a very good fixed network, the convergence is going well. Our combos are doing excellent. In Brazil, I think this year we can have a very good year. I don't know exactly how fast is going to be the recovery in Brazil, but as the core recovery is going good, we're going to take advantage of that recovery.
Great. Thank you.
Thank you.
Your next question comes from the line of Ric Prentiss with Raymond James. Your line is open.
Yeah. Hi. I want to come back to the U.S., if I could, for a moment. When you mentioned better customers in 2019 than 2018, do you expect to have net adds positive for the year or just less of a loss?
If we separate the Straight Talk and the SafeLink, I think in SafeLink that are the lifeline customers that we have, I think we're going to have much less negative adds, so much less than what we have last year. In all the other ones, I think we're going to have a positive this year and much better than last year.
Makes sense. Seems to be that you're having quite a good success with the Straight Talk brand in the U.S. How do you think that's being positioned, and is that really the strength of the growth?
Yeah, Straight Talk is one of our main brands, and it has been very competitive and very well positioned in the U.S. market. As a prepaid brand, it's doing very good. Also, we have other two or three brands. Simple Mobile is doing very good. Walmart Family Mobile is doing also very good. These brands are going to do very good this year. I mean, they are doing good. The SafeLink, that is the lifeline program, is going to have much less reductions than what we have last year. It's the way we're seeing the market.
That's great.
ARPU has increased nearly 7% year-on-year in the U.S., which goes to show how well the company's positioned itself, particularly with Straight Talk.
Yeah, Straight Talk has, I think the main program that we have is around MXN 40, it's a very good program, I think we're having a new one of MXN 50 unlimited. It's a very good program, the Straight Talk, and also the Simple.
Great. Thank you.
Thank you.
Thank you. Your last question comes from the line of Valter Nogueira with Santander. Your line is open.
Hi, good day, guys. You have been doing a decent job in defending your market share in broadband, in fixed broadband in Brazil. I believe part of it, of course, is the strength of your network, also the bundling that you have put forward with all the features that the group has in Brazil. My question comes from the sense that part of the competition has come from the so-called regional players, some of them with radio, some of them with fiber, the local ISPs. Do you guys intend to increase your CapEx in fiber or go through M&A, including fiber assets? How do you plan to continue while defending such important market share in Brazil?
Yes, you are totally right. What we've been seeing in the market is that they're called the small players. They are taking share, very important share in the fixed broadband. I think they have like a 20%, 21% of market share, they are really dispersed across all Brazil. They are using microwaves in some cases, cable in other cases. When you look at the market in the cities that we have network, we've been doing pretty well in market share, as when in the ultra-broadband. We are the leaders in ultra-broadband in Brazil. We believe that maybe get into that market, it could be with wireless proposal more than go to fixed. That is really expensive to go all those regions. You are totally right.
It's a market that they are growing, I think we have a room to get there and to compete against these local players.
Oscar, does it make sense for you to form partnership with some of these players?
Yes. You know that they are only delivering broadband. We've been talking with them to offer bundled packages, adding pay TV as mobile as well. It makes sense to do that as well.
Okay.
A commercial agreement with them.
Okay. Do you believe we should begin seeing numbers on this?
No, we are in the initial-
popping in there
stage of that, but you are totally right. We are getting closer to them to get a commercial agreement with some of them.
Thanks, Oscar.
Thank you.
I would now like to turn the call over to Mr. Daniel Hajj for final remarks.
Thank you, everybody, for being in the call, and thank you Daniela and Carlos, Oscar. Thank you very much.
Thank you.
This concludes this conference call. You may now disconnect.