Earnings Call: Q3 2017

Oct 25, 2017

Welcome to America Movil's 3rd Quarter 2017 Conference Call and Webcast. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead, ma'am. Thank you. Good morning, everyone. We have today on the line Mr. Daniel Hajj, our CEO Mr. Carlos Garcia Moreno, CFO Mr. Oscar von Hauske, COO and also from Telmex, Mr. Carlos Robles, CFO. Thanks, Daniela. Welcome, everyone. Thanks for being in the America Movil Third Quarter of 2017 report. Carlos is going to make us a summary of the results. Carlos? Perfect. Thank you, Daniel. Good morning, everyone. Well, the summer holidays came abruptly to an end as a number of natural disasters hit Mexico, Caribbean and the U. S. At the same time and after a period of relative calm in financial markets, information on the likely acceleration of wage inflation in the U. S. Earlier this month, We've had talked of future inflationary pressures with the Fed signaling that we'll continue raising rates, which has brought about renewed volatility in emerging market currencies. Net subscriber additions for the Q3 came in at 330,000. On postpaid, we added 1,400,000 subs, including nearly 700,000 in Brazil and 200,000 in Mexico. On the fixed line platform, we gained 345,000 broadband clients in the quarter, most of them in Brazil, 162,000 followed by Central America with 95,000 and Colombia. Our access growth was concentrated on our mobile posted and fixed broadband clients with 6% and 5% rates of growth respectively. Other segments registered net disconnections, particularly mobile prepaids down 1.4%. Our pay TV subscriber base were down 1.4 percent annually. Our 3rd quarter revenues totaled ARS 244,000,000,000 with service revenues coming in at ARS 210,000,000,000. They were down 2.2% and 1.9 percent respectively in Mexican peso terms. But at constant exchange rates, service revenues actually posted a 1.5% year on year increase. Our adjusted EBITDA, excluding an item resulting from the arbitrage ruling in Colombia, which is considered to be an operating expense, came in at MXN 66,300,000,000, down 2.1% in Mexican peso terms, in line with the decline in total revenues. At constant exchange rates, it was up 1.3% in the quarter. Revenue and EBITDA growth rates reflect the impact of lost revenues in Mexico and Puerto Rico on account of the earthquakes and Hurricane Maria. In Puerto Rico, we provided bonuses to our prepaid clients and credited monthly fees to our postpaid clients. In Mexico, Pecil and Telmex opened their networks at no cost to their clients for 5 days following the escalates in September 2019. Consolidated service revenue growth reflects also the normalization of the annual basis comparison in the U. S. Since in the Q3 of 2016, we incorporated certain T Mobile subscribers, including their revenues and EBITDA. In addition, in Puerto Rico, our expenditures have been affected by the need to clean up of the cubic and to keep our networks operating on diesel given the lack of electric power. Excluding Puerto Rico, Josevic revenues collapsed 17.4% and the U. S, revenue crunch in our other operations remained very much in line with those seen through the Q2 as you can see in the chart. So you can see the chart, service revenues excluding again for for working for Puerto Rico were practically identical both in terms of revenues and EBITDA than what you have seen in the Q2. So we have effectively the same kind of rate of growth adjusting for Puerto Rico and the change of the base in the U. S. Mobile data revenues led the way across our operations, maintaining a rate of growth of close to 20%, followed by fixed broadband revenues growing 5.5% and Pay TV at 1.6%. In Latin America, overall, mobile data revenues observed a 24.3% increase. In our European operations, mobile data revenues were expanding 8% with petiguru revenues growing 22%. The South American block posted the fastest rate of service revenue growth, 3.4%, followed by Europe, Central America and Mexico. In Mexico, mobile service revenues continued to post a strong recovery even in spite of the earthquakes. They were up 8.5% in the quarter with mobile data revenues expanding 21.3%. In Brazil, mobile service revenues rose 3.5% on the back of 33.6% mobile data growth. Our EBITDA margin came down slightly prior quarter. It was roughly flat quarter over quarter, particularly at the hedging for Puerto Rico, up 37.1%. EBITDA margins have risen substantially in substantially all of our operations with over 2 points improvements in Mexico and Brazil, 4 points in Chile, 7 points in Peru from the year earlier quarter. In South America, EBITDA is growing at a nearly 9% pace, followed by Central America with 6%. Mexico, at slightly below 1%, posted its first increase in 11 quarters. After a comprehensive financing cost of ARS 22,900,000,000, half of which arose from foreign exchange losses mostly incurred as a result of depreciation of the peso of the dollar and the euro. We posted a net loss of MXN 9,500,000,000 in the quarter, principally on account of the Colombian ruling that we mentioned before. In the absence of portfolio, we would have had a net profit of Ps. 