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

Good morning. My name is Lauren and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Mobile first quarter 2022 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's 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 your question, please press star two. Thank you.

now i'll turn the call over to miss daniela lukmana head of investor relations daniela please go ahead thank you good morning everyone thank you for joining us today to discuss our first quarter financial and operating report we have on the line mr daniel hash our ceo mr carlos garcia moreno cfo and mr oscar unjauske ceo

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

Thank you, Daniel. Good morning, everyone. Well, the first quarter of 2022 was marked by sharp increases in interest rates very much across the board, with five-year U.S. pressure rates nearly doubling. and 10-year rates rising from 151 to nearly 250. As concerns about rising inflation rates led investors to revise their projections regarding future monetary policy moves by the Fed and other central banks. These moves happened even in the face of the Russian invasion of Ukraine, which initially caused interest rates to come down as investors looked for a safe haven. Notwithstanding these increases in rates, the main Latin American currencies actually appreciate the visibility of the U.S. dollar in the period, partly as a result of interest rates going up even more rapidly in those countries. We added 3.2 million wireless subscribers in the quarter, of which 1.9 million were posted subscribers, with over half of them coming from Brazil. nearly 300,000 from Colombia, and 217,000 from Austria. As regards prepaid subscribers, we added 1.3 million, with Mexico contributing 485,000, Colombia 349,000, and Brazil and Central America approximately 200,000 each. Our wireless subscriber base ended March with 219 million clients. On the fixed-line segment, we ended up with 74.5 million IGUs in March, practically flat from a year before. We connected 232,000 broadband accesses, including 68,000 in Argentina, 63,000 in Mexico, bringing the total to 30.7 million accesses, 2.3% more than a year before. Our post-subscriber days exhibited the fastest rate of growth over the last 12 months, at 8.4 percent, followed by prepaid with 5 percent. Fixed broadband accesses came in next at 2.3 percent. Both fixed boards and pay TV continue to register declines. The former one has leveled off, whereas the latter one has remained stable. Our first quarter revenues reached 211 billion pesos. up 2.4 percent, with service revenues rising 3.3 percent. There were no major differentiations during the growth between nominal peso revenues and those at constant exchange rates, the latter excluding Argentina, given the very high inflation rates in the country. The Mexican peso appreciated versus the U.S. dollar and the euro, but depreciated versus all other major Latin American currencies, with the exception of the Argentinian peso, and most notably against the Brazilian Real, 12.1%. Mobile service revenues expanded 6.3% year-on-year, very much the same pace as in the preceding quarter, and substantially higher than that seen a year before, 1.2%. On the FIGSAM platform, service revenue declined 1.1% in the first quarter, after increasing 0.5% the prior one, mostly on account of faster declines in both revenue growth, down 5.8% annually compared to minus 3.6% in the preceding quarter. A year before, fixed-line service revenues had been practically flat year-on-year at 0.1%. Colombia and Peru experienced the sharpest deceleration relative to the pace they had observed in the earlier quarter. Both prepaid and posted revenues maintained a growth pace at 8 percent and 5.2 percent respectively on a sequential basis, much higher than the 1.4 and 1.0 percent rates posted the year-earlier quarter. Brazil led the way in terms of mobile service revenue growth with 10.3 percent, followed by Peru and Mexico with 9.7 percent and 9.5 percent respectively. Colombia and Chile saw a decline in their rates of growth, with Colombia being nearly flat and Chile extending the decline to minus 8%. Corporate networks was the fastest growing business line in the fixed-line platform, with 4.9% in the quarter, with broadband revenues coming next at 3.4%. A year before, they had posted 2.4% and 7.8% rates, respectively. Pay-to-be revenues continued to decline at a rate of 6%, whereas fixed-borrowed revenues were down 5.8%, both of them in line with the rate seen a year before. Broadband service revenues expanded faster in the Dominican Republic, 16%, Peru, 11%, and Eastern Europe, 8%. While corporate network revenues rose more rapidly in Eastern Europe, 23 percent, Brazil, 16, and Colombia and the Dominican Republic, 12 percent each. Corporate network revenues rose more rapidly in Eastern Europe, 23 percent, and . Our EBITDA rose 4.2 percent year-on-year to 81.1 billion pesos. It was 4.3% of constant exchange rates, with EBITDA margin expanding to 38.4% from 37.8% a year before. That's 0.6% response margin expansion year-on-year. The Dominican Republic, Eastern Europe, and Central America exhibited the highest annual EBITDA increases at 10%, 8.9%, and 7.6%. All countries except for Chile and Peru posted EBITDA increases in the quarter from a year before. Most countries, with Peru and Chile the main exceptions, increased actually the EBITDA margin. The expansion in EBITDA covering about a 6.1% increase in our operating profit, which totaled 39.8 billion pesos. Our operating profit and a net comprehensive financing income in the amount of 7.3 billion pesos helped bring about a net profit of 30.8 billion pesos in the quarter, which compares to a net profit of 1.8 billion pesos in the year earlier quarter. The comprehensive financing income mentioned above came about as a result of foreign exchange gains in the amount of 22.6 billion pesos, extending from the appreciation of the Mexican peso versus the euro dollar and the euro in particular during the period. We raised 28.9 billion pesos in net financing in the quarter, which helped us cover 28.6 billion in capital expenditures, 9.2 billion in share buybacks, twice as much as a year before, and 6 billion in labor obligations. It is of note that the first quarter of each year calls for a seasonal increase in working capital, as accounts payable on past purchases of network equipment and handsets come due. as well as income taxes for the prior fiscal year and telecom duties in some countries, including Mexico and Brazil. This seasonal requirement for working capital is reversed in later quarters. It did not manifest itself in the first quarter of 2021 because of the significant reduction in capital expenditures and canceled purchases implemented in 2020, particularly the second half, on account of the pandemic. As you can see in the chart, I think it's very telling. how stable and how well-defined our working capital requirements are. Our net debt excluding leases ended March at 425 billion pesos, having increased by 17.4 billion pesos relative to December. It was equivalent to 1.33 times last month's EBITDA. With post-abstraction in November 2021 and the impact of an annual consolidated EBITDA, it's already reflected in the last four months. This net debt follows two major financings arranged in March. One, a five-year, $1 billion equivalency-indicated loan denominated in Mexican pesos, and a 10-year bond issue in the amount of $1 billion. So that's $2 billion in all. While both were arranged by American Mobile, they will become obligations of CITRO Latin America upon its spin-off from American Mobile, expected to take place in the third quarter. The proceeds will be fully applied to the reduction of American Mobile's debt. So with that, I would like to pass the floor back to Daniel for the Q&A session. Thank you all. Thank you, Carlos.

