Earnings Call: Q4 2017

Feb 14, 2018

Welcome to America Movil's 4th Quarter 2017 Conference Call and Webcast. All participants will be in a listen only mode. After today's presentation, there will be an opportunity Please note that this event is being recorded. I would now like to turn the conference over to Ms. Daniella Lecona, Head of Investor Relations. Please go ahead, ma'am. Thank you. Good morning, everyone. Thanks for joining us in our 4th quarter conference call. We're here on the line with Mr. Daniel Hajj, our Chief Executive Officer Mr. Carlos Garcia Moreno, Chief Financial Officer Mr. Oscar von Hauske, Chief Operating Officer and also from Telmex, Mr. Carlos Robles, our CFO. For those of you who are following on the webcast, please make sure you refresh your browser Thank you, Daniela. Welcome, everyone, to this Q4 America Movil Report. Carlos is going to make a presentation of the results. Carlos, again? Thank you, Daniel, and good morning, everyone. The last quarter of 2017 ended on a strong note, with inflation selling the well contained an economic mix filling up in most of the world, both in developed and in emerging countries. With commodity prices coming up, several Latin American countries are on new stimulus for expansion, particularly in Brazil that is recovering from a long and deep recession. In Central and Eastern Europe, the region stood to benefit from the overall economic recovery in Western Europe that has been remarkably strong in both the concrete such as Germany and Austria. The positive economic momentum had us posting good revenue and EBITDA growth very much across the board. With data heavy lifting the way on both the mobile and the fixed line platforms. Mobile ARPUs grows practically based off by data revenues. The investments we made over the last several years on convergence, including the deployment of fiber optic and the expansion of our 4 gs footprint, have provided us with the faster data networks in our region. That gives us a competitive edge on our main business segments and in most countries has helped us strengthen our position. We ended 2017 with 352,000,000 accesses, slightly lower than a year before, with our mobile postpaid and fixed broadband accesses increasing 6 point 4% and 4.2%, and mobile prepaid and Pay TV accesses fallen by approximately 2.6% each. Those that of you that are looking at our chart presentation, you will see this in the first chart. In fixed voice access, we lost 1.9% as people moved from moved to prepaid packages or to postpaid mobile services. In mobile postpaid, we added 1,700,000 subscribers in the 4th quarter, 1,000,000 in Brazil, 206,000 in Mexico and 109,000 in Austria. The finished year was 70,600,000 subs. Our postpaid net adds surpassed those of the year before by 26 0.6%. In fixed broadband, we gained 320,000 clients in the quarter. Our revenues totaled $264,000,000,000 in the 4th quarter. They were down 2% in Mexican peso terms on account of foreign exchange rate movements. But at constant exchange rates, revenues were up 0.5% and service revenues were rising 1.4%. Service revenue growth were driven by posted revenues that were up 9.5% constant exchange rates prepaid data, which was up 9.7% and fixed broadband revenues that rose 5.8%. Mobile data was the main driver overall, with our the traffic on our networks increasing 66% over the year. By the more than 90 one was the South America block with service revenue growth of 4.5% at constant exchange rates, followed by Mexico with 3.3%, which has recovered significantly from a year ago. Mobile ARPUs were up, as we said before, in most operations, with Mexico increasing 7.2 percent, Brazil 10.2 percent and Chile 2.8 percent, even the year increased 2.4 4th quarter EBITDA totaled MXN 70,200,000,000. It was up 6.8% in Mexican peso terms and 9.8% at constant exchange rates compared to 1.3% in the prior quarter when EBITDA was hit by the natural disasters in Mexico and Puerto Rico. In South America, EBITDA rose 13%, 13.5% at constant exchange rates, followed by Mexico with 13.5% and Central America with 7.8%. EBITDA margins were up in most of our operations from the year before, with Mexico increasing by 4.1% this point, Brazil by 2.9 percent, Ecuador by 3.9 percent and Peru by 6.5%. Our consolidated figures reflect the major loss of revenue in Porco Recomb, which was minus 16% year on year in the aftermath of the hurricane that battered the island in September. The revenue decline, mostly to go with the lack of electrical power to our island its impact on fixed line telephony resulted in an even greater drag on consolidated EBITDA. Our operations EBITDA margin plummeted to -3.5 percent in the 4th quarter from 21.6% in the second one. So we went from having a positive EBITDA in Puerto Rico to having an EBITDA loss in the 4th quarter. Excluding Puerto Rico, our consolidated service revenues expanded 1.9% year on year and our EBITDA increased 12%. So consolidated EBITDA of America Movil, excluding Puerto Rico, was up 12% constant exchange rates last quarter. And just looking at a bit size in Mexico and Brazil that you will see in the charts that we are presenting, You can see that in Mexico, EBITDA was up 13.5% year on year with stable revenue growth, driven by data revenues. Postpaid net adds of 2,006,000 that we mentioned in the quarter was slightly higher than what we had in the Q3, but it was single, not in the Q3. So we had some good growth post the market. ARPU, as you can see in the chart again, has been increasing consistently over the last several quarters. So last quarter was up 7.2% on year. Now looking at Brazil. EBITDA was up 