2,500,000,000. After ARS 5,000,000,000 in CapEx, our gross cash flow that is EBITA minus CapEx stood at MXN 123,000,000,000. The Colombian ruling reduced that amount by MXN19 1,000,000,000 to MXN 104,000,000,000. So that is the gross free cash flow that we have had in the 9 months to September. And this cash flow allowed us to acquire equity interest and pay down pension obligations in the amount of ARS 4,000,000,000 and ARS 6,200,000,000 effectively. And we distributed to our shareholders MXN5.3 billion, of which MXN4.3 billion took the form of cash dividends. We were able to reduce also this cash flow that I mentioned by ARS 18,000,000,000 of our net debt in flow terms. So that is correcting for all the effects of valuations of present currencies. In flow terms, we actually paid down MXN 18,000,000,000 of debt. So at the end of the quarter, we had MXN575 1,000,000,000 debt, down from MXN 629,000,000,000 at the end of last year. The debt at the end of September was equivalent to 2.0x the adjusted EBITDA over the last 12 months. So that means that even after the Colombian ruling, the leverage ratio stayed roughly flat relative to where we were in the second quarter. So with that, I would like to pass the floor back to Daniel so that we can meet the presentation. Thank you all. Bye bye. Thank you. Thank you. We can start with the first question, please. With Barclays. Thank you very much and good morning folks and thank you for taking the questions. I was wondering in regards to the recent natural disasters, is there any way to quantify the impact of the natural disasters on both your top line and EBITDA the quarter. Specifically, I was wondering how to think about the size and scope of the potential impact to your Mexico business. You had mentioned that costs were disproportionately impacted, yet still delivered regional EBITDA growth. What would those metrics have looked like had we not had this impact? Well, in Mexico, as you know, we have the earthquake in September 2019 and what we do is we open the networks for the next 5 days so that people can talk and use data as they wish, as they need it and that's why we do it. We don't have too many in terms of costs in Mexico. Our infrastructure was okay. We don't have any big problem with our infrastructure, some towers that we have some problems with, but we are so in terms of cost, there is no there was not a big issue in Mexico. It was only the let's say the revenues that we don't get for these 5 days. Difficult to say a number, but that's what we have. And in Puerto Rico is different. In Puerto Rico, we have the Hurricane Maria and it was a very it's a big disaster in Puerto Rico. We have our external plant with some problems. We have some difficulties with a lot of ourselves. No energy in the island still we have a very small amount, small percentage of energy in the island. So we're putting diesel. So I think the Puerto Rican the Puerto Rican Telecom business, all the Puerto Rican economy is not going to be doing well for the next maybe 2 quarters, 4th and Q1 of next year. We have to we're in the process of recovering everything. So that's I don't know exactly what's going to be the cost. We're still reviewing what are the problems and the infrastructure that was damaged and we're having like a project to recover everything. What we already do is we give like 1 month credit to all our postpaid customers and $30 to all the prepaid customers. Still we're going to give some credits of course to some of the fixed lines that are not working and still we don't have all our network working. So maybe we're going to need to give to some or to other ones other credits in the postpaid business. We still don't know depending on the recovery, but the Puerto Rican disaster was huge, which is big what we have in Puerto Rico. That's very helpful. And then if I could switch gears a bit here, Daniel, to the pricing environment in Mexico. This has up 8 percent year over year, I mean, how would you characterize the recent pricing environment? Do you believe that these types of growth trends are sustainable for the foreseeable future? There have been some concerns that with Compartida expected to meet its first milestone early next year. Could we see a new renewed round of pricing discounts in the market? Or do you think that some of the easing pressure we've seen over the last couple of quarters could continue? Well, it's I'm going to give you the way I see things, okay? I think prices in Mexico are very low right now. So they are low. So I don't think we have a lot of room to go worse not to go down. So that's why you see more stable competition is tough in Mexico, but prices are still very stable for the last 6 months. Let's see what's going to happen on the holidays on November, December. That's it's going to be important. And well, I think everybody needs to win money. So our competitors also needs to make money. And the prices and the way they are doing things maybe it's too the promotions are too aggressive sometimes. So I don't see that prices are going to go down. It's my perception, but well you'll never know. Prices are still very, very aggressive