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

[Operator Instructions] Thank you. Now, I will turn the call over to Ms. Daniela Lecuona, the Head of Investor Relations..

Thank you. Good morning, everyone. Thank you for joining us today. We’re here to discuss our second 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..

Thanks, Daniela. Good morning, everyone. Thank you for being in the call. Carlos is going to make a summary of the results..

Thank you, Daniel. Good morning, everyone. The U.S. economy recovered rapidly, signs of higher inflation towards the latter part of the second quarter created uncertainty and confusion and drove price corrections in some segments of the financial markets.

The yield on three-year Treasury notes, for instance, rose 15 basis points, which was equivalent to a 50% increase in yield as the market brought forward the expected path of increases in interest rates by the Fed.

In several Latin American countries inflation exceeded expectations and pushed some central banks, notably in Brazil and Mexico, to begin to hike interest rates. Foreign exchange volatility increased throughout Latin America.

In this context, we added 4.2 million wireless subscribers in the second quarter compared to a loss of nearly 5 million in the second quarter of 2020 with 1 million subs -- 1.1 million subs, Brazil accounted for half of the postpaid net adds of the quarter followed by Austria with 289,000 and Peru with 234,000.

Colombia was next with 159,000 subscribers. As for prepaid, net adds totaled 2 million subscribers with Argentina accounting for 777,000 followed by Mexico with 432,000 and Brazil with 328,000. On the fixed-line platform we added 128,000 broadband accesses with Argentina and Columbia each contributing over 50,000 clients.

Year-on-year, mobile postpaid exhibited the fastest access growth with 10.7%. Mobile prepaid followed suit with 5.6% with fixed broadband coming in at with a 3.5% pace. Both fixed voice and pay-TV declined slightly, down 3% year-on-year. Revenues totaled 253 billion pesos, slightly higher in pesos terms than a year before.

At constant exchange rates, service revenue increased 5.3% year-on-year and importantly was up 1.8% on a sequential basis. It is to be noted that the second quarter of 2020 was the one in which the effects of the pandemic, both in terms of commercial activity and revenue were more deeply felt, so the annual comparison may be somewhat misleading.

But the first quarter of 2020 was largely free of the effects of the pandemic and happens to be a good reference. In the first quarter of this year, service revenue had risen 1.2% from the prior year. So, the service revenues and mobile service revenues are both greater than pre-pandemic levels.

Prepaid and postpaid mobile service revenues are both on higher levels than they had prior to the pandemic with prepaid revenues surging on the strength of the economic expansion in Mexico, the U.S., Central America, Caribbean and Eastern Europe. Prepaid revenues were up 9.5% and postpaid 4.4% year-on-year.

For the fixed-line platform, revenue of the different business lines have exceeded trend over the last several quarters, led by fixed broadband that has increased levels of between 7% and 9%, and corporate networks that has covered ground in the last two quarters. Pay-TV and wireline voice are both showing improving trends.

Second quarter EBITDA came in at 84.9 billion pesos, a 2.8% increase in nominal peso terms from the year-earlier quarter. At constant exchange rate it increased 11.9%. However, adjusted for the carrier discounts obtained by Tracfone in the second quarter of last year, EBITDA had an even stronger performance, increasing 14.6%.

The EBITDA margin was 33.6%, which was 0.8 percentage points more than a year before in spite of the greater commercial activity. Our operating profit increased 9.3% to 44.7 billion pesos.

Depreciation and amortization charges held steady at 19% of service revenues, resulting, given the increase in EBITDA, in an operating profit that was up 17.9% at constant exchange rates on an annual basis and 6.2% quarter-over-quarter.

Correcting for the carrier discounts referred to before, the annual increase in our operating profit would have been 23.7%.

We registered a net comprehensive income in the amount of 17.2 billion pesos, as foreign exchange gains, 21.1 billion pesos, and gains in other financial expenses, 4.4 billion pesos, more than offset our net interest expense of 8.4 billion pesos.

Our net profit totaled 42.8 billion pesos in the second quarter, more than doubling that of the year-earlier quarter on the back of strong EBITDA growth and our net comprehensive financing income. It was equivalent to 65 peso-cents per share or 64 dollar-cents per ADR.

In the six months to June our operating cash flow allowed us to fund capital expenditures in the amount of 57.4 billion pesos; reduce net debt in the amount of 36.9 billion pesos, which was quite substantial, certainly for first half of the year, and buy back shares in the amount of 11 billion pesos, also substantial.

In addition, we reduced by 5.6 billion pesos our labor obligations. In fact, our share buybacks through June, which amounted to 765.1 million shares, topped those ones of each of the last six years through the same period. Our free cash flow has attributed a trend of strong growth in each year for the last six years.

