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America Movil SAB de CV
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Good morning. My name is Shanteler, and I will be your conference operator today. At this time, I would like to welcome everyone to the America Movil Fourth Quarter 2020 Conference Call and Webcast.
[Operator Instructions]
Thank you. Now I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.
Good morning, everyone. Thank you for joining us today to discuss our fourth quarter financial and operating results. I'm here on the line with Mr. Daniel Hajj, our CEO; Mr. Carlos Garcia Moreno, CFO; and Mr. Oscar Von Hauske, COO.
Thank you, Daniela. Welcome. Good morning. Welcome to America Movil fourth quarter of 2020 financial and operating Report. And Carlos Garcia Moreno is going to make a summary of the results.
Carlos?
Thank you, Daniel. Good morning, everyone. Going into the fourth quarter, the economic recovery already on the way appear to be picking up speed throughout most of our region of operations, with confidence levels shooting up in November following the U.S. presidential election, shortly thereafter, the announcement of the approval of vaccines meant to ward off the COVID-19 virus.
In this context, the Latin American currencies, which have depreciated sharply against the U.S. dollar as the pandemic began strengthened notably with the Mexican, Colombian and Chilean pesos rising approximately 10% versus the dollar during the quarter. Other currencies did as well, including the euro and the Brazilian real that had appreciated 4% and 8%, respectively.
In light of ways of sales and expected COVID containment works, some countries were imposing confinement measures in various cities in December. Nonetheless, trends for the quarter generally showed good results in terms of mobile net additions overall.
We added 6.8 million subscribers in the fourth, twice as many as in the preceding quarter. Net additions, including -- included 2.7 million postpaid subscribers with Brazil leading the way after adding almost 2 million subs, followed by Peru with 223,000 and Colombia with 200,000.
In the prepaid segment, we gained 4 million subscribers, with Mexico and Brazilian -- and Brazil adding 1.2 million each and Colombia close to 800,000 clients. In Central America, we also saw more dynamism in the prepaid market with nearly 600,000 net additions.
By the end of the year, we had fully recovered our prepaid base, the one most affected by the pandemic, which had several sharp reductions in the second quarter on account of the restrictions on mobility and on the functioning of our commercial services. Our postpaid base experienced a much more limited impact and had kept on rising for the most part.
On the fixed-line platform, we have gained 208,000 new broadband clients, almost half of them in Colombia, with Mexico and Argentina, contributing approximately 35,000 each.
Active growth was driven by mobile postpaid and by fixed broadband, with active base expanding 10.1% in the case of mobile and 5.4% year-on-year in the case of fixed-broadband.
Fixed-voice and Pay TV access continued to decline. They declined approximately 4%. Fourth quarter revenues, MXN 255 billion, were down 3% in nominal peso terms, with service revenue declining 0.3%, practically flat. At constant exchange rates, service revenues actually increased 2.2% faster than in the preceding quarter when they had risen 1.5%.
The expansion of service revenues were driven by mobile service revenues that accelerated to 4.1% from 3.5% the prior quarter. For their part, fixed-line service revenue declined slightly, minus 0.9%. It was their best performance in early year.
Mobile postpaid revenues continued to be our top line item, increasing 6.3%, up from 4.7% the prior quarter, with Austria, Puerto Rico, Peru, Brazil and Mexico, all showing sequential improvements.
Prepaid revenues decelerated slightly from 2.5% in the third quarter to 2.3% in the fourth one, practically they stayed the same.
Our second most important revenue line is fixed-broadband services continued to perform well, expanding 8.4% in the quarter, slightly less than the 9% of sales observed the prior quarter as revenues decelerated in Mexico, Peru and Chile. PayTV revenues continued to decline, although less rapidly, minus 7.5% year-on-year compared to minus 9.2% in the prior quarter, reflecting improvements in Colombia, Austria and Chile.
EBITDA came in at MXN 83 billion. It was up 1.3% in Mexican peso terms and 5.3% at constant exchange rates. Most countries registered stronger EBITDA growth. Correcting for the impact of a one-off effect booked in the fourth quarter of 2019, concerning the restructuring of certain lease agreements, EBITDA would have increased 7.6% at constant exchange rates. EBITDA margin expanded 1.4 percentage points and ended fourth quarter at 32.5%.
