America Móvil B de C : Q1 2023 Transcript

FINAL

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-04-26

Q1 2023 Earnings Call

Company Participants

Carlos Garcia Moreno Elizondo, Chief Financial Ofcer Daniel Hajj Aboumrad, Chief Executive Ofcer Daniela Lecuona, Head of Investor Relations

Oscar Von Hauske Solis, Chief Operating Ofcer

Other Participants

Andres Coello, Analyst

Carlos de Legarreta, Analyst

Fernando Froylan Mendez Solther, Analyst

Leonardo Olmos, Analyst

Luca Brendon, Analyst

Soomit Datta, Analyst

Unidentifed Participant

Walter P. Piecyk Jr., Analyst

Bloomberg Transcript

Presentation

Operator

Good morning, my name is Elliott, and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Movil First 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)

Now, I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.

Daniela Lecuona {BIO 15302125 }

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

Daniel Hajj Aboumrad

Thank you, Daniela. Thank you, everyone for hosting the frst quarter '23 fnancial and operating reporting. And Carlos is going to make a summary of the results.

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-04-26

Hi, Carlos.

Carlos Garcia Moreno Elizondo {BIO 1713687 }

Hello, everyone. Thank you, Daniel. Good morning. Well, throughout the frst quarter dollar interest rates remained volatile, hovering between 3.4% and 4%, as sentiment in the U.S. alternated between relief that infation seemingly had come under control; anguish from the potential infationary consequences of what appeared to be an increasingly hot labor market; and fear of contagion stemming from the fall of important banks in the U.S. and Europe. The value of our operating currencies vis-a-vis the U.S. dollar refected this volatility, although they all ended up appreciating vs. the dollar in the period, the Argentinean peso being the only exception: the Mexican peso, 7.5%; the Brazilian real, 4.1%; the Colombian peso, 4.7%; and the euro, 1.2%.

In the frst quarter, we added 1.1 million wireless subscribers, of which 1.9 million were postpaid clients. Almost half of the new postpaid subs, 944,000, came from Brazil, 285,000 from Austria, 164,000 from Colombia and 128,000 from Peru. In our prepaid platform, we had net disconnections of 754,000 clients as Brazil disconnected 1.4 million including 1.6 million former Oi subs that were not generating proft. Organically, we had solid growth including Colombia with 354,000 and Brazil and Argentina with approximately 200,000 each.

On the fxed-line segment, we obtained 313,000 broadband accesses including a 139,000 in Mexico, 74,000 in Argentina and 47,000 in Brazil. In some of these countries, Mexico and Brazil, these were the best numbers that we have had fxed-line access growth in broadband for a long time.

We ended March, with 301 million wireless subscribers of which 116 million were postpaid clients and 73 million fxed-line RGUs including 31 million broadband accesses and 13 million PayTV clients. We have seen certain acceleration in access growth, particularly in mobile, with our postpaid base increasing 8.7% year-on-year and prepaid 5.6%. On the fxed-line platform, broadband accesses were up 2.6% and PayTV was practically fat, having recovered from the 2% decline of sales a year before.

First quarter revenue was up 1.7% to MXN209 billion with service revenue declining 2.2% in Mexican peso terms on account of the appreciation of the Mexican peso versus substantially all of our operating currencies, which reduced the peso value of our international revenue.

EBITDA totaled MXN83 billion in the quarter. It was up 3.2% in Mexican peso terms. Correcting for foreign exchange efects, service revenue was up 6.3%, a slightly faster pace than in the prior quarter and the same as the prior one, vis-a-vis, the top rates of growth that we have seen in a long time as well, more than a year at 6.3% accelerated growth which brings about an EBITDA growth of 5.8% after adjusting for profts obtained from the sale of telecom towers in the Dominican Republic and Peru.

So, as you can see on the slide, the trends have been very good in service earnings growth and EBITDA, and in both counts, we are exceeding the forecast that we had given

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-04-26

back in our Investor Day in October of 2021.

On the fxed-line platform service revenue growth came in at 1.8% at constant exchange rates. It's the best performance in over a year on the back of a strong expansion of broadband revenue, 9.6%. On the mobile platform, revenue grew 9.3%. Mobile service revenue accounted for 62% of total service revenue. So, we do see a slight deceleration in mobile revenue growth, but an important upswing in fxed line revenue growth and the aggregate of the tools service revenue growth was 6.3%, one of the best rates, better than the frst quarter -- than the fourth quarter of last year and in fact, third quarter of last year.

The improvement of service revenue growth was driven mostly by Mexico, Brazil and Colombia jumping to 4.1% from minus 1.3% the prior quarter in Mexico to minus 1.4 -- from minus 3.5% in Brazil and to close 4.2% from minus 3.6% in Colombia. Broadband revenue was up 9.6% in the quarter at constant exchange rates while corporate network revenue increased 12%.

With respect to mobile service revenue, Brazil led the way with 21.5%, followed by Eastern Europe and Mexico at 9.2% and 8.1% respectively. Deceleration in consolidated mobile revenue growth refects the slowdown observed in Colombia and Austria with the pace of growth being reduced to 2.2% from 4.7% the preceding quarter in Colombia and to 3% from 4.9% in Austria. Brazil and Eastern Europe also led the way in EBITDA growth at 13.7% and 9.7% respectively. They were followed by Ecuador and Mexico at approximately 6% each.

