Earnings Call: Q2 2016

Aug 2, 2016

Welcome to the American Movil Second Quarter 2016 Conference Call and Webcast. My name is Sam, and I will be the operator for today. At this time, all participants are in listen only mode. We will conduct a question and answer session towards the end of the conference. As a reminder, this call is being recorded for replay purposes. I would like now to hand the call over to Daniela LaCrona, the Investor Relations Officer for the company. Daniela, please begin. Thank you, Sam. Thank you, everyone, for joining us this morning. We are here to discuss our Q2 financial and operating results and we have on the line Mr. Daniel Hajj, Chief Executive Officer Mr. Carlos Garcia Moreno, Chief Financial Officer Mr. Oscar Von Hauske, Chief Operating Officer and also Mr. Carlos Robles, Chief Financial Officer from Telmex. Good morning. Thank you for being in the America Movil Second Quarter of 2016 conference call. And Carlos is going to make a summary of the results. Thank you, Daniel. Thank you. Good morning, everyone. Although the Q2 saw a recovery of several currencies vis a vis the dollar as the likelihood of new interest rate increases by the Fed appeared to wane. Some indicators pointed towards a stabilization of the main financial and economic variables in China, which had previously been a matter of concern for the international markets. In Latin America, both the Brazilian real and the Colombian peso continued their comeback, but in Mexican peso weakened further. We ended June with 364,000,000 access lines, 0.9% less than a year before, after net disconnections of 1,500,000 prepaid shops in the quarter, most of them in Brazil. This figure includes 283,000,000 wireless subscribers, 34,000,000 landlines and 26,000,000 broadband accesses as well as 22,000,000 pay TV units. On the mobile platform, the postpaid base was up 5.9% and the prepaid 1 were down 4.2%. On the fixed line platform, IUs were up 3.6 percent year on year, driven by broadband accesses that rose 8.9%. Other than in prepaid, we are seeing good growth in the oil business lines. 2nd quarter revenues rose 6.1% from the year earlier quarter to ARS 233,000,000,000, which had these revenues increasing 3.2%, reflecting the appreciation of several currencies vis a vis the Mexican peso. At constant exchange rates, service revenues were down 2.1% year on year. Substantially, all our operations maintained the growth trends in local currency terms. In Mexico, however, we saw a step down in revenues brought about mostly by more aggressive commercial plans in the prepaid segment as a greater part of our subscribers move towards unlimited coal plants. The South American block and the Caribbean both presented a slight improvement in revenue growth trends from the prior quarter with Central America maintaining a steady one. EBITDA of ARS 61,000,000,000 declined 10.7% in Mexican peso terms relative to the prior year, 13.2% at constant exchange rate, bringing about a 29% reduction in operating profits that in turn led a 55% decrease in provisions for income and deferred taxes in relation to the year earlier quarter. We obtained a net profit of Ps. 7,700,000,000 in the second quarter, which was down 45% from the year before. Our net debt stood at MXN 608,000,000,000. In dollar terms, our net debt declined by MXN 1,700,000,000 at nominal exchange rates and by MXN 1,200,000,000 in flow terms. In dollar terms, our gross debt actually came down by nearly $2,000,000,000 1.9 in the 1st 6 months at nominal exchange rates and by $1,500,000,000 at constant exchange rates. Our net debt to EBITDA ratio was practically unchanged in the quarter at 2.1 times. Our cash flow from operations, the distributions obtained from our shareholdings, particularly those in KPN and the unwinding of currency swaps allowed us to finance capital expenditures amounting to COP 57,000,000,000, share buybacks of COP 5,200,000,000 and acquisitions of equity interest of ARS 3,400,000,000. In addition, as mentioned before, they allowed us to further reduce our net debt. Well, with this, I would like to turn the floor back to Daniel and maybe the operator can begin the Q and A session. Thank you. Thank you, Carlos. Let's start with the Q and A, please. We do have several questions. The first question comes from Amir Roswodowski. Please go ahead. You're now live on the call. Thank you very much for taking the question and good morning folks. I was wondering if we could discuss a bit more about the competitive landscape that you're seeing in the Mexican market right now. It does seem as though that there's been some notable traction with you folks in the postpaid market in terms of the higher end subscribers. But there clearly seems to be a bit more competition in the prepaid arena. Would love to hear sort of your thought process on where you stand right now visavis your competitors? How you see the competitive process playing out? Do we should we expect some more pricing concessions coming to the market or anything along those lines? Thank you very much. Amir, good morning. Let's talk a little bit about Mexico. What since 2014, we have a new competitor in Mexico and 2 international and big competitors, we have been the last 2 years investing more and having more competition. So that's what is the market landscape in Mexico. So for the last 2 years, prices has been going