11.6% year on year. Net revenues up 42%. Again, both postpaid and also prepaid, but very significant postpaid. You can see at the bottom in the next chart, postpaid net adds have been increasing consistently over the last quarters, particularly the second half of the year was very strong. And from a year before, we have roughly doubled the net share of ads, of postpaid net ads in the market, okay? And you can see also in the chart that adverts have been trending up in Brazil and will continue to trend up in our view. Now our operating profit came in at MXN 28,600,000,000 having increased 10.9% from the year earlier quarter. Relative to total revenues, it rose from 9.6% at year before to 10.8% at the level of operating profit, a slight increase in the margin. We posted a comprehensive financing cost of MXN 37,000,000,000 in the quarter, which was almost wholly in terms of foreign exchange losses, arising from the depreciation of But for the full year 2017, comprehensive financing costs totaled MXN 28,000,000,000. But for the full year 2017, comprehensive financing costs were down 50% from the year before to MXN 43,000,000,000. We had a net loss of ARS 11,000,000,000 in the 4th quarter by a net profit of $1,000,000,000 for the full year. And here, ultimately, just to make the case that sometimes we very significant moves in a given quarter that have an impact. But for instance, the move last quarter was basically the vessel the last few days of December was shooting up, but it has basically recovered. Today, we are at the levels that we had before this increase in the peso. So all of the FX moves of the last quarter have already been erased. And finally, on net debt, our net debt was down by MXN 15,000,000,000 in 2017 to MXN 640,000,000,000. This is what we said if you look at our balance sheet. This figure reflects the flow reduction in net debt. This is the actual payments of debt that we made in the year of net debt of MXN 47,900,000,000. But then we had to add the effect of the Colombian ruling, equivalent of ARS 18,500,000,000. And then we had the impact of foreign exchange variations throughout the year. And that's how you get to the ARS615,000,000,000 of net debt end of December. Relative to EBITDA, net debt stood at 2.0x, which is slightly better in dollar terms, makes it a lower terms than what we had the prior quarter. So with that, I will turn it back to Daniela so she can leave the Q and A session. Thank you. Thank you, Carlos. We're ready to take the first question. Our first question comes from Amir Rovodkowski with Barclays. Thank you very much and good morning folks. I was wondering, can you provide us an update on the competitive landscape in Mexico? It seems though pricing continues to see positive trends. What do you believe is principally driving that improvement? Is it sort of competitive behavior? Or is it, as you mentioned, some of the data traffic growth you've seen? And specifically, I was also wondering, any update on your thoughts around potential competitive changes with respect to Red Compartiva? And how we should think about that impacting the market as you see it over the next year or 2? Good morning. Talking a little bit about Mexico, what we first of all, I will say that we have been making a lot of work in Mexico. We have been controlling our cost, improving our networks, changing some technologies or state of the art technologies, giving us a better cost and efficiency, more coverage. We do a lot of new cell sites last year that give us better coverage. And we're moving a lot of our customers to our 4 gs network. So the perception that you could see of our customers in Mexico is very good. So it's improving. We have an indicator called Net Promoter Score. And in this indicator, people is very happy and improving the way they are talking about Telcel and the network of Telcel. So that's something that we have been doing for the last year, year and a half. And also the control of the costs that we're having has been very important. 2nd, I think in the market, as the market is more stable, I don't think we are improving prices, but the prices has been more stable. And we're doing a lot on our distribution network. We've been very careful that the new activations that we have been doing are good activations, are profitable activations because sometimes we see that you can activate a lot of subscribers, but they never consume or they consume or they use you as a card instead of being as a new customer. So we have been very careful and improving a lot all the way. We have the retail, doing that. So that's what I see that happened last year. For this year, I also see a very stable competition. I don't see because as I told you in the last conference call and I can tell you today is the prices that we have in Mexico are lower than the prices than a lot of countries around the world. Even in the U. S, we are much lower in our plans than what we have there. And I don't think or I don't see that we're going to go lower. But well, you never know, no competition. But I think the market for 2018 could be more stable in Mexico. And what is happening is that people is starting to consume more data using more data, and that is what is giving us a better ARPU. You're seeing that with the lowest, I think, we get in ARPU is ARPU. Today, we're at ARPU. So the increase in ARPU has been very good in our customers. So that's what I see. We have been giving, as I told you, moving a lot of our subscribers from 2 gs to 3 gs and then from 3 gs to 4 gs. And we are financing the handsets. We are giving them new applications. So I think Mexico is all the work that we