in Mexico. As I said last time in the U. S. They are very aggressive and we are much lower than them. Maybe, Terry, I don't know the comparison exactly, but maybe 30% to 25 percent lower than the U. S. At this moment now with all the competitive pricing that you are seeing in the U. S. So I don't see much prices going down so in Mexico. Thank you very much. And one last one. And with Compartida, I don't know answer you on Red Compartida. Well, Red Compartida is starting. I think it's going to start their first phase in May. Well, I don't know exactly. Reconpartida was going to put net works where nobody has networks, what they are putting networks today what everybody has. So they are putting where Telefonica is, where AT and T is and where and Telcel is that we already have infrastructure. So I don't know exactly what's their strategy, but my understanding is that they are they at the beginning everybody thinks that Red Compatida was going to put infrastructure where nobody has still we have 20,000,000 Mexicans that they don't have coverage. So the Red Compartita was going to be for that and what we're seeing is that they are putting infrastructure where everybody is. So with the I don't know exactly, but prices are low for us, but they are going to be low for them. So prices are very competitive in Mexico at this moment. Thank you very much. And then just one last one if I may. There have been reports emerged that the IFT may consider a tightening of the gap between interconnection rich charge allowing you to begin to charge your customers versus the zero rate we've seen in the past. Do you think that this likely to go through? And any sense of how to think about the potential impact to the business? Well, we don't know. What we know is that the Supreme Court to resolve that there's no interconnection rate and that they felt has to decide what's going to be the rate, okay. So we're waiting for that. There's some news in the news. There's news saying what they are going to be, but we don't know. I don't want to talk because we really don't know what is going to be the resolution. And let's see, it's going to be maybe next week or the next one. So it's going to be very soon the decision on the IFT what's going to be the new because that's not what's going to be the new interconnection for Telcel. But I think it's the old interconnections, I think it's going to be the new interconnection for 2018 and we're going to see what's going to be the rates, the new rates for those interconnections. I don't think personally there's no way that could be a 0 interconnection again. So let's see what's going to be the new rate. Thank you very much for the incremental color. Thank you. Our next question comes from Leonardo Olmos with Santander. Hi, good morning. A very specific question on PTV in Brazil. You mentioned on the release that you are reducing and disconnecting DTH clients. We just wanted to know what's the strategy on PayTV and overall fixed in Brazil? And if the disconnections are in, I don't know what percentage of competition and when are we going, we could be seeing service revenues in fixed going up again in Brazil? Thank you. Yes. Well, when you look at the DTH market in Brazil, it's declining the total market. And what we've been seeing is that the disconnection mainly is in the low end of the face a lot of on collection problems there. So we are trying to cancel those customers in order to become more profitable that business. But if you look at the total revenues of the pay TV business, satellite and cable, we are growing a little bit we believe that we are winning a little bit of market share in revenue. So we are really focused in increasing the ARPU of the customers and to improve profitability in that segment. Okay. Thank you. I don't know if that answers your question. Yes. I just want to know an overall fixed market if there is including broadband, including other revenues, if we could see some improvement in that line? Well, talking a little bit about broadband, I think the 3rd quarter was a quarter for us in broadband. I think broadband is starting to ramp up the new acts of broadband. And I think for next year we're going to have also the broadband penetration in Brazil is still low and there is still a good increase the broadband there. So we see that we have a good opportunity in broadband for end of this year and next year in Brazil. Okay. Thank you very much. Thanks. Our next question comes from Walter Piecyk with BTG. I think that was probably May Walt Piesik at BTIG. Are you there? Sorry? Daniel, can you hear me? Yes, yes. Okay. I didn't know that whether she was calling on me or not. Just first question is on the U. S. If you look at the margins, I mean, you had some obviously sequential revenue growth, but the gross adds weren't that much higher. Is there was there a specific reasons in the U. S. That the margins went down sequentially? No. Let me explain what's happened in U. S. I think what first, I want to start that in the U. S, the competition is tough as promotions and competitions are very aggressive since all this year. So what you could see year