Earnings Call: Q4 2015

Feb 10, 2016

Welcome to the America Movil 4th Quarter 2015 Earnings Conference Call and Webcast. My name is Stephanie, and I will be your operator for today. At this time, all participants are in a listen only mode. We will conduct a question and answer session toward the end of this conference. As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to host for today, Ms. Daniela Lequona, Investor Relations Officer. You may proceed. Thank you. Thanks, everyone, for joining us this morning to discuss our Q4 2015 financial and operating results. We have today on the call Mr. Daniel Hajj, our Chief Executive Officer Mr. Carlos Garcia Moreno, Chief Financial Officer and Mr. Oscar Boncalque, Chief Operating Officer and also with us Mr. Carlos Roles, Chief Financial Officer from Telmex. Thank you, Daniela. Welcome, everybody. Carlos is going to make a summary of the Q4 results. Carlos? Thank you, Gabriela. Good morning, everyone, and thank you for attending the call. While 2015 came to a close, we said finally moving to increase its benchmark interest rate for the first time in the next 9 years, bringing a loan, renewed volatility in financial markets that has intensified throughout this year on the continued decline of the cost of crude oil and on speculation that the Chinese economy may be weaker than expected, maybe also the U. S. Economy. Emerging market financial assets and currencies, among them, those are from Latin America, have been impacted by these factors. We added 1,500,000 Postpaid 1 subscribers in the 4th quarter, including 513,000 in Brazil and 351,000 in Mexico. Our postpaid subscribers increased 5.9% year on year. We had net disconnections of 4,300,000 prepaid wireless subscribers, of which 4,900,000 were in Brazil, 651,000 in Ecuador and almost 300,000 in Peru. All in all, our wireless subscriber base ended 2015 at 286,000,000 clients, and our fixed line IDUs reached 81,000,000 units for a total of 367,000,000 access lines. Our 4th quarter revenues were up slightly in Mexico peso terms, 0.6% year over year to ARS 231,000,000,000, bringing to ARS 894,000,000,000 the figure for the full year 2015. At constant exchange rates, service revenues were down 0.6% from the year earlier quarter, the same rate that was observed in the 3rd quarter. That is we are seeing a stable difference. By product line, there wasn't much change in the growth of service revenues in the 4th quarter relative to the prior one, with data service revenues continuing to expand on both in mobile and fixed platforms, 10.3%, 10.9%, respectively. Private pay TV revenues that rose 6.6%. There were significant improvements in service revenue growth in the 4th quarter relative to the 3rd in Argentina, from 24% in the 3rd to 35% in the 4th in Chile and in Telecom Austria Group. It is important to note that at the consolidated level, the share of mobile service revenues in total service revenues has kept on increasing, reaching 58.5% in the 4th quarter compared to 65 point 8% in the year earlier quarter and b, within mobile service revenues, the share of database revenues reached 50% for the first time. In Mexico, service revenues in the fiscal year have been a downward trend as can be seen in the chart, while mobile services revenues are stabilizing. This is important. We have seen the decline that in this voice service revenues that began mostly on account of the elimination of national long distance tariffs beginning on January 1, 2015. And we are seeing that this reduction of post revenues have leveled off and it's now making some employees. We expect that by the Q1 of this year, when we will have a clean comparison after the regulatory measures, that we will see even better figures. And as you can see also on the chart, mobile service revenues in Mexico have stabilized because we call it more competitive, all we had lost initially out of the regulatory measures that we bought in 2015 and 2014. As for EBITDA, it totaled MXN 63,900,000,000 in the quarter, a 5.1% reduction relative to prior year in Mexican peso terms, although at constant exchange rates, it was down by 2.9%. I think it's important to note here that we had a one off event in Ecuador that basically has to do with for the most part with a mode litigation that was something that was buried the company from even before we acquired it. It has to do with rounding of invoices and it applied to all the operators in Ecuador. This is something that had been in litigation for several years. And finally, over the last few months, we were notified that we were supposed to repay this. So this was, again, something that was in the company, for the most part, out of since before we bought it, and it's something that we have materialized in this quarter. It is important in Mexico, this is something that I'd like to highlight. In Mexico, as we mentioned before, we had 361,000 net adds in postpaid. Well, this number of net adds in postpaid was 51% higher than what we had seen in the year earlier