down very fast. We have been having a lot of competition in pricing in prepaid and in postpaid. And we have new plans like in unlimited voice, unlimited SMS and with some data. So those are the new pricing and plans that we have been having for the last 6 months. These prices are with are similar than in other countries. Let's say, they have unlimited in U. S, we have unlimited also invoice and SMS in Mexico. But the prices that we have in Mexico are really, really low against what you compare in other countries. So the pricing has been going too long, so too far the price of the competition. We have competition in Mexico and we have a lot on reduction on prices. So with these prices, even the competitor that entered in 2014, they have been losing every quarter as they want to gain market share, but they are losing a lot of money in EBITDA. The other competitor has been having big reductions in revenues, also big reductions on EBITDA. So well, that means that the competition is tough and the prices are being too low. Even that the consumption for the people, people is starting with these low prices, people is starting to consume a lot more, maybe 6 times what they used to conserve. So the telecom the demand for the telecom services has been very strong also in Mexico. We have and I think I'm sure that we have the best network, the best capacity and the best coverage in Mexico. So that's very good also for us. So in terms of that, people is consuming lot more than what they have been consuming. I think that in prepaid, our revenues, the last 2, 3 weeks has been very stable, much more stable than that because the people that the prepaid people that had the highest ARPUs and they want to change, I think they already changed. We have been having a lot of people moving from the old plants to these new plants. And I think the people who wants to change, they already changed. So that's why we are seeing more stabilization in our revenues in the last weeks, okay? And the other thing is that we're making some changes in the offers, okay? We're moving a little bit the due dates and moving some cards and moving other things. So it's we're moving also. I think the competition is stabilizing also a little bit more. Prices are being stabilizing. And our revenues in prepaid, I'm seeing that they are stabilizing also more so. That's more or less what you see. It's natural that the way I see things is it's natural that the prices in telecom reduce because of technology, because of competition. But these prices have been reduced too far, okay? So the thing that I see is and what I'm thinking is that in the future, the conditions would change. So that's more or less the view of what is happening here in Mexico. That's very helpful. And if I may, one quick follow-up. You had mentioned that utilization of the network has increased pretty dramatically in terms of overall usage. Do you see an opportunity, particularly as we start to see smartphone penetration grow for you folks to capture some of that incremental usage via pricing? In other words, is there an opportunity to trade some folks up to higher data buckets going forward? I'm just trying to understand where that opportunity set lies for you folks. The thing is that these data buckets if you compare these data buckets against the data buckets of last year, you'd see that these new plants have been having a lot more of data that what they used to have last year. So also in postpaid, we're having been too aggressive. So penetration is moving. Penetration on the smartphones is growing a lot. And I think we have an opportunity that people start to use more, use more data, use more voice. And of course, I see an opportunity because at the end of the day, I think that change are going to things are going to change. So the conditions are going to change in the future. So people is starting to use more and more, then we have an opportunity in the future. The smartphone penetration in prepaid is still very low in Mexico. I think we have also a good opportunity in the prepaid market. In postpaid, penetration is high. I think it's one of the highest in Latin America. In Latin America, But in prepaid, I still I think we still have a lot of room to go. Great. Thank you very much for the incremental color. Thank you. Thank you. Next question? I do apologize. We do have a slight technical issue. If you could carry on with the conference and we will return to Q and A session as soon as it's finished. Is that a problem because we've lost connection? If you could just continue with the call and I will come back to the Q and A as soon as we've resumed the technical problem. Okay. We're being told that they have some technical issues and they will as soon as they sort them out, we can continue the Q and A. We apologize for this. That is correct. If you'd like to finish the rest of the conference, as soon as I get the bridge back, I will restart the question and answer session for you. There's nothing more in this call other than the Q and A. So if you want to dial again, I don't know how you would want to do it, but Yes, I do apologize. I have lost connection with you. I can hear you, but we can't see anything on the bridge. Do you want to call us again? Do you want to call again? Just bear with me, please. Thank you. Andre Baggio, you are now in the queue. Please go ahead. Hi, good