Good morning. My name is Daisy and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Movil Third Quarter 2023 Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

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

Thank you so much. Good morning, everyone. We're very happy to host this call this morning to discuss our third quarter financial and operating results. We have in the room Mr. Daniel Hajj, CEO; Mr. Carlos Garcia Moreno, CFO; and Mr. Oscar Von Hauske, COO..

Hi. Good morning. Thank you, Daniela. Thank you for being in this third quarter financial and operating report. And Carlos is going to make a summary of the results..

Thank you, Daniel. Good morning, everyone.

Well, buoyed by strong US economic data, particularly on employment levels and recently also on consumer spending and lingering inflation concerns, 10-year dollar interest rates shot up by approximately 80 basis points over a 10-week span in the third quarter to 4.6% at the end of September, driving another bout of dollar strengthening.

By the end of the quarter, there was practically no more hope that interest rates would decline in the latter part of the year and there was instead preoccupation that the Fed was still not done raising interest rates.

As you can see in the market, the rates have continued to go up through today and they are about to close to reaching 5% on the 10-year tenure.

We added nearly 3 million wireless subscribers in the third quarter of which 2 million were postpaid clients, 1.2 million in Brazil, 460,000 in Austria, which includes IoT devices from A1 Digital, 104,000 from Colombia, and 93,000 from Mexico. On our prepaid platform, we had net additions of 950,000 clients during the period.

Eastern Europe led with 210,000 clients, followed by Brazil with 193,000, Colombia with 173,000, Argentina with 93,000, and Mexico with 81,000. In the fixed line segment, we gained 223,000 broadband accesses with 65,000 each from Argentina and Brazil. Voice lines and PayTV units decreased by 160,000 and 58,000, respectively.

At the end of September, our subscriber base totaled 306 million wireless subscribers, of which 119 million were postpaid clients. Additionally, we had 73 million fixed-line RGUs, which includes 32 million broadband accesses, 13 million PayTV clients, and 29 million landlines.

Year-on-year, our postpaid base increased 3.7%, prepaid 0.7%, and fixed broadband accesses 3.2%, with fixed voice lines falling 2.6%, as you can see in the slide. Third quarter revenue reached MXN204 billion, a 3.3% year-on-year reduction in Mexican peso terms, with service revenue falling 4.3%.

As has been the case throughout several quarters, these figures reflect the appreciation of the Mexican peso versus all other currencies in our region of operations, reducing the Mexican peso value of our international revenue.

At constant exchange rates, service revenue growth expanded 3.8% and EBITDA 5%, which reflects among all things, the effect of tower sales in Mexico and Peru that took place in the period and one-off events in Austria. Correcting for these, adjusted EBITDA was up 3.9% just about the same rate as service revenue as you can see on the slide.

On the fixed-line platform, service revenue remained on trend, increasing 2.2% year-on-year, having risen from the 0.2% pace seen in the second half of last year, whereas on the mobile platform it rose 4.8%. Brazil attained a positive fixed-line service revenue growth of 0.1%.

In Mexico and Colombia, fixed-line revenue decelerated, remaining stable in Austria and surging in Eastern Europe to 21% and in Central America to 5%. In both cases, it was the most rapid pace in at least one year. The slowdown in Mexico from 5.6% to 3.6% had to do with corporate network services.

In fact, broadband revenue actually accelerated to 8.2% which is its best showing in a decade. In several countries, Brazil, Peru, Colombia, and Central America, we had among the highest, if not the highest, net broadband additions in the past three years.

Others including Mexico, Austria, Peru and Central America posted their most rapid broadband revenue growth in at least one year that can be seen in the chart with Brazil and Eastern Europe sustaining strong growth rates. This led to our consolidated broadband revenue expanding at the fastest rate in more than two years, which was 6.4%.

On the mobile platform, revenue growth decelerated in Mexico from 6.4% to 4.6%, picked up in Central America to 9.5% from 8.8% with Brazil's adjusting to a normal pace after a hump following the incorporation of Oi mobile clients in second quarter of 2022. This is something that you can see here in the -- on the slide.

But going to fixed, it's important to note that revenue from corporate network services has been gaining share within our revenue base. This quarter it became the second most important revenue line within the fixed-line platform after broadband services with the consolidated figure rising 6.5%.

It already accounts for 19% of fixed-line services overall with this share reaching 39% in Austria, 30% in Eastern Europe, and 25% in Mexico.

