Good morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the América Móvil third quarter 2018 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Now I'll turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead.
Thank you. Good morning, everyone. Thank you for joining us today in our third quarter 2018 conference call. We have today on the line Mr. Daniel Hajj, Chief Executive Officer, Mr. Carlos García Moreno, Chief Financial Officer, and Mr. Oscar Von Hauske, Chief Operating Officer.
Good morning. Carlos, as always, is going to give us a summary of the third quarter 2018 financial and operating report.
Okay. Thank you. Good morning, everyone. Well, the continued expansion of the U.S. economy through the summer, with strong job creation even in the face of historically high levels of employment, ended up pushing 10-year U.S. Treasury yields decisively above 3%, bringing about a new bout of dollar strength that affected emerging markets in general, including several of the currencies in the region where we operate, more importantly in Argentina and Brazil. This effect was partially offset by the reduced political uncertainty in some countries, with the currencies appreciating versus the dollar as the presidential elections were left behind. This is particularly the case of Mexico and Colombia, and already partly true halfway in Brazil. In this context, we gained 1.1 million postpaid subscribers in the third quarter, including 472,000 in Brazil, 184,000 in Mexico, and 100,000 in Colombia.
All together, even after net disconnections of 757,000 prepaid clients, we ended up with 339,000 net gains of mobile clients as compared to a net loss of 73,000 clients the prior quarter. This is important because I think most analysts were estimating a reduction of net adds for the quarter. This goes to show the importance of our ongoing commercial effort. In fact, if we look at gross subscriber adds, as to correct for prepaid disconnections, they were up 2.9% versus the year earlier quarter, with Brazil and Austria observing the fastest growth, 7.9% and 9.7% respectively. This again is the rate of growth of gross subscriber additions. On the fixed line platform, broadband continued to be the fastest-growing segment at 6.2% year-on-year, after adding 284,000 new accesses in the quarter, including 105,000 in Brazil and 93,000 in Central America.
In Brazil, with numbers from January through August, we've been increasing market share over the last several quarters practically across the board in the fixed line platform. Mobile postpaid is our fastest-growing segment with 7.6%, followed by fixed broadband at 4.7%. The declines in pay TV accesses have leveled off. Mobile prepaid subscribers have continued to come down as we have gone ahead with various disconnections, most notably in Brazil. Revenues were up 2.1% year-on-year in MXN terms and were just shy of MXN 250 billion, whereas EBITDA came in at MXN 71.8 billion and was 7.7% higher than a year before.
Compared to the prior year, the MXN appreciated sharply, 15% versus the BRL, but appreciated moderately around 5%-6% versus the U.S. dollar, the EUR, and the Colombian peso, all of which have an impact on the MXN value of the respective operations. At constant exchange rates, service revenues were up 3.4% year-on-year, the best performance in five quarters. Our service revenue growth improved practically across the board, while EBITDA increased 8.6%, not including the release of certain provisions in Brazil related to legal proceedings associated with taxes. Including the latter, EBITDA increased by 13%. Postpaid mobile revenues led the way with an 8.6% increase, followed by prepaid revenues of 7.7% and by fixed broadband revenues at 6.2%, as you can see in the chart. The main business lines are growing in the neighborhood of 8%, 7% year-on-year.
In the mobile space, service revenue showed up in Brazil and Mexico, 10.5% and 9.5% respectively. With mobile ARPUs rising 13% in Brazil, 11% in the U.S., and 8% in Mexico as we gain more postpaid clients, and in the U.S., more Straight Talk subscribers. Our EBITDA margin, 28.8%, increased two percentage points from a year before. Approximately one point of the margin is related to the release of provisions in Brazil. Substantially all of our operations posted increases in the EBITDA margins in the period. Our operating profit increased to 23.4% to MXN 35.3 billion. Together with our comprehensive financial income, net cost of MXN 3.3 billion, mostly driven by foreign exchange gains, but also the release of provisions in Brazil. It brought about a net profit of MXN 18.6 billion for the period.
Through September, we funded our capital expenditures of MXN 91.7 billion, reduced by MXN 14 billion our net debt, paid out net dividends and share buybacks in the amount of MXN 10.4 billion, and contributed MXN 15.6 billion to our pension funds. Our net debt stood at MXN 584 billion at the end of September, down MXN 45 billion from December. Relative to our last 12 months EBITDA, our net debt stood at 2.0 times, the lowest leverage ratio we have attained in at least two years. I think that we continue to gain traction in reducing our leverage ratios, and I think that we are very much on track to get to our target of net debt to EBITDA of one and a half times in the next few quarters.
