Earnings Call: Q2 2017

Jul 19, 2017

Welcome to the America Movil Second Quarter 2017 Conference Call and Webcast. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to Daniela Lecona, Head of Investor Relations. Please go ahead. Thank you. Good morning, everyone. Thank you for joining us this morning. We're going to be discussing our 2nd quarter results. And we have on the line Mr. Daniel Hajj, CEO Mr. Carlos Garcia Moreno, CFO Mr. Oscar Von Causke, COO and also Gonzelmex, Mr. Carlo Rolf, CFO. Thanks, Daniela. And thank you everyone for being in the call. And I want to pass to Carlos to make a summary of the America Movil Second Quarter 2017 Financial and Operating Report. Thank you, Daniel. Good morning, everyone. Well, as it's customary, we have a web presentation today for those who want to see the slide show that accompanies this presentation. In the second quarter, financial volatility in Latin America became more subdued in line with the situation in the global markets with world economic growth on a slightly improving path. The U. S. Economy continued to hold up and those of the European Union and China showed clear signs of strength. The appreciation of the Mexican peso versus the dollar offset in the Q1 continued in the second one. So as the Brazilian real, the Colombian peso and the Argentinian peso depreciated versus the dollar And obviously, this versus the peso as well. The first one, mostly on account of new political pressures that's in Brazil. And the other ones in Colombia and Argentina, reflecting for the most part a worsening of the balance of payments position. In the Q2, our wireless subscriber base increased by 215,000 subscribers, having added 560 1,000 postpaid subs, including 166,000 in Mexico and 124,000 in Brazil and disconnected 350,000 prepaid subs. On the fixed line platform, we obtained 209,000 new broadband accesses in the quarter, most of them in Central America, Colombia and Brazil. Our postpaid base was up 5% 5.1%, with Chile's increasing 17.8%, Brazil's 10%, Colombia 7.7% and Mexico's 6.4%. Broadband accesses were up 5.7% year on year. Our 2nd quarter revenues rose 6.9% from the year ending quarter to nearly MXN 250,000,000,000 with service revenues climbing 8.1%. EBITDA was up 13.7% year on year to ARS 69,400,000,000. The increase in peso terms reflect the appreciation relative to the prior quarter of the Mexican peso visavis most of the in southern operating currencies, as I've mentioned before. At constant exchange rates, it's important that constant exchange rates, our service revenues were up 4.2% year on year, their best performance in 10 quarters. And EBITDA showed up 10.4%, marking its strongest client in the last 5 years. In several instances, as the revenue base has been rebuilt, the impact on EBITDA has been proportionately greater. Service revenue growth was driven by mobile data revenues, which were up 21.8%, with fixed broadband revenues increasing 7.5%. Mexico and the South American block, particularly Colombia, Argentina, Chile and Peru were the main forces behind the strong expansion of service revenues. All operations, Phase 1, presented ARPU increases relative to the year earlier quarter. Our service revenues were denominated in 20 different currencies with the Brazilian real accounting for 25%, the Mexican peso for 22% and the dollar for 21% or nearly 27% if the currencies back to the dollar are considered. The euro accounts for nearly 10% of our revenues. The EBITDA margin stood at 27.8%, up 0.7 percentage points from the prior quarter and up 1.7 percentage points from the year earlier quarter. EBITDA margins increased sequentially in practically all of our operations, I think with only 2 exceptions. But EBITDA margins were up. Even though the Q2 seasonally tends to be weaker than the Q1 because of the stronger sales that we have for Morgan's Bay in particular. Substantially, all of our operations observed sequential increases in EBITDA with very significant moves in Peru, 14%, Chile, 11% and Argentina, 7.5%. In Europe, Mexico and Colombia, the quarter over quarter rise was 5.8%, 2.7% and 1.9%, respectively. So that means in all major operations, we had sequential increases in EBITDA, absolute terms. On the following charts on Mexico, Colombia, Chile and Peru, those people that are watching the presentation can see the acceleration of EBITDA growth that has come about with the recovery in revenues. Our operating profit increased almost 21% from the year earlier quarter to ARS 31,200,000,000. After our comprehensive financing cost of ARS 13,000,000,000, it's offering about a net profit of ARS 14,000,000,000 in the 2nd quarter, which was 86% higher than that of the year earlier quarter. We continued our efforts to reduce our leverage with a net debt reduction of MXN 27,000,000,000 in cash flow terms in the Q2. Our outstanding debt has come down from ARS630,000,000,000 in December to ARS550,000,000,000 in June, which is a 12.5% decrease, which reflects 1st and foremost