Good morning. My name is Lauren, and I'll be your conference operator today. At this time, I would like to welcome everyone to the América Móvil First Quarter 2022 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you. Now I'll turn the call over to Miss Daniela Lecuona, Head of Investor Relations. Daniela, please go ahead.
Thank you. Good morning, everyone. Thank you for joining us today to discuss our first quarter financial and operating report. We have on the line Mr. Daniel Hajj, our CEO, Mr. Carlos Garcia Moreno, CFO, and Mr. Óscar Von Hauske, COO.
Thank you, Daniela. Good morning, everyone. Thank you for being in the call. Carlos is gonna make a summary of the first quarter financial results.
Thank you, Daniel. Good morning, everyone. Well, the first quarter of 2022 was marked by sharp increases in interest rates very much across the board, with five-year U.S. Treasury rates nearly doubling and 10-year rates rising from 1.51% to 2%, to nearly 2.50%. Concerns about rising inflation rates led investors to revise their projections regarding future monetary policy moves by the Fed and other central banks. These moves happened even in the face of the Russian invasion of Ukraine, which initially caused interest rates to come down as investors looked for a safe haven. Notwithstanding these increases in rates, the main Latin American currencies actually appreciated vis-à-vis the U.S. dollar in the period, partly as a result of interest rates going up even more rapidly in those countries.
We added 3.2 million wireless subscribers in the quarter, of which 1.9 million were postpaid subscribers, with over half of them coming from Brazil, nearly 300,000 from Colombia and 217,000 from Austria. As regards prepaid subscribers, we added 1.3 million, with Mexico contributing 485,000, Colombia 349,000, and Brazil and Central America approximately 200,000 each. Our wireless subscriber base ended March with 219 million clients. On the fixed line segment, we ended up with 74.5 million RGUs in March, practically flat from a year before.
We connected 232,000 broadband accesses, including 68,000 in Argentina, 63,000 in Mexico, bringing the total to 30.7 million accesses, 2.3% more than a year before. Our postpaid subscriber base exhibited the fastest rate of growth over the last 12 months at 8.4%, followed by prepaid with 5%. Fixed broadband accesses came in next at 2.3%. Both fixed voice and pay TV continued to register declines. The former one has leveled off, whereas the latter one has remained stable. Our first quarter revenues reached MXN 211 billion, up 2.4%, with service revenues rising 3.3%.
There were no major differences in revenue growth between nominal peso revenues and those at constant exchange rates, the latter excluding Argentina, given the very high inflation rates in the country. The Mexican peso appreciated versus the U.S. dollar and the euro, but depreciated versus all other major Latin American currencies, with the exception of the Argentinian peso, and most notably against the Brazilian real, 12.1%. Mobile service revenues expanded 6.3% year-over-year, very much the same pace as in the preceding quarter and substantially higher than that seen a year before, 1.2%.
On the fixed-line platform, service revenue declined 1.1% in the first quarter after increasing 0.5% the prior one, mostly on account of faster declines in both, revenue growth down 5.8% annually compared to -3.6% in the preceding quarter. A year before, fixed-line service revenues had been practically flat year-on-year at 0.1%. Colombia and Peru experienced the sharpest deceleration relative to the pace they had observed the year-earlier quarter. Both prepaid and postpaid revenues maintained a growth pace at 8% and 5.2% respectively on a sequential basis, much higher than the 1.4% and 1.0% rates posted the year-earlier quarter.
Brazil led the way in terms of mobile service revenue growth with 10.3%, followed by Peru and Mexico with 9.7% and 9.5% respectively. Colombia and Chile saw a decline in the rates of growth, with Colombia being nearly flat and Chile extending their decline to -8%. Corporate Networks was the fastest growing business line in the fixed line platform, with 4.9% in the quarter, with broadband revenues coming next at 3.4%. A year before, they had posted 2.4% and 7.8% rates respectively.
Pay TV revenues continued to decline at a rate of 6%, whereas fixed voice revenues were down 5.3%, both of them in line with the rate seen a year before. Broadband service revenue expanded faster in the Dominican Republic, 16%; Peru, 11%; and Eastern Europe, 8%. While Corporate Networks revenues rose more rapidly in Eastern Europe, 23%; Brazil, 16%; and Colombia and the Dominican Republic, 12% each. Our EBITDA rose 4.2% year-on-year to MXN 81.1 billion. It was 4.3% at constant exchange rate, with EBITDA margin expanding to 38.4% from 37.8% a year before. That's 0.6% margin expansion year-on-year.