have been doing. It's in a good shape right now, Mexico. Thank you very much. And then just a follow-up on terms of Red Compartida and how you're thinking about the potential shift in competitive landscape as that ramps? Well, RedComparcita is working. I think they are developing their network still. Well, they have been, I don't know, it's 1 year working on the network. So I don't think they have a big coverage or at this moment. So while I don't understand really what's their business plan and how they are going to do it, but I'm sure that it's a new competition, a new competitor, and we need to see what they are going to do today. They are very small in the market, but I'm sure they are going to grow in the future. I think they are going to sell wholesale. They are not allowed to sell directly to the customer. So what they are going to do, in my view, is get a lot of MVNOs in their network. And while I think that's more or less the business plan, no? We're improving, getting good coverage, good network. We just bought last year 60 megahertz of spectrum and 2.5 giga. We're using that right now. So it's we're giving good speeds, good quality. So we are in good shape right now. Our next question comes from Leonardo Olmos with Santander. The conference call. My first question is regarding the talk we had on Investor Day last year. You're very close to the indebtedness level. The goal indebtedness level of 1.5 net EBITDA. And therefore, you said that probably you have 100% of cash flow or a big part of it going to distributions. And my question is, when could that happen? And if that could happen, which kind of amount of increase on distribution are we to expect? Well, I think the what we have in the investor, it was simply a projection of how things would be expected to evolve over the next few years. And we said to the extent that we can reduce the leverage to our target of 1.5 times net debt to EBITDA, which we have been very consistent about for quite some time. Once you do that and in the absence of any applications, then there's no other outlet for the cash flow of the company than distributions, right? So I think the partly this may depend on exchange rates and, obviously, barring things like the Colombian situation of last year, we would expect that combination of good EBITDA growth that we are having and consistent reductions in debt that we expect to have also this year should put us in a good position to get to our leverage target, I mean, very within the next couple of years. Okay. Thank you. They tell you before the end of next year. Okay. Thank you. And my second question is very is a bit more specific. It's about fixed services strategy in Mexico. You had some additions on fixed broadband, but still we see top line on fixed services negative. What's the strategy going forward, including deployment or upgrading the fixed broadband network? And how do you couple that with pay TV bundling eventually? How do you plan to do the fixed services mix? How to see that in the coming years? I think you have to see if you see the revenue, the service revenue from last quarter up to this quarter, basically they are flat compared to the revenues of the Q3. These the revenues have been stabilizing for the last three quarters. Basically, last year compared to this year, it was a reduction in some international traffic with operators. And what we are forward is to continue to increase the quality of our products and continue to increase the value added services for our customers so that we can sustain and increase the competitive position of our products. So looking forward, our focus will be on quality and will be in increasing the value added service for the customers. Our next question comes from Rodrigo Villanueva with Merrill Lynch. Thank you. Good morning, Daniel, Carlos. My question is related to the functional separation of Telmex. I was wondering if you could share with us which do you think will be the terms and conditions for this functional separation? And when would you expect this functional separation to be concluded? Thank you. Well, still in discussions, Rodrigo. We still doesn't know how this is going to end. We're still discussing. What looks like is at the end of this month, maybe March, we'll have a decision. So it will be soon, but still we doesn't have anything yet. Thank you, Daniel. And regarding the spectrum auctions of 2.5 gigahertz in Mexico, what are your thoughts about these? Are you expecting to participate in these auctions? Or are you going to be blocked by the regulator? Thank you. No. I think the rules the bidding rules are already out. We are not allowed to participate in the 1st round. We are allowed to participate in the 2nd round. And we're starting what to do. Remember, last year, we buy 60 megahertz of the spectrum. They are not covered nationwide. We still have some states meeting and not too much. But I think we have around 85% to 90% of the coverage of Mexico. But we're studying what to do. I think the rules, we don't like a lot the rules, how they end, the bidding rules, but we're studying what to do and how to do it. We are allowed to participate in that second round, not in the first Our next question comes from Andre Baggio with JPMorgan. So first question I have is that we have seen a significant improvement in margins in Mexico. It's been a long time that we saw that before. Do you think that we should see is continuous improvement? Like, there's scope in your view to continue having efficiency in acquisition costs and other stuff so that we could see better margins in 2018 than 2017? Difficult to say because we're doing