Our operating profit was down 8.7% in peso terms to MXN 40 billion, as we increased charges for depreciation and amortization by 13%, having accelerated those associated with the Nextel operation we acquired in Brazil the year before.
Our operating profit, together with the net financing income in the amount of MXN 15 billion obtained in the quarter, stemming from foreign exchange gains, stemming about a net profit of MXN 37 billion, 80% higher than that of the year early quarter. That's equivalent to MXN 0.56 per share, MXN 0.54 per ADR.
Our operating cash flow allowed us to fund capital expenditures in the amount of MXN 130 billion to cover MXN 15 billion of shareholder distributions, including share buybacks and MXN 18 billion of pension and other labor-related liabilities.
And on top of this, it allowed us to reduce our net debt by MXN 65 billion. This is cash repayment of net debt. Our net debt ended December at MXN 647 billion, including capitalized lease obligations. It was equivalent to 1.93x last 12 months EBITDA, slightly below where it had been at the beginning of the year.
In Mexico, both prepaid and postpaid service revenues expanded slightly more rapidly than they had the prior quarter. Fixed-broadband service has decelerated to a 1% pace, while voice and corporate network revenue declined, in line with the rate of third and fourth quarters. EBITDA declined 5.2%, but adjusting for the one-off effect mentioned before, it would have grown slightly in the quarter to 0.4%.
In Brazil, postpaid revenue growth maintained its nearly 10% pace, while prepaid revenues decelerated to 1.5% year-on-year. On the fixed-line platform, fixed-broadband revenue stayed on trend, growing nearly 7% year-on-year, while fixed-voice revenues accelerated their decline.
EBITDA increased 8% in the quarter as the margin inched up from the third quarter to 40.4%, which means a 2.3 percentage points margin expansion over the prior year.
In Colombia, service revenues expanded 9%, with solid growth in both the fixed and the mobile platforms. Postpaid revenue growth increased to 7.4% as prepaid revenues decelerated to 3.5%. On the fixed-line platform, revenue growth continued to accelerate in the case of both broadband and PayTV services. Strong revenue growth brought about a strong EBITDA increase, 7.7% in Colombia.
Finally, in Austria, you could see improving trends on both fixed and mobile service revenue growth, with the latter reaching 2.7% in spite of the loss of roaming revenues brought about by the restrictions imposed on account of the pandemic. EBITDA increased 4.2% before restructuring charges associated with provisions for the early retirement of employees.
Well, with this summary, I will pass the floor back to Daniel Hajj.
Thank you, Carlos. We can start with the Q&A.
[Operator Instructions] And your first question comes from the line of Leonardo Olmos with UBS.
Yes, my first question is about the infrastructure spinoff. A few questions here. Will you do something similar to Telesites? Will you issue new stock for current AMX owners or will you eventually sell control for external party or a sales leaseback type? Which assets will it be? And will we have fiber infrastructure, maybe -- I don't know, maybe submarine cables, in which countries would it be?
It's going to be on spin-off, but Carlos can explain a little bit more on more detail.
I think, as you mentioned, Leonardo, it's similar to the -- to what was done with Telesites. It's a spin-off where we will be distributing shares of the new entity that will be initially in Mexico, and we will be distributing the shares over to our America Movil shareholders.
Okay. Okay. Great. Okay. America Movil current shareholders will be the owners of the assets, got it. And how about countries? And just to understand exactly which assets, we understand that the towers will be there, but how long -- how much fiber will be part of it as well?
We're not expecting to do anything which requires towers. It's only the passive infrastructure of the towers, exactly. And they are going to be in almost all the countries, where we're reviewing, which countries we'll do first, but it will be -- all the countries in Latin America and the Caribbean. So that's what we're doing that. And we are working with our partners in Telekom Austria to decide what will be the way to also decide on the towers.
And your next question will come from the line of Rodrigo Villanueva with Bank of America.
Can you hear me well?
Yes, perfect.
So first, I wanted to see your thoughts regarding the potential for the PayTV sold. This must be a part of the [indiscernible] eliminate autonomous institutions in Mexico. I mean, I was wondering if you have any thoughts on this. If this could be positive for the sector as a whole or you would perceive it as negative? That would be my first question.
