Earnings Call: Q1 2017

Apr 26, 2017

Welcome to the America Movil First Quarter 2017 Conference Call and Webcast. All participants will be in listen only mode. Please note, this event is being recorded. I would now like to turn the conference over to Daniela DeCuana, Head of Investor Relationships. 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 Garcia Moreno, CFO Mr. Roger 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 Q1 results. Thank you, Daniel. Good morning, everyone. So in the Q1 of 2017, economic activity remained sluggish in Brazil, but appeared to be strengthening across the region. This included Mexico, but we assume 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, 2 of the top performing currency in the period. 1st quarter revenues of MXN 254,000,000,000 were 18.5 percent higher than those of the year earlier quarter, with EBITDA of MXN 72,000,000,000, rising 15.8% year on year. EBITDA margin 27.1 percent 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 LATAM currencies and the dollar, with the peso declining 28% versus the real, 20% versus the Colombian peso and 8% versus the dollar, we expect to the prior year. Consolidated service revenues continued their comeback led by Mexico and Colombia. At constant exchange rates, they were up 3.1% year on year compared to 0.7% in prior quarters and minus 0.2% in the Q3. 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 4th quarter to an increase of 1.5% in the first quarter, the first increase in 8 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 posted subscribers, with the former increasing 6.4% and Deliliter posting a 5.1% year on year increase. Postpaid Meras 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 Q1 at constant exchange rates, most notably mobile data revenues. Rate of growth shot up from 11.7% in the 4th 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% points to 33.5%. Data of PayTV 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 In the Q1, real denominated service revenues accounted for 25% of the total, followed by Mexican peso denominated ones with 22 percent. Dollar based revenue represent 21.6% of our revenues, but that percentage increased to 27.3% in those countries whose currencies are practically pegged to the U. S. Dollar, particularly Guatemala, Dominican Republic are also considered as dollar based. Revenue trends in local currency terms show very positive trends in Mexico and several South American countries. We have good growth rates trending up. EBITDA responded strongly to higher segment growth, particularly in Mexico, Colombia, Brazil and Peru. Our operating profit rose 8.3 percent from the year earlier quarter to ARS 30,400,000,000 and together with financial income in the amount of ARS 30,300,000,000 helped us attain a net quarterly profit of ARS 35,900,000,000. Financial income stemmed from foreign exchange gains of ARS 37,000,000,000 that resulted for the most part from the appreciation of the Mexican peso versus the dollar and the euro in the period that is in the quarter. Our net profit was equivalent to COP 0.55 per share and per share and $0.53 per year. Capital expenditures totaled ARS 29,000,000 in the quarter. We invested an additional ARS 3,700,000,000 in the acquisition of ownership interest in Olo in Peru, which basically has Spectrum and MetroNet in Croatia and effective share buybacks in the amount of ARS 448,000,000. Substantially, all of these outlays were covered by our cash flow, the remainder financed by ARS 2,000,000,000 in net borrowings from the market. Notwithstanding our net borrowings, in peso terms, our net debt came down to ARS 584,000,000,000 from ARS 6.30 1,000,000,000 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 3 months in the entire quarter. So with this, I would like to pass the floor back to Daniel, and we can start the Q and 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 The first question comes from Amir Roskodowski 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? And then secondly, we've seen some of the order or the color from the regulatory agencies about unbundling. How do you think about the potential impact, 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. Thank you, Amir. Well, starting with the Mexico landscape, I think it's still Mexican market still very competitive. I think it's more stable. I have to say that it's more stable, but very competitive. So the prices and the promotions that we have in the market are still there. We are not giving extra promotions or reducing more of the prices, but it's stable right now. For the as 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. But what we are sure is that we still have a very, very competitive network with a very good quality capacity and have a lot of distribution points there. So I feel and 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, speed, data. So there's still a lot of things that people is looking. So 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 is at 19. So it's changing a lot and that will change a lot the prices of the concepts. But I'm feeling and my view is that we can see more stable promotions for the rest of the year. On the side, I'm going to make you a summary of what has been happening as on March 8, the IFT notified us new asymmetric measures as part of the 2nd year review process of the measures imposed back in March of 2014. In essence, the IFT extend the review process to 3 years. As we have said before, America Movil has complied with all the measures imposed by the IFT. Nonetheless, IFT decide imposed 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 3 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 on our current