morning, everyone. So Carlos, can you make a comment on the opportunities that you face? Like say, I'm seeing that both wireline data and also prepaid have been growing double digits. So can you talk about the opportunity that you face on the specific two areas, like the data on wireline and also on pay TV? I mean, I think Andres, how are you? Good morning. I think that we are seeing the market generally in Latin America moving from particularly prepaid market segment of the market moving from a voice only market where voice has become commoditized to one that will be voice and data. And as the penetration of smartphones increases, the adoption of smartphone devices increases. We are seeing this. I think it's in its nascent phase. And I think it will be very much about the ability of the different carriers to offer the combination of voice and data services that the clients will be demanding. I think that's what you are referring to, right, Andre? So basically, we are seeing a period in which different competitor operators will be differentiating themselves by their ability to service a market that is requiring both voice and data services. And I think this will lead to very profound changes in the structure competitive structure of the markets that we are seeing today. I think the market for voice only clients is a market that is dying. And I think that we are going to see a very rapid adoption of new devices as the price is coming down quite significantly. Carlos, I have my second question. Can you comment a little bit on what's going on in Peru? Because each time that I see this country, which is not so big for you, I know, but the margins have been lower and lower and lower. Is it just related to the competition to the new player that is there? And could we see the same situation in other markets? Well, in Peru, we have our big reduction on MTR. So it's hitting us in EBITDA. We are having a lot of it's the asymmetric, it was on our favor and today it's changed. So it hit us on the revenues, on the cost and the revenues over there. So that's one thing. The second, the market competition is aggressive. Prices are going down, big subsidies of our competitor. I think one of the competitors, the new one that is getting in. In some cases, I don't think they are doing a lot of money because they are putting a lot of or they used to put a lot of subsidy at the beginning. I think they are more rational today. But I'm feeling in the other side, we haven't had a good network on 4 gs because 2, 3 years ago, we haven't win the spectrum over there. Today, we have a spectrum. Today, we have enough spectrum. We are putting a new 4 gs network in Peru. And I think, of course, not comparing to last year because last year is doing, but I think you are going to see increases on revenue, better market share in subscribers. And of course, I hope that the EBITDA will get back and start to recuperate in the next quarters, okay? So I don't think we're going to go lower than what we have today, and I hope that we can recuperate in the next quarters. Okay. Thanks a lot. And Andre, if you'd like to see I don't know if the question was only referring to Peru, but if you'd like to see the other ones, well, there's a number of countries that have higher margins today than they had a year ago. Argentina is higher, Chile is higher, Brazil is flat, Colombia is a little bit lower. But most of the other ones, Central America is higher. There's a number of countries that are that have higher EBITDA margins today than they had 1 year Okay. Next question? Hello? Next question? Again, no problem. I think we're facing again problems with the operator. We believe that this may be a consequence of Brexit. Maybe you can send the questions to Daniela and we can answer the questions, send it by mail please to Daniela. Carlos, if you're hearing and if you're still in line, again, Andrea, just a follow on, like, if I may. The question I had on the other markets is specifically, say, the situation that we found in Peru, where there's very aggressive player with a new network, a 4 gs network. If that situation could not repeat specifically in Mexico where we also have a new player very well capitalized with is investing a lot on the new for genetics, so which could trend downwards the margins for quite a long time similar to what we saw in Peru? Well, it's totally different to what's happening in Peru than what is happening in Mexico. In Peru, the problem is that they have a good network because they have the spectrum, they have a 4 gs network, and we haven't had that for the last 2 years. We have very small amount of spectrum to running our 4 gs. In Mexico, we have a lot of spectrum. We have the best network, the best coverage, the best quality by far, and that's totally different. I think in Mexico, Telcel is the brand it's the preference for all the subscribers in Mexico is Telcel. So I think it's different, and it's what we want to do in Peru. We are doing good investment and good network in 4 gs. We have enough spectrum right now. And I think things are going to change in Peru, and you're going to see that subscribers are going to start to grow again and revenues also. I think, Andres, just to follow on what Anir is saying, We have mentioned here in the report that in the Q2, we acquired the new spectrum in Peru in the auction that they conducted. Also