Well, we are not to close on that. There is some news that the government will disappear if I tell and will do it in another sector. But we are not -- today, we don't understand exactly what are the reasons and why they want to do it. So I don't want to take any position on that right now.
Understood, Daniel. Then my second question is related to EBITDA margin in Brazil. And we have seen a significant expansion to 40% from -- around 37% last year. I believe, part of this has been driven by synergies and acquisition of Nextel. So I wanted to ask, if you believe you have already achieved 100% of the synergies from this acquisition or there is more to come in the future?
Well, we have been -- I think that the synergies of the acquisition of Nextel, we have been already do everything. Still, we have a small part on the towers. There are some towers that we are not using, and we need to decide what to do with them. We're leasing the towers and we are not using the towers. So we need to decide what to do with that. But all -- overall, I think that the synergies that we have from buying Nextel, we already do it.
But also, the expansion on the margin is not only because of the synergies of Nextel. I think, we're doing very good on the market. We're gaining share, gaining share on revenues. On the mobile side, we're reducing cost and expenses. We're transforming, on the digital side, a lot of our costs. So we're being more efficient. There's a lot of things that we're doing in Brazil, not only the synergies of Nextel. But Oscar can talk a little bit more about what we are doing in Brazil.
Thank you, Daniel. Just as you mentioned, we are considering [indiscernible], but we went line-by-line in all the P&L and find opportunities to reduce costs in [indiscernible]. Of course, one of -- the main one is to do a digitalization of process, customer care and customer retention. We developed our chat bots. We are using WhatsApp. We are moving the payments to do it digital. So it's different action item that goes to a digital transformation, and of course, taking the senior leaders from Nextel. It is full practices of cost reduction and expense.
And in the other side, I think what I said is we're doing very good on the commercial side. We're gaining good revenues, and that is helping also to increase our margin.
Very clear, Daniel. And one final question, if I may, which is related to your byelections. I think, recently, you increased the fund by around MXN 6 billion. I mean, I was expecting you potentially now that you're close to sell the operations of TracFone and well reaching your net debt-to-EBITDA target of 1.5x potentially to be more aggressive with respect to buybacks. Is this something that you are still considering to do?
Can we see AMX increasing its -- the resources for its buyback funds further in the near future? Any answer on this probably would be very helpful.
Yes. What -- we do like extraordinary assembly, I think, what's on Monday because we almost finished what we have on the funds -- on the buyback fund that we have. So we do it, and we're going to have our ordinary assembly in April. And we are going to review what to do or what amount we can increase on the share buyback fund. So that's what -- we only do this to go to April. And on April, we're going to decide the amount of the fund again.
And your next question will come from the line of Carlos Legarreta with GBM.
Can you hear me?
Yes, yes.
Daniel, I don't know if you can provide us with some color regarding CapEx. I mean, obviously, the figure for 2020 was very much in line with your previous comments. But I don't know if you can talk about a little bit about 2021.
What we always do around -- the previous CapEx in 2020, the budget that we had on 2020 was around $8.5 billion. And we decide, during the pandemic, to reduce that because a lot of things. But one of the most important thing is because we cannot do -- there were 3 months where we were stopped, so we cannot put the CapEx to the infrastructure because of the pandemic in April, May and June. So that's also a reason why we do -- we decided to reduce the CapEx.
And at the end of the day, I think our CapEx for 2020 was around $7 billion, more or less is what we finish off from $8.5 billion. We do around $7 billion, a little bit less than $7 billion. And I think, for this year, we are around $8 billion, including what we are going to buy on frequencies for 5G. So that's more or less what we're thinking to do in 2021.
And your next question will come from the line of Alejandro Gallostra with BBVA.
The first one is related to the ICC segment. You have been mentioning in the past few conference calls and press releases, the progress that you are making in IT solutions. And you are even launching a new set of products for corporate clients in some countries.
So it would be very helpful to know more about your strategy here. And what is the market opportunity that you see in this segment? How much of your revenues come from the ICC sector and how much you could go?
Sure. As we mentioned before, [indiscernible] ICT services, in cloud services 4 years back and we have, as you know, a very large footprint of data centers. What we've been doing is to install the data centers to have the line availability to have cloud services, and we have a generation of the data centers.
So all the trials are fully interconnected. So we could do more loads across all these clouds. What we do, we offer them cloud. We offer the different range of cloud services, Software-as-a-Service, Infrastructure-as-a-Service and Platform-as-a-Service.
