Welcome to the América Móvil first quarter 2017 conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Daniela Lecuona, Head of Investor Relations. Please go ahead.
Thank you. Good morning, everyone. Thank you for joining us in this call. We have on the line Mr. Daniel Hajj, our CEO, Mr. Carlos García Moreno, CFO, Mr. Óscar Von Hauske, COO, and also Mr. Carlos Robles, CFO of Telmex.
Thank you, Daniela. Welcome, everyone. Carlos is going to make a summary of the first quarter results.
Thank you, Daniel. Good morning, everyone. In the first quarter of 2017, economic activity remained sluggish in Brazil, but appeared to be strengthening across the region. This included Mexico, that resumed its expansion after a rocky start for the year in the wake of the U.S. election, as increased uncertainty about NAFTA's prospects impacted consumer sentiment and pummeled the peso. By the end of the quarter, retail sales were surging and the peso versus the dollar had risen to its best level since the U.S. election to have the top-performing currency in the period. First quarter revenues of MXN 264 billion were 18.5% higher than those of the year-earlier quarter, with EBIT of MXN 72 billion, rising 15.8% year-on-year. The EBITDA margin, 27%, 27.1%, were nearly flat in the period, having declined 0.6 percentage points.
The significant peso increases reflect the year-on-year depreciation of the peso versus other LatAm currencies and the US dollar, with the peso declining 28% versus the BRL, 20% versus the COP, and 8% versus the US dollar with respect to the prior year. Consolidated service revenues continue their comeback, led by Mexico and Colombia. At constant exchange rates, they were up 3.1% year-on-year, compared to 0.7% the prior quarter and -0.2% the previous. Most regions experienced sequential improvements in service revenue growth. As service revenue growth accelerated, EBITDA continued to improve with a significant swing from an 8.1% year-on-year decrease in the fourth quarter to an increase of 1.5% in the first quarter, the first increase in eight quarters. Mexico, Brazil, Colombia, and Peru were all important contributors to this sequential improvement, with the latter experiencing an important turnaround and Mexico recovering rapidly.
To some extent, the acceleration in revenue growth can be traced back to the important and sustained increases in broadband accesses and postpaid subscribers, with the former increasing 6.4% and the latter posting a 5.1% year-on-year increase. Postpaid net adds totaled 632,000 subs in the quarter, including 177,000 in Mexico and 205,000 in Brazil. Every single business line presented sequential improvements in the first quarter at constant exchange rates, most notably mobile data revenues, whose rate of growth shot up from 11.7% in the fourth quarter to 16.5%. Voice revenues recovered sequentially on both platforms, particularly on the fixed one, although are still posting negative rates of growth. Over the last year, the contribution of mobile voice to our revenues declined 3.9 percentage points and was for the most part substituted for by the contribution of mobile data revenues, which increased 2.8 percentage points to 33.5%.
Data revenues reached 10.4%, which is 1.6 percentage points more than a year before. The significant currency movements over the last few quarters, particularly with the Mexican peso, led to a marked change in our revenue structure by currency. In the first quarter, BRL denominated service revenues accounted for 25% of the total, followed by MXN denominated ones with 22%. Dollar-based revenues represent 21.6% of our revenues, but that percentage increases to 27.3% in those countries whose currencies are practically pegged to the US dollar. Particularly Guatemala, Dominican Republic, are also considered our dollar-based. Revenue trends in local currency terms show very positive trends in Mexico and several South American countries, with ARPU growth rates trending up. EBITDA responded strongly to higher service revenue growth, particularly in Mexico, Colombia, Brazil, and Peru.
