Welcome to the América Móvil third quarter earnings conference calling webcast. My name is Alex and I will be your Operator for today. At this time, all participants are in listen-only mode. We will conduct a question and answer session toward the end of this conference. If at any time during the call you require assistance, please press star zero and an Operator will be happy to assist. As a reminder, this is being recorded for replay purposes. I would now like to turn the conference over to Daniela Lecuona, Investor Relations Officer. Please proceed.
Good morning, everyone. Thank you for joining us for this quarter's third quarter results. We have today 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 of Telmex.
Good morning. Thank you, Daniela. Good morning, everybody. Thank you for being in the third quarter financial results. Carlos is going to make a summary of the results.
Thank you, Daniel. Good morning, everyone. The expectation throughout much of the third quarter that the Fed would lift interest rates before the end of September brought about renewed volatility in the capital markets. The fear that such a 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 issuers had to the debt capital markets in the U.S. Signs of renewed economic weakness in China, while dispensing with some of the fears regarding an interest rate increase by the Fed, spooked markets further, particularly when China decided to depreciate slightly its currency. In this context, we ended September with 368.2 million access lines, which was 1.1% more than a year before. Obviously, the figure includes 288 million wireless subscribers, 35 million landlines, and 23 million broadband access.
In addition, we had 21.6 million pay TV units. In mobile, it's important to note that our postpaid base was up 5.1% year-over-year to 61 million subscribers. Postpaid net additions were 836,000, most of them coming from Mexico, Brazil, and the European operations. Third quarter revenues were up 1.2% from the prior year to MXN 223 billion, bringing the total through September to MXN 663 billion. 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 second quarter. Both revenues, both mobile and fixed, continued to decline in relation to service revenues. Data revenue growth accelerated in the third quarter in relation to the preceding one. It was 10.7% and 10% in the mobile and fixed platforms respectively. EBITDA amounted to MXN 66.7 billion in the quarter.
It was down 8.2% year-over-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. Year-to-date, EBITDA totaled MXN 203 billion, 5.5% less than a year before in Mexican peso terms. Part of the reduction in EBITDA in the quarter was 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 us having booked some extraordinary revenues the prior year. In the case of Austria, they had sold Liechtenstein. In the case of Puerto Rico, they had booked some EBITDA gains on account of changes to the pension plan that they managed. This year, we also had some one-offs, partly in Puerto Rico and particularly in Ecuador.
In Ecuador, we had roughly $50 million 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. We had to book in the third quarter all the amount that was due since February. We had an unduly large booking of taxes in Ecuador in the third quarter. 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, EBITDA would have fallen 4.9% in peso terms, and it would have fallen 2.5% at constant exchange rates. This means that the reduction in EBITDA in the third quarter, once that we adjust for these one-offs, was better than what we had seen the prior quarter. The prior quarter, the EBITDA reduction had been 3.1% at constant exchange rates.
At any event, Central America has emerged as the fastest growing region, followed by the South American block. It has actually increased its rate of growth over the last few quarters, in contrast to the 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 neighborhood of 7%, 8%, and we are seeing very strong EBITDA growth in the neighborhood of 13%. After depreciation and amortization charges that were equivalent to 16% of service revenues, slightly higher than in the prior year. We obtained an operating profit of MXN 35.2 billion.
Our comprehensive financing costs grew to MXN 38.9 billion, mostly reflecting the sharp depreciation that took place in the quarter of the Mexican peso and the Brazilian real relative to the US 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 MXN 1.6 billion, we posted a net loss of MXN 2.9 billion. 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 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 one third came from the combination of suppliers and 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. 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 movement is in the end borne by consumers. I would say that our net debt increased.
In relation to the debt of the company, it is to be said that it has a long-term profile, 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 MXN 61 billion in December, allowing for the reclassification of our stake in KPN from a long-term investment valued at cost to an available for sale asset valued at market prices. Our net debt represented 1.8 times last 12 months EBITDA. It must be noted that from the spin-off of Telesites, our net debt is to be reduced by MXN 21 billion.