We turned an operating proft of MXN44 billion in the quarter, up 9.7% year-on-year, which helped bring about a MXN30 billion net proft in the quarter, slightly down, 2% -- 2.1% from the year-earlier quarter. The decline in net income has to do with a reduction in foreign exchange gains, down from MXN22 billion in the frst quarter of 2022 to MXN13.7 billion in the frst quarter of this year. So, we had a signifcant reduction in foreign exchange gains and that's what explains that operating proft was practically -- that net income was practically fat to slightly down as compared to an increase of nearly 10% in operating proft.

Capital expenditures totaled MXN29 billion in the quarter with share buybacks amounting to MXN1.9 billion. These items were funded by our operating cash fow and net borrowings of MXN2.4 billion and by the freeing up of MXN5.9 billion in assets formerly invested in our pension fund. Our operating cash fow was supported by the sale of towers in the Dominican Republic and Peru that provided MXN6.4 billion, and by dividend income of MXN0.7 billion coming from that item.

Our net debt excluding leases totaled MXN365 billion at the end of March having come down by MXN16 billion from the end of December. It was equivalent to 1.39 times last twelve months EBITDA.

So with this, I will pass the foor back to Daniel, and we will start the Q&A session.

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-04-26

Thank you, all.

Daniel Hajj Aboumrad

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

Questions And Answers

Operator

Thank you. (Operator Instructions) Our frst question comes from Walter Piecyk from Lightshed. Your line is open.

Q - Walter P. Piecyk Jr. {BIO 1510511 }

Thanks. Carlos, I guess the frst question is on, it's kind of a weird specifc one, so I apologize. I usually ask larger macro, but if you look at Mexico, your equipment revenue grew year-on-year but if you look at the subscriber growth, your net adds, I think were lower and churn rate was lower. So are you just selling more expensive phones in Mexico driving that higher equipment sales?

A - Carlos Garcia Moreno Elizondo {BIO 1713687 }

I think what is happening in Mexico, we have the fourth quarter that is Christmas. In Christmas last year, we sell a lot of equipment and we had some disconnections because people only changed the equipment, they bring the SIM in the new equipment and that's why you're seeing higher sales and changing the SIM. So, you don't see too many new subscribers.

I think we're doing good in selling equipment. We have a good proft, good revenue there. And all overall, I think we're doing very well on new subscribers. Also in Mexico, you see the postpaid is starting to grow again. We have around 85,000 postpaid new subscribers. So, I think our 5G network is doing good. We're putting a lot of customers in this network. We are bringing also 5G in prepaid in those days. So, all overall, I think we're doing good in equipment and net adds in Mexico.

Q - Walter P. Piecyk Jr. {BIO 1510511 }

Thanks. Daniel, just an overall question, I guess. In the U.S., the replacement cycle is lengthening. People are holding on to their phones longer, and I think that's kind of what I was trying to understand is, I understand that in your markets, there's a lot of SIM cards that are connected to gross adds and net adds. I'm just curious, though, given the investments you've made in 5G, how are overall phone sales in general across the markets, whether it's just Mexico or Brazil in general. Are they -- are people holding their phones longer or do you see more upgrades in your markets because of your network investments? Can you give us a sense of what that market looks like?

A - Daniel Hajj Aboumrad

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-04-26

Well, our ARPU is growing in Mexico. So you're seeing people is using more in prepaid and also in postpaid people is upgrading their plants to a better plan for 5G. I think 5G is working very good. Also, we are doing good fnancing in the handsets. We're also fnancing in the prepaid market. So we're fnancing postpaid, for a long time, and we're starting to do a little of fnancing in the prepaid. And it's bringing good sales and good customers. So that's doing good.

In this cycle, I think it's reducing -- it's getting a little bit longer. The people, everybody is thinking a little bit what is happened in interest rates and everything in the economy. So, people is trying to hold a little bit more for a long -- a little bit more time, their phone. But we're not seeing the big, big changes right now in Mexico and Latin America. Let's see what is happen in the next quarters.

Q - Walter P. Piecyk Jr. {BIO 1510511 }

And if I just -- if you don't mind, one more, just on the capital -- I'm sorry. Go ahead, Carlos.

A - Carlos Garcia Moreno Elizondo {BIO 1713687 }

Just want to make it clear to everybody that hasn't focus on this. Equipment revenues were growing nearly twice as fast in Mexico as service revenue. And that's -- basically a lot of what -- a lot of these has to do with our annual work experience. There is a lot of our equipment fnancing that we're providing today with insurance and that has proven to be a very good combination. We are getting a good margin out of the sales and we are getting good margin out of the fnancing itself. So that's something that some people do not have the complete picture on.

A - Daniel Hajj Aboumrad

And I'm going to add another thing on that is, I think last year, the increase of importing handsets in the market has been growing and with interest rates getting higher, I think the importing handsets has been reduced. So, give us opportunity to sell more through that. I don't think the market is growing, but I think that sell is growing selling more and more handset, it's what is happening right now.

Q - Walter P. Piecyk Jr. {BIO 1510511 }

Can I assume that if you're fnancing a phone to a prepaid customer that if that customer is not going to recharge their phone each month that you'll require full payment of the phone or can they continue to have -- make their fnance their lease payments or their fnance payments on their phone and not recharged on the prepaid because obviously that would be something that could help your churn rate in the prepaid side of things as well.

A - Daniel Hajj Aboumrad

No, we're starting to fnance. It is not a big operation, but what we're seeing is that we have -- we can lock the phone. If they don't pay, then we can lock the phone that they cannot use the phone. So, people are starting to pay again. So, it's been -- the bad debt is not -- it's lower than what we thinking and we're going to do that smoothly, slowly to

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