Good morning. My name is Nadia, and I'll be your conference operator today. At this time. I would like to welcome everybody to the América Móvil fourth quarter 2022 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A 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 followed by two. Thank you. Now I would like to turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.
Thank you. Good morning, everyone. Thank you for joining us today to discuss fourth quarter 2022 financial and operating results. We have on the line Mr. Daniel Hajj, CEO, Mr. Carlos García Moreno, CFO, and Mr. Oscar Gonzalez, COO.
Thank you, Daniela. Welcome everyone in the fourth quarter 2022 financial and operating report. Carlos is gonna make a summary of the results. Thank you, Carlos.
Thank you, Daniel. Good morning, everyone. Well, at the beginning of the fourth quarter, uncertainty about inflation and how much bringing it down would require in terms of additional interest rate hikes by the Fed drove long-term interest rates in the U.S. to the peak for the year in October at 4.2%. They remained very volatile the rest of the quarter, ending the year at 3.37%. Nonetheless, the impression they had peaked ended up helping several currencies in the region, particularly the Mexican peso and the Chilean peso, which appreciated sharply vis-a-vis the dollar, with the Colombian peso stopping and then reverting its decline of several months. Throughout the period, the Brazilian real remained quite volatile and with no apparent trend as the country was in the midst of a presidential election.
We added 3.3 million wireless subscribers in the quarter, of which 1.5 million were postpaid clients. Brazil led the way with 600,000 subs, followed by Austria with 332,000, and Colombia with 160,000. Our net gains in prepaid totaled 1.8 million, with Mexico contributing over half of that figure with 975,000 subscribers. Colombia came next with 546,000, then Central America with 247,000. On the fixed line platform, we obtained 110,000 new broadband access. Argentina and Eastern Europe generated substantially all of them, 69,000 and 40,000, respectively. Central America, the Dominican Republic, and Brazil added close to 30,000 each one. Pay TV reverted the losses of the last several years with 97,000 new clients.
This included 53,000 in Argentina, 36,000 in Eastern Europe, and 34,000 in Central America. Although Brazil continued to post net disconnections, they were substantially lower than they had been in prior quarters, -60,000 in the fourth quarter, whereas in previous quarters they had hovered between 150 and 200,000 clients. In terms of actual growth rates and correcting for the acquisition of Oi clients in the second quarter, our postpaid base continued to be the more dynamic one, with a 38% increase year-over-year, with prepaid coming next at 4.9%. Including all clients, the access growth rates at the end of 2022 came in at 8.8% and 6.8% respectively.
These figures already reflect a 4.1 million cleanup of our wireless subscriber base in the quarter to do with former Oi clients that were not generating traffic. Broadband accesses remained very stable with a 2.4% growth pace. As for Pay TV, there has been a noteworthy shift in the expansion of its client base, which turned positive for the first time in several quarters. Our fourth quarter revenue totaled MXN 216 billion, down 2.4% year-on-year in Mexican peso terms, with service revenue declining 1.4%. The yearly reduction in revenue in Mexican peso terms stems from the appreciation of the Mexican peso. These are practically all our main operating currencies except the Brazilian real.
At constant exchange rates, correcting for the currency movements mentioned above, service revenue actually increased 6% year-on-year, which were the same pacing in the preceding quarter. EBITDA declined 4.4% year-on-year to MXN 84 billion in the fourth quarter, or MXN 79.6 billion adjusting for extraordinary items. At constant exchange rates, adjusted EBITDA rose 5% as compared to 5.7% in the preceding quarter, 4.6% in the second quarter, and 4.8% in the first quarter. The adjusted EBITDA margin remained almost flat at 37.8% year-on-year, a 34 basis point reduction in relation to the year earlier quarter.
The adjustments include extraordinary revenue from the sale of towers by Telmex, both in the fourth quarter of 2021 and 2022, and by Peru in the current quarter. The reduction in medical costs and in property taxes levied on telecom infrastructure in Puerto Rico and the elimination of a provision in Ecuador associated with the also with payment obligations regarding telecom infrastructure. You can see the numbers here in this slide. On the both mobile and fixed line service revenue expanded a similar pace than in the prior quarter. Mobile revenue growth was robust at 9.8%, whereas fixed line service revenue was slightly positive at 0.2%. Very similar to that of the third quarter.