we have also acquired a company that was based in Peru and that essentially what it has is its own spectrum. So spectrum became our bottleneck and it was something that really did not allow us to compete particularly in data because we didn't have really the ability to provide it. We didn't have the capacity by way of the spectrum. I think this bottleneck is being open right now, and I think that we should be able to follow through with our own investments to stay in the market, not competitive in the market. But again, this was Oparoo was a one off situation. It was exceptional. It was, as Daniel pointed out, we just had the backlog that 2 years ago we lost out in auction and ended up not having the spectrum that we needed for 4 gs. And this obviously made us have lack of competitiveness over the last couple of years. But this has been resolved, and I think that we are going to be much more competitive going forward. I do apologize. This is Sam, the operator. We have the connection resolved now. So if you would like to commence the Q and A again, I can start that for you. Okay. Yes, please go ahead, Jan. Okay. Andre Baggio, you are still live on the call. So please go ahead with your question. I'm done. Andre already said the question. Can we go to the next one, please? The next question comes from the line of Hello? Take the next one. Well, the next one? I have Walter's question here. Walter Piecyk from BTIG. The question is, please provide more color on prepaid usage that was up 6 times in Mexico and the popularity of unlimited and then comment on whether this means CapEx can still come down 25% this year and what the outlook would be for the next year on CapEx? Well, Mexico, I think in prepaid, as I said, customers that are changing from the old plans to these new unlimited plans are moving, and they have 6 times 5 times to 6 times more usage in voice. Also they have more usage in data. But we are prepared with this spectrum that we have, this new spectrum that we had in beginning of this year, we're able to do so. We are investing and all overall, I don't know in Mexico, but all overall, we are still trying to do our $8,000,000,000 CapEx that we estimate. And not only in Mexico, in other countries are growing a lot the usage in data and in voice. And we're going to still have all the big investments that we do the last 3 years are going to make us and be able to do all these new plans and all these new data and unlimited voice that we are doing all around Latin America. The next one? The next question comes from the line of Alejandro Galostrat. Please go ahead. You're now live on the call. Hi, good morning, Daniel and Carlos. My first question is regarding your leverage. Do you have plans to further deleveraging your balance sheet? And do you have any net debt target in mind? Hello, Alejandro. Well, as shown here, I think in the 1st 6 months of the year, our growth head came down by nearly $2,000,000,000 in nominal terms. We have some important bond maturities that are taking place in September that amount to close to $3,000,000,000 I think for the most part, we should be able to pay that down from what the cash position we built and the cash flow that we're going to have from here to then. So I do expect that in nominal terms for the full year, probably growth debt is going to be coming down at least $4,000,000,000 and maybe between $4,000,000,000 $5,000,000,000 the growth debt. Debt. In terms of net debt, we are probably looking at roughly $2,500,000,000 reduction $2,500,000,000 $3,000,000,000 reduction in net debt for the year. So yes, I think that we are continuing with this deleveraging. It's important we have maintained our ratings that as you know are top ratings in telecom sectors. And we intend to hold on to them. So we have we are acting quickly just to make sure that the leverage position stays within the guidelines that we have seen with the rating agencies. Okay, great. Thank you very much. And my second question is regarding the favorable ruling from Ifetel when it comes to Telmex broadcasting UNO TV through the Internet. Do you have plans to becoming more aggressive in streaming as a result of this? Or is your strategy in Mexico going to change as a result of this favorable ruling from IFFETEL? No. I think what we have been doing is exactly what we are going to do is and there is no new plans that we're going to do with this new decision with this decision on the Ifetel. So we have our plans, our strategy and on the streaming and we're going to do exactly the same of what we're doing right now. Okay. Thank you very much. Thank you. The next question comes from Michael Moran from the American Mobile Company. Michael, please go ahead. You're now live on the call. Hi. It's Michel Morin at Morgan Stanley. So I was wondering if we could dive in a little bit more into Mexico and if you could by any chance break out the prepaid and postpaid revenue growth trends. It seems from what you're describing that the impact has really been on prepaid. So it would be helpful to get a little bit of granularity there. And then in Brazil, both of your major competitors, Vivo and Tim, have flagged that they've experienced positive portability metrics over the last several months. So I was wondering if that's consistent with what you're seeing. And if so, what would be what would explain market? Thank