Well, with this, I would like to pass the floor back to Daniel, we will begin the Q&A session.
Thank you, Carlos. We can start with the Q&A questions.
At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile a Q&A roster. Our first question comes from the line of Matthew Niknam from Deutsche Bank. Your line is open.
Hey, guys. Thank you for taking the question. Just two, if I could. One on Mexico, with the insurance stabilized, their solid ARPU growth, any updates that you can share on the competitive landscape in Mexico? Secondly, Carlos, on the point on leverage now at 2 turns, you talked about getting to 1.5 turns in the next 2 quarters. Is that sort of the timing we should look at in terms of a potential acceleration in the rate of shareholder returns once you get to that 1.5 turn target? Thanks.
Thanks. Starting with Mexico, I think overall, our results in Mexico are very good. Talking a little bit about wireless in Telcel, I think everything that we have been doing on the network, remember that we launched 4.5G, we are investing a lot in our network, have been very successful. I think people is using more and more data, that's the reason why ARPUs are going up. This quarter, we are more or less in the highest level of service revenue, right? The same service revenue that we had 2 years ago, 2.5 years ago. Overall, Mexico is doing very good. We are also working very hard on the digital transformation, improving coverage, improving capacity. The market, as you know, is very competitive. Still, our competitors are, in some things, are doing very aggressive promotions.
I think we feel comfortable and with everything that we have been doing here in Telcel, quality, coverage, capacity, the digital transformations, our stores, our dealers, I think we have very good support to maintain what we have been achieving.
Okay. Well, on the leverage, just to repeat, I said the next 2 quarters, I said the next 3 quarters. Yes, the expectation is that sometime soon, certainly rolling probably as soon as the middle of next year, depends on the exchange rates, it's very difficult to say exactly when. We don't really have any M&A of any significance that we're looking at. That means that once that we get to our leverage ratio, we basically don't have any other way out for our cash other than shareholder distributions, which is the question. Yes, once that we get to our target, in the absence of M&A, which we're not really looking at, we have to speed up our shareholder distributions.
Got it. Thank you.
Thank you.
Our next question comes from the line of Leonardo Olmos from Santander. Your line is open.
Hi. Good morning, everyone. My question is on 5G. Last week, we saw some statements on about $1 billion in Dominican Republic being the first one in Mexico to launch 5G. In Brazil, in Futurecom, Claro is very advanced on 5G tests this week. My question is regarding 5G. Regardless if the investments begin in 2019 or 2020 or 2021, how do you see it impacting the long-term guideline of $8 billion CapEx? Can it be sustained? Can it be fitted into that $8 billion, or should we expect in those years some type of increase in CapEx?
I think what we said in Dominican Republic and everything that we have been doing and what we're going to do, it doesn't change a lot the guidance that we have in CapEx. I think we can sustain our $8.5 billion in CapEx for the next years. We're going to launch 5G when we feel it's the right time to do it. We are doing a lot of things to launch 5G. The networks are not this way. You wait until you decide to launch 5G. We are virtualizing our network right now, putting fiber to the node, more and more fiber all around Latin America. All these things that we're doing right now are preparing to launch 5G. That's not something that we're going to do and then we're going to spend more money.
The money and the CapEx that we're spending right now, part of this CapEx is we do the photonics, and more and more of these technologies that we're doing. We are not thinking to change the CapEx, okay. We're buying some frequencies in some countries. We are every day improving our networks to do 5G in the future.
Very good. On the other side, on the side of opportunities, also on Futurecom, Brazil's management mentioned about IoT and kind of things and the opportunities on some specific verticals, specifically agribusiness. How do you see the B2B opportunities for América Móvil, either in Brazil or as a whole with 4.5G or 5G? Do you see it in the mix changing more to B2B?
Our new network of 4.5G, I think at the end of the year, probably we're going to have 4.5G in all of the countries where we operate. The ones that we already have, like Mexico, Dominican Republic, Brazil, all those places, I think people is using more and more data. When we talk the last question about the ARPU in Mexico, it's because people is the megabytes of use, let's say, in América Móvil are growing around 80%. People is using more and more data, and that's the reason why people is spending and ARPUs are growing. It's very important, the network. In the terms of IoT, we think that we're going to do a lot things in IoT. We have a good platform of IoT. We have a good platform for the verticals.