quarter. And that obviously explains part of the reduction in the EBITDA in Mexico. It is important also to note that in Mexico, Africa and other countries that it have been very noticeable here, equipment revenues linked as they are to the exchange rate have increased much faster than service revenues. Therefore, looking at the EBITDA margin in relation to total revenues will amplify the real impact on margins. The reduction in EBITDA margin, for instance, is 50% higher if expressed in relation to total revenues than if it is expressed in relation to service revenues. So it is important to correct for the disruptions for the distortions incurred by FX volatility on total revenues. So this is very important. So what I would say is when you look at the reduction of EBITDA margins in Mexico, onethree is accretable simply to the comparison to total revenues. The equipment revenue component has increased a lot given the FX depreciation. 1 third, a little bit less than a third could probably be attributable to Tenesite, And the remaining is attributable to the faster pace of net additions in Mexico, which already has taken place also in a more competitive environment. Anyway, our 4th quarter operating profit was down 5.9% year on year to the ARS 2,200,000,000, but our net profit was 6 times higher than in the year earlier quarter as our comprehensive financing costs came down along with foreign exchange losses. Our net profit was equivalent to MXN 0.24 per share or MXN 0.28 per ADR. Net debt ended the year at ARS588,000,000,000 as compared to ARS507,000,000,000 a year earlier. The former figure considers ARS 44,000,000,000 in marketable securities available for sale. That is the value of our KPN stake after deducting the value of KPN shares around the pending mandatory exchangeable bond issued in September in the amount of EUR 750,000,000 Our capital expenditures totaled ARS 164 64,000,000,000 in 2015, while our shareholder distributions amounted to ARS 71,000,000,000, including the extraordinary dividend payout in September. Our net debt to EBITDA ratio stood at 1.8x at the end of December, allowing for the equity grade on our hydro bonds and for the market value of our derivatives position. We have, as you can tell, a strong balance sheet, which has is an important reason for the why we have the best ratings in the telecom sector today, the best ratings in the telecom sector. That basically needs to show that we have a lot of financial flexibility, which we will be prepared to use it when convenient. So with that, I would like to finalize this part of the call and pass the flow back to Anil. Anil. We're going to start with that. We're going to begin the Q and A session. And your first question comes from the line of Amit Ryvadelsky from Barclays. You may proceed. Thank you very much for taking the questions. If I may, thank you first for the color on how to think about sort of the margins in Mexico and the various impacts there. But I was wondering if you could give us an update on how you folks are viewing the competitive landscape. Obviously, we've seen some new competitors in the market. They've just started to report some of the results and would love to hear your thought process in terms of how we should think about the potential impact to pricing trends in the market and your own sort of subscriber acquisition costs? Thank you. Well, as Carlos said, he gave us an overview on the costs. Well, first I have to say that in Mexico, the valuation of the peso is increasing a little bit all our costs. So we are having not only Mexico, Mexico, Brazil, Colombia, a program on cost controls that it's very important. As the exchange rates go higher, then some of our costs are in dollars. So we have to review them and work on all of our costs in the company. 2nd, in terms of the competition, I think as you can see in Mexico, there is effective competition, even everybody is in the news, even some regulatory persons are saying that the we already have effective competition in Mexico. We have some changes in the structure of the market with this new competitor plus the other competitors that we have plus the MVNOs that we have in Mexico. We have more services. And that all of that is bringing a big reduction in the prices in the market. So the consumers are the ones that are gaining here in Mexico. As you could see in the Q4, prices are going down. We have been very successful in the postpaid market. We can we have been I think we have 51% more postpaid subscribers than what we have in the Q4 of 2014. So we're doing good as we are doing good in the market, even that the market is very competitive. It's going to bring us higher cost of acquisitions. It's going to bring us higher cost on retain our subscribers. But all overall, I think Telcel is doing good in Mexico. In number portability, we're gaining still gaining in number portability, and we feel that this year still is going to be very competitive market, and that's what you could see for 2 1,050. Thank