The Dominican Republic, Eastern Europe and Central America exhibited the highest annual EBITDA increases at 10%, 8.9%, and 7.6%. All countries except for Chile and Peru posted EBITDA increases in the quarter from a year before. Most countries, with Peru and Chile the main exceptions, increased actually the EBITDA margin. The expansion in EBITDA helped bring about a 6.1% increase in our operating profit, which totaled MXN 39.8 billion. Our operating profit and a net comprehensive financing income in the amount of MXN 7.3 billion helped bring about our net profit of MXN 30.8 billion in the quarter, which compares to a net profit of MXN 1.8 billion in the year earlier quarter.
The comprehensive financing income mentioned above came about as a result of foreign exchange gains in the amount of MXN 22.6 billion, extending from the appreciation of the Mexican peso versus the U.S. dollar and the euro, in particular, during the period. We raised MXN 28.9 billion in net financing in the quarter, which helped us cover MXN 28.6 billion in capital expenditures, MXN 9.2 billion in share buybacks, twice as much as the year before, and MXN 6 billion in labor obligations. It is of note that the first quarter of each year calls for a seasonal increase in working capital as accounts payable on past purchases of network equipment and handsets come due, as well as income taxes for the prior fiscal year and telecom duties in some countries, including Mexico and Brazil. This seasonal requirement for working capital is reversed in later quarters.
It did not manifest itself in the first quarter of 2021 because of the significant reduction in capital expenditures and handset purchases implemented in 2020, particularly the second half, on account of the pandemic. You can see in the chart. I think it's very telling how stable and how well-defined our working capital requirements are. Our net debt excluding leases ended March at MXN 4.25 billion, having increased by MXN 17.4 billion relative to December. It was equivalent to 1.33 x last 12 months EBITDA. We disclosed a structure in November 2021, and the impact on consolidated EBITDA is already reflected in the last four months. This net debt follows two major financings arranged in March. One, a five-year, $1 billion equivalent syndicated loan denominated in Mexican pesos, and a 10-year bond issue in the amount of $1 billion.
That's $2 billion in all. While both were arranged by América Móvil, they will become obligations of Sitios Latinoamérica upon its spinoff from América Móvil, expected to take place in the third quarter. The proceeds will be fully applied to the reduction of América Móvil's debt. With that, I would like to pass the floor back to Daniel for the Q&A session. Thank you all.
Thank you, Carlos. We can start, please.
Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. Our first question comes from Leonardo Olmos from UBS. Leonardo, please go ahead.
Hi. Good morning, everyone. My first question is related to Colombia. Can you discuss a bit both the mobile and the fixed segment? We noticed that churn reduced, but still ARPU is going down, net add has decelerated a bit. Can you discuss if competition has changed, or should we expect the same dynamic for the rest of 2022?
Yes. What we have been seeing in Colombia is, as we know and as we have been talking for the last year, a new competitor in the market with more promotions, more new plans with more megas and more data. Overall, this quarter, we grow around 300,000 new net adds in postpaid, and it was a very good growth. What is happening, and it's true, and you can see that, is that our ARPU is declining. The reason why it's declining is because as you give more data in your plans, then people decide to reduce the amount that they pay. That's really what happens when you give those promotions. The trend is still we are growing.
It's very important. That I want to mention, and we have been seeing that for all this year, is that we have a very good network, a strong network, and it's very good. Our brand, people is preferring our brand. We have a very good NPS and Claro is very strong there. We have excellent customer care and very good distribution. Overall, people is still preferring our network, even though the competitors are doing more and higher promotions than what we have been doing that. The market, no doubt, is very competitive, but I think what we have been doing this last quarter, I think it's good. It's still growing in postpaid, very good growth, 300,000. Also growing in prepaid, and it's been good.
On the other side, I'm talking about fixed. I think on the fixed side we grow 20,000 in broadband. It's very important, we're giving a quadruple play, the convergence. That's also helping us. We are the company that is giving full four play to our customers. I can tell you maybe 60% of our customers, they already have a combo, a convergent plan, and it's doing very good. That's where we are. I don't know, Oscar, if you want to talk a little bit about the fixed in Colombia.