On the mobile platform, postpaid service revenue growth, 10.5% stayed strong, but that from prepaid declined slightly from 9.5% in the third quarter to 8.6% in the fourth one. Brazil posted 22.7% mobile service revenue growth, partly reflecting the incorporation of former Oi subscribers. Mexico came in next at 9.1% and then Eastern Europe at 7.3%. These are all in the mobile platform. As for the fixed line platform, revenue from both corporate networks and broadband services decelerated from the third quarter from 12.4% to 10.5% in corporate networks and from 3.6% to 2.9% in broadband services.
Pay TV revenue continued its recovery, declining only 3.5% in the fourth quarter, its smallest decline in several quarters. Broadband revenue increased faster in Eastern Europe, the Dominican Republic and Puerto Rico, all of them close to a 13% pace, with Colombia observing a decline of the same magnitude on account of stiffer competition. Corporate networks revenue declined 10.5%. Together with postpaid, it was the fastest growing business line. Eastern Europe, Brazil and Ecuador stand out as the more dynamic ones in this segment. EBITDA growth accelerated in Eastern Europe to 10.7% from 8.6% the prior quarters. In Mexico to 9.4% from 4.3%, more than double. In Peru to 5.3% from -0.9%.
It remained flat in Austria and decelerated to eight, 10.5% from 10.8% in Brazil, and to -3.7% from -0.3% in Colombia. Our operating profits totaled MXN 44.7 billion in the quarter, down 10% in Mexican peso terms, as depreciation and amortization charges dropped to 1.2%. This incorporated reduction in tower-related depreciation charges pursuant to the tower spin-off and the increased rights of user depreciation charges arising from the new tower lease obligations.
After our comprehensive financing cost of MXN 8.3 billion in the quarter, which was 57% smaller than the one observed a year before, we ended up with a net profit of MXN 23.1 billion from our continued operations, 5.3% greater than that observed a year before, and of MXN 13.3 billion once the effect of the reconsolidation of Claro Chile is taken into account. Again, the net profit of MXN 23 billion from continued operations, which was 5% higher than the prior year. Our cash flow and net borrowings of MXN 7 billion allowed us to cover capital expenditures in the amount of MXN 160 billion, net shareholder distributions of MXN 50 billion, and labor obligations totaling MXN 24 billion.
The tower spin-off and net acquisition of ownership interest in different assets, including a portion of Oi mobile clients, resulted in a net receipt of MXN 35 billion, which you can see in this slide. Excluding leases, our net debt totaled MXN 389 billion at the end of the year. It was down MXN 19 billion relative to year and period in 2021. Our net debt to EBITDA ratio came down to 1.3x at the end of the year. With that, I will pass the floor back to Daniel. Thank you.
Thank you, Carlos. We're going to start with the Q&A.
Thank you. At this time, I would like to remind everyone in order to ask a question, please press star then the one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question goes to Lucas Chaves of UBS. Lucas, please go ahead. Your line is open.
Hey, guys. Thanks for having my question. I would like to understand what you have in mind in CapEx for the near future, especially considering 5G, and how that would affect shareholder distribution. If I may ask a second question on Mexico, if you could give us more detail on the mobile strategy adopted during the quarter, mostly to understand the strategy going forward in prepaid plans and if the space acquisition is going to continue going forward. Thank you very much.
Thank you. First question on the CapEx. What we said last year is that we're gonna have a $24 billion CapEx for the next three years. I think it's the target that we have that includes frequencies. Last year, I think we do $7.9. This year our target is around $8, $8.2 because we have something last year that we're gonna put this year. 5G... What I said one or two years ago is that the 5G is not increase a lot of CapEx because what we have been doing is investing in 5G. We have putting the bases-
Fiber.
With the fiber to the node, a lot of the things that 5G needs. The only thing that we need to put to increase and to do 5G is more the radio, okay? A little bit on SF-MFD and some of the other things that we need a little on electronics, but it's not a big investment to do 5G in our network. We have been investing in our networks and modernizing it. What we're targeting for this year is to increase our fiber in some places. We're seeing some opportunities in some countries doing more fiber and increasing our fixed broadband. That's more or less where we're gonna focus.
We're going to focus on the digitalization of all the company to save costs. We have been doing that for the last 5 years, and that's something that we are doing. More digital, more everything, more new, and cutting costs. You have to invest to do better systems, IT. That's more or less where we're investing. Our target is $24 billion in 3three years, and we are on that. On Mexico, what's your question specifically on Mexico?