you very much. One important thing that I have to mention is that still Mexico is one of the lowest markets in Latin America in terms of penetration. So still we have a big share of growth in the future. So we still can grow in smartphones and in the markets of new subscribers. So it's also one important thing for Mexico, specifically for Mexico. That's very helpful. And then if I may, you talked about the ability to sort of lap some of the regulatory measures that are in place and the impact to sort of the service revenue going forward. Based on where you sit today, obviously, there is some regulatory review going on around the competitive initiatives that have been put into place. What are the prospects for further potential regulatory initiatives to spur ongoing competition? It seems as though you feel comfortable with sort of the competitive dynamics of the marketplace currently and supporting the need for increased competition, but would love to hear your thoughts around incremental regulatory measures that could come up? And your next question comes from the line of Michel Morini from Morgan Stanley. You may proceed. Thank you. I don't know if you're going to want to answer that earlier question from Amir. But in any case, I wanted to ask about the buyback. You've made an announcement of MXN 12,000,000,000 earmarked for buybacks this year. That seems to be lower than what you've been doing in recent years. So I was hoping to hear what the plan is there, what the thought process was in targeting that amount. And then secondly, regarding your comment on Mexico and the impact on margin of handset sales, if you can comment also on how you've changed your subsidy policies, are you being more aggressive or less aggressive on handset subsidies? Thank you. We are having And your next question comes from Michel Martin. You may proceed. Yes. Hi, good morning. So the question was regarding buybacks. You've announced a MXN 12,000,000,000 plan. I was wondering if you could elaborate a little bit more on the thinking around that number considering that it seems to be lower than what you've been doing in recent years. And then secondly, Carlos, on your comment on the impact of handset sales in Mexico and the impact on margin, Did you actually also increase your handset subsidies in Mexico? Or what is the trend on that front? Thank you. Hi, Michel. In terms of subsidy, I think all around America Movil, we have trying to reduce the subsidies. We're reducing a little bit the subsidies. It has been like a race because all the handsets are in dollars. So as the exchange rate is moving, so we have to actualize the prices. But all overall, I think the numbers are that we are reducing our subsidies in Mexico and in Latin America. In the buybacks, we announced yesterday that $12,000,000,000 because we have a remaining balance of last year of $17,000,000,000 So we're going to add this $17,000,000,000 to the sorry, MXN 17,000,000,000 to the MXN 12,000,000,000 that we have. And we're always open to ask for more if we need that in the future. Hey, Michel, as you know, we have done it before. And we obviously come at the beginning of the year with an idea for what our financial planning looks like. As Daniel said, we have a certain balance left over from last year that will be added to whatever we are increasing. But I think the important thing to note is, as I mentioned today, we have financial flexibility to do what we think makes sense And having these limits is really not an issue because all limits can always be redefined over time as we have done in the past. Okay, great. Thank you very much. Thank you. And your next question comes from the line of Vera Rossi for Goldman Sachs. You may proceed. Thank you. Good morning. Could Could you talk about your discussions with the regulator about the preponderance status? And what will be the priorities in these discussions that are likely to start in March? What are the AMX priorities to get from these discussions? And second is about your 4 gs users. What is the percentage of subscribers you already have with 4 gs devices? And what countries you are ahead and behind in this migration to 4 gs? Thank you. Good morning, Vera. In terms of the regulation in Mexico, I think the process starts in March, 2 years since they declare us as a preponderant player. What they are going to review are the effects that the measures that they put they have in the market. So I think in America Movil, we are accomplished in Telcel and Telmex everything on terms of the regulation. During these 2 years, we have the regulator review with us all the measures. And I think they are we are happy the way we have been accomplished all these measures. What they are going to review in March, and I don't know how long they are it's going to take for the regulator to review is if there is some changes in the market, so a structure in the market with new competitors, MVNOs, reduction in prices, I think more services, more investment in Mexico and looking