We are doing the cloud, and we are doing all these new services, and we are being successful. We are prepared to do all the. I think América Móvil today is the company that we are well prepared to be the first ones in our country to do all these services. I think what we need a little bit more is that the countries start to be more digital, that we have more e-government or more services in health or more services in other things. We are prepared for everything. Brazil is doing very well in that scenario, I think we are in the right way to do that.
Great. Thank you, Daniel.
Our next question comes from the line of Diego Arguelles from Goldman Sachs. Your line is open.
Hi, good morning, Daniel, Carlos, and Daniela. Thank you for taking my question. Two questions, if I may. The first one is a follow-up related to your business in Mexico. You mentioned that prepaid revenue grew almost 11% year-on-year, while postpaid expanded by 7% on a yearly basis. My question is, can you share these numbers and how these numbers would compare to the past two quarters? I just want to understand whether or not postpaid and prepaid are accelerating or decelerating on a sequential basis. Thank you.
I think we are accelerating a little bit. We have two quarters also with good growth in first quarter. Second quarter are also quarters that we have good growth in revenues in Mexico. This one is also a good one. People is using, we are the preferred network for the customers in Mexico. We are selling a lot of data and people is happy with that. We also have the World Cup, and people used a lot data because of the World Cup. I think people is happy with the network that we have. We have very good speeds, a lot of capacity, and very good coverage. By far we are the best network in Mexico.
Perfect. Just to make sure that I understood correctly, so this 11% growth in prepaid, we should expect the trends to continue going forward, right?
Yes, we think we can expect the same trend for the fourth quarter. We are growing at a very good pace right now.
Okay, perfect. My second question is related to Brazil. Can you provide further details on the one-time items counted in the quarter? I just want to understand whether margins could eventually benefit from lower provisions in the upcoming quarters. Also, if you don't mind to provide more colors on the pay TV revenue dynamic in Brazil, when do you expect, for instance, to see broadband revenue growth to fully offset the structural headwinds from both long distance and pay TV? Thank you.
I'm going to talk a little bit about the market in Brazil and the results in Brazil. Oscar can add something. What I see is, if you compare our results quarter year-over-year, we are growing. I think our EBITDA is growing, our revenues are growing. Right now, I feel that we have the best platform in Brazil. We are modernizing our network. We're working a lot on giving more for LTE capacity in more rural areas. I think we're working a lot in the convergent network that we said that we're working. We're very advanced on that. Overall, if you see year-over-year, we're gaining market share in postpaid, we're gaining market share in broadband, we're gaining market share in pay TV, even that the pay TV is losing, and we have these connections in DTH. Our cable TV is also growing.
I think in the commercial side, we are doing very well. Even in the corporate business, I think we're doing also very strong. In the commercial side in Brazil, I feel very comfortable on that. In terms of the digital transformation that we're looking, we're investing in our stores, we're investing in platforms, we're working in paperless. We're trying to improve a lot all these digitals. We're selling more and more digital. We feel that we are working. I cannot see, of course, this quarter does not have the same growth that we have been having the last quarters in terms of EBITDA. In year-over-year, we're growing in EBITDA, and we're doing very good.
Oscar can talk a little bit more about the networks and a little bit more about the market shares, Oscar, in Brazil and how you see the market.
Sure. If you look at the total fixed market revenues are decreasing. I mean, the total market is decreasing 3.4%. We are decreasing less than the market. If you look at the breakdown of the revenues, in fixed broadband, we are growing 12% revenues. Of course, in cable TV, we are steady. I mean, the revenues are not growing. We have the impact of satellite TV. Mainly it's coming for the disconnections and the fact of the disconnection is on collection, the people could not pay, so we need to disconnect some of the DTH customer, because this product was really focused on the DE market of the population. As you can see, the economy is not very good in the past.
When we look at the economy, the trend of the economy looks better on the last quarter, we will still expect that we'll get increase of revenues coming from a better economy in the country. On the corporate market, as the economy is, there is a lot of price erosion. I mean, if you look at the units of products, we are steady on units, but it has been a lot of price erosions in the marketplace. As Daniel mentioned, in mobile, we are gaining as well market share. The trend that we believe there is the right path to go in revenues. We are working in cost efficiencies. I mean, as Daniel mentioned, the digital transformation, we want to digitalize all the customer interactions. We are really focused in reduce core expenses like energy, all different sources of expenses.
