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Edited Transcript of AMXL.MX earnings conference call or presentation 16-Oct-19 2:00pm GMT

Q3 2019 America Movil SAB de CV Earnings Call

Mexico, D.F. Oct 23, 2019 (Thomson StreetEvents) -- Edited Transcript of America Movil SAB de CV earnings conference call or presentation Wednesday, October 16, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carlos José García Moreno Elizondo

América Móvil, S.A.B. de C.V. - CFO

* Daniel Hajj Aboumrad

América Móvil, S.A.B. de C.V. - CEO & Director

* Daniela Lecuona Torras

América Móvil, S.A.B. de C.V. - Head of Investor Relation

* Oscar Von Hauske Solís

América Móvil, S.A.B. de C.V. - Chief Fixed Line Operations Officer & Director

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Conference Call Participants

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* Alejandro Gallostra de Arnedo

BBVA Corporate and Investment Bank, Research Division - Team Leader & Chief Analyst

* Andre Baggio

JP Morgan Chase & Co, Research Division - Senior Analyst, Latin America Telecom, Media and Technology

* Carlos Sequeira

Banco BTG Pactual S.A., Research Division - Head of Research & Analysis and Brazil Strategist

* Carlos Antonio de Legarreta Diaz

GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division - Research Analyst

* Diego M. Aragão

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Frederico P. Mendes

Banco Bradesco BBI S.A., Research Division - Research Analyst

* Juan Pablo Alba Bertin

Crédit Suisse AG, Research Division - Research Analyst

* Maria Tereza Azevedo

UBS Investment Bank, Research Division - Director and Research Analyst

* Richard Hamilton Prentiss

Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research

* Rodrigo Villanueva

BofA Merrill Lynch, Research Division - VP

* Walter Piecyk

LightShed Partners - Partner and TMT Analyst

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Presentation

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Operator [1]

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Good morning. My name is Marcella, and I will be your conference operator today. At this time, I would like to welcome everyone to the América Móvil Third Quarter 2019 Conference Call and Webcast. (Operator Instructions)

I would now like to turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead.

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Daniela Lecuona Torras, América Móvil, S.A.B. de C.V. - Head of Investor Relation [2]

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Thank you. Good morning, everyone. Thank you for joining us today to discuss our third quarter financial and operating results. We have on the line Mr. Daniel Hajj, CEO; Mr. Carlos García Moreno, CFO; and Mr. Oscar Von Hauske, COO.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [3]

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Thank you, Daniela. Welcome, everyone, to América Móvil third quarter of 2019 financial and operating report, and I'm going to transfer to Carlos to make a summary of the results.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [4]

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Thank you, Daniel. Good morning, everyone. Well, notwithstanding relatively strong economic reports in the U.S. throughout the third quarter, as the global economy continued to slow down, the concern that the country would follow brought about a major drop in U.S. interest rates in the period with the Fed reducing the discount rate twice and 10-year treasury yields falling to levels close to their all-time lows. In Latin America, several central banks -- Brazil, Mexico, Chile -- introduced new interest rate reductions as well, as those countries were also experiencing a significant economic deceleration.

We ended September with 278 million wireless subscribers after adding 1.6 million postpaid subscribers in the quarter, of which 928,000 came from Brazil; 215,000 from Mexico; and 159,000 from Austria, and disconnecting 827,000 prepaid subs, 900,000 in Brazil.

As for fixed RGUs, at the end of the quarter, they totaled 84 million after net disconnections of 229,000 RGUs, resulting from 208,000 new broadband accesses and the disconnection of 247,000 wirelines and 190,000 PayTV units.

Mobile postpaid and fixed broadband remained the main drivers of access growth at 7.8% and 5.6% year-on-year, respectively, with mobile prepaid and PayTV units declining 3.5% and 2.5%. Fixed-voice accesses were down slightly, 0.2%, from a year before.

We posted solid revenue growth in the quarter with our revenues reaching MXN 248 billion. In Mexican peso terms, they were slightly higher year-on-year, 0.2%, in spite of the depreciation of various currencies, particularly Colombian and Argentinian pesos, vis-à-vis the Mexican peso, all of this in the quarter.

At constant exchange rates, revenue growth remained solid with service revenues expanding 2.5%, slightly faster than in the prior quarter. I'm talking -- all of this is excluding Argentina in these calculations because the accounting of Argentina is expressed not in nominal terms but in inflation-adjusted terms. Several countries posted their best service revenue growth rates in over a year.

Under IFRS 16, our third quarter EBITDA came in at MXN 78.2 billion and was equivalent to 31.7% of revenues. Organically and at constant exchange rates, our EBITDA expanded 3%. However, adjusting for the booking last year of an extraordinary revenue item deriving from a legal proceeding in Brazil and for restructuring charges in Austria associated with its program of early retirement for employees, EBITDA increased 7.2% over the year-earlier quarter.