commercial offer. On the peak side, most of the measures are focused on strengthening the access to the local loop on bundling and passive infrastructure we own. Such services has been heavily regulated pursuant to terms and conditions including prices imposed by the IFT in 2014. Nonetheless without sound data IFP has ordered the legal separation of such services into a newly formed entity that will have 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. Your next question comes from Alejandro Galloestra from 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? I mean, should it be high operating expenses in Mexico or a one off expense? And if you could quantify it? It's very difficult to see to tell you right now as to what are going to be the what is going to be the impact on Telmex because still we don't know what is going to be the resolution. So it's going to be very important to understand. We are on talks with the IFT. We already present our proposal and they are 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. And 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 and we are seeing some of your competitors increasing prices in some of the telecom services of especially in pay to view, which you do not offer at the moment in Mexico, but also in broadband. Do you plan to increase prices in Mexico or 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. But we don't feel that right now makes sense to increase prices. Of course, we will love to increase prices, but it doesn't make any sense to increase prices. I understand that they are other products like the TV that it's increasing prices, but in broadband, we are not increasing prices and 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 that we have the price reduction that we have maybe we have 60% to 70% price reduction on the pricing wireless. So it's huge what we have been doing today looks more stable. The prices looks 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 the U. S. Is starting to be more competitive, prices in Mexico are maybe half of the prices of the United States. So we don't see higher promotions. And just to tell you, Telmex hasn't increased prices maybe for the last 10 years. So in anything, we have been increasing prices for the last 10 years. Next question comes from Walter Mompaycic from BTIG. Go ahead. Thanks. Hey, Daniel, the ARPU performance in a lot of the markets seemed better than expected. I mean, Brazil is up 8%. The declines in Mexico and Colombia seem to have improved, I guess, in the Q1. Is there any commonality for why this is happening? Are you doing something different across your markets? And on a related question, can you give us an update on what you're thinking about capital investments in 2017 versus last year? Thanks. What we're focusing on really what is happening is that people is using more wireless data and that's why ARPUs are increasing. So the data is growing. People are starting to use more as they are moving from a 3 gs to a 4 gs, they are using more data. And 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. Post paid has been very important. You could see that in Colombia, we're starting to grow again, good growth on the postpaid side. But I feel we're growing very good on postpaid. Mexico, we are growing also on postpaid. So and these subscribers are really contributing. So we smartphones are driving data every day higher and higher. So 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 and we feel that the rest of the year is going to be also good in the economic side. So people is going to consume more. So if you see, you can talk to Daniela, the trends of the data usage is growing very, very step back. So it's good news for us. We are well prepared to stay in our networks. We have capacity. We have been doing all the modernization of the networks. So megabytes are maybe growing 75 percent per user year over year. So people is using more and more data in Mexico and in Latin America. On the CapEx side, we said around $7,000,000,000 what we have. It could be a little bit higher, 10% higher or less. And we're still in that with that number. And I think we are okay with that. We don't feel that we need to invest that. That type of data growth, that's not driving higher capital investment? No. We already have invested a lot. We have the latest technology and the CapEx that we have planned is what we can handle all the traffic that is that we're growing, that our subscribers are using. This big amount 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 that's changed, which is in Brazil, as we all know, there's always going through its process. And AT and T, there might be an opportunity first for them to sell that asset in Brazil. Has your interest improved, given some of the comments that you made about 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 1 year ago. So I don't think nothing has been changed. And it's my feeling. So we are focusing a lot in I think in Brazil, we have a very good platform. We are very good on cable. We have wireless broadband peaks. So our platform in Brazil is very good and we feel a very good opportunity in Brazil for the next 3 or 4 years in Brazil is going to be in a very good position or much better position that what it was before. So 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. Next question comes from Richard Dine from UBS. Please go ahead. Hi, this is Maria Theresa 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 Paolo. And there's no we always want to get more market share. We always want to be very competitive and nothing on that is going to change. So no big changes. Yesterday we launched a big campaign of all our products of focusing