America Movil SAB de CV

BMV:AMXB

Earnings Call Transcript 2022-Q4

[Operator]

Good morning. My name is Nadia, and I'll be your conference operator today. At this time, I would like to welcome everybody to the América Móvil Fourth Quarter 2022 Conference Call and Webcast. [Operator Instructions] Thank you.

Now I would like to turn the call over to Mr. Daniela Lecuona, Head of Investor Relations.

[Daniela Lecuona, executive]

Thank you. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter 2022 financial and operating results. We have on the line Mr. Daniel Hajj, CEO; Mr. Carlos Jose Garcia Moreno Elizondo, CFO; and Mr. Oscar Von Hauske Solís, COO.

[Daniel Hajj Aboumrad, executive]

Thank you, Daniela. Welcome, everyone, in the fourth quarter '22 financial and operating report, and Carlos is going to make a summary of the results. Thank you, guys.

[Carlos Jose Garcia Moreno Elizondo, executive]

Thank you, Daniel. Good morning, everyone. Well, at the beginning of the fourth quarter, uncertainty about inflation and how much bringing it down would require in terms of additional interest rate hikes by the Fed drove long term interest rates in the US to the peak for the year in October at 4.2%. They remain very volatile the rest of the quarter, ending the year at 3.7%.

Nonetheless, the impression they had peaked ended up helping several currencies in the region, particularly the Mexican peso and the Chilean peso which appreciated sharply vis-à-vis the dollar with the Colombian peso stopping and then reverting slightly decline of several months. Throughout the period, the Brazilian real remained quite volatile and with no upper end trend as the country was in the midst of our [indiscernible] election.

We added 3.3 million wireless subscribers in the quarter, of which 1.5 million were postpaid clients. Brazil led the way with 600,000 shops followed by Austria with 22,000 and Colombia with 160,000. Our net gains in prepaid totaled 1.8 million, with Mexico contributing over half of that figure with 975,000 subscribers. Colombia came next with 546,000 and then Central America with 247,000.

On the fixed-line platform, we obtained [ according 30,000 ] new broadband access. Argentina and Eastern Europe generated substantially all of them, 69,000 and 40,000, respectively. Central America, the Dominican Republic and Brazil added close to 30,000 each one.

Pay TV reverted the losses of several of the last several years with 97,000 new clients. This included 53,000 in Argentina, 36,000 in Eastern Europe and 34,000 in Central America. Although Brazil continued to post net disconnections, they were substantially lower than they had been in prior quarters. Minus 50,000 in the fourth quarter, whereas in previous quarters, they have covered between 150,000 and 200,000 clients.

In terms of actual growth rates and correcting for the acquisition of our clients in the second quarter, our postpaid base continued to be the more than align with a 38% increase year-over-year, with prepaid coming next at 4.9%. Including our clients, the excess growth rate at the end of 2022 came in at 8.8% and 6.8%, respectively. These figures already reflect a $4.1 million cleanup of our wireless subscriber base in the quarter to do with former or clients that were not generating traffic. Broadband accesses remained very stable with a 2.4% growth pace. As for Pay TV, there has been a noteworthy shift in the expansion of its client base, which turned positive for the first time in several quarters.

Our fourth quarter revenue totaled MXN 216 billion, down 2.4% year-on-year in Mexican peso terms, with service revenue declining 1.4%. The yearly reduction in revenue in Mexican peso terms stems from the appreciation of the Mexican peso vis-a-vis practically all our main operating currencies except the Brazilian trial. At constant exchange rates, correcting for the currency movements mentioned above. Service revenue actually increased 6% year-on-year, which was the same prison the preceding quarter. EBITDA declined 4.4% year-on-year to MXN 4.8 billion in the fourth quarter or MXN 79.6 billion adjusted for ordinary items.

At constant exchange rates, adjusted EBITDA rose 5% as compared to 5.7% precision quarter, 4.6% in the second quarter and 4.8% in the first quarter. The adjusted EBITDA margin remained almost flat at 3.8% year-on-year, a 34 basis point reduction in relation to the year earlier quarter.

The adjustments include extraordinary revenue from the sale of towers by Telmex, both in the fourth quarter of 2021 and 2022 and by Peru in the quarter. The reduction in medical costs and property tax rate level and telecom infrastruction in Puerto Rico and the elimination of a provision in the color associated with -- also with payment obligations regarding telecom infrastructure. You can see the numbers here on this slide.

