America Movil Q2 2024 Earnings Report

America Movil EPS Results

• Actual EPS: -$0.02
• Consensus EPS: $0.34
• Beat/Miss: Missed by -$0.36
• One Year Ago EPS: N/A

America Movil Revenue Results

• Actual Revenue: $11.93 billion
• Expected Revenue: $12.37 billion
• Beat/Miss: Missed by -$434.69 million
• YoY Revenue Growth: N/A

America Movil Announcement Details

• Quarter: Q2 2024
• Date: 7/16/2024
• Time: TAS
• Conference Call Date: Wednesday, July 17, 2024
• Conference Call Time: 11:00AM ET

América Móvil is a Mexican telecommunications company headquartered in Mexico City that provides a broad range of communications services. Established in the early 2000s out of the expansion of the Slim family’s telecommunications holdings, the company is a major provider of mobile and fixed-line telephony, broadband internet and pay-television services in the region. Its operations span retail consumer services as well as wholesale and enterprise solutions, positioning it as an integrated communications provider across multiple customer segments.

The company markets services under several regional brands—most notably Telcel in Mexico and Claro across many Latin American markets—and offers both prepaid and postpaid mobile plans, fixed and mobile broadband, fiber-to-the-home where available, and video/broadcast distribution services. In addition to core connectivity offerings, América Móvil develops and sells related telecommunications products and business-to-business services, including managed network solutions, data center and cloud capabilities, machine-to-machine and IoT applications, and other digital services aimed at enterprises and service providers.

América Móvil’s footprint is concentrated across Latin America and the Caribbean, with operations in multiple national markets and selective presence in other international jurisdictions. The company serves residential, business and wholesale customers and emphasizes network investment, spectrum management and technological upgrades to expand coverage and capacity in its served geographies. Its market position is built on extensive mobile and fixed infrastructure and long-established distribution channels in the region.

The company has long been controlled by the Slim family, and its executive leadership has included Daniel Hajj as chief executive officer, supported by a corporate management team responsible for operations across its markets. América Móvil’s strategic focus historically centers on scaling connectivity services, improving broadband penetration, and developing value-added digital and enterprise offerings while managing regulatory and competitive dynamics in the telecommunications sector.

America Movil Q2 2024 Earnings Call Transcript

Key Takeaways

• Added a total of 2.4 million subscribers in Q2—with 1.8 million postpaid and 599 000 prepaid net additions—and recorded 306 000 new fixed broadband accesses, driving 6 % postpaid and 4.9 % broadband base growth year-on-year.
• Reported Q2 revenue of MXN 206 billion, up 1.5 % year-on-year (service revenue +3.5 %, +4.7 % at constant FX), and achieved an EBITDA of MXN 83.1 billion, growing 6.9 % at constant rates with a margin expansion of 1.5 pp to 40.4 %.
• Posted a net loss of ARS 1 billion in the quarter after incurring ARS 40 billion in comprehensive financing costs due to foreign exchange losses from the Mexican peso’s depreciation.
• Improved free cash flow by MXN 10 billion versus H1 2023 and executed MXN 12.5 billion in share buybacks—four times last year’s level—while reducing net debt leverage to 1.38× EBITDA from 1.5×.
• Equipment revenue declined 9.8 % year-on-year as handset prices fell—particularly cheaper 5G models—despite only a 5 % drop in unit sales in key markets like Mexico.

Presentation

[Operator]

Good morning. My name is Kiki, and I will be your conference operator today. At this time, I would like to welcome everyone to the América Móvil Second Quarter 2024 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press Star followed by two. Thank you. Now, I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Daniela, please go ahead. Good morning.

[Daniela Lecuona, Investor Relations and Sustainability Officer at América Móvil]

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

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you, Daniela. Welcome everyone to América Móvil second quarter of 2024 financial and operating report. Carlos is gonna make a summary of the results. Hi, Carlos.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Hello. Thank you, Daniel. Good morning, everyone. Well, the second quarter of the year got started with an important session in long-dated U.S. Treasury yields, with those in the 10-year tenor advancing 50 basis points in April on the back of unexpectedly strong employment figures. They remained volatile throughout the quarter, closing June at 4.4%, practically the midpoint of the range, which they traded throughout the period. The Mexican peso, which had withstood well the U.S. interest rate volatility, weakened sharply following the Mexican presidential elections on June second. After months of appreciating vis-a-vis not only the U.S. dollar, but also practically all the currencies in our region of operation, the Mexican peso was to depreciate against all.