for all these things that they are going to review, I'm optimistic that there's, as they said, more effective competence in the market and that the revision is going to be in good terms for America Movil. It's my personal view. And what will be the priorities of Amex in this discussion? It's eliminate asymmetric regulation or there are other things that AMEX would like to discuss with the regulator in this revision? Well, of course, there's a lot of revisions in terms of commercial issues that we want to review with them, small commercial issues, things that we have to give to our customers that the competition is not giving or in our position is that or we give them to all the customers or nobody give that to all the customers. So there is still a lot of small things that we want to review. We want also to review, as you said, the asymmetric interconnection. The price of the unbond links, we want to review because in some things, we are not we are not on an agreement with them. But there is a lot of things that we're going to start to review on March. But there is no doubt, Vera, no doubt that what they were looking 2 years ago, the regulator were looking with this telecom reform is that they want more competition and they are looking for more competition in the market. And if you could see prices, if you could see investments, if you can see the structure of the market, there is no doubt that we have that. You remember in several years in Mexico and other countries, it was when all of the penetration wireless penetration was increasing and it was happening very quickly, there was a lot of advertising, there was a lot of investment, they were very lively markets. Well, that's exactly what you have today in Mexico. There's a lot of new investment for the first time in years, certainly from the competitors. There is much, much more advertising. You see a very energetic market out there. As Daniel said before, it's a market that we think is going to grow. So I think there will be share for everyone in this expanded market. Wireless penetration in Mexico by the last count is probably still less than 90%, which is below what we have in other countries in the region. And we think that there's going to be some increase of penetration over the next several years, several months that will be helping out in this effect. And all of this is for the benefit of the consumers, Verage. If you can review some commercial information in Internet, you could see that the prices in Mexico today are much lower than the prices, let's say, in the United States. So you could see that in these last 2 years and specifically in the last 6 months, the prices has been dropping Mexico a lot, much lower than, let's say, what you could see in U. S. Okay. And could you also talk about the 4 gs migration and what are the countries that are ahead and behind in this migration? Yes, I don't have exactly the 4 gs numbers, but I can tell you a little bit about the penetration on the smartphones. I think Mexico is doing good. It's Mexico, Chile, Colombia are the ones that are the higher countries penetrated. Let's say, Central America, Ecuador, Peru still sorry, we need to do more and more penetration on that. The Brazil is in the mid on the chart is in the mid place on the chart. And America Movil in terms of smartphone penetration is around 36% penetration all overall. In postpaid, we have around 56% as the average penetration of smartphones in America Movil, With Mexico, one of the highest with 78%. It's more or less the numbers that I can remember. If you want to go deeper on that, you can talk with Daniela to give you a step more sense on that. And your next question comes from the line of Daniel Federle. You may proceed from Credit Suisse. Okay, good morning. Thank you for taking my questions. My first question related to CapEx. It was mentioned during the AMX Investor Day last year that CapEx to sales ratio could decline in 2016 in one word. Now with the currency depreciation, how do you see CapEx evolving in the coming years? That is the first question. And the second question is related to the pay TV because the ready to ask for a pay TV license in Mexico. I'd like to hear from you how you the company is evolving in this matter as well. Thank you. Well, I think let's start on the pay TV. The pay TV, I think we are working on the pay TV permission. And when we think it's the right moment, then we're going to ask for that permission. So we're working. We're doing things, but we're waiting to see when is the right moment to ask for the pay TV permission. In terms of the CapEx, well, we said last year in the Investor Day, What we want is to have around 15% CapEx to service revenues, and we are in on that trend. What I can say is that the last 3 years 2015, 2014 and 2013, we have a big investment $33,000,000,000 on CapEx for the last 3 years. I think we invest good. We put all our networks on shape as we grow coverage, as we move from 2 gs to 3 gs and from 3 gs to 4 gs. So we do