We are investing in the network. We believe that photonics is going to bring us a lot of bandwidth in the network, and we're still doing the integration of all the networks to have a simple and unique fiber network in Brazil. We see a good future in Brazil.
Other adding something more, I think that at the end of this year or beginning of next year, we're going to modernize all our wireless network. All of our cell sites that we have over there are going to be modernized and ready to have 5G in Brazil.
Fiber.
Yeah.
Fiber to the node, the new technology. All of that we are doing, and I think at the beginning of next year, we're going to have more than 90% of our cell sites modernized. There's a lot of things that we are doing, and we're preparing. This company is not going to be for one quarter.
Long term
The next 20 years. That's right. In terms of the taxes, Carlos can explain a little bit about that.
In terms of this release of provisions
Those were the provisions that have been created in Claro, separate from Embratel and NET. As regards the famous PIS/COFINS, they should have been part of the base for the determination of ICMS taxes. Claro won the legal proceedings on a definitive basis, we are basically having a release of reserves that on a net basis is equivalent to about BRL 500 million in this quarter. This is basically what we are showing here, that explains a significant part of the increase in the margin in Brazil to 25%. That's basically the basis for this release of the legal provisions, of the accounting provisions.
Okay, perfect. This was very helpful. Thank you.
Thank you.
Our next question comes from the line of Alejandro Gallostra from BBVA. Your line is open.
Hi, good morning. Daniel, Carlos, and Daniela, thank you very much for taking my questions. First, we've seen a remarkable sustained strength in the margins of your Mexican operations. I was wondering how much of your traffic has already been migrated to VoLTE, and what are your expectations for 2019 or the next few years and the type of efficiencies that you obtain from this migration?
I think VoLTE on LTE, I don't remember exactly the number of customers, but we have been migrating that since the beginning of this year. We have our network ready, and we have a good quality. We don't want to launch before because what we want is to have the best quality there. I don't remember exactly. Daniela can give you the number later, but I don't have it, but we have been working with VoLTE. Depends a lot on the number of handsets that have that technology. That does not depend only on what we want, also on what handsets have that technology. Remember that different as the U.S., we're selling also handsets at $100 or $80 handset that doesn't have that technology. It depends a lot on the number of handsets that have that technology.
Thank you, Daniel. Is this one of the drivers behind the improvement in margins? Do you think this will continue to help you in the years to come?
No, I don't think I cannot say that in Mexico, there's only one thing that we are doing that is increasing the margins. I think you need to see Mexico overall. We are, as I said, working very hard and investing a lot in our networks. We were the first one in 4.5G. We have the best throughput, the best quality, the best coverage in data, in 4G. Also, by far, in our customer care centers, we have the best services. We have been digitized all of that. We have a very good network of distributors to good retailers. Overall, we feel very comfortable in Mexico, I cannot say that it's only one thing. We are competitive in the market. The market has been also aggressive.
You know that in Mexico, we have one of the lowest prices in the world, not in Latin America, but in the world. As I said last time, I don't have the measure today, but we are much lower than what the U.S. is selling over there. It's a very competitive market, we are competing there with very good quality is what I said. People is choosing our network. Some people is leaving then is returning with us because all of the things that we are saying. They are testing other networks, then they are returning with us. That's what we could see all this year.
Okay, Daniel, because of these things that you're implementing, do you still see room for further margin improvements, not only in Mexico but also across the region? Are you pretty confident that you will be able to keep improving your margins?
I don't know in the short term if we can improve margins. We have been improving the margins in the last two years. Of course, I think in the long term, we're going to increase margins. I cannot say tomorrow, no. Well, next quarter is a very important quarter in terms of sales. It's the Christmas sales, when you sell more, then you have more expenses. I think we are looking to increase our margins in 2020, 2021. We're not looking only short term, we're looking long term there.
Okay. Thank you, Daniel. My second question, it seems that competition from OTT players is intensifying, with Netflix showing a good performance, especially outside the U.S. For example, Roku getting authorization to sell again in Mexico. I would appreciate if you could give us more color on the performance of your Claro Video platform, what your strategy is and how do you plan to compete in the OTT?