Our operating profit rose 8.3% from the year-earlier quarter to MXN 30.4 billion, and together with financial income in the amount of MXN 30.3 billion, helped us attain a net quarterly profit of MXN 35.9 billion. Financial income stemmed from foreign exchange gains of MXN 37 billion that resulted for the most part from the appreciation of the Mexican peso versus the US dollar and the euro in the period, at least in the quarter. Our net profit was equivalent to MXN 0.55 per share and $0.53 per ADR. Capital expenditures totaled MXN 29 billion in the quarter. We invested an additional MXN 3.7 billion in the acquisition of ownership interest in Olo in Peru, which basically has spectrum, and Metronet in Croatia, and effected share buybacks in the amount of MXN 448 million.
Substantially all of these outlays were covered by our cash flow, which was mainly financed by MXN 2 billion in net borrowings from the market. Notwithstanding our net borrowings, in peso terms, our net debt came down to MXN 584 billion from MXN 630 billion in December as a consequence of the appreciation of the currency. As of March, our net debt to EBITDA last 12 months ratio stands at 2.1 times, which is roughly flat with the entire quarter. With this, I would like to pass the floor back to Daniel, and we can start the Q&A session right now. Thank you.
Thank you, Carlos.
Thank you. We can take the first question.
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Amir Rozwadowski from Barclays. Please go ahead.
Thank you very much, and good morning, folks. A couple of questions, if I may. I was wondering if we could touch a bit on the competitive landscape in Mexico at the moment. It does seem as though, based on the commentary that you provided and some of the comments in the release, you are seeing a bit of an easing of the pricing pressure that was experienced over the course of last year. I was wondering if you could talk a bit more about the trajectory at which you expect pricing to unfold through the course of this year, and what you're seeing from a competitive landscape. Secondly, we've seen some of the order or the color from the regulatory agencies about the expectations for local loop unbundling.
How do you think about the potential impact on some of the segmentation or color that they have provided could have on the business on a going forward basis? Thanks very much.
Thank you, Amir. Starting with the Mexico landscape, I think Mexican market is still very competitive. I think it's more stable. I have to say that it's more stable, but very competitive. The prices and the promotions that we have in the market are still there. We are not giving extra promotions or reducing more the prices, but it's stable right now. You are asking also how we see the year on that. It's very difficult. We don't know exactly what our competitors are going to do. What we are sure is that we still have a very competitive network with a very good quality, capacity and have a lot of distribution points there. I still feel that we are very competitive in Mexico, that our network by far is the best, and it's what is giving us what we have today.
People is not looking only for price, is looking also for quality, capacity, speeds, data. There's still a lot of things that people is looking. I'm happy the way our network is developing, and I still think that the market for the end, the rest of the year is going to be more stable. I don't see much higher promotions. Those are in the plans. When you see subsidies on handsets and other things, depends a lot on the exchange rate. You know that we buy all the handsets in dollars, so it's going to depend a lot. We used to have exchange rate of 20 or 21 at the beginning of the year. Today it's at 19. It's changing a lot, and that will change a lot the prices of the handsets.
What I'm feeling and my view is that we can see more stable promotions for the rest of the year. On the regulatory side, I'm going to make you a summary of what has been happening. On March 8th, the IFT notified us new asymmetric measures as part of the second year review process of the measures imposed back in March of 2014. In essence, the IFT extended the review process to three years. As we have said before, América Móvil has complied with all the measures imposed by the IFT. Nonetheless, IFT decided impose additional measures both on fixed and mobile. We do not believe the IFT resolution considers the deep changes that the telecom sector has had in the last three years. In our view, the new measures are neither reasonable nor proportionate from a regulatory or economic perspective.
On the mobile side, most of the measures are focused on strengthening the access and replicability to MVNOs with respect to our current commercial offer.
On the fixed side, most of the measures are focused on strengthening the access to the local loop unbundling and passive infrastructure we own. Such services have been heavily regulated pursuant to terms and conditions, including prices imposed by the IFT in 2014. Nonetheless, without sound data, IFT has ordered the legal separation of such services into a newly formed entity that will have a certain degree of operational independence from us. The legal separation is subject to a proposal prepared by us. It's very important. It's prepared by us and to be approved by the IFT. We are currently working on that proposal and on the details of the separation. It's more or less what we have and in the stage where we are right now.
