Welcome to América Móvil third quarter 2016 earnings conference and webcast. At this time, all participants are in a listen only mode to prevent background noise. For assistance during the conference, just press star and zero. We will have a question and answer session later, the instructions will be given at that time. As a reminder, this conference is being recorded. Now I would like to welcome and turn the call to Daniela Lecuona, Head of Investor Relations. Please go ahead.
Thank you. Good morning, everyone. Thanks for joining us in our third quarter conference call. We have today on the line, Mr. Daniel Hajj, CEO, Mr. Carlos Garcia Moreno, CFO, Mr. Oscar Monjaraz, Chief Operating Officer, and also Mr. Carlos Robles, Chief Financial Officer from Telmex.
Thank you, Daniela. Good morning, everyone. Carlos is going to make a summary of the third quarter results.
Okay. Well, thank you, Daniel. Good morning, everyone. Throughout the third quarter, economic activity showed signs of renewed strength in some of the major Latin American markets, including Mexico and Brazil. Financial flows in the international capital markets remained fairly stable. There were no imminent threats of an increase in rates by the Fed. The earliest move would have been in mid-September. Bond issuance throughout the summer quarters took place at unseasonally high levels. Latin currencies 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 U.S. dollar, going from MXN 18.3 to the U.S. dollar at the end of June to nearly MXN 20 to the U.S. dollar towards the end of September.
As of the value of this report yesterday, the U.S. dollar was trading at MXN 18.8 per U.S. dollar. On the mobile platform, we added 750,000 postpaid subs in the third quarter, nearly half of them in Brazil and the rest mostly in Mexico and Colombia. In the prepaid side, we acquired 1.2 million subscribers from T-Mobile, but disconnected 880,000 clients in other operations. Our postpaid base was up 5.7% from the year before, whereas the prepaid one was down 3.5%. On the fixed line platform, internet users were up 3.1% year-over-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 equal parts from Mexico and Brazil, followed by Colombia and Guatemala. Our third quarter revenues total MXN 250 billion.
They were up 11.8% in MXN terms and 3.1% at constant exchange rates from the year earlier quarter. Service revenues were practically flat year-over-year at constant exchange rates, which represents a 2 percentage point improvement with respect to the annual growth rate of sales in the second quarter. The stronger revenue base helped bring about a notable increase in EBITDA. In MXN terms, it grows 11.1% sequentially and 1.5% on a year-over-year basis, to say MXN 67.7 billion. At constant exchange rates, EBITDA, while still down year-over-year 5.4%, exhibited a notable recovery from the 13.2% decline posted the 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, whose year-over-year rate of growth rose from 4.1% in the second quarter to 7.7% in the third quarter.
Fixed broadband revenues expanded at a slightly faster pace in the latter quarter, 8.8% versus 7.9% in the second quarter. Pay TV revenues maintained their trend at 6.1%. Most revenues, both fixed and mobile, declined somewhat less rapidly in the third quarter than in the second quarter. That's an improvement basically across all business lines. From a regional perspective, the sequential improvement in the annual rate of growth was one and a half 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 third quarter versus 5.1% in the second 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. Our third quarter operating profits, MXN 30 billion, were still 14% below those of the prior year. On a sequential basis, they jumped 16.7%, buoyed by the EBITDA increase. Our comprehensive financing cost totaled MXN 24.7 billion, including a foreign exchange loss of MXN 10 billion, which was 10% lower than in the preceding quarter and 37% below that of the year earlier quarter. Our net income totaled MXN 2.1 billion in the quarter and was equivalent to MXN 0.03 per share or $0.03 per ADR.
In the nine months to September, our cash flow, as well as the unwinding of certain currency hedges, allowed us to fund capital expenditures in the amount of MXN 100 billion and reduce net debt by MXN 19 billion. In addition to this, we distributed a net amount of MXN 9.6 billion 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 Telekom Austria. It is important to note that our gross debt has come down by the equivalent of $3.5 billion since December. Our dollar denominated obligations were reduced by $4.3 billion in the period, including the amortization in September of two bond issues with a face value of $2.7 billion.