a lot of work in the cost cutting. We are moving to the digital transformation. We are investing in a lot of new technologies that will give us a better cost coverage. In the other side, the people is consuming more, prices are more stable. So I think we are in a good path in Mexico. And well, we are in the first step. You're asking me if we're going to have another step in terms of margins, EBITDA margins. And maybe yes, but well, we have to consolidate what we have right now in the market and see it's going to be very important to see the consumption of the people. Economies will help a lot. So if people start to consume more and spend more money with us, then I think it's of course, we're going to have a much better increase on EBITDA, another increase on EBITDA. So that's why that's how I see the market in 2018. Perfect. And the second question is So we have some good news about the inter connection rate. We are charging interconnection. In the other side, we have some new expenses because we bought some frequencies last year, and so we have to pay some fees, starting to pay some fees this year. So well, all overall, we're doing a lot of things, but I think we can sustain what we have achieved at this moment. Perfect. The second question I have is regarding Brazil. In Brazil, we are seeing some very good trends in terms of mobile, let's say, growing almost 10%. On the other hand, the wireline, which I understand is mostly the cable company that services is now shrinking at roughly 2%. So what can be done in order for this big piece of the Brazilian revenues, which is more which is a wireline to resume growth? Is it more investments? Is this recovery of the economy? What do you have in your mind? Well, I think you have to divide net, and Oscar can talk a little bit more about that, into the cable company and the BTH, direct to com, the satellite. I think in the cable company, we're doing very good. We are doing more quad plays. We are with broadband, we're fixed, TV and also with mobile. It's helping us a lot with we have been doing that for maybe 2 years, and it's helping us a lot with the churn. So I think even in the cable company, we're gaining market share. So we're doing good in the cable company. And we are having a little bit of disconnections in the satellite business. On satellite business, we want to be very careful because what we don't want is to spend money in acquisition. People get it and then they use it for a couple of months or 3 or 4 or 5 months. So we want to have changing. We We're changing. We put a new person in charge in Brazil of the satellite business. And I think this year, we're going to see improvements. But if you see cable net cable company, we are gaining market share. And what is important is, in my view, if the economy of Brazil recovers, then we are going to see a good recovery in broadband and in services. But Oscar can expand a little bit on that. Yes, sure. Thank you, Daniel. If you break down the fixed revenues, you have different products. We've been doing pretty well in fixed broadband. I mean, we are growing and we are getting market share. If you see pay TV, cable is steady, I mean, and the market is steady. When you look satellite TV and you look all the revenues of pay TV, all the market decreased close to 1.7% year over year. We decreased the same path. So we are keeping the market share of pay TV business. But what is really decreasing strongly is long distance. I mean, the long distance nationalinternational has decreased 26% in 1 year. And to be honest, we won a little bit of market share, but the decrease was too high. And as well, local voice has been decreasing because the people, as you know, is using different sources to get that product like could be WhatsApp, IP or whatever. So there is an evolution. But I totally agree with Daniel that if the economy recovers, we will see different figures in satellite or ATV and as well on fixed. So we are expecting that and we believe this year we see getting better over last quarter of the economy. So we will really focus on and you know the products that we've been pushing in the market is quite play. I mean, we believe the bundles are the ones that we are taking place. So we are really successful to bundle the products. Perfect. Thanks a lot. Thank you. The next question comes from Walther Piatek with BTIG. Thanks. Carlos, in Mexico, your service revenue was up 8%, ARPUs were up 7%. I think in your prepared comments, you talked about in 2017 about adding cell sites. Is that still going to be the plan for Mexico and some of these other markets, which we're also seeing increased ARPU? And maybe you can give us an update on your CapEx plans for 2018 versus the I think you spent about $7,200,000,000 in 2017? I think talking about CapEx, I think the guidance for this year would be around $8,000,000,000 It's what we're expecting to have. We want to accelerate a little bit some things in Brazil, let's say, the modernization in Brazil. We have something in Argentina that we're going to pass 1,000,000 home passes for doing TV and broadband. Also in Mexico, we have some coverage issues. So I think we're going to increase a little bit between 5% 10% of what we do last year. We're finalizing the CapEx for this year. And we have been very disciplined in CapEx, in cost. Everything that I explained that we're doing in Mexico, we're doing that in Brazil. We have a very cost control and expenses that we're taking care of there in Brazil and very disciplined. And I think with everything that we're doing in the networks plus being very efficient in costs, I think we're going to have a