our debt reduction efforts, but also the appreciation of the Mexican peso peso currencies in the period. Our net debt to EBITDA ratio stood at 1.9x at the end of June after accounting for our derivatives position and the equity credit of our hybrid bonds. Our capital expenditures totaled ARS 51,000,000,000 in the first half of the year, whereas our acquisitions reached Ps. 3,600,000,000. After adjusting for dividends received from KPN, net shareholders distributions totaled ARS 734,000,000 in the period, mostly by way of share buybacks. Our cash flow from operations was almost entirely consumed by our capital expenditures and our net debt amortizations. With that, I would like to pass the floor back to Daniel and Q and A session begin. Thank you very much. Thank you, Carlos. I think we can start with the Q and A, please. We will now begin the question and answer session. The first question comes from Amir Rovsatosky, Barclays. Please go ahead. Thank you very much and good morning folks. I was wondering if we could dial in a bit more in terms of the competitive landscape with respect to your Mexican wireless business. When we look at sort of ARPU trajectory, it seems as though ARPU continues to improve, at least relative to our expectations. Could you provide a bit more color in terms of how you see the competitive landscape shaking out when it comes to competitive pressures? And then maybe a quick follow-up. We've all seen some of the news with respect to the litigation when it comes to the constitutionality or legality of the interconnection questions around competitive interconnection fees and so forth. Any thoughts in terms of sort of your positioning, what type of benefits that could accrue to the business? Should the case work in your favor? Any color along those lines would be helpful. The 0 interconnection rate, I just want to tell you that since 2014, we filed some Amparos injunctions against the certain articles of then recently enact Telecom and Broadcasting Law. Since we strongly believe that such articles including those related to the so called 0 interconnection rate interfere with the constitutional reform of 2013. We understand Stelsell and Paros filing 2014 are set to be resolved shortly. Although at this point, there is not an specific day announced by the Supreme Court. Once resolved, we will communicate the outcome of soft challenges and the depth of the resolution. So that's more or less what I can say about that. There's nothing else that we can talk at this moment. On the landscape of Mexico, what Amir, what my view is I think to start on that, I want to tell you that the rates are very low in Mexico. As we know in prepaid and in postpaid in all 2016, we have been reducing all the rates. So the rates today are very low in Mexico. I think since the last 3, 4 months, things are a little bit more stable, No more reductions on rates even still some of our competitors are subsidizing still a lot some of the handsets. But what is very important is that in my view the networks are very important and the customer care centers and all overall is not only in Mexico all about rate. It's important the service that you give to the customer. And at this point, I think Telcel is the superior brand, very good recognition, very good distribution, good quality. So I think that our customers are well satisfied with our service. And it's what we have been seeing for the last years. People is preparing to stay with Telcel than moving to other companies. Data is improving a lot, I. E. The rate of data is growing very fast. A lot of prepaids are moving to smartphones. So as they are starting to use more and more data and with the network, the coverage and everything that we're having as the people is staying and happy with the services more or less what I can see. Still as I told you since the beginning, the rates are too low in Mexico or very low in Mexico. So I think are the lowest in by far in Latin America. Other things that I in my view about that interconnection and zero rate, what doesn't make any sense for me is that the interconnection today in Mexico is 2 times higher than the average price that we see in the market. So it doesn't make any sense that the interconnection that we're paying is more or less 2 times higher than the average price that we see in the market. So well, those are my comments and let's see what those the Supreme Court is going to define. The next question comes from Richard Dunin, UBS. Please go ahead. Hi, thanks for the question. This is actually Maria Azevedo on behalf of Richard. You've obviously done a great job reducing leverage, but with CapEx sales around just 10%, we would like to know whether this might rise a little in years to come or if you think that 10% is sustainable going forward in your view? Well, I think what you're seeing in the first half is partly reflecting the seasonality in terms of the execution of CapEx. It happens every year. It's not linear. I think the