At 4.6%, mobile services revenues were the driver of revenue growth with revenues expanding 11% in Brazil, 8.2% in Mexico, 4.7% in both Colombia and in Europe. The Dominican Republic and Central America also registered strong performance. As for fixed-line service revenues, they declined 1.2%, principally because of the reduction of fixed-voice revenues.

Postpaid revenues continued to accelerate, increasing at a pace of 5.8%, while prepaid revenues are exhibiting greater dynamism in several markets, including Mexico and Colombia, mainly on account of greater data consumption.

Revenues from fixed-broadband services and corporate networks increased 5.7% and 6.7%, respectively, while PayTV revenues, although still down 3.3% on a yearly basis, stabilized in the third quarter, posting a 2% sequential increase, though, from the second to the third quarter, they increased 2%. In some countries, Colombia being an important example, the fixed-line platform is growing well on all 3 business lines: voice, broadband and PayTV.

In Mexico, prepaid revenues kept growing at more than 10% while postpaid revenues stayed close to 6%, as they have for quite some time now. On the fixed-line platform, data services, including retail and corporate, grew 2.7% with both revenues continuing to decline on a yearly basis. All in all, EBITDA shot up 7.6% in Mexico from the year before, reflecting greater operating leverage and good cost control.

In Brazil, postpaid revenues accelerated to a 13.5% pace, followed this time by prepaid revenues of 4.8%, while the fixed-broadband revenues decelerated to 6.6%, and PayTV and broad revenues improved slightly on sequential basis. EBITDA was up 7.6% in Brazil.

In Colombia, EBITDA increased 12.8%. Our fixed-broadband revenues accelerated to a 13.6% pace, and prepaid revenues continued to recover, expanding 4.6% from the year before.

In the case of Tracfone, service revenue growth remained slightly positive as it has for several quarters, but EBITDA growth stayed close to 10% on a yearly basis. In addition to the ones that I just mentioned -- Mexico, Brazil, Colombia and Tracfone -- EBITDA expansion was very strong also in Peru, besting the EBITDA of that in Colombia, growing nearly 15% year-on-year.

We raised the operating profits of MXN 38 billion, up 7.3% and comprehensive financing costs of 12% -- of MXN 12 billion, resulting mostly from foreign exchange losses derived from the depreciation of the Colombian and Argentinian pesos relative to the dollar and the impact on accounts payable to suppliers and others. After this, we obtained a net profit of MXN 13 billion in the period equivalent to MXN 0.20 per share or $0.20 per ADR.

Our cash flow, together with net financing of MXN 15.9 billion through September, allowed us to fully cover capital expenditures of MXN 100 billion, fund shareholder distributions of MXN 12 billion, pay MXN 6 billion in acquisitions for Telefonica Guatemala, and amortize pension obligations in the amount of MXN 17 billion. This is in the 9 months to September.

At the end of September, our net debt stood at MXN 673 billion, including MXN 112 billion in capitalized lease obligations per IFRS 16. Our net debt to EBITDA last 12 months was 1.92x, using for consistency the methodology prior to IFRS 16, the one that we had until last year. So this is the one that we will continue to focus on to measure the progress that we are making towards our goal of 1.5x by the end of 2020.

Okay. With that, I would like to pass the floor back to Daniel, and we will then open Q&A.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [5]

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We're going to start with the Q&A. Thank you, Carlos.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [6]

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Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Rodrigo Villanueva from Merrill.

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Rodrigo Villanueva, BofA Merrill Lynch, Research Division - VP [2]

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Yes. I have a couple of questions, the first couple on Mexico and then one in Brazil, if I may. Regarding Mexico, we saw again an ARPU of MXN 152, increasing by almost 7% year-on-year and by around 3% quarter-on-quarter. I have the impression that this comes mostly due to higher usage. However, considering that your peers are raising prices aggressively in Mexico, is this something that you would consider doing as well? That would be the first question.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [3]

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Rodrigo, as you said, ARPU in Mexico is growing 7%. And mainly, we have very good revenues on prepaid. Prepaid revenues growth, around 10% to 11%, so the growth in service revenue in prepaid was very good. And I don't see, really -- in constant prices, I think the increase of prices of the competition was mainly around April or May. In the last months, we don't see any increase in prices.

From -- for the fourth quarter, that dates more like the Christmas season, we are not seeing any increase on prices at this moment, maybe in some handsets -- new handsets or something like that. But we are not planning to raise any prices as the -- for the Christmas promotions these next 2, 3 months, Rodrigo.

