Earnings Call: Q3 2016

Oct 28, 2016

Welcome to America Movil Third Quarter 2016 Earnings Conference and Webcast. We will have a question and answer session later and the instructions will be given at that time. And as a reminder, this conference is being recorded. Now I would like to welcome and turn the call to Daniela Lequona, Head of Investor Relations. Please go ahead. Thank you. Good morning, everyone. Thanks for joining us in our Q3 conference call. We have today on the line Mr. Daniel Hajj, CEO Mr. Carlos Garcia Moreno, CFO Mr. Oscar Monchausque, Chief Operating Officer and also Mr. Carlos Robles, Chief Financial Officer from Cellmex. Thank you, Daniela. Good morning, everyone. Carlos is going to make a summary of the 3rd quarter results. Okay. Well, thank you, Daniela. Good morning, everyone. Throughout the Q3, economic activity showed signs of renewed strength in some of the major Latin American markets, including Mexico and Brazil. And financial flows in the international capital markets remained fairly stable. There were no imminent threats of an increase in risk by the Fed. The earliest move would have been in mid September. Fund issuance throughout the summer holidays took place at on seasonally high levels. LatAm currency is traded within narrow ranges with the notable exception of the Mexican peso that since the prior quarter had developed an increasingly negative correlation with the U. S. Election. As this appeared to increase through September, the Mexican peso plummeted versus the dollar, going from COP 18.3 to the dollar at the end of June to nearly COP 20 towards the end of September. As of the value of this report yesterday, the dollar was trading at 18.8 pesos per dollar. On the mobile platform, we added 750,000 postpaid sales in the 3rd quarter, nearly half of them in Brazil and the West, mostly in Mexico and Colombia. And in the prepaid side, we acquired 1,200,000 subscribers from T Mobile, but disconnected 880,000 clients in other operations. Our postpaid base was up 5.7% from the year before, while the prepaid one was down 3.5%. On the fixed line platform, our UUs were up 3.1% year on year, driven by broadband accesses that were up 8.3% after net additions of 500,000 accesses in the quarter. Just over half of the increase came in nickel parts from Mexico and Brazil, followed by Colombia and Guatemala. Our 3rd quarter revenues totaled COP 250,000,000,000. They were up 11.8% in Mexican peso terms and 3.1% at constant exchange rates from the year earlier quarter. Service revenues were practically flat year on year at constant exchange rates, which represents a 2 percentage point improvement with respect to the annual growth rate observed in the 2nd quarter. The stronger revenue base helped bring about a notable increase in EBITDA. In Mexican peso terms, it grows 11.1% sequentially and 1.5% on year to year basis to MXN 67,700,000,000. At constant exchange rates, EBITDA who are still down year on year 5.4 percent, exceeded a notable recovery from the 13.2% decline posted in prior quarter, an improvement of nearly 8 percentage points sequentially. The main factor behind improvement in service revenues was the renewed dynamism of mobile data revenues, where year on year rate growth rose from 4.1% in the 2nd quarter to 7.7% in the 3rd. Fixed broadband revenues expanded at a slightly faster pace in the latter quarter, 8.8% versus 7.9% in the second. For our specialty revenues maintained the trend at 6.1%. Both revenues, both fixed and mobile, declined somewhat less rapidly in the 3rd than in the 2nd quarter. So that's an improvement basically across all business lines. From a regional perspective, the sequential improvement in the annual rate of growth was 1 point 5 percentage points in each of the South American and European blocks, 0.7 percentage points in the Caribbean and 0.5 percentage points in Mexico. Only the Central American block raised a somewhat slower service revenue growth, 4.4% in the 3rd versus 5.1% in the 2nd quarter. The U. S. Had a strong showing in the quarter independently of the acquisition of T Mobile subscribers. EBITDA trends strengthened across the board with most countries posting higher EBITDA margins. The Caribbean continued to improve its margin as they have over the last few quarters, while the South American block presented a slight increase. In the U. S, platform had a very strong quarter with EBITDA rising 37%, even before accounting for the T Mobile subscribers. Whereas our 3rd quarter operating profits, ARS 30,000,000,000 were still 14% below those of the prior year, on a sequential basis, they jumped 16% 16.7%, more by the EBITDA increase. Our comprehensive financing cost totaled ARS 24,700,000,000, including a foreign exchange loss of ARS 10,000,000,000, which was 10% lower than in the preceding quarter and 77% below that of the year earlier quarter. Our net income totaled ARS 2,000,000,000, ARS 3.0 per share or ARS 3.0 per ADR. In the 9 months to September, our cash flow as as well as the unwinding of certain currency