guidance that we have given for the year is CapEx in the neighborhood of $7,500,000,000 So you can come out with your numbers, but it's obviously not a 10% of sales number. It's higher than that. But again, don't make too much of the seasonality in the execution of the CapEx plan. And what we want and I think with this more flexibility times debt to EBITDA. So we're returning to the numbers that we like. So we have more flexibility to invest where we see opportunities to have the best networks, to have the best coverage, to give the best speeds in data. So well we have more flexibility. So we still don't know what we're going to do next year, but we don't have any change for this year, but we have more flexibility and that's good. Perfect. And then as a follow-up question, if you could please share with us if you're seeing any developments in the local lupa and opportunities with the MVNOs that will be very helpful. Thank you very much. Well, if the in the MVNOs, I think there are 3 or 4 MVNOs, I don't remember exactly if the work is or 5 MVNOs working here in Mexico with us and they're fine. We're following the rules that we have with the ESSA and I think in terms of the MVNO is okay. They are growing and well that's more or less what I can say. In terms of the local loop, I don't know if there's some comments. Also in the local loop on modeling there are about pipe operators are using it and we're providing those services as it is stated on the ruling of Aetate. The 5 operators using the local loop of Telenex also. Perfect. Thank you very much. Thank you. The next question comes from Walter Piecyk, BTIG. Please go ahead. Thanks. Daniel, you're seeing a lot of good ARPU growth, presumably from all the beta growth that you're seeing. But I was noticing that in Brazil, ARPU was down 3% sequentially. Is there anything different happening there in Brazil as far as how people are using the product or how pricing is working in the market that might have explained that kind of sequential decline in the wireless ARPU there? Yes. I think we're let me talk a little bit about Brazil, okay? On Brazil, I think we're doing very well on the fixed line as the TV, fixed and broadband. I think we are doing well. We are reducing our growth because the economic situation that is in Brazil. We don't want to grow and then with this economic situation have expenses or disconnection. So we have been very careful at this moment with the growth of TV and broadband, but still growing and maintaining market share. In the post in the let's say wireless side, in the in the wireless we're doing very good on Konta. Konta means the postpaid that doesn't have any limits. We're doing great. We are growing and we're performing very well. Even in prepaid, we are also growing our revenues. We stopped decreasing and growing the revenue. So I think all overall, we are performing good. Still in Brazil, difficult situation on the political side and doesn't help us on the economy of the country. But I think we are making the investments. We are trying to reduce cost, making all the synergies. It's not from one day to the other one, but we are performing. We are growing our EBITDA from last year more than one point, Still a lot of unemployment in Brazil. And other important issues, if you divide the 2 markets consumer and corporate, I think on consumer, we're also doing very good. But on corporate, we are doing good, but the prices on the corporate side has been going down very fast. So with these things, companies try to get the best of that. So the competition is very intense and the competition is very intense on all the corporate market and well that makes that the revenues with the same customer are decreasing both. Oscar can help us to make more comments on Brazil. Oscar, I don't know if you have something else. Sure. As you mentioned, I mean, when you look at the total market, the total market is shrinking a little bit in the fixed world. But when you do the breakdown of the revenues, we are doing pretty well in fixed broadband. We are growing 17%. So we've been working on ARPU in order to move The next question comes from Alejandro Galloestra, BBVA. Please go ahead. Sorry, sorry, sorry. No, Oscar, something happened here. Yes, you can talk, Oscar. Yes. Well, as I mentioned, I mean, when you look at the total fixed market, it's shrinking. So when you make the breakdown of the revenues, we are doing pretty well in fixed broadband. I mean, we are growing more than 2 gits. We are growing like a 17% accumulated figures in revenues. In pay TV, we've been having a lot of disconnection mainly in satellite TV in the low end of the market. But we've been working in increasing the ARPU in all the platforms in pay TV. The main impact that we have is like what Daniel mentioned, we have a lot of price erosion in the enterprise market given the economic situation. And secondly, the voice traffic has been decreasing very importantly. So when you add all the market is shrinking