good year. So Daniel, that doesn't include spectrum, I assume. And then for Brazil, when you say network modernization, does that mean adding cell sites or just replacing the equipment on existing cell sites? When I talk about modernization, we're adding equipment or modernizing the old equipment to a new cell site. But we are also doing we're going to do maybe another 2000, 1500 cell sites. So I don't have the number exactly what we're doing. In Brazil. In Brazil. Wow. In addition to what you're doing in Mexico. Got it. In addition of what we're doing in Mexico. So everything is going to be covered by this total CapEx that I'm saying. This CapEx is going to include frequencies, if we are going to buy some frequencies and modernization, more fiber, photonics. Photonics is very important. Photonics is about I'm talking about the new technology that we I've been saying. It's consolidating all the IP and being much more efficient in the cost for data. So we're doing a lot of things and everything is included in the number that I just said. I think you added 800 cell sites or so in Mexico last year. Are you going to add a similar amount this year or maybe more? I don't know exactly if they're going to be 800, but there's going to be more capacity, others are going to be for coverage, others are going to be indoors. So when we have a set things. But what we want and at the end of the day, what we want is to have the best quality in our networks in each country and we're working to do that. So I think the preference of the customers is going to be because of the quality coverage speed of the service that we give, and that's what we're aiming and working for. Great. Danielle, if you don't mind, just one last question. In Austria, they're going to auction off 3.4 gigahertz spectrum. Is this do you have plans to use this? How do you plan to deploy it if you use it like small cell deployment, fixed wireless? What are the plans in Austria for that spectrum if you intend on bidding on it? We are reviewing and making the analysis on that. And I don't have an answer right now because we're working defining what to do. And soon, we can have a decision there. Great. Thanks, Daniel. Thank you very much. The next question comes from Daniel Federle with Credit Suisse. Hello. Good morning, everyone. Thank you very much for taking my questions. The first one is related to the cost cutting efforts announced at the Investor Day last year. It seemed to me to be like a 3 year plan. So I was wondering if you could tell us if which countries are more advanced in this initiative and if they contributed significantly to 4Q results already? And if I may, the second question is related to Mexico. You have been mentioning this issue with this impact and if it's expected to worsen or to improve with the new MTR rates in 2018? Thank you very much. The first question is about the modernization of the networks or the modernization of the new products is the question. The first question is related to the cost cutting efforts across the group, okay? Which countries are more advanced in this? I think if you ask me that, well, we are advancing in all of them, but it's not sufficient. So I think this year, we're going to still we're working very hard on that. We have specific projects in each country. So they are different and it's not cost plan, it's also being more efficient. So we have like a digital transformation, we call it, is a plan that we're going to do in all the we're doing, not we're going to do. We're doing in all the countries, and it's going to give us much efficiencies in everything. And not only efficiencies, it's going to be much easy for all our customers to deal with those. So in our customer care centers, in our web pages, in our invoices, in apps, in everything. So we are having a good project there. Plus, in it goes from purchasing and acquisitions. We're working very hard on that to all new projects, infrastructure projects. I don't know, Oscar, if you want to add other projects that we're having. No. As you mentioned, these digital transformation goals to eCare, eBilling, supporting, try to digitalize all the interaction with the customers. It could be in our commercial offices, in the IVRs, in the web page, in the applications, through monitoring their social networks in order to really be fast to support the customers. So we are selling over 3.60 view of the customers, digitalizing as much as we can all these interactions is 1. And as Daniel mentioned, we are doing it in the network, trying to reduce the cost to handle data traffic in the network. That's photonics. We are getting closer the fiber to the customers. We are doing a lot of catching and bidding to review the cost of the company's network. So it's a different effort and different needs of the country depending the needs of the different countries. And these efforts are also coming with new, let's say, plans, commercial plans. By an example, in Brazil, something that is working very, very good is we call them Pasa Forte Americas, that if you can take your phone to all Latin America without charging any roaming or anything. So in Central America, S. And Canada. So with all these things that we're doing, we are also doing new things in the commercial side. So there's a big plan that we're having on that. Okay. And related to the second question on long distance results. Yes. Regarding the natural long distance, as I mentioned during the Q3 compared to the Q4, the revenues coming from the long distance have already stabilized. They are 1.2% above the 3rd quarter revenues. So going forward, this might be the trend that we