hedges, allowed us to fund capital expenditures in the amount of ARS 100,000,000,000 and reduced net debt by ARS 19,000,000,000. In addition to this, we distributed a net amount of ARS 9,600,000,000 in dividends and share buybacks, which were partly funded by distributions received from our investments in Europe and the sale of part of our stake in Telecom Austria. It is important to note that our growth rate has come down by the equivalent of $3,500,000,000 since December. Our dollar denominated obligations were reduced by $4,300,000,000 in the period, including the amortization in September of 2 bond issuers with a face value of $2,700,000,000 Considering the equity credit given to our hybrid bond issues and the market value of our currency derivatives, our ratio of net debt to EBITDA last 12 months came in at 2.2 times, which was similar to the one in the Q2. We expect this ratio to decline in future quarters as our planned deleveraging takes place. Well, thank you. And with this, I would like to pass the floor back to Daniel for Q and A. Thank you. Thank you, Carlos. We can start with the questions now. Thank you. And our first question is from Walter Piecyk with BTIG. Please go ahead. Thanks. Hey Carlos, can you just give us your sense on where you think Mexican EBITDA margins will ultimately bottom out? And when maybe you can see some return to ARPU growth there? Obviously, the interest in LTE phones is there, but you've got these other competitive headwinds. So if you could just comment on kind of where margins bottom out and when you might see some ARPU growth? Well, good morning. In Mexico, what we're seeing in Mexico, I think in Mexico, we're starting to see that revenues are starting to stabilize. Some people are buying a little bit more, are increasing a little bit the ARPU. Other ones are moving to these new plans. Still, we have some customers that are moving to all these new plants. So we're starting to see that. Still, the market is very competitive, where the competition is tough in Mexico. You can see that the prices in Mexico, maybe if you compare the same plan in Mexico and in the U. S. With our competitor in Mexico is maybe 60% to 70% lower the price of what they are selling in the United States. So while revenues, as we're saying, are stabilizing, we are putting a lot of effort in giving the best technology I think we're covering maybe 80% of the population in Mexico with 4 gs. The new spectrum that we get at the beginning of the year is helping us to have very good service, good quality of service, good coverage. I think of the margin in of the margin in EBITDA, but because all of these things is we are getting some more expenses. But I think if the revenues are starting to stabilize and then we hope that next year can grow a little bit, then we're going to feel very comfortable in Mexico. Thanks, Daniel. And for the follow-up question, can you just comment on strategy in the United States? Obviously, this acquisition looks like you're committed to stay in the U. S, but is there an opportunity for them for you to possibly sell that business or potentially partner with other companies that don't necessarily have a wireless presence right now? Thanks. We're happy with our business in the United States. TracFone is doing good, I think, and that's why we are taking that more than 1,000,000 customers from T Mobile. We're managing very well all the retail business, the prepaid business. We know how to handle the prepaid business. So we're happy the way TracFone is developing in the United States. So that's main. I think margins are better this quarter than the last quarter and last quarter of last year. So we're doing good improvements in TracFone. Great. Thank you. Thank you. And our next question comes from the line of Richard Deneen with UBS. Please go ahead. Good morning. Thanks for taking the question. Just question on the depreciation and amortization. That seemed to accelerate sequentially this quarter, up 20% year on year. It was running up more like 10% increases in the 1st and second quarters. If you could maybe just explain what's perhaps behind this, if it's changing CapEx, changes in the sort of mix of depreciation rates for different assets. Maybe if you can sort of say if there's been any change in the methodology or how we should think about that line going forward, that would be very helpful. Thank you. Thank you. I think that a portion of the where the depreciation has probably to do with more CapEx. But there's a portion that is probably a bit more than half of the increase. And this is basically for Brazil, which has to do with the qualifiers for just a set of boxes. For the set of boxes and the antennas were basically shortening a little bit the depreciation the life of those for purpose of depreciation. So that's basically it. Okay. And is there any sort of is it possible to guide for that line, Carlos, going forward or If you look at the numbers in the income statement, that also has to do a lot with foreign exchange movements because when like