[Carlos García Moreno Elizondo, CFO at América Móvil]

We added, in the quarter, 2.4 million subscribers, of which 1.8 million were postpaid, with Brazil contributing roughly half, Colombia, 333,000, and Mexico, 99,000. The numbers you see for Austria also include, telemetry, POS, machine-to-machine. In, our prepaid platform, we registered 599,000 net additions, with Colombia gaining 251,000 subscribers, followed by Argentina with 191,000. In the fixed line segment, we obtained 306,000 broadband accesses, including 148,000 in Mexico and approximately 63,000 each in Argentina and Brazil. Both lines and pay TV units registered losses in the period and were down 63,000 and 56,000, respectively.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Our posted base increased 6% year-on-year, with prepaid expanding 1.6% and fixed broadband accesses 4.9%. They were the second more dynamic access line. Our second quarter revenue, MXN 206 billion, was up 1.5% from a year before, with service revenue expanding 3.5% and equipment revenue falling 9.8%. At constant exchange rates, service revenue increased 4.7% year-on-year, practically same pace it had maintained the prior quarter, but with slightly faster mobile revenue growth and somewhat slower fixed line revenue growth. And that helped us bring about a 6.9% increase in EBITDA.

[Carlos García Moreno Elizondo, CFO at América Móvil]

The greater operating leverage stemming from positive revenue growth in, on both platforms, has been the main driver of EBITDA growth, obviously, coupled with strong cost controls. Mobile service revenue accelerated to a 5.1% pace from 4.9% the preceding quarter on the back of stronger postpaid revenue growth, as prepaid revenue stayed on pace. On the fixed line platform, service revenue growth decelerated to a 4.1% from 5.1% the prior quarter, basically on account of corporate networks revenue, which had seen a big jump then. Broadband revenue growth continued to improve, reaching 7.9%, up from a 6.4% in the first quarter, and corporate networks revenue increased 7.2%.

[Carlos García Moreno Elizondo, CFO at América Móvil]

The prior quarter, it had seen a 13% jump on account of some extraordinary contracts that had been obtained. It is important to note that fixed broadband revenue, consolidated, has come to be nearly 25% higher than the combined pay TV and fixed voice, revenue. EBITDA totaled MXN 88.1 billion in the quarter, which represented a 5.6% increase in Mexican peso terms from the year and the quarter, and 6.9% at constant exchange rates as seen before. The consolidated EBITDA margin reached 40.4% in the quarter. That was 1.5 percentage points improvement from a year before, again, on great operating leverage and solid cost controls. Our operating profit came in at MXN 0.6 billion, having recently dropped to 9% from the year in the quarter.

[Carlos García Moreno Elizondo, CFO at América Móvil]

But our comprehensive financing cost reached MXN 40 billion on account of foreign exchange losses, resulting mainly from the depreciation of the Mexican peso. And because of this, we ended up posting a net loss of MXN 1 billion in the quarter. I have to say that at the end of May, prior tothe move in the peso, two-thirds of our net debt were Mexican peso-based. In cash flow terms, our net debt increased by MXN 14.3 billion, and together with MXN 67 billion in operating cash flow, allowed us to cover CapEx totaling MXN 56 billion, share buybacks in the amount of MXN 12.5 billion, and labor obligations for a similar amount. That's in the six months to June.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Now, our free cash flow was MXN 10 billion, greater than that of the first half of 2023, partly because of lower capital expenditures, which were down MXN 8 billion. Our share buybacks in the period were four times the ones we started a year before. We went from MXN 3 billion in the first half of 2023 to MXN 12.5 billion in share buybacks in the first half of 2024. Our leverage ratio came down to 1.38x EBITDA from 1.5x the prior quarter. So that's the summary, and I will turn the floor back to Daniel for the Q&A. Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

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

[Operator]

Thank you. At this time, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad. We pause for a moment to compile the Q&A roster. Your first question comes from the line of Leonardo Olmos from UBS. Leonardo, your line is now open. Please go ahead.

[Leonardo Olmos, Deputy Head of Brazil Research at UBS]

Morning. Thank you for taking our questions. So we have two. The first is, can you break down the FX losses in this quarter? I know there's an unusual behavior, but considering what you just said, about two thirds of net debt being in peso-based, how should we forecast this line, the FX losses, in correlation with the Mexican peso? That's the first question. The second one, completely unrelated. Across LatAm, we're seeing prepaid decelerating, not only AMX, but its competitors as well. Do you expect prepaid revenue to return to growth at some point? Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, Carlos can start with this.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Okay. On the FX side, as I said, two-thirds of the exposure, of the net exposure, are in pesos. But the net exposure you get to after using derivatives, and the impact of derivatives, is different from the results from the one that you get from the actual FX movements or FX gains or losses on the underlying debt, okay? So there's differences there. We can guide you through them, but it's not easy to predict how those movements can take place. Then there's a portion of our old debt, which has to do with the intercompany transactions, and they basically wash all of them. We retain a certain exposure to Reais, okay?

