America Móvil B de C : Q3 2021 Transcript

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Daniel Hajj, Chief Executive Officer

Carlos Garcia Moreno, Chief Financial Officer Oscar Von Hauske, Chief Operating Officer Daniela Lecuona, Head of Investor Relations

Alejandro Gallostra, Analyst

Carlos Legarreta, Analyst

Chelsea Colon, Analyst

Fred Mendes, Analyst

Gilberto Garcia, Analyst

Leonardo Olmos, Analyst

Marcelo Santos, Analyst

Walter Piecyk, Analyst

Bloomberg Transcript

Presentation

Good morning, my name is Lauren and I will be your conference operator today. At this time, I would like towelcome everyone to the America Movil Third Quarter 2021 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After thespeakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Now, I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.

Thank you. Good morning, everyone. We're very pleased to join us this morning to discuss our third quarter results. We have on the line Mr. Daniel Hajj, Chief Executive Officer; Mr. Carlos Garcia Moreno, Chief Financial Officer; and Mr. Oscar Von Hauske, Chief Operating Officer.

Thank you, Daniela. Thank you everyone for being in the call. Carlos is going to make a summary of the third quarter results.

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Bloomberg Transcript

Thank you, Daniel. Good morning, everyone. During the third quarter, it's a pleasure to share we're prevalent in several industries at a global level. Capping inflation data continue to surpass estimates in the US and other countries. The market consensus appears to shift in favor of the fair another multi-authority moving more rapidly than anticipated we have to expansion over the multi base and 50 base interest rates to begin to rise. This context 10-year interest yield from US economy (inaudible) correction just prior to the end of the quarter helping strengthen the dollar versus most currencies, including the new and several Latin American ones. Growth in the quarter is high because all of them.

Regarding the operations in the third quarter, we added 4.2 million wireless subscribers of which 2.2 million postpaid clients. Ending September were 302 million subscribers, 7% more than a year before. Roughly half the new postpaid clients came from Brazil with Colombia contributing 313,000 subs and Peru 252,000. Chile and Austria, which contributed 204,000 [ph] subscribers -- postpaid subscribers. Mexico led the way in prepaid with 577,000 net adds followed by Brazil with 307,000 (inaudible) 270,000. Colombia, Ecuador, the Central American block and our European operations each obtained around 200,000 new prepaid clients.

On the fixed-line platform, we got PayTV net disconnections in Brazil, but more than 30 million we had in (inaudible). At the end of the quarter, Brazil's PayTV accessories were down 5% from a year before whereas Colombia's were up 6%, and in the rest of our subsidiaries -- they were up 3%. For America Movil, there was a 2% reduction overall (Technical Difficulty).

For broadband accesses, Argentina are up almost 50% year-on-year, followed by Peru and Colombia with approximately 10% each. In the aggregate, America Movil's broadband accesses increased 3% over the year ago.

Our revenue totaled MXN $253 billion in the quarter, that's a 2.6% decline in nominal peso terms on account of the appreciation of the Mexican peso versus other currencies in our region relative to the year rewards.

At constant exchange rates service revenue increased 4.5% year-on-year slightly less than cost and expansion leading to a 7.5% increase in EBITDA totaled MXN $87 billion.

Peru, Eastern Europe, The Dominican Republic and Mexico (inaudible) was fastest from 16.6% in Peru to 6.4% in Mexico. Central America, Colombia, Costorico and Austria all delivered growth in the 4% to 5% range.

Mobile service revenue expanded 5.9% with fixed mobile devices and 5G services playing an increasingly important role in some countries, while fixed-line service revenues increased 1.6%. In both cases, the mobile and fixed their best showing in several quarters if we correct for the low second quarter base affected the yearly compete (inaudible).

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Bloomberg Transcript

In the third quarter, both prepaid and postpaid mobile revenues increase around 6%. The comps that you see in chart (inaudible) with distortion in the annual comparison I mentioned before as prepaid keep its lowest point in the second quarter of '20.

Mexico and Brazil both increased their mobile service revenue in 9%. Peru posting 15.8%. In the Caribbean, Puerto Rico and Dominican revenue increases are 14.5% and 7.7%, respectively. Our European recorded nearly 11% growth with value equation of Macedonia and Serbia all registering better than 10% revenue increases. At nearly 7%, Austria's revenue growth was buoyed by 5G services and fixed mobile device.

On the fixed-line platform, broadband and corporate network revenue expanded 5.6% and 4.6%, respectively and PayTV revenue fell 5.2% with clients in Brazil continuing to revise down the cost of their PayTV plans reflecting a greater share of content coming from streaming services as opposed to the traditional multichannel offerings.

On the fixed-line platform, revenue growth was not working in Peru, close to 20%, Colombia, 9.8% and Eastern Europe 9.2%, with Bulgaria posting 15.5% growth and Belarus and Serbia expanding their revenue more than 20%. Not included in the charts of Argentina even with high inflation, but it's fixed service revenues have risen almost 9% in real time after inflation.

Our EBITDA margin jumped to 34.6% from 33.2% the prior year. And this was our highest EBITDA margin in nine years. Mexico and Central America, The Dominican Republic, Peru, they were all behind this margin expansion having the first three of them registered 3% point improvement beginning with Mexico, and Peru's 2.5%.