in this quarter, the peso came down relative to all other currencies, And that means that all of the, say, depreciation expenses, for instance, in Brazil and Colombia were worth more in peso terms. So what we would need is to look at this at constant exchange rates and maybe we can give you a bit more guidance for that. I think for the consolidated, in the absence of these currency moves, we would not have had much of an impact on the overall depreciation of the company. I'll provide you the numbers. If you can contact Daniela, we can give you those numbers. That's terrific. Thank you very much, Carlos. Thank you, Daniel. Thank you. Thank you. And our next question is from the line of Ric Prentiss with Raymond James. Please go ahead. Yes. Thank you. Good morning. Question, obviously, a very large deal in the United States with AT and T and Time Warner announced recently. What are your thoughts as far as combining your networks with content? How important is it to have content? And also maybe update us on where you stand as far as being able to combine with add video to your bundle? Well, interesting move in the United States. Let's see what's going to happen. In Mexico, we are we think that content is important. We have some things in Colombia. We are doing some things in Brazil. We have also in Mexico. So we feel that content is going to be it's important. It's going to be very important, makes a lot of sense to have some content to give to your customers. We have satellite TV, cable TV and all the wireless TV everywhere, streaming all our OTT products that is Claro Video and even Claro Musica. So I think content is it's important right now. It's going to become very important in the future. And update on where you stand on getting video? In Mexico, where we have video in all the countries, not in Argentina. But I think in Argentina, it has some time to 2 years, and then we can have video. And in Mexico, well, we are we don't have nothing still with video in Mexico. We feel that we are covering all the requirements of the IFFEL, and we hope that we can get the video soon. Okay. But still we don't have nothing. Yes. Right. And our next question is from the line of Amir Roslodowski with Barclays. Please go ahead. Thank you very much for taking the questions. I was wondering if we may chat a little bit about the competitive environment in Mexico. Looks like based on the metrics you reported, it seems as though pricing pressure has eased a bit and you folks are doing a lot better in the postpaid market. So it does seem like some of the more pressured competition that we've seen in the market may be easing. Is that a correct way to think about the current environment? Well, I think well, it's really competitive. So I don't think we're getting lower rates in the market, but still the competition is it's tough, it's big. So everybody is competing. As I said, if you compare prices in the U. S. Against prices in Mexico, in Mexico it's maybe 70% lower than what they are selling in the U. S. So I don't think it should go lower because it's very competitive. What we are seeing is that a lot of our customers are moving, still moving a lot to all these new plants. But we don't think that we're going to compete only with price. I think people want quality, people want coverage, people want speed in the networks and we are doing that. So we are being very careful to have the best network and the best quality for our customers. So we are Telcel is focusing a lot on moving to give the best, let's say, end to end quality to our customers. When they go to a store, we have to give the best service, the best in our own stores, then the quality of the network, then the throughput. So we are working a lot on giving them like a good service in here. Well, in Mexico and in all around Latin America, we're also looking a lot on the ARPUs. We don't want to see only subscribers. We want to see good subscribers, good ARPUs and revenues, okay, because we can get a lot of subscribers and reducing revenue. So I think we are being very careful also on the ARPUs of our customers, increasing their ARPUs, trying to sell them more things. So that's where we are right now in Mexico. Thank you very much. And a brief follow-up, if I may. I think we've all been watching and waiting for color on the regulatory review process. When do you think we should get some color? And how do you think about the potential for incremental asymmetric regulations? I think it's hard to not to argue that competition hasn't increased. And clearly pricing as you had mentioned has come down fairly significantly. And so would welcome any thoughts there. I think we have competition. Even the regulatory departments are saying they do some statements that there are a lot of competition in Mexico. So there's no doubt that we have a lot of competition. We don't know exactly when are going to be the when does the IFFETEL is going to decide on this new regulations or take or put more regulations. So we are we think that maybe between in the first