On the -- both mobile and fixed line service revenue expanded a similar sale than in the prior quarter. Mobile revenue growth was robust at 9.8%, where site service revenue was slightly positive at 0.2%. -- very similar to the start of the third quarter. On the mobile platform, postpaid service revenue growth at 10.5% stayed strong, but that's on prepaid declined slightly from 9.5% in the third quarter to 8.6% in the fourth one. Brazil posted 22.7% mobile service revenue growth, partly reflecting incorporation of former subscribers.

Mexico came in next at 9.1% and then Eastern Europe at 7.3%, and this always move to. As for the fixed-line platform, revenue from both corporate networks and broadband services decelerated from the third quarter from 12.4% to 10.5% in corporate networks and from 3.6% to 2.9% in broadband services. However, pay TV revenue continued its recovery, declining only 3.5% in the fourth quarter, its smallest decline in several quarters.

Broadband revenue increased faster in Eastern Europe in American Republic and Puerto Rico, all of them close to a 13% pace, with Colombia observing a decline of the same magnitude on account of structure competition. Corporate Networks revenue climbed 10.5% out. Together with postpaid, it was the fastest-growing business line. Eastern Europe, Brazil and Ecuador, standard of the more dynamic ones in this segment. EBITDA growth accelerated in Eastern Europe to 10.7% from 8.6% in prior quarters.

In Mexico, to 9.4% from 4.3%, more than Bob and in Peru to 5.3% from minus 0.9%. It remains flat in Austria and decelerated to 3.5% from 10.8% in Brazil and to minus 3.7% from minus 0.3% in Colombia. Our operating profit totaled MXN 44.7 billion in the quarter, down 7% in Mexican peso terms as depreciation and amortization charges dropped 1.2%. These incorporate the reduction in related depreciation charges restate spinoff and the increased rights of year depreciation charges arising from the new tower lease obligations. After a comprehensive financing cost of MXN 8.3 billion in the quarter, which was 57% smaller than the one offered the year before, we ended up with a net profit of MXN 23.1 billion from our continued operations, 5.3% greater than that set year before and of MXN 13.3 billion once the effect of the deconsolidation of Claro Chile is taken into account. So again, the net profit of MXN 23 billion from continued operations, which was 5% higher than the prior year.

Our cash flow and net borrowings of MXN 7 billion allowed us to cover capital expenditures in the amount of MXN 160 billion, net shareholder distributions of MXN 50 billion and labor obligations totaling MXN 24 billion. The tower spin of a net acquisition of ownership interest in different assets, including a portion of our mobile clients resulted in a net receipt of MXN 35 billion, which you can see on the slide.

Excluding leases, our net debt totaled MXN 389 billion year over year. Were down MXN 19 billion relative to the year-end in 2021. Our net debt-to-EBITDA ratio came down to 1.3 at the end of the year.

So with that, I will pass the floor back to Daniel. Thank you.

[Daniel Hajj Aboumrad, executive]

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

[Operator]

[Operator Instructions] Our first question goes to Lucas Chaves of UBS.

[Lucas Chaves, analyst]

And I would like to understand what you have in mining CapEx for the near future, especially considering 5G and how that would affect shareholder distribution? And if I may ask a second question on Mexico, if you could give us more detail on the mobile strategy adopted during the quarter, mostly to understand the strategy going forward in prepaid plans and if the space of addition is going to continue going forward?

[Daniel Hajj Aboumrad, executive]

Thank you. First question on the CapEx. What we said last year is that we're going to have a $24 billion CapEx for the next 3 years. And I think it's the target that we have. That includes frequencies. And last year, I think we do 7.9%. So this year, our target is around 8.2% to because we have something last year that we're going to put this year. But -- and what I said 1 or 2 years ago is that 5G did not increase a lot of CapEx because what we have been doing is investing in 5G. So we have put the basis with a fiber to the node. A lot of the things that 5G needs. So the only thing that we need to put to increase and to do 5G more the radio, okay?

A little bit on NFV and some of the other things that we need a little in our network. We have been investing in our networks and moderate nice. So it's not something that -- what we're targeting for this year is to increase our fiber in some places. We're seeing some opportunities in some countries doing more fiber and increasing our fixed broadband, and that's more or less where we're going to focus. We're going to focus on the digitalization of all the company to save cost. We have been doing that for the last 5 years, and that's something that we are doing. So more digital, more everything more new and the cutting costs you have to invest to do better systems, IT. So that's more or less where we're investing. Our target is MXN 24 billion in 3 years, and we are on that.