It's more to understand the strategy regarding the mobile strategy, especially seeing the net addition in prepaid, if this pace is going to continue going forward. Thanks for the first question.
Yeah. On Mexico, I think we're doing good. We have around 100 cities in 5G. We are in a very good position in 5G. I think our competitors really, they are not competing in 5G. We have good quality, good name, good distribution, good top of mind in Mexico. We are doing good. We're growing. We're growing in prepaid a lot. Since the 2020 with the pandemic, I think the postpaid subscribers decreased a little bit. This year, in last year, 2022, it start to grow again. This quarter we have 60,000. Good. We feel we're doing also very good in postpaid. We have a good strategy.
We are good with a very good name in the market, and that's good. What is happening a little bit is in 2020, the fixed wireless, we grow a lot in the fixed wireless because people stay at home and needs internet, and that is becoming is reducing, we're having disconnections on that because a lot of companies and Telmex is putting fiber, so they are disconnecting a little bit the fixed wireless. In the normal phone, we're growing also still good. That's more or less what we have been seeing. That's people is starting to move. They need a phone, they need 5G, and they are not staying at home.
They are, let's say, moving from the wireless in fixed from the wireless internet to a mobile internet. That's what we have been seeing in the last six months.
Okay. That was very clear. Thank you very much.
Thank you.
Thank you.
Thank you. The next question goes to Alejandro Gallostra of BBVA. Alejandro, please go ahead. Your line is open.
Hi. Good morning, Daniel, Carlos, Oscar, and Daniela. I would like to ask you about the fixed line business strategy in Brazil. You've been reporting consistently good good results on your broadband business and also on your corporate segment in Brazil. Somehow the voice and the P2B segments continue to track down results and you continue reporting small declines in this fixed line business. I'd like to better understand why this is happening despite the strong FTTH deployment that you are implementing in the country. How are you seeing the competition or why this is happening and when we should expect to see a turnaround in this fixed line business in Brazil? Thank you. This is my first question. Thank you.
Yes. Well, as you mentioned, when you look at the revenues of fixed broadband, we are growing 5.5%. Let me comment that we did in previous conference calls. Look at the network. All the cable network is already prepared for DOCSIS 3.1. We could deliver 1 gigabit speed in all the cable network. As you mentioned, we've been building fiber to the home. We end up last year with close to 8 million home passes with fiber to the home. We will continue to do that. We see a very good month on December on the net asset program. We were really positive on that side.
I think the landscape is changing, you know, with the ISPs and all the environment that we saw in the last years. As you mentioned, voice is declining, and it's declining everywhere. I mean, it's difficult now. It's a substitution through the mobile or through different sources of IP voice. In pay TV, when you look at the decline, we are half of the decline that we saw in the prior quarters. Has been working pretty nicely, the new, let's call it the new TV. We call app, Claro and Claro Box. They are running pretty good. Of course, not enough to compensate the decline, but it's, we believe that it's a good trend to compensate the decline on pay TV.
On corporate, we mentioned before, we have a very good year in different value-added services. When I mention value-added services, we are running pretty good in cloud services, in new vertical solutions in the market, in a chatbot that includes machine learning and artificial intelligence. We feel that we have the right organization to get a good position on the corporate market. Blend it all, I think the revenues were good and the EBITDA in Brazil as well. We will continue to do that. We will do, as I mentioned, more fiber in the country. Another thing that I forgot to mention is that in fixed broadband, speed is relevant, no question. It's, but more relevant is availability of the network, time to repair.
We've been working how we do the best customer experience in the market. We are number one in ultra broadband in the country, and we are working to reduce the churn. When you look at the last quarter, the churn was really good against the prior quarters because we are working as well in all customer experience around the fixed broadband and all the services.
I think in Brazil, just to make a summary of what Oscar is saying, I think in Brazil we are expecting a better this year than last year in terms of broadband and in terms of the TV subscribers market and everything. I think it's a good opportunity this year on Brazil on that.
Yeah, yeah.
On that segment of the market.
Thank you, Oscar and Daniel. Any color on whether or not you plan to use the infrastructure of other companies or sharing infrastructure there? Any color on that?
We have talks with a lot of them. As until today, we haven't closed anything in Brazil. No, no comment on that. Still no comment on that.
