Earnings Call: Q3 2015

Oct 20, 2015

Welcome to the America Movin Third Quarter Earnings Conference Call and Webcast. My name is Alex, and I will be your operator for today. Will conduct a question and answer session toward the end of this conference. As a reminder, this is being recorded for replay purposes. I would now like to turn the conference over to Daniella Liquona, Investor Relations Officer. Please proceed. Good morning, everyone. Thank you for joining us to discuss our 3rd quarter results. We have today on the line Mr. Daniel Hajj, Chief Executive Officer Mr. Carlos Garcia Moreno, Chief Oscar Bonjousque, Chief Operating Officer and also Mr. Carlos Robles, Chief Financial Officer of Telmex. Good morning. Thank you, Daniela. Good morning, everybody. Thank you for being in the 3rd quarter financial results, and Carlos is going to make a summary of the results. Thank you, Daniel. Good morning, everyone. The expectation throughout much of the Q3 that the Fed would lift interest rates before the end of September what about renewed volatility in the capital markets? The fear that such move would lead to more capital flowing back to the U. S. From emerging markets caused a new wave of currency depreciations in the region and partly curtailed the access that emerging market issues had to the debt capital markets in the U. S. S. In terms of renewed economic weakness in China, while dispensed with some of the figures dividing an interest rate increase by the Fed, spoke markets further, particularly when China decided to depreciate slightly its currency. In this context, we ended September with 368,200,000 access lines, which was 1.1% more than a year before. Obviously, the figure includes 288,000,000 wireless subscribers, 35,000,000 landlines and 23,000,000 broadband access. In addition, we had 21,600,000 PayTree unit. In mobile, it's important to note that our postpaid base was up 5.1% year on year to 61,000,000 subscribers. Postpaid net additions were 836,000, most of them coming from Mexico, Brazil and the European operations. 3rd quarter revenues were up 1.2% from the prior year to ARS 223,000,000,000, bringing the total through September to ARS663,000,000,000. At constant exchange rates, service revenues were down 0.6% from the year earlier quarter, a figure that was almost identical to the one observed in the 2nd quarter. Both revenues, both mobile and fixed, continued to decline in relation to service revenues. Data revenue growth accelerated in the 3rd quarter in relation to the preceding one. It was 10.7% and 10% in the mobile and fixed platforms respectively. EBITDA amounted to COP 66,700,000,000 in the quarter. It was down 8.2% year on year in Mexican peso terms, which partly reflects the depreciation of certain currencies, including the Brazilian real and the Colombian peso in relation to the Mexican peso. Net to date, EBITDA totaled ARS 203,000,000,000, 5.5% less than a year before the Mexican peso turns. Part of the reduction in EBITDA in the quarter were due to certain extraordinary items in Puerto Rico, Ecuador and in Austria. In some cases, both in Austria and part of it in Puerto Rico, it had to do with some with us having booked some extraordinary revenues the prior year. Because of Austria, they had sold a Liechtenstein. In the case of Puerto Rico, they had booked some EBITDA gains on account of changes to the pension plan that they managed. And then this year, we also had some one offs, partly in Puerto Rico and particularly in Ecuador. In Ecuador, we had roughly $50,000,000 that had to do with certain payments of taxes and in particular, a new tax that has been imposed based on market share in the country, and we had to book in the Q3 all the amount that was due since February, okay? So we had an unduly large booking of taxes Ecuador in the Q3. If we were to adjust for these extraordinary items, the ones that we have booked this year and the ones that were booked last year, then EBITDA would have fallen 4.9% in peso terms and it would have fallen 2.5% at constant exchange rates. This means that EBITDA, the reduction in EBITDA in the Q3 once that we adjust for these one offs was better than what we have seen the prior quarter. The prior quarter digital reduction had been 3.1% at constant exchange rates. In the event, Central America has emerged as the fastest growing region, followed by the South American block, has actually increased its rate of growth over the last few quarters in contrast to experience of South America that has seen more of a declining trend on account of the economic slowdown in some countries, particularly Brazil. It's important to note in Central America, we are seeing revenue growth in the network growth of 7%, 8%, and we are seeing very strong EBITDA growth in the network growth of level of 13%. After depreciation and amortization charges that were equivalent to 15% of service revenues, slightly higher than the prior year, we obtained an operating profit of MXN 35,200,000,000. Our comprehensive financing costs grew to MXN 38,900,000,000, mostly reflecting the sharp depreciation that took place in the quarter of the Mexican peso and the Brazilian real relative to the euro dollar. Net interest expenses actually came down by 2.4% year on year and by 10% year to date. Notwithstanding negative income tax provision in the quarter of ARS 1,600,000,000, we posted a net loss