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 second quarter. We expect this ratio to decline in future quarters as our planned deleveraging takes place. Well, thank you. With this, I would like to pass the floor back to Daniel for Q&A. Thank you.
Thank you, Carlos.
We can start with the questions now.
Thank you. Ladies and gentlemen, as a courtesy to other analysts, please limit your questions to one and one follow-up and get back in the queue if necessary. To ask a question, just press one, and to remove yourself, press the pound key. 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. 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 the 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 plans. 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%-70% lower the price of what they are selling in the United States. Well, revenues, as we're saying, are stabilizing. We are putting a lot of effort in giving the best technology, investing in 4G.
I think we're covering maybe 80% of the population in Mexico with 4G. 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 the perception of the brand in Mexico is excellent, it's helping us a lot. We're moving on that direction. I still don't know what's the bottom of the margin in EBITDA, because all of these things is we are getting some more expenses. I think if the revenues are starting to stabilize, we hope that next year we can grow a little bit, we're going to feel very comfortable in Mexico.
Thanks, Daniel. For the follow-up question, can you just comment on strategy in the U.S.? Obviously, this acquisition looks like you're committed to stay in the U.S., but is there an opportunity 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 U.S. TracFone is doing good, I think, and that's why we are taking that more than 1 million customers from T-Mobile. We're managing very well all the retail business, the prepaid business. We know how to handle the prepaid business, we're happy the way TracFone is developing in the U.S. That's main. I think margins are better this quarter than the last quarter and last quarter of last year. We're doing good improvements in TracFone.
Great. Thank you.
Thank you.
Our next question comes on the line of Richard Dineen with UBS. Please go ahead.
Good morning. Thanks for taking the question. Just a question on the depreciation and amortization. That seemed to accelerate sequentially this quarter, up 20% year-over-year. It was running at more like 10% increases in the first and second quarters. If you could maybe just explain what's perhaps behind this, if it's a change in 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 greater depreciation has probably to do with more CapEx. 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 codifiers.
Set-top
Set-top boxes. For the set-top boxes and the antennas, which are basically shortening a little bit the life of those for purpose of depreciation. That's basically it.
Okay.
Is it possible to guide for that line, Carlos, going forward, or no?
If you look at the numbers in the income statement, that also has to do a lot with foreign exchange movements. Like in this quarter, the peso came down relative to all other currencies.
That means that all of the, say, depreciation expenses, for instance, in Brazil and Colombia, were worth more in MXN terms. What we would need is to look at these 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. You can give to Daniel. Thank you.
Thank you.
Thank you.
Our next question is from the line of Rick Prentiss with Raymond James. Please go ahead.
Yes, thank you. Good morning. Question, obviously a very large deal in the U.S. with AT&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? 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 U.S. Let's see what's going to happen. In Mexico, we think that content is important. We have some things in Colombia. We are doing some things in Brazil. We have also UnoTV in Mexico. We feel that content, 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 Música. I think content, it's important right now. It's going to become very important in the future.
Update on where you stand on getting video?
In Mexico?
Yeah.
Well, we have video in all the countries. Not in Argentina, but I think in Argentina it has some time.
Two years.
Two years, then we can have video. In Mexico, well, we don't have nothing still, [audio distortion], with video in Mexico. No, we feel that we are covering all the requirements.
We hope that we can get the video, [audio distortion] , soon.
Okay. Thank you.
Still, we don't have nothing. Yes.
Right.
Our next question is from the line of Amir Rozwadowski 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 post-paid market. 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?
I think it's really competitive, so I don't think we're getting lower rates in the market, but still the competition, it's tough. It's big. Everybody's 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. I don't think it should go lower now because it's very competitive. What we are seeing is that a lot of our customers are still moving a lot to all these new plans. 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. We are being very careful to have the best network and the best quality for our customers.