And as you know, one of the things is that we developed a concept that is cloud offer. We orchestrate different clouds, and we have a single point of contact with the customers that we could offer to them different proposition around the cloud. And above the cloud, we are bringing vertical solutions for agricultural sector and mining, transport, retail.
So what we want to become a single point of contact to the customer. From the connectivity, security, data centers, it could be private cloud or public cloud. And then, above all of these is all these vertical solutions that I have mentioned.
And to be honest, it will be released in the market. And we won a very big contracts in Mexico and Brazil and Colombia. But given the area that we have a good room to gain into this market.
And I have a follow-up question on the tower spinoff, if I may. I think -- I believe you said that the company will be listed in Mexico and then its [indiscernible] right. And I would also like to know, what will be the legal structure of the company, if that would be a FIBRA REIT? And also give a point to transfer some of your debt to new entity in a similar way you did it with Telesites back then?
Yes, it's -- we're not thinking to do a FIBRA right now. We're going to only spin-off as we do it in Telesites and we're going to put some debt. So we want to give, and give value to the actual shareholders on America Movil. So we're going to spin-off the towers in Latin America and we're going to put debt.
So it helps for the shareholders, we are giving value and we're reducing the debt in America Movil. So we still don't know exactly what the levels of debt that we're going to put. We're still making all the paper work, and we think we can complete all this reorganization this year to spin-off the company.
And your next question will come from the line of Andres Coello with ScotiaBank.
Yes. I have two quick ones. If you can clarify, how many of the 60,000 towers are in Latin America and how mainly in Europe? And my second question is -- it's pretty technical. I was just wondering if you can confirm, how many operating liabilities you have with related parties at America Movil?
I believe that in the last 20-F report, you mentioned MXN 23.8 billion of operating lease liabilities with related parties. And I was wondering if this is primarily related to Telesites.
I think in Latin America, we have around -- between 35,000 and 37,000 towers. I think it's what more or less we're going to spin off. And in Europe, we have around 16,000 towers. It's Austria plus the rest of the other countries where we are. So that's more or less what we have. So we divided in two, Latin America and Europe. And the other question, I don't understand exactly.
It's just a very technical question. In the last 20-F report, you mentioned operating lease liabilities with related parties for MXN 23.8 billion. I was wondering if this is related to Telesites because this could be an important reference for the new company in regard to how many operating lease liabilities you will have to book as a result of the spin-off.
So I was just wondering, confirming with you that the MXN 23.8 billion is primarily related to Telesites.
Yes. I think that we need to check. I don't really have this information here with me on the 20-F, but let us go through that.
And your next question will come from the line of Marcelo Santos with JPMorgan.
I would like to ask about 5G auction. So first, if you could give us some color on the discussions for the 5G auction in Mexico. And second, you mentioned that the $8 billion CapEx for 2021 should include the frequencies for 5G. So what countries are you considering in this calculation? If you could give some color on that component of the CapEx as well would be very helpful.
I don't have exactly the countries. I think it could be Brazil, could be Colombia. Here in Mexico, we already have -- of course, we are interested in the option. But in Mexico, we already have some 3.5 frequencies that we have. Maybe Dominican Republic would be other country. So there's a lot of countries, but we can -- Daniela can give you a little bit more color on which countries we are considering on the options.
And yes, the CapEx is included -- what we have been doing the last years is we have been investing -- heavily investing in our networks. I think we have the best networks in Latin America. And we're preparing the networks to do 5G. So the 5G investments we have been doing last year and previous year to prepare the network to do 5G. So we are there to -- we already -- a lot of our countries already has been built to life, our networks, our core. So there's a lot of things we are already advanced. And I think this year, we can launch 5G in some countries.
And there's 3 types of 5G, the DSS, the non-standalone and the standalone. And so we are deciding in which frequencies and which 5G we are going to launch and then what the path we're going to take. So that's more or less what we can tell you.
And look, there's important -- it is very important that all our towers -- almost all our towers have fiber or high-speed microwave. So we also are prepared for that. So there will be a lot of things. We have a good core network, fiber all around the nodes. So we have been advancing a lot on the -- for -- to put 5G.
And some color on the Mexican 5G auction, is there anything that you would say?