At the end of September, we had already deducted MXN 14 billion from the other short investment line item on the control sale of KPN shares that took place with a mandatory bond placed in September. We placed a mandatory convertible bond, exchangeable bond, that has a three-year tenure, and this was placed at the beginning of September. At the end of the day, it involves the outright sale of roughly 200,000 shares of KPN that were valued at EUR 750 million at the time that we went to market. 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 MXN 105.7 billion and shareholder distributions totaling MXN 59.5 billion, including both dividends and share buybacks.
I would say that a very significant portion of the shareholder distributions was actually affected in the third quarter. The first part of the ordinary dividend was paid in July. Then obviously we have had share buybacks all throughout the year. If we look after the spin-off of Telesites that is happening today, earlier this 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 $1.2 billion, the debt of the company. That means that gross debt of América Móvil, financial debt of América Móvil, valued in dollar terms, is virtually identical today than what it was at the beginning of the year. Okay?
That's just to put in perspective that we haven't really had to go to market to seek any financing. With that, I would want to pass the floor back to Daniel, and maybe we can begin the session of the Q&A. Thank you.
Yes. The first question, please.
Ladies and gentlemen, if you wish to ask a question, please press star one on your phone. If your question has been answered, you wish to withdraw your question, please press star two. Please press star one to begin, and stand by for your first question. Mr. Rozwadowski, please proceed.
Thank you very much. It's Amir Rozwadowski from Barclays. Just wanted to confirm, you had mentioned that the Telesites 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.
Yeah. I think we already have all the authorizations on the Telesites offer. This week, legally, the company is going to spin off, and during November, I think we can distribute the shares. That's more or less the timing that we have. All the authorizations that we need are okay. 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. If I may, switching to the mobile market in Mexico, we continue to see healthy subscriber trends out of your business in Mexico. Would love to hear how we should think about this going forward. 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? How do you see your positioning in the marketplace post the review process? Thank you very much.
Let me talk a little bit about the Mexican market. I think since two years ago, we have the Mexican telecommunication reform. I think with that reform, there was a lot of changes in the market. One big company from the U.S. bought two of the small companies here in Mexico. What you see right now is that we have three big competitors in the market. We already in Mexico have an effective and very competitive market. I think what América Móvil is thinking is that, let's say in the asymmetric regulations like the interconnection, we don't want to subsidize AT&T or Telefónica by paying interconnection to them, and they pay us zero interconnection. I think that's a good opportunity for us with the regulator in March when it's going to finish the two-year term.
We are going to renegotiate some of those terms because I don't feel that América Móvil should pay or subsidize these two big companies in Mexico. I think we have a good opportunity on that. On the other side, I think Mexico needs more competition in pay TV. We are also preparing the TV. We want to grant a concession of the TV. Those are the two issues that we're working with the regulator right now. Today, we are not presenting anything. Still today, we haven't presented anything to the regulator, but we're preparing everything to talk and present it to them.
If I may, what do you think your prospects for getting a license for 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 in the pay TV. We need to comply with all the rules. That's what we are doing. We comply as a preponderant player as América Móvil is complying with all the rules that they have been giving us to us. I think we have a good opportunity to have that pay TV license.
Thank you very much for the incremental color.
Thank you.
As a reminder, ladies and gentlemen, to ask your question, please press star one. Please limit yourself to one question and one follow-up, please. 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. 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 impacted subscribers are the low-end subscribers. We have been having less consumption in the prepaid subscribers. We have some cancellation, as you are 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 bad debt. We're having a little bit more of bad debt also. We're being very careful on how to whom we're selling and to all the sales to be more profitable. We are being careful on the subsidies on the pay TV satellite, on the subsidies on the prepaid customers.
In the other side, all the investments that we have been doing in Brazil, the integration of the companies, I think América Móvil 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. We are well positioned in Brazil at this time, Vera. Even that the economies are not looking good also for the next year.