Our operating profit stood at MXN42 billion in the quarter, a 6.7% year-on-year reduction in Mexican peso terms which partly stems from the EBITDA decline mentioned before, but also from a 17% increase in depreciation of rights of use associated with tower leases.

Most of this effect had to do with successful renegotiation a year before of certain lease agreements in Brazil that reduced Claro's obligations to a tower company. Our comprehensive financing cost totaled MXN30 billion, including an MXN8.8 billion net interest expense which was 3.9% lower than that registered a year before.

Under other financial expenses, there is a MXN4.7 billion charge associated with the partial impairment of our stake in Claro Chile, our joint venture with Liberty Latin America pursuant to the fair value of the new JV for which under IFRS rules had to be defined within a year after its closing.

Finally, our comprehensive financing costs also include a MXN12 billion foreign exchange loss in the quarter, resulting principally from a 3.8% depreciation of the Mexican peso versus the dollar in the third quarter. Net income amounted to MXN2 billion. It was equivalent to MXN0.03 per share or $0.04 per ADR.

Year-to-date, our net income totaled MXN58 billion. Through September, our net income totaled MXN58 billion, 2.9% lower than that registered year before. Capital expenditures came in at MXN100 billion in the nine months to September where distributions to shareholders reached MXN34 billion.

These include share buybacks in the amount of MXN7.7 billion and dividends of MXN16 billion and were partly funded by MXN3.7 billion in dividend income.

To cover all of these expenditures, but also labor obligations in the amount of MXN10 billion, we resorted to our operating cash flow of MXN115 billion and to net financing in the amount of MXN12 billion in the quarter -- in the period with MXN5 billion coming in mostly from the payment of an earn-out on the [indiscernible] platform.

As of September, our net debt excluding leases totaled MXN390 billion and was equivalent to 1.4 times last 12 months EBITDA. As you can see on the chart, it was fairly flat leverage ratio. It was MXN8.3 billion higher than the figure at the end of December. Okay. Well, thank you. And I will pass the floor back to Daniel for the Q&A session..

Thank you, Carlos. We can start..

Thank you. [Operator Instructions] Our first question today comes from Victor Tomita from Goldman Sachs. Victor, please go ahead. Your line is open..

Hello, good morning all and thanks for taking our questions. Two questions from our side. The first one is on capital allocation.

Given your healthy leverage position and cash flows, even considering your increased CapEx budget, do you have any plans to in anyway further increase cash deployments? So maybe by further increasing CapEx on fiber or by further increasing equity stakes in specific businesses as you did in Austria or by carrying out further M&A or even by increasing buybacks following the recent decline in share prices and seeing that you already seem to have increased buybacks based on the third quarter? The second question from our side would be on corporate networks.

You highlighted that there was an increase in relevance of corporate networks in your global revenue mix.

Could you give us a bit more color on which types of corporate offerings have been driving that growth and on what their economics and margin profile is like compared to the more traditional consumer-focused telecom offerings? Thank you very much..

Thank you. Thank you, Victor. Well, on the allocation of resources, there is really nothing we are looking at on the M&A front as we have mentioned before. I think we're not looking at increasing anything more our CapEx certainly this year. And I think we will make some comments later regarding our budget for next year.

But as regards the distributions, as you point out, we have been accelerating our buybacks. I've been reiterating on various calls that our free cash flow is very cyclical and we basically tend to get most of our free cash flow in the last three, four months of the year. So that's typically when we would want to increase our share buybacks.

If you look at the distribution or share buyback so far this year, we spent about US$100 million in the first quarter and $50 million in the second quarter, $272 million in the third quarter. And so far this month, we've increased an additional $70 million. So, basically $350 million between the end of June and until so far in October. So still to go.

Obviously, in addition to this, we have already paid US$200 million of dividends and we have another payment of the same magnitude that we will be expecting in the middle of November. But so, again, some we can say something on CapEx budget for next year..

I can -- what we discussed and we have been saying in the last year is that we have a budget of $24 billion for three years, that's '23 -- '22, '23, and '24. And so we are on that budget. We increased a little bit the CapEx this year. We haven't finished our budget for next year, but I think we are going to accomplish with that.

So what we increased this year, maybe we are going to reduce that the next year. So that's more or less what we're thinking. We don't have anything extra on CapEx for 2024. So, we are on budget and we think we can do that. On the corporate network, I think that's a segment that we are doing well. We are increasing in all the countries.

And Oscar can talk a little bit about what are the new products and the products -- what we're looking is to have and to manage the networks of the customers and that's more or less what we're aiming for. And Oscar can tell you a little bit more on that..