Excellent. Thank you very much for the incremental color.
Thank you. Thank you very much.
The next question comes from Alejandro Gallostra of BBVA. Go ahead.
Hi, good morning. Hi, Daniel, Carlos, and Daniela. Thank you for taking my question. I would like to better understand what's the impact we should expect from the legal separation of Telmex. Should it be a high rating expense in Mexico or a one-off expense? If you could quantify it.
It's very difficult to tell you right now what is going to be the impact on Telmex, because still we don't know what is going to be the resolution. It's going to be very important to understand. We are in talks with the IFT. We already presented our proposal, and the stage where we are today is that they are reviewing that proposal, and we are having talks with them on that. Very difficult to tell you the impact on Telmex because we don't know exactly what's going to be the final resolution.
Okay, I understand. Thank you. My second question is regarding pricing in Mexico. In an environment where pricing competition in wireless is easing, but especially where inflation is picking up, we are seeing some of your competitors increasing prices in some of the telecom services, especially in pay TV, which you do not offer at the moment in Mexico, but also in broadband. Do you plan to increase prices in Mexico? Reducing the expiration date in your prepaid products will be the only response to inflation at the moment?
Well, we have been having that. We have been reducing our due dates of the cards. We don't feel that right now it makes sense to increase prices. Of course, we would love to increase prices, it doesn't make any sense to increase prices. I understand that there are other products like TV that are increasing prices. In broadband, we are not increasing prices, in wireless, we are not increasing prices. It's the other side. In 2016, we have reduced the price. If you review between the volumes that we grow on volumes and the price reduction that we have, maybe we have a 60%-70% price reduction on the price in wireless. It's huge what we have been doing. Today, it looks more stable. The prices look more stable.
I think for the rest of the year, I don't think there's going to be more promotions because if you compare the prices in Mexico and you compare, let's say, against the U.S., even though the U.S. is starting to be more competitive, prices in Mexico are maybe half of the prices of the United States. We don't see higher promotions. Just to tell you, Telmex hasn't increased prices maybe for the last 10 years. In anything, we have been increasing prices for the last 10 years.
Okay, understood. Thank you very much.
Thank you.
Next question comes from Walter Piecyk from BTIG. Go ahead.
Thanks. Hey, Daniel. The ARPU performance in a lot of the markets seem better than expected. Brazil is up 8%. The declines in Mexico and Colombia seem to have improved, I guess, in the first quarter. Is there any commonality for why this is happening? Are you doing something different across your markets? On a related question, can you give us an update on what you're thinking about capital investments in 2017 versus last year? Thanks.
Really what is happening is that people are using more wireless data, and that's why ARPUs are increasing. The data is growing. People are starting to use more. As they are moving from a 3G to a 4G, they are using more data. We have, in some markets, really crazy promotions that maybe they are due, and we are not renewing some promotions. We are focusing a lot on the postpaid market. The postpaid has been very important. You could see that in Colombia, we're starting to grow again, good growth on the postpaid side. Brazil, we're growing very good on postpaid. Mexico, we are growing also on postpaid. These subscribers are really consuming. Smartphones are driving data every day higher and higher. That's mainly what is happening. Not different. That's what we have been doing.
Other thing that is helping us is we feel that in some countries, the economic side of the country is doing better, we feel that the rest of the year is going to be also good in the economic side. People is going to consume more. If you see, you can talk to Daniela, the trend of the data usage is growing very, very fast. It's good news for us. We are well prepared in our networks. We have capacity. We have been doing all the modernization of the networks. Megabytes are maybe growing 75% per user year-over-year. People is using more and more data in Mexico and in Latin America. On the CapEx side, we said around MXN 7 billion, what we have.
It could be a little bit higher, 10% higher or less, we're still with that number, I think we are okay with that. We don't feel that we need to invest that.