on wireless. So we are executing the strategy that we have. And I think Paolo is going to help us to execute what 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. And 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 or long term view? I mean, will you do a cost analysis in that margin? Will the price be regulated? How might that compare with your current retail prices? You are talking about Mexico? Yes. Sorry. No. But it's very difficult to say anything on that because we are just discussing with the IFT some of these With the MVNOs. With the MVNOs, it's well with them. We have right now in Mexico 5 MVNOs working. Of so competitive, so competitive for the IndianOs, it's more difficult to succeed because the market is so competitive that the margins for everyone are the more reduced. But we are open. We want the MVNOs and we are giving I think for 5 or 6 MVNOs we're working today in Mexico. We are an MVNO in U. S. As the TracFone, we know what those MVNOs need and want and we want to support our MD and O's here in Mexico. Thank you very much. Next question comes from Diego Aragao 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. So my question is, how do you see your competitors at this point? And what are you doing to accelerate voice to 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. And all the investments that we have been doing for the last 10 years, well, are 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. So we are very very competitive in Mexico. What does my competition is doing well? We have good competitors. We know Telefonica, And today. So competition is good and that's what we're doing here in Mexico. Thank you. Is it fair to assume that you have like a big incentive to accelerate this data migration in order to reduce this interconnection cost? Well, interconnection is in voice, okay. And I think people going to start is going to use voice always. They are using less voice because of course they are using more data, but they are going to use voice always. What it's important and what we're doing is that we're moving all our 2 gs to 3 gs subscribers and a lot of the 3 gs to 4 gs subscribers and that is giving them a very good speed, quality. People is very happy with our 4 gs network. And of course in the future we're going to prepare with LTE advance and we're doing that to be competitive and to be prepared for what is coming. Okay, perfect. And just a follow-up question. On Colombia, actually, can you provide more details on your results in that country? I mean, apparently, it was very strong. So just want to understand how you get to those results in Colombia? Well, I think the results of this quarter is work of the last 3 or 4 quarters that we have been doing. We changed the management, as I told you some time ago, and we are focusing much more on the market. We're cutting costs, cutting expenses. We have a good plan and we're executing that plan. In the peak side, we are growing also very good. And TV, we're very competitive. So also our company there stay in broadband, in pay TV, in fixed and in wireless. We're doing very good. People is really focused on what they need to do and it's what we're doing. So that's really we don't start from last quarter and we have the result this quarter. So company has been improving and 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 Fernandez 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 in ARPU tends to be tricky given it depends on subscribers that are in and out versus the pricing environment. Just wanted to understand whether you think the decline, not only in ARPU, but the revenue in wireless service wireless revenue. It was coming up little by little in the last couple of quarters and now it's down a bit. Is that how much of that is seasonal in the Q1 versus the Q4 or 3rd? Or how much is that a mix 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. So we are not losing good subscribers and adding bad subscribers. What it's happening a little bit in postpaid is because of the aggressiveness of the plans and the rates and the promotions. People sometimes not always is renewing with us in a lower plan as that what they already have. It's because with a lot of data that we are doing and because of the competition that we are doing a lot more data, then they don't need to stay in the plant where they are and they do one step down as to the plant. So that's more or less what you could see in the post pay side. Remember Mauricio that we have all these big promotions start in January February last year. So January, February, we started promotions. But when the big amount of subscribers move to these promotions in the prepaid site there maybe in April, May June, we have a big amount. So 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. So 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 market, but I think it's a little bit more rational, really a little bit more stable the market. And I think the prices are very, 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 on the moving up than moving more down, okay, because the prices today in Mexico are really I think are one of the cheapest the world. So our base is up in the postpaid side, our base is up 7% and there's a lot of subscribers joining our postpaid base. So of course, I cannot tell you that in Mexico everything is finished and that's where we want to be. Now in Mexico, the trends are good. I think they are going to be still good for the next quarters. But there's still a lot more things that we need to do in Mexico. Competition is there, nothing Telefonica and AT and T, they are not disappear from Mexico. They are still there and very aggressive. So and also one thing is