quarter of next year, we can find some decision on EBITDA. I think one thing that is important to note, Amit, is that beyond the notion, just general notion of competition, I think there's very clear parameters, very objective that you can look at specifically in terms of pricing and in terms of what has happened to the consumption. So for instance, take a look at MOUs. MOUs in Mexico were up 68% year on year, 68% year on year. They went from 2 63 minutes per user last year to 442,000,000 I mean, 442 minutes per user in this quarter. I mean, this, obviously, goes to show 2 things. On the one hand, that we have a fantastic network that has been able to accommodate this kind of an increase in such a short period of time. And the second thing is that, obviously, all the consumers in Mexico have benefited because they are nearly increasing by 70% of the MOU. But this is happening to a large extent because prices have come down tremendously. If you continue to look that we don't do much anymore, but if you continue to look at the all the metric of prices per minute, the prices per minute today in Mexico are MXN 10. That means that it's approximately 0.5p, 0.5p in the U. S. And that means, obviously, that consumers have benefited because of low prices and much more consumption. So I think these are very objective metrics that we can discuss with the regulators and that they should point to the reduction of asymmetric regulation in Mexico for us. Thank you very much for the incremental color. Thank you. And our next question is from the line of Daniel Federle from Credit Suisse. Please go ahead. Hello, good morning. Thank you for taking my questions. My first question is about Brazil. We see that in Brazil, Amex has one of the best service equality in the mobile segment. But the financial performance so far, it has not been that strong. So I would like to know if you have any plan to change strategically or commercially your strategies in Brazil? And my second question about CapEx. With all these FX volatility, how are you thinking CapEx for 2016 2017? Thank you. Well, on the CapEx, we don't have still, we're working on the budget for 2017. And 20 16, we are on budget. We said that we're going to have CapEx around $7,500,000,000 and it's what we think we're going to end this year. So we are on budget and still working on the next year CapEx. On Brazil, I think on Brazil, We are doing much better in the postpaid mobile customers. We're increasing our postpaid mobile customers. We are also improving on our prepaid ARPU or prepaid usage. So I think all overall, we are going better. We are in the right direction, but still lot to do When you see the numbers of the competitor, you still have we still have a lot to do. And we're investing in our network. We are investing in the synergies of the companies. And we still have some bad debt. We still have customers that are not consuming. When you compare our ARPUs and the ARPUs of our competition, still our ARPUs are much lower than what they have. So we still need to work to have better customers when they get into our network to have a better ARPU, I think we're having around BRL 89 when our competitors around BRL 120 or BRL 130. So they are proof of the postpaid. So we think we need to increase that. We need to move on that direction. And I think we have a very good organization there. And I'm sure that we're still going to see good performances still this year and next year in Brazil. We're still reviewing the numbers for next year, but I'm sure there's going to be growth in revenue and better EBITDA for next year. And our next question is from the line of Michel Morin with Morgan Stanley. Please go ahead. Good morning. So first on Mexico, I was hoping to see if you can give us a little bit more color on your margins this quarter. You had if we look at relative to the Q2, you were up in revenues and service revenues, and yet your margins were still down even if we exclude equipment sales. So wondering if you can help us quantify, give us a little bit of color of what's behind this. Have you increased handset subsidies Or is it kind of the asymmetry of termination fees? What's really driving that margin compression in the Q3? And also you had very strong fixed RGU net adds. I think it's a 5 year high. So I'm wondering also if you can talk a bit about what you're seeing in the competitive landscape on the fixed line in Mexico. Thank you. There's a lot of questions in one question, Michel. Good morning. Well, in Mexico talking about Mexico. So in Mexico, I think, as you said, service revenues are stabilizing. Expenses. Yes, the asymmetric interconnection is costing us money and people is talking more to as the prices are going down, there are more calls and then more calls means more interconnection. So this part of the cost that we have. Another cost, we get some spectrum at the beginning of the year, then you have to pay monthly a fee for that. And we are growing on our postpaid base and the postpaid base cost you also more SAC than the prepaid