[Carlos García Moreno Elizondo, CFO at América Móvil]

And in this quarter, we had a depreciation of the peso, but also with that, and that's what resulted in this, okay? But that's basically, you have, there's a little bit of noise in the results associated with the underlying depreciation. That's been always the case.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, on the second question, on the prepaid decelerating, I think the prepaid is related, and in each country is a little bit different. But what we can see in all the countries is that some prepaid customers are moving to postpaid. So they are getting, as we are moving to 5G and giving some more data, better handsets, so they are moving to being a postpaid customer. So that's one thing. The second, very important, is depending on the economy of the country, so prepaid is a lot related on how the economies are doing and spending on the people on that. So that's more or less what you have been seeing all around Latin America.

[Daniel Hajj Aboumrad, CEO at América Móvil]

People moving to postpaid, from prepaid to postpaid, and depending on the economies also, we can see if they are gonna spend more or not. Also, some promotions in some countries, that we are seeing, all around. So that's more or less.

[Carlos García Moreno Elizondo, CFO at América Móvil]

And just to go back on the FX question, there is a very comprehensive information that is sent over to the Mexican Bolsa, is available to all the analysts and investors. You have all the details of the underlying debt positions and of the underlying derivatives position.

[Leonardo Olmos, Deputy Head of Brazil Research at UBS]

Very good.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Okay.

[Leonardo Olmos, Deputy Head of Brazil Research at UBS]

Thank you very much, Daniel.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you.

[Operator]

Thank you. The next question comes from Leonardo Olmos from UBS. Leonardo, your line is now open. I'm sorry. Pardon my mistake. The next question comes from Walter Piecyk. Walter, your line is now open.

[Walter Piecyk, General Partner at LightShed Ventures]

Thanks. I guess first question, just in general on ARPU growth. I know I kind of ask this every quarter, but just always want to check in on it. Seems like it's sustaining, and again, I'm primarily interested, I guess, in Mexico, Brazil, and Colombia. When you look out over 2024 and 2025, do you see the trends of usage or perhaps maybe price alterations continuing to sustain that growth in the average average revenue per user?

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, we have been seeing that for the last two years, no? Since we have been-

[Walter Piecyk, General Partner at LightShed Ventures]

Yeah

[Daniel Hajj Aboumrad, CEO at América Móvil]

putting 5G. And the customers are using more, doing more applications. They are moving to better plans, so that's more or less what the ARPU... The ARPU is moving and increasing because two things, or the customer is moving to a better plan, so they are a little bit more of the rent with more, more for more, more data, but you pay a little bit more, and then I give you more. So that's one thing. And the second is you are staying in your plan, but you are consuming more. And you are consuming more because, let's say in Mexico, we have five, 10 million, more than 10 million customers in 5G. We have been developed these networks all around, and people is using more data.

[Daniel Hajj Aboumrad, CEO at América Móvil]

So that's more or less what we have been seeing. So more things that people is doing online, they are using more the phone, and that's what is happening, I hope, and I think that for 2025 and 2026 or 2024 and 2025, we're gonna still seeing that trend.

[Carlos García Moreno Elizondo, CFO at América Móvil]

See, and, and, uh-

[Walter Piecyk, General Partner at LightShed Ventures]

Okay. Thank you.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Just so that you, so that you know, I think the average quarterly growth in ARPU in Mexico is 3.3% per quarter. That's for the last five quarters, and, and in Brazil, it's should be in the range of 6% for the last five-

[Walter Piecyk, General Partner at LightShed Ventures]

I'm sorry. Say again, that you think it should be in the range of 6% going forward?

[Daniel Hajj Aboumrad, CEO at América Móvil]

In range of six-

[Carlos García Moreno Elizondo, CFO at América Móvil]

No, it's what we have been seeing for the last five quarters.

[Walter Piecyk, General Partner at LightShed Ventures]

Oh, yeah, yeah, yeah, of course. And then just on equipment revenue, alternatively, that, that didn't look as high. You know, you report churn, so we can see gross adds, so it doesn't seem like it's gross additions that's impacting that. It must be just other equipment revenue upgrades or maybe whatever accessories and things that you sell in the stores. But just if you could give us a sense of what you're seeing in terms of phone purchases, and do you think, do you anticipate that may change, you know, with the release of the, you know, the new AI services on iPhone and Samsung and other devices?