I don't have it right now the date where they want to launch. But as I told you, we already have 3.5 megahertz. We bought 50 megahertz some -- maybe last year. And then we already have another 50 megahertz, where we're in the process on the reviewing with the IFETEL the rules for those frequencies. And I think what Daniela is telling me is that on October 2021 are going to be the auctions on 5G in Mexico.
And our next question will come from the line of Walter Piecyk with LightShed.
Daniel, just I guess a quick question on just CapEx again. The -- I think you said 2020 was $7 billion. I think, when I look at the numbers, the math says it's $6 billion. But you might have been including some acquisitions or something that I wasn't familiar with or maybe it's a currency change. But is there -- of the $7 billion, was there something else in there that would not be like actual network equipment for 2020?
And then for 2021, for the $8 billion, can you give some sense of the breakdown of like network equipment versus spectrum, what the difference -- what the allocation would be?
Yes. Maybe you are right. There's going to be a $6 billion total what we have including that for last year. I think it's between $6 billion and $7 billion. I need to review exactly the numbers, but it could be $6 billion, $6.5 -- 6.5 billion, so it's around that. We're still closing everything on the infrastructure. So -- and on the transformation -- digital transformation that we're doing a lot on that. So I can check and give you a precise answer.
No problem. And then, the $8 billion for next year, is there -- do you have a sense of the mix between spectrum and network equipment of that $8 billion?
I think the spectrum -- I don't have the numbers exactly, but I can tell you that we're really interested in doing more fixed in some countries. I think we have a lot of -- there is a lot of opportunities in the fixed, let's say, in Peru that we're growing around 20% revenues in the fixed side. I think in Colombia, also will be a good opportunity. In Brazil, we are doing like more than 2 million of home passes for this year.
So we're looking where we have good opportunities -- revenue opportunities and we're going to invest on that. I think you are right, they accrue. It's around $6.3 billion the accrual, but we already asked more. So that's the number that I gave you. So that -- the rest of this $500 million is in process to finalize and do that. So that's what it is.
And I don't know exactly what's the number of the -- on the spectrum. And also, it's important that we don't know what's going to be the end-price of all the spectrum. What we have around, for this year, maybe $600 million to $700 million on spectrum. It's what we feel we have to pay this year on the spectrum.
So obviously, an increase in network equipment, even if you exclude all that other stuff. Understood. And then I don't know if Carlos wants to answer this or you, Daniel, but historically, when you kind of hit these milestones of your leverage ratios, sometimes you do very large special dividends. Sometimes you do very large share repurchases. Is that -- are you conceptually looking at that the same way or is it possible that it's kind of a more steady flow of share repurchases or dividends every quarter as opposed to be just kind of onetime large special things that you've done historically?
Well, we still -- I have to be honest with you, we still don't know. We need to really finalize the sale of TracFone. We need to complete the oil repurchase and to do our towers spin-off. And when we have all of that, of course, I think it has to be on more share buybacks or a special dividend that we used to give previous years. So we still does not -- we haven't decided exactly what we're going to do.
But we really want to finalize all these transactions, all these operations that we have in the way. And when we decide that and see exactly where we are, then we're going to take a decision. So it's more share buybacks or so it could be extra dividend, a special dividend, something like that.
I don't know, Carlos, if you want to add. Carlos, do you want to add something on that?
No. I think what Daniel said. I think, once we hit our leverage targets, and we are clear in terms of more certainty on the growth, I think that we are prepared to do more distributions. In fact, what I'm really saying is we still need to define what it's going to be more along the lines of share buybacks or its going to be more exceptional dividends -- extraordinary dividends, or maybe both.
No, Carlos, I understand that. I think the question -- I guess that you can decide between the two. The question was more about whether it's going to be regular versus like these large special ones that you've done because it seems like companies are more tempted to do regular ones because if it's predictable, it draws in a broader investor base and maybe helps the valuation a bit more. But that might not be something that you guys care about, I don't know.
We de care, Walter.
And our next question will come from the line of Ernesto Gonzalez with Morgan Stanley.
We just have one question, and it, how should we think about the increase in stake in KPN recently?
Sorry, I don't hear you well. You said about the ?
Yes. How should we think about the increased stake in KPN recently?