Yeah. Thank you, Daniel. As you say, the first step is how do we manage the network of the customers. And there is the SD-WAN technology that allow us to do this in an easiest way. So when we move the customer through SD-WAN, we are trying to bring security, cloud services as well bundled in the services.

And as well we are offering what we call horizontal solutions. We are selling data lake as a services. We are selling AI as a services in our cloud. We develop what we call cloud broker that we -- we are agnostic as the type of cloud that the customer wants.

If the customer want hyperscaler or one over cloud, they have a dashboard that could manage both clouds in an easy way. And as well, we are getting into the private wireless network. I'm talking about vertical solutions for mining, for retail, for manufacturing and have been well received in the market.

We see a big opportunity in this -- in this segment because it improves the efficiency of the customers, brings productivity. And, you know, we are all on digital transformation and these products support that evolution. That's why we -- we see that market has a very good trend in the near future.

So, all overall, on summary, we're not offering only the classic and connectivity products that it's broadband or fixed or wireless or prepaid or postpaid or -- we're offering all these new services to all the B2B customers..

Another is that we are fully convergent. So in our offering, we offer as well mobile and fixed altogether to the customers..

Very clear. Thank you very much..

Thank you..

Thank you..

Thank you. Our next question is from Eduardo [Ruby] (ph) from UBS. Eduardo, please go ahead. Your line is open..

Hi, everyone. Thank you very much for taking our question.

I would like to know if you could provide an update on the Mexican regulatory environment, discuss the proponent revision and there is an additional regulatory risk for AMX, particularly on the concession given what happened in airports? And another one, if you could discuss also the spectrum prices, if you see any additional risk there too? Thank you very much..

Well, on the regulatory side, I think, to make a little history, we have been having 10 years of having these regulatory measures, 10 years accomplished all the measures that IFETEL has been putting us. And -- and not too much to say. Only, I think that we expect and we think that these regulatory measures should relax in the future.

At the end of the day, what the markets need is investment and what the customer wants is quality, price, coverage that you attend the customer in a good way. So all these things you cannot put measures on that. So that what is happening in the last 10 years. And I think in Mexico, in a lot of our products, we have the preference of our customers.

And we hope that the IFETEL take a very deep revision on what is happening on the market and we relax the measures that we have. So that's more or less. We don't know nothing more on that, but we hope that we have that..

Sure. That's clear. Thank you very much..

Thank you..

Thank you. Our next question is from Walter Piecyk from LightShed. Walter, please go ahead. Your line is open..

Thanks. Hey, Daniel. And if I look at Mexico, obviously you had good unit growth and ARPU was also very strong in '21 and '22 obviously, maybe somehow the pandemic had some impact on that. But this quarter this shows a little moderation there.

Is that just kind of coming out of the pandemic or is there economic issues that we need to think about in terms of Mexico? Obviously, ARPU is still growing and service revenue is still growing, wireless service revenue specifically.

I'm just curious kind of what are your thoughts on some of the moderation of that growth and how we should think about that going into future quarters?.

Well, I think what you are saying is right, it's moderation. We are still growing our revenues in Mexico. I think the moderation is more on the prepaid than on the postpaid. So maybe it has to be a little bit with this acceleration of the economy. I don't know.

We don't know exactly what it will be, but I can tell you that we have very good 5G network, good coverage. We are working very hard on control cost platform all around. And I think also could be a little bit on the market. Our competitors could be doing some promotion. So I still feel very comfortable on what we're doing in the mobile products.

And by far, we have the best perception to the costumers in terms of coverage, quality and price, attendance, digitalization. So all these things will help us a lot on how the customer is taking the decision. As I said the moderation that we're having is more on the prepaid side than on the postpaid side. So that's what we have been seeing.

On the fixed side, yeah, Carlos want to add something..

Just to add something here, Walter. The ARPU growth in Mexico was 1.5% year-on-year. And -- but if you look at postpaid, it was actually strong, it was 3.1%. So this is what Daniel said, the moderation was a little bit more on the prepaid side. And the postpaid, it remains quite firm, not very different from what we have seen in prior quarters..

And you said also --.

And you think -- and Daniel, apology, you said that -- that you think -- if you just looked at prepaid, you think that might be more the promotions of the competitors may be impacting prepaid than necessarily some sign of the economy reducing the usage of some of those? Yeah..

Yes, I think so. That's what I think. Yes..

Okay. Okay. Just a similar question. If you look at the equipment revenue line, that actually looked stronger, meaning, like if you do the math on it, looks like maybe people in Mexico are buying more expensive phones.