Okay, thank you. My second question is.
We're open depending on the conditions, but, until today, we don't have anything, closed.
Okay, good. Thank you, Daniel. My second question is regarding the 5G technology. I would like to hear from you, what's been your experience with the 5G deployment. It's been a few quarters since you already started deploying this technology in the region. I would like to hear from you, what you expect to get out of this technology going forward. Maybe more specifically, what's been your experience with the customers using this technology? Do you believe that they are willing to pay a premium for using this technology, and therefore we should expect an increase in revenues and ARPU is going forward as you continue deploying this technology?
Also maybe, if given the increased efficiency of the 5G technology, maybe we should expect an improvement, continued improvement in margins going forward? If maybe, these efficiencies should be offset by the higher operating expenses driven by the increased number of towers that you should be renting in order to deploy this technology? Overall, how should we think about the 5G deployment going forward? What should be the impact in revenues, ARPU, and profitability going forward given your experience so far? Thank you.
It's a very good question. It's difficult to explain everything. The thing that I can tell you is that in Mexico that we have been deployed 100 cities and it was our first city. Well, also Austria and Mexico. Brazil is going as the also in a good phase. The ARPU has been growing. In Mexico, ARPU grow, let me tell you around 6%, and a lot of that imposed by this because 5G. 5G is helping us to grow that. I think the experience with the people is good. I think the speeds are okay. People is using more the gigas, GB of use.
Well, you need to do a lot of work to optimize the network because then you are running 3G, 4G, 5G. There's a lot of things that you need to do. As you said, it's more efficient 5G than 4G. There's a lot more handsets with 5G than we have last year. There's a lot of things coming and I think it's a good technology. It's more efficient, as you said. Doesn't make any sense to put only 4G if you can have 5G.
If you as I said as a few minutes ago, if you do all the work on all the investments that you need to do, fiber to the node, electronics, and a lot of things as in the core also to deploy 5G. In the other side, that's the massive market, okay? In the corporate market, I think there's a lot of new applications that we're gonna sell. There's a lot of things, Internet of Things, things connected, and it's starting to go on and on. I think that's that's not for tomorrow, but for the next five years, I can tell you that we're gonna have millions of things connected in the corporate side and a lot of new applications in that.
We're happy deploying 5G. I think it's profitable for us deploying 5G and the people likes 5G. It's a little bit of advertising, a little bit of more speed, a little bit of applications. There's a lot of things. The other applications that I think it's working very good in the U.S. is the 5G with the Pix, okay? Fixed broadband, Fixed broadband wireless in 5G. I think it's another application that it's going well. In places where you are not gonna have fiber, I think it's very competitive. It's a very good product. I think the CPs are reducing the prices. We're gonna start to put more and more of this.
In Austria, we have a lot of that, and it's because, let's say young people does not want to call us for fiber connected. What they do is they buy the 5G modem, and then if they change home or they change place, they take it with them, and it's very easy for them, good speed, and it's working very good. There's a lot of things that around 5G, and it's working for us. Definitely is working.
Thank you, Daniel. Thank you very much for the explanation.
Thank you.
Thank you. As another reminder, if you would like to ask a question today, please press star followed by one on your telephone keypad. Please note we will take one question and one follow-up per person. Our next question goes to Walter Piecyk of LightShed Partners. Walter, please your headline is open.
Thank you. Carlos, thanks for providing the constant currency growth in service revenue. Was there also any type of one-time counter entry to what you report in service revenue? I know sometimes there's like intercompany eliminations or anything in that service revenue line that might have reduced it relative beyond currency, which you also obviously put in your press release. And maybe if you can give us some sense of, in constant currency terms, what you think service revenue growth will look like for 2023?
Well, I think it's, you know, it's been quite consistent, the revenue growth. It has been accelerating throughout the year as we saw in one of the slides. I think it has been stable around 6% for two quarters, having increased from about 4% at the beginning of the year. I think that the underlying trends point to growth remaining in this range, which is, by the way, higher than what Luis had mentioned in the Investor Day, you know, a bit more than one year ago. We're looking at 2.5%-4% service revenue growth, and we've been delivering 6% over the last two three quarters.
I think, at present, we estimate that we are going to be continuing with this kind of service revenue growth. Well, nothing exceptional in terms of revenues.