to date, we have 45 percent increase on EBITDA. And the reason why in Q3, we are not increasing and maybe in Q4, we're not going to increase because last year, we have like a setup in the 3rd and 4th quarter. We start to reduce cost to be a little bit more to be not to sell only for selling customers to be more profitable as they know the customers that we're selling. And that's the reason why U. S. Is not showing the same growth that we have been doing because 3rd Q4 of last year were very good quarters. We grew EBITDA a lot in those quarters. So that's the reason. And we have the same trend as the beginning of this year. That's why in the first and second quarter of this year, we have like 45% 1st, 2nd and third quarter we have like 45% EBITDA growth all over also. You are not going to see the same trends that you have been seeing, but I think we're going to have good results even with tough competition because we're having tough competition in prepaid market in the U. S. So that's really what is happening. Got it. And then just back to the Mexican prepaid I'm sorry, the Mexican earthquake impacted. It's 5 days of free service, I mean prepaid is whatever, it's usage based. So shouldn't we assume that your prepaid revenue would have been like 5%, 6% higher than it normally would since you weren't charging customers for those 5 days? Yes, it's the quarter. I don't make the math, but that could be. I think people maybe start to recharge a little bit more in the next days when you finish the promotion people start to recharge a little bit more than usual. So you have to take that off. But yes, it could be that I don't know exactly the number. It's difficult to see what will be the number. But of course, it could be better revenue than what we posted in this quarter. Great. Thank you. Thank you. The next question comes from Andre Baggio with JPMorgan. Hi, good morning, everyone. So mean, first question I have is in Brazil, you have done some progress of improving the margin, but there's still a good gap for TIM and VIVO. What do you think that you can do in order to bridge this gap? Or is it like you said, are the cost of pay TV that you have that could weight down the path towards, let's say, closing the gap? Well, I think I'm not going to compare against Beboe. I'm going to compare against us. And I think we're doing a very good cost cut program in Brazil. It's not something that we're going to do this year. We're going to do it also next year is a program for 3 years. And I think it's going to give us very good results. We have a different cost structure in Vivo. I don't know how they account things, but we have more pay TV. We have more broadband. So it's different company. What I think if you could see really what's happening in Brazil, I think we have been as Oscar is saying gaining market share even that we have disconnections in DTH, we're gaining market share in TV. We are gaining market share in broadband. All overall in fixed where in revenues we're gaining market share. And in postpaid we're doing very good. So I think the last thing that we need to fix is prepaid. Prepaid has been difficult. But I think all overall we're doing very good. We have 699,000 postpaid ads in the quarter. So I think it was very good. And I think we're very excited about what we can do next year still with the cost costing plan that we have, it's becoming aggressive also for next year. And for what we're going to do is we're starting to be a little bit more aggressive in prepaid, intelligent but more aggressive in prepaid. And we want to we think we could have a better 2018 than what we have in 2017. So we are step by step, but we are doing much better in Brazil. Perfect. And the second question I have is regarding the U. S. You have an MVNO strategy in the U. S. And what we see in the U. S. That people are moving more and more for limited plans or with at least with a high consumption of data. How the MVNO model works in this process? Because in the end of the day, you have to pay for the megabytes that people consume. So how can you balance the profitability of MVNO in a world of people using a lot of data? Well, what you're going to see is that we're going to give also we're giving unlimited plans already. And well, what you need to do is to with your carriers to also have a good negotiation to allow you to give also and to be competitive in the market and to give also unlimited plans. So that's more or less if the market moves to unlimited, I think everybody needs to move to unlimited and we're going to move to unlimited. So that's more or less what you're going to see. We're not the only MD and O, but I think as an MD and O, we're also very important for some carriers. And also the carriers want us to be competitive. So I think it's what you have been seeing all this year. We already have a unlimited plan in TracFone. Perfect. Thanks a lot. The next question comes from Daniel Federle with Credit Suisse. Good morning. Thank you very much for taking my question. My question is regarding the fixed line operation in Mexico. Revenues are declining in the region. My question is if you could