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Rodrigo Villanueva, BofA Merrill Lynch, Research Division - VP [4]

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Understood. And my second question is regarding fixed-broadband service revenue in Mexico. We saw a decline of 2% during the quarter. However, we also see that broadband subscribers continue to increase by almost 4%. So I was wondering if you could elaborate a little bit more on the reason behind the revenue decline.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [5]

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Just -- only to add a little bit more on the first question, I think people in Mexico is consuming more. We're giving a very good network. We are giving 4.5G to all of our customers. I think a lot of prepaid customers are moving to smartphones, and these smartphones are consuming more data and also is something that is helping us to move the ARPU in prepaid and the service revenues in prepaid to grow more than --

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Oscar Von Hauske Solís, América Móvil, S.A.B. de C.V. - Chief Fixed Line Operations Officer & Director [6]

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You have to (inaudible) to what Daniel has said, Rodrigo, the sequential increase in consumption of data services in Mexico was nearly 15%. In the second quarter to the third quarter, it was increased by nearly 15%, the data usage per site.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [7]

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So prepaid customers are moving to feature phones, and these feature phones are consuming a lot more data. In the fixed side, I think competition is strong. As we said at the beginning of the year, Telmex is investing more, is doing more Fiber to the Node, Fiber to the Curb, Fiber to the Home, so we're really investing all around Mexico in the fixed side.

And the reason why revenues decreased 2% and subscribers increased is because of all these competition, our customers are moving a little bit down. So if they used to have a plan of MXN 400, they are moving to a plan of MXN 350 because they are having better speeds and everything there. So we are trying to give them a very good quality, and we're investing to increase our service and our quality and our speed in the fixed side for you.

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Rodrigo Villanueva, BofA Merrill Lynch, Research Division - VP [8]

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Understood. And finally, regarding Brazil, if I may. Could you please share with us your thoughts on competitive dynamics, particularly in wireless? Also in Brazil, we have seen your competitors, particularly the leading company postpaid, increasing prices by around 6x over the last 12 months. So I was wondering if you expect to follow them in terms of price increases or if you expect to grow ARPU only by increased usage.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [9]

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Well, I'm not so agreeing with what you are saying because they deliver higher prices, but then, on the other side, they give a lot of promotions. So I don't think they really, really are increasing prices. So in Brazil, we have been investing. We have very good 4.5G networks, very good speeds. Our coverage has been increasing.

We're moving and transforming everything to digital. We're giving very good service to all our customers, so I think we have a very, very good proposal in wireless in Brazil, and that's why we're growing more than -- like 11% our service revenue there, mostly in postpaid. We also are giving combos there. So we have good [picks] TV, and we're giving the combo there. So everything is working fine in Brazil, and I really don't think that prices has been increased of our competitors.

So let's see what is going to happen in fourth quarter, but we -- what we are really, really focusing is on giving the best service to our customer, and that means quality, coverage, speed and giving a very fast cellular service to all of them. So our brand, Claro brand, has been improving a lot, and the perception of the people there is very good also. So we are doing a very good job in the prepaid side in Brazil.

Also, the same as Mexico. People is consuming a lot. They are doubling the megabytes of use also in Brazil. So if you give speed, you give good network, they have a very good phone, I'm sure people is going to spend more.

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Operator [10]

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Your next question comes from the line of Alejandro Gallostra from BBVA.

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Alejandro Gallostra de Arnedo, BBVA Corporate and Investment Bank, Research Division - Team Leader & Chief Analyst [11]

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Regarding the corporate segment in Mexico, which is growing double digits and becoming more relevant, I was wondering if you could give us more color about how much it contributes to Mexican revenues and what is the strategy there to increase market share.

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Daniela Lecuona Torras, América Móvil, S.A.B. de C.V. - Head of Investor Relation [12]

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Sorry, Xander, we can't hear you very well.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [13]

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Can you speak a little bit more slowly or -- because it's not so clear, your voice.

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Alejandro Gallostra de Arnedo, BBVA Corporate and Investment Bank, Research Division - Team Leader & Chief Analyst [14]

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Absolutely. My question, my first question is regarding the corporate segment in Mexico, which is growing at double digits and becoming more relevant. And I was wondering if you could give us more color about how much this segment contributes to you in the overall Mexican revenues. And what is your strategy in this corporate segment to increase market share?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [15]

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You are right. Our corporate segment is doing very good in Mexico. We have -- doing excellent in that segment and delivering more toward the big corporates, the small and medium businesses also, and we are focusing a lot on that, and we're delivering good revenues.

We have -- Oscar can explain a little bit all the services that we're giving to these customers.

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Oscar Von Hauske Solís, América Móvil, S.A.B. de C.V. - Chief Fixed Line Operations Officer & Director [16]

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Sure. On the -- it's mainly on the enterprise. We used to have data connectivity, so we are moving from just connectivity to solutions. So we are bringing new services as security, as cloud services and some vertical integrations for the retail market or the finance market. So we are complementing the connectivity with solutions. We believe that we need to integrate more around machine learning and big data and data lakes to integrate a full offering to the enterprise market.