you. Alberto, starting with Brazil, the numbers that I have hi, Michel, first hello. On Brazil, on number portability, on June, we have plus 8,000 number portability on a gainings. Year to date, we have 41,000 on postpaid. Those are numbers on postpaid. And on prepaid, we are losing a little bit. I don't know exactly how much, but on prepaid, we're winning 41,000 postpaid new ads in number portability. I think the total numbers on postpaid, we're gaining this year 600,000 more than 600,000 postpaid and I think was one of the biggest for us. So in postpaid, we're doing good. In prepaid, we still need to adjust some things, but we're focusing a lot on the postpaid sector and we are doing very well with our strategy on the combo we are offering to our cable subscribers as we have a very good distribution network for our postpaid. So we're being looking very deeply on all the post paid business in Brazil, and we're doing good. In Mexico, what was your question again, Michel, please? It was just because when you talked about the relative weakness year to date, you flagged the unlimited plans on prepaid. So I'm wondering if your revenue growth on paid has been trending maybe more favorably. If you could share with us the trends for both post paid and prepaid revenue growth as one of your competitors did for the Q2? That will be helpful. Thank you. I don't have right now the number right here with me. Let me find it. But I do know that in postpaid, we are having positive service revenue growth. It's slightly less than the pace of growth of the postpaid subscriber base, Michel. So that means that there is some ARPU dilution in the process, but it is but service revenue growth is positive on the postpaid segment. So what you're saying is correct. Basically, all of the service revenue decrease is taking place on the prepaid side. And as I was mentioning before with Andre, I mean, this is, I think, a moment in which we are going to see the last parts of our market that is voice only, and that will be morphing fairly rapidly into voice and data. And we believe that the ability of operators to provide both and data will be key to their competitiveness going forward. And just to add more to one more thing to Carlos, Michel. In my view, I think we have been too aggressive in the promotions in prepaid and in postpaid. I think we are if you compare prices against U. S. On plans or prepaid plans or unlimited plans in prepaid and on postpaid, the difference are high. So if you compare please check-in the Internet prices here to prices in U. S, so the prices are really low here in Mexico. And my view is that things are going to change. I don't know if they are going to change tomorrow, but things have to change in the future. So that's how I see it. That's very helpful, Daniel. And if I can just follow-up on that. When you say we have been too aggressive, are you referring really to we as the industry or we, America Movil? We are not. You're a company? No. In Mexico, we as the industry has been very aggressive, not us, all the industry. We don't start with the promotions. I think the promotions, one of the competitors start with those promotions in November of last year or maybe a little bit earlier. So with this big promotion, so when they are not promotions and they are plans that they are going to stay, well, everybody has to follow that. And it's what we have been doing. And I think it hasn't been good for anybody. We usually see one of our competitors since they get in, in the market, they are losing money. They don't have any profit since they start. I don't know if that's their plan or not. I don't care. But they have been losing every quarter since they start. And then the other has been if you see the last results, well, the revenues and EBIT has been going down very fast also. So that's the market, it's not us. And I think in the future, things are going to change. I don't know where and how, but things are going to change. Thank you very much, Daniel. Thank you, Michel. The next question comes from Carlos de Lagarreta. Carlos, please go ahead. You're now live on the call. Yes, thank you. I was wondering if you could give us more information. I mean, I was looking at the CapEx figure that Telenex discloses. I believe this is 45% larger year over year for the 1st semester of the year. And I'm just curious what it is related to. It seems that, that is not in line with that's the first question, please. Well, I don't have the disclose of the CapEx of each company, of each country. But I can tell you that all overall, what we are going to do is to we have the budget of $8,000,000,000 on CapEx loss. The frequencies that we bought is what we are thinking. It could be a little bit higher. It could be a little bit lower. But that's around the strategy that we have. I don't know if in Mexico, how much is Telmex, how much is Telcel, overall, the networks are the same. So they are doing more or less the same CapEx. So I don't see any change on the numbers. I don't know exactly what is the number that you see, but Carlos is here, can talk a little bit about that. Yes. Just to mention one thing. It's basically a matter of seasonality in the sense that at the end of the year we'll be with the target of the $8,000,000,000 that we have as America Movil. There's a reduction also in tailings for this year. And it's basically a