On Mexico, what's your question specifically on Mexico?

[Lucas Chaves, analyst]

It's more to understand this strategy regarding the mobile strategy, especially in the net additions in prepaid, if this space is going to continue going forward?

[Daniel Hajj Aboumrad, executive]

On Mexico, I think we're doing good. We have around 100 cities in 5G as the -- we are in a very good position in 5G. I think our competitors really -- they are not competing in 5G. We have a good quantity, good name, good distribution, good top of mine in Mexico. So we are doing good. We are growing. We are growing in prepaid a loss. In the 2020 with the pandemia (sic) [ pandemic ] think the postpaid subscribers decreased a little bit, but this year, last year 2022 start to grow again.

And this quarter, we have 60,000 good, we feel we're doing also very good in postpaid. we have a good strategy. We are with a very good name in the market, and that's good. What is happening a little bit is in 2020, the wireless fixed wireless, we grow a lot in the fixed wireless because people stay at home and needs internet. And that is becoming -- is reducing as we're having disconnections on that because a lot of companies and Telmex is putting fiber. So they are disconnecting a little bit the fixed wireless. But in the normal one we are growing also the goods. So that's more or less what we have been seeing. So that's -- people is starting to move. They need a phone, they need 5G, and they are not staying at home. So they are, let's say, moving from the wireless in peak from the wireless Internet to a mobile Internet. So that's what we have been seeing in the last 6 months.

[Operator]

And the next question goes to Alejandro Gallostra of BBVA.

[Alejandro Gallostra de Arnedo, analyst]

I would like to ask you about the fixed line business strategy in Brazil. You've been reporting consistently good results on your broadband business and also in your corporate segment in Brazil. But somehow, the voice and the Pay TV segments continue to drag down results and you continue reporting a small decline in this fixed-line business. So I'd like to understand why this is happening despite the strong FTTH deployment that you're implementing in the country. How are you seeing the competition? Or why this is happening and when we should expect to see a turnaround in this fixed line business in Brazil -- this is my first question.

[Oscar Von Hauske Solís, executive]

Well, as you mentioned, when you look at the revenues on fixed volume, we are growing 5.5%. Let me comment that we did in the prior conference calls, looking at the network, all the cable network is already prepared for DOCSIS 3.1. So we could deliver 1 gigabit speed in all of the cable network. And as you mentioned, we've been building fiber to the home. We are not last year with close to 8 million home passes with fiber to the home. And we will continue to do that. So -- and we see a very good month on December on the net asset program. We were really positive on that side. I think the landscape is changing with the ISPs and all the environment that we saw in the last years but as you mentioned, voice is declining and is declining everywhere. I mean it's difficult now is a substitution through the mobile or to different sources of IP voice.

And in Pay TV, when you look at the decline, we are half of the decline that we saw in the clear quarters and has been working pretty net new, let's call it, the new TV. So we call app Claro and Claro [indiscernible]. They are working pretty good, of course, not enough to compensate the decline, but it's -- we believe that it's a good trend to compensate the decline on Pay TV. On corporate, we mentioned before, we have a very good year and different value-added services. When I mention value-added services, we are running pretty good in cloud services in new vertical solutions in the market in a chat bot that includes machine learning and artificial intel.

So we feel that we have the right organization to get a good position on the corporate market. So branded all, I think the revenues were good and the EBITDA in Brazil as well. But we will continue to do that. We will do, as I mentioned, more fiber in the country. And another thing that I forgot to mention is that fixed broadband speed is relevant. No question is at more relevant is availability of the network, time to repair. So we've been working how we do the best customer experience in the market. We are #1 in ultrabroadband in the country. And we are working to reduce the churn. And when you look at the last quarter, the churn was really good against the previous quarters because we are working as well in all customer experience around fixed broaden and all the services.

[Daniel Hajj Aboumrad, executive]

Well, I think in Brazil, just to make a summary of what Oscar is saying. I think in Brazil, we are expecting a better this year than last year in terms of broadband and in terms of the TV subscribers market and everything. So I think it's a good opportunity this year on Brazil on segment of the market.

[Alejandro Gallostra de Arnedo, analyst]

Well, I think in Brazil, just to make a summary of what Oscar is saying. I think in Brazil, we are expecting a better this year than last year in terms of broadband and in terms of the TV subscribers market and everything. So I think it's a good opportunity this year on Brazil on segment of the market.