[Daniel Hajj Aboumrad, CEO at América Móvil]

What you see in, let's say, equipment revenue, where you see that we have a decline, a big, big decline is in Mexico, 14%. And it's really because, we are only reducing 5% in units. The rest is that people is buying, let's say, not cheaper phones, so the phones has been reducing prices, and we have-- we used to have 5G phones at $300, $400. Today, we have 5G phones at $200. So people is buying phones, cheaper phones with the same, the phone is a very good phone, good camera, a lot of good chips. So people is looking and reviewing a little bit on more detail, which phone is buying.

[Daniel Hajj Aboumrad, CEO at América Móvil]

We have 5% decrease in units, but 14% decrease in equipment revenue in Mexico. That's more or less what the trend and what is happening right now. People is-

[Walter Piecyk, General Partner at LightShed Ventures]

Dan, do you think that changes?

[Daniel Hajj Aboumrad, CEO at América Móvil]

The better phone and the cheaper phone.

[Walter Piecyk, General Partner at LightShed Ventures]

Yeah. Understood. But by going forward, there's a lot of hype, interest in what Apple has recently announced. And obviously, Samsung has also added some AI features. Do you think that trend that you saw this quarter, will reverse and do something different at the end of this year and into 2025?

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, I think AI is gonna be very important. It's what Samsung is doing in their phones because they already have in some phones the AI application. Still, with iPhone, it's only the announcement that they have. But I think that will be... But at the end of the day, I think the AI application, in my view, is gonna have all the phones again, not only the high-end phones, you know, the mid-end phones are gonna have also this application. So that's the trend. Everything starts at the high end and moving to the mid-end, and let's say, low.

[Daniel Hajj Aboumrad, CEO at América Móvil]

So, I think, yes, the trend at the beginning will again make people buy more the high end, but as the application's moving to other phones, then people is gonna choose the best phone at the best price, no?

[Walter Piecyk, General Partner at LightShed Ventures]

Yep. Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you.

[Operator]

Thank you. The next question we've got is from Vitor Tomita from Goldman Sachs. Vitor, your line is now open. Please go ahead.

[Vitor Tomita, VP of Equity Research at Goldman Sachs]

Hello, good morning, and thanks for taking my questions. I have two main questions from my side. The first one is if you could give an update on how you are thinking about your share buyback strategy for the second half of the year, following what we understand was an acceleration in the second quarter. And my second question would be on Chile. If you could give any additional color on the competitive environments there, notice still cited in the earnings release that client bases in mobile and fixed have been growing over the last 12 months. So wanted to understand better how you are thinking about the commercial approach and competition in there. Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Where? Where, in Chile? Oh, okay.

[Vitor Tomita, VP of Equity Research at Goldman Sachs]

On the buybacks.

[Daniel Hajj Aboumrad, CEO at América Móvil]

On the buybacks, Vitor, hello. I'd say, as we've mentioned repeatedly, typically, we pace the buybacks so that they are more closely related with our cash flow. Our cash flow is very, very cyclical, very seasonal, with the first half of the year requiring a lot of working capital, which we get back on the second half of the year. That's why the second half of the year is when we make the payments of dividends. But that is also when, if you look back for the years, we typically have a great amount of share buybacks in the second half than in the first half.

[Daniel Hajj Aboumrad, CEO at América Móvil]

But yes, generally, I'd say that the distributions will be matching closely the free cash that the company has to the extent the company does not divert cash to M&A, which is not going to be the case, and to the extent that the company does not require any more CapEx, which is not going to be the case. Yes, and on Chile, I think everybody knows that Chile is a difficult market. It's a very competitive market. And what happened, we start in 2022 with Liberty, and we defined a plan, a three-year plan on synergies, on reducing costs, integrations, better infrastructure.

[Daniel Hajj Aboumrad, CEO at América Móvil]

We just closed one year ago a good deal with 5G, 4G, 3G, more coverage. We are doing a lot more redundancy and fiber through all the country. We closed a capacity agreement with OnNet also to move part of our subscribers to fiber. So we have a three-year plan. I think we are on target. We still need end of 2025, 2026 to review that. But overall, we are comfortable on that. We have put new management since the beginning, we integrate the management. So we are working hard, but it's not something that is from today to tomorrow. It's a good three-year, four-year plan that we have been doing.

[Daniel Hajj Aboumrad, CEO at América Móvil]

It's the same that we do in Brazil when we integrate the companies and in other countries. So, we're comfortable. It's a very competitive market. Well, it's four players market, no, four players in mobile, maybe more players in fixed. But we are comfortable on what we're doing, and we think in the next, in the future, Chile is gonna be a very good country for us. We have the size right now because before doing the merge, we only have mobile revenues, not so high. So today we are more than a billion-dollar company. I think it's $1.2 billion, so we can work on that. We have the size and I think we're gonna be successful in Chile.