What you see in all the results that we have in the reported countries, all the intercompany transactions are eliminated. Okay? They are canceled out. There's really no noise in the results from intercompany transactions at all. Okay? Everything has been-
Yeah. Maybe it's just the math on how we're calculating that conversion. Yeah.
Okay. Nothing
Just one.
Yeah.
Just one follow-up. Okay.
Good.
Thank you. Carlos, you know, obviously the move in the currency has helped the debt leverage relative to the EBITDA. When you think about, capital return, you know, who knows how sustained currency moves are gonna be? But how do you think about that internally, you know, when currency helps your net debt leverage, are you willing to pounce in that quarter, to add additional share repurchase? Or, you know, do you, do you wait some period of time to see kind of where currencies will ultimately end up?
Yeah. I think that, you know, most of the varies is really in pesos. Mexican pesos also represent the largest share of our EBITDA. I don't believe that the returns or the distributions will be determined really by the currencies. I mean, we've been accustomed to seeing currencies all over the place. What we are seeing, if anything, going forward is a strengthening of all the other currencies that have been depreciating in light of higher interest rates. To the extent that there's some perception that inflation has peaked, I think that we will continue to see currencies like the Brazilian real appreciate.
I would think, we will continue to see the CLP appreciate, the COP. I think most of the currencies in the region will be gaining strength over the next few quarters. I think the MXN will remain also quite strong. I don't, I don't see that really affecting our distributions. I think, you know, the EBITDA, the leverage ratio, I think is going to be remain fairly stable at around 1.3-1.4 times net debt[Inaudible] to EBITDA throughout the year.
Got it. If you don't mind just sneaking one more in for Daniel. He talked a lot about 5G and consumers buying phones. In last year in the United States, the replacement cycle was getting longer. People were, you know, taking longer to replace their phones even though 5G was available. I'm just curious, when you look at
Yeah.
At your markets in 2023, do you think people will be upgrading their phones more frequently or follow the same trends that we're seeing in the U.S.?
I think good question. I think last year and maybe 2022 definitely there's a lack of handsets. Chips and handsets. I think they don't replace as often because of that. Maybe 2021 a little bit. Also 2022. I think today we have enough handsets. People what's happening and what we're seeing, people is choosing a better high handset in Latin America, a higher priced handset. As you said, they are replacing that a little bit longer. Is what we are seeing a little bit. They choose a 5G. 5G phones are available at $250, $200 right now. There is a good prices for 5G handsets.
For us it's good if people delay a little bit the replacement. It's, it's a longer what they stay, and I think it's good. Mostly in all places we have been selling the-- We are not subsidizing anymore in Latin America. Some places, yes, other ones, no. I think it's good if people stay a little bit longer with the handsets. And, and we're seeing that all around Latin America.
Yes. Just think of it.
Thank you.
Thank you.
Thank you.
Thank you. The next question goes to Alejandro Azar of GBM. Alejandro, please go ahead. Your line is open.
Hello. Good morning Daniel, Carlos, Oscar, and Daniela. My question is on value creation, and especially on tower announcements, spin-offs. Congrats on the announcement on Telekom Austria. My first one is on that front and down the road on your stake in Telekom Austria. Should we think that, you know, you could monetize part of that stake? And on your tower business in Latin America, how many towers does AMX Telmex you have on the balance? If you're planning to divest some of them in the next one, two years? And the third one, if I may?
Also value creation is on the possibility of seeing monetization of other infrastructure assets. Perhaps a fibra of your network in Mexico. Thank you very much.
Well, the tower assets, remember we do Sitios Latinoamérica, and we spin off that last year. I think we still have Colombia and Peru. We're planning to do Peru, as we said already, that we're gonna do Peru this year. We're still reviewing, it's gonna be, yeah, in the next month to do Peru. The only towers that we still have are Colombia. Those are the only ones. In Austria. In Austria, the only thing that we do is we authorize the spin-off of. We wanna work on the spin-off of the towers of Austria. These towers are gonna be, I think, listed in Austria, planning to be listed in Austria.
We're gonna remain with the shares that we already have. I think the government of Austria is gonna stay also with that. We are not planning to take it out to the market. At the beginning, we're gonna stay like this, only outside of Telekom Austria, and that's what we're planning to do. Still a lot of work and a lot of authorizations, but that's what we have been discussing and what we're gonna work to do in the next months. Okay? No, I don't think we are thinking to sell any other infrastructure in Latin America this moment. We are okay.