matter of the investments that we are making to strengthen further the network for our customers. Okay, perfect. That's helpful. Thank you. And if I may just a follow-up. I don't know if you are disclosing the figure that you got for the sale of the stake in the Telkomaster, if you could talk about a little bit about that. Well, as you said, we have sold part of our stake. It's a combination of transactions that the sum of which allowed us to sell 7.8% of our stake. And that is providing us I think, there was an average price of about $5.20 $5.21 I think it was. So maybe you can compute that. I don't have the exact proceeds here with me. Okay. Thank you. Thank you. The next question comes from Richard Deaneen from UBS. Richard, please go ahead. You're now live on the call. Thank you very much. Thanks for taking the question. Good morning, Daniel and Carlos. Just interesting commentary on the Brazil competition. Maybe if you could just comment on the sort of Brazil margin progress. It flattened a little bit this quarter on a year on year basis versus some gains previously. I'm just wondering if you're starting to see the synergy benefits from the integration of the 3 companies, whether that's slowing down or whether there are other things in the mix this quarter, whether that's cost pressures or other one offs that seems to have slowed down that sort of margin progression a little bit? And then secondly, if I may, I understand Efitel has ordered fixed to mobile termination rate cuts of 30% in Mexico from the 1st August. Just wondering if you've given any thoughts how significant that would be on your Mexican revenue or whether that's something that is probably not going to make much of an impact? Any color on the above would be fantastic. Thank you, gentlemen. Carlos can answer the interconnection. Please, Carlos. Yes. Basically, as we have doing in previous years and we have been doing for the last 16 years, we have lowered or we have reduced our prices by transferring the benefits of our operational effectiveness and the reduction in the technological cost to our customers. So this year, we announced that we were going to reduce the CPP cost for our customers by 30% and by 50% for the next year and then 50% in the following year. At this point, it is difficult to know the impact because at the end, it's a matter of elasticity in which traffic might increase and therefore it's difficult to actually have a number about that. What I can tell you is 2 things. First, is that our customers will receive directly the 30% reduction starting on the 1st August. And secondly, our package customers, what we are doing is we are further increasing the speed of our Internet services. We are strengthening our packages by value added services. So that as you can see just as in the mobile sector, in the fixed sector, we have very competitive prices and we are keeping very competitive conditions even compared to international standards when you compare it to the U. S. Or any other country in the world. Right. That's very helpful. So this is sort of a voluntary rate cut rather than something that's this is not the interconnection rate yet? Yes? Yes, that's right. That's something that Ternes proposed to the hotel of reducing the CPP tariff. Right. Okay. That's clear. Thank you. Thank you. And in Brazil, I think the margin reduced 4.5% against last year. But I think we're working hard on the cost and expenses. The integration of the companies are doing that. But in the other side, we have Brazil with exchange rates a little bit higher, so that means a little bit more cost in local currencies. We have some other contingencies on collectibles are growing also a lot. So there are new things that we're facing in Brazil because of this economical and political issue. But if I personally feel that we're doing very good in Brazil that we still need to fix some things there. But in TV, we're doing very well. In broadband, we're doing well. In fixed, we're doing well. In post paid, we're doing well. We need to fix a little bit data on the prepaid that we're looking to be to see. There's promotions that they are being out of the market. So we think that the data in prepaid needs to grow faster and we're working on that. So all overall, I see Brazil in good shape. I don't know if we're going to end the year with the same margin as we have last year, but we could be very close on that. So we're working to have those numbers. So I'm feeling comfortable on Brazil. That's great. Maybe just to clarify, just in terms of that specific integration of the three businesses, Claro, Embrytel and NET, how far through that process are you? Is that mainly complete or are there other efficiency gains that you think you can make from that exercise? No, of course, there are more efficiency gains that we need to get more and more in the network, in the IT, in the engineering side, in the marketing side also. So there's still a lot of things. So that I think there's still 1 or 2 years more of efficiencies that we need to get in Brazil, okay? So that's something that we need to focus and we're really focusing on that. And I think we are advancing on the right direction in Brazil. Okay, got it. Many, many thanks indeed. Thank you. The next question comes from Mauricio Fernandez from Merrill Lynch. Please go ahead. You're now live on the call. Good morning. Carlos