share with us more color on the main reasons for this declining fixed line revenues in Mexico? And if you see any reason to see those revenues stabilize in the coming quarters? Thank you. Sorry, can you repeat the question? I don't hear you very well. Yes, sure. My question yes, do you hear me? On the fixed side, yes, yes, yes, yes. Yes, revenues in the fixed line in the wireline business in Mexico, why are what are the main reasons for the decline? And if you see any reason to for those revenues to stabilize in the coming quarters? Okay. Yes. When you say revenue size, basically 2 things are happening. The first one is the growth in the broadband market, it's been reducing in the last two quarters. And it's mainly due to the highly competitive market in which we are playing. And the second one is the fact that the long distance revenues are declining due to the reduction in the traffic of other operators. So basically what we could see looking forward is what we are putting is strategies to increase revenues so that they stabilize in the future and increase. Daniela, if I may add to that, I mean, notwithstanding this decline in non digital revenue that has been happening for some time, if you look at the rate of growth of service revenues on the fixed line side in Mexico, It came out at 0.6% in the Q3. The prior quarter, it had been 0.9. The prior quarter, it had been that's the first quarter, it had been minus 0.2. And the prior quarter, it had been 1.4. And a year ago it had been minus 2.0. So the fact of the matter is that you can say that fixed line service revenues in Mexico have been really flat for the last year essentially, okay? So yes, there's been some changes in like reductions in long distance revenues, but there's been good traction in new products, particularly in fixed broadband and corporate network that are and managed services have been doing really well, particularly with the new services that we have been offering in cloud and so on. They have allowed us to compensate for the decline in both. So service revenues in Mexico fixed line side flat for the last year and good growth in mobile that is the one that is determining the growth of service revenues in Mexico. Okay. Thank you very much. Thank you, Daniel. The next question comes from Richard Dineen with UBS. Hi, good morning, everyone. Thanks for taking the question. So just a question on unbundled local loop, maybe a question for Carlos Robles. But presumably, Telmex is pretty concerned by the ultra low local lupa modeling rate set by Efitel, Ps. 68 per month per line. It's about a third of the rate Europe, essentially what you're getting at Telecom Austria. And I can't believe the cost back is so radically different in Mexico. Just wondering if there's scope to appeal that rate as we head into 2018 because as things stand, Mexico looks like it's about the most profitable place to do ULL on the planet. So just wondering whether we should anticipate some disruption there if the rate remains like that. And just secondly, on the unbundly, if you can just give us an update on how many players are actively taking advantage of the ULL or maybe planning to do that to unbundle Telmex's last mile, that would be super helpful. Thank you, guys. Yes. Just to mention about unbundling, the disaggregation offer of services of Telmex began 2 years ago in January Ladies and gentlemen, please hold. Sorry, sorry. Thank you. All the main operators having asking us for services, either the resale of products or the unbundling of the local loop. In terms of pricing, what I can tell you is that, yes, the price that we have in Mexico is much lower compared to that to other countries. You compare Europe, Europe you have €9, and in Mexico you have only €3, so it's a third of what is happening. But at the end, this is one resolution of the IFT in which it will apply for this year and the next year. So we will see what will happen in the coming resolution of the in the coming resolutions of the IFT. Sorry. So just if I understand that correctly, the rate, the current rate of Ps.68 is supposed to is expected to continue into 2018 as well. Is that right? Yes. For the moment, yes. Okay. Understood. Thank you for those comments. And maybe just a super quick clarification, I think it was Walt's question earlier. Just to make sure, in Mexico, just trying to figure out the impact of the 5 days free service. Is there any sort of subscription credit for postpaid mobile or fixed line customers for those 5 days in Mexico, the kind of thing that you did with the postpaid mobile customers in Puerto Rico? Or was that 5 days free? Yes. It's totally different. In Puerto Rico, we give a credit for our postpaid. In Mexico, we just opened the networks in Mexico. There is no interruption. We have the service as usual. So we only give that for open the networks to give it to people talks with their families and to do that. So that's only the reason why we do it in Mexico. So it's different to what we do in Puerto Rico and what we do in Mexico. Got it. Got it. Thank you, Daniel. And thank you for those comments, Carlos, as well. Thank you very much. Thank