America Móvil B de C : Q1 2020 Transcript

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Daniel Hajj Aboumrad, Chief Executive Officer

Carlos Garcia Moreno, Chief Financial Officer

Daniela Lecuona, Head of Investor Relations}}}

Oscar Von Hauske, Chief Fixed Line Operations Officer

Bloomberg Transcript

Good morning. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the America Movil First Quarter 2020 Conference Call and webcast. All lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question-and-answer session. (Operator Instructions) thank you. Now, I will turn the call over to Miss Daniel Lecuona, head of Investor Relations.

Daniela Lecuona

Thank you.

Good morning everyone and we're here today to present our first quarter 2020 financial and operating cost because everybody is safe, which are available -- Daniel Hajj, our CEO; Mr.Carlos Garcia Moreno, CFO; and Mr.Oscar Von Hauske, Chief Operating Officer.

Thank you, Daniela. And welcome everyone to the first quarter 2020 financial and operating report and I'm going to pass please Carlos. So, he can give us a summary of the first quarter results.

Carlos?

Carlos Garcia Moreno

Hello? Good morning, everyone. We have essential result we have today. As I show that -- First quarter

figures in this report show limited impact so far from the pandemic. Our consolidated results were strong, with all our main operations performing well.

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Bloomberg Transcript

However, after contingency measures were enforced in all countries, most of them around mid-March, operational talked since begun to change. There's no clarity it with creation of magnitude of reward or it's impacting the countries where we operate. Now make a model we have been fully committed to ensuring the continuity of our top quality services, prioritizing the health and well-being of our clients and employees and adapting I will process and commercial plans. The commodities of all subscribers.

We will continue to work together with our various stakeholders weekend. Signs of the emergence of the Coronavirus pandemic in China early in the first Quarter and of the ensuing contagion of other regions, first in Europe and then in the Americas, brought about a chaotic response we sponsor financial markets concerns are a major economic contraction would follow over the last several weeks before the partial lockdown of various countries has resulted measure collapse of economic activity and rapidly rising levels of unemployment most Latin American currency depreciated versus the US dollar will be Mexican peso losing 25% civilian realm 29% of the Colombian Peso 24% relation to the levels of the class of 2019. We gained 1.4 million mobile postpaid subscribers in the first quarter, including 874 thousand in Brazil and 215 thousand in Mexico. In addition, we incorporated

3.5 million postpaid clients that came to us with the acquisition of Nextel Brazil. Fixed-broadband is still the main driver on the fixed-line platform; we connected 432 thousand new accesses, including 107 thousand in Brazil and 105 thousand in Mexico.

Mobile postpaid and fixed broadband continue to be the main drivers of actual growth with 7.8% and 3.5% respectively. All over the axis lines continue to determine year-on-year. Our consolidated revenue expanded or a rapid pace.

Our several operation including Mexico I feel like Colombia also the very, very increase in magnified course. Consolidated revenue 250 billion pesos will up 1.8% in Mexican pesos terms. We service revenue growing 5.0% at constant exchange rates from a year before, and EBITDA rising 8.3%. Mobile services with the main driver of revenue growth at 8.4%, the more economically place in several quarters.

While -- services we can continue to expand slightly. Mobile segment revenues -- 15.4% -- and approximately 10% in Mexico Colombia and the Dominican Republic where 650 revenues expand it also 110% in Argentina and Colombia. We recover posting 40.5% after simple. Posted revenue was up 30.6% constant exchange, which also brought America Movil partly on account of incorporation of an extended, our several concrete experience and an acceleration of revenue growth.

Prepaid service revenue expanded at 3.9% all throughout the group. Although Mexico, Colombia and Dominicana saw 13% increases. Mobile ARPU rose in most countries from the year before driven by data services, as data consumption per client kept on increasing rapidly - and Fixed-broadband revenues of 7.8% the second most dynamic business line in our group after mobile postpaid revenues-did not manage to fully offset the declines seen in voice and PayTV. Peru, Colombia and Ecuador presented sequential improvements and their best results in over a year while fixed service revenues in Brazil and Puerto Rico continued their downward trend.