And we can start, please.

Thank you. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your phone is unmuted locally. Our first question comes from Leonardo Almas from UBS. Leonardo, please go ahead.

Hi. Good morning, everyone. So my first question is related to Colombia. Can you discuss a bit both the mobile and the fixed segment? We noticed that churn reduced, but still ARPU is going down, NetEd is accelerated by a bit. Can you discuss if competition has changed, or should we expect the same dynamic for the rest of 2020?

Yes. What we have been seeing in Colombia is, as we know and as we have been talking for the last year, a new competitor and the market with more promotions, more... new plants with more megas and more data. But all over all, this quarter, we grow around 300,000 new netats in post space, and it was a very good growth. what is happening and it's true and you can see that is that our ARPU is declining and the reason why it's declining is because as you give more data in your plans then people decide to reduce the amount that they pay so that's a really what what what happens and when you give those promotions but the trend is still we are growing and it's very important that I want to mention and we have been seeing that for for all this year is that we have a very good network a strong network and it's very good our brand is People is preferring our brand. We have a very good NPS and Claro is very strong there. We have excellent customer care and very good distribution. So, all over all, people is still preferring our network even though that the competitors are doing more and higher promotions than what we have been doing that. The market, no doubt, the market is very competitive, but I think what we have been doing this last quarter, I think it's good. It's still growing in postpaid, very good growth, 300,000, also growing in prepaid, and it's been good. On the other side, I'm talking about pigs. I think on the pig side, we grow 20,000 in broadband. One of, and it's very important, we're giving Quadruplay the convergence, and that's also helping us. We are the company that is giving full foreplay to our customers. I can tell you maybe 60% of our customers, they already have a combo, a convergent plan, and it's doing very good. So that's where we are. And I don't know, Oscar, if you want to talk a little bit about the peaks in Colombia.

Oh, I think it was mentioned.

We are... in order to complement the offering market.

Yeah, and we do 37,000 in TV. That is also a good growth in TV. So all over all, I think... 70,000 in fixed line. And 70,000 in fixed line. So all over all, I think we are doing okay. There's not only... There's also a lot of fiber competition there. We're putting also fiber, and you're giving good speeds to our customers. So... Colombia is in a very high competitive environment, but we're doing good. On the other side, something that we're doing also good is in the corporate customers. Please, Oscar.

No, in the corporate market, we've been offering these new value-added services. Cloud, we have a very competing cloud broker. We are selling SP1, certainly data center as well. And it's growing pretty naturally. And as well, we focus on small business, not only with connectivity, with value-added segment of the market with small business.

I think all over all, we are doing okay in Colombia. Of course, it's under a very highly competitive, with a lot of competition, but we feel that brand distribution, network, combos, convergence, corporate market, everything, I think we have the lead over there and we're doing okay.