So we have a good market share on data connectivity, so we are leveraged from that connectivity to bring new solutions and services to this market. And as well in the small business, we are offering cloud services for all the small business, and the penetration that we've been having there is quite good.

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Alejandro Gallostra de Arnedo, BBVA Corporate and Investment Bank, Research Division - Team Leader & Chief Analyst [17]

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And any possibility that you give us an idea of how much this segment contributes to the Mexican revenues?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [18]

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We don't have it, but Daniela can give it to you later. But I don't have it right now.

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Alejandro Gallostra de Arnedo, BBVA Corporate and Investment Bank, Research Division - Team Leader & Chief Analyst [19]

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Okay. And my second question, if I may. We have seen now a few quarters -- several quarters with an effective tax rate above 40%. What is the reason behind this? And is this -- and if it is reasonable to expect that the tax rate will eventually come down again to mid-30s?

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [20]

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I think the statutory average of the tax rate is in the neighborhood of 32%. We have 30% in most countries. But in some of the bigger ones, like Colombia and Brazil, the tax rate is 34%. So our base is roughly 33% so to start. Then when you are -- it's basically 3 different major items. One is Mexico, which has 2 things that I don't think are likely going to change anytime soon. One of them has to do with the way how, in Mexico, they only deduct the real interest rate and not the nominal interest rate from taxes. So that's something that has been always there with us for the last 30 years, at least.

Another part has to do with some expensing in the payment of pensions or of pension people from Telmex, which only roughly half of that may be deducted from taxes, and that's basically the impact of Mexico.

And then essentially, the other impact has to do with the use up of the amortization of deferred tax credits that we have basically in Chile and in Brazil. So to the extent that we reduce those tax credits, that increases the effective tax rate. And so it's a high tax rate but for a good reason because it reduces our cash taxes.

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Operator [21]

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(Operator Instructions) Your next question comes from the line of Fred Mendes from Bradesco.

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Frederico P. Mendes, Banco Bradesco BBI S.A., Research Division - Research Analyst [22]

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I have 2 quick questions here, mainly related to Brazil. I mean the number one, you have been pretty much dominating the net adds on the postpaid segment throughout 2019. I just want to get a better understanding here if most of these net adds concerning our own base of prepaid clients that they keep selling or if you're also gaining a lot of clients from the competition, especially in the pure postpaid. That would be the first one.

And then my second question. Again in Brazil, prepaid revenues were up 5%, very different from what we're seeing from the competition the last quarters. So just trying to understand if this is something specific that you're seeing from AMX, or if you are starting to see an improvement in markets in there, and then this prepaid revenue, this should improve throughout the next quarters?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [23]

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Well, in the first question on postpaid, we have been focusing a lot on postpaid. And I think postpaid is -- people is looking, as I said, best network, best quality, good speed, coverage, so people is looking for that. So we are gaining share. Part of that is we have number portability in a lot of countries, so we are gaining in number portability, so people is coming from other companies to Claro. But also, there's a lot of prepaid subscribers that are moving to postpaid -- to be a postpaid subscriber. So we have both. I don't have exactly the data here, but we're gaining market share by number portability, and we're moving the prepaid to postpaid subscribers.

In the prepaids, as we said, even that the numbers are disconnecting because we have disconnections in the quarter, I think there are -- because part of these customers are moving to prepaid -- to postpaid, sorry, but I think these customers are consuming more. They are moving to a better handset. They are using more data, and that's why we have been growing our revenues in the last quarter.

If you could see, let's say, let's put an example, specifically in Colombia. In Colombia, we have been -- at the beginning of the year and last year, we have been negative in growth in service revenue in prepaid. And today, we are -- this quarter, we are growing around 5% there. So we are moving as the people is consuming. We are giving more distribution, and we're making a very good commercial work in all the countries to cover everything in terms of prepaid subscribers also.

I don't know if Carlos wants to...

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [24]

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I think in the case of Brazil, and this is important because notwithstanding this migration of prepaid to postpaid and the disconnection of prepaid subscribers that Daniel mentioned, part of the matter that prepaid revenues increased nearly 5% quarter-over-quarter.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [25]

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Given that we have negative subscribers growth in the quarter, so we're having...

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Unidentified Company Representative [26]

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Much better subscribers.

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Operator [27]

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Your next question comes from the line of Andre Baggio from JPMorgan.