We have seen very steady, very consistent increase in free cash flow year after year for the last six years, increasing over 80% in dollar terms in the period. And finally, our net debt-to-EBITDA ratio tranche in this quarter, and it stood at 1.64 times last 12 months EBITDA, down from 1.9 times a year before.

So, we have had the largest correction in the net debt-to-EBITDA ratio that we have seen probably in as many as 10 years. So, with that, I would like to open this for Q&A..

[Operator Instructions] Your first question is from Marcelo Santos from J.P. Morgan. Your line is open..

Hi. Good morning. Thanks for taking my questions. I wanted to ask about broadband in Brazil and Mexico. So, the first question related to Brazil is you have been losing subscribers in broadband, at least when we look at Anatel data until May. And we are seeing many players in Brazil going to fiber, new ASPs trying to list.

We are seeing the large like Oi, TIM, Vivo creating these vehicles to invest in fiber.

What are your plans in Brazil? How do you see this going? Do you plan to test yourself more in fiber, migrate maybe your cable network to fiber, and what would be the impact on CapEx? And on Mexico, I just wanted you to comment a bit on the competitive environment because you also saw some broadband losses in the quarter.

So, if you could comment on that would be great. Thank you..

Thank you, Marcelo.

Oscar?.

Yes. Hi, Marcelo. Well, first, talking about Brazil. As you know, we have cable networks in Brazil. So, what we’ve been doing is upgrading the network. So, we have a very strong plan to break down the notes in order to deliver more speed to our customers. When you look at the new sales, 60% of the new sales is in a product that is 240 megabits.

So, we already prepare the network through that. So, we believe that we will protect all the HFC network. By the end of the year, we will upgrade 70% of the network to really deliver the speed that the market is needed. And secondly, talking about fiber-to-the-home, we already have 3 million home passes with fiber-to-the-home.

We opened 110 new cities with GPON technology in order to be prepared with fiber. And when you look at those cities, 110 cities, the penetration that we are getting in those cities is quite relevant. And we have a program to finish the year with around 5 million home passes with GPON.

And when you look at the figures, we are the leaders on ultra broadband in the marketplace. And no, we are not only focused on the speed that we need to deliver the speed that the market is needed and the competition is offering.

But as you know, we are focused on the combo play that we add Claro Box, mobile, and that proposition has been working pretty good. And as you know, the ASPs are growing pretty rapidly, but in regions that we don’t have network. When you look at the market share and where we have network, we even increased a little bit the market share.

So, that’s the plan for Brazil. And in Mexico, when you look at the customer base, 43% of the internet base is already GPON and the rest is with VDSL. Just to give you a flavor on the first half of the year, we built 1 million home passes today with fiber, and we migrated 500,000 customers from copper to fiber.

We want to increase that part of construction and migration in Mexico. And as well in Mexico, the market has been receiving -- well-accepted the bundles that we are doing with the streamers, providers. As you know, we have bundled with Netflix, with Disney Plus and recently we launched with HBO Max.

So, we are moving the customers to fiber as well in Mexico..

Your next question comes from the line of Leonardo Olmos from UBS. Your line is open..

Let me discuss a bit the prepaid and postpaid division between mobile clients, noticed a lot of prepared net additions, except for Brazil, of course, on postpaid.

But if you can discuss how they see the largest [indiscernible] the prepaid and postpaid mix, how do you see that playing out in 2021, considering that you had a lot -- you and the market had a lot of these connections prepaid last year due to the pandemic. How do you see the prepaid playing out in the second half of ‘21? Thank you..

Well, we don’t hear you so well. We don’t know if you are talking about Mexico or Brazil. But I can tell you that, in my view, since the pandemic starts, a lot of people are using more and more and becoming more digital. And of course, we had some disconnections last year in prepaid.

But I can tell you that this year, today, we have more prepaid subscribers than what we had last year, before the disconnection. So, people start to reconnect again and start to use more. Our ARPU in Mexico, I’m talking about Mexico, the ARPU in Mexico is higher than first quarter of last year.

So, people is using more, people is connecting and using more data. So, that’s more or less what I’m seeing. In the postpaid, people is still a little bit worried about the pandemic. They don’t want to get -- like something like a bill every month. So, that’s why also some people is moving from postpaid to prepaid.

But, as we’re seeing, they are using a lot also data. So, in prepaid and postpaid, all around Latin America, we’re seeing the same.

Anything else?.

Yes, yes. Well, first of all, thank you for hearing. That was my question exactly. Just a quick follow-up. Besides Brazil and Mexico that is discussed specifically, which are the regions do you think there’s more potential for prepaid growth, specifically prepaid growth? Thank you..