Just one comment on the reduction of ARPU that Daniel mentioned. It is almost identical on a year-on-year basis to what we saw in the prior quarter and the quarter before that. So the effect of ARPU reduction really happened. more or less a year ago, and it has remained stable since then.

Okay.

Great. Okay, thank you. Thank you very much for the three to comment on my question. Good thing that you mentioned corporate in the end Oscar. Can you please comment on, you Daniel, on what you expected for B2B for corporate in the remaining 2022? For example, the performance was incredible in first quarter. Was there any type of seasonality or should we expect this type of growth for the remaining year?

I think I'm going to talk not only in Colombia. I think in the corporate side, we're focusing a lot in America Mobile. We have very good people, knowledge, training people, and we have good products. So all over all, we're focusing there, and we have very good results, specifically in Colombia. Oscar?

Yeah, well, in Colombia, we have a very large data center. It is a tier three, one of the best in class. We are selling data center products. Not only that, we are complementing the connectivity with value added services, as I mentioned. Cloud, machine learning, artificial intelligence, and some vertical solution for, let's say, retail, finance. And it has been taking very well in the marketplace. Let me tell you that these are long negotiations. It's a process that has to go many times with the customers. It's more a business driver selling than technical selling. But we already prepared the people to have that start learning with the customers. We have in each of the countries that we call product house, are the ones that are looking at the market, which are the particles that make sense to go to the market. So I think we are well in progress on the B2B business.

Exactly. Okay. Thank you very much, gentlemen. Have a good day.

Thank you. Thank you. Thank you.

Our next question comes from Marcelo Santos from JP Morgan. Marcelo, please go ahead.

Hi, good morning to all. Thanks for taking my questions. I have two. The first, if you could provide some details on expectations for the Oi mobile assets acquired, like what kind of margins these assets would have. Any information would be interesting. The second, if you could provide an update on the fiber operations in Mexico. How much of your network is already covered with fiber? If there is a relevant output difference between the clients with fiber and without fiber, any color there would be helpful.

Thank you. The first question on oil, I think we finally closed oil. We have around 12 million customers, almost 5 million in post-paid and the rest in prepaid, 2 billion in re-ails. And what I can tell you is that we have been working and preparing our network, and we are ready to take all these customers. Of course, we're going to have very good synergies, and at the end of the day, maybe 70% to 75% of this revenue will go to Evita. It's more or less what we think, and it makes a lot of sense. makes a lot of synergies, and we're working to have that. So we have, I think, six months to change the customers to our network, and then we have like one year to change the customers to our IT system. So that's more or less what we have, and we're ready. We have been working for some time now. to prepare our networks and our systems to receive these customers. And on Mexico, can you repeat Mexico?

Update on fiber operations in Mexico, whatever color you could give, how much of your subscribers are already in fiber, how is that evolving, fiber plans that you might have?

Yeah, well, if you look at the customer base itself, 54% of the customer base is already fiber. I would say with pure ADSL is less than 8%. In the middle, we have BDSL. As you know, we could deliver highest speed than the pure BDSL. And we have a very, very aggressive program in fiber in Mexico for this year. So we are pushing to grow the construction of the fibers and the migration of the customers from EDSL or EDSL to fiber. It's working pretty nicely, to be honest. So we expect to cover around 2.5 million compas this year with fiber. So that's our plan. That year we did 1.8, so we are focused on the market. And another thing is that, you know, the that has been offering in the market, in my opinion, are unique when you combine a very good quality of broadband and streaming video platforms. I think it's a very, very, very, and combos and packages with broadband and streamers and music. That has been working pretty nicely in Chalmers.

Perfect. Thank you very much.

Thank you.

Our next question comes from David Joyce from Barclays. David, please go ahead.

Thank you. Could you please describe your rollout process with 5G that you just recently launched? What metrics in terms of how much of the market you plan to pass and what are the milestones we should be looking for there? Thank you.

I think it's very different in each country. We already launched, let's say, Mexico, Dominican Republic. We have something in Peru. Well, in some countries, we are rolling out. And what we have been doing, and Austria, of course, Austria, we have or maybe one year already, and it's doing good. I think 5G is going to give us a better ARPU to our prospective customers. I think we're going to have more customers and better ARPU in 5G. So there is still in some countries that we need to – we have – to buy some frequencies, hope they do it soon. But in the countries where we already have a spectrum, we are rolling out the network and making plans And these plants are more focusing on giving more for more, giving more data, more 5G data, but with paying a little bit more, increasing our pusovats. more or less the strategy that we have. It's going to be a little bit different in each country depending the competition, depending a lot of other things, coverage. But let's say Mexico, I think Mexico we're going to end this year with, we start with 18 of the biggest cities and we're going to end with around 100. of end of the year and people is liking we have a very good quality very good speed and people is moving to 5G okay so that's more or less what I can tell you thank you very much thank you as a reminder to ask any further questions please press star followed by the number one on your telephone keypad

Our next question comes from Carlos Lagaretta from JVM. Carlos, please go ahead.