big investments. And I think this year we can reduce the CapEx as it's around 25% of what we do last year. So we're starting to reduce our CapEx. It's difficult to give you a number today because with all the exchange rates that we're having, we are working on that. And when we have already the number, we can give it to you. So, but it has been difficult for us because it's moving. Some of the things are in local currencies, other ones are in dollars. So we are reviewing very good we're reviewing exactly what are going to be the number for this year. What I can tell you that we can reduce from 20% to 25% the CapEx of last year. I think it's important to note that the hotel component, the fixed rate component of CapEx is only about 40%. So the rest of that is basically to civil works and things that are basically local costs. So what Daniel said, it's difficult to gauge what the impact in dollars will be because, obviously, there's been different depreciations in different countries. So if you look at 60% of CapEx in each country is going to be local currency. We don't really know exactly where that will be coming out in dollar terms. But yes, the intent is we have just finished a phase of heavy investment in the last 5 years, dollars 50,000,000,000 As you know, we invested in our infrastructure. From here now on, we do not need to invest as heavily. A lot of what needed to be done has already been done. And that's why we are stepping down the intensity of CapEx for the next 5 years. This is not only something to for this year alone, but it's something that will happen over the next 5 years. Okay. Thank you very much. Just to clarify, this 20%, 25% decline is in U. S. Dollars, right? Yes. But again, the final effect is going to be dependent on the exchange rates because of what I just explained, that's why I didn't want to give you a figure. But yes, it could be in dollars, but it's approx. Cannot give you a number still today. We're reviewing new pricing. We're reviewing exchange rates. There's a lot of things that still we are working on. And your next question comes from the line of Marcelo Santo from JPMorgan. You may proceed. My first question is about the U. S. Dollar component of costs. So you gave a little bit of detail on the handset side. Are there other relevant costs which are not handset that are also denominated in U. S. Dollars in the subsidiaries? This is my first question, a little bit of clarification on that. And the second question is, how much of your data revenues are comprised of SMS? I asked this because in some countries the data growth is at single digits. So I was wondering if that was not because you have Internet growing and SMS shrinking. So an idea of how much SMS still left would be interesting. Thank you. Well, in terms of the first question on the dollars, there's other costs that are in dollars, IT, software, content. There's other things that I don't have it right now, but there's other things that we purchased and they are in dollars and then we're reviewing and seeing exactly what part of our costs is in dollars and that's why you see that the margins are and the cost can increase a little bit. The second question, can you repeat it, please? The loss SMS. My second is about SMS. I mean, we see in some operations that mobile data growth below 10% and would expect sometimes them growing faster. So I wonder if that's not because of SMS component, which might be shrinking. So I just want to get a general idea of how much SMS do you have? I think SMS is in my view, SMS is very related to WhatsApp. As people have people is using more smartphones and they have the availability to use WhatsApp, then they use WhatsApp in instead of using SMS. I think that's the relation that we are having mostly in all the countries. As they use more WhatsApp, they use less SMS. So that's what you can see. But how much of the data revenues, rough numbers are SMS, just percentage wise? I don't have the number. Very different in each country. Some countries they use a lot still they use a lot of SMS. In the other ones, other countries, they don't use a lot of SMS and they start to use more WhatsApp. So I don't have the number right now. And it's not directly linked, as I said, with the penetration of smartphones in its country. And your next question comes from the line of Walter Piecyk from BTIG. You may proceed. Thanks. I just want to go back to the capital investment question. So you're saying 2016 versus 2015 is going to drop 20% to 25%. So you're talking basically like US8 $1,000,000,000 as far as capital investment. Did I hear that correct? That's what we have as a previous number. As we are saying, we have good investments and big investments, a heavily investment in 2013, 2014 and 2015. And I think we can reduce our investments in 2016. I don't know if it could be 8, it could be 7.5, it could be I don't know exactly the number, but I can tell you that our It's going to depend still too early for us to say. It depends a lot on