or Daniel, in Mexico, could you tell us, and I apologize if you already mentioned this, but what percentage of subscribers, particularly prepaid, but overall have migrated to the new pricing plans at the end of the second quarter. Remember you're saying half of them had migrated to the new pricing plans at the end of the Q1. And if you could give us some sense as to what's been the speed of migration towards during the quarter or even in July, that will be great. And the second question is in Brazil. There was a decline, a steeper decline in wireless service revenues went down by 11% versus 6% in the first quarter, contrary to what we saw happening at the competitors so far who have reported. At the same time, your fixed line revenues accelerated. So I'm wondering if there was any change in the way you account for wireless or fixed line pay TV revenues in particular in the bundled products? Thank you. Our first in Mexico, What I remember in prepaid, I think in postpaid, maybe 20% or 25% of our subscribers are on the unlimited plans. Remember that on postpaid, they are having some contracts. And in postpaid, what we're trying to do is that they don't go down. So we're giving more and more things to the plants to stay or to upgrade the plants. So it's what we're doing on postpaid. And in the prepaid side, maybe on June, we have around 56% of the subscribers moving to the unlimited plan. So a lot of the subscribers has been moved. What's happening? I think the subscribers and what I said at the beginning of the call, the subscribers that the highest ARPUs in prepaid are the ones that move faster because they get a lot of gains there. So they are using more the phone, using more voice, using more data and paying less. So it's what we see at the beginning. So 1st and second quarter is what you are going to see. The other subscribers that hasn't been changed are the customers that has less ARPU subscribers. So these ones maybe is not convenient for them to move. So it's what you are seeing. I think people is moving less and less to the unlimited plan. At the beginning, maybe January, February, March, April, we have a lot of subscribers moving. And but the last 2 months, less subscribers moving. And as I said, the last weeks, we have been stabilizing. We're checking every week how those prepaid revenues are behaving. And I think they are stabilizing in the last week. So that's more or less what is happening in Mexico. In Brazil, what I don't know. I need to check if they have a different accountability, but I don't think so, the way they account for the on bundle for the combos that we're doing in Brazil. What is happening, I think, in data in prepaid what I said again is postpaid, I think we're doing good, and we want to accelerate postpaid and go deeply on that. On the prepaid side, what you see is on voice, we are doing better than the competition. In SMS, we're doing better than the competition. In interconnection, we're doing the same if you compare revenues against revenues. But in data, we are not doing as good as the competition is doing. And what we have 2 things. 1st, in value added services, the content that we have there, last year, we are comparing our last year that we have a lot of revenues, but also we have a lot of uncollectibles, okay? Because people ask for a lot of services and then they don't pay for that service. So today, we are being more we have different policies for these customers. So they have to really commit that they're going to pay for that service, for that content. And that's why we have been reduced our revenues in the content in value added services. And the other one is in the Internet, in data. And in data, what you could see Mauricio is that we're still giving social networks included in the day, included in the ARPU, we have social networks included there. So competition is getting out for that, and we're reviewing what to do with the social network. We still don't know what we're going to do, but we're reviewing what would be our strategy in the future. So that's more or less the explanation on what is happening on Brazil, Mauricio. Thank you very much, Daniel. And just if I could come back to Mexico. Even with only about 56% of subscribers seem to have migrated at the end of the quarter, but still revenues are down near 17%, which would suggest we could continue to see the revenue decline going forward. But we are saying what you're saying is it seems to have stabilized in which case the revenue decline that we saw in the Q2 could be slower going forward. Is that right assessment? Yes. Look, Mauricio, really this new plan, the unlimited plan, what's happened with the unlimited plan? The unlimited plan is it hit us with the higher ARPU subscribers because that higher ARPU subscribers, if they put, let's say, ARPU what is happening is that they have more service, they have more data and they have unlimited. But the other and they have a lot on limited voice and date. But the other ones that they are consuming, let's say, Ps. 50, Ps. 30 in the other plants, maybe it's not too convenient for them. And if it's convenient, then they are going to pay the same and use more. So maybe they are going to use more, but we are not going to have a reduction on ARPU. So it's what we are seeing. I don't know if I explained well what is happening. But the lower ARPU subscribers, if