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. We are working a lot on giving them a good service in here, well, in Mexico and in all around Latin America. We are also looking a lot on the ARPU. We don't want to see only subscribers. We want to see good subscribers, good ARPU, and revenues, okay? Because we can get a lot of subscribers and reducing revenues. I think we are being
Very careful also on the ARPU of our customers. Increasing their ARPUs, trying to sell them more things. That's where we are right now in Mexico.
Thank you very much. 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 not to argue that competition hasn't increased, and clearly pricing, as you'd mentioned, has come down fairly significantly. Would welcome any thoughts there.
I think we have competition. Even the regulatory department are saying, they do some statements that there are a lot of competition in Mexico. There's no doubt that we have a lot of competition. We don't know exactly when IFT is going to decide on this new regulations or take or put more regulations. We think that maybe in the first quarter of next year, we can find some decision on IFT.
I think one thing that is important to note, Amir, is that beyond the notion, just general notion of competition, I think there's very clear parameters that are very objective that you can look at, specifically in terms of pricing and in terms of what has happened to the consumption. For instance, take a look at MOUs. MOUs in Mexico were up 68% year-on-year. 68% year-on-year. They went from 263 minutes per user last year to 442 minutes per user in this quarter. This obviously goes to show two 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. The second thing is that obviously all the consumers in Mexico have benefited because they are nearly increasing by 70% their MOU.
This is happening to a large extent because prices have come down tremendously. If you continue to look, that we don't too much anymore, but if you can continue to look at the older metric of prices per minute, the prices per minute today in Mexico are MXN 0.10. That means that it's approximately half a penny in the U.S. That means obviously that consumers have benefited because of low prices and much more consumption. 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.
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, AMX has one of the best service quality in the mobile segment, but the financial performance so far, it has not been that strong. I would like to know if you have any plan to change strategically or commercially your strategies in Brazil. My second question about CapEx. With all this FX volatility, how are you thinking CapEx for 2016 and 2017? Thank you.
Well, on the CapEx, we don't have still as we're working on the budget for 2017, and on 2016, we are on budget. We said that we're going to have CapEx around MXN 7.5 billion, and it's what we think we're going to end this year. 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. I think all overall, we are going better. We are in the right direction, but still a lot to do. When you see the numbers of the competitor, we still have a lot to do, and we're investing in our network. We are investing in the synergies of the companies. 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. 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 competitor is around BRL 120 or BRL 130. The ARPU of the postpaid. We think we need to increase that. We need to move on that direction. I think we have a very good organization there, and I'm sure that we are still going to see good performances still this year and next year in Brazil. We're still reviewing the numbers for next year, I'm sure there's going to be growth in revenue and better EBITDA for next year. Next question.
Our next question is from the line of Michel Morin with Morgan Stanley. Please go ahead.
Good morning. First on Mexico, I was hoping to see if you can give us a little bit more color on your margins this quarter. If we look at relatives of the second quarter, you were up in revenues and service revenues, and yet your margins were still down even if we exclude equipment sales. I'm 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 third quarter? Also you had very strong fixed RGU net adds. I think it's a five-year high. 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. In Mexico, I think, as you said, service revenue is stabilizing. As we said at the beginning of the call, still EBITDA is not stabilizing. We have some costs and expenses. Yes, the asymmetric interconnection is costing us money and people is talking more. As the prices are going down, there are more calls, more calls means more interconnection. This part of the cost that we have. Another cost, we get some spectrum at the beginning of the year, you have to pay monthly fee for that. We are growing on our postpaid base, and the postpaid base cost you also more SAC than the prepaid base. There's still some cost and expenses that we need to work for the next year.
well, the important issue is that service revenue is starting to stabilize, and that is something important for us. That is a good metric in América Móvil. As we said, we are working a lot on the networks, doing coverage, more 4G, better quality, more capacity. As Carlos is saying, some of our customers are maybe using three or four times more the minutes than what they used to have at the beginning of the year. You need to put more capacity on the network. There is still a lot of things to do in Mexico, but I think the first phase of stabilizing the revenues is looking good, okay? What is the other question?