will be looking forward. It's important to remember that in 2018, we are going to further reduce the going body paid for our customers. Therefore, that decrease in the tariff would be to enhance the products that we have. And therefore, you might see an impact in other revenues, other voice revenues. Okay. Thank you very much. You're welcome. The next question Regarding Colombia, what should we expect from mobile ARPU in Colombia as is one of the few countries where ARPU is declining. Is this ARPU performance related to less mobile data take up versus other countries or is pricing pressure? And my second question is regarding Puerto Rico. When do we expect to have the fixed service fully restored? Thank you. Well, in Colombia, let's divide to the fixed, I think, is going very well. We're growing. We're doing very good in broadband, in TV. Our margins are expanding. I think we have a very good technology and the people where we put in our services is very happy. So we're doing very good. The people what people thinks about the service is excellent. So we're growing. We're doing very good. In the other side, in the mobile, in the mobile, it's being more competition. It stopped. In the postpaid, we have been having some problems with some acquisitions of some customers, but we are changing some plans, some ways of doing that. Some people that is getting we are acquiring some customers that at the end, they are not consuming what we feel they are going to consume. So we're changing a little bit on that. In prepay, the market is difficult because rates are going down, more social networks, more that. But I think in this year, I think it's going to be more stable, and we're going to do much better. It's I have a good view in the future for Colombia. We're working also hard in efficiencies, in controls. And we are I think we can see some improvement in the year. The margins are not bad. The margins are around 40%. So it's difficult to increase a good margin, but we're doing a lot of things to improve that. But you're what Vanir is mentioning. The fixed revenues in Colombia, yes, revenues are up 10% year on year, but mobile revenue was up. So it is indicated that fixed is going very, very well, but the mobile market has had more issues, including regulatory. And I think that's something that we need to shake off. And regarding Puerto Rico, I think we have a very tough Q4 because the hurricane was at I think it was in September, mid of September. So really the top situation was in October November. So we have a tough quarter, even negative in EBITDA or what we have in the quarter because we have to give to our customers a lot of credit notes. We have to spend a lot of money establishing all our networks. Today, we have the mobile network maybe 99 9% working. It's doing good. We do a lot of work to reestablish everything there. Even that the energy is not 100% working. So we are having 99% of our network working. We have a big fiber optic rings that we also recovered during the last quarter. And in those places, in those sectors, we're okay. In the peaks, still, we are working very hard in the peaks. And I think it's going to take us a little bit of time to do that. We are, let's say, renewing some part of our fixed network. So in places where we don't have the fixed service already fixed, We're giving them some wireless phones for them to use them. Competition is tough. What I think Q1, you are going to see a recovery of what we're having last quarter. So in terms of revenues and EBITDA, I think but still we're putting a lot of money in this fixed network to reestablish everything. So I hope that in the Q2, yes, of this year, it will be as normal as what we have last year. But still this quarter, we're going to do so much better than the last one, but still we're going to do some expenses to reestablish everything. I think we are much better than the competitors right now, but much better than what some of our competitors are doing. Our next question comes from Sumit Dayda with New Street Research. Hi. 2 or 3 questions, please. Just first couple on Mexico. Can you comment at all on Blue Telecom, which I think is pushing increasingly nationwide, obviously, backed by Televisa. At the moment, it still seems to be a slightly tentative process. But I just wondered whether you'd seen any impact yet or if you had any thoughts on what impact that might have on the fixed business? I don't get your sorry, can you? Sure. Shall I repeat it? Yes. I was asking a question on competition in Mexican fixed. Blue Telecom, I think, have pushed more nationwide in the last couple of weeks or so. I wondered what impact you thought that might have on your fixed business Telmex in 2018? Well, I think Carlos can talk a little bit more on that. But I think in Mexico, we're having a lot of competition all around. If the Energies entering in new markets, well, I think they are already in a lot of markets. So I don't see like a new competition or a specific competition, and we have been having competitions all over also. But that's our discussion in with the regulators. The competition is there and there's a big competition. So that's some of the discussions that we're having with them. So where it's not where we don't have where they don't have competition is in TV and that's where we need to have that concession to have TV in Mexico. There is no competition there. Okay. And then just a follow-up please. Just back to Red Compartita. Are you planning on using the network yourselves? Have you had any discussions there regarding wholesale pricing? Are you keen to start deploying 700 or start using the 700 