of ARS 2,900,000,000. It's important to note that the foreign exchange losses incurred have had no impact on cash flows. They partly originate in intercompany financing positions, partly have to do with supplier debt and partly have to do with the financial debt. Just in very general terms, I would say that of the net FX losses that we would have booked after considering the effect of hedges, Of the net losses, fully onethree came from the combination of suppliers intercompany transactions. In the case of suppliers, it's important to understand that a lot of the debt that we have has to do with the purchase of handsets, where the handsets are denominated in dollars. And the eventual sale of the handsets in local currency is effectively being borne by consumers with a certain lag, probably not fully, but for the most part, the effect of the FX movements is, in the end, borne by consumer rates. So I would say that our net debt increase well, the in relation to where the company, it is to be said that it has a long term profile with an average life of more than 10 years, which means that we have limited refinancing requirements, and we don't really have any issue maintaining the structure of debt that we currently have in place. Our net debt increased by ARS 61,000,000,000 in December, allowing for the reclassification of our staking KPN from a long term investment value at cost to an available for sale asset value at market prices. Our net debt represented 1.8 times last 12 months EBITDA. It must be noted that upon the spin off of telesites, our net debt is to be reduced by Ps. 21,000,000,000. At the end of September, we had already deducted Ps. 14,000,000,000 from the Orocot investment line item and the country sales KPN shares that took place to be mandatory bond placed in September. We placed a mandatory convertible bond, exchangeable bond that has a 3 year tenure. And this was placed in September, in September. And at the end of the day, it involves the outright sale of roughly 200,000 shares of KPN that were valued at €750,000,000 at the time that we went to market. So we are deducting now these shares from our holdings of KPN shares in the balance sheet. It's important to note that through September, we funded capital expenditures in the amount of ARS 105,700,000,000 and share holder distributions totaling ARS 59,500,000,000, including both dividends and share buybacks. I would say that a very significant portion of the shareholder distributions was actually affected in the 3rd quarter. We had payments the first part of the ordinary dividend was paid in July. In September, we had the the in September, we had the payment of the extraordinary dividend. And then obviously, we have had share buybacks all throughout the year. So if we look at the after the spin off of Televisatz that is happening today, L'ilovid's week, Certainly, before the end of the week, the spin off will have been completed from a legal perspective. We will have reduced, as I mentioned, by roughly $1,200,000,000 the debt of the company. And that means that gross debt of America Movil financial debt of America Movil valued at in dollar terms is virtually identical today than what it was at the beginning of the year, okay? So that's just to put in perspective that we haven't really had to go to market to seek any financing. So with that, I would want to pass the floor back to Daniel, and maybe we can begin the session of the Q and A. Thank you. Yes, the first question please. Mr. Wrozodowski, please proceed. Thank you very much. It's Amir Wrozodowski from Barclays. Just wanted to confirm, you had mentioned that the Telefytes spin off seems to be on track in the very near term. I was wondering what specific steps need to be taken care of in order to ensure the spin off occurs. It sounded like you said it could happen by this week's end. Would love some color around that if possible. I think we already have all the authorization on the Telecyte offer. So this week, legally, the company is going to spin off. And during November, I think we can distribute the shares. So that's more or less the timing that we have. But all the authorizations that we need are okay. So the company will spin off during this week and then we're going to distribute the shares during November. I think that's more or less the dates that we have. Thank you. That's very helpful. And then if I may, switching to sort of the mobile Mexico. Would love to hear how we should think about this going forward? And then if I may, obviously, we've got some review process going on right now with the various regulatory agencies. How do you think the potential risk is for additional asymmetric regulation coming down the pipeline after this review process is completed? And how do you see sort of your positioning in the marketplace post the review process? Thank you very much. Let me talk a little bit about the Telecommunication Reform. I think with that reform, there was a lot of changes in the market. 