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Andre Baggio, JP Morgan Chase & Co, Research Division - Senior Analyst, Latin America Telecom, Media and Technology [28]

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So we are seeing América Móvil growing way above its peers in Brazil in mobile. So I wonder what the thing that's behind that, and you think that's -- how sustainable is this growth advantage in AMX getting market share?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [29]

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As I said, we are doing very good in Brazil. I think in prepaid and postpaid also and in the fixed side because, even in the fixed side that we are not growing, I think we're maintaining or growing a little bit market share there. But if we're -- are going to talk a little bit about wireless as -- the investments that we have been doing during the last 2, 3 years are giving us people. And the rebranding that we're having with Claro, what people think, the coverage, the way we market our products, all the combos that we're doing with the fixed, so there's a lot -- the peak conversion that we're having there, it's been very important for us. So our fix customers wants to have Claro also with them, so we package them. So we are doing a lot of commercial -- different commercial things, so people is preferring to have Claro with them.

So -- and the most important thing, we have a very good network, a very high-speed network. We have 4.5G all over Brazil, so it's a excellent network, and people is using that. They are consuming very good. The megabytes of use has been doubling, so we're in a very good position right now in Brazil in the wireless side.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [30]

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Yes. Andre, as you know, we invested a lot of money over many years to develop the best fixed-line platform in Brazil. And we have basically built a convergent platform. The -- our mobile runs a lot of the more basic ones on the fixed-line platform that, as you know, is the best one, by far, in Brazil. So I think that what you are seeing is basically the reflection of all of those years of strong investment in developing a convergent platform that represents our competitive edge, and that is -- it's not something that is a 1 quarter event. I think -- we think it's something that is really structural at this point.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [31]

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And other very important thing is convergence, what Carlos is saying, and the other one is coverage. If you see 2 years ago, we don't have the same coverage as our competitors have. Today, we have a very good coverage. We can match in all or be better than our competitors in some places in Brazil. So that gives us a very good advantage. we're working a lot in the network side in the last 2 years.

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Andre Baggio, JP Morgan Chase & Co, Research Division - Senior Analyst, Latin America Telecom, Media and Technology [32]

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Perfect. And if I may ask a second question. You are now moving towards deleverage and going to your targets. So is it reasonable to assume that, next year, we should -- we could see an increase in distribution from América Móvil? Or do you think that's -- there's anything like, say, a large M&A or something that could focus the cash flow on something else besides the distribution because probably deleveraging story is probably going to get over at some point.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [33]

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Well, Andre, as I mentioned in my presentation earlier, we have the goal of getting to 1.5x net debt to EBITDA by the end of next year. That's -- we have -- a goal that we have. And I think everything else is basically subordinated to this objective. So I think what we -- you should be focusing on is how far we can attain our desired leverage ratio.

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Operator [34]

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Your next question comes from the line of Diego Aragão from Goldman Sachs.

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Diego M. Aragão, Goldman Sachs Group Inc., Research Division - Equity Analyst [35]

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Yes. My question is actually about subsidies and, in fact, about your customer acquisition strategy. We are seeing the level of handset subsidies consistently reducing over the past 2 years, and it's now, if I'm not mistaken, at the lowest level ever.

So can you comment about your handset sales strategy and whether this should be viewed as a major change on your customer acquisition strategy given that, for several years, AMX used aggressive, let's say, handset subsidies to differentiate its offer. Apparently, it's now turning -- it's focused on different services like the Claro passport or the network quality and the customer experience, as you just mentioned during your opening remarks.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [36]

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Well, one of the main strategies of América Móvil through all Latin America is the cost control and reducing cost and expenses, and subsidies is one of the most important expense in América Móvil. So what we have been doing is 2 things in the subsidies. First, we have big -- a lot of our at least new adds or renewing the plans, we are financing the handset. So with a -- when you finance a handset, then you don't lose or you don't subsidize the handset. So with interest and the cost and everything, it gives you a little bit of more profit than if you do it directly and pay cash. So it's moving a lot to finance the handsets.

In the other side, when you finance, the working capital gets higher, and then you have to be careful with the bad debt. So there's other implications when you finance because there's a lot of money when you start to finance handsets, but it has been a good business for us, and people like to finance the handsets. Because instead of paying, let's say, $300 or $400 or $500 cash, then you -- they can pay maybe $20 or $30 or $50 per month for the next 24 or 36 months. So it has been good, and that is giving us a space to have more profit.

In the other side, 5 years ago, everybody subsidized the prepaid -- in the prepaid side. And today, we are not subsidizing in the prepaid business. So people, if you want to be in the prepaid, and we don't have exactly your credit rating, then we are not giving you any subsidy or any financing there. So that's mainly what we're doing.

And also we have a big cost control in all the companies, and we have a very, very important strategy on reducing and cutting work, transforming the company to a digital company. And doing that, we are saving a lot of costs over there. So let's say to give you an example, our customer care center 3 years ago, you have to go there and sign papers, and everything is on paper. Today, everything is on digital. We have chat bots to answer questions. So we are moving to that phase, and it's been very good on the cost side.

