Earnings Call: Q1 2019

Apr 30, 2019

You for joining us today to discuss our Q1 2019 Financial and Operating Report. We have today on the line Mr. Daniel Jash, our CEO Mr. Carlos Garcia 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. Well, before going into the summary of the quarter, I'd just like to make sure that we are all on the same page. In terms of the accounting changes that have been enacted, that have been implemented in this quarter. So 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 of January 1. 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 and equipment revenues. And this, we were presenting on a consolidated basis all of last year. But beginning this year, we are presenting it on a per country basis as well. So all of the numbers, all of the PUs are comparable from the point of view of revenues in 2019 to 2018. This is relevant for things like ARPUs, okay? You cannot consider more the ARPU figures that we had in the past. But for changes and the new levels, you have to look at the present numbers in this report. Anyway, the first the Q1 of 2019 ended up with a reduction in U. S. Long term interest rates as it became apparent that the sale reserve would not be able to continue increasing interest rate throughout the year as it had signaled late in 2018 and in the 1st months of 2019. The world economy appears to be slowing down. During this period, the value of the U. S. Dollar versus the main Latin American countries was fairly stable, not too different at the end of the quarter than it had been at its beginning. Our wireless subscriber base ended March with 277,400,000 subscribers, including 1,400,000 that came from the acquisition of Telefonica Guatemala. We added in the quarter 1,300,000 postpaid subscribers organically plus 159,000 through the acquisition of California's asset. Growth was particularly strong in Brazil, but we added 932,000 subs. Then came Mexico with 201,000 and Austria with 96,000. In Brazil, we have consistently driven to April being the main operator in growth in the postpaid part of the market. On the 5th platform, we connected 48 7,000 broadband accesses, including 74,000 in Brazil, bringing the total to $30,200,000 which is 5.6% more than a year before. The APV units, 21,400, 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 have significant disconnections in Brazil. And both fixed voice and pay TV almost flat from a year before. Our revenues totaled ARS 246,000,000,000 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 U. S. Dollar being the main exception. On average, the Brazilian real fell 11.7%, the Chilean peso 7.5%, the Colombian peso 6.6 percent and the euro 5.3 percent, versus the Mexican peso in the Q1. This is Q1 of 2019 vis a vis Q1 of 2018. So the so this basically means that most of the international operations of America Movil, when expressed in peso terms, ended up showing a decline, again, because the currencies of those operations declined in value vis a vis the Mexican peso. EBITDA came in at MXN 75,000,000,000 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. And again, as with the case of the revenues, it's mostly to do with the change of value of the currencies vis a 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 levers seen in the last quarters. In this deceleration of EBITDA, two factors are important, and I think it's important to highlight them. 1 is restructuring costs in Telecom Austria associated with plans to incentivize early retirement of employees and that represent onetime compensation costs. They were important and in this particular quarter, they amounted to roughly MXN 500,000,000. And 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. Again, all of this together between Telecom Austria and Telmex, we are talking about roughly Ps. 1,000,000,000 in one off charges. In Telecom Austria, by the way, and in the section of Telecom Austria, I mean, 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, Thermocela, has a line item that is adjusted EBITDA for their EBITDA adjusted for this restructuring cost. Mobile service revenues continued very much along their trend, and fixed service revenues, although down from the prior quarter, appear to be improving, buoyed 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 2 years. In the South American block, service revenue growth 3.8% remained in line with that of the prior quarter. Brazil and Central America rose from 0.5% in the 4th quarter to 4.2% in the first one, basically to do with the incorporation of Telefonica'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 minus 1.1% in prior quarter. In Mexico, service revenue growth was stable in both postpaid and fixed broadband at 6.9% and 1.0%, decelerating prepaid to 4.7%. Fixed voice revenues continued to 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% 14.5%, respectively, and improving in pre tech that was almost flat year on year. Fixed malls and pay TV revenues continued to decline at roughly the same pace they have observed the last few quarters. With comparable figures, the consolidated EBITDA margin was slightly down at 0.3% from the year earlier quarter. EBITDA margin was up 2.9% in the Caribbean and roughly 1% in Peru, Colombia and Brazil, with Ecuador improving 0.5 percent response and declining slightly in Mexico, 0.3% response and Central America. Our operating profit reached ARS 35,000,000,000 under the same IFRS 16 standard, while our comprehensive financing costs totaled MXN 1,200,000,000. 