[Vitor Tomita, VP of Equity Research at Goldman Sachs]

Very clear. Thank you very much for the replies.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you.

[Operator]

Thank you. The next question come from Phani Kanumuri from HSBC. Phani, your line is now open.

[Phani Kanumuri, Equity Research Analyst at HSBC]

Thank you for taking my questions. My first question is regarding Mexico mobile revenues. It has decelerated from 5.8% in 1Q to 4% in 2Q. Is there any specific reason for this trend? And how do you expect this to trend going forward? My second question is regarding further extension on Chile. Do you have any plans to do any kind of M&A in Chile? You have stated in your capital markets day that you don't have any major M&A plans, but with Chile consolidation, do you see further any plans of M&A in Chile? Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, first in Chile, I, everybody knows that the WOM is in, in Chapter 11, and, there are plans. I don't know if there's gonna be M&A or not. We, we are open to see alternatives, but we don't know, exactly what we're gonna do. So as always, we are open, but, we're working very strong in the synergies and, all the implementations in new infrastructure, fiber, 5G, more capacity, more coverage all around. So that's our focus, but we are open to see what the alternatives are with, WOM, no? So that's, first. Second, in, in Mexico, I, I think that the trend is, going, the revenue is, is, decline, no, not declining, reducing the growth. I don't know what's gonna be the next,...

[Daniel Hajj Aboumrad, CEO at América Móvil]

But in Mexico, we are doing very good in 5G. I think we are the only company who has a real 5G network with the coverage, with capacity. In postpaid, a lot of our subscribers are renew in a 5G plan that it give us good output there. So as Carlos is saying, is 3.3 increase on output. We haven't increased any price in any of the segments that we have. So it's only moving to be a higher plan or people consuming more as we are seeing.

[Daniel Hajj Aboumrad, CEO at América Móvil]

So we have also, as in other countries, a lot of competition, promotions, and we don't know exactly what's gonna be on competition and promotions for the future, but we are ready to compete, and we have the strong basis, good distribution network. We have good customer care people, a lot of centers, a lot of stores, and very good network and a very good coverage and quality. So we are ready to compete. If there's still a lot of promotions, we can compete on that, and the market will be more rational, then we can also be more rational. So we are ready to compete in the future in Mexico. We're prepared, let's say, to compete.

[Phani Kanumuri, Equity Research Analyst at HSBC]

Thank you. Very clear.

[Operator]

Thank you. The next question comes from Lucca Brendim, from Bank of America. Lucca, your line is now open. Please go ahead.

[Lucca Brendim, Equity Research Associate at Bank of America]

Good morning, everyone. Thank you for taking my questions. I have two from my side here. The first one, in Colombia, we saw some developments from your main competitors in recent quarters, and I wanted to know if this is already reflecting in some way in the competitive environment, if you're already seeing some changes in it, and how do you expect this market to behave going forward? And then second, on Mexico for the fixed business, can you give us more color on how you're seeing competition? You have not raised prices in Telmex, but is there room for price hikes in the future, in the coming quarters, years? So if you could give us some color on that as well. Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, well, in Colombia, what happened in Colombia? I think in Colombia, two years ago, we have a new entrance that was WOM, very aggressive, very aggressive plans, so everybody has to compete in the market. So this competition reduces the growth and the output that we have been having, because people, if you give more data, then people sometimes prefer to reduce the plan and stay and have more data in contrary than increasing plan for more data. So it was a very aggressive entrance on WOM, but we compete on that. But today is a little bit different. WOM is having some problems, and we're still competing. We increased 5G. 5G is giving us in Chile a very good customer. We have been growing.

[Daniel Hajj Aboumrad, CEO at América Móvil]

We grow more than 100,000 customers in postpaid in Chile this quarter, in postpaid. So, we're starting to do better, and we're confident. We have a very good company, as I told, very good basis also in Chile, good distribution, a lot of stores, good network, 5G. We have the biggest 5G network capacity, and that's what we have seen. So I think we can see more improvements. I hope we can still this trend of improvements in Colombia for the rest of the year. So that's what we're thinking to have. And Mexico, in the fixed, Oscar can talk a little bit, or we are not planning to increase plan prices at this moment. So we're gonna stay with these prices, and we're doing good.

[Daniel Hajj Aboumrad, CEO at América Móvil]

We are growing in the broadband and in the corporate, and we already do a lot of fiber through Mexico, so we have a good fiber network coverage, and we're growing in Mexico.

[Lucca Brendim, Equity Research Associate at Bank of America]

Very clear. Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you.

[Operator]

Thank you. The next question comes from Carlos de Legarreta from Itaú BBA. Carlos, your line is now open. Please go ahead.

[Carlos de Legarreta, VP of Equity Research at Itaú BBA]

Yes, thank you. Good morning. I have two questions on this side. The first one is a follow-up in Mexico fixed broadband. I'm wondering if you can talk about the net additions that you're seeing. You know, it's obviously a very good volume, but I'm wondering if it's mostly migration from your copper to your fiber product, or you're actually acquiring new customers as well. Perhaps Oscar can talk about that. On the second question, just to follow up on Chile, just to make it clear, you know, the information that you provide is very clear, obviously, that the leverage level. But I'm wondering if there's any kind of contribution that you need to make, you know, obviously now you will control the company after this debt conversion.

[Carlos de Legarreta, VP of Equity Research at Itaú BBA]

But I was under the impression that the equity injection was actually necessary for that company, and it was relatively sizable, also, up to one... So I'm just wondering if what are the plans, in terms of equity or CapEx for, for the, the Chilean, you know, subsidiary now going forward? Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Well, Oscar can talk a little bit on Mexico, but just to clarify, the 150,000 that we have are new subscribers. So we have a lot of our subscribers moving from copper to fiber, but 150,000 are new subscribers in the network. So Oscar can talk and-

[Carlos García Moreno Elizondo, CFO at América Móvil]

You are totally right. Migration, it doesn't count as a net add, so all the net adds are new customers. The migration, we don't count as net adds.

[Daniel Hajj Aboumrad, CEO at América Móvil]

We have been moving a lot of copper to fiber.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Yeah, 84% of the customer base is already in fiber.

[Daniel Hajj Aboumrad, CEO at América Móvil]

People is okay. We have a good brand as the... We have also very good quality and support, and I think what we're aiming and trying to do is to recuperate part of the market that we used to have. So we are working on that.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Yeah, and another thing just to add is that we've been working the bundles of streaming video in, you know, with the customers, and has been very, very well received in the market. So we include the different add-ons, like Netflix, HBO, et cetera, in the bundle program, and has been working pretty well.

[Daniel Hajj Aboumrad, CEO at América Móvil]

On Chile, let me explain to you. Since the beginning, when we do the merge, we make a plan, and in that plan, we incorporate some cash in the company. So we need to put cash to put equity in the company. Of course, the company needs equity, and in that plan, we think that's why we do the agreement with Liberty to put cash for CapEx and part of the debt that we put in the beginning, also to contribute that equity in Chile. That's what we decide to do since the beginning, and well, Liberty has the right to catch up all this what we... All this plan, let's say, all this plan, and unfortunately, they don't catch up. They decide not to do it.

[Daniel Hajj Aboumrad, CEO at América Móvil]

And that's what we are, and we are comfortable with the equity, the way financially the company is gonna end doing at the end of this year. I think financially, the company is gonna be good. And the operations, that it's something that it's very important, the operation, CapEx, investments and new networks, I think are under the plan that we decide.

[Carlos García Moreno Elizondo, CFO at América Móvil]

I think that going forward, Carlos, we don't expect any major cash injections into Chile. I think the CapEx is going to be almost fully funded by their own EBITDA. So it's going to be practically self-sufficient in the next year or the next...

[Daniel Hajj Aboumrad, CEO at América Móvil]

Yeah.

[Carlos García Moreno Elizondo, CFO at América Móvil]

So the equity contributions have basically, you know, taken place. We will probably need it over the next couple of years. We will be having a company that's fully self-sufficient, right?

[Daniel Hajj Aboumrad, CEO at América Móvil]

I think what you could see is this agreement to capitalize the company. I think at the end of 2024, we're gonna have the company fully capitalized. And with all the investments in place to do and to have a very strong infrastructure, capacity, coverage, quality company and with a very good team in place.

[Carlos de Legarreta, VP of Equity Research at Itaú BBA]

Thank you. That's super clear on both issues. I appreciate it.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you.

[Operator]

Thank you. As a reminder, if you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star two. The next question comes from Daniel Federle from Bradesco BBI. Daniel, your line is now open. Please go ahead.

[Daniel Federle, Senior Equity Research Analyst at Bradesco BBI]

Thank you. The first one is a follow-up on Mexico broadband business. Our view net additions were good in the second quarter, but significantly lower versus the first quarter. So my question is, what has changed in the market from the first quarter to the second? Which level is like the sustainable level, going forward? And the second question is related to Brazil. Brazil was a very strong region, especially in the mobile front. The company has been presenting like an acceleration in mobile service revenue growth. My question is, if do you see room for further acceleration in the upcoming quarters? And I was wondering if maybe like growth in the second quarter could have been helped by any kind of mismatch in terms of the timing of price increases.

[Daniel Federle, Senior Equity Research Analyst at Bradesco BBI]

I don't know if you are, like, increasing prices earlier this year versus last year, and that has helped, helping out. That's my question.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Sorry. The first question was on the fixed broadband in Mexico, in Telmex. And but the second question, which, which country you are talking? I, I, we don't hear you very well.

[Daniel Federle, Senior Equity Research Analyst at Bradesco BBI]

Exactly. The first question is regarding Mexico, ARPU that were good, but lower than in the first quarter. What has changed from one quarter to the next? And the second question is related to Brazil, because mobile service revenue growth has been accelerating. So I'm asking if, do you see room for further acceleration? And if second quarter could have been helped by any kind of mismatch in terms of the timing of price increases, like increasing prices earlier this year than last year. Those are my questions.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Yeah, I'm gonna start on Brazil. I think in Brazil, we have a very good quarter in terms of revenue, in terms of mobile revenue. Also, in terms of fixed revenue, we have been increasing. I think we increased the revenue in Brazil, so it's been a good increase in revenue in pay TV. So we start to see, like a couple of quarters increasing broadband and growing net adds, and decreasing less in TV and pay TV. So that's what we're seeing in Brazil. Also, in mobile, we have good increases, but there's still a lot of competition. So Brazil is very big, so you can see in some states, some places very strong promotions, in other ones, less promotions. But overall in Brazil, it's not only price.

[Daniel Hajj Aboumrad, CEO at América Móvil]

I think we have been also controlling cost a lot. You see that the EBITDA is growing and more than the revenue. So all the synergies, the investments, systems, digitalize, everything that we have been doing is giving us good results in terms of costs. Still in Brazil, inflation is at 4%-5%, so you have to increase in some, we have some costs to increase every year since that inflation. So we have been able to control that, and we are growing also in market share in mobile, and that is giving us this growth.

[Daniel Hajj Aboumrad, CEO at América Móvil]

So I think, in mobile, the growth that we have been having will be great if we can sustain that and maintain that level of growth in Brazil. So, for me, Brazil, and not only Brazil, I think operational, overall, in all the countries, we have been doing good in América Móvil. Carlos has been showing, but we have been growing more than what we said, and also reducing costs, doing synergies and increasing our EBITDA, mainly in all the markets. In Mexico, Oscar, it's difficult to explain why we have been having more than 300,000 net adds in first quarter and then 150,000.

[Daniel Hajj Aboumrad, CEO at América Móvil]

But, in my view, we're gonna still grow and we are already with a good fiber capacity and coverage, and we're gonna still grow in the broadband in the next months. So we cannot say quarter-by-quarter exactly how much we're gonna grow, but the trend is to grow in Mexico, in the broadband market. So, Oscar, I-

[Carlos García Moreno Elizondo, CFO at América Móvil]

No, I totally agree what you say. On the second quarter, we have a decrease on the productivity and installation issues, because the climate was really bad in that time, so we decreased the productivity on installation. Second, we saw in May and June, a little bit of increase in churn in on collections. So we believe that that will be solved on the third quarter. But as Daniel say, we see a good trend of adding net adds on the next quarter. So because we already have the fiber already deployed, we believe that we have a very unique product in the market that has been very well received. And we will catch up the productivity installation on the next quarters.

[Daniel Hajj Aboumrad, CEO at América Móvil]

The way we see, well, the way I see things is we don't want to see quarter-by-quarter. I think, maybe year, if you see year 2023 against year 2024, I think 2024 overall the year is gonna be much better than 2023. So-

[Carlos García Moreno Elizondo, CFO at América Móvil]

Oh, that's right.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Maybe one quarter or the other one will be different, but all overall, the trend, the year is gonna be good in Telmex.

[Daniel Federle, Senior Equity Research Analyst at Bradesco BBI]

Thank you. Clear.

[Operator]

Thank you. The next question comes from Alejandro Lavin, from Santander. Alejandro, your line is now open. Please go ahead.

[Alejandro Lavin, Executive Director at Santander]

Thank you. Good morning, everyone. Thank you for taking my question. I have a couple of quick questions. First of all, on M&A, I mean, you mentioned that you're, you're always, in general, open to opportunities, so I'm wondering, like, what kind of geographies or, or assets would you be looking at? And number two, it's more of a longer-term question. I mean, we hear a lot about, you know, artificial intelligence and all the possibilities that this might enable. So, what are your thoughts on, on this mega trend, and how you think América Móvil can position to benefit from this mega trend? Thank you.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Hello, Alejandro. I mean, I think that what we have said is, we don't expect any M&A to take place this year. That's what we said in our Investor Day. I think there was a recent question on whether the new environment in Chile would call for that. We only know that there's this issue with Chapter 11, which won't have been placed into. But, it's not... As Daniel said, I think, we're always open to listening to things, but, certainly the expectation that we have had this year is that we wouldn't go into any M&A so far.

[Daniel Hajj Aboumrad, CEO at América Móvil]

The second question is on the trends, or can you repeat the second question? The mega trends on-

[Alejandro Lavin, Executive Director at Santander]

Yeah, sure. Yeah, so, so thinking about artificial intelligence, I mean, how does the management think about, positioning to take advantage of this mega trend? I guess this trend for the next 10 years or so, how can América Móvil participate in this trend?

[Daniel Hajj Aboumrad, CEO at América Móvil]

I think it's very important. I think artificial intelligence is something that we have already, but it's not—it's gonna take some time to implement in the company. We're working on that. The first thing that we do is we're digitizing everything internally in the company, and we are working very hard on all the data, but there's gonna be a lot of AI coming to be more efficient, to know more the customer, to reduce cost, to save energy, to do a lot of things, and we're working on that, to take all this mega trend that will be more efficient and productive, the company. So there's a lot of things in AI that are coming to make us more efficient, more productive, and to know more our customers. And we're working on...

[Daniel Hajj Aboumrad, CEO at América Móvil]

Saving also costs, you know, in call centers, data centers. There's a lot of things that AI is coming, and América Móvil, of course, is working on that. But that's not something that you're gonna see for tomorrow, but we are working on all these trends to put the company in a very good, the good opportunity on saving cost and all of what I'm saying.

[Alejandro Lavin, Executive Director at Santander]

Okay, understood. Thanks a lot.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you. Thank you very much.

[Operator]

Thank you. The next question comes from Juan Cruz, from Morgan Stanley. Juan, your line is now open. Please go ahead.

[Juan Cruz, Director Emerging Markets Debt at Morgan Stanley]

Thank you, and good morning. I apologize if this was already answered. I joined late, so my apologies. Going back to the Chilean JV, I just wanted to know, now that América Móvil is assuming ClaroVTR, if there's going to be disclosure on the operations and financials of the JV going forward? That's number one. And number two, given that VTR had bonds outstanding, what are the plans with those bonds? What is the company going to do with those, if anything, as a result of the JV being consolidated? That's it. Thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

I think that when we consolidate the company, there's gonna be the same information for Chile that we have for all the other countries. That's what we're gonna do. And yeah, once we consolidate, you know, the bonds will remain outstanding as they have been, and they will be serviced as any other debt of América Móvil.

[Juan Cruz, Director Emerging Markets Debt at Morgan Stanley]

Okay. Gotcha. But, but not, there's no plan to either refinance those for the time being or do anything with them?

[Daniel Hajj Aboumrad, CEO at América Móvil]

No, no plan.

[Juan Cruz, Director Emerging Markets Debt at Morgan Stanley]

Okay. Okay, thank you.

[Daniel Hajj Aboumrad, CEO at América Móvil]

Thank you.

[Operator]

Thank you. We currently have no further questions, so I will hand back to Mr. Daniel Hajj for final remarks.

[Daniel Hajj Aboumrad, CEO at América Móvil]

No, I just want to thank everyone for being in the call, and Carlos, Oscar, and Daniela. Thank you very much. Bye-bye.

[Carlos García Moreno Elizondo, CFO at América Móvil]

Thank you all. Bye-bye.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Analysts

• Alejandro Lavin, Executive Director at Santander
• Carlos García Moreno Elizondo, CFO at América Móvil
• Carlos de Legarreta, VP of Equity Research at Itaú BBA
• Daniel Federle, Senior Equity Research Analyst at Bradesco BBI
• Daniel Hajj Aboumrad, CEO at América Móvil
• Daniela Lecuona, Investor Relations and Sustainability Officer at América Móvil
• Juan Cruz, Director Emerging Markets Debt at Morgan Stanley
• Leonardo Olmos, Deputy Head of Brazil Research at UBS
• Lucca Brendim, Equity Research Associate at Bank of America
• Phani Kanumuri, Equity Research Analyst at HSBC
• Vitor Tomita, VP of Equity Research at Goldman Sachs
• Walter Piecyk, General Partner at LightShed Ventures