With that type of data growth, that's not driving higher capital investment?
No. We already have invest a lot. We have the latest technologies, in the CapEx that we have planned is we can handle all the traffic that we're growing, that our subscribers are using. These big amounts of data that they are using.
Okay. I just want to ask a question I've asked many times before, but just want to see if there's anything's changed, which is, in Brazil, as we all know, there's Oi is going through its process, and AT&T, there might be an opportunity for them to sell that asset in Brazil. Has your interest improved, given some of the positive comments that you made about Brazil in your prepared remarks?
Well, I don't think there's nothing right now in the market. It's my view. I think everything is the same as it was one year ago, so I don't think nothing has been changed, and it's my feeling. We're focusing a lot I think in Brazil, we have a very good platform. We are very good on cable. We have wireless, broadband, fixed. Our platform in Brazil is very good, and we feel a very good opportunity in Brazil for the next three or four years. I think Brazil is going to be in a very good position or much better position than what it was before. We are investing in our company, and we're happy in the position where we are in Brazil right now.
Great. Thank you very much.
Again, if you have a question, please press star then one, and please limit to one question and one follow-up question. Thank you. Next question comes from Richard Dineen from UBS. Please go ahead.
Hi, this is Maria Teresa on behalf of Richard. Our question is on the competitive landscape in Brazil mobile. Should we expect a change in strategy with the new CEO, perhaps a more aggressive focus towards market share gains, in line with the recently announced offers with unlimited voice?
I think we don't change any strategy. I think the person that arrives to Claro is an excellent person. We're very happy with Paulo. We always want to get more market share. We always want to be very competitive, and nothing on that is going to change. No big changes. Yesterday, we launched a big campaign of all our products, of focusing on wireless. We are executing the strategy that we have, and I think Paulo is going to help us to execute the plan that we have. In Brazil, we have a very good infrastructure. We have been investing for a long time, and I think we are ahead of our competitors in the platform, in the infrastructure in Brazil.
Perfect. Thank you very much. Just as a follow-up question, you mentioned about the MVNO, and is there any way we can measure what's going to be the impact from the cost-based wholesale capacity in terms of pricing for a medium and long-term view? Will you do a cost analysis and net a margin? Will the price be regulated? How might that compare with your current retail prices?
You are talking about Mexico?
Yes. Sorry.
No. It's very difficult to say anything on that because we are just discussing with the IFT some of these.
MVNOs.
With MVNOs? With them, we have right now in Mexico five MVNOs working. Of course, when you have a market so competitive for the MVNOs, it's more difficult to succeed because the market is so competitive that the margins for everyone are more reduced. We are open. We want the MVNOs, and we are giving, I think for five or six MVNOs we're working today in Mexico. We are an MVNO in U.S., TracFone. We know what those MVNOs need and want. We want to support our MVNOs here in Mexico.
Thank you very much.
Next question comes from Diego Aragão from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my question. Just want to follow up on the competitive landscape in Mexico. Apparently, you continue to add more postpaid than peers. You are still a net gainer in mobile number portability. My question is, how do you see your competitors at this point, and what are you doing to accelerate voice data migration, given this should help you to reduce interconnection costs? Thank you.
Well, I think people is using lot more data, as I told you, maybe 75% year-over-year. All the investment that we have been doing for the last 10 years, well, are giving us that. Still we are gainers in number portability, that's right. We have a big distribution network. We have the best quality, the best coverage, the best capacity, very good speed. We are very competitive in Mexico. What is my competition doing? Well, we have good competitors. We know Telefónica, we know AT&T. They are our good competitors, and we need to improve every day to compete against them and to be ahead of them, that's what we're doing today. Competition is good, and that's what we're doing here in Mexico.
Yeah. Thank you. Is it fair to assume that you have big incentive to accelerate this data migration in order to reduce this interconnection cost?