base. So there's still some cost and expenses that we need to work for the next year. But while the important issue is that service revenue is starting to stabilize and that's something important for us. That's a good metric in America Movil. As we said, we are working a lot on the networks, doing coverage, more 4 gs, better quality, more capacity. As Carlos is saying, some of our customers are maybe using 3 or 4 times more the minutes than what they used to have at the beginning of the year. So you need to put more capacity on the network. So there's still a lot of things to do in Mexico, but I think the first phase of stabilizing the revenues is looking good, okay? So that what's the other question? Well, it was around your fixed RGUs in Mexico. They were pretty good. And it looks like it's like a 5 year high. I'm wondering if there was anything unusual this quarter. Carlos? Yes. If you want to it was a good quarter in the sense that as we mentioned, when we are doing it, we are providing better quality and we are focusing just as in the mobile side, in the fixed side, we're focusing on quality, having the best network in the country. And also what we are doing is including more benefits on the packages that we offer to our customers. So our packages in a if you compare them from a financial point of view in prices, they are very low compared to other countries, the U. S. And Spain. So just as it is in the mobile, in the fixed line, you can see that prices are going down. But we are what we are looking forward is to improve the through more benefits to our customers. The bundles that we're giving to the customers, the package that we're giving are working very good. That's great. And Daniela, just to clarify the CapEx number you gave earlier, 7.5 right? And you had some I think in the Q3 in Peru. Is that correct? We have $300,000,000. $300,000,000 in Peru, yes. That's what we have last quarter in Peru. $200,000,000 in Mexico. $200,000,000 in Mexico. Yes, maybe we're going to get to 7.5 plus 500 of spectrum. I don't know if we're going to get exactly to the 7 point 5. So we are more or less in those numbers, Michel. Okay, perfect. Thank you. Thank you. Thank you, Michel. And our next question is from Alejandro Gajustra with BBVA. Please go ahead, Alejandro. Hi, good morning, Daniel, Carlos and Daniela. Can you hear me well? Yes. Okay, great. Thanks. Is there anything specific that you're doing to keep the good momentum going in the data consumption? And I'm wondering if growth continues at this pace, would that trigger a higher CapEx Or are you still committed to reduce CapEx to those $7,500,000,000 to $8,000,000,000 for the next 4 years? Or do you believe you're still pretty much covered to face increased data consumption in the years to come? Data consumption, it's different in each country. I think data, it's growing and it's going to grow for the next years as we move more customers, well, from 2 gs to 3 gs and from 3 gs to 4 gs. 4 gs. And then in the future for to 5 gs, there's going to be much more consumption for all of our customers. All the CapEx that we're putting includes all these consumption that the increase of the data that we're having. I think it's different in each country. Let's say, talking a little bit about Peru that we talk about the spectrum. I think in Peru, we get the spectrum, we put the infrastructure and everything is working very good in Peru. I think it's stabilizing our customers, using more the data. So things are going well. In each of the countries, we have a different strategy, but all over all, Peru is doing very good on the new strategy with a new network. Colombia with to our customers. Argentina is doing also very good. Central America, all overall, we are besides Mexico Brazil that we already talked about them. All the other countries are also doing very good in terms of moving to 3 gs and 4 gs, new smartphones, more data, more usage. We have been when you talk about the CapEx, we already put our cable submarine that help us to move all the data around Latin America, a lot of transport networks, a lot of sites connected to fiber, also satellite. So we have been doing, as Carlos said in the has been saying in the last calls, we put we have like €30,000,000,000 in 3 years. I think it was €12,000,000,000, 13, 2014,000,000 or 13, 2014,000,000 that we put 10 year per €10,000,000,000 per year and that allow us to do everything that we're doing today. Okay, great. So it seems that your CapEx estimates already include maybe the increase in data consumption and that you would be comfortable maintaining these levels of CapEx. Yes. Okay, great. Thank you. And then my second question is, if you plan to change your to change your dividend policy, if you will stop paying in stock going forward looking to further deleverage your balance sheet? Can you repeat the question? I don't understand the question. It's regarding the dividend policy. If you would also propose to keep paying in stock going forward deleveraging the balance sheet? For this end of