[Daniel Hajj Aboumrad, executive]

We have talked with a lot of them until today, we haven't closed anything in Brazil. So no comment on that. Still no comment on that. We're open depending on the conditions. But until today, we don't have anything close.

[Alejandro Gallostra de Arnedo, analyst]

My second question is regarding the 5G technology. I would like to hear from you what's been your experience with the 5G deployment. It's been a few quarters since you already started deploying this technology in the region. And I'd like to hear from you what you expect to get out of this technology going forward -- and maybe more specifically, I know what's been your experience with the customers using this technology. Do you believe that you are willing to pay a premium for using this technology, and therefore, we should expect an increase in revenues and ARPUs going forward as you continue deploying this technology. And also maybe even given the increased efficiency of the 5G technology, maybe we should expect continued improvement in margins going forward.

We maybe these efficiencies should be offset by the higher operating expenses driven by the increased number of towers that you should be ramping in order to deploy this technology. So overall, how should we think about the 5G deployment going forward? What should be the impact in revenues, ARPUs and profitability going forward, given your experience so far?

[Daniel Hajj Aboumrad, executive]

It's a very good question. It's difficult to explain everything. But the thing that I can tell you is that on Mexico that we have been deployed 100 cities, and it was our first city, well, also Austria. Austria and Mexico. Brazil is going also in a good pace. The ARPUs have been growing. In Mexico, ARPU grow. Let me [indiscernible] around 6%, and a lot of that in postpaid is because 5G is 5G is helping us to grow that. I think the experience with the people is good. I think the speeds are okay. People is using more [indiscernible] touch of use. And well, you need to do a lot of work to optimize the network because then you are running 3G, 4G, 5G. So there's a lot of things that you need to do.

As you said, it's more efficient 5G than 4G. So there's a lot more handsets with 5G than we have last year. So there is a lot of things coming. And I think it's a good technology. It's more efficient, as you said. So it doesn't make any sense to put only 4G, if you can have 5G. If you -- as I said a few minutes ago, if you do all the work on all the investments that you need to do fiber to the node, electronics and a lot of things in the core also to deploy 5G. In the other side, that's the massive market, okay?

In the corporate market, I think there's a lot of new applications that we're going to sell. There's a lot of things, internet of things, things connected and it's starting to go on and on. And I think that's not all to model, but for the next 5 years, I can tell you that we're going to have millions of things connected in the corporate side and a lot of new applications in that. So we're happy deploying 5G. I think it's profitable for us deploying 5G and the people like 5G.

So there's a little bit of advertising, a little bit of more speed, a little bit of applications. There's a lot of things. And the other applications that I think is working very good in the U.S. is the 5G with fixed broadband, fixed broadband wireless in 5G. I think it's another application that is going well. And in places where you are not going to have fiber, I think it's very competitive. It's a very good product and I think the CPs are reducing the prices. So we're going to start to put more and more of this.

In Austria, we have a lot of that. And it because, let's say, young people does not want to call us for fiber connected. So what they do is they buy the 5G model. And then if they change home or they change place, they take it with them. And it's very easy for them, good speed, and it's working very good. So there's a lot of things that around 5G and it's working for us, definitely is working.

[Operator]

[Operator Instructions] And our next question goes to Walter Piecyk of LightShed Partners.

[Walter Piecyk, analyst]

Carlos, thanks for providing the constant currency growth in service revenue. Was there also any type of onetime counter entry to what you report in service revenue? I know sometimes there's like intercompany eliminations or anything in that service revenue line that might have reduced it relative beyond currency, which you also obviously put in your press release.

And maybe if you can give us some sense of in constant currency terms, what you think service revenue growth will look like for 2023.

[Carlos Jose Garcia Moreno Elizondo, executive]

Well, I think it's been quite consistent with the revenue growth. It has been accelerating through the year as we saw in one of the slides. And I think it has been stable at about 6% for 2 quarters, having increased from about 4% at the beginning of the year. And I think that the underlying trends point to growth remaining in the range, which is way higher than what we had mentioned at the Investor Day a bit more than a year ago. We're looking at 2.5% to 4% service revenue growth, and we've been delivering 6% over the last 2, 3 quarters.

So I think at present, we estimate that we are going to be continuing with this kind of service revenue growth. And we have nothing exceptional in terms of revenues. So what you see in all the results that we have in the reported countries, all the intercompany transactions are eliminated, so they cancelled out. So there's really no noise in the results from intercompany transactions at all.