Is there anything you can tell, I mean, because that would suggest that the economy is pretty good, that people are buying or upgrading phones. So just curious on any thoughts you have on, on your equipment revenue line? And why that might show, you know, some decent growth? Yeah..

Yeah, I think on the equipment revenue, we're doing good. What is happening is not only Telcel, the ones, I think we have been having a lot of imports of handsets. And this has been thus accelerating a little bit.

Some brands does not like, let's say, Samsung does not like that Samsung phones will gain not through their office in Mexico, through other country. So I think that's a little bit on that. And I think they are cutting and reducing these imports. So that's why you are seeing that there is more sales on equipment this month..

Got it. And then just one final question. There is a line on the cash flow statement that I believe you call payments of lease liabilities. This is where some of the payments, I think primarily to tower companies exist. I'm just curious how we should think about that going forward.

Are there normal escalators that should take that? And for this quarter, I think the number was MXN9.7 billion. So I'm just curious if that's -- that line item on the cash flow statement, is that something that should grow at a similar rate that it has in recent years, I think it's about 10%.

Or is there any opportunity to moderate as you've kind of completed a lot of the 5G deployment in a lot of these markets?.

Yeah, I think you are right. I don't think in 5G, we're going to need the same amount of towers that we need in 3G or 4G. The new tower should be more on coverage than on capacity. And that's more or less what we have been seeing. So I think that will moderate in the future..

Great. Thank you very much..

Thank you. Thanks..

Thank you. Our next question today comes from Marcelo Santos from JPMorgan. Marcelo, please go ahead. Your line is open..

Hi. Good morning. Thanks for taking my question. I have two. The first question is about Colombia. If you could please comment on the competitive environment on the fixed market? We saw that you started adding broadband subscribers again, so it was a very strong result. So a comment there would be very helpful.

And the second question is if you could provide us an update on the joint venture with Liberty Latin America in Chile and the outlook on potential capital injections that operation might need. Thank you very much..

As you mentioned in Colombia program, on the third quarter, we did it pretty good. And what we did is that we really changed the way that we go to the market. We did [indiscernible] focus in the area that we have a lot of competition. So we started winning share on both areas. We upgraded the network.

And as you know we are building fiber as well in Colombia. So we believe the third quarter is the trend that we are going to see in the next quarters in fixed broadband. And as well, we improved all the quality of services to the customers, time to deliver, time to repair.

So we really focus on the third quarter to really change all the structure to go to market for fixed broadband in Colombia..

And on Chile, well, I think Chile is a very important market for us. And we have a program -- synergy program since we get together with Liberty. And we're doing well. We're advancing our synergies and our revenues and sales are going much better. So we think that we're going to really focus on creating value on Chile.

And that's more or less, we still think that Liberty will be our partner in the future. We hope so. It's a very good partner. And we're focusing to really get everything, all the cost control, reducing expenses and moving in the market.

We're also putting more coverage, better quality and we're really focusing in making Chile a much stronger company for the future. So that's more or less what we're doing there..

So could we say that it's on track? You think it's on track or it's above expectations versus what you hoped?.

No, I think we are on track. We don't have a synergy program for six months. I think we have a synergy program for two years, very strong, very focused. And we are on track and we are doing very well. We are happy the way the company is evolving. We're growing. We have been losing some customers in peaks in the last quarter, we're growing customers.

So we are improving and improving and improving every day..

Great. Thank you very much..

Thank you..

Thank you. Our next question is from John Ho from Mizuho. John, please go ahead. Your line is open..

Hey, good morning and thank you for taking my question. Just to get further clarification on the previous question regarding the joint venture in Chile.

Have you -- has America Movil contributed anymore capital during third quarter for the Chile operations? And then one thing to note, the joint venture partner Liberty did admit on its 2Q call that America Movil has been making most of the contributions to date.

Are we to expect that going forward? And more from the perspective of America Movil's plans.

Right now the -- I know you mentioned in the -- that your previous statements are that you said the JV is 50-50 and you like Liberty, but considering America Movil has been making most of the contributions and what you've been doing, would you look to assume control in the future, would that be a possibility? And lastly, would it be possible to get the Chilean JVs management maybe increase communication regarding what's going on there because since for bondholders, since the JV has been closed last October, communication has been very low.

So we'd like to see an increase if there is -- if we can get it if possible. Thank you..

Well, thank you. Let me begin with the last part of your comments or question. I think we've heard some of these comments to the effect that maybe the company should improve a little bit its visibility that it provides to the market.