Remember that we have our Claro Video, we're selling our Claro Video, this over-the-top platform we're selling all over Latin America, also in some countries, we are selling. I think Netflix is also, as you're saying, Netflix is a complement for us. In Brazil, we're going to start selling also Netflix, a lot of our customers have Netflix. We have, Oscar can explain a little bit, but in Claro Video, we have other services that we can sell, HBO and Fox.
Yeah. We include what we call add-ons in Claro Video. We have HBO, we have Fox One, we have Crackle, and we have Nickelodeon. Noggin is for kids. We are selling, adding to our Claro Video, these, what we call add-ons, that are different providers of streaming over the top. We are bundle all these products within our Claro Video platform.
I think it's important all over the tops, and I think we're bundling our services with over the top.
Yeah. To give to the customer all the alternatives together in the central and proper way.
Okay, could you please explain to us where the economics-
Alejandro, I am sorry. We have to move to the next question. Please, everyone, try to limit your questions to two per call.
Okay. I will get back in the queue. Thank you.
Thank you.
As a reminder, please limit questions to two questions. Our next question comes from the line of Rodrigo Villanueva from Merrill Lynch. Your line is open.
Thank you. Good morning, Daniel, Carlos, Daniela. My first question is related to Mexico. I was wondering if you could share with us your thoughts on the court ruling in Mexico that ordered Telcel to compensate other carriers for anti-competitive practices. Is there any potential amounts that you could share with us? The second question is related to the U.S. I think you still have around 3 million subscribers that are still using SafeLink. I was wondering if you could tell us, do you expect to disconnect all these subscribers at some point in the future? Thank you.
Well, in the first question, Rodrigo, it's a damage claim from one of our competitors that derives from an old proceeding related to interconnection disputes. It is based on a resolution from the competition commission that has been revoked by a court for the benefit of Telcel. We believe there are no basis for damages. The ruling does not provide a specific amount, so we don't know about amounts. We have appealed the ruling, and we will initiate additional procedures given certain irregularities that we have detected on such procedures. That at this time is the only comment that we have on that. The second question is on TracFone. What was your question on TracFone?
Sure. Thank you, Daniel. Basically, it seems to me that you have been disconnecting your SafeLink subscribers, but you still have around 3 million. The question is if you expect to keep disconnecting these subscribers or probably migrating them to other brands.
In SafeLink, we have two different subscribers. There are subscribers that are consuming a little bit more than the other one. Maybe part of these subscribers are disconnecting. The ones that are the lowest ARPU are the ones that are disconnecting. We are still selling SafeLink, we are not canceling the sales of SafeLink, but we have been more cautious on where we sell, how we sell, and the subsidies that we're putting there. We're trying to be profitable since the beginning. We're focusing in the states in SafeLink that are the highest ARPU. That's where we're focusing, and when we have been seeing that we have a lot of disconnections of these customers, but in the other side, it's very successful with our other brands.
If we talk a little bit about TracFone, I think this year TracFone has been very good because overall, we are not achieving exactly the same EBITDA as last year, but we're growing a lot. We have a good pace of growing. If you take out Straight Talk, I think we are going to end, I hope we're going to end our year having a little bit of gains in terms of subscribers. We are thinking that for next year, we can sell more. In TracFone, and we're still with that, we're having a very good EBITDA margin.
Rodrigo, just to add to that, as I mentioned at the beginning, ARPU in the U.S. were up close to 11%, and that's basically a reflection of what Daniel is saying. We have been gaining a lot of new Straight Talk clients that are very high ARPU clients. They are on average, probably $40, $45 per client. We have disconnected completely disconnect some of the SafeLink clients there. Net/net We've been getting an improvement in ARPU that I think is quite impactful.
Sorry, that's not only Straight Talk. We have also good adds on Simple Mobile and Walmart Family. We have some brands of high ARPUs that we have been growing very good, Rodrigo.
Also one thing that has to do also with what I mentioned, the ARPU, if you look at rate of growth of service revenues, it was 1.5% year-on-year, which is better than what we have had for at least five or six quarters. It was already positive last quarter, but today it continues to accelerate, and we're expecting a good quarter in the fourth one. Likewise, in the case of EBITDA, all of the last five quarters, I think, or six, EBITDA was experiencing negative growth. Now it is growing 3.2%. Okay, it is again recovering. Positive growth on revenues, positive growth on EBITDA, and we expect this to continue going forward.
Understood. Thank you very much.