you. The next question comes from Julio Arcimiegas with RBC. Yes. Hello. Thank you for taking the question. Some of your competitors in Colombia, they have mentioned that they are reinvesting heavily in acquisition and commercial activity. Have you seen some pricing pressure in the market? Can you give some color of the competitive dynamics in Colombia? And my second question is regarding Puerto Rico. I saw that revenue was down 17%. How should we think about Q4, considering that part of the infrastructure has been repaired? And have you seen that repairing fixed networks is more challenging than models in this market? Thank you. Well, in Colombia, I think we have been the promotions has been all the promotions and the market is very competitive always during all these years. So I expect that it's going to be the same in the end of this year and next one. I think everybody is in Colombia, I can split in 2. I think in the mobile, we're doing cost cutting and we're growing on post paid and we're growing revenue. So we're recovering a little bit on what we have last year. So we're doing very good. In fixed, we're growing our pay TV and our broadband and also we have like a cost cutting plan. So all overall in Colombia, we're doing okay and we feel we can do also a good 2018. So we start to stop the decline in the EBITDA, start to grow our EBITDA and I think we can sustain that. So that's mainly we're doing very good in peaks and in postpaid also we're doing very good in Colombia. In Puerto Rico, as part of the infrastructure is still not working. We don't still don't know what we're going to do in the Q4 in October November depends on how fast we can recover our network today. We have much a lot more infrastructure working than what we used to have when the hurricane pass. So we have been moving very fast. As you said, external plants and the fix is much more difficult and take more time to recover than the wireless and recover than the wireless and we're thinking what strategy to do to give some wireless to the people until we recover the peaks. So we are deciding and how long it's going to take us that recovery and what how we're going to compensate the people with. So still we don't know and we're in the process of deciding that. But still Q4 maybe is going to have some credits in the billing for some of our customers. And I hope it's much less in the Q1 of next year. So the recovery has been doing good, still very difficult because we don't have energy in the island. Still I understand and what my people told me sometimes we have 20%, 25 percent of the island with energy and then sometimes with 15% to 20%. So still a lot of The government said that at the end of December they are going to recover everything, all the energy. So that will help a lot to give the service. A lot of our problems is energy at this moment. Thank you very much for your question. The next question comes from Fred Mendes with Bradesco. Good morning, everyone. Thanks for the call. I have two questions. I mean, the first one is related to Argentina. How do you think that the competition will evolve in that market for the next quarters considering the M and A between Cabrales Vision and Telecom? And also on this line, AMEX seems to be another relevant convergent player in that market at least yet. My question is, was the overall leverage decreasing if you see an opportunity for an M and A move in that market? That's my first question. Thank you. Which market you are talking about? Sorry. We don't hear you. Sorry, Daniel. We talk about Argentina. Argentina, I think okay. Well, in Argentina, I think we're doing good. We're gaining market share as the revenues are doing okay. Our EBITDA is growing. And what we have is a good challenge for next year because next year that we're going to be allowed to give TV. So we're going to have a strategy to do some home passes and to start giving broadband and TV and fixed to some of our customers. So that's going to be the challenge in Argentina. We have the opportunity already to do it maybe it's not the resolution done, but maybe we're going to do also DIRECTV, satellite TV. So we are in the process of making an analysis and strategy to give broadband and to give TV to some of our customers. Okay. Okay. Thank you. Perfect. Thank you. And then my second question, just regarding the competition in Mexico. I had the impression that your competitors, they were decreasing the level of subsidies for the handsets, for the equipment. But it seems that on this part, they adopted different strategy and actually increased the subsidy. So just wondering if this reading is correct. And if it is correct, if there is any change, you could also, let's say, change your strategy and be a little bit more aggressive. Thank you. I think, yes, I think they have to do it because in my view the way and the subsidy that they have been giving to the customers are not profitable. So of course they need to change. If they want to be profitable they need to change some of their promotions and their subsidies that they have been doing are non profitable. So of course they have to change and do if