[Walter Piecyk, analyst]

Maybe it's just a math on how we're calculating that conversion. And then Carlos, obviously, the move in the currency has helped the debt leverage relative to the EBITDA. When you think about capital return, who knows how sustained currency moves are going to be, but like -- but how do you think about that internally when currency helps your net debt leverage are you willing to pounce in that quarter to add additional share repurchase? Or do you wait some period of time to see kind of where currencies will ultimately end up?

[Carlos Jose Garcia Moreno Elizondo, executive]

I think that most of the [indiscernible] is really in peso. And so Mexican peso represent a larger share of the -- of our EBITDA. I don't believe that the returns or the distributions will be determined really by the currencies. I mean we've been accustomed to currencies all over the place. And what we are saying is anything going forward, is a strengthening of all the other currencies that have been depreciating in light of higher interest rates and to the extent that this -- from perception that inflation has peaked, I think that we will continue to see currencies like the Brazilian Real appreciate, and we think we will continue to see the Chilean peso appreciated the Colombian peso.

So I think most of the currencies in the region will be gaining strength over the next few quarters. And I think the main a peso will remain also quite strong. But I don't see that really affecting our distributions. I think the EBITDA -- the leverage ratio, I think, is going to be -- remain fairly stable, around 1.3%, 1.4% as noted to EBITDA throughout the year.

[Walter Piecyk, analyst]

If you don't mind, just sneaking one more in for Daniel, you talked a lot about 5G and consumers buying phones. But in last year, in the United States, people -- the replacement cycle was getting longer. People were taking longer to replace their phones even though 5G was available. I'm just curious, when you look at your markets in 2023, do you think people will be upgrading their phones more frequently or follow the same trends that we're seeing in the U.S.

[Daniel Hajj Aboumrad, executive]

I think last year and maybe 2022, definitely, there's a lack of handsets, so chips and concepts. So I think they don't replace as often because of that, maybe 2021, a little bit also 2022, I think today, we have enough handsets. But people -- what's happening and what we're seeing, people is choosing a better high handset in Latin America, a higher price handsets. But as you said, they are replacing that a little bit longer. It's what we are seeing a little bit, they choose a 5G. 5G phones are available $250 $020 right now. So there is a good prices for 5G handsets.

So for us, it's good if people delay a little bit the replacement. So it's longer what they say. And I think it's good mostly in all places we have been selling. We are not subsidizing anymore in Latin America, some places, yes, other ones no. But I think it's good if people stay a little bit longer with the handset. So I'm working that all around Latin America.

[Operator]

And the next question goes to Alejandro Azar of GBM.

[Alejandro Azar Wabi, analyst]

My question is on value creation and especially on tower announcements in congrats on the announcement on Telekom Austria. My first one is on that front and down the road on your stake in Telekom Austria. Should we think that you could monetize part of that stake. And on your tower business in Latin America, how many towers does AMX you have on the balance? And if you're planning to divest some of them in the next 1, 2 years. And the third one, if I may, also value creation is on the possibility of seeing monetization of other infrastructure assets, perhaps PVA of your network in Mexico.

[Daniel Hajj Aboumrad, executive]

Well, the tower assets, remember, we do Latin sites, and we've seen of that last year. I think we still have Colombia and Peru, and we are planning to do Peru, as we said already that we're going to do Peru this year, we're still reviewing what it's going to be -- yes, in the next month to do Peru. -- and the only towers that we still have are Colombia. So those are the only ones in Austria. In Austria, the only thing that we do is we are -- we authorized the spinoff of -- so we want to work on the spinoff of the towers of Austria.

These towers are going to be, I think, listed in Austria, planning to be listed in Austria, but we're going to remain with the shares that we already have. And I think the government of us is going to stay also with that. So we are not planning to take it out to the market. So at the beginning, we're going to stay like this only outside of Telekom Austria, and that's what we're planning to do, still a lot of work and a lot of authorizations, but that's what we have been discussing and what we're going to work to do in the next months.

No, I don't think we are thinking to sell any other infrastructure in Latin America at this moment. We are okay. I think it's -- we have a lot of fiber, but we are not planning to sell any of our fiber in Latin America and Europe. And also in Europe, we are not thinking on selling that. I think it's a good asset. We want to use it. We want to penetrate. We want to have more subscribers. And on the other side, we're going to do more fiber to the home fiber to the core fiber. We're going to put more fiber. Part of the CapEx of this year is to put more fiber through Europe and Latin America and Mexico.