Well, on KPN, the only thing I can tell you is that there's -- what we're doing is only a financial investment, and we are not interested in doing a bid or buying the company. So that's only a financial investment that -- what we are doing in KPN.
And your next question will come from the line of Gilberto Garcia with Barclays.
Can you comment on whether you continue to eventually request again a PayTV license for Mexico?
Yes. Well, of course, we are interested in asking for a TV license. There's -- we already submit in the IFETEL TV license. So of course, in Mexico, we want a TV license. There is no reason why they don't give us that TV license, and we hope we can have that TV license soon. So it's very important for us to have a TV license, and we're waiting for that. Of course, we are interested.
And our next question will come from the line of Maria Azevedo with Santander.
My first question would be on your view on the network sharing agreements that some of your competitors are doing in Brazil. Would you be interested in joining such agreements in less strategic market? And how do you see those neutral fiber network playing out?
On network sharing, we have maybe a different view on some of our competitors. I think in some places, we can we agreed to do network sharing, depends where and how. But to do network sharing, let's say, in big cities and then do the network sharing and then grow because you're going to have more capacity and then you have to decide with the one with your partner that you do the network sharing and increase and do more, I think, doesn't make any sense for us.
So in some places, maybe where we need some coverage and there are rural places and we don't think we're going to need capacity or upgrade or do something in the network soon, maybe yes, we're interested to do some network sharing.
Also, we can do network sharing on the fiber. Of course, we can put fiber and then do sharing on that fiber in some places. So in some things, we agreed to do network sharing. In other things, it's not because we don't agree. It is because we think that doesn't make any sense for us to do network sharing at this time. I don't know, Oscar, if you want to add something.
No, I totally agree. I mean, we mentioned it is in a greenfield area to share network in fiber, that's so great. And we [indiscernible] we are analyzing.
Perfect. And my second question would be on -- did you see any initiatives taking place in monetizing your subscriber base, financial services, digital wallets, mobile advertising, anything that could generate some incremental ARPU more advanced in the region?
Yes. We're doing the digital wallet in Mexico. We want to do it in Brazil, in Colombia, and we can expand Argentina also. And we want to expand to all the rest of the countries. But Oscar can talk a little bit about what we do on the digital wallet.
Yes, we are doing this digital wallet concept that is to address a market that is not bankrupt and to get a solution that is a fully integrated solution that you could use the digital wallet or as well as third-party payments as gaming, as paying utilities. So this is an ecosystem around, and we believe that the focus is the pick that is not bankrupt. We are in a friends and family environment in Mexico, in Colombia, in Argentina and in Brazil. So it's a concept that we will export to other properties as we find out the way to address the bank, or we are now in a friends and family move in all those countries.
[Operator Instructions] And your next question will come from the line of Soomit Datta with New Street Research.
Two, please. Firstly, on Brazil, just regarding the acquisition of Oi wireless. You did not pick any spectrum up in that transaction, I think, mainly for regulatory reasons. Should we assume because you're picking up subscribers, but no spectrum, you might have to increase your CapEx in Brazil to accommodate the new subscribers and new traffic once the deal closes?
And then the second question, please, is on Colombia. I wondered, have we yet seen any activity from the new entrant or effective new entrant one in the market? And how are you preparing for the imminent launch?
Yes. On the Brazil CapEx, we already have included in the CapEx that we have in Brazil to take all the Oi subscribers in our network. So we are working on that. We're expanding our infrastructure in the places we need to expand, and it's already taken that into consideration. So the CapEx include the Oi subscribers in Brazil.
Now on one -- yes, one is another competitor. We know them very well what they do in Chile. As for any competitor, we're working and we're increasing capacity. We have very good coverage. We have very good network. We have 3 or 4 plays in some of our customers. And well, we're prepared to compete now as we compete in other places with new competitors.
So we have that on Peru with Entel and Bitel both and another in Chile. So we compete, so let's see how -- what they are going to do and what we need to do, but we are prepared. What we can tell you is we are going to compete, and we're prepared to compete there.
And there are no further questions at this time. I would now like to turn the call over to Mr. Daniel Hajj for final remarks.
I just thank all of you to be in the call, and thank Daniela, Carlos and Oscar for being here. Thank you. Thank you all.
Thank you, everyone. This concludes today's conference call. You may now disconnect.