1 big company from the U. S. Bought 2 of the small companies here in Mexico. So what you see right now is that we have 3 big competitors in the market. So we already in Mexico have an effective and very competitive market. And I think what Ameritamobile is thinking is that, let's say, in the asymmetric regulations like the interconnection, we don't want to subsidize AT and T or Telefonica by paying interconnection to them and they pay us 0 interconnection. So I think that's a good opportunity for us to with the regulator to in March when it's going to finish the 2 year term. So we are going to renegotiate some of those terms because I don't feel that America Movil should pay or subsidize these 2 big companies in Mexico. So I think we have a good opportunity on that. In the other side, I think Mexico needs more competition in pay TV. So we are also TV. So those are the 2 issues that we are working with the regulator right now. Today, we are not presenting anything. Still today, we haven't present anything to the regulator, but we're preparing everything to talk and present it to them. And if I may, what do you think your prospects for getting a license for the pay TV look like at this point? I think it should be high because I think Mexico, if you see the Mexican market, the Mexican market needs more competition. So in the TV in the pay TV. So I think we think we want to we need to comply with all the rules. That's what we are doing. We comply as a preponderant player. The American model is complying with all the rules that they have been giving to us. So I think we have a a good opportunity to have that pay TV live. Thank you very much for the incremental color. Thank you. The next question comes from the line of Vera Rossi with Goldman Sachs. Talk about Brazil and the impact of the weak economy in your business, especially in terms of subscriber usage and the delinquency rates. And what are the services that are most impacted at this point? Thank you. Hi, Vera. I think in Brazil, well, with the economy slowdown that we're having in Brazil, the most impact to subscribers are the low end subscribers. We have been having less consumption in the prepaid subscribers. We have some cancellation, as you were seeing in the pay TV, the satellite, the low end, the segment, let's say, C and D of Brazil. They are consuming less. They are being more careful on their consumptions. And that's what we're seeing a little bit more on the height a little bit more bad debt. We're having a little bit more of bad debt also. We're being very careful and how to whom we're selling and to all the sales to be more profitable. So we are being careful on the subsidies on the pay TV satellite, on the subsidies on the prepaid customers. And that's both in the other side, all the investments that we have been doing in Brazil, the integration of the companies, I think America Movil in Brazil has been doing well and I hope that for the next year, we can see a little bit more on the integration, on the cost cutting and on all the infrastructure that we have been integrated. So we are well positioned in Brazil at this time, Ettedberg. Even that the economies are not looking good also for the next year. Okay. And one follow-up question on your CapEx. How the currency valuations are impacting your CapEx decisions in Latin America? And you think with all the devaluations we saw this year, the migration to 4 gs will slow down or you think it will continue at the current pace, especially because the smartphones are getting cheaper in U. S. Dollar terms? Thank you. Yes. Well, we have been the CapEx is not all the CapEx is in dollar. So part of the CapEx is in local currencies and part of the CapEx is in dollar. So we are reviewing, yes, of course, we are reviewing. We cannot have the same CapEx in dollars, but we are renegotiating with suppliers and we are also reviewing what are the really the things that we need to. But one of the things that America Movil has been doing, let's say, in Brazil, we have investing very good on the last 4, 5 years. So we have been doing all our big investments in the last year. So I think we are well prepared to support for and even if we reduce the CapEx in Brazil, we are going to be well supported for the next year. So what we are in the other side also, we have variable CapEx that it's the CapEx that we put when you with all the suppliers this CapEx to try to put it in local currency. But that's more or less what we're doing, Esteban. Thank you. Your next question comes from the line of Rodrigo Villanueva with Merrill Lynch. Please proceed. Thank you. Good morning, Daniel and Carlos. I was wondering if it is true that Telecom Austria I mean, the government of Austria is looking to sell its stake in Telecom Austria. I was wondering if you could give us some color on why they will be trying to do this and if AMX would really be interested in acquiring this stake? That would be my first question. Yes. We haven't had any indication from the government that they want to sell. So I think today, there are only notes in the press, maybe rumors, but what I understand is that the Minister of Finance said that they don't want to sell or somebody there they don't want to sell. So until today, we haven't had any indication on that. Understood, Daniel. Thank you very much. I was also wondering if you could give us an update regarding the investigation related to the Telmex dish, Unoceve that the IFFEL is doing. What is the likelihood that the IFFEL finds Telmex as guilty of any charge? And which do you think would be the worst penalty that the Ifetel could impose on Telmex? Well, we it's an investigation. We it's an investigation. What we'll receive is an investigation. And we have filled the response to that investigation