[Alejandro Azar Wabi, analyst]

Just to clarify, the only towers that AMX and Telmex have on balance sheet are the Colombian ones?

[Daniel Hajj Aboumrad, executive]

See, I don't know if Telmex has something still there, but really the country Mexico, Telmex, Mexico as fast a lot of towers, the we've been enough like, I don't know, 6 years ago. Then light-scale CFOs Latin America, was pinning around 40,000 sites last August. I think we do that last August. And there are still 2 countries where we don't have. We just do the Dominican Republic this month and still Peru and Colombia are the ones that we have. Peru, we're planning to do that. And Colombia still we don't have any plan to do that. And still, maybe we have something in Telmex, but it should be very small, not so big.

[Operator]

Our next question goes to Carlos de Legarreta of Itau.

[Carlos Antonio de Legarreta Diaz, analyst]

I have a couple of questions here. The first one is fixed-line in Mexico, you have some disconnections in the quarter in broadband. Have you noticed a tighter competitive environment that your competitors expand their networks? And if you can disclose how many home passed with fiber do you have by the end of the year, that would be great.

[Daniel Hajj Aboumrad, executive]

No, as you know, Telmex has been narrating the customer from copper reset to fiber. Within last year with 67% of the customers already connected with fiber and we will continue to grow that through the next year. So now 67% of the base of Telmex is already connected with fiber. And we will continue to do that migration this year. So we are expecting to increase that 67% higher within this year.

[Oscar Von Hauske Solís, executive]

I think what we have been doing in fiber in Mexico has been good for Telmex. I think we're migrating copper to fiber. We're doing a lot more home passes. A big part of what we do is Mexico, Mexico well employed. We're going to deploy also a lot of we're not disclosing how many in each country, but Mexico is with a very good plan on deploying fiber, replacing copper and doing greenfield new areas. reviews in other places. So that's more or less what we have been doing.

Competition is very, very tough. In Mexico, prices are very competitive and what we need is to compete more and to do what to work and give good speed, good experience to the customer seen add more value to our offer, and that's what we are doing.

[Carlos Antonio de Legarreta Diaz, analyst]

And 2 quick follow-ups. Just the first one on the timing for the stock conversion. It's a single series, if you have any timing for that? And lastly, if you can please disclose the proceed you will receive from the tower sale in the Dominican Republic.

[Daniel Hajj Aboumrad, executive]

I think on the shares depending on the CNBV, but I think it's not going to take too long. I hope we can do it in this quarter as the February, March, but we don't know. It doesn't depend on authorization. All the papers are submitted. So we're waiting for that. And on the Dominican Republic, we don't disclose those numbers, but we already do around 3000 -- I remember, it's around 3,000 towers now what Dominican Republic has. I don't - Daniela can give you exactly the number, but we're not disclosing country by country. So we're already doing like a spinoff of everything sailing something has been not in other ones, and that's what we have been doing. But you can get 3000…

[Carlos Antonio de Legarreta Diaz, analyst]

I'll talk to Daniela, for sure.

[Daniel Hajj Aboumrad, executive]

I think -- sorry, not 3,000 are 1,400 towers what we sell in Dominican Republic.

[Operator]

And our next question goes to Cesar Medina of Morgan Stanley.

[Cesar Medina, analyst]

It relates to shareholder distributions and cash flows. So if I understood correctly the comments that Carlos was mentioning. You have MXN 8 billion to MXN 8.2 billion in CapEx and then leverage is supposed to be roughly stable. I'm assuming you went through your budget process, or maybe you can give us an indication of the building blocks or the free cash flow generation that you have? And what does that mean for directionally speaking, the amount of dividends and potential buybacks that you can do this year relative to 2022?

[Carlos Jose Garcia Moreno Elizondo, executive]

Well, the building go forward with the same. So M&A, we have nothing that we are considering in terms of new acquisitions for the year past. And we will continue to have some income coming from the sale of Crackdown because there is a part of the earnout is still taking place this year. And therefore, there will be some amount that will be coming in. So slightly positive on that front. Then on leverage, which has come up before, I mentioned, we don't expect to be less than 1.3x, which is where we are today. Probably 1.3 to 1.4% total we would like to be in terms of the leverage ratio. And I think that very much defines what's left for distributions. No leakage on M&A. Obviously, Daniel has already mentioned the CapEx, which is a relatively flattish compared to last year, a minor increments for this year. And that's about it.