Okay. One follow-up question on your CapEx. How the currency valuations are impacting your CapEx decisions in Latin America? You think with all the devaluations we saw this year, the migration to 4G 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.
Not all the CapEx is in USD. Part of the CapEx is in local currencies, part of the CapEx is in USD. We're reviewing. Yes, of course, we're reviewing. We cannot have the same CapEx in USD, we are renegotiating with the suppliers and we are also reviewing what are really the things that we need, too. One of the things that América Móvil has been doing, let's say in Brazil, we have been investing very good on the last four, five years. We have been doing all our big investments in the last year. I think we are well prepared to support for, even if we reduce the CapEx in Brazil, we are going to be well supported for the next year.
In the other side also, we have a variable CapEx that is the CapEx that we put when you grow only. This one, I think, we also are renegotiating with all the suppliers, this CapEx to try to put it in local currency. That's more or less what we're doing, Vera.
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 the government of Austria is looking to sell its stake in Telekom Austria. I was wondering if you could give us some color on why they would be trying to do this, and if AMX would really be interested in acquiring this stake. That would be my first question.
We haven't had any indication from the government that they want to sell. 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. 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, Uno TV that the IFETEL is doing. What is the likelihood that the IFETEL finds Telmex as guilty of any charge, and which do you think would be the worst penalty that the IFETEL could impose on Telmex?
It's an investigation. What we receive is an investigation, we have filed a response to that investigation to the IFETEL, disputing the allege of that violation. The only thing that I can tell you is that América Móvil strongly believes that Telmex is in full compliance with the terms of its concession. We really believe that we are doing exactly what the concession said. We already filed that response.
Understood. Thank you very much. Final question, if I may, Daniel. Following the implementation of the Telco Reform in Mexico, AMX's 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.
Yeah, 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, it's what in all Latin America, not only in Mexico, we're doing. In Mexico, we reduced to the 20%. Well, in this quarter, the local currency, the peso, goes from 15.30 to maybe 17. You cannot pass all these prices immediately, 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, we are growing on the financing on the handsets. 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 Piecyk with BTIG. Please proceed.
Just a sense of what's going on in the U.S. It looked like things were more competitive, the margin pulled in a bit. 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 SafeLink, 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?
Yes. We lose some SafeLink customers. Losing a little bit of TracFone and Net10 customers, the old brands. We are growing on the Straight Talk customers. As you said, the U.S. is becoming more and more competitive. The competition is tough in the U.S. We launch a new product also. We spend some money on that launching. That is more or less what you see of the reduction on the EBITDA is because the launch of the product, a lot more advertising. That is what you see. The competition is growing in the U.S.
Okay. Just one other question. 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, 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? Can you give us any sense of what the penetration is of LTE smartphones in maybe Mexico or Brazil? Thank you.
I don't have exactly the penetration here. You can talk to Daniela. I don't have any issue to give it to you. We are growing a lot on 3G and LTE. Still with this devaluation, I still think that there's a lot of LTE products and phones that are available for the people. We are, for the next year, our strategy is to grow more on LTE. LTE customers are consuming maybe two times or three times what they consume in 3G. Data is going to grow for the next year, I'm sure of that.
Great. Thank you.
I think we're going to have a lot more customers on LTE.
Only true to what Daniel said regarding platform, just want to note, the ARPU did not decline. The ARPU is exactly the same this quarter than it was the entire year. The service revenues really are practically identical. They are down -0.1%. They are practically identical to what they had last year. We haven't really seen any decline in ARPU in the U.S. As Daniel said, it's simply 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. The ARPU remains strong at $20 in the U.S.
Also, when you said about smartphones are growing fast in Latin America. All around Latin America, in América Móvil, the 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 JP Morgan. Please proceed.
Hi. Good morning, everyone. I'm interested in the trends in Mexico, where we saw a sharp decline in the EBITDA margin. I want to know what's the measures which are being taken in order to stabilize this margin, and how should we think about those?