In Mexico prepaid revenues shot up 13% with postpaid revenues accelerating to 6.8%. On the fixed platform broadband revenues hovered around 3% and fixed voice continued on an improving trend. All this resulted in EBITDA shooting up 12%}

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In Brazil proforma mobile postpaid revenue growth stood at 17.2%, with prepaid trends improving. On the fixed line platform broadband revenues expanded 6.3% but voice and Paytv stayed on a declining trend. Ebitda shot up 7.5%. In Colombia service revenues expanded at similar rates on both the mobile and the fixed-line platforms, approximately 9.5%. On mobile prepaid revenues surged 13.5% with postpaid moving up to 7.7%.

On fixed, broadband service revenues continued to shine at nearly 13%. EBITDA expanded rapidly in all our main operation, rising more rapidly in Mexico nearly 12%, in Brazil and Colombia EBITDA were 7.5% and 8.2%. Peru stood out with a 13.5% yoy increase.

A comprehensive financing costs totaled 79.6 billion pesos resulting from 93 billion pesos in foreign exchange losses stemming from the depreciation of the Mexican peso be it will be fairly easy you recover and in Europe.

They gave rise to a 29.4 billion pesos net loss in the quarter. Most of our debt have been raised in international markets in hard currency. Since the company is based in Mexico the debt is therefore subject to foreign exchange variations. However, the exposure arising from this funding is managed through the use of financial derivatives and had been significantly reduced over the last several months to better conform to the currency mix of our revenue base and equity investments.

Our net debt ended March at 817 billion pesos; in cash flow terms it was up 24.6 billion pesos year-to-date, helping us fund a seasonal increase in working capital.

Our net debt EBITDA for the last 12 months stood at 1.7 -- 8.7 -- 1.87 times under the prior year methodolgy of IAS17, which will be under the we have continued to year for compares profitability with last year. So, with this I would like to pass it over to Daniel.

Bloomberg Transcript

thank you. Yes.

next question.

(Operator Instructions) for your first question is from someone from the Bank of America. Please state your first and last name your line is open.

Yes, thank you.

Hi. Good morning. Daniel, Carlos May Oscar Daniela I hope you and your family sir well considering the credit that we are going through is it Rodrigo Villanueva from Bank of America. I've had a couple of questions here.

First is why does growth across countries in Latin America has a pretty solid for you next over the last several quarters, mostly driven by increased data usage. Now that many

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customers are probably using more Wi-Fi networks due to the stay-at-home measures, would you expect to see significant reduction in where the data glove? That would be my first question. Thank you.

Good morning, Villanueva.

I know here you very well the question on the -- capacity, people I am and what I can tell you is that we have almost one month with a lockdown in all the countries and capacity in wireless is growing around 10% more than what we said -- it's growing but that's one issue the other issue is that there are some places like the commercial areas is where we have a lot of traffic and these traffic is moving to places where people leave two more to residents places so it's not only the growth of the traffic it's also that the traffic is moving from one place to another on the same city or from one place to the other one. Let's say in places where we have a lot of tourism, this is really the traffic is go down very fast and move to places where the people live right now. So its incremental is not so much, is 10% more on what we have been seen one week in -- but the moving of the traffic is the one that is we are reviewing. And overall what we're seeing is that all the big investments that we have been doing the last last year to say 4.5 5G ready modernizing the networks that fiber cooking technology increasing our back on weakest I think the greatest -- in Latin America or a single run good run per meters to move also traffic very fast from one place to the other one from to 2G from -- 4.5 kg so on all of those things has been helping us to recover the very, very good capacity and so we have a stress test on the networks and everything is working perfectly.

Bloomberg Transcript

Understood. Thank you very much Daniela. And then my second question is related to topics deployment at the beginning of the year the target was around $8.5 billion, I believe you already realize these number probably 20% lower, and I was wondering if there is a possibility to take it even lower than that and where would you be focusing your investment in 2020? Thank you.

Yes.