in Brazil. But the way that we are approaching the in the market is to improve the ARPU in all the products. And in the enterprise market, we are complementing the offering with IT services in order to compensate the price erosion that we are suffering in Brazil. And thank you, Oscar. And just to finalize your specific question, I think the ARPU in Brazil is growing from the Q2 of 2016 that we have 13 reals to Q2 of 2017 to BRL 15. So their ARPU in Brazil is growing 9.1% year over year. So I don't know why you mentioned that it's reducing the ARPU is growing in Brazil. Yes. I think I was mentioning sequentially not over year over year, but that's fine. But just one other question for Carlos, the debt leverage of the company is now below 2. And if you look at the share repurchase you guys did in like 2013, 2014, 2015 very high, It obviously slowed down the last 4 quarters or so. Would you anticipate now that your leverage is at that level and your operations are performing so well that maybe we see some more share repurchase going forward? You think that opportunity that possibility for next year. I think that we are still set on getting to 1.5x net debt to EBITDA. I think it's something that we should be able to achieve in the next 3 quarters or so. And I think once we have what we want, I think we are open to all the uses of our cash. Great. Thank you, Carlos. Thanks, Daniel. Thank you. Thank you very much. The next question comes from Alejandro Gajostra, BBVA. Mr. Gajostra, your line is open. Hi, good morning, Daniel, Carlos and Daniela. Thank you very much for taking my question. Taro, you just mentioned that you have leverage target of 1.5 times net debt EBITDA for the next 54 quarters. Is that correct? No. The target is the 1.5 and what I said is that I expect that we should be able to get to that target within the next 3 or 4 quarters. And I was wondering if you have a plan to hedge your debt or interest expenses at the current FX rate? Or if we should expect profits to reverse if the Mexican peso depreciates again? I think you cannot be expecting for your density depreciates or appreciates. I think that we tend to do some rebalancing of our positions over time as the mix of our revenues changes. I think that you just saw in the presentation that Americas has revenue denominated in 20 different currencies. And the most important ones, 50% of our revenues are the pesos and the reals, okay? So we have another 50% that is mostly dollars and euros. And so our debt exposure very much reflects this kind of revenue mix that we have. That's what we aim to have. Okay. So I understand you're not engaging into significant currency hedging at this time? We do rebalancing of position from time to time, yes. Okay. And my second question is actually, because I would like to have a better understanding of the driving forces behind the strong ARPUs. Is it simply the exponential growth that we are seeing in wireless data perhaps linked to high smartphone penetration or maybe the implementation of shorter expiration times in prepaid cards as well as the strategy that you recently implemented in Mexico? Well, what we're trying to do all overall in all Latin America is to try to drive the customer to have more data, more minutes at higher ARPU. So it's what we're doing focusing a lot on the postpaid segment driving promotions on the postpaid side. And in the other way in the prepaid, yes, what we're doing is recently we don't do anything, but at the beginning of the year we got some dates on the prepaid cards in Mexico. And well that's also part that is helping to drive ARPU higher. But we are both making some promotion driving the customer to get a better plan and spend a little bit more, but having much better a lot more data, more minutes and other value added services is what we're trying to do all around Latin America. So Daniel, are you also lowering the expression times in prepaid cards in the rest of Latin America? No, no, we are not. As I remember in this quarter, we don't reduce any expiration date in the rest of Latin America. No. Is this something you plan to do in the short term? Yes. I don't know if we want to do that. Maybe we can have what we're doing a lot is making some packages, okay? Instead of reducing, we give packages to the people in the prepaid with better terms, better conditions, more minutes, more data and to spend a little bit more is what we and people is driving to use those packages. So instead of having let's say 100 megs for 30 days maybe you can have 300 megs for 7 days in a package and at better price than the other one. So those type of packages are the ones that are driving higher ARPUs. Okay. Thank you, Daniel and Carlos for the color. Thank you very much. The next question comes from Fred Mendez, Bradesco Bank. Please go ahead. Good morning, everyone. Actually, I have two questions. I mean, the number one, if you can get to Brazil, you changed the leadership of Claro in Brazil in April and on