Well, as you know, with the telecom reform in Mexico, we don't have any more long distance. In the wireless, we have a zero interconnection rate. There's some of the things that we're reducing on no roaming. 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 integrating more and more all of the company, selling more to our customers. That's where we are in Mexico.
Andre, if you look at EBITDA of Telcel, second quarter and third quarter, they are basically identical. The core EBITDA, which is EBITDA before subscriber acquisition cost, is identical the second quarter and the third quarter.
We're growing much more.
The impact that you are looking, which is the comparison to last year, it's not something that is valid sequentially. It's simply something that is factoring in the effect of the loss of these long-distance revenues that took place from January 1st of this year.
Carlos, also the postpaid subscribers, we're growing very good in Mexico with the postpaid subscribers. 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, for Mexico. Practically the only one where we see an increase that is significant is 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, down the road. That's what I would say. There's really no changes in EBITDA cost control in Mexico. It's fine. The effect is the loss of long-distance revenue this year, and obviously part of the interconnection revenue that started happening in the middle of the third quarter of last year. That's basically the impact. There's no news here. It's that and the effect of the depreciation of the peso, the Mexican peso on the cost of equipment.
Other Yes, exactly. You have also other costs in dollars. We need to start on the cost-cutting renegotiation of everything, because a lot of some, let's say, software and a lot of things, it's valued in dollars. That's also a little bit on the reduction on the EBITDA.
Fermin, one thing that I think is really important, Andre, because when we look at the year comparison, last year, we didn't have the elimination of long distance, nor did we have fully the elimination of the interconnection rate. Still, in spite of this, by the third quarter, this is the first 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 three or four quarters on account of some of these measures that were implemented here in Mexico, and now we are seeing an upturn. Okay. I think that's an inflection point, and it's really, really important. Again, this is before we look at the fully comparable figures.
The long distance.
inflection point is already happening without seeing the similar comparable figures with the long distance interconnection.
When we stopped the long distance in all Mexico, it was in January.
January.
The long distance finished on January.
The elimination of interconnection rates took place in the middle of August of last year. It was not a full quarter.
Okay, thanks a lot. Just a follow-on to actually to an earlier question. 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 billion 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 two years?
Yeah, we haven't finished the CapEx. 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 billion. Of course, it's going to be less than that.
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 had $11 billion of CapEx, including the spectrum. We do not see the same spectrum needs next year, we are not going to have the same infrastructure needs also next year. This is the year that marks the end of the five-year plan that we had set for ourselves of $10 billion per year. We have invested now $50 billion in Latin America over the last five years, and now it's time to move into a new phase. That's what we are going to be talking to you a little bit about on the Investor Day next week.
Other important thing when you talk about in CapEx is that the CapEx, we divide it into the fixed CapEx and the variable CapEx. The variable CapEx depends a lot on the growth. I'm sure that, let's say, in Brazil, because there's slowdown, we're going to grow less. In other countries also, we're going to grow a little bit less. 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. Please proceed.
Yes. Hi. Two questions, if I may. First, you mentioned Telesites 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 fourth quarter.
Okay. I think the first effect is, as I mentioned before, we are going to have a reduction in the debt position of América Móvil in the amount of MXN 21 billion. That's about $1.2 or $1.3 billion. That's happening immediately upon the spinoff, which is sometime this week, we expect. 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 million per year on rental payments for Telesites.
Yes. That amount.
Okay. 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 in Brazil, América Móvil is in a very good position. We have the cable company. We have pay TV, satellite, we have fixed, we have wireless, we have all the backbone with Embratel, the corporate customers. América Móvil in Brazil, the last five years has been doing a very good job. 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 open to see anything. Right now, we are in a very good position in Brazil. That's what I can tell you.