Thank you.
Our next question comes from the line of Arturo Langa from Itaú BBA. Your line is open.
Hi. Thank you very much for taking my question. I just have one brief question. Could you please give us some color on the strategy you plan to follow in the wireless market in Brazil? I ask this because it looks like competition is heating up with more aggressive offers, I just wanted to understand how you think about positioning the brand, positioning the network. Where do you try to differentiate yourself versus Vivo and TIM? If you could just provide some color on that, it would be very helpful for us. Thank you.
The first thing that I can tell you is that this year and last year, we have been improving a lot our coverage. We are growing a lot our coverage, our 4G coverage, our data coverage, we have been growing a lot our coverage, and we also are giving a lot more speed and the quality. If you check the quality with the regulators, you are going to see that the quality of our networks is the best one. We have been improving a lot the quality. We are not going to compete only with price. We are competing with price, and we are going to be as aggressive as the market demands. In the other side, we're giving a very good quality of the network.
In the other side, what we are also doing is we are not only selling wireless also, we're selling combos, no? We are selling wireless plus broadband, or we're selling to our subscribers of pay TV our postpaid service. We are doing these combos, and we have been very successful. If you are saying we are only going to compete with price, no, we're going to be competitive, and we're going to be competitive as the market demands to be competitive. In the other side, we are going to try to give something else to our customers in terms of quality, coverage, speed, and combos, and all of those things.
Thank you. Just on that point, are you comfortable with the market share that you currently have in Brazil? Do you think this could increase a little bit?
We have been increasing our market share in Brazil, and I think we can increase a little bit more. Market share is important. Also, ARPUs are important, and I cannot say we want, no. We have been increasing in mobile our market share around 1.5 points in service revenues. We really don't care about the market share in subscribers. We care about revenue. Market share in revenue is the important part for us.
Okay. Thank you very much, Daniel. Thank you for taking my question.
Thank you.
Our next question comes from the line of Daniel Federle from Credit Suisse. Your line is open.
Thank you. Good morning, everyone. My first question is regarding EBITDA margin in Brazil. We see that the recurring EBITDA margin expansion was not that strong as we saw in the past few quarters. My first question is there any cost pressure that is affecting margins in the third quarter in Brazil? Any specific points? That's the first question. If I may to use my second question to brief clarification of the first one. It was said that the company is not looking at any significant M&A. The question is, could you consider that Claro is not interested in Nextel in Brazil? The second clarification is the guidance for $8 billion-$8.5 billion in CapEx. That includes the spectrum acquisition, or it doesn't include the spectrum acquisition? Thank you.
The first one is $8 billion-$8.5 billion in CapEx. In our budget, includes spectrum, and let's see what are going to be the prices for the spectrum. For us, it's including the spectrum. We can increase a little bit depending on the prices. That's our view and our vision is not that the government shouldn't sell the spectrum at high prices, but they should expect big investments in the country. That will be the best thing to do in the spectrum side. In the EBITDA in Brazil, as I told you, of course, we have less growth than what we have been doing in the first and second quarter, but we have a good growth against last year. I'm not worried about first and second quarters, I'm not looking at the EBITDA and the margins.
I think that will recuperate. I'm sure that our growth will recuperate in the future. What we're looking is, we're doing important commercial efforts in Brazil. We have a little bit more of bad debt also in Brazil. I'm not really looking in the short term, I'm looking in the long term. What we're doing in Brazil in the long term is we're consolidating our platforms, we're consolidating our networks, we're investing a lot to modernize the networks. We are improving our commercial distribution and our digital transformation. That requires a little bit of, at the short term, more money and a little bit more of expenses. I think I'm feeling very comfortable in Brazil.
If Brazil starts to grow as a country again, then you're going to see that we're going to be well prepared to take part of this growth in the future. That's more or less. Carlos wants to add something.
Just to put it in context, I think if you see mobile service revenues, they were nearly at the same pace as last quarter. I think they are the fastest of any operator in Brazil today. They are the second best in the last 10 quarters, I think, nearly identical to last quarter. On the fixed line side, you see service revenue has been declining for quite some time. This is the best show in the last three quarters. You begin to see a deceleration, a stabilization of the decline of fixed mobile revenues. Yes, they are still down, but they are down 3.2%, they were down 4.5% two quarters ago. That's, I think, something that is also important. On the cost side, I don't think that there's anything that we can report now.