Well, interconnection is in voice, okay? I think people is going to use voice always. They are using less voice because, of course, they are using more data, they are going to use voice always. What is important and what we're doing is that we're moving all our 2G to 3G subscribers and a lot of the 3G to 4G subscribers, and that is giving them a very good speed, quality. People is very happy with our 4G network, of course, in the future, we're going to prepare with LTE Advanced, and we're doing that to be competitive and to be prepared for what is coming.
Okay, perfect. Just a follow-up question. On Colombia, actually, can you provide more details on your results in that country? Apparently it was very strong. Just want to understand how you get to those results in Colombia. Thank you.
Well, I think the results of this quarter is work of the last three or four quarters that we have been doing. We changed the management, as I told you some time ago, we are focusing much more on the market. We're cutting costs, cutting expenses. We have a good plan, we're executing that plan. In the fixed side, we are growing also very good. In TV, we are very competitive. Also our company there in broadband, in pay TV, in fixed and in wireless, we are doing very good. The people is really focused on what they need to do, it's what we're doing. We don't start from last quarter, we have the result this quarter. Company has been improving, this has been a very good quarter because all the execution that we have the last year.
Okay. Very helpful. Thank you.
Next question comes from Mauricio Fernandes from Merrill Lynch. Please go ahead.
Thank you. Hi, Carlos. Hi, Daniel. One question still on Mexico and kind of the competitive landscape and the revenue trends. ARPU was still down despite prices being up. I know some of that has been addressed already, but ARPU tends to be tricky given it depends on subscribers that are in and out versus the pricing environment. Wanted to understand whether you think the decline, not only in our pool, but the service wireless revenue, it was coming up little by little in the last couple of quarters, and now it's down a bit. How much of that is seasonal in the first quarter versus the fourth quarter or third? How much is that a matter of the mix of subscribers? You might have lost good subscribers and won less good subscribers.
I'm going to start with your last comment. We are not losing good subscribers and adding bad subscribers. What is happening a little bit in postpaid is because of the aggressiveness of the plans and the rates and the promotions, people sometimes, not always, are renewing with us in a lower plan than what they already have. It's because with a lot of data that we're doing, and because of the competition, that we're doing a lot more data, then they don't need to stay in the plan where they are, and they do one step down the plan. That's more or less what you could see in the postpaid side. Remember, Mauricio, that we have all these big promotions start in January, February last year. January, February, we start the promotions.
When the big amount of subscribers move to these promotions in the prepaid side, they are maybe in April, May, and June, we have a big amount. It's where you're going to see the decline of the ARPU in those months of last year, is where ARPU declined a lot. Today is recovering. We are seeing good recovery. The trend is good. I cannot tell you that we are right now where we want to be. No, still very competitive, the market. I think it's a little bit more rational, a little bit more stable, the market, and I think the prices are very competitive, and what in my view, it's just my view, if you are going to see movement on the pricing, I think the movement on the pricing on the promotions are going to be moving up than moving more down.
The prices today in Mexico I think are one of the cheapest in the world. Our base is up in the postpaid side, our base is up 7%, and there's a lot of subscribers joining our postpaid base. Of course, I cannot tell you that in Mexico everything is finished and that's where we want to be. No, in Mexico, the trends are good. I think they are going to be still good for the next quarters. There's still a lot more things that we need to do in Mexico. Competition is there. Nothing, no Telefónica and AT&T, they are not disappear from Mexico. They are still there and very aggressive. Also one thing is our prepaid ARPU is up quarter on quarter.
Remember that the fourth quarter, the ARPUs always because Christmas are higher, people are spending a little bit more than other months. The trends are good, Mauricio. I can tell you that I'm feeling much more comfortable in the Mexican market right now.
Okay. Thank you, Daniel.
A lot of our other comment that I want to tell you. Yeah, all the subscribers that want or should join, switch to the new promotions, I think they are in the new promotions right now. We don't expect big volumes of subscribers moving to the new promotion. Everything that we have, we already have it, okay? The next things should be good news for us. No, I think in the prepaid side, I'm seeing that people is spending a little bit more day by day. All these things are trends. I cannot tell you that we are where we want to be.