the year, I don't know what the assembly is going to propose next year. So I still don't know what's going to happen for next year. Okay, great. Thank you. Thank you very much. And our next question is from the line of Carlos Delegarreta with GBM. Please go ahead. Thank you. And sorry, just to answer the other question. Remember that it's always is going to be your decision if you want to do shares or cash. So if you want cash in your dividend, it's always going to be the cash. It's your option that. And if we do that and if the assembly proposed that, I think it's going to be the same for year. It's your option to do cash or shares or cash and shares, okay? So that's your option. Go ahead, John. Sorry. Thanks. Getting back to the question, no problem. I mean, for the first on prepays in Mexico, you're mentioning improvement there. I just want to know what is the driver that you're seeing for the increases in the recharges? Is it perhaps, I mean, the more attractive pricing? Is it the fact that the recharges last longer? I mean, what is exactly what's moving the market there? Well, a lot of things. I think people is using more, so they need to recharge and data. So data because we have unlimited minutes, but also we the prepaids are being we shortened a little bit the days of the cards. So also make them to recharge a little bit more. So there's a couple of things that we're doing in the prepaid side. Now. I think I'd just like to add, and this is not specific about prepaid, but when I was mentioning that, that we already have 4.42 mills of use in Mexico, I just want to put it in perspective. This compares this is more than twice, more than twice the median of MOUs in the rest of the countries where we operate. And we're operating today in 25 countries. So if you take the median of MOUs in all of these 25 countries, Mexico has twice the median. Thank you. That's very unlikely. And the second question is a bit more forward looking. So obviously, it's a little bit early perhaps to talk about 5 gs deployment for America Movil. But maybe I mean, I was wondering if you can share with us your view on the I mean, on this technology and what it implies for the market for Internet of Things, because I really haven't heard much from you guys regarding this segment. No, I think we're well, we are still putting a lot more coverage in 4 gs, but of course, we're thinking to put 5 gs. We're moving a lot with we're preparing the company in the SDN on virtualization, on we're moving on 4 gs plus that 4.5 LTE. The narrowband. The narrowband and we are moving there. And of course, we are getting prepared to 5 gs, if you don't hear about America. I think we do some testings, big testings in Brazil about 5 gs and in Puerto Rico with our networks in 5 gs. So we are testing and we are prepared when we decide to do that. I think it's too early to talk about that, but we're preparing our networks to when we decide to go to 5 gs, then we can go there. That's great. Thank you. And our next question is from Sumit Datta with New Street Research. Please go ahead, Sumit. Hi. A question on Colombia, please. First of all, the numbers look to be improving there. The margin was a little stronger than in the first half of the year. It would be interesting to get some kind of general perspective on how you see that market. And on a related note, we've heard from one of your competitors this quarter, who I believe have pursuing antitrust measures against you in Colombia suggesting you've been discriminating pricing by geography. Have you got any perspective on that particular accusation, please? Thank you. The second question is let me answer you the first question and then I don't understand the second question. But in Colombia, I think we have a new organization, and I'm going to talk a little bit about mobile. We are increasing our coverage, doing much better in terms of quality on throughput of our network. So we feel that our customers are getting very satisfied with that network, and we're increasing our distribution. We're putting much a lot more focus on the commercial side. So we are these new organization is lot more focused on all the commercial side. And I think I want also we're doing very well in the fixed side in TV. Oscar can talk a little bit about what we're doing in the fixed side in Colombia. Jeshu, well, as you know, we launched a different kind of packages through the years and the market has been very well receptive to our triple play offering in the market. So we've been growing our triple play and double play offering that includes pay TV and broadband as well. And I think we have the best offer in pay TV. It's not only a pay TV. We already have streaming video, a video on demand through the offering. And the market has been very well receptive to these new packages on the marketplace. So we've been growing pretty good on fixed broadband and pay TV as well. And as well, the bundle includes fixed voice that it's all included. So it has very good reception for our customers. Yes. I think service