our prepaid ARPU is off quarter on quarter and remember that the 4th quarter is the ARPUs always because Christmas are higher people spending a little bit more than other months. So 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. A lot of our other comment that I want to tell you, yes, all the subscribers that want or should join switch to the new promotions, I think they are in the new promotions right now. So we don't expect big volumes of subscribers moving to the new promotion. So everything that we have we already have it, okay. So the next things should be good news for us. I think in the prepaid side, I'm seeing that people is spending a little bit more day by day. So 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, apples in Mexico were falling 18%. In this Q1, they are down 2%. So that's the kind of improvement that we have seen in only 3 quarters or 4. So it's the trend that Daniel is pointing out is very, very solid. It's a strong acceleration from falling minus 18% to going to only being minus 2%. We are quite positive that maybe by next quarter, we are likely going to see some growth. And as I said, even in absolute terms, if you look back, we may not be where we were 1 year ago, but we are better than where we were in the last few quarters. Yes. And that's true. Got it. 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 Sorry, I don't hear you. They what? They include voice unlimited, no, on the postpaid plans and the new postpaid plans. Is this something you plan to replicate to the rest of the region? Or is it something that is specific to Brazil even though it looks like the trend for voice included in pricing plans? Mauricio, I think the unlimited voice plans are in Mexico. In Colombia, we have also big amounts on Chile. So there's all around in Peru, we're giving a lot. In Austria, we give also unlimited. So unlimited is coming and it's coming and it's going to stay is the unlimited plans on voice. In Brazil, our new plants are unlimited in the high end of the plants. We have a very good launch yesterday. And of course, we have capacity in Brazil. Our most in Brazil are low. Our interconnection in Brazil is going down. That permits to be unlimited voice. And well, that's what we're doing there. So and I think you're going to see more and more on that all around Latin America. Okay. Thank you very much, Daniel and Carlos. Thank you. Thank you, Mauricio. Next question comes from Carlos de la la Renta from GBM. Please go ahead. Well Well, what we're having is we have a I think we're having a very good reduction on costs. When we merge all the 3 companies, we work very hard and it's still giving us good cost savings and 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. And well that is giving us a better margin and that's really what is happening in Brazil. Also a little bit of growth in the service revenue. So all overall is giving us a good increment in our operating profit. Right. Thank you. And if I go if I may go back to Mexico and I understand it's too soon to talk about the impacts of functional separation. However, I was reading at the annual report that you guys filed recently and you guys mentioned a 2 year period to implement this. Is that defined by the IFT? Is that already defined? I didn't have that on the radar. So if you could just confirm that, that would be great. Thanks. What we put in this file is that and it's what the Ipatel release is that we have up to 2 years to implement all these things. So that does not mean that it's going to take 2 years to implement. So what I'm saying today is we already returned with a proposal. The ESSA is right now starting that proposal is going to discuss with us that proposal. I think they have 65 to 70 days. I don't know exactly the 2 to 3 months to discuss that and then they are going to take a decision and then well both in all these steps you can have a little bit more days if you ask for more days. So we don't know exactly that. But what you are saying is right. They said they have up to 2 months, 2 years to implement all these measures. Right. Thank you. Next question comes from Masha Kahn from Dutch Bank. Please go ahead. Hi, good afternoon. Congratulations on a good set of numbers. I wanted to ask a couple of questions. One on the U. S. Market that's 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. And 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 then what countries you're going to invest more? Thank you. John, you're talking about the first question you're talking about TracFone and I can tell you that yes, the market in U. S. Is every day more competitive as everybody is they already the big companies are already launched their results and it looks like the market is more competitive. And in TracFone, we are taking care about the cost 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 connecting all these customers. But 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. It you're talking about the The next line is cable investments. Yes, you invested 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 the fixed line investments? Margie, Marja. I mean, 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 Oscar can give us a bit more color on this. And not only part of the CapEx will always be linked to things, for instance, like the set top boxes. So to the extent that you are growing distribution in accesses, then you will also have an associated part of CapEx. But Oscar will be elaborating 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. So that implies that we need to invest CapEx on the backbone in order to attend this global traffic. And the other part of the CapEx is a more revenue driven CapEx. That is