May you announced an aggressive price strategy, particularly in the pupil space segment. Just want to understand about what terms of in terms of your strategy, what can we expect in Brazil and of course in prices for the next quarters? That will be my first question. And then my question is, look at the margin of the sale of the equipment, it improved versus the average of the last quarters. Also when you look at less representative countries in terms of EBITDA contribution, we see an increase in sale of equipment and it's still an improvement in EBITDA margin. So just wanted to get a better understanding of the dynamic. And then on the same line, just to understand how much of that is a chain commercial strategy that you're giving less subsidy and how much the FX impact consider of course the maximum peso versus the dollar? Thank you. The first one is Brazil Postpaid. Well, we get a little bit more aggressive, but it's not so much aggressive. I think we're doing something on limited voice in Brazil in postpaid. There's something that is coming. We have it in the really higher plans. We'll reduce to some lower rent plans. And I think it's working very good. People like that. And it's under reasonable prices. It's not that we're dropping the prices down. So these promotions are good promotions driving higher ARPUs and people is happy with what we are presenting. So I for us, I think it has been a very good promotion and people is coming in Brazil. Today in number portability we have one of the highest number portability that we have in Brazil at this moment. So people is preparing at this moment this type of plans and what were the promotions that we're putting in the market. So that's one thing. 2nd, what you see in the margins in the subsidies and margins in all the cities and margins in all the handsets, smartphones, feature phones everything. The strategy is and I think it's going to be all around the world. The strategy is not to subsidize. So we think that subsidies are in prepaid. Well, you never know how long the people is going to stay with you. So it's very difficult to see what would be the subsidy if you don't know how much is going to consume or for how long is going to stay with you. So we're trying to take out as much as possible the subsidies on the prepaid segment. And I think as the market is a lot on the competition in each country, but our strategy in the next years is to take out subsidies in the prepaid side. In the postpaid side, you know where you have a contract, you know where you can subsidize, but also the strategy could be to reduce those subsidies in the postpaid side. So that's the strategy on America Movil. I think that's the right strategy for all the telecom companies because to give big subsidies and these type of prices that we're giving in all Latin America doesn't make any sense. So in terms of margins and subsidies, I think we're going on the right direction. And the last question, I don't get it. Can you ask again, please? No, yes, Daniel. I think you answered both questions. If you just allow a quick follow-up on the first one about Brazil. You mentioned that portables are doing quite well after the change. So can we even right to say that at this point, you find your price are quite competitive and we should not see, I guess, any moves, any more moves, I mean, offering more data for the same price, you think you're already competitive, you shouldn't see any change in the short term at least for now? No, I don't know. I cannot say anything because I don't know what those my competitors are going to do. When you do things internally on the company, you can plan for 2, 3, 4, 5 months, 1 year when you have but when the market is open and you don't know what is going to do your competitor tomorrow or the other competitor in 2 months or increase MaxSold, well, I cannot assure you that we are not going to move. But what I can tell you is that we are going to be competitive and we don't want to grow being not profitable, but we want to be competitive in the phosphate market. Remember something that is very important. Our network today in Brazil is the best network in terms of quality. So we are ranked the best network in the quality in Brazil. So we have very good speeds. We have very good data. So the perception on Brazil on our network is very good. We're working a lot on the coverage. I think we're getting there. But in terms of quality, we're doing very good. So we're investing in Brazil. And I think Brazil, we feel I feel personally, I feel very comfortable on our strategy in Brazil with our management in Brazil with everything that we're doing in Brazil and it's going to take some time to see better and better numbers. Okay. So that's my comment on Brazil. Perfect, Daniela. Thank you very much for the extra color. Thank you. The next question comes from Rodrigo Villanueva, Merrill Lynch. Please go ahead. Thank you. Good morning, Daniel and Carlos. My question is related to Colombia. I