Maybe there's something we can discuss it with you and Daniela later, but at present, we don't really have anything to add to that. Other than what I mentioned at the beginning, which is that growth has have been doing very, very well, that year-over-year, the growth has in Brazil are up nearly 9%, I believe it was 8%-9%, and that this is a network that is also, this is sequentially, by the way. It's sequentially. There's an increase sequentially, and there's an increase this year to prior year. The commercial effort is ongoing, and it's ongoing on a very strong basis.
Thank you. Very clear. Could you comment on the Nextel points? If when a company-
Remember that we're always open to all the opportunities, and when Carlos said that we don't have a major, no, Carlos, if you want to add.
No, I think what I said is correct. I mean, we're not looking at anything of any significance at the moment. I don't think that there's anything else to say.
Open to all the alternatives in Latin America or in Europe, no? In the sense of Telekom Austria and all of that.
Perfect. Thank you very much.
Our next question comes from the line of Andre Baggio from JP Morgan. Your line is open.
Hi. Good morning, everyone. My question, in one more of a, is for follow-up on the competition. In essence, you have been doing a great job in Mexico, that reverted some trends that in a couple years ago. Is it a function of others not being aggressive on price? Is it a function of you reducing again the recharge of the prepaid cards and so on? Can you give a little bit more color on what's going on in Mexico that's backed this strong performance?
I don't understand the question.
Like if there's any difference in competition.
I don't think there has been a lot of even new promotions. I think in the market in Mexico, we have been having new promotions, even that we have a more commoditized market in terms because the prices are too low. We're still having some new promotions and new things. The market is still very, very competitive and I've been saying that in the call, I think some of the things that customers prefer from us or from Telcel is because of the coverage, quality, capacity, customer care centers, the digital transformation that we're doing, that people is happy when they go to a Telcel center and you attend him very fast, very good.
Okay.
Online, that we have been doing a lot on online, mostly, it's our network that is superior than all the other networks in Mexico.
Andre, just to add to that, I think we have continued to invest in the network, as you know, and it's both in fixed and in mobile. As you know, we are obliged to give capacity even to our network competitors. It is the case that all our competitors today have access to the network. They are roaming on our network, and this traffic is also helping us. We are investing a lot. We are making sure that the network is available most everywhere and that it has sufficient capacity. I think that we are also having good revenues as a consequence of that.
Perfect. The second question I have is that we now have a new administration in Mexico. Do you think that you could have a better chance of applying to a pay TV license now with the new government, or do you think that the new government is going to make any change that's meaningful for your business?
As you know, Telmex has formally requested regulators for many years the elimination of the restriction providing its concession. I think it's time for the regulators to take steps for promoting competition in a really heavily concentrated pay TV market. That's the way we feel, that's the way we think. I hope that the regulators will take that step and decide to give us the pay TV. That's our view.
Sorry. In that sense, I had understood that you had to formally apply for something. It's just on the hands of the government. It's not on the hands of América Móvil, the next step.
I think it's on the hands of the government right now.
Perfect.
On the regulators, yes.
Yes, regulators. Okay. Thanks a lot.
Thanks.
Our next question comes from the line of Maria Espada from UBS. Your line is open.
Hi, thank you for taking the question. The first question would be on your FTTH strategy in Brazil and overall geographical expansion plans, if you can comment a little bit on that. With more visibility on the macro and political side, would you consider intensifying your fiber rollout and even considering a potential M&A of regional fiber players? The second question, if I can circle back on the competitive environment in Brazil. You recently added more data and zero-rating apps. Do you believe that the market is moving towards an unlimited data plans environment? Thank you very much.
Yes. Well, about fiber to the home, as you know, within AMX, we have a cable company, mainly. When you look at Brazil, Colombia, we are really a cable company. We are using 3.5, and we reach very good high speeds for fixed broadband. In all the new cities that we are doing, we are using fiber to the home. We are using GPON technology. In Mexico, we already have home passes with GPON, as well in Puerto Rico, Dominican, Argentina, and in Peru. The focus is to cover really the ABC plus market with fiber and the rest with cable or copper. We have a program from the next two or three years to really achieve that we will cover the ABC plus market with a very high technology fiber to the home and to upgrade all the network to DOCSIS 3.1.