We are already talking to the partners so that together we can see to it that from here now on we can provide a bit more color than is strictly necessarily from the perspective of the guidelines of the bonds. But we can provide a bit more color on the operations themselves, okay.

So I think we will be tending to your comments and those for the investors to make sure that you have a clearer view of the developments of the Chilean operation, okay, which I think --.

We would appreciate that. And I thank you for that..

Yeah, yeah. So I would expect that probably before the end of this month, we can provide the financial statements for the -- through September. And that in the context of this release, that we can provide also more color, more information on the actual operations.

In terms of the -- I think it's very important what Daniel mentioned to the effect that this is a 50-50 joint venture and the partners needed to agree on a business plan, okay, which would be the beginning of the year. The business plan, as he mentioned, is not for a year. It's a medium-term business plan. And we are focused on executing on it.

I think the execution has been fine. As Daniel mentioned, on the operational side, it's very clear.

We are beginning to get some of the synergies that we expected first quarter or even first half of the year, there were some one-offs because of the -- when you get these companies together, there's always a one-off expenses, there's people that leave the company, et cetera.

But we don't have many -- most of that -- I mean most of that is really behind us. So I'd say that in agreeing business plan, we have also agreed on what it takes to execute this business plan, and that requires also some funding.

So we have put in place the appropriate mechanism that should see to it that the company gets the funding that it needs in the time that is required. And that's basically what we have, okay. At this time, it's only mechanism that provide for this -- for financing throughout the period.

At some point -- we at some point -- at this point have not envisioned any change in stakeholdings. And there has not been any change as of today on any of the stakeholdings. So that's all what we can say on this result..

And one more thing on Chile, I think we have -- I haven't mentioned that, but we are already put -- we are very happy in America Movil with the management that we have there. As Carlos said, we have to structure and to take out some people and put other ones.

But right now, we feel that the management that we have there is in place working and focusing on executing that. So that's also something that we are happy on that..

Has there been any other further capital in the 3Q results for America Movil to VTR, I mean to the joint venture?.

There hasn't been probably any capital waste at the level of VTR. So there hasn't been any equity provided. And as I said and I don't think we can go beyond that, I think there's been financing mechanisms that have been put in place to ensure that the company gets the funding that's required to execute its business plan. That's it.

At this point, we are not envisioning any capital contributions as such..

Okay, thank you..

Thank you..

Thank you. Our next question is from Soomit Datta from New Street Research. Soomit, please go ahead. Your line is open..

Yeah, hi. Hi, guys. Couple from me, please. One, just on the group prospects for service revenue and an EBITDA, your medium-term guidance or your '22, '24 guidance has seen EBITDA running ahead of service revenues. The guide, I think, is 4% to 6% versus 2.5% to 4%. So service revenues and EBITDA run rate is similar today.

I just wondered, do you still see the opportunity essentially for margin expansion? Do you see the opportunity for EBITDA run rate to come in ahead of service revenues as we look forward? That's the first question please. And then the second one if I could on Mexico, I think, you have been resistant to increasing prices over the last few quarters.

I just wondered how you are looking into 2024? Do you still think that's the right strategy or is there room to consider lifting prices or do market conditions not allow for that? Thank you very much..

Okay. On the first question, I think, the revenues that we're having, the service revenue that we are having, are running, as Carlos said, 3.9% -- 3.8% and the EBITDA is going and increasing 3.9% taking all that one-offs and everything. So I think we have a very good platform. We're very focused on controlling cost and expenses.

In every country, it's a little bit different. In every country, you have managed to increase a little bit the -- and pass through the inflation to some prices, to some segments, in other ones, no. We can't -- we haven't done that.

And -- but in every country, we have a big platform controlling cost, controlling expenses and digitalize more, reducing people. So we have a very focused controlling cost strategy on the company. So that's something on that. And in countries where competition allow us to do that then we can pass through a little bit on that.

The second question, can you repeat that?.

It was a question on Mexico and on a similar theme, price increases. I just wondered how you are looking at the outlook for potential price increases. On the fixed side, we know your competitors have moved their prices and you have not.

I just wondered broadly across wireless and fixed, do you see the opportunity to increase prices at all in Mexico?.

Well, we still don't know that, but at this time, we are not thinking to increase prices at this moment. And we are focusing, we're putting a lot of fiber. I think we have 16 million home passes on fiber and giving to all our customers the chance to move from copper to fiber and have new customers with fiber.