was wondering if profitability at levels of around 40% are sustainable in this country and what has been driving this? Thank you. Well, I think yes, we used to have 40% and I think we're having we have a very good cost reductions in taking care about our cost and our expenses in Colombia. Then we're having good growth in the fixed side in TV, broadband and fixed. It's growing maybe 6 points of the EBITDA year over year. In the wireless side, postpaid is growing also our revenues. Data is growing very good also in prepaid and postpaid. So I think we are there and I hope we can sustain and still improve what we have right now. Understood, Daniel. Thank you. And I have another question related to Guatemala, I'm sorry. There has been some new reports suggesting that AMX has been involved in a corruption case there. Could you be able to elaborate a little bit on this? What is the reasoning behind this investigation? Is it the government the one that is doing so? Any additional color would be helpful. What I can say is that the Guatemalan authorities have determined that certain payments made back in 2011 by our Guatemalan subsidiary Telgua did not comply with the Guatemalan laws governing contributions to political parties. We are conducting right now a review of the circumstances of these payments and we are cooperating with the investigation. Our review is ongoing and at this point, I don't have any further comments on it. So we are reviewing that and we don't have any more comments. The next question comes from Julio Arsenegas, RBC. Please go ahead. Yes. Hello. Thanks for taking the question. Coming back to the ARPU evolution and in general service revenue evolution across the board, which actually has been quite good in Mexico and Colombia. Just to have a clear view, is the company increasing the prices following a more for more strategy? That means that or basically does the customer has the optionality to subscribe to these bundles of services or just the company's increasing the price to an specific base in exchange of more for more services? And my second question is if you could give us more color on the competitive dynamics in Colombia. How do you I see that the market actually quite stable. Do we expect this stability to continue going forward? Thank you. Well, on the first question, I think, yes, we're doing promotions more for more as the people pay a little bit more and then you get more, okay? So and this is helping all overall. And the thing that it's helping us a lot is that very important that if you have a good network, if people rely on your network, then people use your data and then it's what is happening. So we're giving promotions as you said more for more. Yes, we're giving and people is getting those because they need to use more and more data. In the other side in prepaid where we are growing smartphones and that is helping us that they drive more data and they pay a little more. So that's more or less our megabytes of use across America mobile are growing around 80% year over year. So it's a lot. So you are almost doubling what they used to have that they used to use 1 year ago. So as you could see people is using more and it's more for more our promotions that we're having. Okay. So it's demand driven? It's not like basically just price increase is demand driven this No, it's demand driven. Of course, it's demand driven. So price increase, I don't think we have any country where competition let us only increase prices and that's all. So I would love to have that. But well, unfortunately, it's not easy to have a and very competitive markets in all Latin America. So it's more for more of course. Thank you. And about Colombia? Colombia, I think as I said maybe 1 year ago, we make some changes in the organization. I think these changes in the organization are helping us. We put a very, very cost control in the company and very focused on the markets to grow distribution, to grow customer care, attention our customers a little bit more care centers. So a lot of online also helping us to attend our customers. So we are evolving very well. We are really focusing on Colombia and I think we can sustain what we achieve at this moment. Thank you very much. Remember that in Colombia we have having a lot of things, a lot on the regulatory side asymmetric interconnection that today is not anymore. But also we have a fiscal reform on January. And well that also it increased the tax to the end customer like 3 points from 16 to 19. So well that's reduced even with that we are think we are performing very well. The next question comes from Daniel Fedele, Credit Suisse. Please go ahead. Hello. Good morning, everybody. Could you please provide us with an update on the functional separation plan in terms of timing and what which are the main points in discussion? And also if you could comment the chances of including the PayTV license in the negotiation would be very good? And the second question is more like a follow-up