Its very important question. And first I want to again repeat that we have the best networks in Latin America today by far. So, all the investments that we have been doing the last five years again in everything frequencies, infrastructure, 4G, 4.5G, 5G, Volte, one Wlan, single Wlan, everything, it's today. So, today we are seeing that we have an excellent networks that the networks are growing, the traffic is growing without any problem.

And today, it's difficult because we don't have disability on really what is going to happen, because today what's happening today. I think second query, I see the copy prices in two ways, okay? The second quarter I think, we're going to see the lockdown among the countries so containing the virus and what we're going to be there, there's not going to be too much people in the street, so everybody's going to be in their houses. So not a lot of activations, so in terms of prepaid, I don't see that we're going to sell too much. I don't

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see that in can set its going to be reduced a lot handset traffic is going to grow and that's going to be more or less what we see in the second quarter.

In the third quarter, we're going to be other things. No, we're going to see so problems all around the world in the economic part. So, that's very difficult to see the visibility on what is going on in the rest of the year. And I think, yes that we can be per part of our CapEx has an important part of our CapEx.

And all of that, it will be without sacrificing any of the quality of the capacity availability and having always the best technology there, but yes we can reduce partly low that 20%. Yes.

I don't have a number and we are very flexible company. So we can stay when we have more disability, then we're going to take the decision what we're going to do which project we're going to take out or differ and which other ones who are going to put them, because things are moving.

So I think projects like online project, I think our traffic online is growing a lot of people terms of the things that we do go online instead of doing the customer care center. So, all these projects I think we're going to move faster than what we have been doing. But other ones maybe were going to stop them. We need to see really what's going to be the end of this and what's going to be the traffic and then we're going to take the decision on that.

Understood and very clear. Thank you very much.

Bloomberg Transcript

Thank you.

Your next question comes from Marcelo Santos from JP Morgan.

Your line is open.

Hi, good morning. Thanks for taking the question and I hope you are well and stay well. The first question would be if you could could give a little bit more detail on the behavior of the last two weeks, especially two weeks of the quarter, especially on the main markets Brazil Mexico, maybe Columbia on how the different lines behaves like we saw for example prepaid very strong Brazil and Mexico in the quarter.

But how did that behave towards the end of the quarter if you could anticipate a bit of what happened in April? This is the first question.

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Bloomberg Transcript

Yes. Well the COVID classic and the lockdown as starts second first week in Austria, maybe second and third week in the other country. So unlikely we have to lockdown all the countries in Latin America I think Europe, Austria is different than what we have in Latin America.

In Latin America what working is very different things in each of the country I think we have more strongly on towns in countries like Ecuador and Peru in Mexico, Brazil and Colombia with passed from Phase 1 then the Phase 2 and then we are in Phase 3 Mexico let's say so what we're seeing all over all in the main countries is a big reduction on context handset sales, so handset people is not getting out by handset. On the prospect side, I think activations decreasing, revenue I think its okay. In prepaid as much not big reductions on the prepaid side as people who can't go out or they are not, they don't have the money to date divided this card. So it's more or less what we are seeing in the big countries.

In other countries where the not answer more strong like Ecuador and Peru and that some relations nations that did you cannot be disconnected subscribers, phosphate subscribers, then we're seeing a little bit of some people who is not paying and then we need to see when the lockdown is yes, it's finished then we're going to see how many of those would pay and how many of these accounts would cancel. What all overall I think during April, we were seeing this indicators. It's activations low, handset -- selling sunset going down very fast and the revenues more or less a little bit less than what lease having pretty much.

Thank you.

Just a follow-up on this first question. Broadband remains that a strong pace in April that will be the follow-up and the second question is due to your comment about government action. Could you summarize what are the main government actions in the countries, which have affected you in a relevant way. You mentioned it -- mentioned Ecuador, but are there other important government actions that impacted you offer? Thank you.

In broadband, broadband is doing good, broadband is still the growing in even with everything closed in in April Broadband is still growing in a pre let's see what's going to happen a 0 million film. But Broadband fixed Broadband is growing their faces the very good COVIDsome people consuming so that that doing okay. So I think it's the best product right now in terms of the lockdown the one that people is asking for and other products like all the things Oscar can talk a little bit. later about what we're selling because there's a lot of people going to home office and we're having a lot of sales on on these products and in Well, I think let's say let's talk a little bit about Mexico.