So we are focusing -- we have 76% of our customers connected with fiber and we're going to follow that. So I don't know and I cannot tell you what we're going to do in '24. But until the end of this year, we haven't had any -- for the fixed. We haven't increased any prices all this year..

Okay, thank you..

Thank you.

Another question? Hello?.

Hi, Daisy.

Can you hear us?.

Apologies, I was muted. We have a question from Cesar Medina from Morgan Stanley. Cesar, please go ahead. Your line is open..

Great. Thank you so much for taking my question. I have two related questions. The first one is what is your read on the stock performance today after the printing down 6%? And then related to that, if I hear all the commentary around, it seems the following. Service revenue is going well. You have room for margin expansion.

CapEx is on a positive trend, if not lower. So is there room to increase or like to start a discussion of increase in shareholder remuneration given that two-year yields are like north of 5%? Thank you..

Okay, Cesar, you are asking for a question of what we think about -- and I'll tell you what I think. I think there is a lot of stress today in the market. If you see 10-year interest rates have been climbing sharply the last day, the last couple of days. They are now -- last time I saw at 4.90%.

That's the highest level they've been in, you know, since all of these pressure for rates -- since rates started to rise. So they are now close to 5%. This in spite of the Feds having been saying that they probably didn't need to raise rates once again because the market was doing the work for them.

So my read is that there's a lot of stress in the market. That means that it's a risk off. And when people want to go to de-risk, often they sell what is liquid. And I don't think that sometimes America Movil is utilized as a proxy for other things given the liquidity. That's my take. I think it has less to do with the actual results.

It has more to do with the move to de-risk given stress in the market..

And in my view, I think, as Carlos says, he gives his view. My view is that the results were consistent with the -- what the market thinks. And I think the fundamentals are okay. And the business in America Movil is growing and it's okay. So that's my view..

No, no, I'm with you.

So this is why I was just flagging, you know, if you look at the margin trend, revenue trend, is there a scope for you to evaluate perhaps increasing shareholder remuneration?.

Yeah. So again that takes us back to one of the prior questions. I think that we were saying we typically tend to pace with share buybacks with -- materializes mostly the last third of the year. I had already said that since July, we have had a significant deployment of resources in share buybacks.

And we have had, since the end of June till today, MXN350 million in share buybacks, and we're still not done. And obviously, we still have another big payment of dividends $800 million or less that will be made in November.

But certainly share buybacks, we can continue with them because this is time when we can get the funding, the leverages where we want it to be. And the cash flow is coming in as we expect it to..

Thank you..

Thank you..

Thank you. Our next question is from Andreas [indiscernible] from BTG. Andreas, please go ahead. Your line is open..

Hello, thank you for taking my question. I would like to ask question related to margins in Mexico. Last year, we saw good expansions across the year and this year has been quite volatile in the first quarter, posting a margin -- quite a large margin contraction and happening again this quarter.

So what's your view on the level of -- sustainable level of margins in Mexico going forward? That will be my first question. Thank you..

We're checking a little bit. I mean, I have here the -- I have the adjusted margins I think, but maybe you have to look at the adjusted margins because we have done from time to time some tower sales. So that has had an impact on the margin. So if you look at adjusted margins in 3Q '22 where it was 41.0%. In second quarter of '23, it was 40.9%.

And we did have a reduction from 40.9% to 40.0% in this quarter. But they've been -- I don't see a lot of volatility. I think margins have stayed in the 40% to 41% range, adjusted margin for the last five quarters..

Yeah. And the growth is 5.9%, second quarter 5.1% and this quarter 3.6%. So, it's more or less the growth is there and it's not -- I don't think it's volatile. It's more or less following the increase on revenues..

Understood. And what should we think going forward given the possible increase in minimum wages or gain of 20% on your labor costs and the possibility to see the labor week to reduce by one day.

How should we -- could we -- could this impact the operations in Mexico?.

Well, we already have that increase at the beginning of the year. So it's part of the cost that we're having. And as I told you, we have been focusing a lot on taking care about the cost to have a very good cost control in all the operations. So it's not only in Mexico, the increase in salaries. It's all around Latin America.

And we're focusing on that being more efficient, being more digital. I see this number, I think, in America Movil in '19 -- in 12/19, we have 190 -- let me tell you, we have 94,000 people, in '20 186,000, in '21 181,000, in '22 178,000 and in August we have 176,000 people. So the reduction -- we are not hiring people.

We're being more efficient and we're training more our people. So all of that is giving us that control of the costs. So the reduction and retraining the people is being for the last four years..