I think it's, we have a lot of fiber, but we're not planning to sell any of our fiber in Latin America at this moment. Also in Europe, we are not thinking on selling that. I think it's a good asset. We want to use it, we want to penetrate, we want to have more subscribers. And, in the other side, we're gonna do more fiber to the home fiber, to the core fiber. We're gonna put more fiber. Part of the CapEx of this year is to put more fiber through Europe, and Latin America and Mexico.
Great. Just to clarify, the only towers that AMX and Telmex have on balance sheet are the Colombian ones?
see, I don't know if Telmex has something still there, but really the country, Telmex that has lot of towers, we spinning off like I don't know, six years ago. Sitios Latinoamerica, we spin it off around 40,000 sites last August. I think we do that last August. There are still two countries where we don't have. We just do Dominican Republic this month. Still Peru and Colombia are the ones that we have. Peru, we're planning to do that, and Colombia is still, we doesn't have any plan to do that.
Yes.
Still, maybe we have something in Telmex, but it should be very small, so not so big.
Okay. Thank you.
Thank you.
Thank you. Our next question goes to Carlos de Legarreta of Itaú BBA. Carlos, please go ahead. Your line is open.
Thank you. Good morning. I have a couple of questions here. The first line. In fixed line in Mexico, you had some disconnections in the quarter in broadband. Have you noticed a tighter competitive environment as your competitors expand their networks? If you can disclose how many home passed with fiber do you have by the end of the year, that'll be great. Thank you.
No, as you know, Telmex has been migrating the customer from copper DSL to fiber, which is last year with 67% of the customers already connected with fiber. We will continue to that through the next year. Now 67% of the base of Telmex is already connected with fiber. We will continue to do that migration this year. We're expecting to increase that 67% higher within this year.
I think the what we have been doing in fiber in Mexico has been good for Telmex. I think we're migrating copper to fiber. We're doing a lot more home passes. A big part of what we do, so, is Tel Mex. Mexico will deploy. We're gonna deploy also a lot of... We're not disclosing how many in each country, but Mexico is with a very good plan on deploying fiber, replacing copper and doing greenfields.
Greenfields. New areas.
In other places. That's more or less what we have been doing. Competition is very tough in Mexico. Prices are very competitive. One, what we need is to compete more and to work and give a good speeds, good experience to the customer...
Customer experience
Add more value to our offer, and that's what we are doing.
Okay, thank you. Two quick follow-ups. Just the first one on the timing for the stock conversion into a single series, if you have any timing for that? Lastly, if you can please disclose the proceeds you will receive from the tower sale in the Dominican Republic?
I think on the shares depending on the CNBV, but I think it's not gonna take too long. Hope we can do it in this quarter as the February, March. We don't know, it doesn't depend, it's on authorization. The all the papers are submitted, so we're waiting for that. On the Dominican Republic, we don't disclose those numbers, but we already do around 3,000... I remember it's around 3,000 towers, no? What Dominican Republic has. Daniela can give you exactly the number, but we're not disclosing country by country. We already do like a spin-off of everything, selling some things, spin-off in other ones, and that's what we have been doing.
You can guess if it's 3,000.
Okay. Thank you
3,000 towers.
I'll talk to Daniela for sure.
Thank you. I'm Nico Santos. Sorry, not 3,000, 1,400 towers what we sell in Dominican Republic.
Thank you. Our next question goes to Cesar Medina of Morgan Stanley. Cesar, please go ahead, your line is open.
Hi, thanks for taking my question. It relates to shareholder distributions and cash flows. If I understood correctly the comments that Carlos was mentioning, you know, you have $8 to $8.2 billion in CapEx, and then leverage is supposed to be, you know, roughly stable. I'm assuming you went through your budget process or maybe you can give us an indication of the building blocks of the free cash flow generation that you have, and what does that mean for, you know, directionally speaking the amount of dividends and potential buybacks that you can do this year relative to 2022? Thank you.
The building blocks are always the same, no? M&A, we have nothing that we are considering in terms of new acquisitions for the year at present. We will continue to have some income coming from the sale of Crackle because there is a part of the earn out is still taking place this year. There will be some amount will be coming in. Slightly positive on that front. On leverage, which has come out before, I've mentioned, we don't expect to be at less than 1.3x , which is where we are today.