Well, it was around your fixed RGUs in Mexico. They were pretty good, and it looks like it is a five-year high. I am wondering if there was anything unusual this quarter.
Carlos.
It was a good quarter in the sense that as we mentioned, what we are doing is we are providing better quality, and we are focusing just as in the mobile side, in the fixed side. We are focusing on quality, having the best network in the country. Also what we are doing is including more benefits on the packages that we offer to our customers. Our packages, if you compare them from an international point of view, in prices, they are very low compared to other countries, the U.S. and Spain. Just as it is in the mobile, in the fixed line, you can see that prices are going down. What we are looking forward is to improve through more benefits to our customers.
The bundles that we are giving to the customers, the packages that we are giving are working very good, Michel.
Daniel, just to clarify, the CapEx number you gave earlier is MXN 7.5. That does not include spectrum, right? You had some, I think, in the third quarter in Peru. Is that correct?
MXN 300 million in Peru, yes. That's what we have last quarter in Peru.
MXN 200 in Mexico.
MXN 200 in Mexico. Yes. Maybe we're going to get to MXN 7.5 plus MXN 500 of spectrum. I don't know if we're going to get exactly to the MXN 7.5. We are more or less in those numbers, Michel.
Okay, perfect. Thank you.
No, thank you. Thank you, Michel.
Our next question is from Alejandro Gallostra 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 data consumption? I'm wondering if growth continues at this pace, would that trigger a higher CapEx or you're still committed to reduce CapEx to those $7.5 billion-$8 billion for the next four years? You believe you're still pretty much covered to face increased data consumption in the years to come?
Data consumption is different in each country. I think data is growing, and it's going to grow for the next years as we move more customers from 2G to 3G and from 3G to 4G, and then in the future, to 5G. There's going to be much more consumption for all of our customers. All the CapEx that we're putting includes all this consumption, 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 infrastructure, and everything is working very well in Peru. I think it's stabilizing our customers using more of the data. Things are going well. In each of the countries, we have a different strategy.
Overall, Peru is doing very well on the new strategy with the new network. Colombia, with the new organization, is looking very good also. Chile is also increasing revenues. We are selling much more data to our customers. Argentina is doing also very well. Central America, overall, besides Mexico and Brazil, that we already talked about them, all the other countries are also doing very well in terms of moving to 3G and 4G, new smartphones, more data, more usage. 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. We have been doing, as Carlos has been saying in the last calls, we have $30 billion in three years.
I think it was 2012, 2013, and 2014 or 2013, 2014, and 2015, that we put $10 billion per year, and that allow us to do everything that we're doing today.
Okay, great. It seems that your CapEx estimate will include maybe increasing data consumption, and that you'll be.
Yes
You'll be comfortable.
Yes
maintaining these levels of CapEx. Okay, great. Thank you.
Yes.
My second question is if you plan to change your dividend policy review, if you will start 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 and-
Wait
with the purpose of deleveraging the balance sheet.
Do it for this end of the year. I don't know what the assembly is going to propose next year. I still don't know what's going to happen for next year.
Okay, great. Thank you.
Thank you very much.
Our next question is from the line of Carlos de Legarreta with GBM. Please go ahead.
Thank you.
Sorry, just to answer the other question. Just remember that it's always going to be your decision if you want to do shares or cash. If you all want cash in your dividend, it's always going to be the cash.
Yes.
It's your option. If we do that, if the assembly propose that, I think it's going to be the same for next year. That it's your option to do cash or shares or cash and shares, okay. That's your option.
Go ahead, Carlos.
Sorry. Thanks. Getting back to the question, no problem. For the first one on prepaid 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 the more attractive pricing? Is it the fact that the recharges last longer? What is exactly what's moving the market there?
Well, a lot of things. I think people is using more, they need to recharge. Data, data because we have unlimited minutes. Also the prepaids are being, we shortened a little bit the days of the cards, also make them to recharge a little bit more. There's a couple of things that we're doing in the prepaid side now.