a different kind of set of boxes for triple play, global play, satellite TV. But that will depend how we see the market, how we see the growth in the market. So you have these 2 baskets. One is the growth in 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 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 start with the combo multi in Brazil and the reaction of the market was pretty good. So we are delivering combo plays in most of the countries. So we are trying to bundle triple play plus wireless offering. And we believe that the market is well receptive to this kind of offering. And it's, to be honest, a unique offering that we have in the different in the different countries. But only to add something to Oscar comments is that we are not only offering SD Quad Play offerings. We also do only broadband, only fixed, only TV. So of course we are trying to a lot of our products, but we are selling a lot of broadband alone. So we have all the promotions in all our products. Right. Okay. Thank you. Thank you. Next question comes from Barbara Haverstad from Bank of America. Go ahead. 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. So I just wanted to have a little bit more color of the reason for that is something seasonal or just an or not? Thank you. Sure. Thank you, Baba. Well, the first thing to note is that the numbers in the financial statements when they are expressed in pesos, they are subject to a lot of noise is associated with the currency moves, as I explained at the beginning of the early presentation. So in particular, what you see is that in peso terms, the certain operations, in particular, Brazil, Colombia, have come to have much more weight in the financial statements. So that basically leads to a certain impression of higher working capital, okay? So it's important to understand that a number of things in the balance sheet can be very much affected by the currency moves. And so that's one comment. And the other one is the working capital is very, very, very seasonal. And the Q1 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 quarter is where we have our greatest sales season. So a lot of the, for instance, handsets that are sold in the last quarter are basically paid for in the Q1 of the year. And 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 prior year end of being paid at the end of the year. So typically, at least in our case, the Q1 is very, very seasonal, and that explains whatever increase at constant exchange rates you would have had in terms of working capital. Okay. Thank you. 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 will be my first question. Rodrigo, I think well the measures are all around every part of the company we're doing measures in IT, we're doing in operations, in administration, they're all around. So we're looking, we're making like 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. And well, it's more an execution thing than on a strategy, okay, because well, you need to find where are the savings and then you need to execute all those savings. So 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. Now there are things that you need to do to change and to save some money. So that's something that we have from the last year. We're moving 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. So sometimes some of the savings can come from subsidies, which is part of subscriber acquisition cost. We always focus on the on this call EBITDA, which is basically the structural cost. And 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 EBITDA margins in core EBITDA margins by the end of the year. So 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. And maybe there are going to be new ones in 3 or 4 months. So that's something that we're working every day. We have a special people looking on that and that's what we're going to do for the next 2, 3 years. Understood. Very clear. Thank you. And my second question is regarding fixed broadband 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. So I was wondering if there's any reason, particular reason for that to be happening now? I think Carlos can answer that. Carlos Robles is going to answer that. But 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 is execution is more or less what we have. Carlos Robles, I don't know if you can tell us something extra. Also, what we are doing is basically we are basically what we are doing is adapting our photofolop products so that customers have new products to be accessed to have access for them. And 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 in all around the nation. Thank you, Carlos. Okay. Thanks so much. Thank you. Next question comes from Juan Pablo Alba from Credit Suisse. Go ahead. Hello and thank you very much for taking my question. So 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 and when needs finish, we send to them and that's really the reason why we do it before our last day. And well, the next step, as I said, is to they are going to review this plan and we're going to sit down with them and discuss it. That's mainly the next step is in the next 60 to 70 days or something like that. Okay. And 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 resolution of this separation. But as we said, we are not agree on that. And we think that the IFC do not review really the changes in the market for the last 3 years. There have been big changes in the market for the last three years and we don't agree with that. Okay. Thank you very much. Thank you. This concludes our question and answering session. I would like to turn the conference back over to Anil Haj 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 may now disconnect.