Thank you. For the prepaid growth, I think Colombia, we’re growing in prepaid, all Central America, we’re growing also in prepaid, Dominican Republic, we’re doing well. Eastern Europe also, we’re growing in the prepaid side.

So, all overall, people -- sometimes people doesn’t want to have a commitment every month, but -- and they are moving to a prepaid platform. But, we think that they are having good ARPUs and consuming well all the data. Sowe’re okay on that..

[Operator Instructions] Your next question is from Alejandro Gallostra from BBVA. Your line is open..

Hi. Good morning, everyone. Thank you very much for taking my question. We have been significantly increasing the pace of share buybacks in recent months and even before reaching the desired level of leverage.

So, should we expect an increased amount of capital distributions to shareholders once you reach your 1.5 times net debt-to-EBITDA and complete the sale of Verizon or you’re already reaching your levels of -- your entire levels of capital distributions to shareholders?.

Well, I think what I mentioned in the overview a moment ago, we had actually a very good cash flow in this first half of the year, and that allowed us to pay nearly $2 billion of debt and [indiscernible] the operation, this is before getting any of the proceeds from platform or whatever we might end up having with the towers.

So, I think that that gave us confidence that we were very much on track to get to our desired levels where we need to wait on that number. So, I think that that’s all depending on the Company today. We will be reaching our levels. We are confident that the two things I mentioned, both platform and the towers are still on track to close this year.

And with that, I think that maintaining a good cash flow allows us to raise the share buybacks today with capital..

Your next question is from Carlos Legarreta from GBM. Your line is open..

Hi. Thank you. Good morning. I have two questions, if I may. The first one regarding CapEx, we see that in the first six months of 2021, it’s actually down versus the last year.

Does this imply that you will pick up significantly during the second half, or has something changed there? And the second one, in terms of regulation in Mexico, there’s been a public consultation regarding the potential wholesale deregulation for rates for Telmex in certain municipalities.

So, I’d like to understand if this can lead to perhaps the authorities granting Telmex a pay-TV license in those areas? Thank you..

Well, on the CapEx side, we have our budget of 8 billion, 5% more, 5% less. So, we’re in that range, and we are on track for the first six months. We are on budget. And we are not increasing anything else. What Oscar says about fiber-to-the-home in Brazil, fiber-to-the-home in Mexico, we have also a lot of fiber-to-the-home all around Latin America.

Everything is including in this budget. So, that’s more or less. And on Telmex on pay-TV, I hope we can get it. There’s a lot of time that the IFP is saying that is going to give us the TV. So, I hope that we can have the TV in Telmex for this year.

So, as we said always, there is maybe not in the world, there’s a company, a phone company that doesn’t have a pay-TV. Basically -- I hope that we can get that pay-TV license this year..

Do you think it’s reasonable to think that those processes are related or not necessarily?.

I don’t think so, I don’t -- necessarily is related to that. We have been having that -- the pay-TV for maybe 10 years. Now, we’re asking for the pay-TV for more than that. So, I hope this year we can get it..

Your next question is from Arturo Langa from Itaú. Your line is open..

Hi. Good morning. Thank you for taking my question. Just one, I wanted to see if you can provide any more color regarding Colombia and what you’re seeing there from the launch of Vox operation.

Just to get a sense, how aggressive do you perceive them to be right now? And what is the base case that we should be working with? Should we expect something like when AT&T went into Mexico or maybe want to come into Chile.

Is that -- or [indiscernible] into Peru, is that your working assumption or do you expect something much less aggressive? That would be very helpful. Thank you..

I cannot compare what they do, AT&T in Mexico or the other ones in Chile or in Peru. So, what I think, one today in Colombia is very aggressive. Their plans are very aggressive. But I think it’s not only aggressiveness. Now, you need to have a good network, a good branding. We have quad-play, convergent, customer care centers, good distribution network.

There’s a lot of things around, a good offer, okay? And customers, we have a very good NPS in Colombia, people prefer us. So, of course, there’s strong competition there. There is three other big competitors, one Telefonica and Vivo. But, we feel comfortable. We’re investing there in the network, we have good quality there.

And the convergence is very important for us. We have been putting a lot of our subscribers in for play. So, what can I say? So, it’s a big competition, it’s a strong competition, good competitors. We’re competing against good competitors, but we feel that we’re in a good position in Colombia..

There are no further questions at this time. I will now turn the call over back to Mr. Daniel Hajj for final remarks..

Okay. Well, so it was a short call. Thank you, everyone. And I don’t know if you want to add something, Carlos or Oscar..

No, thank you..

Thank you..

Thank you very much..

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