pricing, the dollar and the growth also, it's going to be very important about what's going to be the growth, let's say, in the fixed, because part of the CapEx is variable, it's set of boxes and all of those things. So it's going to depend on a lot of things that we don't have clear today what we're going to have. But as I said, at least we can reduce the 20% to 25%. So I don't I think that was asked earlier, maybe I missed the answer. I think there's a pretty low percentage of your customers that are using LTE phones today. So I get there was capital investment, but as data grows, theoretically, you have to keep up with the networks. I mean, I think in Brazil, as an example, one of your competitors, Tim Brazil is like spending 20% or 25% of revenue in anticipation of this LTE growth. So your strategy seems a bit different, given this kind of expectation of data growth, which is hopefully what's going to provide revenue growth. So I'm just trying to understand like where exactly are you cutting the CapEx? Is it U. S. Dollar denominated type things like radios from Nokia and Ericsson? Is it and you're spending more in the local stuff until the currency recovers? Help us understand how that's a big because that's a very big cut that no other operator I think has identified yet. Well, I don't want to my answer to you is going to be, we are not reducing the CapEx because we're going to cut LTE or we're going to cut capacity or we're going to cut moving 3 gs subscribers to LTE subscribers. We're not going to do anything on that. I think the last 2 years, we have been investing heavily. We have been investing in the backbone, in the links, in the fiber, in everything. And that's exactly what it's let's say, in some countries, if you add some more frequency, then you don't have to do anything. Then you have to do more a little bit more of radios and then you have a lot more of capacity. So I don't want to get involved in the engineering side and how we are going to grow. But we have been investing a lot. We have a very robust networks in all of our countries compared to a lot of our competitors. And that's what going to give us the ability to invest less this year. So in terms of competitiveness, I think still in 2016 2017 with the investments that we are going to do, we are still going to be very competitive in the market in terms of our infrastructure. As we said repeatedly, Walter, in the past, to manage data, you really need to have a good fixed line platform. And a lot of the $50,000,000,000 that we incurred for 5 years were deployed precisely to build, as Anil said, more fiber optic links, fiber to the towers, a lot of the things that are really required. All of that is behind us. When you look at the cost of radios, as you say, relative to the rest of our Building Fixed Line platform, it's nothing. So the fact that we are reducing CapEx is simply because we have already finished with a lot of the construction that needed to be done on the fixed line side. It's not that we are going to be curtailing now that we have everything done, we're going to be curtailing the easy part, which is the radius. Radio. We invest last year in cable submarine, satellites, fiber, Metropolitan Rings. So look what Net is doing in Brazil. Net is the one that in cable, there's the one in pay TV, it's the one that it's growing in subscribers in Brazil. So and that's really because we have the network to go to all these new houses. So I feel pretty comfortable on what we have been doing the last years and what we're going to do this year. The difference of being an integrated player as opposed to being only a mobile one. And your next question comes from the line of Carlos de Llegarreta from GBM. You may proceed. Good morning. Thank you for taking the question. I think it will be helpful for all of us to understand what's at stake at this regulatory review in March, obviously, aside from the possibility of getting the pay TV license? I mean, some people are thinking about worst case scenarios. And I mean, certainly, the asymmetric regulation we've seen so far has been pretty stringent. And I think the effect on competition, it's pretty obvious. But I was wondering if there's any specific issues that are currently being discussed with the regulator that we could be looking at? Thank you. Well, talking about well, as I told you, in March, we're going to review the effects that the measures that they put to us 2 years ago, we're going to review if they work or they don't work. And they can keep put more asymmetric regulation. They stay where they are or they can reduce the regulations that they put to America Movil. So it's what they are going to do. In terms of their symmetric interconnection, well, the position of America Movil is that America Movil can should not subsidize companies like AT and T and Telefonica that are strong international operators and that I don't think that America Movil would subsidize paying them interconnection review there. As I said before, there