on a previous question on CapEx. I'd like to know if this CapEx reduction has been more concentrated in any specific markets or any specific segment? Thank you very much. On the separation proposal, just what I can tell you is that it's been reviewed currently by the IFT, by the IFTEL. As a group of representatives of Telmex and also from the IFT have been discussing the different aspects of the separation. Telmex is in the process of providing additional information requested by the IPETEL. So at this moment, we are presenting and providing more information. And we expect the approval process at the IFT to be resolved maybe in the Q4 of 2017 or the first one of twenty 18. So I think that's the timing. I don't have anything else to say that we are providing more information to them and that it's going to go to the Q4 or to the Q1 of this year. So that's that. On the pay TV license, we haven't talked anything on that. We're talking about the separation. But as I can tell you, we I think in Mexico is the only place where there is no there's a limitation for the telco to give TV and doesn't make any sense. And I hope that the IFFEL understand and review that and give us the permission to give TV. So that's what I have. In terms of CapEx, I think and it's very important to remember what we do the last 3 years. I think in 2013, 2014, 2015 we do a very big CapEx investment, okay? We do mark more than 30 $1,000,000,000 in 3 years, maybe $31,000,000,000 or $32,000,000,000 in 3 years. So that give us the basis to do what we're doing today. So still we feel comfortable with the CapEx. Revenues and data is growing a lot. So maybe we're going to need to put a little bit more CapEx in the next years, but we don't know. Still we feel comfortable with our budget that we have this year. We are not of course maybe we are giving a little bit more CapEx to 1 or other countries depending on the demand, depending on the growth of data. So all the countries are important and we're focusing in all of them. So the big investment that we do years ago we do it all over all Latin America and that give us the support to do what we're doing right now. The next question comes from Carlos de la Garda, JVM. Please go ahead. Thank you for the question. Just very quickly in the U. S. We saw a very important increase in EBITDA margin. You guys also mentioned that without the inorganic growth that would actually been higher. So I just want to understand what is the nature of this and if it's sustainable going forward? So that will be the first question please. Well, on TracFone, I think as we know as we have been talking as the competition is being important in the prepaid segment in the U. S. But I think TracFone is performing well. We are being a little bit more profitable than what we do last year. We are at this moment end of the second I think in the Q3 we haven't been so competitive, but right now we are competitive again in the market. We launch new plans with more data and that is giving us to be more competitive in the market. So we feel comfortable on what we're doing in TracFone. We expect a good the next two quarters. As we grow more, of course, it goes directly to the profitability, but we feel that we can achieve a better EBITDA than what we do last year. So even if we grow we have been doing new agreements with T Mobile, with Verizon, with everybody, all our carriers and that give us the possibility to be more competitive in the market. That's perfect. Thank you. And the follow-up would be regarding Argentina. What do you make of the merger between your competitor, Tableau Vision and Personal? I mean, I know you guys will be able to offer PayTV by 2018, but how does these moves affect your outlook for the country going forward? Thank you. Well, what we're going to see is we're going to have a player that it's convergent. They have a full integrated competitor and what we are going to do, well what we're going to need is we're going to have the permission to give TV at the beginning of next year and we're preparing the company to do that. So that's at this moment what we can say. And we already have some households. We already have some fixed in Argentina with fixed voice and broadband not with fiber. So we preparing our network growing a little bit our network to do more and more and to have be able to get in our network TV at the end at the beginning of next year is what you could see. The next question comes from Marcelo Santos, JPMorgan. Please go ahead, sir. Hi, good morning. Thanks for taking the question. I just wondered if you could comment a little bit more on the Peruvian recovery. We see much better margin and there is additions in prepaid, but postpaid is still seeing some declines. So if you please give a little bit more detail on what has been the drivers? Yes. Let me make you like a small summary of Peru. I think we have the last years we have 2 main things. We have one new company entering the market. They bought Nextel. They