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 year 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 19,000,000,000 in the quarter, which was 3.6% higher than the one observed in the year earlier quarter. Our net debt ended March at MXN 703,000,000,000, which includes now MXN 116,000,000,000 in former lease payments that were capitalized under IFRS 16, as you can see in the chart. In the Q1, our capital expenditures totaled ARS 20,000,000,000 and were partly funded by new debt. We paid ARS 6,300,000,000 for Telefonica's operation in Guatemala and contributed ARS 5,900,000,000 to our pension funds. The main changes in our income statement 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 expenses is reduced by MXN 7,100,000,000. We have now greater EBITDA by the same amount. And there are now new depreciation charges of ARS 5,900,000,000 and incremental fee financing costs of ARS 2,100,000,000, all of which result in a reduction of net income of ARS 782 1,000,000. So here is the bridge between the prior methodology, which is IAS 17, to the new accounting standard, which is IFRS 16, okay? So this is summarized in the table very before you. The new leverage metrics would be 2.27 percent sorry, 2.27x, which is if we were to annualize the Q1 EBITDA, which is the only one that we have under IFRS 16, or it would be 2.08x. If a new metric is introduced, which is one that is now utilized very much in the industry, which is called EBITDA AL, EBITDA after leases, which means that the change in accounting standard brings out an increase in the leverage metric of approximately 0.2x. 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 1.95x as shown in the chart. Okay? So 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 be to require more working capital in the Q1 and which tends to yield back in the next quarters and particularly in the Q4, okay? So using the private methodology, as you can see, the net debt to EBITDA ended up marching 1.25 times. So with this, I would like to maybe throw back to Daniel, and maybe we can begin the questions the Q and A session. Thank you all. Thank you, Carlos. We're ready to take the first question. 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 and T decided to raise prices in a significant way from the Q2 of this year, you would be in a position to do the same? And 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 is in the wireless side is becoming a little bit more rational. Prices were very low in the last years, a lot of promotions. And I think competitors last year stabilized a little bit some prices and the promotions and our competitor increased prices in April. We increased also prices in the prepaid segment. We reduced the duration of the card, of the MXN 100 card. It's a very important card for us. We reduced from MXN 17 to MXN 15. And also we increased our low end plans around 4% 3% to 4%. So we start on that, and we're going to see how the market does the market is behaving and the demand is those the market is behaving and the demand is having. What I can tell you also in Mexico, that 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. So I think all overall, our wireless segment is doing very good. So 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. And 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? And 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 Q4 of this year, end of Q3 or Q4 of this year. What we do, I think it's very important is 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 De Janeiro, in Sao Paulo give us a lot of spectrum. So we can have a better network, saving some CapEx with more spectrum. They have good people. And I think all overall, it's very important for the market to consolidate and does not have 5 and instead of having 5 competitors to have 4 competitors. So I think all overall is good. We don't I don't have the number specifically on what is going to be the synergies, but the synergies are very important in terms of spectrum and the subscribers. We have very good subscribers in the CapEx. 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's a lot of things that we can reduce in the operating side. So makes a lot of sense for America Movil to do that. We have been doing very good in the wireless side also in Brazil, growing, growing faster than our competitors, growing ARPU, minutes of use, data. So our network is the best network in Perfect. Thank you very much. Thank you. Thank you, Rodrigo. Your next question comes from Matthew Niknam with Deutsche Bank. Your line is open. Hey, guys. Thank you for taking the questions. Just 2 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. But 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? And then 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 1 to 2 points this year, and we are on target. As Carlos said, we have saw in Mexico specifically, we have some things on the revenue side. We are as we talk a little bit about the wireless segment in the peaks, we are increasing speeds. We're giving unlimited voice in the big side. So it's had been more competitive and more aggressive broadband side, 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 are some legal disputes that we have and other ones