Okay, 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 are 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 Sahba] 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 million being accounted for in 3Q15, but that accounts for a longer period of time. 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, you know we have a new law in Ecuador. This new law, you need to pay depending on your market share, a percentage of your revenues. This law gets, I think since January or February or March, I don't remember exactly the date. The secondary laws finished in September. What we're booking is all this revenue that we have since, let's say, March. That's why we are booking, it's February, August, what we are booking in this quarter. There are around $40 million. I think it's going to be around $60 million, what it's going to cost this tax that we're paying. It's more or less what you are going to see quarter by quarter. 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 Valter Nogueira with Santander. Please proceed.
Thank you for taking the question. As you said in your answer to Baggio, your ARPU has already undergone a long series of strong headwinds, ranging from the long distance to interconnection and so on. If we look beyond the FX headlines of the third quarter, what we could see was a decent and a good execution in Mexico. I believe this has to do with the quality of the client that you're getting. Although the price is coming down, the volume that you're getting or the quality of the client is reverberating stronger. What can you say about it? Because at the same time, you are losing the market share that 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?
I think that's a good strategy, and we have been doing also this strategy in other countries. It's not only because the regulation here, it's because I think when there's 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. What we want is that everything that we sell, if it's pay TV, if it's prepaid, and if it's postpaid, it would be profitable. It's exactly what we're doing here in Mexico. What we said in Mexico is, we are not going to sell any more activos, any more assets, because when we know that AT&T is coming, and they have the assets, 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.
On the other side, we think that we can live with that preponderance. 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 two MVNOs in Mexico. 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 customers in the market. That's what we're looking, and that's what we're going to still see in all the strategy for next year. 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, 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 going to be very transparent. We're selling to our customer, financing good equipment, going to 4G, giving a lot of data. Our infrastructure is working very good. Data is a very important issue for the customers, for the high-end customers, and we're giving very good speeds on data. All overall, it's the strategy that we're following all around Latin America.
Just to elaborate, Walter, on what Daniel said. We gained 361,000 subscribers in Mexico, which were all postpaid. We also added 122,000 broadband accesses on the fixed-line platform. That means, all together, we're talking about nearly 500,000 net additions of RGUs, of access lines in the quarter. One other thing that is important to note is that the service revenues in MXN 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 decline, and I think that we are seeing now a good platform from which to begin to grow the revenues. I think that's what we should be focusing on. The clients that we are getting are essentially postpaid clients.
Good customers.
are higher ARPU clients. I think that in time we are going to see the effect of the new addition that we're having today.
It's because the good service that we're giving to our customers.
As my last question, if Telesites 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, would you consider doing a Telesites LatAm?
Well, at this time, we are not considering doing any Telesites LatAm. We're not close on that. At this stage, this and next year, we don't think we're going to do Telesites LatAm. Maybe in the future, we are open, as we're saying, as the opportunities that we could see in Brazil, we are also open to review that. Today, we are not considering doing any Telesites LatAm.
Thank you, gentlemen.
Thank you.
Your next question comes from the line of Morin, Morgan Stanley. Please proceed.
Good morning. It's Michel Morin. The first on Mexico, you've talked about the postpaid net adds. It was a record for a third quarter, congratulations on that. 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. If you can parse that out for us, that would be helpful. Also in Mexico, on the fixed line, you also did very well. You just mentioned the net adds. 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. Those are broadband and fixed voice, those two things. We're seeing with the corporate customers giving all good services all around what they have. We're going more to the cloud, to all of these communication services that we're giving that. In the postpaid, it's what I'm saying. No, I think we have the best network, good quality, customer care centers. We're giving a good value to our customers, and it's more or less why they are moving to have a prepaid. Those are the things, Michel.
To your question, Michel, the RGUs, we had 122,000 new broadband accesses.
132?
122,000 new broadband accesses on the Fusión platform.
Great. Okay. If I can throw a quick one out there, receivables seem to have gone up. 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. That's the economic situation that brings a little bit more the .
Great. Thank you.
Thank you.
Your next question comes from the line of Kevin Smithen 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's still a four-player market, and it looks like Oi is struggling. Vivendi is looking to do something maybe with TIM. There's Europe. How do you think about M&A in this low interest rate environment and seemingly a lot of deals on the table right now?