to the IFFEL disputing the alleged of that violation. So and the only thing that I can tell you is that America Movil strongly believes that Telmex is in full compliance with the terms of its concession. So we are really we really believe that we are doing exactly what the concession said. So and we already feel that response. Understood. Thank you very much. Final question, if I may, Daniel. Following the implementation of the telco front in Mexico, AMX handset subsidy declined to around 20% of the cost of handsets. However, more recently, this subsidy has been approaching to the mid-20s. I was wondering if this has to do with the massive FX depreciation of the LatAm currencies and if you think that the level of subsidies should come back to the 20% that we've seen in the past? Yes. I think that you are right, Rodrigo. I think that we have been trying to reduce the subsidies. I think everybody in the world is trying to reduce the subsidies and it's what in all Latin America, not only in Mexico we're doing. So in Mexico, we reduced 20%. But well, in this quarter, the local current peso goes from 15, 30 to maybe 17. So you cannot pass all these price immediately and that's why you are seeing that the subsidies increase a little bit more. In the other side, we have been doing a lot more financing on the subsidies. It's been strongly good for the customers. Customers like that and we are growing on the financing on the handset. So that's a strategy that is working very good all around Latin America. Thank you very much, Daniel. Thank you. Your next question comes from the line of Walter Pachek with BTIG. Please proceed. With a sense of what's going on in the United States, it looked like things were more competitive, the margin pulled in a bit. And specifically, the ARPU really came down. Is it that you're just losing Straight Talk customers and you're just getting a much bigger mix shift to these Assurance? Or can you just give us a little bit better color of what's happening in the U. S. And why it makes sense to stay in this business rather than looking for a buyer for that asset? We lose some SafeLink customers, losing a little bit of TracFone and Net10 customers, the old brands, but we are growing on the straight top customers. As you said, U. S. Is becoming more and more competitiveness. The S. We launch a new product also, and we spend some money on that launching. And that's more or less what you see of the reduction on the EBITDA is because the launch of the product, a lot more advertising and that's what you see. But the competition is growing in the U. S. Okay. And then just one other question. Your last conference call, I think the last couple, you've talked about the importance of an LTE smartphone getting under a certain price, I forget the exact number. Now that there's been some kind of, I guess, you would call it economic issues in some of these markets, is that price of the LTE smartphone low enough to stimulate interest in an LTE smartphone? And can you give us any sense of what the smartphones in maybe Mexico or Brazil? Thank you. I don't have exactly the penetration here, but you can to Daniela. I don't have any issue to give it to you. So we are growing a lot on 3 gs and LTE. And there is still with this devaluation, I still think that there is a lot of LTE products and phones that are available for the people. And we are for the next year, our strategy is to grow more on LTE. LTE grow for the next year, I'm sure, on that. And I think we're going to have a lot more customers on LTE. And only fair to what Daniel said regarding platform, the other one to note, the ARPU did not decline. The ARPU is exactly the same this quarter than it was the entire year. And the service revenues only are practically identical. They are better than minus 0.1%. So they are practically identical to what they had last year. So we haven't really seen any decline in ARPU in the U. S. Daniel said it's simply the low the legacy brands of SafeLink that have very low ARPUs and the old platform or Net10, those are the ones that we have lost clients. But the ARPU remains strong at $20 in the U. S. And also when you said about smartphones, smartphones are growing fast in Latin America. In America, mobile smartphones are growing really fast. Okay. Thanks for that extra clarification, Carlos. Thank you, Walter. Your next question comes from the line of Andre Baggio with JPMorgan. Please proceed. Hi, good morning, everyone. So I'm interested in the trends in Mexico where we saw sharp decline in the EBITDA margin. So I want to know what's the measures which are being taken in order to stabilize these margins and how should we think about those? Well, Well, as you know, with the telecom reform in Mexico, we don't have any more long distance. In the wireless, we have a 0 interconnection rate. So there's some of the things that we are reducing on roaming. But we have been doing good plans, and I think Mexico is also becoming more competitive. We are having a big strategy on cutting costs, on subsidies, on companies, selling more to our customers, and that's where we are in Mexico. Also Carlos? Andre, if you look at EBITDA of Telcelis, 2nd quarter and third quarter, they are basically identical. The core EBITDA, which is EBITDA before subscriber acquisition costs, is identical, the 2nd quarter and the 3rd quarter. So basically, the