spectrum by their network this year? I think 700 is a very good frequency because you have a lot of coverage and it's good for the wireless. And RedCompassive is going to be another competitor and well, we're going to compete against them. And as the way we think we can compete, as I told you, is with good service, with good network, good coverage, a lot of speed, quantity in the service, and that's where we're going to compete. So that's mainly what we've got. So does that mean you're not going to use their network? We're not planning your question is if I'm going to use Alt and Revit. No, I don't think we're planning to use Alt and doesn't make sense. It's not because I don't want it because I don't think they are going to give me something that I don't have. So I have good network, good quality, better coverage than them. So it's no, I don't think we're going to use Alton Red. Okay. Very clear. Thank you. The next question comes from Carlos Negarieta with GBM. Hi, thank you. Good morning. My questions are regarding the U. S. The first would be what is the potential impact from the fiscal reform? And the second would be regarding the SafeLink program. We saw a number of disconnections this quarter. And I'm just wondering if this should be a one off or we should see more going forward? Thank you. I think in the straight talk program, I think we have been sorry, disabling program, we have been disconnecting some of the subscribers. It's the program, it's the lifeline program that the government is data. Data. So I think the program is starting to be a little bit more complicated, and that's the reason why we're disconnecting a lot of them in SafeLink. But in U. S, we have other brands, other straight talks into mobile, Page Plus, Total Wireless. So a lot of these brands with higher ARPUs, we are improving. Competition is tough. Every month or every 2 months, you have to add more and more data to the plants. But I think we're doing good in these other plants. And this year, we're going to gain subscribers in all of these plans. And I still think that in SafeLink, we are going to still disconnect for some months customers that they are not consuming or they are not using this service. So that's more or less what is happening in U. S. In platform. Competition in prepaid is becoming more aggressive. So you have to add more service, more data, more things to your plans. And that's what is happening all around Latin. That. Just to add to what Anel is saying, in the case of Straight Talk, which is the main brand of the company, we have introduced recently a new $50 plan that has unlimited voice, unlimited data, unlimited SMS, and it has had a tremendous acceptance. So I think, again, it's our main brand, and we have a good expectation that it can continue to do well. This is the brand that is sold exclusively through Walmart. Thank you. And regarding the tax reform, I mean, is that does that change anything that you guys are planning to do in the U. S? I think it already reduces the tax rate from 35 or thereabouts to 21. I'd say that One question. It reduces the tax rate, but reduces also the deductions in some cases that we're going to have. So it's not going to be as high as 35 to 20 1, O Carlos? That's right. But net net applicable rate would be coming down significantly. And so the issue at the end of the day is if the dividends flow back to Mexico, then there's practically no change in the tax regime. So that's the things that we need to understand better to see if there's going to be any changes also in the tax laws in Mexico. The next question comes from Masha Khan with Deutsche Bank. Hi, good morning. I've got a quick question on Columbia. When do you expect to get 700 megahertz spectrum? And what's the update of the latest on the auction there? And the second question is on the financing handsets versus given subsidies in the past, if you could just probably estimate the impact on moving to financing and whether you've seen any pickup in bad debt that would be out? Thank you. I don't hear you very well, but the first question is about the spectrum in Colombia. Well, I think About the 700. The 700 spectrum in Colombia, I think we are interested in that spectrum. And we are discussing with them the bidding process and the rules that they are going to put for that spectrum. So we are in that moment discussing with the regulator. But of course, we are interested in the semicon spectrum in Colombia. It's a good spectrum. And that's good for us and good for Colombia because then we're going to be allowed to give more speed, more coverage to all the Colombia. So both games. So I hope we can get good, let's say, rules in this spectrum. And in the financing in the handsets, we have been financing handsets for maybe 2 years, and it's been good. I think what will help us to give a better handset to the customer and then with a better handset, the customer can use more data and do more things, more applications. And we're doing that maybe all around Latin America, every place in Latin America. And in some places, we have a little bit higher back debt than in other ones. But all overall, our program has been very successful and very good. Okay. Thank you very much. So the $700,000,000 is expected this year most likely, right? And it's not part of your CapEx guidance? Yes, yes, yes. I hope so it will be this year. So the government still doesn't say exactly when it's going to be, but I hope it would be this year. And everything that we are discussing is going to be inside this budget that we have. So that's included in the $8,000,000,000 CapEx guidance for that spectrum