[Cesar Medina, analyst]

And then for the rest of working capital, any comments on that front?

[Carlos Jose Garcia Moreno Elizondo, executive]

I think working capital is very cyclical in this company. We require a lot of working capital in the first quarter, and then we'll start getting it back over the rest of the year, okay? So it's very, very cyclical. But the increase year-on-year on growth in capital is relatively small and is linked to the overall growth of the company.

[Operator]

Our next question goes to Phani Kanumuri of HSBC.

[Phani Kumar Kanumuri, analyst]

So my question is regarding the pricing power for AMX. So among the major markets, which are the markets where you're able to increase the prices for plants and pass on the inflation to the consumers? And looking forward to 2023, which are the countries where you are confident that you could increase prices in line with inflation. That's my first question.

[Oscar Von Hauske Solís, executive]

I think we have been increasing prices in some countries, not in all of them. Let's say, Mexico, we haven't increased prices. We feel comfortable in Mexico in the peak. There's a lot of competition sorry, in the mobile, a lot of competition in the peak. So it doesn't look easy to increase prices there but in other countries, we were increasing and depending a lot we're going to see. The inflation is high. So of course, we're looking where we can -- where we're going to increase prices in 2023.

So in 2022, yes, we already do. We already do some countries. And as I said, in Mexico and in other countries also we don't do, so not only Mexico, another one, yes, we do it, and we were successfully increasing prices good. but we're reviewing 2023, and we're going to see where it makes sense for us to increase prices. Of course, we know that inflation is high costs are increasing. So we have to work hard on cutting costs and also in some places, increased prices, depending on the competition.

[Carlos Jose Garcia Moreno Elizondo, executive]

What we were saying before, I think that we expect currencies in revision we likely be stronger than the year-to-date. So that gives some relief on the cost side for FX-related acquisitions, content and the like.

[Oscar Von Hauske Solís, executive]

But it's something that we're looking every month to see exactly cost competition, prices, promotions, everything. So that's what we need to do all this year.

[Phani Kumar Kanumuri, analyst]

My second question is regarding the labor obligations. I think you had a EUR 24 billion of obligations outflow this year. How do you see the outflow going forward? And the recent negotiations with Telmex, how do you expect that to impact the labor obligations outflow going forward?

[Daniel Hajj Aboumrad, executive]

You have some important comments. So the labor obligations we are presenting the use of our cash flow is basically what is called out. That is not coming from the pension fund itself. We have a pension fund in Telmex and the pension plan in Telmex sometimes, we would want to keep it more funded, and that's why we haven't been withdrawing as much. But we expect that the amount that will be coming out of the -- our own cash flow as opposed to the fund itself is going to be some quite smaller than what we saw for last year, okay? So I think that we will start to see some reduction.

The pension fund of Telmex, the assets have increased significantly. I think it's a larger percentage of the obligations. So I think that we are happy to take out a bit more of that fund and a little bit less of our customer.

[Operator]

And the next question goes to [ Luca Brenton ] of Bank of America.

[Unknown Analyst]

So it is related to the Brazilian mobile market. And well, since the [indiscernible] consolidation, we saw that both prices, ARPU and net adds have been really strong. So my 2 questions are in relation to ARPU, if you believe that there's strong sequence to continue and if higher price hikes will be the new structure of the business or if this will only keep up in the short term? And then also in net adds, if you believe that those will be sustained at least in the short term.

[Daniel Hajj Aboumrad, executive]

Well, I think we have a good business in the mobile side [indiscernible]. In last purchase of oil customers, we do very good synergy there. I think we incorporate those customers and good costs. In terms of ARPU, we increased some prices in Brazil, so ARPUs are growing. And we have good quality. We have good distribution, good cost working a lot on coverage and also 5G. So we feel that we can continue to invest [Technical Difficulty].

[Operator]

And the next question goes to Andres Coello of Scotiabank.

[Andres Coello, analyst]

Carlos, you already mentioned the pension fund. Can you perhaps busy comment on the relevance of the potential conversion of Telmex pension liabilities into stock? Would you have perhaps any specific targets on what percentage of potential liability could be converted? And what will be the value proposition to workers?