impact that you are looking, which is the comparison to last year. It's not something that is valued sequentially. Simply it's something that is factoring in the effect of the loss of these long distance revenues that took place from January 1 this year. Carlos, on the postpaid subscribers, we're growing very good in Mexico with the postpaid subscribers. So also it's a very good indication on that. The only line of growth in the cost side, because I see I have all the cost lines here for Telcel, practically the only for Mexico, Practically, the only one where we see an increase that is significant is in the cost of equipment. As I explained before, the cost of equipment is basically something that will accounting wise affects you, but it's ultimately realized through sales of equipment in the ongoing months. It's a good day down the road. So that's what I would say. There's really no change in EBITDA cost control in Mexico is fine. The effect is the loss of long distance revenue this year and only part of the interconnection revenue that is happening in the middle of the Q3 of last year. So that's basically the impact. There's no news here. So it's that and the effect of the depreciation of the peso the EBITDA on the cost of equipment. And other yes, it's exactly and you have also other cost in dollars. So we need to start on the cost cutting renegotiation of everything because a lot of the of some, let's say, softwares and a lot of things, it's the value in dollars. So that's also a little bit on the reduction on the EBITDA. And Fermo, one thing that I think is really important, Andre, because when we look at the year on year comparison, last year, we didn't have the long distance elimination of the long distance nor do we have fully the elimination of the in the connection rates. But still, in spite of this, by the Q3 this is the 1st quarter in a number of quarters where the rate of service revenue growth is actually better than in the prior quarter. We have seen declines for 3 or 4 quarters on account of some of these measures that were implemented here in Mexico. And now we are seeing an upturn, okay? So I think that that's an inflection point, and it's really, really important. And again, this is before we look at the fully comparable figures along the inspection point, it's already happening. We start looking at without seeing the similar compagotrigo with the long distance interconnection. When we stopped the long distance in Old Mexico, it was in January. The long distance finish on January. And the elimination of interconnection rates took place in the middle of August of last year. So it was not a full quarter. Okay. Thanks a lot. And just a follow on actually to an earlier question. So because a part of the CapEx is in local currencies based on your answer, can I understand that this year CapEx and that next year CapEx should be a little bit lower than the $10,000,000,000 that was indicated before? Let's say, do you have a guidance or at least some kind of indication for the number for this next few years? Yes. We haven't finished the CapEx. But yes, I think I'm sure that the CapEx in dollars is going to be less than what we have last year. That is $10,000,000,000 of course, is going to be less than that. And one thing also, Andre, that you have to consider. Remember last year, we had CapEx, we have said it repeatedly, hit its peak in absolute terms because we have $11,000,000,000 of CapEx including the spectrum. We do not see the same spectrum mix next year, and we are not going to have the same infrastructure mix also Because this is the year that marks the end of the 5 year plan that we had set for ourselves of $10,000,000,000 per year. We have invested now $50,000,000,000 in Latin America over the last 5 years. And now it's time to move into a new phase. And that's we are going to be talking to you a little bit about on the Investor Day next week. And other important thing when you talk about in CapEx is that the CapEx we divided into the fixed CapEx and the variable CapEx. And the variable CapEx depends a lot on revenue. And I'm sure that, let's say, in Brazil, because the slowdown, we're going to grow less. So in other countries also, we're going to grow a little bit less. So I'm sure that in the variable CapEx, we're going to have less variable CapEx than what we have this year. Okay. Thanks a lot and look forward to see you in a couple of weeks. Thank you. Your next question comes from the line of Ric Prentiss with Raymond James. Two questions, if I may. First, you mentioned telecytes this week and maybe able to spin that out. How will that affect the financials in Mexico? Will you start paying tower rent starting in late October, November then? Just thinking through how the financials will look when we see Q4? I think the first effect is, as I mentioned before, we are going to have a reduction in the debt position of America Movil in the amount of ARS 21,000,000,000. That's about $1,200,000,000 or $1,300,000,000 And that's happening immediately on the upon the spin off, which is sometime this week, we expect. And then as you point out, there will be some rental payments that will be made over time. I would say that at current prices, we're probably looking at slightly less than $200,000,000 per year on rental payments for sell side. Yes. That's more than that. Okay. And then within Brazil, obviously, a