cost? Yes. Okay. Thank you. Thank you. The next question comes from Maria de Pedda with UBS. Hi, thanks for taking the question. I would like to know if you see any opportunities in Brazil in terms of potential M and A, but not only M and A, also in terms of network sharing agreement and infrastructure sharing with Oi and the other players? And if you have any expectations of 5 gs spectrum auction or even participating on the 700 left over that Brazil regulator hasn't made comments about? Thank you. There is first one about the 5 gs, I think it's too early. We are launching our 4.5 gs network in Brazil, very successful. We are the first ones to launch the 4.5 gs network, and we are happy. Our customers are very happy with that. M and A, well, M and A, I don't hear a lot of things on M and A right now. I think Oi has already restructured some part of their debt. So if they are going to having share agreements with some of the of us. I don't know. They still doesn't that we haven't talked with them at this moment. We're open always to discuss everything with everybody. And I don't know what's going to be the strategy of Oi at this moment. But well, I think Oi, they maybe for 2 or 3 years has been trying to restructure their debt and doing that. So in my view, they still have a lot of things to do at this moment. So well, that's how I see the things in Brazil. But I feel a lot of competition, not crazy competition, but a lot of competition. So Brazil is still a very competitive place. And I hope that economy will recover fast. So that will be very good for all the sector. Announce. Our last question comes from Alejandro Galosca with BBVA. Hi, good morning, Daniel, Carlos and Daniela. I have a question on the cost reduction initiatives that you're implementing in Mexico and the margin improvements that you expect. And I was specifically wondering how much of that should come from the new interconnection rates, If you plan to keep up all of these savings or if you plan to transfer some of them to the final customers? And perhaps if you could quantify the margin improvement in Mexico? And second, I was also wondering what are your views to the potential change in Mexican government? And more specifically, if AMLO were to win, would you expect significant changes in the industry? Thank you. The first one is, we don't see if I understand your question because we don't do things because, let's say, what you are saying is how much of the interconnection rate that we're getting is moving to the customer. So we don't see the we don't do things that way. We have been implementing a digital transformation, a customer care plan, a better network plan since 1 or 2 years and improving and improving. And that's not because the interconnection right? So we have been doing that for a long time, and we're going to still doing that because of because I think that's the future of the in for our customers are for the long term of the company. So that's what we're doing. And we are in America Movil, we are not we are, as we said, investing in Mexico. And independent of who is winning or who will win, we are going to invest on what we're going to do, what we need to do to have the best network, the best distribution, the best brand, a good customer care centers. We have around 400 today, and we are remodeling them and making our customers to get in and have a good experience there. So we are doing a lot of investments, and we're doing that for the long term. So we're not moving anything because elections are not. So I understand that most of the margin improvements and operating improvements in Mexico would come from all these strategies that you just mentioned. I was just wondering how that compares to the margin improvement that you should get from the new interconnection rates if this should be a significant improvement, a significant portion of the EBITDA margin improvement that you expect or if most of the improvement should come from all these strategies that you just mentioned? I think the improvement that you see is cost cutting, efficiencies, more consumption, look the ARPUs of the people, it's consuming more. In the cost cutting, it's a little bit interconnection, but then we have to pay fees for the new frequency. So well, it's different. So all overall, it's giving us it's not only one thing that we're doing. We're have it separate how much and what percentage is because each of the things, no, I don't have it that way. Thank you very much, Daniel. Just to clarify my second question, do you think that a change in government would significantly change the dynamics in the industry? Or do you think that the dynamics would stay pretty much the same then nothing typically would change? So as I said, we're investing for the long term, not investing for the short term. And when you invest for the long term, then you have your investments done for a long time. So that's the only thing I can tell you. So depending on who wins, what we really care is about our customers. So we're investing in Mexico on our customers, and that's the plan we're having for 2018. And that's the plan for the last 10 years that we have been having now. Yes, great. Thank you very much for the call. Thank you. Thank you. This is the last question. We thank everyone on the line. Yes. Go ahead, Loreta. Sorry. This concludes our question and answer session. I'd like to turn the conference back over to Mr. Daniel Hajj for any closing remarks. Please go ahead, sir. Thank you everybody for being in the call and thank you, Roberto. Thank you. The conference has now concluded. 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