And I'd just like to stress again that regarding Mexico and sometimes other countries. It's important to normalize from the effect of extraordinary things like the sales towers, okay, because they have been important in Mexico over last year. They've been important this year.

And I think you have to correct for that, because of -- that the volatility in the margins you're referring to has to do with the tower..

Understood. Thank you very much..

Thank you..

Thank you. Our next question is from Alejandro Azar from GBM. Alejandro, please go ahead. Your line is open..

Hi. Good morning, Daniel, Carlos. I'm sorry I joined a little bit late, but I was wondering if you guys mentioned something about the Verizon earnout that I believed the deadline was September of this year. Could you give us some color on that if it's possible? Thank you..

Hello. We did get a payment for the earnout. It was MXN3.5 billion -- MXN3.3 billion in the quarter. It's part of the MXN5.5 billion that we mentioned here in the cash flow. There was a slide there that we will be happy to provide you the slide..

Thank you..

We mentioned in the free cash flow.

Thank you..

Thank you..

Thank you. Our next question is from Phani Kanumuri from HSBC. Phani, please go ahead. Your line is open..

Thanks everyone for taking my question. My first question is on Brazil. It seems that you're growing very well in Brazil and the ARPU is up nearly 12%..

We don't hear -- can you speak a little bit louder, we can't hear you, please. Yes, a little bit louder..

Can you hear me now?.

Yes..

Okay. My first question is regarding Brazil. It seems that you're doing really well in Brazil and your mobile ARPU is up nearly 12% year-on-year in the third quarter. Is it driven more by price increases or more by volume increases? And how do you expect this trend to go going forward? That's my first question..

Well, I think on Brazil, we are doing well in market share. We're doing well, as Oscar has mentioned and Carlos mentioned also, we're starting to grow in broadband again reducing the losses in TV, improving like 1.1 million subscribers in postpaid. So we are doing very well in Brazil.

The synergies that we have and the control cost that we have, also we have a pass through on part, not on all our products, but in part of our products I think at the mid of beginning or mid of this year. So in Brazil, we are doing okay, improving, growing revenues and controlling costs. So that's what we're seeing in Brazil..

Thank you. So the second question that I had is on the Mexico corporate segment. The revenue growth has decelerated this quarter.

Is it because it's more of a lumpy quarter or what is driving that revenue growth deceleration in the corporate segment in Mexico?.

Yeah, well, as I mentioned before, in Mexico, we are doing exactly the same, selling those products, SD-WAN, security, outsourcing of the networks, cloud services, vertical solutions. So we are doing pretty well in Mexico, addressing those markets and it's growing around 12%, the revenues in corporate.

So, you know, when you look at Mexico, corporate is growing. Broadband as well is growing 8%, 8.5%. So I think we are doing well in Mexico and we feel that we continue with that. We have the base of the network. We did the right investments in the network, not only in fiber. We reskilled the people to sell these new set of products.

So we bring people with experience in cloud services, in vertical solution. So I think we see this market trend pretty optimistic..

Thanks for answering my questions..

One question -- one comment on the other part, what I said, because the issue with our corporate networks revenue, which we mentioned, it's been gaining shares. It's becoming more important in most operations. But it can be sometimes volatile. But sometimes you get a new contract and you book all the revenues at once.

But if you look at the full nine months of this year, so we raise the volatility, you have the increase in revenue is 10.3%. So the year to September, corporate network revenue in Mexico is 10.3% larger than the prior year..

Yeah, thanks, everyone..

Thank you..

Thank you. Our next question is from Andres Cardona from Citi. Andres, please go ahead. Your line is open..

Good morning, Daniel, and good morning, Carlos. Thanks for the preliminary comments on 2024 CapEx program. Let me ask you about 2023 net working capital, if you can comment about what do you expect for the full year? And if there was any event that explained slower reversion on the third quarter? Thanks a lot..

Working capital..

Working capital, which is the reversion on working capital? Can you explain again? We don't hear -- we don't understand?.

Andres, I don't know if this is the question, but basically what we've been saying for a long time is that our cash flow is very cyclical because of working capital. So the first several months of the year, we require a lot of working capital and then we get it back typically the last third of the year, let's say.

So typically, when we have a -- we begin the -- having a reversion work capital because we're beginning to get back the working capital that we contributed in the first half of the year..

Thank you. Our next question is from Till Moewes from Schroders. Till, please go ahead. Your line is open..

Hello and thanks for taking my question. It's about Guatemala. You've been fighting to get to more balanced market share there.