difficult economy right there. You talked a little bit about what you're seeing on the customer side. There's also been some speculation in the press that there could be some industry structure changes. Nextel Brazil might be coming up, DIRECTV Brazil might be something on the market in the coming period. How do you think about your position in Brazil and are any of the assets at other operators of interest? And why would they be interesting? Well, I think we have think Brazil, America Movil is in a very good position. So we have of the cable company, we have pay TV satellite, we have fixed. We have wireless. We have all the backbone with Embratel, the corporate customers. So America Movil in Brazil, the last 5 years has been doing a very good job. So we are well prepared and we have a very good position in Brazil. On all the speculations that are in the market about Nextel, as you're saying, or Dish or Oi, all these companies, well, we're going to be we're open to see anything, but right now we are in a very good position in Brazil. So that's what I can tell you. Okay. So you've got a good bundle, but if somebody's got something interesting, you'll certainly take a look at it? Yes, of course. If there's something interesting, we're always open to look at the opportunities that we could see. Thanks. See you guys next week. Thank you. Your next question comes from the line of Andre Saba with Credit Suisse. Please proceed. Yes. Good morning. Thank you for the call and taking my question. I just wanted to clarify on the detail on the Ecuador tax. I understood that there is an impact of $50,000,000 being accounted for in 3Q15, but that accounts for a longer period of time. So if you could just help us understand how much do you think we should expect for coming quarters on a normalized basis and if you expect to be also continuing to disconnect more of these low volume prepaid subscribers as well? Thank you. What happened is that we have a new law in Ecuador. This new law, you need to pay on depending on your market share, a percentage of your revenues. So this law is gets, I think, since January or February or March, I don't remember exactly the date. But the secondary loss finished in September. So what we're booking is all this revenue that we have since, let's say, March. So that's why we are booking it's February, August what we are booking in this quarter. So there are around $40,000,000 I think it's going to be around $60,000,000 what it's going to cost this tax that we're paying and it's more or less what you're going to see quarter by quarter. So to this time, we are booking since February to August and then you are going to see month by month. Thanks. Your next question comes from the line of Valder Nogueira with Santander. Please proceed. Thank you for taking the question. As you said in your answer to Badjo, your ARPU has already undergone a long series of strong headwinds ranging from the long distance to interconnection and so on. And if we look beyond the FX headlines of the Q3, what we could see was decent good execution in Mexico. And I believe this has to do with the quality of the client that you're getting. So although the price is coming down, the volume that you're getting or the quality of the client is reverberating stronger. What do you what can you say about it? Because at the same time, you are losing the market share and you need to lose and you're keeping the right one. How much room do you have to fight this battle? What else can you put on the table of the customer in order to continue this trend? No, I think that's a good strategy. And we have been doing also this strategy in other economic, let's say, slowdowns, economic things in the country, you want to be sure that all the postpaid that you are selling are good clients, good customers. So what we want is that everything that we sell, if it's paid TV, if it's prepaid and if it's postpaid, it would be profitable. And it's exactly what we're doing here in Mexico. And what we sell in Mexico is we are not going to sell any more Activos anymore assets because when we know that AT and T is coming and they have the assets, so we are not going to sell any more assets. We are open to sell some customers to do more MVNOs and to reduce our market share. But in the other side, we are also that we think that we can live with that preponderance. So those things, it's going to depend on what it's more convenient. We're open to sell the customers. We're open to do a lot. We already have 2 MVNOs in Mexico, but that has to be that's one thing. The other thing is that we are doing the right things in the market, the commercial things to get the best to merge in the market. So that's what we're looking and that's what we're going to still see in all the strategy for next year. And not only in Mexico, we're trying to do that in all Latin America. On these right things to the right customer that you mentioned, has it been more data capacity? Has it been more bandwidth or how you treat voice, how you combine that with the interconnections that you have to pay on all ends and netting out in the best way possible? What has been the main driver of this of this, in my view, better quality? I think we're trying to give the best service to our customers. It's an end to end service, end to end quality. We're trying to have the best quality in the network. We're