Okay. I think I'd just like to add, this is not specific about prepaid, when I was mentioning that we already have 442 minutes of use in Mexico, I just want to put it in perspective. This compares, this is more than twice the median of MOUs in the rest of the countries where we operate, and we're operating today in 25 countries. If you take the median of MOUs in all of these 25 countries, Mexico has twice the median.
Thank you. That's very enlightening. The second question is a bit more forward-looking. Obviously, it's a little bit early perhaps to talk about 5G deployment for América Móvil, maybe, I was wondering if you can share with us your view 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 still putting a lot more coverage in 4G. Of course, we're thinking to put 5G. We're moving a lot, we're preparing the company in the SDN on virtualization, we're moving on 4G+, that 4.5G LTE.
Narrowband
the narrowband. We are moving there, of course, we are getting prepared to 5G. If you don't hear about América Móvil. I think we do some testings, big testings in Brazil about 5G and in Puerto Rico with our networks in 5G. We are testing, and we are prepared when we decide to do that. I think it's too early to talk about that. We're preparing our networks to when we decide to go to 5G, then we can go there.
That's great. Thank you.
Our next question is from Soomit Datta with New Street Research. Please go ahead, Soomit.
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'd be interesting to get some kind of general perspective on how you see that market. 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.
All right. Let me answer you the first question. I don't understand the second question. In Colombia, I think we have a new organization. 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. We feel that our customers are getting very satisfied with that network. We're increasing our distribution. We're putting a lot more focus on the commercial side. This new organization is a lot more focused on all the commercial side. 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.
Yes, sure. Well, as you know, we launched different kind of packages through the years. The market has been very well accepted to our triple-play offering in the market. We've been growing on triple-play and double-play offering that includes pay TV and broadband as well. I think we have the best offer in pay TV, is not only a pay TV. We already have streaming video, a video on-demand through the offering. The market has been very well accepted to these new packages on the marketplace. We've been growing pretty good on fixed broadband and pay TV as well. As well, the bundle includes a fixed voice that it's all included. It has very good reception for our customers.
Yeah, I think service revenues in Colombia on the fixed line side have been growing double-digit for quite some time now.
Yeah, for two years.
They are now growing nearly 13%.
That's right.
At core.
Yes.
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. Discrimination on pricing on the different regions. Well, that's a new for the competition. Let me understand that. I don't have any news on that.
Okay
we don't think we're giving anything 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'm really sure that we are not doing something that the regulations don't allow us to do. We are fulfill all the commitments or all what the regulation ask us. We already fulfill everything in Colombia. We are okay on the regulation side, no?
Okay, very clear. Thanks.
Thank you.
Our next question is from the line of Julio Arciniegas 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. Let's talk first in Brazil. In Brazil, we have 22 million households. All of them, 98% of that, the network is fully bidirectional. We are using, as you know, DOCSIS. We are using DOCSIS 3.0, and then in some regions, we already deployed DOCSIS 3.1. Our core of the network is a fully integrated network, all IP network. 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. In Colombia, we have 7 million households, and as well, fully bidirectional, 98% of the network. The same situation, we're using DOCSIS 3.0 and DOCSIS 3.1 in some of the areas.
We're closer to 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. These networks serves small business and enterprise market through those last miles.
Okay. Can I follow up with another question?
Sure.
How do you see the evolution of fixed mobile convergence, for example, in Colombia? As you have said, you have been growing quite well in the double-play and triple-play packages. Do you see any potential for fixed mobile convergence?
We start to offer in some combos in Brazil that includes mobile in our offering. We recently start to do that in Colombia. The market in Brazil has good appealing to this kind of product, so we will test that. We are already starting Colombia to bundle the triple-play and the mobile offering in benefit of our customers. That's on the commercial side. Within the network, we already have just one network. We fully merge the network. All the core and aggregation of the network is a fixed and mobile. 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 all the testing in AMX. We really have an state-of-the-art networks in Colombia and Brazil.
Okay. Thank you.