We obtained an operating profit of MXN $47.2 billion in the third quarter. It rose 4.7% in peso terms and 10.4% at constant exchange rates in relation to the prior year as depreciation and amortization charges declined 2.5% in peso terms.

Our comprehensive financing cost amounted to MXN $35 billion, which was (inaudible) a year before, mostly driven by an MXN $11 billion foreign exchange loss which resulted from the application of the dollar the quarter that we mentioned at the beginning.

Our net interest expense was down 12%. At MXN $15 billion -- MXN $15.8 billion, our net profit was down 16% from the prior year -- from the year-earlier quarter. It was equivalent to 24 peso-cents per share and 24 dollar-cents per ADR.

In the nine months to September, our cash flow helped us cover capital expenditures of MXN $91 billion pesos distribute 37 billion pesos to our shareholders by way of dividends and share buybacks. The latter amounted to MXN $22 billion. We have to see a reference. Last year by this time of the year, the share buybacks were (inaudible). So this year we're having MXN $22 billion.

We have -- our cash flow also helped us pay-down MXN $14.5 billion labor obligations and reduce our net debt by MXN $38 billion in cash flow terms. At the end of the quarter

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Bloomberg Transcript

our net debt stood at MXN $588 billion or MXN $488 billion which exclude leases. The latter amount was equivalent to 1.55 times EBITDAaL of the last 12 months. This is EBITDA after leases that I'm talking about. So 1.55 times. Net debt excluding leases -- EBITDA after lease. Relative to December, the debt in balance sheet was down MXN $59 billion.

Okay. So with that, I would like to pass the call back to Daniel and open for Q&A.

Thank you, Carlos. Thank you, Carlos. We can start with the Q&A.

(Operator Instructions) Your first question comes from Marcelo Santos from JP Morgan. Marcelo, your line is now open.

Hi, good morning. Thanks for taking my questions. I have actually two questions on broadband. The first is in Mexican broadband where you put a good number of ads. Could you speak a little bit more on how -- these ads comprise -- these are fiber ads? And second -- and given the question, if you can comment on the Mexican broadband competitive environment. The second question is on broadband in Brazil, where for the third consecutive quarter you have been losing subscribers. We saw what you discussed in the Investor Day regarding network being upgraded and being prepared to offer higher speeds but how do -- what do you expect to happen with the subscriber trends in Brazil? Do you think you revert those losses and start growing more of the market and not losing. Could you please make some comments regarding Brazil broadband? Thank you very much.

I'm going to start with Brazil and then I'm going to ask Oscar can give his comments, but on Brazil what I just want to tell you is that we have been improving and upgrading our network -- our fixed network and our mobile network and in not only in fiber, we have been growing fiber this year, we're going to be around 2.5 million to 3 million home passes in site[ph], maybe we're going to end with 5 million home passes with fiber. But in our cable network we upgrade all our cable network and almost every place in Brazil, we can give one gig of capacity. So what I can tell you is that, our network, our cable network is as competitive as fiber in terms of the speed and that so I'll ask Oscar if he can give his comments on our networks in Brazil and what we're doing with the broadband. Oscar, please?

Sure. Well, in Brazil, as you mentioned, we've been investing through getting fiber closer to the customer. And then we think that we have more or less fully resilient for the market

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Bloomberg Transcript

(inaudible) needs, even it's a very competitive market and has been changed. I mean the traditional telco has been upgrading its networks. As you know the ISPs start coming outside our network but now they are getting some cities in our network. So, it has become a very, very, very competitive market in the speed and in prices. So, what we've been doing is that we have the network ready to deliver the speeds that the market need. Even we launched, as Daniel mentioned, 1 gigabit speed across all the network, but we believe the speed of course is a fact but not only speed our new proposal has WiFi mesh included in the product with two hotspot the customers could do the right architecture to distribute the speed across their houses. And we have the best NPAs in the year that we've been implementing a lot of processes to improve the quality of services in the network and in the services. So it's a very competitive market. We believe that with these new products we will get gain in the next quarters. So I think we are ready with the quality, with the network. We've reshaped the organization in order to be in a more competitive market. So we believe that we could get new apps in the next quarters.

To add a little bit more on Brazil, just we're growing in the broadband revenues in Brazil, around 5%. So we're still growing. And I think we're doing good. We're going to talk a little bit more on the pay-TV business where we have, in Brazil, a lot of piracy. But in the broadband business, the competition in Brazil is changing, is getting more competitive all this environment. But we feel that we have a very good network, we can compete, we can do bundles and we have a very good network to compete there.

Yeah. Totally agree. And in Mexico, we reshape our offering in the market. Even we launched recently the 1-gigabit speed as well in Mexico. And we mentioned that the bundles with the streaming providers have been working pretty good. So I think that will reshape as well the commercial organization. We are doing a strong migration for customers from copper to fiber. So we'll continue to do that and we will adapt to the market conditions -- our market -- our products. So I think it was a good quarter and we believe that we could continue with the effort in the next quarter.

We are also improving our network distribution, our own stores and focusing on our digital platforms and we're focusing more on the sales of all these fiber that we have. So that's more or less what is happening in Mexico.

Perfect. Very, very comprehensive answers. Thank you very much.

Our next question comes from Leonardo Olmos from UBS. Leonardo, your line is now open. Your line is now open, Leonardo Olmos.

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