getting we're going to be very transparent. We're selling to our customer, financing good equipment, going to 4 gs, giving a lot of data. Our infrastructure is working very good. So data is a part a very important issue for the customers, for the high end customers, and we're giving very good speeds on data. So all overall, it's the strategy that we're following all around Latin America. And just to elaborate, Walter, on what Daniel said, we gained 361,000 subscribers in Mexico, which were all postpaid. And we also added 122,000 broadband accesses on the fixed line platform. And so that means altogether, we're talking about nearly 500,000 net additions of RGUs, in the quarter. One other thing that is important to note is that the service revenues in peso terms, absolute terms, they are virtually identical in the second quarter and the third quarter. As I said, we have stopped the decline, the momentum of the decline. And I think that we are seeing now a good platform from which to begin to grow the revenues. So I think that's for the part where we should be focusing on. The clients that we are getting are essentially for good clients, higher ARPU clients. And I think that in addition that we're having today. And it's because there is good service that we're giving to our customers. And as my last question, if TeleSides proves to be a good strategy, if the market reads it in a very mature way regarding at which stage of the tower business you're running to and proves to be a good unlocking of value for you guys. Do you would you consider doing a tele sites LATAM? Well, at this time, we are not considering doing any tele sites LATAM. We're not close on that. But at this stage, this and next year, we don't think we're going to do a telecyte slot time. Maybe in the future, we are open, as we're saying, as the opportunities that we could see in Brazil, we're also open to review that. But today, we are not considering doing any telecytes lab. Thank you, gentlemen. Thank you. Your next question comes from the line of Mauryn, Morgan Stanley. Please proceed. Good morning. It's Michel Mauryn. So the first one on Mexico, you've talked about the postpaid net adds. It was a record for a 3rd quarter. So congratulations on that. And I was just wondering if you can give us a bit more color. I think in the past you've alluded to there being a lot of iPads and kind of non voice customers driving that. So if you can parse that out for us that would be helpful. And then also in Mexico on the fixed line you also did very well. You just mentioned the net adds and I'm wondering if that's voice, broadband or both and if you can give us a bit more color. Also with the revenues on the fixed line, because when I look at your sequential uptick on fixed line revenue in Mexico, it was also very strong. Sometimes there's some IT projects that move the needle a little bit. So I'm wondering if there's anything unusual there that we should be aware of. Thank you. No, I think on the fixed side, we're selling voice and broadband to the customers. So those are broadband and voice, those two things. And we're seeing with the corporate customers giving all good services all around what they have. So we're going more to the cloud to all of these communication services that we're giving that. In the postpaid, this is what I'm saying. I think we have the best network, good quality customer care centers. So we're giving a good value to our customers, and it's more or less why they are moving to have a prepaid. That's the those are the things, Michel. To your question, Michel, we had a 120 2,000 new broadband accesses. 132,000. 122,000 new broadband accesses on the system platform. Great. Okay. And if I can throw a quick one out there, receivables seem to have gone up. So I don't know if that's just because of country mix changing or if there was really higher delinquencies that are starting to creep up in your receivables. No, I think it's more on the economic slowdown a little bit in some countries more than in other ones, but that's what that's the economic situation brings a little bit more there. Great. Thank you. Thank you. Your next question comes from the line of Kevin Smith with Macquarie. Please proceed. Yes. When you think about the diversification of revenue and EBITDA away from Mexico, can you talk a little bit about some of your strategic priorities? In the Caribbean, Digicel just pulled their IPO. Brazil is still a 4 player market and Vivendi is looking to do something maybe with Tim. And then there's Europe. So how do you think about M and A in this low interest rate environment and seemingly a lot of deals on the table right now? We have also Central America. Central America is doing also very good. We're growing in Central America. We're developing very good our these countries. We're putting 4 gs. They are growing in 4 gs. They are growing in data. And then we have the Caribbean. And as you're saying, we have we're open to see any opportunity depending on the country, depending on our market share, depending on our position. But our strategy is to give the foreplay, to give fixed wireless broadband and TV. And depending on each country, we can see that you see that we are growing small companies in Eastern Europe, but we are buying some fixed companies, so we can be allowed not only giving wireless to give fixed, to give broadband