Mauricio, just a reference point. In the second quarter, ARPUs in Mexico were falling 18%. In this first quarter, they are down 2%. That's the kind of improvement that we have seen in only three quarters or four. The trend that Daniel is pointing out is very solid. It's a strong acceleration from falling minus 18 to only being minus two. We are quite positive that maybe by next quarter, we are likely going to see some growth. As Daniel said, even in absolute terms, if you look back, we may not be where we were one year ago, but we are better than where we were in the last few quarters.
Yeah.
In ARPU.
That's true.
All right. Thank you, Carlos. Thank you, Daniel. If I can still follow up on the topic of pricing.
Yes.
As Maria was asking, the new pricing plans for postpaid for Claro in Brazil, they include voice unlimited, okay?
Sorry, I don't hear you. They what?
They include voice unlimited on the postpaid plans and the new postpaid plans.
Yes.
Is this something you plan to replicate to the rest of the region? Is it something that is specific to Brazil, even though it looks like a trend for voice to be included in pricing plans?
Mauricio, I think the unlimited voice plans are in Mexico. In Colombia, we have also big amounts on Chile. There's all around. In Peru, we're giving a lot. In Austria, we give also unlimited. Unlimited is coming, and it's going to stay, the unlimited plans on voice. In Brazil, our new plans are unlimited in the high end of the plans. We have a very good launch yesterday. Of course, we have capacity in Brazil. Our MOUs in Brazil are low. Our interconnection in Brazil is going down. That permits to give unlimited voice and, well, that's what we're doing there. I think you are going to see more and more on that all around Latin America.
Okay. Thank you very much, Daniel, Carlos.
Thank you, Mauricio.
Next question comes from Carlos de Legarreta from GBM. Please go ahead.
Thank you. Good morning. My first question with regards to Brazil again, it's a more specific question, sorry. I'm looking at the operating profitability, that's growing by 91% year-over-year. I was wondering what's happening here?
Well, what we're having is, I think we're having a very good reduction on costs. When we merge all the three companies, we work very hard, it's still giving us good cost savings, I think that's part of what we're having. The other thing is, we're being very careful not to sell, let's say in DTH, we're being very careful to sell very good subscribers. We don't want to sell in prepaid. We want to sell subscribers that consume. Well, that is giving us a better margin. That's really what is happening in Brazil. Also, a little bit of growth in the service revenue. All overall is giving us a good increment in our operating profit.
Right. Thank you. If I may go back to Mexico, I understand it's too soon to talk about the impacts of the functional separation. However, I was reading the annual report that you guys filed recently, you guys mentioned a two-year period to implement this. Is that defined by the IFT? Is that already defined? I didn't have that on the radar. If you could just confirm that would be great. Thanks.
What we put in this file, it's what the IFT released, is that we have up to two years to implement all these things. That does not mean that it's going to take two years to implement. What I'm saying today is we already returned with a proposal. The IFT is right now studying that proposal. It's going to discuss with us that proposal. I think they have 65 to 70 days. I don't know exactly the two to three months to discuss that. Then they are going to take a decision, then, well, in all these steps, you can have a little bit more days if you ask for more days. We don't know exactly that. What you are saying is right. They said they have up to two years to implement all these measures.
Right. Thank you.
The next question comes from Masha Kahn from Deutsche Bank. Please go ahead.
Hi, good afternoon. Congratulations on a good set of numbers. Wanted to ask a couple of questions. One on the U.S. market that's getting a little bit more competitive. Is that affecting your MVNO business at all? I mean, we haven't seen that in the results, but is that a risk? If you could comment on that. Second question is about fixed line investments. I noticed that you're investing more aggressively in pay TV and cable across Latin America. Can you just talk a little bit about your investment plans on the fixed line and in what countries you're going to invest more? Thank you.