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Diego M. Aragão, Goldman Sachs Group Inc., Research Division - Equity Analyst [37]

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This was very clear. And if I may, just would like a second question regarding like -- what is the status on the Nextel acquisition and also on the Telefonica transaction in Central America? And finally, on the PayTV license in Mexico, if you can just quickly comment on those 3 things, that would be great.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [38]

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Like the PayTV license in Mexico?

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [39]

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Acquisition.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [40]

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The acquisition of Nextel, I think, is going well, and we hope that we can close the company maybe on November so looks like we can close the deal in November. El Salvador is also where we submit all the papers. They are asking for a little bit more of information, and we are in a good process over there.

And the PayTV license in Mexico, as we discuss in the past, in October '18, we request a license -- América Móvil request the IPT license to provide PayTV services in Mexico. To this date, we have provide all the additional information they have request for the analysis. So the application complies with all current regulations, and the approval for the applications continue to be pending.

And as you can see and as shown by the data published by the IFETEL, the Mexican PayTV market is highly concentrated. There is limited choices of the service for consumers, and prices have been consistently increasing since the telecom reform back in 2013, so in addition PayTV, the only market of the telecom sector where there has been nonregulatory intervention to promote competition. So I think it is because all of these reasons why we leave the entrance of América Móvil to the PayTV market will be in the best interest for the consumers. So that's what we have. We don't have anything else to comment on this topic.

On the other side, what you could see all around the world impact, streaming is growing a lot. So if you have a broadband and then streaming, streaming is growing a lot. So you -- in the next years, you are going to see a big increase in streaming broadband in the -- with all the consumers. So streaming is going to grow in the next years a lot. That's growing around the world, and it's going to grow in Latin America.

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Operator [41]

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Your next question comes from the line of Carlos Legarreta from GBM.

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Carlos Antonio de Legarreta Diaz, GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division - Research Analyst [42]

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Very quickly. In Colombia, I saw very good results; early quarter service revenue, and particularly revenue seemed to be accelerating. I was wondering if you could you give us more color in this regard.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [43]

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I think Colombia has been -- the results of Colombia in the third quarter has been extremely good. We have been growing since the beginning of the year in postpaid, and we have been growing also in the fixed side. But this quarter, we have been also growing in the prepaid. So all our lines has been growing, and I can give you a little bit of data here. But in Colombia, postpaid is growing 4.8%; prepaid, 4.6%, so it's a very good recovery of the prepaid side. Broadband, 13.6%; fixed voice, 5.9%; TV, 6%. So all overall in the fixed side, 8.9%.

So we have been doing good in Colombia, also investing a lot in the network, also investing a lot in the digital side in the transformation of the company to give a very good service to all our customers. And we have very good content, very good speeds in the broadband side. In the -- we have been making convergence and giving the combo to all our customers, we're doing a good job in Colombia.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [44]

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Just again to add to what Daniel has said, when you look at prepaid revenues in Colombia, which have been not doing particularly well for a long time, they were up nearly 8% quarter-over-quarter. And this is driven, in the aggregate in Colombia, MOUs increased by 7.4%, again, quarter-over-quarter and 31% year-over-year, MOUs, whereas, data per client increased 81% year-over-year and 20% quarter-over-quarter. So we are at different strategy that are working in Brazil. And in Mexico, it's a more-for-more kind of strategy. We are driving further spending by having people consume more data, and this is even also mobiles.

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Carlos Antonio de Legarreta Diaz, GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division - Research Analyst [45]

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That's very helpful. And if I may, a follow-up. It's more on the strategic side. As you guys have probably noticed, there seems to be a trend across larger operators that are perhaps moving to divest or spin off the assets, such as towers, fiber, data centers, et cetera. And do you think AMX will join this trend? Or do you still see this asset as part of your core strategy?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [46]

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Well, we did that 3 years ago -- no, more, 4 years ago with Telesites in Mexico. We spin off the towers. It was more for a regulatory to give what the regulators wanted to give access to this to all the competitors who will spin off the towers. We create Telesites. And today, everybody can use the towers in Mexico and what is that -- and you are seeing what is happening here in Mexico. So it's not a problem of access. Access, they have been.

In the strategic side, we are not thinking at this moment to spin off any other tower or to spin off data centers or fiber. I think we are in a very good position financially, and we're trying to get the target for next year. And so we don't have any pressure to spin off any of our important assets at this moment.

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Operator [47]

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Your next question comes from the line of Juan Pablo Alba from Credit Suisse.