they want to be profitable they have to do it. So I don't know if they are going to stay that way or they are going to return to subsidies. You never know what those the competition is going to do. But well, it's more rational what they have been doing. Okay, perfect. Thank you very much. The next question comes from Mauricio Fernandez with Bank of America. Thank you. Good morning. I would like to go back to the subject of pay television in Brazil, maybe to Oscar. Oscar, you mentioned that the declining subscribers and eventually, I'm not sure if PayTV revenues are falling too or not, is more on concentrated on DTH rather than cable. And particularly because it seems it's on the low end of customer base. Just wondering with economy improving already even though not yet as much as expected for next year, would have expected that to stabilize instead of still declining unless we are going through a structural change in which people are definitely cutting the service because they're watching video differently through OTT and all that. So just wanted to get your perspective about what's driving that decline in VTH and whether you see that happening as well in cable TV? Thank you. Well, I totally agree with you. I mean, if the economic is improved, we see a lot of room in GTH because as Daniel mentioned, the pay TV penetration is still very low in the country. So if the economics improve, we will see an opportunity there. I think if we have the right product, the problem is the economics. I mean, if you with a good economic as you see 2 years back, we were growing pretty good in those segments. So if those segments come back, I think we will have a good opportunity. But when you look at as well cable, the total market of PayTV has been declined. When you look at net service issues, we were growing pretty fast and then we reduced when the economic has slowed down. But on the last quarter, we see an improvement in pay TV and as well in broadband. So if that will continue, we will see a 2,008 a good year for not only broadband as well cable, pay TV and in some segments of BTH. So I agree with you. If the economic is right, I hope that we will have a good year next year if the economics improve. And adding something to Oscar de Mauricio is that I think I see DTH as a little bit as postpaid. You need to go to the customer, but to be profitable since the beginning. So if you're going to give everything for free, then maybe they are not going to pay you never. So the churn is large and the churn is going to be very high. So you need to have a good strategy to go to DTH to these segments of the market. And if you have a good strategy and you'll be profitable since the beginning, then I think it might have been a very good market. And I think if the economy of Brazil recovers, I think there's a lot of people who are going to be interested in these products. Okay. Thank you, Daniel and Oscar. The next question comes from Cesar Medina with Morgan Stanley. Hi, thanks for the call. I have two questions. 1 on Colombia. What does the arbitration payment does to your carryover losses and the tax impact in the country? As in what type of effective tax rate should we expect? And then the second one is how should we think of the impact of currency movements on the Mexican peso on your overall debt? What percentage of the foreign denominated debt is hedged? On the part of the currencies, as we've mentioned several times before, we manage our FX position. So that does not necessarily correspond to the underlying debt. And the notion of hedging doesn't apply necessarily to bringing everything into pesos because we do not generate all our revenues or EBITDA in pesos. So that's what I would say. I think if you look at the structure of our revenues and EBITDA, 80% of our revenues coming from currencies, which are peso, reals, euros 8 and dollars, okay? That's 80% of our revenues and 80% for EBITDA. So that's basically the currency that we need to be to have exposure to, irrespective of what's the accounting effects that we might have in Mexico on account of this. As to the Colombia situation, currently, we don't have any tax losses in Colombia that we were going forward. So I think it's an issue we need to determine how things should be what would be the impact of this measure. You know how it has been treated. You have seen we have basically had to account for a new obligation that was established by the ruling of this arbitrage panel. It gave rise to a new obligation that has come out without anything in exchange for this. So it's an obligation that has to go against our net worth of the company or our equity. And that's why it has had an impact on income statement by way of a compensating expense. That's how it has been called. So, what is that you have in Colombia? Well, I don't yet know. We need to look at this coming next year. Excuse me. Due to time constraints, we have time only for one more question. Our last question comes from Rodrigo de Manuela from Merrill Lynch. Thank you. Good morning, Daniel and Carlos. My questions are related to specific markets, Peru and Telecom Austria. We saw significant