that we have that's the one off that we have. And of course, some extra costs that are increasing. Energy in Mexico is increasing a lot. So it's part of the cost that we have been increasing. But all overall, I think in the mobile side, we're doing very good and looks like for this year is going to be better. And in the fixed side, I think it's going to 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 net debt to EBITDA. We will continue to post the EBITDA under the old methodology and the debt on the other methodology so that we can keep it very clear and very simple. We are not changing our targets of 1.5 times net debt 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. I think the CapEx expectation is $8,500,000,000 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? And then for Daniel, in the U. S. Market, your margins were down in 2018 and looks like it's down again in the Q1. 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 mean, I'm specifically thinking of Sprint T Mobile is required to divest their Boost business for prepaid. Is that something that would be of interest to you? Or alternatively, if you could get a sale of that to like T Mobile or AT and T at a decent EBITDA multiple, which way strategically do you think makes more sense for America Movil going forward? Thank you. Well, I'm going to start on the U. S. Just to let you know, you said that we reduced our margin this year against last year and last year against 2017. Just on what we do on 2018, we start to grow. So 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 Q1 because of the tax it's much softer than expected the tax return season. So that's why we don't grow more. But I think in April, we are growing more. But we have a budget on EBITDA in U. S. That is a little bit higher than $600,000,000 and we are on target on that. We feel that we accomplished that. And this EBITDA is with more growth than what we have last year. So I think in TracFone, we are doing good. We are developing the market. Prepaid is doing also we are better than some of our big carriers in the U. S. They released the numbers. And in TracFone, we're doing good the Q1. So 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're happy with this company and how Traccon is evolving. And on the CapEx, we are sticking to our 8,500,000,000 dollars CapEx for the year. That's the budget. The dividend that was approved by the shareholders assembly in the last several weeks is $0.35 per share. So that's already been redefined. And I think that other than the MRA transaction that we have discussed so far, Telefonica and Nextel, I think the intent is basically to keep on reducing debt, okay? So we are very clearly going to be tracking our goal of 1.5 times net debt to EBITDA continues to be a priority. We'll discuss this with the rating agencies. We'll discuss this with fixed income investors in the context of placing 2 bond issues in the market a few days ago. So I think that we are very much intent on continuing to bring our leverage down. And just to finish with the TracFone EBITDA, I think margins 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. So I think we're improving and this year is going to be an improved on track from against last year. Understood, Daniel. Can I just have one quick follow-up on that? Does it ever make sense to be a network owner in Mexico? Or are you happy just remaining as an MVNO? In Mexico? I'm sorry, in the U. S, in the U. S, go ahead. No, no, no. It makes it doesn't make sense for us to be less it's we're happy to be an MVNO. We are 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. Or 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 Aragao 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. So I was wondering if you can quantify the total amount of these items so we can properly calculate the business performance in Mexico. And separately, if you can comment about the overall business performance in the country Q1 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 400,000,000 is what we have in Mexico. The one offs that we have in Mexico are around MXN 400,000,000 is what we have. And as I say, to talk a little bit about the development of the Mexican market, as I said, in the wireless side looks good. I think looks more rational. The competition will you never know with the competitors, but looks like everybody wants to be a little bit more rational and some price increases of our competition, some price increases from us. So 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. So 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 is still a lot of broadband that we have still to grow in the market. In the TV side, prices are too high. So I think there's still room to do something in the pay TV market. And we're investing in our networks not only on the wireless also on the peaks brought by fiber to the home. So I think these things are not one day to the other one, but we're a better result in the a better result in the fixed broadband market. I think the other side also in the peak side, we have a big reduction on the voice. On voice, we have but we the voice is still going down and down. So there's no more room to go down in voice. So this is finished. So that's also some good news. Voice is going down and down. So long distance, we don't have any more long distance. So things that are