revenues in Colombia on the fixed line side have been growing double digit for quite some time for 2 years. They are now growing nearly 13% since the Q4. And the second question, what's your second question? I don't understand. Sure. Sorry. Just to be clear, one of your competitors in the market in Colombia has said it's filed antitrust lawsuits against you in the context of discrimination in pricing between different regions in the country. I just wondered what your view on that was? I don't have any news on that. So discrimination on pricing on this different regions, well, that's a new for the competition. So let me understand that. I don't have any news on that. So we don't think we're giving anything as different on pricing. We don't think maybe we have some special offers in some places, but not on pricing, maybe on handsets, maybe I don't I'm really sure that we are not doing something that the regulation don't allow us to do. So we are fulfill all the commitments or all the what the regulation ask us, we already fulfill everything in Colombia. So we are okay on the regulation side. Okay, very clear. Thanks. Thank you. And our next question is from the line of Julio Arcin Iles with RBC. Please go ahead. Yes. Hello. Thanks for taking the question. Very fast question. Can you give me some color of how your network in fixed compares against your competitors in Brazil and Colombia in terms, for example, of home pass and technology? Sure. Well, let's talk first in Brazil. In Brazil, we have 22,000,000 households. All of them, 98% of that, the network is fully bidirectional. And we are using, as you know, DOCSIS. We are using DOCSIS 3 and then in some regions, we already deployed DOCSIS 3.1 and our core of the network is a fully integrated network, all IP network. And we are in the process, as Daniel mentioned, on a fully integrated of the network. We are making some changes in the network to merge IP and optics in order to reduce the cost of the network and improve the throughput of the network. And in Colombia, we have 7,000,000 households and as well fully bidirectional 98% of the network and the same situation we're using DOCSIS 3 and DOCSIS 3.1 in some of the areas. So we closed the fiber even in Brazil and in Colombia. So we could deliver good speeds for broadband and very good offering for pay TV with high definition channels all across the networks. And as well, these networks serves small business and enterprise market through those last mines. Okay. Can I follow-up with another question? How do you see the evolution of fixed mobile convergence, for example, in Colombia? Well, as you have said, you have been growing quite well in the 2 play and free play packages. But do you see any potential for fixed mobile convergence? Well, we start to offer in some combos in Brazil that includes mobile in open offering. And as well, we recently started to do that in Colombia. And as you know, the market in Brazil has good appealing to this kind of products. So we will test that. And we are already starting Colombia to bundle the triple play and the mobile offering in benefit of our customers. So that's on the commercial side. Within the network, we already have just one network. We fully merged the network. All the core and aggregation of the network is fixed and mobile. And now as Daniel was explaining, we are moving on software defined network as well and the new evolution of the network, not only in Colombia, we are doing this all the testing in AMX. So we really have a state of the art networks in Colombia and in Brazil. Okay. Thank you. And our next question is from the line of Rodrigo Villanueva with Merrill Lynch. Please go ahead. Thank you. Good morning, Daniel, Carlos, Daniela. My question is related to Brazil. I was wondering if you could give us an update on what you're seeing there with respect to the potential for the market to consolidate. I think there were some news reports a couple of weeks ago suggesting that you would be interested in some of the assets of Oi. So I would like to hear what you can or what you have to say on this respect. Thank you. What I said and I said always is that we are always open to hear things and to review things that I never said that I'm interested in buying oil. So what I said is I'm open and that we can review and we are going to be open always in Brazil, in Mexico, in Latin America to hear and to see opportunities for America Movil. That does not mean that we're having. In Brazil specific, they have there's a lot of rumors and a lot of talks about merging and consolidating the market for the last 2 years. So I don't know still what is going to happen, but I don't think there's going to be something soon. It's my perception. But you don't know, maybe things get a little bit on a hurry and starting to consolidate sooner than what I think. But all overall, AmericanMobil is not having talks with anyone and we don't have anything right now. Understood, Daniel. Thank you very much. Thank you. And our next question is from the line of