Probably one to, 1.3-1.4 is probably where we would like to be in terms of the leverage ratio. I think that very much defines what's left for distributions, no? No, no leakage on M&A. Already Daniela has already mentioned the CapEx, which is fairly relatively flattish compared to last year. Just minor increments for this year. That's about it.
Then for the rest of working capital, any comments on that front?
The working capital is very cyclical in this company. We require a lot of working capital in the first quarter, and then we start getting it back over the rest of the year. Okay? It's very cyclical. You know, the increase year-over-year on working capital is relatively small and is linked to the overall growth of the company. It's very cyclical.
Perfect. Thank you so much.
Thank you.
Thank you. Our next question goes to Phani Kanumuri of HSBC. Phani, please go ahead, your line is open.
Thanks everyone for taking my question. My question is regarding the pricing power for AMX. Among the major markets, which are the markets where you're able to increase the prices for plans and pass on the inflation to the consumers? Looking forward to 2023, you know, which are the countries where you are confident that you could increase prices in line with inflation? That's my first question. Thank you.
I think we have been increasing prices in some countries, not in all of them. Let's say Mexico, we haven't increased prices. We feel comfortable in Mexico in the peak. Sorry, in the mobile, a lot of competition in the peak. It doesn't look easy to increase prices there. In other countries, yes, we're increasing. Depending a lot, we're going to see. Inflation is high, of course we're looking where we can, where we're going to increase prices in 2023. In 2022, yeah, we already do some countries. As I said, in Mexico though, and in other countries also we don't do.
Not only Mexico, in other ones, yes, we do it, and we were successfully increasing prices good. We're reviewing 2023 and we're gonna see where makes sense for us to increase prices. Of course, we know that inflation is high, costs are increasing, so we have to work hard on cutting costs and also in some places increase prices depending on the competition.
Transcript of a speech given by a speaker at a conference. "Uh, and what we were saying before, I think that we expect currencies in the region will likely be stronger than the year to date. So that will give some relief on the cost side for FX related acquisitions, content and the like.
It's something that we're looking every month to see exactly cost, competition, prices, promotions, everything. That's what we need to do all this year, you know?
Yeah.
Okay. Thanks for that. The second question is regarding the labor obligations. I think you had a MXN 24 billion of labor obligations outflow this year. How do you see, you know, the outflow going forward and, you know, the recent negotiations with Telmex, you know, how do you expect that to impact the labor obligations outflow going forward?
Okay. Yes, some important comments. The labor obligations, what we are presenting there as a use of our cash flow is basically what is paid out that is not coming from the pension fund itself. We have a pension fund in Telmex, and the pension fund in Telmex, you know, sometimes, we would want to keep it more funded and that's why we haven't been withdrawing as much. We expect that the amount that will be coming out of our own cash flow as opposed to the fund itself, is going to be somewhat smaller than what we saw for last year, okay? I think that we will start to see some reduction.
The pension fund of Telmex, the assets have increased significantly. I think it's a larger percentage of the obligations. I think that we are happy to take out a bit more of that fund and a little bit less of our cash flow.
That's very clear. Thanks, everyone.
Thank you.
Thank you.
Thank you. The next question goes to Luca Brenta of Bank of America. Luca, please go ahead. Your line is open.
Hi. Good morning. Thank you for taking my question. It is related to the Brazilian mobile market. Well, since the sector consolidation, we saw that both prices, ARPU, and net adds have been really strong. My two questions are: In relation to ARPU, if you believe that this strong sequence should continue, and if higher price hikes will be the new structure of the business or if this will only keep up in the short term? Also in net adds, if you believe that those will be sustained, at least in the short term. Thank you.
Well, I think we have a good business in the mobile side industry. Last purchase of Oi customers, we do very good synergy there. I think, we incorporate those customers and good costs. In terms of ARPU, we increased some prices in Brazil, so ARPUs are growing. We have good quality, we have good co- distribution, good cost, working a lot on coverage and also 5G. We feel that we can continue to do good in the mobile side in Brazil.
Okay, perfect. Thank you.
Thank you.
Thank you. The next question goes to Andrés Coello of Scotiabank. Andrés, please go ahead. Your line is open.
Yes, thank you for taking my question. Carlos, you already mentioned the pension fund. Can you perhaps briefly comment on the relevance of the potential conversion of the Telmex pension liabilities into stock? Did you have perhaps any specific target on what percentage of the pension liability could be converted? What would be the value proposition to workers?