don't things that are not going good in the right direction are disappearing. So and in the other side, we have a very good room in the fixed broadband side. So that's how I see them, the Mexican market. That's excellent. Thank you. Just to clarify, the ARS 400,000,000 is the net impact on EBITDA, right? Yes. Okay, perfect. So yes, thank you for that. So just and second, just a follow-up on the recent deals in LatAm. I mean, your acquired assets from Telefonica in Central America announced that a deal to buy next time in Brazil. And I understand that 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 LATAM region? Thank you. I think the what we do is we were not as I said, we were not looking to do some acquisitions, but these three acquisitions that we do specifically Guatemala, El Salvador and Nextel in Brazil our in market consolidations give us a lot of spectrum in all the 3 acquisitions and good customers. And I think to do all the synergies, well, it takes around 18 months to 2 years, 24 months. So 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. So we are in the process of doing that. Everything is going well. And we hope that El Salvador, we closed the deal at the beginning of Q3. I think we can do that. And as I said, Inextel could be in the Q4. So that's more or less what we have to do. And the time that takes is more or less 18 to 24 months the time to do really to do the synergies that we need to do. Excellent. Thank you. Thank you. Next question? Yes. 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? Or 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, but our convergence strategy is very clear. We are going to do all the synergies between the peaks and the mobile. We have been doing that for the last 3 years. The network commercial, We have packages, the combo package that we have in Brazil. So all of these things we start. And 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 then you don't have to put so much CapEx. So there is a lot of things that we could do. And what we have our convergence strategy going forward and doing very good in Brazil. And also what we can have is with more spectrum, of course, you get better quality, more speed. And I think in Brazil, still data is going to grow a lot. In Latin America, data is going to grow a lot. So spectrum is it's important to do that. Perfect. Thank you. And as a follow-up question, I'd like to touch a bit on 5 gs. Can you please comment on what are your expectations in terms of 5 gs auctions expected to happen in 2019? And if your CapEx budget is already considering 5 gs investments for the coming years? Thank you very much. Well, I think 5 gs is not it's not the CapEx that we're putting this year in 2019 has part of 5 gs. We are doing the fiber to the node. We are doing the virtualization of the networks. We're buying some spectrum in some countries. So all of that we are doing through this year. I think we're going to do some testings in some countries this year. But I think 5 gs in America mobile is going to start to be in 2020. It's not going to be in 2019. So some opportunities on the spectrum for 5 gs 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 March, we closed the option on Austria. So Austria is going forward. I think the country that is more advancing 5 gs is going to be Austria. And I think we can get some countries, some cities in Austria by the end of 2019 in 5 gs. So that's more or less where we are. Perfect. Thank you very much. Thank you. Your next question comes from the line of Carlos Ligueta with GBM. Your line is open. Hi, thank you. Good morning. Just 2 very brief questions. Just the first one, on the Q4, you mentioned a fine of $2,500,000,000 we 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 400,000,000, okay? Not really, it's ARS 400,000,000 one offs in Mexico, okay, for the Q1. No, I'm sorry, that's very clear. But on the 4th quarter, there was a disclosure of a fine that was imposed of around $2,500,000,000 if I recall correctly. I understand it hasn't been paid. You guys are still disputing it. What I would like to know It's being compensated in court. Yes, it's what we have in the Q4 and it's a fine and it's been contested in court. So that's nothing to do nothing related to this. Okay. That's very clear. Thank you. And just the follow-up, if I may. Just in Mexico, I'm still trying to make sense of the slowdown in service in wireless service revenue growth. I mean, you guys are, like you said, still growing ARPU, improving the mix of postpaid versus prepaid. So I want to know how can we understand what's making or explaining 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 and every year we have been growing. So 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 had in 2018. Also, if you are comparing against 4th quarter, remember that the Christmas promotions are very important. So the growth in revenues, people has more money and people spend more. But 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. I think there's something to be said, Carlos, about changing the accounting standard to IFRS 15. And this is it becomes difficult to look at year on year comparisons because then you have a different basis. So I think that may be creating a little bit of noise. We have the numbers so we can look at the actual trends on a common basis of absolute numbers, but looking