[Carlos Jose Garcia Moreno Elizondo, executive]

Well, I think it's still in the stages of this. I think this is so far a concept that has been floated. I think to the extent that there's a conversion of pension rights for Telmex equity, that obviously puts the company on a stronger position because it's overall liabilities would be thereby reduced. And to the extent that's the case, the equity can take some more value over time because it will be equity of a company that will be stronger. So I think that's conceptually what is. I think there's everything else oil and this concept remains to be worked out. So I don't think that I can give you more light on that. But I think the concept is easy to understand.

[Andres Coello, analyst]

And my second question will be on Colombia. We've seen weaker results in recent quarters, some margin compression. As you mentioned in the press release that you've seen more pressure on the broadband segment. If you perhaps can elaborate a little bit on where that pressure is coming from? Is it's from [indiscernible] or if it's from Telefonica. Just a little bit more color on Colombia.

[Oscar Von Hauske Solís, executive]

I think what you see in Colombia is the one starts maybe 1.5 years ago, very aggressive in the mobile side. So we start to be -- also all the markets start to be more aggressive. But you could see the trends on the mobile. The mobile lease is starting to grow again. We grow this quarter 4.5%. It's good. So we used to grow 1 or even right now, we're growing. So on the mobile side, I think things are getting to growth again.

On the fixed side, well, it's a decision. I think the market is very competitive prices are going down. We decided to compete. So we are -- our ARPU is reducing a little bit. But at the end of the day, I think that's what we need to do. So it's going to take a little bit of time to recover. We are putting a lot more fiber all around Colombia. I think we have a very good offer and that's it, no more than that. It's not only one competitor. I think the market is under a big competition in the fixed side. And what we're doing is we are competing. So we -- that's what we have there is fiber for contracting fiber.

We are also doing fiber and prices are going a little bit down. So we decided to complete that more or less while we do promotions. We do some things to compete in the market. That's more or less what is happening in Colombia. It's not one competitor or the other one is the market.

[Operator]

And our final question today goes to Marcelo Santos of JPMorgan.

[Marcelo Santos, analyst]

I wanted to ask your views on FWA, fixed wire lack access. How does América Móvil see that? Do you think there's potential? You mentioned that in Mexico, you are losing some of those subscribers as fiber advances in the country. So is that something you think could be useful on LATAM or even in Europe? Or do you think it's a technology that's going to go down as fiber keeps growing?

[Oscar Von Hauske Solís, executive]

I think it's going to be a good fiber. It's also important where you put it, okay? If it's going to be in a house where they already have fiber, and they already have WiFi and fiber and everything, well, it's going to be difficult to enter that, but there's a lot of places all around Latin America where you don't have fiber. The speeds are not so good. And fixed wireless access, it's good. We have around 4 million fixed wireless access in Latin America. They grew a lot in the -- during the -- by the pandemia (sic) [ pandemic ] and slowing the growth right now. But I think there's still very good room for this service.

It's going to be very difficult for the fiber to cover all the places, all the territories, and I think it's a good product there. It's also important in low and then the low and medium density areas, okay, where it's difficult to put fiber or so. I think it's -- we're going to have a good competition. There's also the satellite business that are putting some I think this product is better than a satellite business. Also, there's going to be places where we fix wireless factors don't go in. So it's also an opportunity for the satellite business of, I think, to cover all Latin America with broadband, you need to have all the service, now it's fiber, fixed wireless as and then satellite. So that's what you're going to see in the next year.

[Marcelo Santos, analyst]

Just a follow-up, but do you think it's going to be like relevant, you grow substantially versus the fiber wired broadband or is always going to remain kind of a more niche product?

[Oscar Von Hauske Solís, executive]

It's a difficult question, depending in some places depending for what you use that depending if the fiber you already have fiber in your house, depending if you are going to deploy what -- it's not the same price to deploy fiber in a city than to deploy fiber in low densities areas. It's depending a lot on the use of that because this one you can move it wherever you want in your house, the other one you have to put the WiFi in basis, WiFi mesh. So I think it's -- there's going to be a market for all these products. Of course, I think fiber is going to be the biggest one, but there is going to be for this one -- the fixed wireless assets and also for satellite in -- and more in Latin America but in all the countries .

[Operator]

As there are no additional questions waiting at this time. I'd like to hand the conference back over to Daniel Hajj for closing remarks.

[Daniel Hajj Aboumrad, executive]

I just want to thank all of you for being in the call. Thank you very much.

[Operator]

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect your lines.