Well, I think it's it's still early stages of this. I think this is so far a concept that has been floated. I think to the extent that there's a conversion of pension rights for Telmex equity, that obviously puts the company on a stronger position because its overall liabilities would be thereby reduced. To the extent that's the case, well, maybe ex- equity can take some more value over time because it will be equity of a company that will be stronger. I think that's conceptually what there is. I think there's everything else other than this concept remains to be worked out. I don't think that I can give you more light on that.
I think, you know, the concept is easy to understand.
Thank you. My second question will be on Colombia. We've seen weaker results in recent quarters, some margin compression. You mentioned in the press release that you've seen more pressure on the broadband segment. If you perhaps can elaborate a little bit on where that pressure is coming from, if it's from Millicom or if it's from Telefónica, just a little bit more color on Colombia? Thank you.
I think what you see in Colombia is one and a half years ago, very aggressive in the mobile side. We start to be also all the markets start to be more aggressive. You could see the trends on the mobile. The mobile is starting to grow again. We grow this quarter 4.5%. It's good. We used to grow one or even. Right now, we're growing. On the mobile side, I think things are getting to growth again. On the fixed side, well, it's a decision. I think the market is very competitive. Prices are going down. We decide to compete. We are, our ARPU is reducing a little bit, but at the end of the day, I think that's what we need to do.
It's gonna take a little bit of time to recover. We are putting a lot more fiber all around Colombia. I think we have a very good offer. That's it. No more than that. It's not only one competitor. I think the market is under good big competition in the fixed side. What we're doing is we're competing. That's what we have. There's fiber, people constructing fiber. We are also doing fiber, and prices are going a little bit down. We decide to compete. That's more or less why we do promotions. We do some things to compete in the market. That's more or less what is happening in Colombia. It's not one competitor or the other one, it's the market.
Thank you.
Thanks.
Thank you. Our final question today goes to Marcelo Santos of JPMorgan. Marcelo, please go ahead. Your line is open.
Hi. Good morning. Thanks for taking my question. I wanted to ask your views on FWA, fixed wireless access. How does América Móvil see that? Do you think there's potential? You mentioned that in Mexico you are losing some of those subscribers as fiber advances in the country. Is that something you think could be useful on LatAm or even in Europe? Do you think it's a technology that's going to go down as fiber keeps growing? Thank you.
I think it's gonna be a good fiber. It's also important where you put it, okay? If it's gonna be when in a house where they already have fiber and they already have Wi-Fi and fiber and everything, well, it's gonna be difficult to enter that. There's a lot of places all around Latin America where you don't have fiber or the speeds are not so good and fixed wireless access, it's good. We have around 4 million fixed wireless access in Latin America. They grow a lot during the pandemic. It's slowing the growth right now. I think there's still very good room for this service.
It's gonna be very difficult for the fiber to cover all the places, all the territories, and I think it's a good product to there, no? It's also important in low and then low and medium density areas, okay? Where it's difficult to put fiber or. I think it's we're gonna have a good competition. There's also the satellite business that are putting some. I think this product is better than a satellite business. There's gonna be places where we fixed wireless access don't go in, it's also an opportunity for the satellite businesses. I think to cover all Latin America with the broadband, you need to have all the, these services. Now it's fiber, fixed wireless access.
Satellite
Satellite. That's what you're gonna see in the next year.
Just to follow up. Do you think it's going to be like relevant, you grow substantially versus the fiber wired broadband? Or is always going to remain kind of a more niche product?
It's a difficult question. Depending in some places, depending for what you use that, depending if the fiber you already have fiber in your house, depending if you are gonna deploy what. It's not the same price to deploy fiber in a city than to deploy fiber in low densities areas. It's depending a lot on the use of that because this one you can move it wherever you want in your house. The other one you have to put Wi-Fi in some places.
Wi-Fi mesh.
Wi-Fi mesh. I think it's there's gonna be a market for all these products. Of course, I think fiber is gonna be the biggest one, but there's gonna be for this one, the fixed wireless access and also for satellite in and more in Latin America. In all the countries, no?
All right. Thank you. Thank you very much.
Thank you.
As there are no additional questions waiting at this time, I'd like to hand the conference back over to Daniel Hajj for closing remarks.
I just want to thank all of you for being in the call. Thank you very much.
Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect your lines.