No, I think what you mentioned, we are building capacity, fiber as well this year in order to complement the offering to the market.
Yeah, and we do 37,000 in TV. That is also a good growth in TV. All overall, I think.
70,000 in fixed line.
70,000 in fixed line. All overall, I think we are doing okay. There is not only new, there is also a lot of fiber competition there. We're putting also fiber and we're giving good speeds to our customers. Colombia is in a very high competitive environment, but we're doing good. In the other side, and something that, we're doing also good is in the corporate customers. Please, Oscar.
No. In the corporate market, we've been offering these new value-added services. Cloud, we have a very competitive offering in cloud broker. We are selling SD-WAN, certainly data center as well, and it's growing pretty nicely. As well, we focus on small business, with not only with connectivity, with value-added in this segment of the market, which is growing in Colombia.
I think all overall, we are doing okay in Colombia. Of course, it's under with a lot of competition, but we feel that brand, distribution, network, combos, convergence, corporate market, everything, I think we have the lead over there and we're doing okay.
Just one comment on the reduction of ARPU that Daniel mentioned. Yeah, it is almost identical on a year-on-year basis to what we saw in the prior quarter and the quarter before that. The effect on ARPU reduction really happened more or less a year ago, and it has remained stable since then.
Mm-hmm. Okay. Great. Okay. Thank you very much for commenting on my question. Good thing that you mentioned Corporate in the end, Oscar. Can you please comment, Daniel, on what you expected for B2B, for Corporate in the remaining 2022? For example, the performance was incredible in first quarter. Was there any type of seasonality or should we expect this type of growth for the remaining year?
No, I think I'm gonna talk not only in Colombia. I think in the corporate side, we are focusing a lot in América Móvil. We have very good people, knowledgeable, trained people, and we have good products. Overall, we are focusing there, and we have very good results, specifically in Colombia. Oscar, do you want to?
Yeah. Well, in Colombia, we have a very large data center, which is a Tier III, one of the best in class. We are selling data center products. Not only that, we are complementing the connectivity with value-added services, as I mentioned, cloud, machine learning, artificial intelligence, and some vertical solution for, let's say, retail and finance. It has been taking very well in the marketplace. Let me tell you that these are long negotiations. I mean, it's a process that has to go many times with the customers. It's more a business driver selling than technical selling. We already prepare the people to have that learning with the customers. We have in each of the countries that we call product house.
They are the ones that are looking at the market, which are the verticals that make sense to go to the market. I think, we are well in progress on the B2B business.
Exactly. Okay. Thank you very much, gentlemen. Have a good day.
Thank you.
Our next question comes from Marcelo Santos from JP Morgan. Marcelo, please go ahead.
Hi, good morning to all. Thanks for taking my questions. I have two. The first, if you could provide some details on expectations for the Oi mobile assets acquired, like what kind of margins these assets would have. Any information would be interesting. The second, if you could provide an update on the fiber operations in Mexico, how much of your network is already covered with fiber? If you could, if there is a relevant ARPU difference between the clients with fiber and without fiber. Any color there would be helpful. Thank you.
The first question on Oi. I think we finally closed Oi. We have around 12 million customers, almost 5 million in postpaid and the rest in prepaid. BRL 2 billion . What I can tell you is that we have been working and preparing our network and we are ready to take all these customers. Of course, we're gonna have very good synergies. At the end of the day, maybe 70%-75% of this revenue will go to EBITDA. It's more or less what we think. It makes a lot of sense, makes a lot of synergies, and we're working to have that.
We have, I think, six months to change the customers to our network, and then we have, like, one year to change the customers to our IT system. That's more or less what we have. We are ready. We have been working for some time to prepare our networks and our systems to receive these customers. On Mexico, can you repeat Mexico?
An update on fiber operations, in Mexico, whatever color you could give, how much of your subscribers are already in fiber? How is that evolving? Fiber plans that you might have.