and to give more or less what our strategy has been in all the countries. Now at the end of the day, what America Movil wants is to have the foreplay in each country. Great. Thank you. Your next question comes from the line of Sumit Datta with New Street Research. Please proceed. Yes, good morning. Couple of questions, please. First is on the balance sheet. I make your net debt just sort of shy of ARS 600,000,000,000. You report a 1.8 times leverage number. Can you help me understand how the 2 reconcile? I'm guessing there's a couple of adjustments in there. Tele sites debt spin off, but a bit of clarity there would be helpful, please. And then secondly, maybe if we could touch on Colombia, much better, I think, trends on the fixed side, some better trends on data, but the voice market on wireless looks very difficult still. Are there any signs of improvement there? Is there anything you can do to alleviate some of that weakness there? Thank you. Okay. On the first one, I think that we have this disclosed before how to run it. It's basically we apply we use the same methodology that the rating agencies utilize. We have some hybrid debt, which is meant to be like equivalent of subordinated debt, and that has a 50% credit by the rating agencies. So we have roughly $3,000,000,000 a little bit more of hybrid securities at the level of America Movil. So in that case, we applied the 50%. Then we, obviously, discount, and that's obviously also what the operating agencies do. The net value that we have under the catch positions that we have, They have a market value that is sizable. So that amount is also deducted from the net debt. It's equivalent. If you were to close those positions, you can immediately realize that mark to market value that they currently have. And then on the telesites, it doesn't have an effect because the telesites we had already issued debt at the telesites level at OpsimEx. But all of that debt, the funding from the proceeds from the issuance of that debt, was still in cash. So telesites, as of the end of the quarter, had really no impact on net debt because, yes, they had issued more debt, but they had all the cash there. So the cash already is required to pay us off upon this spin off, okay? So the I was not including yet the reduction of net debt at the Amelagamovie level that will take place after telephax, okay? That is not yet included. If you want to contact Daniela Lecona, we can provide you the numbers, okay? Yes. Thanks. And just on Colombia, if you could help with the wireless voice market. Thanks. Can you repeat the question on Colombia? Sure. Yes. So it was just on in Colombia, some better trends in parts of the business, but the wireless voice revenues continue to be under pressure. I just wondered if there was any sign that may improve if you were doing anything actively to improve those trends? Thank you. What happened in Colombia is that, well, since 1 year for all the country, you cannot do contracts in the postpaid side. So what you are seeing is that people is adjusting to new plans. So what is happening is that all the postpaid customers can come as they don't have a contract, they move to a better plan. But in the other side, we are not anymore subsidizing any handset handset there. So that's the regulation in the country. It's not for America Movil. The regulation is for everybody in Colombia and that's what is happening. So what I think that's something that it's almost taking place, yes, where we don't think that in the future, there's going to be big movements on those customers. And the prices and the competition in Colombia stock, we have been having 17% reduction in price per minute. In data, Also, the competitiveness is high. The prices in data are low. And that's more or less what is happening in Colombia. But in Colombia for the next I hope for the next year. Okay. And again, following on what Anil said, if you look sequentially from the second quarter, service revenues increased by 1.4% in Colombia, again sequentially. EBITDA was practically flat. And this, in spite of the fact that the currency has depreciated considerably there because of the impact of oil prices. But again, if you were to take out this issue of the equipment costs, the cost of equipment, practically the rest of the costs are way below inflation in Colombia. So I think, again, EBITDA has held up in spite of the increase in the cost of And let me add something. I think in the fixed side, we're doing very good. We're growing a little bit more market share on TV. We have a low market share. We're starting to grow market share in TV, in broadband, in peaks, and we're trying to do convergence there. And I think for we feel that in the peak side, we're doing also very good in Colombia. Great. I mean, it helps to stabilize the market for the future. Okay. Thank you. Thank you very much. And ladies and gentlemen, due to time constraints, that was our last question. I would now like to hand the call over to Daniela for closing remarks. Thank you, everyone. I just want to remind you that we're a few days away from our Investor Day and tomorrow is the last day to register. So if you want to attend our event, please access our website and register. If you need any assistance with that, you can contact myself, Anna or Alejandro. All of the contact info is on our website. Okay. Thank you. Thank you very much.