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Juan Pablo Alba Bertin, Crédit Suisse AG, Research Division - Research Analyst [48]

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Just a small update in terms of how you see the macro slowdown in Mexico. And do you think your results could have been even better if the macro scenario was a little bit better in Mexico?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [49]

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Well, it's an interesting question, but what I can tell you is that, [in Nextel], things are going well. In the prepaid side, we're growing 10% our revenue, so we are not seeing any deceleration on the economy, not in our products. And remember, telecom is very resilient sometimes to the economy. But today in Mexico, we are not seeing any deceleration on our products.

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Juan Pablo Alba Bertin, Crédit Suisse AG, Research Division - Research Analyst [50]

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And just as a follow-up, just a quick -- in terms of Peru. Just if you could provide a little bit more color on the competitive market over there and if you expect to keep delivering good EBITDA growth over there despite like the tough competitive environment.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [51]

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Well, the competition is still very tough, prices has been going down, and that's why you see that our revenue is going down. But we have been putting a lot of pressure on cost control and subsidies as we have been discussing, and digitalization, transforming the company to digital to saving costs. And that's what we're doing.

But in terms of the competition -- the commercial competition in Peru, this is still very tough. The typical prices are very low, and when we are competing, we are upgrading all our networks. We are putting a lot of money on the coverage. We are investing also in the fixed side. And we think that, in the future, Peru is going to be a little bit more reasonable. The prices will be a little bit more reasonable.

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Operator [52]

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Your next question comes from the line of Maria Azevedo from UBS.

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Maria Tereza Azevedo, UBS Investment Bank, Research Division - Director and Research Analyst [53]

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I have 2 questions on my side. The first one is on 5G. You have the best network and very strong spectrum holdings. Do you think it's fair for us to assume that you are not going to need a CapEx surge to roll out 5G networks? Should we expect the same level of CapEx for 2020 and 2021?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [54]

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So we don't think we're going to raise our CapEx in '20 and '21 because of 5G, but we think that we are not in a hurry of putting 5G in Latin America. What we're doing right now is to virtualize the network, much more fiber to the node and some things that we are going to use in 5G when we decide to launch 5G. We are definitely -- the only country where we're going to launch 5G soon is Austria. That is going to be on February. But all the rest, we are only making testings and, as I said, improving the network and make the network ready to decide when we want to launch 5G. We are not planning to put more CapEx because of 5G.

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Maria Tereza Azevedo, UBS Investment Bank, Research Division - Director and Research Analyst [55]

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Perfect. And my second question is on Brazil. Do you see room for market repair in a scenario that Brazil goes from 4 to 3 players? And are you interested in participating of any consolidation move or even acquiring more mobile spectrum in the secondary market? Or Nextel was enough in terms of Brazil M&A for your strategy?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [56]

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No. We believe a lot in Brazil, I think, and we hope that Brazil will start a good recovery next year. The economy will recover next year. There's a lot of rumors that Oi is for sale, some of them that -- some assets are going to be for sale or that they're going to sell it totally or they're going to mix. We, as América Móvil, of course, we're interested in doing something with Oi in Brazil, and we're open to discuss anything that will be. We are -- I think with the spectrum of Nextel was going to be a good increase of a spectrum for us. But also, we are interested in the mobile-side subscribers or infrastructure. We are open to discuss something with the Oi.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [57]

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But I think even before any acquisitions, Maria, we know the market is consolidating day by day, simply because one of the competitors is -- has been bleeding clients and revenues and EBITDA. So that basically means that the market is concentrating more.

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Operator [58]

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Your next question comes from the line of Carlos Sequeira from BTG.

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Carlos Sequeira, Banco BTG Pactual S.A., Research Division - Head of Research & Analysis and Brazil Strategist [59]

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So my question is kind of a follow-up from the previous question. So after the acquisition of Nextel Brazil, Claro has now like 30 megahertz more spectrum than Vivo and almost 60 megahertz more than TIM. My question is how important competitively do you think this is going to be in the next quarters, the fact that you have significantly more spectrum than the other players?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [60]

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Well, I think it's not something that it's for the next quarters. I think to have a spectrum, you are going to have a spectrum, and then you have to put network over there and do a lot of investments. And so spectrum is good -- is very good, very important for us, but it's important for the future. And I think TIM and Vivo are going to have -- there's going to be more options in Brazil for more spectrum, and they are going to have the alternative to buy more.

I think what is important in Brazil for us is that we have a good fixed network, a good broadband network, a good TV network, and we're doing comparison in the [marketplace] all overall. We have our combos, and these combos have been very successful. So that's really what has been important for Claro in Brazil: to have the convergence and do the combos for all our customers. Even that you have to have good coverage, good networks all around, we're giving -- we're leaving -- and Oscar can talk a little bit more. We are leaving our ultrabroadband in fixed, our ultrabroadband market. I think we...