is effective competition in the market. So if there is not competition, the prices look on the pricing that we have. I think Mexico today is one of the lowest pricing countries in maybe in the world. So I think those are the things that Ipatel are going to review and well, let's see what's going to happen. Okay. Thank you. And a follow-up, if I may. On Brazil, you acquired a small cable company. I was wondering if you could give us any details about that particular acquisition or any others that could be on the radar going forward? Thank you. Yes. The company name is West Blue. It's a small company that has close to 8,000 home passes, 300,000 customers. The company is already upgrade the network is fully directional. So it complement well all what we've been doing net. So that company will be integrated through net. I think expand the reach that we have and we get into a market that we don't have network. So we complement the network position on net. So we will integrate in the next 3 or 4 months the company. And we have been some approvals to do all the integration that will occur in the next 2 or 3 months. And your next question comes from the line of Richard Thienen from UBS. You may proceed. Thanks very much for taking the question. Good morning, guys. Yes, you mentioned in the release about cost reduction efficiencies streamlining operations or whether it's more a case of being less aggressive in your commercial strategy, lower subsidies, discounts and promotions and so forth? And then secondly to that, whether Brazil and the U. S. Are perhaps unique situations in that regard or whether you think there are opportunities to lift margins by similar methods in other markets? So that's my question. Let me start on Brazil. I think on Brazil, what we have been doing the last 2, 3 years is we are integrating pay TV and that integration is giving us a reduction on costs. So I feel very competitive in Brazil. I feel we have the best platform in Brazil for the growth and the best platform for taking a share in the market. We're still growing good in the fixed platform. We're growing in the pay TV. And I think this last quarter looks much better in the mobile. Portability in postpaid. So the indicators that we have looks like in Brazil, we're doing good. Even that the economic situation that we're leaving there, we feel that Brazil could give us better margins for this year. In the U. S, well, the competition in U. S. Is tough. So as an MVNO, we have to being also more aggressive in the market and that reduce a little bit our costs. But we are for this 2016 reviewing new plans for the market that will give us again growth and give us again the margin. Still, we think 2016 for Tracfone is going to be very competitive. And but I'm sure that we could have good plans to compete in the market. So that's what we have in Brazil and in the U. S. The other question about the cost control that we have, we're putting cost control in all the countries. As Carlos said in the beginning of the conference, there are some countries that let's say, El Salvador, Puerto Rico, Ecuador that we sell in dollars. So the exchange rates don't hit us. In other ones like in Central America, we haven't had any devaluation there. So we're still having cost controls. And in the other ones like Colombia, Mexico, Peru that we have big devaluations on the exchange rate. We are putting more and more cost controls and we're working very hard to maintain as much as possible our cost down. So that's more or less what we need to do all 2 1,006. I think, fair to what Amir is saying, as you know, we have what we call our core EBITDA, which is basically the EBITDA that we have before factoring in subscriber acquisition costs. What you can see is that in substantially all the countries and I would tell you only there's 2 of the smaller countries in South America that are an exception. But of the rest, all of them have seen increases in core EBITDA margins. So that's important because it basically shows that other than in the commercial networks, there have been important progress in terms of streamlining costs, okay? So it's not through a reduction in the commercial presence, it's simply by having a more efficient structure. And your next question comes from the line of Mauricio Fernandez from Bank of America Merrill Lynch. Please proceed. Thank you. Good morning, everyone. So I want to go back to the buybacks and in fact the capital question, Carlos and Daniel. But the renewal of the fund doesn't mean much since you can renew the fund whenever the Board meets. But it seems based on what you said on the at the Investor Day last year, the plan is to achieve 1.5 times net debt to EBITDA. I just wanted to confirm that that's still the case given a lot has changed, particularly in the macro environment and the fact since then. And 2, when would you expect to achieve that 1.5 times? Thank you. Mauricio, hi. Well, what we have said is the 1.5 times is kind of our medium term target. We have