And I was wondering where you stand currently in the process? How long do you think the remainder is going to take and what additional measures if any should we expect?.

I think in Guatemala, we're doing well. We are investing. We just get the 700 frequencies. We have a little bit lack of coverage in some -- in wireless. And with the 700 frequencies, I think we can get a little bit more coverage on that. We can give better quality and attend more customers there. In the fixed, we are putting more fiber.

We're changing a little bit more copper for fiber, giving more speeds to the customers. So we are doing there. We are not being so aggressive. We are not reducing prices.

And just the only thing that we're doing in Guatemala is we are being more focused on quality, better service, more speeds in the fixed and changing our fiber to -- our copper to fibers and do the convergence. Also in the corporate side, we are doing also good. So we are improving our operations in Guatemala..

On the fixed line side, we have been improving. On the service revenue growth, it has been negative and now we're in positive. But it's been an improvement quarter after quarter for the last five quarters that we can see..

Okay, thank you. Another question, if I may. In Mexico City, Megacable is increasing its penetration.

And I was wondering, what do you think, does it mean for the competitive landscape there?.

Yeah, Megacable, they are building fiber in Mexico. Some of them is overlapping the cable networks, some of them is a greenfield. But to be honest, we have a great platform in Mexico. We have 16 million home passes with fiber. As Daniel mentioned, we have 76% of the customers already connected with fiber.

Let me add that we've been doing very well to bundles with streaming platforms as HBO, Netflix, Clarovideo. So, we bundled the broadband with this streaming and has been very well receptive in the market. So I agree Megacable is growing with fiber, but I think we have the right network to compete. So we already have fiber.

So I think we have a good proposition in the market to compete with the other competitors, not only with Megacable..

All right. Thank you..

Thank you..

Thank you. Our next question is from Jesus Romo from GlobalData. Jesus, please go ahead..

Good morning. Thank you for taking my questions. I have multiple of questions regarding the Mexican operation.

I wonder if you could provide additional color on the deceleration in Mexico for corporate network services, you know, adding the color of what's happening there or some context? And what's guiding the broadband revenue given that, you know, you do mention in this quarter.

What's wrong with the revenue over there? And the second question is for wireless. Just a bit of color of what's guiding postpaid net ads in Mexico and ARPU growth in Mexico? Thank you..

Well, I'm going to start with wireless. I think what wireless is driving a little bit better ARPU and growth is our 5G network. I think we have more coverage, better quality. And we are really the only one that has been investing in Mexico in 5G. So customers are using that network, using more data and sometimes upgrading their plan to have more data.

So that's more or less what we're seeing there.

And in the fixed side in corporate?.

Well, as you know, the corporate market, it's a totally different market than the mass market. The negotiations takes many months to really get the projects. In some quarters, we won a very large project, and in other quarters we don't. But what we see is that we have a great pipeline in place. So, you know, this kind of selling is a different approach.

You need to go to the customer to show a business case of the efficiency, the cost reduction, the productivity. And it takes a while to convince the customer. Sometimes we won a very large project and some quarters we don't. But what we have is a very good pipeline that we are followed. So that's why we are optimistic on those -- on these markets..

And just to repeat what we said before. If you look at the nine months to September, copper network revenue in Mexico increased 10% year-on-year. Okay, so it's -- when you look at long enough periods then you can make a big volatility.

But what is important is to have a good pipeline of opportunities, right?.

Thank you. Very clear..

Thank you. Our last question is from Alejandro Lavin from Santander. Alejandro, please go ahead. Your line is open..

Hi. Good morning. Thank you all for taking the questions. Thank you for the call. I just have a quick question on Argentina. You're seeing good growth there. So could you please expand on what kind of opportunities you're seeing there over the medium term? And how do you balance that versus the current macro environment and FX depreciation? Thank you..

We know what is happening in Argentina with the macro environment, so -- but where we're seeing good opportunities is in the fixed line. We have been running the wireless for a long time. We have a decent market share. We're growing, we're doing well. And we start maybe four years ago in putting fiber. And it's given very good returns, this fiber.

So we have like 1.2 million broadband subscribers in Argentina right now and that's where we see the good opportunities in all the fixed platforms as well..

PayTV as well..

PayTV, fixed and broadband is where we're seeing that..

Yes..

Okay. Thank you..

Thank you. Thank you very much..

Thank you. This is all the time we have for the Q&A session today. So I'd like to hand back to management for any closing remarks..

No, just thanks. Thank you all of you for being in the call. Thank you..

Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely day..