The first question, you're talking about TracFone. I can tell you that yes, the market in U.S. is every day more competitive as everybody's, the big companies are already launched their results, and it looks like the market is more competitive. In TracFone, we are taking care about the cost, the expenses. We want to be more competitive in the market. We want to play a big role in the prepaid market in the U.S., and that's where we are preparing. The losses that we have, they are mostly in SafeLink. They are customers that don't qualify with the new rules, and that's why we are disconnecting all these customers. In the other brands, we are trying to be aggressive, and we want to play a good role in the U.S. Your second question, I don't understand what you said.
You're talking about the fixed-
Second question is about fixed-line and cable investments. Yeah, you invest a lot in cable in Colombia and I noticed in some other markets, you're putting more into cable and TV and also creating your own content. If you could just give a little bit more color on fixed-line investments.
Masha, I think the intent is to deploy the capital, particularly in those countries, those regions where we can provide triple-play bundles, because that's basically where the return on the capital is best. I think Óscar can give us a bit more color on this. Another part of the CapEx will always be linked to things, for instance, like the set-top boxes. To the extent that you are growing in distribution, in accesses, then you will also have an associated part of CapEx. Óscar will be elaborating on this.
Yes. Well, I refer to what Daniel mentioned about the data growth, and it's happening in mobile as well, in fixed. Broadband is growing 70% every year. That implies that we need to invest CapEx on the backbone in order to attend this global traffic. The other part of the CapEx is a more revenue-driven CapEx. That is a different kind of set-top boxes for triple-play, double-play, satellite TV. That will depend how we see the market and how we see the growth on the market. You have these two baskets. One is the growth on the backbone for data products, and the second one is the net gain that we have on units on the different products that we are addressing in the market.
I guess I was curious how important quad play was for you. You started launching quad play bundles combining wireless and fixed-line. Is that overall a strategy and a trend, or is it just country specific?
Well, as you know, we started with the Combo Multi in Brazil. The reaction of the market was pretty good. We are delivering combo plays in most of the countries. We are trying to bundle triple-play plus a wireless offering, and we believe that the market is well receptive to this kind of offering. It's, to be honest, a unique offering that we have in the different countries.
Only to add something to Óscar's comments is that we are not only offering the quad play offerings. We also do only broadband, only fixed, only TV. Of course, we are trying to bundle a lot of our products, but we are selling a lot of broadband alone. We have all the promotions in all our products.
Right.
Okay. Thank you.
Thank you.
Next question comes from Barbara Halberstadt from Bank of America. Go ahead.
Hi?
Yes.
Hi, sorry, my line was muted.
Yes.
Hi. I wanted just to follow up, I don't know if that was commented during the presentation. Just regarding the working capital needs, in this quarter, it seemed like it increased quite a lot, specifically on the suppliers line. Just wanted to have a little bit more color of the reason for that, if something seasonal or not. Thank you.
Thank you, Barbara. The first thing to note is that the numbers in the financial statements, when they are expressed in MXN, they are subject to a lot of noise that is associated with the currency moves, as I explained at the beginning of the yearly presentation. In particular, what you see is that, in MXN terms, the certain operations, in particular Brazil, Colombia, have come to have much more weight in the financial statements. That basically leads to a certain impression of a higher working capital. It's important to understand that a number of things in the balance sheet can be very much affected by the currency moves. That's one comment. The other one is the working capital is very seasonal.
The first quarter of the year is always the one where we have more to put in terms of working capital, precisely because it comes after the last quarters where we have our greatest sales season. A lot of the, for instance, handsets that are sold in the last quarter are basically paid for in the first quarter of the year. There's also some things that have to do with CapEx. A lot of the CapEx accounts payable that you have from the CapEx of the entire year end up being paid at the end of the year. Typically, at least in our case, first quarter is very seasonal, and that explains whatever increase at constant exchange rates you would have had in terms of working capital.