All the countries in the backbone, the network is already available to deliver 3.1, we are ready to really have good speeds. In Brazil, as you know, in the segment of ultra broadband, we have a very good market share. We have 50 something market share. I think the network is ready to do that. To be honest, what we do is to make the economic balance to really move to fiber to the home and to use as much as we can upgrading the copper network. It's the strategy that we are following within AMX.
Yes. You talked that we increased our data in Brazil, and if we're going to go unlimited data. Well, we don't know if we're going to reach unlimited data in our plans. Right now, I think the plans are very strong plans and are giving a lot of data. Very competitive plans, what we have.
Perfect. Thank you very much.
Thanks.
Our next question comes from the line of Cesar Medina from Morgan Stanley. Your line is open.
Hi. Thanks for taking my call. I have two questions. The first one was, what are the trends that you're seeing in your own market share of broadband in Mexico? Second, what should we expect for the margins in the U.S.? I mean, 7.1%, it's a bit low relative to the improvement that we saw in the second quarter. I appreciate your comments on both questions. Thank you.
No, if we talk about the U.S., I think you have to check if you compare against last year. This year, we are growing more than what we have been growing last year. You need to check EBITDA plus the growth that we have in our subscribers. I think we are reducing our EBITDA a little bit, but we are growing our subscribers. I think taking out cycling, we hope that we can be positive in net adds this year. That's the reason of why our EBITDA is a little bit. In this quarter, our EBITDA is even a little bit higher than what we have last year's quarter in TracFone. Overall, I think this year, totally this year, TracFone is going to grow much more than what we have been growing last year.
I think you have to consider that TracFone's EBITDA is very seasonal. If you look at, for instance, in the second quarter, EBITDA was down 22% year-over-year, but in this quarter, EBITDA is up 3.2% year-over-year. There's a very big change from -22 to +3 from one quarter to the other. Okay. This is basically because of seasonality. You have to correct for that. In Mexico, in broadband, well, you know, in Mexico, it's as well as you mentioned, mobile is a very competitive environment. We already give the shape of our offering in the marketplace to deliver a more bandwidth, more speed than our competitors. We are adding on all the Claro video OTT offering in order to compensate the way that we don't have pay TV.
I think is the way that we see the competition. The network is really prepared. We have a good proportion of the network with the FTTH. As well, we operate all the network to VDSL to deliver more speeds. We are getting closer to fiber in order to really have good speed all across the network. That's the environment that we see. Then we are setting up these new products in order to be competitive in the marketplace.
Relative to the question that was asked before, would you assume that if you get a pay TV license eventually, you're going to get more market share on the broadband side? Wondering if it helps on the commercial.
Well, we have all the elements to be competitive in that shape.
Sure. Okay. Thank you.
Thanks.
Due to time constraints, our final question today will come from the line of Mauricio Fernandez from Merrill Lynch. Your line is open.
Thank you. Good morning, Daniel, Carlos, Daniela, just to follow up and apologize for repetitive subject of Brazil margins. To Carlos' point, revenues were actually up sequentially in the quarter during this year. Still the pace of EBITDA margin, actually EBITDA margin itself was down in the third quarter, so it must be cost related. It doesn't look like, even though with a little tougher competitive dynamics, it doesn't look like competitive dynamics were enough based on Carlos' comments. Is there any cost item, is there anything that has already been achieved that is no longer available that would stop or make the EBITDA margin expansion less than before, than what we were seeing in the last couple of quarters? Thank you.
No. I don't think there's nothing specific on that sense. As I told you, Mauricio, I think we cannot see quarter-over-quarter. I think what we're doing in Brazil is going to be successful, and you're going to see better growth in the future quarters. We're growing 10% our mobile revenues. We're growing a lot our broadband. In TV, we're losing less than the market, all over all the market. In revenues, we're doing okay. Specific some costs that we have, no, I don't know if we have something specific in this quarter, but I think if you see all over year-over-year, we're doing good.
I haven't identified specifically anything, Mauricio, but to say that we will let you know.
No, the growth in-
In fibers
also some important things is the growth on subscribers. We're growing more, Mauricio, in service. We're spending a little bit more on the commercial side. That's the only thing that we can see at this moment.
Okay. Thank you.
Thank you very much.
Thank you.
Now for the.
Thank you for being in the call.
We're back.
Thank you everybody for being in the call. Thank you, Carlos, Oscar, and Daniela.
Thank you all.
Thank you.
Bye-bye.
This concludes today's conference call. You may now disconnect.