Well, we have also Central America. Central America is doing also very good. We're growing in Central America. We're developing very good these countries. We're putting 4G. They are growing in 4G. They are growing in data. We have the Caribbean, and as you're saying, we're open to see any opportunity depending on the country, depending on our market share, depending on our position. Our strategy is to give the quad play, to give fixed wireless broadband and TV. Depending on each country, we can see that. You see that we are growing small companies in Eastern Europe, we are buying some fixed companies so we can be allowed not only giving wireless, to give fixed, to give broadband, and to give pay TV. That's more or less what our strategy has been in all the countries.
Now at the end of the day, what América Móvil wants is to have the quad play in each country.
Great. Thank you.
Your next question comes from the line of Soomit Datta with New Street Research. Please proceed.
Yeah. Good morning. Couple of questions, please. First is on the balance sheet. I make your net debt just sort of shy of MXN 600 billion. You report a 1.8 times leverage number. Can you help me understand how the two reconcile? I am guessing there is a couple of adjustments in there. I am not sure if you are already adjusting for the Telesites debt spinoff, but a bit of clarity there would be helpful, please. 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 discussed before how to run it. It's basically, we use the same methodology that the rating agencies utilize. We have some hybrid debt, which is meant to be like an equivalent of subordinated debt, and that has a 50% credit by the rating agencies. We have roughly $3 billion, a little bit more of hybrid securities at the level of América Móvil. So in that case, we apply the 50%. We obviously discount, and that's obviously also what the rating agencies do. The net value that we have under the catch positions that we have, they have a market value that is sizable. 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.
On the Telesites, it doesn't have an effect because the Telesites, we had already issued debt at the Telesites level at Opsimex. All of that debt, the funding from the proceeds from the issuance of that debt was still in cash. 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. The cash already is required to pay us off upon the spinoff. Okay? I was not including yet the reduction of net debt at the América Móvil level that will take place after Telesites. Okay? That is not yet included. If you want to contact Daniela Lecuona, we can provide you the.
Yeah.
with the numbers, okay?
Okay. Yeah, thanks. Just on Colombia, if you could help with the.
Okay
the wireless voice market. Thanks.
Can you repeat the question on Colombia, please?
Sure. Yeah. It was just 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 that may improve, if you were doing anything actively to improve those trends. Thank you.
What happened in Colombia is that, well, since one year for all the country, you cannot do contracts in the postpaid side. What you are seeing is that people is adjusting to new plans. What is happening is that all the postpaid customers can come as they don't have a
A contract, they can move to a better plan. On the other side, we are not anymore subsidizing any handset there. That's the regulation in the country. It's not for América Móvil. The regulation is for everybody in Colombia, and that's what is happening. What I think, that's something that is almost taking place. We don't think that in the future there's going to be big movements on those customers. The prices and the competition in Colombia is tough. We have been having the 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. I think I could see we can maintain the EBITDA that we have in Colombia, I hope, for the next year.
Okay. Again, following on what Daniel says, if you look sequentially from the second quarter to the third quarter, service revenues increased by 1.4% in Colombia. Again, sequentially. EBITDA was practically flat. This in spite of the fact that the currency has depreciated considerably there because of the impact of oil prices. Again, if you were to take out this issue of the equipment cost, the cost of equipment, practically the rest of the costs are way below inflation in Colombia. I think, again, EBITDA, it has held up in spite of the increase in the cost of
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 low market share in TV, in broadband, in fixed, and we're trying to do convergence there. I think we feel that in the fixed side, we're doing also very good in Colombia.
I think we've helped to stabilize the market for the future.
That's probably very simple to say.
Okay. Thank you.
Thank you very much.
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. If you want to attend our event, please access our website and register. If you need any assistance with that, you can contact myself, Daniela, or Alejandro. All of the contact info is on our website.
Thank you. Thank you very much.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.