improvement on a sequential basis with EBITDA increasing in Peru by around 11% and then Telecom Austria by around 14%. I was wondering if there's any one off that we should be aware of or if you could elaborate a little bit on the strong performance this quarter? Thank you. On Peru, I think we're doing very good. The cost has been going down. We have been very careful on the cost and expenses in Peru. Our even with the competition, the new competitor that is in the market for the last 2, 3 years. We have we maintained part of our postpaid base, our revenue, so we don't lose a lot of market share. So we're in a good position in the market. And if we are reducing cost, we're reducing expenses and that will allow us to increase our margin. So it's not a one off of anything and we're doing good in Peru. So we're happy how the company is developing in the last two quarters. In Telecom Austria, I think Telecom Austria also there's good markets. The Eastern countries has been doing also very good. Also, Telecom Maestro has been good. So we're growing in broadband. We're growing in postpaid in some markets. In pay TV, we are also growing. So that's allow us to see the better result. Yes. I think generally Telecom Austria, we're having very strong performance as we've mentioned both in the fixed line platform. We have fixed broadband is growing very, very fast. And now we have pay TV. Pay TV is also growing, I think, it was something like 22% year on year. So and at the same time on the mobile side, I think that we have seen a stronger revenue position than most everybody had expected on account of the phasing out of roaming charges in that were very important for Austria in particular. And so it's been the end of the summer, roaming charges came down and it didn't really have much of an impact on our overall revenue. So that I think speaks a lot about the strength of the operation today in Telecom Austria. So very strong fixed. It has been good at managing this decline in roaming charges on the mobile side, and I think it has good potential. Overall, the economy in Austria has been much stronger than anybody else had expected at the beginning of the year. I think it's growing close to 3%. I think the expectation initially was 1.5%. And the rest of the international footprint there in Eastern Europe is also doing very well. Yes. Remember that 2, 3 years ago, we don't have anything. We're only mobile in all the Eastern Europe countries that we have. Today we have fixed broadband TV in a lot of those countries. So that allow us it's giving us good results and allowing us to grow inside TV in broadband. Building a convergent platform, which is what we found in Latin America is what they're doing in the European operations and it's paying well. Thank you. Thank you very much. One more question, yes. Yes. We do have time for one more question that comes from Mr. Carlos de la Capenta with JB GBM. Hi, thank you. Good morning. Good morning. Just going back to Mexico operations, I'd love to understand a little more. So you're seeing the increase in the wireless service revenues, which hasn't really been translating to higher profitability. And since we noticed a slowdown in the minutes of use year over year, at least when compared to the last few quarters, I'm wondering if the hampering the slowdown or I mean, certainly an improvement in EBITDA, but not as much as perhaps we anticipated. Do you think this is related to higher subscriber acquisition cuts perhaps? I don't understand your question. Sorry, I'll try to rephrase. We definitely saw an improvement in service wireless service revenues in Mexico even with the effect of the earthquake, right? So we would anticipate that that would improve that would translate to better EBITDA margin for the country and that wasn't necessarily the case. So I'm wondering given that we are seeing the minutes of use still growing but a much slower rate than before. Do you think this is related from other subscriber acquisition costs perhaps? Yes. Of course, remember that we're growing more on the postpaid side and that could be part of the reason why we are growing more on revenues than what we grow on EBITDA. Not everything that grows on revenues goes directly to the EBITDA because part of the revenues are also value added services and other things. But I think that's the reason the Susqueh acquisition cost. But you can say for instance if you look at sequentially, service revenue went from growing 2.3% in the 2nd quarter to growing 3% in the 3rd quarter. So that's an increase from 2.3% to 3% or 0.7%. But if you look at EBITDA, it was in the second quarter, it was down 3.3% year on year. And now in the Q3, it's up 0.9%. So the increase is 4.2%. So I think I don't know that we can say also too much more or than the basis of comparison also have an impact. Correct. That's helpful. Thank you. Thank you. This concludes our question and answer session. I'd like to turn the conference over to Mr. Daniel Haj for any closing remarks. I just thank everybody for being in the call and thank you. Thank you all. Bye bye. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.