always had a medium term target. You're never exactly there. And but yes, we intend to remain hovering around the target. We are today, as we showed in the presentation, at 1 point 8 times EBITDA. And when you factor in the review to the methodology, same way that you're guiding agency too. So I think that we are pretty much where we need to be today on that because we don't need to make any special arrangements to our financial plan. And but what is important Mauricio is to understand that having the financial flexibility is something that is important when you're willing to use it. And I think we I think the bottom line is yes, we have the financial flexibility. And as I said at the beginning, it's something that we may use if and when we see we think it makes sense. So that's where I would leave it. Obviously, there's a long term goal, a long term goal in terms of overall leverage. I think that we are satisfied with where we are today. I think that we are going to see a good progress on the financial front. And this does not impede us from continuing with what we have basically said in terms of overall distributions. But having said that, we have the flexibility and may use it if it makes sense. Okay. Is there any intention, Carlos, to reduce the activity of buybacks, particularly given the share price has come down, it would make sense actually to perhaps increase buybacks, not to reduce buybacks, despite the strategy, not that far away from being that close to around the level of 1.5 times of that EBITDA. I said the leverage ratio is medium term ratio. It's something that we are covering around. We do not have a deadline that said we need to be at 1.5 tomorrow. No, we don't. We have flexibility. And this is obviously something that we can always revisit with the rating agencies. But having said that, you do have an outstanding plan. Daniel said, we have roughly Ps. 30,000,000,000 already in reserve. And as you say, it may be increased as we have done in the past. We have increased in the middle of the year as we said, we think it makes sense. And due to time constraints, we're going to take one last question. And your last question comes from the line of Chelsea Konsko from is just more of a clarification on what you spoke about at the beginning of the call, in terms of the contribution to the margin contraction in Mexico, it was a little bit difficult to hear you. I think you're saying a third from one factor, a third from another and a third from a third factor. So if you could just repeat that. And my second question is related to your capital market plans, considering the debt that you have coming due this year and in which currencies would you prefer to issue and refinance that debt? Well, what Carlos said is that in Mexico, we have a very competitive market. So part of the reduction of the of our margins are first, because we grow a lot on postpaid subscribers. 2nd, because we have a lot more competition reduction on prices, it's very important. And the third is because the exchange rates, okay? The exchange rates hit us in 2 things. 1st, because the revenues in handsets are growing more. 3rd, because we have other costs like Telecyte. Telecyte is more or less costing 1.5 percent of our EBITDA because the spin off of tele sites and of service revenue. And the last one is because the exchange rates and the costs that we are having in dollars. So all of those things are playing all around in the margins of Mexico. So that's what I can Carlos explain a little bit what we think we can On the refinancing, well, this is a year that I think that we are going to see reductions in debt. Already Telecom Austria paid EUR 750,000,000 I think 2 or 3 weeks ago, which means that over the last since the end of December to April today, they have already paid roughly EUR 1,000,000,000. So that's been a net reduction that is not being refinanced. We are we have approximately EUR 3,000,000,000, EUR 4,000,000,000 in amortizations left for the year dollars 3,000,000,000 amortization left for the year. And I don't expect that we will go to a market for more than 1,000,000,000 dollars And do you have a currency preference? I think that is really determined at the time when we launched the transaction depending on the conditions in different markets. As you know, we have established a presence in various markets, so we can afford to look at which appears to be best for our objectives. But I don't think that we will have more than one offering in the market this year, maybe $1,000,000,000 and we're done. So we are going to actually see a good reduction in gross debt for America Movil in principle. And all of this consistent with everything else that we have mentioned in the absence of all the extraordinary situations where we might want to use more value financial flexibility. And now I would like to hand the call over to Daniel Hajj for final remarks. I just want to thank everybody for being in the call. Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect.