Good morning. My name is James and I will be your conference operator today. At this time, I'd like to welcome everyone to the América Móvil First Quarter 2021 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise and after the speaker's remarks; there will be a question-and-answer session.

[Operator Instructions] Thank you. Now, I'll turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead..

Thank you. Good morning, everyone. With me today to discuss our first quarter financial and operating results, we have on the line Mr. Daniel Hajj, CEO; Mr. Carlos García Moreno, CFO; and Mr. Oscar Von Hauske, COO..

Thank you, Daniela. Good morning, everyone. Carlos is going to make a summary of the first quarter financial and operating results. .

59% in the US, 47% in Puerto Rico, 36% in Peru, 15% in Dominican, with Colombia and Central America expanding approximately 10 percentage. EBITDA margins rose across the board, increasing almost seven points in Peru, five in the Caribbean, both Puerto Rico and Dominicana, four in Central America, followed by Mexico, Brazil and Argentina with 2.6.

With our operating profit increasing 5.7% to MXN 41.1 billion. And our comprehensive financing cost coming down by 55% year-on-year to MXN 35.9 billion. We were able to post a net profit of MXN 1.8 billion, reversing the 29 billion loss register a year before on account of foreign exchange losses.

Our net profit was equivalent to MXN 0.03 per share or $0.03 per ADR. Our operating cash flow allowed us to fund capital expenditures in the amount of MXN 25 billion, and to buy back shares worth of MXN 4.4 billion. In addition, it allowed us to reduce our debt in cash flow terms by nearly MXN 10 billion. Our free cash flow, this chart is interesting.

Our free cash flow, this is looking at EBITDA minus CapEx has executed a solid path of growth over the last five years. Even in the midst of the pandemic. So the free cash flow has gone from $5.6 billion in the year to $9.4 billion in the year 2020 and has kept on rising in the 12 months to March to $9.6 billion.

So even in spite of this deceleration in sales and revenue that we have had, we have seen continued strong performance on EBITDA and free cash flow. Our net debt fell by MXN 20 billion in the first quarter, ending March at MXN 627 billion. This obviously includes the capital large leases under IFRS 16.

At this time, it was equivalent to 1.77 times the EBITDA for the last 12 months. So with that, I would like to pass the call back to Daniel, and we continue the Q&A session. Thank you. .

Thank you, Carlos. We can start with the first question..

[Operator Instructions] Our first question comes from the line of Marcelo Santos with JPMorgan. Go ahead, please. Your line is open..

Good morning. Thank you for taking question. I have two. The first is if you could provide an update on the tower spin-off operation that you're planning for América Móvil in Latin America.

And the second, if you could compete, if you could comment on the competitive environment in Colombia, now that 1 has officially launched their mobile brand by operations? Thank you..

Hi, good morning. Well, talking about the towers as we are currently implementing the structure within the América Móvil Group to separate locally the towers and obtain the required approvals in the different countries prior to the final step, the spin-off at the América Móvil level.

So we think and we expect that this implementation will occur in this year, end of this year is what we have right now. On the Colombia one and the competition, well, I think they already launched their plans at the beginning of April, mid of April, they were very aggressive plans, but I think we are well prepared to compete in Colombia.

There is not only price in Colombia. I think we have a very good coverage. We have fourth place. So we have a lot of our customers in convergence. So in a fourth place offer, but it's very important, reduce a lot our churn. We have one of the best qualities in Colombia in terms of in mobile and in fixed also. Good distribution.

We have a very good distribution all around Colombia. Good image, Net Promoter Score very high and very good image, and very good service. So I think it's not only price. We are prepared to compete in price, but also, we are prepared to compete in all these sort of things. So we have strong competition. Their plans were aggressive.

We know that they are coming very aggressive these plans and we prepare for that. So we are competing. So I don't have any news. It's only 10 or 20 days of competition. This competition is going to take all these years. So we are prepared to compete. So that's what I can say..

Perfect. Just a follow-up on the first question.

The stock that's going to be listed on the tower spinoff, which exchange will it be listed? Is there any update there?.

We haven't decided anything until right now. So we don't know, if it's going to be in Mexico, it's going to be also a for Mexico and the US. So we still -- we're not -- we need to make that definition stay in the next months. .

Perfect. Thank you very much..

Our next question comes from the line of Alejandro Gallostra from BBVA. Go ahead please. Your line is open..

Hi. Good morning, Daniel, Carlos, Daniela. I have a couple of questions. First, you mentioned different reasons to explain the margin expansion in each country.

But what are the main reasons that are currently driving that margin expansion in all geographies, if there is on to reason behind that expansion across the board? And how much margin expansion you expect going forward at a consolidated level? And second, could you comment about your FTTH deployment strategy in Mexico and how much of your network is currently FTTH and how you're expanding your FTTH footprint, given the aggressive investment plans of your competitors? Thank you..

Well, as Carlos said in previously, I think part of the margin or the EBITDA growth that we had is controlling costs and expenses. But we have been having the last two, three years digital transformation that is allowing us to reduce cost.

And that's mainly one of the reasons why we are reducing costs because everything that we're doing, we're trying to do digital, saving people and reducing cost in a lot with a lot of parts of the companies, okay? So in every country is different, in every country, the bad debt is different than in the other countries.

The expenses, commercial expenses are going to be different because we have different competition, let's say, in Colombia, we are putting more efforts in the commercial side. In other places, it's more on the administration of in the network; we are saving a lot with new technologies in the networks.

We're going to start to roll out 5G so we are already virtualize all the network that we have in all the countries we're virtualizing all the networks. So it's a program cost expenses, technology, digital that we have been having for the last two, three years. And it's not ending this year. It's going to go for the next five years.

So it's a big program that we're having and is what we're doing. In the revenues, as Carlos said, we -- in constant exchange rates, we grow a little bit on revenues. But as he said, there's a new wave of COVID in the south of Latin America and is -- we have more stores close and our commercial has been hit a little bit.

But I think as the economy gets better in all these countries, I think we are going to return with the revenue. So that's more or less in the FTTH, Oscar can tell us a little bit on Telmex what we have been doing..

We will be operates a network to expect PH in Mexico. We have around -- and we are the levers in the market Internet connection with the pirate comp. So we have 4.4 million connect copper with fiber. And we're still growing every more to improve the network to FTTH and to migrate customers from copper to FTTH..

So Arin, a little bit to what Ranier was mentioning, to give you a little bit more color. The cost of service stayed in line with service revenues. But selling and marketing expenses were down 6% at constant exchange rates. And administrative expenses were down 14%.

So we did have very major reductions as a lot of that came, as Andres was saying, out of the digitalization that have been implemented in the company..

Okay. Thank you, Daniel, and Carlos and Oscar. Thank you..

Thank you, Alejandro..

Our next question comes from the line of Andres Coello with Scotiabank. Go ahead please. Your line is open..

Thank you. Good morning and thank you for taking my questions. Two quick ones.

First, can you give us an update on the negotiations with the Telmex union regarding the patient liability? And second, given TracFone's strong results, how do you feel about achieving the performance measures established in agreement with Verizon regarding the MXN 500 million in additional payment. Thank you..

Well, talking first platform, okay? So I think the regulatory approval process for the sale of TracFone is ongoing. It's going well. We're working very closely with Verizon and the regulatory authorities to get clearance on that transaction. And we think and we believe that this transaction will be closed in the third quarter of this year.

So that's the first step. Second, the earnouts that we have. I'm sure since the beginning there’s nothing changed with the performance of the company, but the indicators that we put, I'm sure that we're going to comply with that, and we're going to take the earnouts of what we are agreeing the transaction, it's around $500 million.

And I think that we're going to get that. It's more or less that amount of money. I don't remember if it's $500 million or $700 million, but we are sure that we're going to get for the 100% or a big part of that earnout. On the Telmex negotiation, we're still in negotiations. Nothing else to say. So we are still negotiating with them.

And we hope we can get on an agreement with the unions, okay? So that's mainly what I can tell..

Thank you very much..

Thank you..

And our next question comes from the line of Arturo Langa with Itaú BBA. Go ahead, please. Your line is open..

Hi. Good morning, everyone. I apologize if this was already answered; I had some trouble in my line.

But with regards to the acquisition of Oi, when should we see that being consolidated into your financials? When do you expect to see that? And then, two other questions, if I may, but also similarly, when can we expect the acquisition of -- or sorry, the sale of U.S.

operations to be excluded from your reporting files? And lastly, if there's any color regarding the PayTV license request in Mexico? That would be useful. Thank you..

Well, on Oi, the approval process before Cade and Anatel in Brazil is advancing accordingly with its different stages. All parties are committed to cooperate with the authorities during this process. And we think that we can close this transaction this year also. So we hope that this year, we can consolidate Oi in our financials.

So that's the first one. The second one, I don't hear you very well.

Can you repeat it, please?.

Yes. Sorry, Dan. With regards to the sale of TracFone to Verizon, when do you expect to discontinue the U.S. operations or stop reporting the U.S.

operations in your results?.

When it's closed, and I think we are thinking that this transaction is going to be closed in the third quarter of this year. So that's our expectations. And the PayTV license, we hope that we can get a PayTV license. We're working to get the PayTV license. And well, nothing to say. Only we are hoping that we’ll really get the PayTV license.

So that's a lot of time working on that..

Perfect. Thank you very much..

Thank you. Thank you..

Our next question comes from the line of Carlos Legarreta from GBM. Go ahead, please. Your line is --.

Hi. Thank you. I have two questions, please. The first one, in Mexico, you're mentioning a negative effect from the chip shortage from handset sales. However, it doesn't seem to have affected most of the other operations at all.

So can you give us some color on whether this is an isolated effect in Mexico? Or can we expect any problems like this in any other countries on the road? That's the first one. And then secondly, in your financial statement for 2020, you saw a significant revaluation into your tower portfolio.

Can we take this figure as a proxy for the value unlocking associated with tower transaction? Thank you..

So I think, it's not a secret that there's no chips for the handsets and not only for the handsets, for the set-top boxes and for even cars, I read that there's some shortage in the chips for car. So there's a shortage in the chip of all around the world, and it's getting worse.

I think all the operations, we have been having some problems getting the handsets that -- and the brands and in the segments that we need. And also, we have been having some shortage in the set of boxes and broadband boxes. So all around, we're having some problems, but I hope -- and I don't think it's going to get fixed immediately.

But we have been placing orders for some time ago, and it's been helping us to have the amount of equipment that we need. So that's where we are. Carlos can talk a little bit about the revaluation..

So, Carlos, as you point out, there was a process for devaluing the towers. As you know, on the IFRS 16, you can choose whether you keep your assets for second capital you posit at cost of you having a market.

We had a valuation on the towers, and then we kind of capture this valuation based on impairment terms that we have to come up for various operations. But net-net what we have is a first proxy or particularly for quart value, mostly the value in Latin America, okay? It is all of the full category of towers have been revalued.

But as you know, we have not yet determined anything regarding towers in telecom Austria. So it's -- but nonetheless, we have to bring all the category of towers within our consolidated results, and we had a certain revaluation, okay? That's 50 days for this spin of eventually..

Right.

But this OLE incremental value over the book value you have over hours, right?.

That's correct. That's correct. We have already affected the incremental value as of the end of December, which was when we changed the accounting policy to be able to adopt the new policy of booking towers based not on cost, but on market value..

Great. Appreciate the answer. Thank you..

Our next question comes from the line of Leonardo Olmos from UBS. Go ahead, please. Your line is open..

Hi, good morning, everyone. My question is related content and over-the-top content, we noticed that you have some new launches for example, the Claro Box TV in Brazil.

My question is, do you intend to roll out that what the regions and what are the other content or over-the-top strategies that will have waiting for to be launched in 2021?.

I think we launched Claro Box in Brazil, and we are thinking to launch that Claro Box all around Latin America, in all the other countries. And I think it's a good idea that Oscar can talk a little bit what's the Claro Box and please, Oscar..

But as you know, the PV provisional business has been moving. There is a lot of streaming offers in the market. So we did like and analyze how the market is moving on. And I think Claro Box in Brazil.

There is a full IP technology, as well as a new seasonality like boisterous, catch up TV, remote TV but the good commercial proposition in the market is that you couldn't start with basic packages, and then you could add on different streams that is more related to what the customer context like, so you could add on, in the case of Brazil global play or you could add on metrics or telecine or paramount or sports.

So you could bundle your services, given the profile of the customer. So we feel that this will have happened is more cost-efficient because it doesn't require installation. Is sales store by the customer. And as I mentioned before, is the full IP head post to manage better traffic in the network. So I think there is a unique proposition in the market.

We will start in Brazil. And as Daniel mentioned, we are ready to open in all the properties the same concern. And I think we are adapting trends that happen in the pay TV. And let me add that this is not only pay TV. We see this as an entertainment hub. So we do go along music as well.

We could have Facebook watch and another alone that are in the market and to sell like a hub like ecosystem of entertainment that we are offering in the market..

That are interesting proposal. Okay. Thank you very much. Have a good day..

Thank you. Thank you..

Our next question comes from the line of Maria Azevedo with Banco Santander. Go ahead, please. Your line is open..

Hi, thank you for the call. My first question is on the CapEx. Can you comment a little bit on the CapEx outlook for the next years? You have a very strong metric. So can we assume that 5G is not going to require an aggressive cycle of CapEx going forward? Any color on that would be very helpful. .

No. I -- we already give you the color of what's going to be the CapEx of this year. And I don't think even for this year or for the next years, we are not going to have an increase -- substantial increase of CapEx for 5G.

So as we said in previous calls, we have been working to implement 5G virtualizing networks put on fiber in the towers, putting the photonics in the backbone, so a lot of things we have been doing. So we are ready to launch 5G in many countries. And we are not thinking to put more money because we are going to launch 5G.

So it's in our numbers, 5G is included in this CapEx and in the future CapEx that we have. So, no substantial CapEx for next years. .

Perfect. Thank you. This is very positive. And my second question is on the competitive environment. In Brazil and Mexico for mobile. If you can comment a little bit on how the offers are, if you see any opportunities for price and ARPU increases? And if you can also comment on Claro Pay, that would be very helpful. Thank you very much..

Well, let's talk first on Brazil. I think Brazil, we've being gaining good market share, including good subscribers on cost base and also in prepaid. Our -- what we said -- what Carlos said at the beginning, the new wave of COVID is slowing down a little bit, Brazil, but I think it's slowing down for everybody, for all the companies.

We have, at this moment, some store closes. So our commercial activities is slowing down a little bit. Also the helping money that the government is giving to the people is reducing, so also reduce a little bit the amount of money in the people in prepaid that they are spending.

But all overall, I can tell you that we have a very good network, very good proposal. We are doing and making our combos in -- with fixed broadband and TV also with wireless. So we have a very good proposal for the customers, good quality. So we are very competitive in Brazil at this moment in prepaid and in postpaid.

And in Mexico, well, Mexico, we're seeing that a lot of subscribers, not a lot, but some subscribers are moving and wants to be more careful and moving from postpaid to prepaid, but they are starting to consume a little bit more.

So overall, we are also competitive in Mexico, and I think we're doing good in both countries in the wireless side, in the prepaid and postpaid side. On Claro Pay, we are advancing, we are advancing in all the countries. We are doing Claro Pay in Colombia, Brazil, Mexico and putting Claro Pay in other ones.

And well, that's going to be a new offer that we're going to do, and we're working on that. Nothing else to say right now. .

Perfect. Thank you very much..

Thank you..

[Operator Instructions] Our next question comes from the line of Walter Piecyk with LightShed. Go ahead, please. Your line is open..

Thanks. Daniel, I just wanted to talk about the share repurchase. I think like you -- if I have it right, you did in pesos, I think it was $6 billion last April, you upped it again another $6 billion. So you probably should have a couple of hundred million left, then you added $25 billion.

I think historically, you have utilized whatever you've been authorized to do over the course of the year.

Is there any reason we should think about that differently as we look over the next four quarters when you get to next April when you kind of look at your regular reauthorization plan?.

Well, let's wait until that time. But we -- let's say, in February, we asked for an extra form and we use it. In this assembly, we do MXN25 billion on fund. So we're thinking to expand it. We think that share is a very good price, and we're thinking to spend all the fund that we have.

So if in the future, we use it and we need more, then we're going to do another one and ask for another fund. So that's what we're thinking. We are increasing in first quarter, we do a good buyback. And we think that we're going to do more or less the same in -- for the rest of the year. So that's mainly what I can tell you. .

More or less, the same meaning, basically at the run rate you did in Q1. Thank you. And then on dividends, at the April meeting, was there any discussion of kind of the dividend policy? I know that you kind of do this in the second half of the year, you've been kind of around MXN 0.19, MXN 0.20 per share.

Should we think about a similar dividend policy going forward? Or are you shifting more of your capital to share repurchase?.

What we discussed in this assembly was dividend for this year that is going MXN 0.40 and it's going to be like last year, I think, in July and November. And you are asking me for next year and what we're going to do? I really don't know.

First, we need to sell what we need to sell to close all the transactions that we have, and then we're going to decide what to do. So that's more or less we have a lot of things we have oil transaction. We have transformed transaction and then we have the towers transaction. All of these we're working hard and try to close everything this year.

So depending on that is what decision we're going to take. .

Thank you. And then just one last question, if you don't mind. In Mexico, I think there were some press reports very recently about the -- maybe the struggle that Altan Redes has had to sign up subscribers and maybe hit some of their coverage targets.

Has there been any discussion within Mexico about whether that spectrum is better utilized by yourself or AT&T in Mexico?.

No, no discussions with us. What you're telling me, I just read it in the press as you. And I don't have any discussions with nobody about the spectrum or about the company. So no, I don't know nothing about that. .

Okay. Thank you Daniel..

Thank you very much..

Our next question comes from the line of Gilberto Garcia with Barclays. Go ahead please. Your line is open. .

Hi, good morning. Thank you for the call. Just a quick follow-up on the towers. Have you decided yet whether you will list the company in the US market or only in Mexico? Thank you..

No, they ask us at the beginning of the call. We don't know still if it's going to be on Mexico only or it's going to be in Mexico and in the US. So still we are deciding..

Okay. Thank you..

And we're deciding also if it's going to be only the LatAm Towers and the European, we're still deciding when they are going to be. So it's still -- we're working and having all the authorizations on the spin-off of all the towers, not that we're going to sell a lot of work to do still. .

Thank you..

Thank you. .

Our next question comes from the line of Arturo Langa with Itaú BBA. Go ahead please. Your line is open. .

Hi, thank you. Just a follow-up.

And it's maybe more of a strategic question, but we're seeing a lot of telecom groups around the world sort of reduce their footprint, for example, Telefónica Purina LatAm or Vodafone of India, you get sort of the US, is there any read-through for your footprint? I mean, for example, looking at Europe, is there a possibility you could be reducing or selling assets going forward.

Is there any consideration regarding that?.

No. I think we're very happy with telecom Austria. It's a very good performance. The company is doing very good. We're growing in North Eastern Europe also. So no, we haven't think of doing something like that. I think we're really, really happy with the performance of the company being partnered with the government, so that's much.

What we already do is track for non-res and what you're saying is stracon, yes, we decide to sell stracon and that's an MVNO in the US, so it's a little bit different. So yes, we are looking what's the best America mobile, where we are and the expectations, the future expectations of the companies where we are is import. .

Okay.

And maybe just on that, for example, regions like Chile or Argentina, which continue to consume cash, could there be a possibility maybe of reducing your pricing events?.

Argentina is not consuming cash. Argentina is a very profitable company. I think giving very good cash flow. And Chile also is doing very good. So both companies are doing good. So, no we haven't think also in doing something in Argentina that or in other places..

Okay, understood. Thank you. That’s very helpful..

Thank you. .

And there are no further questions at this time. I'd like to turn the call back over to Mr. Daniel Hajj for some final comments. .

I just -- thanks everyone for being in the call and Daniela, Carlos and Oscar. Thank you very much. Thank you. .

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..