get in the market and they've been very aggressive. The second one we lose the option maybe 3 years ago the option of the spectrum in the for the 4 gs license. So for that time, there is the competition has been very strong in terms of the to give the speeds and the quality of the network because we don't have the spectrum that we need. But in 2016 we buy a company, the Colo, we have the spectrum for 4 gs. We start to invest. I think the market is much more stable and rational in terms of that. It's also very competitive, but it's more stable. And the good thing is in all those years we don't lose a lot of market share. So we sustain our revenues. We have the same amount of subscribers that we used to have 3 years ago more or less. And well what we need to correct is we have to put other thing that hit us a little bit is some interconnection rates that goes down that also hit our revenues. So all overall, 2006 team we invest. We correct some of the things that we have. We put some cost controls. And today well you could see that Peru is growing 50% EBITDA as they grow in postpaid, growing in prepaid. So all the things, the difficulties that we used to have 3 years ago, I think we worked very hard on 2016. 2017 give us the return on what we have. And I think we can sustain and do better than what we have been doing until today. So it's what Peru, I don't know exactly what is going to happen. Competition in the next month. So it's difficult to say, but the trends that we're having in Peru are very good trends and I hope we can sustain those trends. So Carlos wants to give you some numbers. I think it's more to highlight that there's good growth in ARPU. I think ARPU is going 7.5% year on year. And I think that this is, as Daniel said, very much supported by the fact that we have now. There were no spectrum constraint anymore. So we are providing more services both in voice, okay? Voice menus have gone up 21% year on year, but also in data, okay, the expansion in data per users has been very significant in Peru. So again, as in other countries, we've had a good net growth. We've had invested a lot throughout the years. Then all of a sudden, we run into a spectrum constraint. That has gone away. And now we are benefiting from these past investments and with a good position in the market. There is only time for one more question coming from Mr. Diego Aragao, Morgan Stanley. Please go ahead, sir. Hi, good morning, Daniel, Carlos and Daniela. Thanks for taking my question. After the spin off of your tower business in Mexico, I was wondering if you have any plans to divest from towers in other countries anytime soon. Thank you. I mean, that will be something that we have been asked repeated reviews since we did the telecites spin off. And I mean, one reason for doing the telecites, the one that we initially had when we got into it was, if that's a more efficient means of having administering your balance sheet. It's a more capital light model and that made a lot of sense. But it having done it, we know that it's very difficult to get through all the tax issues or all the legal issues. Contracts can be quite cumbersome. So it's I think the short answer is something that we are overly willing to keep on considering because of the advantages from a balance sheet point of view. But it's also something that it's not easy to get done, and we have to see what are the other countries that may lend themselves better to this kind of transactions. Okay. Just quickly, actually a follow-up regarding Argentina. What will be a timeline for you to provide video service in that market? Thank you. Can you repeat it again, if I don't hear? Yes. I was wondering how long it will take for you to provide video service in Argentina in 2018? In January when we have the permission, I think we can be ready to give TV, okay? So we already have fiber to some houses and we have the technology. We do it in other countries. So I think in January we can start give TV. When they we have the right to do it, we can do it. Okay, perfect. So I would assume that probably this is the same case as of Mexico, right? If you get a license in Mexico probably on the very next day you will be able to provide video service as well, right? Yes, not on the very fast. Okay, perfect. Thank you very much. Thank you. Thank you very much. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Daniel Hajj for any closing remarks. Well, Josh, thank you everybody for being in the call. And we just want to remind everyone we are hosting an Investor Day this year. It's going to be held in Mexico City on October 11. The link to register for the event will be available in the next couple of days. It will be by invitation. So if you have not received one, please feel free to contact myself or anyone from the team and Paloma will be helping us on this. And hope you could join us. Okay. Thank you. I think you will send all the details to them. Okay. Thank you very much. Thank you all. Bye bye.