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. I would like to hear 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. I never said that I'm interested in buying Oi. What I said is I'm open and that we can review, and we're going to be open always in Brazil, in Mexico, in Latin America to hear and to see opportunities for América Móvil. That does not mean that we're having. In Brazil specific, there's a lot of rumors and a lot of talks about merging and consolidating the market for the last two years. I don't know still what is going to happen. I don't think there's going to be something soon. It's my perception. You don't know. Maybe things get a little bit on a hurry and starting to consolidate sooner than what I think.
All overall, América Móvil is not having talks with anyone, and we don't have anything right now.
Understood, Daniel. Thank you very much.
Thank you.
Our next question is from the line of Mitch Reznick with Hermes. Please go ahead.
Thanks for taking my question. Just on the credit rating, notwithstanding the gross delevering that América Móvil's executed over the past nine months, to what extent are you willing to defend the ratings to avoid a kind of BBB rating? In other words, to what extent are you willing, if there's rating pressures, to keep from staying out of the BBB rating category?
[Foreign language]. Well, thank you for clarifying that. I think it's clear that we are in the single A category in all 3 ratings.
Yeah.
As you know, we are-
Sorry, I apologize for-
Yes. I was getting confused that you thought that you were in a different call, no?
Basically, I just want to know to what extent and how important it is for you to maintain the single A rating is what I'm driving at.
I think we have been committed to the ratings. We have a mandate directly from the board to see to it that we maintain those ratings at all costs. I think that, but yes, we are good. We are in constant dialogue with the rating agencies. They know exactly where we are. They've seen our forecast, et cetera. I think that we are confident that has been the case in the past, that we will not get any downgrade. To the extent there is a negative outlook by one or two 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. 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 MXN 2 billion next year and the year after. I think that we are in good shape from the point of view of the overall leverage position of the company.
Okay. Thanks. That's clear. My other questions were already answered. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, we only have time for one more question, our last question is from Arturo Langa from Itaú. Please go ahead.
Hello. It's Arturo from Itaú BBA. Good morning, thank you for taking my question. Just two brief questions. First, could you remind us what is the timeline for the local loop unbundling process in Mexico, and what are your thoughts around that? My follow-up question would be regarding Telekom Austria. We saw a nice increase in EBITDA. If you could just share with us the strategy that the company is implementing there. Also, if you could comment, there have 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 control of the company formally barely two years ago, I think in August of 2014. Obviously, at first, we were more than anything focused on reducing the leverage of the company. It had been very high. I can say that it has been brought now down to the level that América Móvil overall has. From 3.5 or something, net debt to EBITDA, it's come down to 2.2 net debt to EBITDA. That's part of what we did in the first year. We've had our management on the ground for just a bit more than a year and a half. Quite frankly, we have had very successful results. The EBITDA is increasing, and so far, a lot of this is driven by Austria itself.
In Austria, we have been able to get significant efficiencies from the operation simply by reducing costs, streamlining the operation. We have stabilized revenues, they are, I think, supposed to grow. EBITDA is really growing fairly rapidly. In a company that has now much less debt than used to be the case, that is now having a 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. What you mentioned about capital increase, well, we have never done a capital increase to fund an acquisition. I think the company today is getting stronger financially, it is getting stronger operationally. I'd say maybe one day it can look eastward and look at possibilities of expanding there. I don't think it's there yet.
We certainly are not looking, by any means, at any capital increase in the company other than the one that was done two years ago.
Finally, regarding the local loop unbundling, it's something that is already implemented in Mexico. We have already, since starting we have implemented in accordance with the rules stated by the IFT, and we have already provided these services to the operators that have been appealing to them or have been signing the contract for them?
Yes. Thank you.
Okay. Thanks.
Thank you.
Ladies and gentlemen, this concludes our Q&A for today. I would like to turn the call back to Daniel Hajj for any final remarks.
Just to thank everybody for being in the call, and Carlos, Daniela, Oscar, also, thank you very much. Thank you.
Thank you. Thank you all.
Thank you.
Ladies and gentlemen, this concludes our conference for today. You may all disconnect. Have a wonderful day.