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Oscar Von Hauske Solís, América Móvil, S.A.B. de C.V. - Chief Fixed Line Operations Officer & Director [61]

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It's up 49%.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [62]

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Like 50% in the ultrabroadband.

But I don't know, Oscar, if you can explain a little bit more what we're doing in Brazil.

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Oscar Von Hauske Solís, América Móvil, S.A.B. de C.V. - Chief Fixed Line Operations Officer & Director [63]

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Sure. We have all the network -- the cable network prepared with DOCSIS. DOCSIS, we could move to DOCSIS 3.1 to get the speeds -- we could get to 1 gigabit when the markets need it.

But secondly, we are building Fiber to the Home. We open 62 cities right now with Fiber to the Home, so we are expanding the fiber footprint, as Daniel mentioned, to be ready for 5G, getting closer the fiber to the users. So we did, as Carlos mentioned, through the years (inaudible) in the fixed, to make a robust network, not only in the long haul in the metropolitan [rings] in order to have this fiber closer to the users.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [64]

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So I think that's what give us the growth that we're having in Brazil, the convergence.

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Operator [65]

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Your next question comes from the line of Walter Piecyk from LightShed.

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Walter Piecyk, LightShed Partners - Partner and TMT Analyst [66]

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Daniel, you had mentioned that the CapEx is not increasing. Obviously, your EBITDA is increasing. So I guess the question is for Carlos in terms of the 1.5x leverage. Do you expect to get some reduction in the interest that you're paying on your debt like you're expecting to refinance the debt at 1.5x leverage? Or otherwise, why not use some of that free cash flow now that you've been under 2x leverage for a couple quarters now to buy some stock or to buy more stock aggressively?

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [67]

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Walter, I think this is the initial discussion we have. As you know, we have a preference to be more conservative financially. I think the mindset in the company that in this industry where you have such a rapid technological change, your ability to stay in the game and be competitive is very much have to do with your ability to continue to invest, and that means that you have to have a lot of dry powder always. It's better to be able to act opportunistically, if there's a case to be acquired, like there was right now with Nextel and the market consolidation in Central America. And it's important to be able, as I said, to invest when we're about to begin all the efforts regarding 5G and the like.

So I think we believe it's strategically important for this company to remain, I think we always have been, financially strong. We have, as you know, the top credit ratings in the sector. And we believe that, at the end of day, this does translate in our -- being more competitive in the market.

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Walter Piecyk, LightShed Partners - Partner and TMT Analyst [68]

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Understood. And then so when you do reach 1.5x leverage, should it be our expectation that the company will just maintain that leverage and then use that excess free cash flow for share repurchase or -- and/or dividends?

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [69]

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That's what we have done in the past, remember? We used to be at -- in our early days at 1x net debt to EBITDA, and all of the excess cash flow was basically returned back to shareholders. So this time around, we are reducing leverage, but once we get to our desired ratio, we likely will be able to increase distributions.

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Operator [70]

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Your next question comes from the line of Ric Prentiss from Raymond James.

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Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [71]

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You've mentioned convergence a couple times and how important that is. Can you talk a little bit about what you see happening in Puerto Rico as Liberty looks to buy the AT&T properties there? And as a second question, what are your thoughts on the U.S. with the possibility of Dish becoming a facilities-based operator, what that might do to the competitive environment?

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [72]

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Well, in Puerto Rico, AT&T was also converging there. They are also having some -- in the U.S., they can do convergence. So in Puerto Rico, I'm sure, they can do it. They are going to sell it to Liberty. There's going to be a new competitor over there. So -- well, that's we need to compete. We're doing our job there. With the -- last year, (inaudible) we are making all the network, again. We are remaking the fixed network in some places, so we are putting good investments over there. And in the wireless side, we are ready. We have been doing that. And in the fixed side, we're still investing for this year. And the next one, I think we're going to be well prepared to give good speeds, convergence at TV and give that ultraband that we're needing.

And in the U.S., well, that's something that it has to close. I understand that Dish is going to buy some assets, spectrum and subscribers from T-Mobile and Sprint. If they close, they are going to buy this. Tracfone is doing good, and we can have another carrier that can give us the capacity. That's the case on -- if that close, we have another alternative to have capacity from Dish. So I think it will be good for us also.

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Operator [73]

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There are no further questions at this time. I would now like to turn the call over to Mr. Daniel Hajj for closing remarks.

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Daniel Hajj Aboumrad, América Móvil, S.A.B. de C.V. - CEO & Director [74]

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I just thank everyone for being in the call, and thank you, Carlos, Oscar and Daniela. Thank you very much.

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Oscar Von Hauske Solís, América Móvil, S.A.B. de C.V. - Chief Fixed Line Operations Officer & Director [75]

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Thank you.

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Carlos José García Moreno Elizondo, América Móvil, S.A.B. de C.V. - CFO [76]

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Thank you all.