Yeah. Well, if you look at the customer base of Telmex, 54% of the customer base is already connected with fiber. I would say with pure ADSL is less than 8%. In the middle, we have VDSL. As you know, we could deliver highest speed than the pure DSL. We have a very aggressive program from fiber in Mexico for this year. We are pushing to grow the construction of the fibers and the migration of the customers from VDSL or ADSL to fiber. It is working pretty nicely, to be honest. We expect to cover around 2.5 million homes passed this year with fiber. That's our plan. Last year we did 1.8 million, so we are focused on the market.
Another thing is that, you know, the bundles that Telmex has been offering in the market, in my opinion, are unique. When you combine a very good quality of broadband and streaming video platforms and combos and packages with broadband and streaming and music that has been working pretty nicely in Telmex.
Perfect. Thank you very much.
Thank you.
Our next question comes from David Joyce from Barclays. David, please go ahead.
Thank you. Could you please describe your rollout process with 5G that you just recently launched? You know, what metrics, you know, in terms of how much of the market you plan to pass and what are the milestones we should be looking for there? Thank you.
I think it's very different in each country. We already launched, let's say, Mexico, Dominican Republic. We have something in Peru. Well, in some countries we are rolling out. What we have been doing, and Austria, of course, we have for maybe one year already. It's doing good. I think, 5G is gonna give us a better ARPU to our postpaid customers. I think we're gonna have more customers and better ARPU in 5G.
There is still in some countries that we have to buy some frequencies. Hope they do it soon. In the other countries where we already have a spectrum, we are rolling out the network and making plans. These plans are more focusing on giving more for more. Giving more data, more 5G data but with paying a little bit more, increasing ARPU. That's more or less the strategy that we have.
It's gonna be a little bit different in each country, depending on the competition, depending on a lot of other things, coverage, but let's say Mexico. I think Mexico, we're gonna end this year. We start with 18 of the biggest cities, and we're gonna end with around 100 end of the year. People is liking. We have very good quality, very good speed, and people is moving to 5G. Okay, so that's more or less what I can tell you.
Thank you very much.
Thanks.
As a reminder, to ask any further questions, please press star followed by the number one on your telephone keypad. Our next question comes from Carlos de Legarreta from GBM. Carlos, please go ahead.
Hi. Thank you. Good morning. Thanks for taking the question. To continue on the 5G topic, I understand obviously the strategy will change across countries, but if you can talk about Daniel in Mexico in particular, I think I was surprised, and perhaps I was not the only one, to see that there was different pricing for 5G plans. I understand that you're saying it's more for more, but just it seems different than what we've seen in other geographies, in other countries, even in Austria with Telekom Austria. If you could talk about why you are pursuing this strategy, and just to get a sense as to why to that strategy, that'll be great. Thank you.
No, I think no. I think when we launch Austria, we have new plans for Austria. Maybe could be a little bit confusion when you have the fixed wireless and the postpaid wireless. I don't know if you see different plans there, but in Mexico, what we have been doing is in the postpaid, in the mid plans of postpaid, we're giving 5G, and then you can upgrade to all those plans. It's what we do in Mexico, and I think it's what we do in Austria and in other countries. Also it's what we have been seeing that is happening in, let's say in U.S.
No, in U.S., they also have plans for 5G at higher ARPU giving more. We can check on more detail, but I don't think it's any difference between Mexico and the other countries. Could be a little bit different depending on the competition, but all overall what the strategy on 5G is give more for more and to try to upgrade our 4G or 3G customers to 5G, and that's more or less what we have. But of course, we can sit down, you can sit down with Daniel and review on detail, but it's very easy to review that.
No, thank you so much for the color. Talking about coverage, I mean, you guys cover around 50 million people or so currently. Obviously, there's going to be an increase in the coverage. Do you have any timeline for when do you expect to reach full coverage?
No. I think since we start on February, maybe end of the year, we're gonna have double number of cell sites with 5G with more cities and more coverage, more densification in each city. That's more or less what we are gonna do in the rest of the countries. It's very, very interesting as we can move more customers from 4G to 5G or 3G, 4, 5, 4G to 5G, then the CapEx should be more in 5G because we have more customers there and take out some CapEx on 4G to put it in 5G. I don't think it's gonna be more CapEx for doing 5G.
