America Movil, S.A.B. de C.V.

Good morning. My name is Faith. I will be your conference operator today. At this time, I would like to welcome everyone to the American Mobile Second Quarter 2021 conference call and broadcast. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw a question, press the pound key. Thank you. Now, I will turn it over to Ms. Daniela Guarna, 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 Cash, CEO, Mr. Carlos Garcia Moreno, CFO, and Mr. Oscar Gronkowski, 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. Well, the U.S. economy recovered rapidly. Signs of high inflation towards the latter part of the second quarter created uncertainty and confusion and low price corrections in some segments of the financial markets. The yield on three-year pressure notes, for instance, Those 15 basis points, which was equivalent to a 50% increase in yields, 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, Brasil accounted for half of the post-emerge of the quarter, followed by Austria with 289,000 and Peru with 234,000. Colombia was next with 159,000 subscribers. As for prepaid, NetApp totaled 2 million subscribers, with Argentina accounting for 737,000, followed by Mexico with 432,000 and Brazil with 328,000. On the FishLine platform, Louisiana covered 28,000 broadband accesses, with Argentina and Colombia each contributing over 60,000 clients. Year-on-year, mobile post-tax exceeded the fastest tax growth with 10.7%. Mobile trip followed suit with 5.6% with 6 more than coming in with a 3.5% annual pay. Both 6 more and pay-to-do returns slightly less than 6% year-on-year. Revenue total 253 billion pesos, slightly higher in nominal pesos than a year before. At constant exchange rates, service revenue increased 5.3% year-on-year, and importantly, it was up to 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 happened to be a good reference. In the first quarter of this year, service revenue had risen 1.2% from the prior year. So service revenues and mobile service revenues are both greater than pre-pandemic levels. Prepared and posted mobile service revenues are both at higher levels than they had prior to the pandemic, with prepared 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 posted 4.4% year-to-year. As for the Fitchland platform, revenue of the different business lines has exceeded a smoother trend over the last several quarters, led by a Fitch program that has increased at levels of between 7 and 9%, and corporate networks that have recovered ground in the last two quarters. KPD and Y-Land boards are both showing improving trends. Second quarter EBITDA came in at 34.9 billion pesos, a 2.6% increase in nominal peso terms from the year-earlier quarter. At constant exchange rates, it increased 11.9%. However, adjusted to the carry discounts obtained by traction in the second quarter of last year, EBITDA had an even stronger performance increasing 14.6%. The EBITDA margin was at 3.6%, which was 0.8% 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% for service revenues, resulting, given the increase in EBITDA, in an operating profit that was up 17.9% at constant exchange rates on a manual basis and 6.2% quarterly. Correcting for the tariff 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 21.1 billion pesos and gains no financial expenses which were 4.4 billion pesos more than of set 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 digital growth and our net comprehensive financing income It was equivalent to $55 cents per share and $54 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. We did net debt in the amount of $36.9 billion, which was quite substantial, certainly for the first half of the year. and buyback shares in the amount of 11 billion pesos, and also quite 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 exhibited a trend of strong growth, as you can see in the chart, for the last six years. It has been very steady, very consistent, increasing free cash flow year after year for the last six years, increasing over 80% in dollar terms in the period. And finally, I will note that we did a ratio crunch in this quarter, and it stayed at 1.64 times last month's 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 in probably in as many as 10 years. So with that, I would like to open this for Q&A and pass the floor back to Emil Hasch. Thank you. Thank you, Carlos.

At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question is from Marcelo Santos from JP Morgan. Your line is open.

Hi, good morning. Thanks for taking my question. I wanted to ask about broadband in Brazil and in Mexico. So the first question related to Brazil, You have been losing subscribers in broadband, at least when we look at Amatel data until May, and we have seen many players in Brazil going to fiber, so new ISPs trying to list, we're seeing the large, like, OA team, 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 graphics. And 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, it would be great. Thank you.

Thank you, Marcelo. Yes. Hi, Marcelo. Well, first, talking about Brazil, As you know, we have eight 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 nodes 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 prepared the network to do 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 Fiverr to the home, we already have 3 million home passes with Fiverr to the home. We opened 110 new cities with G-tone technology in order to compete with Fiverr. And when you look at those cities, the 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 now we are not only focused on 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 ClaroBox, mobile, and that proposition has been working pretty good. And as you know, the ISPs are growing pretty rapidly, but in a region that we don't have networks. When you look at the market share and where we have network, we even increase a little bit the market share. So that's the plan for Brazil and Mexico. When you look at the customer base, 43% of the internet base is already JIPON and the rest is with BDSL. Just to give you a flavor, on the first half of the year, we built one million home passes with FIDR. And we migrate 500,000 customers from copper to fiber. And 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 bundles with Netflix, with the Disney Plus, and recently we launched with HBO Max. So we are moving the customers to Fiverr as well in Mexico.