In Mexico, we should be Shanty be paid. We give maybe 228 million customers will be poultry a package of minutes and an SMS during April. We offer to all of our prepaid customers, the ones have to download that package is for free and they can talk minutes and SMS, they do it for free. We have also some reduction in our plans for the timing.

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Bloomberg Transcript

So, if you don't pick up you cannot pay then where you have rent for two or three months something everything is that is done and then you again increase your postpaid plan. So we're having all around the country a lot of different plants and we call them sometimes emergency plans for our people to help them and to stay connected and so we have that

• In terms of the regulatory side, I think they only think that I don't think its a very good idea, let's call them that way is that people they allow them not to pay no. So what the-- Glover and they do they said you can not pay because we are in lockdown then you cannot disconnect the line. I think that only -- I think these two countries and maybe other wanting in Central America, I don't remember exactly which ones we have that.

But I don't think it's a good idea called nobody and that's only in those countries where we have back.

Perfect. Thank you very much. Very clear.

Thank you.

Your next question comes from Maria Azevedo from Santander. Your line is open.

Hi, thank you

Thank you everyone for taking the question.

My first question is on competition. So you're saying lower turn especially where the stores are closed and players are adopting a more defensive mode Telefonica reducing the focus in some countries. You think you can be a bit more aggressive commercially or is it time to be more defensive?

I don't see more aggressiveness in the commercial sites here in April. I think everybody's a little bit and I'm doesn't make any sense, because nobody in the street, nobody trying, so doesn't make any sense to have a more aggressive products in April.

I don't think I don't think in May, I don't know really when we finish this lockdown and people start going now and start going again and biting. So I don't know how the competition would be. But I think I'm not seeing more aggressive plans all overall in the countries, which these days so doesn't make any sense and I don't think so. I think today what we need to do is to take care about our customers who have a good quantity to give more options online to all our customers and to work on having the capacity, the quality and to give a very good service.

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Bloomberg Transcript

I think people working from their homes need that service and were given the data. And I think all over all in Latin America by far, we are the best networks in Latin America.

Thank you very much for the daily assuring and as a follow-up question. I mean as you're approaching your leverage targets and cash flow remains strong, do you see any interesting M&A opportunities not only in Brazil, but also in Latin in general.

And you can comment anything on synergies expectations of the next several Brazil acquisition. That would be to be very helpful. Thank you very much.

I don't hear the first part of the question.

But and mix then, I think we're working on this energy. So I think was very weak for us. We incorporate 3.5 million customers prospects customers to our based in Brazil and we're working very hard with all the synergies. We're not going to get it immediately, but I think in the next year or this year, we're going to work on that.

We have a plan and we're executing that plan. So I think it's a very good purchase for America mobile. Other things on mergers, we are not seeing any other measure today, we're only focusing today on the very strong financially to have liquidity to be careful on the inventories, because today liquidity class is very important and we are being very careful and Carlos can talk a little bit about that. But no, we're not seeing any thing on the buying or making something in the short term.

Always we are open to anything, but today we are not men.

Perfect. Thank you very much.

Thank you.

Your next question comes from Carlos De Legarreta from GBM Your line is open. Please go ahead.

Thank you for taking my question. I hope you stay safe and healthy.

My first question is for Carlos, if you could provide more nature of liquidity, specifically MNO plant?

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Bloomberg Transcript

Conversion from the regarding the -- that probably you'd talked recorded lines but we have drawn and they were available.

Okay. Its helpful.

What do we have drawn to committed lines, so we have one for 2.5 billion year and we wanted to do a little bit better than EUR2 billion.

We basically cut them to be able to face situations for in the counter phase nothing to to do with the company. I think that' great. The financial markets will not be functioning properly. So we decided to do to go on these lines at accountability towards the end of March financial and market -- is located.