It's the CapEx that we do in 5G, we do it, the last years on the, fiber to the node, on, virtualization and all of these things that we have to do to have 5G. Today, in terms of capacity, if we grow faster, then we put more on 5G. If we grow at a slower pace, then we still are gonna put more on 4G. That's more or less, but it's not more CapEx to do 5G in the rest of the Latin America countries.
That's it. Thank you.
Thank you.
Our next question comes from Alejandro Chavelas from Credit Suisse. Alexandre, please go ahead.
Hi. Thanks for taking my question. Congratulations on the results. Perhaps just a couple of things. First one on Sitios Latam. If I got it correctly, it has been delayed to the third quarter, the closing of the transaction, if I'm not mistaken. If you can share anything on that front on what's happening there, that could be super useful. The second one is about the ICMS tax resolution by the Supreme Court in Brazil. Do you have any view of what the potential impact on the business could be from this resolution, and when would we could see any effect from it? Thanks.
Well, on the spin-off of Sitios, I think that we're basically ready to go. As we mentioned in the report, we already did a couple of major financings in international markets, international banks. Now it's going to be that I will be moving on to Sitios. I think it's well-defined. Today we are looking at spinning off 31,000 towers in 14 countries. I think we are only awaiting the last, let's say, clearance on the transaction from the tax authorities. That should be, you know, we expect to receive it in the next few weeks.
Other than that, I think that we are really ready to go with the towers. The other question was?
On the ICMS.
On the ICMS, I don't have this information. Maybe we can check back with Daniela later. I don't think that for us it's so much of an issue.
Understood. Thank you very much.
Yeah.
Mm-hmm.
As a reminder, to ask any further questions, please press star followed by the number one on your telephone keypads. Our final question comes from Walter Piecyk from LightShed Partners. Walter, please go ahead.
Thank you. Daniel, CapEx for the year, I know you talked earlier about 5G/4G mix, but just are you still on track for MXN 8 billion for the year?
Yes. Yes. It's we're on track, and we think we can do the MXN 8 billion. CapEx, I think it's a great opportunity for América Móvil. There's still a lot of opportunities. First, in 5G and to grow ARPU. Second, on the fixed side, in more broadband in some countries. There's still some countries which have a low penetration in broadband. In the mass market we still see good opportunity. Also part of the CapEx is on the corporate customers that we're doing very well. We're on track. I think it's a good opportunity to invest that. I think it will give good returns.
Then there's just a second question, I guess, on inflation for you, Daniel, and/or perhaps Carlos. You know, he's got some obviously legacy experience in this type of stuff. I mean, what. You know, if inflation kinda kicks in, you know, everywhere, how do you think that plays out in terms of what happens in your markets usage, ability to increase price? And what kind of pivots or steps can you take as a reaction to, you know, if inflation gets materially worse?
Well, we have inflation, so not if inflation.
Sure.
I think we have inflation in some countries. Right now, I think something that is helping us in Latin America is the appreciation of all the currencies. There's a lot of costs related to the dollar, and that is helping us there. We are focusing on the market and, doing that, we are working a lot in cost control. We're working very strong on cost controls. Well, of course, we can decide in each country what to do, if we want to give new plans or take out promotions or put more, let's say, control on the cost.
That's something that we can decide depending the market, depending the competition, depending the currencies, depending a lot of things. Of course, we have the availability of doing a lot of things, no?
Walter, you know, demand for telecom services is more inelastic than what you see in other segments. There's always potential for some redistribution of the wallet, no? The expenditures of the consumers over time.
Thank you. Just last question related. I mean, does any of this in terms of kind of how you're I mean, obviously you haven't changed CapEx for the year. Does anything change kind of your view on your capital return policy, or is it kind of the same that you've laid out pretty consistently over the last several quarters?
You know, I think I don't think that there's anything more to add since we came out with our medium-term outlook in our Investor Day back in October. I think you know, the CapEx is very stable. We're not seeing anything maybe in the M&A front other than what we had already said with Oi. You know, the leverage policy, the leverage objective is already set in our goal. Nothing more to add there, but.
Great. Thank you.
Okay.
I think we currently have no further questions, so I'll now hand you back over to Daniel Hajj for closing remarks.
Well, thank you for being in the call.
Okay. Thank you very much.
Thank you all.
Cheers.
Goodbye.
This concludes today's call. Thank you for joining. You may now disconnect your line.