Thank you.
Thank you.
Our next question comes from Rodrigo Villanueva from Merrill Lynch. Go ahead.
Thank you. Good morning, Daniel, Carlos. I was wondering if you could give us more color in the measures that have been implemented to achieve cost cutting across your different regions, and if you expect these measures to bring further efficiencies going forward? That would be my first question.
Rodrigo, I think the measures are all around. It's every part of the company. We're doing measures in IT, we're doing in operations, in administration. They're all around. We're looking, we're making a big comparison of each of the countries where we are the best, and we're trying to do in the places where we're the best, trying to do that in the other countries. Well, it's more an execution thing than a strategy, okay? Well, you need to find where are the savings, and then you need to execute all those savings. Sometimes it's not easy. Sometimes some are taking you a little bit of time to implement that because that's not something that you need only to take it out and that's all, or cancel. No, there are things that you need to do to change and to save some money.
That's something that we have from the last year. We're putting much more effort this year. I think it's important for us to be more and more productive, more efficient, and that's where we are right now.
I think, as you remember, we have a concept that we call our core EBITDA. Which is basically the EBITDA margin before subscriber acquisition costs. Where sometimes some of the savings can come from subsidies, which is part of subscriber acquisitions cost, we always focus on this core EBITDA, which is basically the structural cost. Those are the ones that we are trying to improve very substantially this year. I think we're already working with a number of operations with very specific guidelines, that we expect will attend some increases in core EBITDA margins by the end of the year. It's some ongoing measures that Daniel pointed out, but there's some new ones that we are basically implementing this year in some operations.
Maybe there are going to be new ones in three or four months. That's something that we're working every day. We have special people looking on that, and that's what we're going to do for the next two, three years.
Understood very clear. Thank you. My second question is regarding fixed broadband net additions in Mexico. It seems that they have accelerated very strongly over the last 12 months while your peers have been facing trouble to keep growing. I was wondering if there's any particular reason for that to be happening now?
I think Carlos can answer that. Carlos Robles is going to answer that. In my view, the thing that we're doing in Mexico is putting more and more focus on the commercial side, on the distribution. What I can tell you, it's execution. It's more or less what we have. Carlos Robles, I don't know if you can tell us something extra.
What we are doing is basically adapting our portfolio of products so that customers have new products to have access for them. Additionally, we are focusing in different areas. As it has happened with other countries, we have deployed already technology. We have good technology, and we have good quality of service, and also we are focusing on specific commercial strategies all around the nation.
Thank you, Carlos.
Okay, thanks so much.
Thank you.
Next question comes from Juan Pablo Alva from Credit Suisse. Go ahead.
Hello, thank you very much for taking my question. My question is regarding your comment, as you mentioned, that you have already presented a plan to IFT for functional separation in Mexico. My understanding is that this is a little bit ahead of the deadline that they established for you. I'm just wondering if you have any sort of interest in speeding the implementation, or if you feel like you can reach the target a lot sooner.
No, we don't do it because of that. We just prepare our plan, when it's finished, we send to them. That's really the reason why we do it before our last day. Well, the next step, as I said, is they are going to review this plan, we're going to sit down with them and discuss it, no? That's mainly the next step is in the next 60-70 days or something like that.
Okay. My follow-up is if you see any sort of upside regarding cost-cutting initiatives that you could achieve through the functional separation, if you see any sort of advantage on that.
It's difficult. I cannot tell you anything until we don't know exactly what is going to be the end resolution of this separation. No, as we said, we are not agree on that. We think that IFT do not review really the changes in the market for the last three years. There have been big changes in the market for the last three years, we don't agree with that.
Thank you very much.
Thank you.
This concludes our question and answering session. I would like to turn the conference back over to Daniel Hajj for any closing remarks.
No. Just thank everyone for being in the call and thank you. Bye-bye.
The conference has now concluded. Thank you for attending today's presentation. You might now disconnect.