at growth rates, it becomes very useful. Maybe we can later share with you the what it looks like in absolute terms so that we can have a better idea of the real trend that we are having. And I think, Steve, a lot of the prepaid subscribers are going to use more and more data and convert to a postpaid or use more in the prepaid side. So still in Mexico and in the rest of Latin American countries, I think we still have a lot to do in that. So people is going to use more data and if we are available to charge for that data with reasonable promotions, the revenues has to go up, the ARPU has to go up. So still there's a lot. As I said before, still broadband 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. And if we have these reasonable promotions, then it's going to we have a good revenue growth. Thank you very much. And 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 recharge, the average recharging prepaid? I don't Livo, I don't have the numbers here. But yes, I think there's going to be more money in Mexico. It's going to be it's really impact our 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 and that and I think that will make more spending in the prepaid side. So 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 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 $600,000,000 in EBITDA. And I think we are going to have that EBITDA this year. Very clear. Thank you. We're sure that we're going to grow more than what we have last to have better numbers in terms of customers this year than last year. Great. Thank you. And 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 is expecting. So the recovery in Brazil is taking a little bit more time on what everybody is expecting, So we're strong. I think we are being the leaders in net adds, the leaders in service revenue in the wireless segment. And 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. So I think all the work that we have been doing for the last 3 years is getting better. We are doing good investments in the network, in 4 gs, in 4.5 gs. We have the best speeds in the market. So we are very competitive not only in price, we are competitive in everything there. So also we have a very good fixed network, so the convergence is going well. Our combos are doing excellent. So in Brazil, I think this year we can have a very good year. So 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. Yes. 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 all these and the SafeLink, I think in SafeLink that are the customers 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. And in the other ones all the other ones, I think we're going to have 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 United States. How do you think that's being positioned? And is that really the strength of the growth? Yes. Straight Talk is one of our main brands and it has been very competitive and very well positioned in the U. S. Market. So as a prepaid brand, it's doing very good. Also, we have other 2 or 3 brands. Simple Mobile is doing very good. Walmart Family Mobile is doing also very good. So these brands are going to do very good this year. I mean, they are doing good. And 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. ARPU has increased nearly 7% year on year in the U. S, which is all to show how well the company has positioned itself, particularly with Straight Talk. Straight Talk has I think the main program that we have is around $40 So it's a very good program and I think we're having a new one of $50 unlimited. So it's very good, very, very good program, the straight up and also the simple. Great. Thank you. Thank you. Your last question comes from the line of Valder 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 line broadband in Brazil. I believe part of it, of course, is the strength of your network, but 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 and the local ISPs. Do you guys intend to increase your CapEx in fiber or go through M and A, including fiber assets? How do you plan to continue well defending this such important market share in Brazil? Yes. You are totally right. What we've been seeing in the market is that they call the small players. They are taking share, very important share in the fixed problem. I think they have like a 20%, 21% of market share and they are really dispersed across all of Brazil. They are using microwaves in some cases, cable in other cases. We believe when you look at the market in the cities that we have network, we've been doing pretty well in market share. And as we enter ultra broadband, I mean, 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 fix. That is really expensive to go all those regions. So you are totally right, it's a market that they are growing. And I think we have a room to get there and to compete against these low players. Oscar, does it make sense for you to form partnership with some of these players? Yes. 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. Commercial agreement with them. Okay. And do you believe we should begin seeing numbers on this? Or this is just No, no. We are in the initial 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. Well, thank you everybody for being in the call and thank you, Daniela and Carlos, Oscar. Thank you very much. Thank you. This concludes today's conference call. You may now disconnect.