Mitch Radciniuk with Hermes. Please go ahead. Thanks for taking my question. Just on the credit rating, notwithstanding the gross delevering that America Movil has executed over the past 9 months. To what extent are you willing to defend the ratings to avoid a kind of or BBB rating? In other words, to what extent you're willing to keep from if there's rating pressure, to keep from staying out of the BBB rating category? Sure. Well, thank you for clarifying that. I think it's clear that we are in the single day category in all three ratings. Yes, yes. I was getting confused that you probably were in a different thought that you were in a different call. Basically, I just want to know to what extent and how important it is for you to keep your maintain the single A rating is what I'm driving at. No, no, I think we have been committed to the ratings, and we have a mandate directly from the board to see to it that we maintain those ratings at all costs. So I think that yes, we are good. We are in constant dialogue with the rating agencies. They know exactly where we are. They've seen our forecast, etcetera. And I think that we are confident that as has been the case in the past, that we will not get any downward under the we tend to raise a negative outlook by 1 or 2 of the agencies that those outlooks will become stable probably going into next year or in the middle of next year. That's our expectation. But yes, we're committed to the ratings, and we are in a path as you can see of delevering the company. We are proceeding very much according to plan. We expect further reduction in debt, probably net debt of roughly $2,000,000,000 next year and the year after. So I think that we are in good, good shape from the point of view of the overall leverage position of the company. Okay. And ladies and gentlemen, we only have one time for one more question. And our last question is from Arturo Langa from Itau Bank. Please go ahead. Hello. It's Arturo from Itau BBA. Good morning and thanks for taking my question. Just two quick questions. First, could you remind us what is the timeline for the local lupusum bundling process in Mexico? And what are your thoughts around that? And then my follow-up question would be regarding Telecom Altra. We saw a nice increase in EBITDA. If you could just share with us the strategy that the company is implementing there? And also if you could comment, there has been some headlines regarding a possible capital increase. Just to hear your thoughts on that would be great. Thank you very much. I'll talk a little bit about Austria. I think in Austria, we took over the company, the control of the company formally barely 2 years ago, I think in August of 2014. And obviously, at first, we were more than anything focused on reducing the leverage of the company. It has been very high. And I can say that it has been brought now down to the level that AmecaMobile overall has. So from 3.5 or something net debt to EBITDA, it's come down to 2.2 net debt to EBITDA. So that's part of what we did in the 1st year. And then we've had our management on the ground for just a bit more than a year, year and a half. And quite frankly, we have had very successful results. The EBITDA is increasing. And so far, it's a lot of this is driven by Austria itself. And in Austria, we have been able to get significant efficiencies from the operation simply by reducing costs, streamlining the operation. We have stabilized revenues and they are post to grow, but EBITDA is really growing fairly rapidly. So in a company that has now much less debt than used to be the case and that is now having a much more coordinated approach towards the rest of the operations in Eastern Europe. I think this company will continue to surprise us with positive increases in EBITDA. And what you mentioned about capital increase, well, we have never done a capital increase to fund an acquisition. And I think the company today is in very it's getting stronger financially, and it is getting stronger operationally. And I'd say maybe one day you can look eastward and look at possibilities of expanding there. I don't think it's there yet, but and we certainly are not looking by any means at any capital increasing the company, other than the one that was done 2 years ago. Finally, regarding the local lupa bundling, it's something that is already implemented in Mexico. We have already since starting we have implemented regarding the in accordance with the rules stated by the Ifetel. And we have already provided these services to the operators that have been appealing to them or have been signing the contract for them. Okay. Thank you. Okay. Thank you. And ladies and gentlemen, this concludes our Q and A for today. I would like to turn the call back to Daniel Hajj for any final remarks. Just to thank everybody for winning the call and Carlos, Daniela, Oscar also thank you very much. Thank you. Thank you, Oliver. Thank you. Ladies and gentlemen, this concludes our conference for today. You may all disconnect. Have a wonderful day.