So I think that we are in a good position. We try to a big motivation to go again of May which is a few billion Euro bond that was exchanged every to KPN shares these bond we painted for one two weeks ago and that we have already paid down roughly half of the bond with the other cut would be paid at the end of May we do have a number for the lines of credit they are only short term in nature but I'd say in order to we have probably one we have been doing lines that we do not expect that we would require any further financing to be able to pay down the maturity that we have these vehicle dynamics here. What is the that will be resilient and so we have now source of -- liquidity.

Thank you.

That's very helpful. And a follow up -- collections plans. Would it be possible to talk about how the -- is May, April channel payment or collections or is that can be -- done the loan -- lockdown -- expand. We do this evening.

Thank you. That's very helpful. malls or shopping centers?

Yes. I think this is fell on something that covers many countries or you have a different situation small remote communication with the people is not a major are directly linked to the charges because of invoices that you collect there could have been a little bit of a disruption account point Castle Park or wherever parks have been close.

But we have been moving everything more to digital payment, so we are at this point not having muchmuch to the PPP Centre Jerry for the group of a home. But different in that we're monitoring closely. Both are the special collections overall and the depositary account. We monitor these be very close.

They don't think that there's anything that we can put a lot of attention and making sure that we don't have any issues.

Thank you so

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Bloomberg Transcript

Thank you.

(Operator Instructions) We do have another question from Fred Mendes. Please state your company.

Your line is open.

Good morning, everyone and thanks for the call. I have two questions here. I wanted more towards -- you actually.

I saw once again very strong results on the mobile segment and my apologies its disastrous questions already made a gesture I had to enter the college. But very strong results once again, you are delivering like 10% growth serves a mobile service revenue while the other guys I've been living like most single digits, so that doesn't call to attention. And so I'm just wondering these very solid solid results even on the prepaid as we approach 5%. This solid results comes more from know what you're doing and upselling on your own day.}}

So basically of course, increasing argue and then selling more for more and more data for more price or you basically being able to gain a lot of clients from competition. And if you can give us that if I won't throw any specific company as well. So just Trying to understand the very strong results on the mobile front of you. Thank you.

Carlos Garcia Moreno

Yes, thank you for the call. And we have very, very good stronger results in -- also and especially in the postpaid and prepaid side in the mobile side and we can see that in Mexico with a very strong results that's really because the I insist because of the our good networks of people is preparing to move to our network so it could be a little bit more on consumption, but there's also parts that you can be on gaining market share so in Mexico, definitely we are we are doing very well people is having we have the best distribution networks so very good brand we have recently in Caswell open signal study where we have the best reliability opening, sounding, latency and people are looking for quality. So that's very important and that's why you are growing. In Brazil, also we are growing very- very strong.

We have been putting a lot of money in the CapEx in the last year's in both States in prepaid in all the mobile site growing COVID action growing 4.5 GSP to become the desk speeding 4.5G in Brazil. I think we get almost 1 million a million subscribers per quarter for the last three or four quarters. So that's also I think it where we are gaining that see the not number one everybody reports, but I think we are also gaining a little bit on market share there. And Colombia also moving good, we are growing in Colombia, we're growing prepaid and postpaid, very strong prepaid and very strong postpaid.

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Bloomberg Transcript

So all over all, the rest of the countries also we're doing good Chili, we're starting to grow again and Peru we are doing excellent, Dominican Republic very good. So all overall, we are doing very good. In Mexico especially, we have very good -- we have been having very good increases in the prepaid market. Prepaid has been growing very strong using a lot more data, moving to better balances.

They used to recharge. Let's say 50 pesos. And today they are charging 100 pesos. So, people is moving and people is consuming more and more imprecise in Mexico.

So, I can tell you that its distribution, its competition with more consumption better everything together. I cannot say that something that that is what it sells the most. No, I think it's all over all the work on the last 3 years, 2 years that it is giving us these results today.

Thank you very much, Daniel.

Very-very clear.

Thank you.

Thank you.

I would now like to turn the call back over to Mr.Daniel Hajj for closing remarks.

I just want to thank you everybody for being the call Carlos Costa. Thank you very much, everyon. Bye-Bye.

This concludes today's conference call.

You may now disconnect. The Event has Ended

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Bloomberg Transcript

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