they change, it don't we don't have a big hit on ARPU, on revenues. They are going to get more and more minutes and more data, but we are not we're going to not get that hit on revenue. So it's what we are seeing in the last weeks, Mauricio. Okay. Understood. Thank you very much, Daniel. Thank you. Thank you, Mauricio. The next question comes from Andrew De Luca from Barclays. Andrew, please go ahead. You're now live on the call. Hi, good morning and thank you for taking my question. My question is related to the competitive environment in Colombia. And I was wondering if you could just give us an update on what you've been seeing in the market both on the mobile and the cable side. And then if you could just remind us of what your strategy is for each of those segments within the country? Thank you. Well, in Colombia, let's start with fixed. In Colombia, fixed, we're doing very well. I think we're growing our revenues. We're growing our subscribers. Peaks, we're gaining market share. And I feel very comfortable on what we're doing on the big side in Colombia. On the wireless side, I think we're turning around. We have been losing some subscribers. We have been losing also revenues because as they don't have any more contracts in there, they can change. So if you have any new promotion, the subscribers will change for this new promotion. But that's why we're losing some revenue in Colombia. In the postpaid side, we're starting to grow. This year, we are growing 4.7%. And I think in the prepaid, we're going to start to grow this Q2. So we do some changes. We do also the new organization there in Brazil, more focus on what we more focus on sales, marketing, customer acquisition, more focus on all the commercial side and it's working. So you could see a much better turnaround in I think it's stabilizing and turning around revenues. Great. That's helpful. And just a follow-up Not immediately, but it's moving on the right direction. Okay, great. That's very helpful. And just to follow-up on the absence of subsidies. Can you just explain what you've been seeing in terms of smartphone penetration in Colombia? I don't have the number here. But what we have been doing in Colombia, we have been financing the handsets. So it's more affordable for them in 24 months, 12 months, 18 months, small payments and smartphone penetration is growing. And I don't have the numbers here what level of penetration we have, but it's also growing the penetration in smartphones. Great. That's very helpful. Thank you very much. Thank you. The last question comes from Daniel Fedeli. Daniel from Credit Suisse. Please go ahead. You're now live on the call. Hello. Good morning, everyone. Thank you for taking my question. My first question is about the fixed line business in Mexico. I was wondering if you could comment a little bit more about the competition in the fixed line business, especially regarding the fixed broadband products. And what is the MAX strategy for fiber to the home and fiber to the nodes? And how you see that your competitors evolve in this segment? And my second question is about the wireless market in Mexico, because you mentioned that the prices are very low in Mexico already. I was who you think will be the which will be the company that will increase prices first? AMX could be the 1st mover increasing prices or AMX will wait for the competitors to increase price? Thank you. Well, in Mexico, in the wireless side, no, it's a difficult question. So I think those things, you don't decide on who's going to be the 1st or who's going to be the 2nd. I think it has to be overall the market, it has to have an stabilization of the market. It has to be the conditions. I don't know if we are going to increase prices. Maybe we can reduce due dates of the cards. We can give more to the customers. We can increase ARPU. So I don't know. There's a lot of things that you could do. We have been reducing subsidies. I think we are the company that has been in prepaid, we have been profitable on selling the handsets here in Mexico and we're doing a lot of things. And as I told you last time, we think that the conditions will change. I don't know when, but the conditions will change in Mexico. And on the Telmex side, on the TSI, the cargo? Speaking about the broadband business in Mexico, what I can tell you is that it has been it's a very competitive market in which basically we are competing with cable operators. And in the market, what we are doing, our strategy is to 2 things. In the first one is to have the best network and to further invest in technologies, fiber to the home, fiber to the nodes to be able to provide our customers with better services, more speeds and more value added services. Example of this is for the SME customers, we have introduced the last month more services, cloud services included in their packages so that they can be able to so that we can even become more competitive. In the speaking about offers, what I can tell you is that the market, it's the competitors are also giving more products, but at the end, it's in the benefit of customers. Yes. Okay. Thank you very much. I would now like to turn the call over to Mr. Daniel Hash for the final remarks. Thank you. Just thank everybody for being in the call, and thank you again, Sam. Thank you. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a good day.