Perfect. Thank you very much.

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

Hi, good morning, everyone. I want to discuss a bit the prepaid and postpaid division between mobile clients. I noticed a lot of prepaid net additions, except for Brazil, of course, had a lot of postpaid. But if you can't discuss how they see the largest amount for the lead teams, the prepaid and postpaid makes, how do you see that you and the market had a lot of disconnections pre-paid last year due to the pandemic. How do you see the prepaid playing out in the second half of 2021? Thank you.

Well, we don't hear you so well. We don't know if you're talking about Mexico or Brazil, but I can tell you that in my view, as the pandemic starts, A lot of people are using more and more and becoming more digital. and of course we have some disconnections last year in free space but i can tell you that this year today we have more free paid subscribers than what we have last year before the disconnection so people start to reconnect again and start to use more our r2 in mexico i'm talking about mexico uh they are doing mexico is a higher than the 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 post phase, 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 post-paced to pre-paced. But as we're seeing, they are using a lot also data. So in pre-paced and post-paced all around Latin America will be the same data. Anything else?

Yeah, yeah. Well, first of all, thank you for hearing. That was my question exactly. Just a quick follow-up. Besides Brazil and Mexico that you discussed specifically, which other 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 were growing in pre-tape. All Central America were growing also in pre-tape. The Dominican Republic were doing well. Eastern Europe also we're growing in the prepaid side. So all over all people, sometimes people doesn't want to have a commitment every month, and they are moving to a prepaid platform, but we think that they are having good outputs and consuming well all the data. So we're okay on that.

That's very helpful. Thank you very much and have a good day. Thank you. Thank you.

Again, to ask a question, please press star 1 on your telephone keypad. Again, that's star 1 on your telephone keypad. Your next question is from Alejandro Velostra from DVVA. Your line is open.

Hi. Good morning, everyone. Thank you very much for taking my question. We have been significantly increasing the pace of shared buybacks in recent months, and even before reaching the desired level of leverage. So, do you expect an increased amount of capital distributions to shareholders once you reach your 1.5 times that EBITDA and complete the sale of Verizon, or you're already reaching your levels of capital distributions to shareholders. Thank you.

Thank you. Well, I think what I mentioned in the overview a moment ago was that we had actually very good cash flow in this first half of the year, and that allowed us to pay nearly $2 billion of debt This is before getting any of the proceeds from the platform or 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. We didn't need to wait all that longer. So I think that's a little bit the company today. We will be reaching our levels. We are confident that the two things I mentioned, both the 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 to very good cash flow.

Okay, thank you very much.

Thank you.

Your next question is from Carlos Legareta from GDN. 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 it 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 cell mix update to be licensed in those areas. Thank you.

Well, on the CapEx side, we have our budget of 8 billion, 5% more, 5% less, so we are 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 said 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 project. So that's more or less. And on Telmex, on fake TV, I hope we can get it. Yeah, there's a lot of time that the IFP is saying that is going to give us the the tv so i i hope that we can have the tv in telmex for this year so as we said always there's Maybe not in the world there's a company, a phone company that doesn't have a pay-to-be license. I hope that we can get that pay-to-be license this year.

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

I don't think so. It's not necessarily related to that. We have been having 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.

Okay, thank you.

Thank you.

Your next question is from Arturo Longa from ETAL. 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 WOMS operation. Just to get a sense, how aggressive do you perceive them to be right now? And what are your what is the base case that we should be working with? Should we expect something like when AT&T went into Mexico or maybe when One came into Chile, or when Intel came 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 in Mexico or the other ones in Chile or in Peru. I think one today in Colombia is very aggressive. Their plants are very aggressive. But I think it's not only aggressiveness. You need to have a good network, a good branding. We have what plays, convergence. customer care centers, good distribution networks. There's a lot of things around a good offer, okay? And customers, we have a very good MPS in Colombia. People prefer us. So, of course, there's a strong competition there. There's three other big competitors, one, Pelotonica, But we're still comfortable. We're investing there in the network. We're having good quality there. And the convergence is very important for us. We have been putting a lot of our subscribers in poor place. 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. Thank you, Daniel.

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

Okay, well, so it was a short talk. Thank you, everyone. And I don't know if you want to add something, Carlos. No, no, thank you. Thank you. Thank you very much. Thank you.

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