Thank you. Good morning. Thanks for taking the question. To continue on the 5G topic, I understand, obviously, the strategy will change across countries. But if you can talk about, Daniel, in Mexico in particular, I think I was surprised and perhaps I was not the only one to see that there was different pricing for 5G. And I understand that you're saying it's more for more, but just it seems different than what we've seen in other geographies, in other countries, even in Austria with telecom Austria. So if you could talk about why are you pursuing this strategy and just to get a sense of why is it a strategy, that would be great. Thank you.

No, I think no. I think when we launch Austria, we have new plans for Austria. Maybe it could be a little bit confusion when you have the fixed wireless than the postpaid wireless. I don't know if you see different plans there. But in Mexico, what we have been doing is in the We're giving in the post-paid higher – not higher, in the mid-plants of post-paid, we're giving 5G, and then you can upgrade to all those plants. It's what we do in Mexico, and I think it's what we do in Austria and in other countries. Also, it's what we have been seeing that is happening in, let's say, in U.S. In U.S., they also have plans for 5G at higher ARPU giving more. So we can check on more detail, but I don't think it's any difference between Mexico and the other countries. So it could be a little bit different depending on the competition, but all over all, what the strategy on 5G is give more, for more and to try to upgrade our 4G or 3G customers to 5G. And that's more or less what we have. But of course, you can sit down with Daniela and review in detail, but it's very easy to review that.

Thank you so much for the caller. And talking about coverage, I mean, you guys cover around 50 million people or so currently. Obviously, there's going to be an increase in the coverage, but do you have any timeline for when do you expect to reach full coverage?

I think since we start on February, maybe end of the year, we're going to have double number of cell sites with 5G, with more cities and more coverage, more densification in each city. And that's more or less what we are going to do in the rest of the contract. We can move it's very very interesting as we can move more customers from 4g to 5g or 3g for 4 to 5g then the capex should be more in 5g because we have more customers there and take out some capex on 4g to put it in 5g so i don't think it's going to be more capex for doing 5g if the capex that we do in 5g we do it the last years on the fiber to the node, on virtualization, and all of these things that we have to do to have 5G. And today, in terms of capacity, if we grow faster, then we put more on 5G. If we grow at a slower pace, then we still are going to put more on 4G. So that's more or less, but it's not more capex capacity. to do 5G in the rest of the Latin American countries.

That's great. Thank you.

Thank you. Our next question comes from Alexandro Chevrolet from Credit Suisse. Alexandro, please go ahead.

Hi, thanks for taking my question, and congratulations on the results. Perhaps just a couple of things. First one, if I got it correctly, it has been delayed to the third quarter, the closing of the transaction, if I'm not mistaken. if you can share anything on that front on what's happening there that could be super useful. And the second one is about the ICMS tax resolution by the Supreme Court in Brazil. Do you have any view of what the potential impact on the business could be from this resolution and when we could see any effect from it? Thanks.

Well, on the spin-off of CTOs, I think we're basically ready to go. As we mentioned in the report, we already did a couple of major financings in international markets, international banks. There is going to be debt that will be moving on to CTOs. I think it's well-defined. Today, we're looking at spinning off 31,000 towers in 14 countries. I think we are only awaiting the last, let's say, clearance on the transaction from the tax authorities. That should be, you know, we expect to receive it in the next few weeks. But other than that, I think that we are really ready to go with the towers. And the other question was, On the ISMS, I don't have this information. Maybe we can check back with Daniela later. But I don't think that for us it's so much of an issue.

Thank you very much.

As a reminder, to ask any further questions, please press star followed by the number one on your telephone keypad. Our final question comes from Walter Pisek from LightShed Partners. Walter, please go ahead.

Thank you. Daniel, CapEx for the year, I know you talked earlier about 5G, 4G mix, but just are you still on track for $8 billion for the year?

Yes, yes, we're on track, and we think we can do the $8 billion. I think it's a great opportunity for American Mobile. There's still a lot of opportunities in the – first, in 5G, to grow ARPU. Second, on the peak side, in more broadband in some countries, still some countries we have a low penetration in broadband, so in the mass market we still see good opportunity. to also part of the cap exceeds on the corporate customers that we're doing very well. So we're on track, and I think it's a good opportunity to invest that. I think it will give good returns.

And then just a second question, I guess, on inflation for you, Daniel, or perhaps Carlos, you know, who's got some obviously legacy experience in this type of stuff. I mean, what If inflation kind of kicks in everywhere, how do you think that plays out in terms of what happens in your markets, usage, ability to increase price? And what kind of pivots or steps can you take as a reaction to if inflation gets materially worse?

Well, we have inflation, so not if inflation. So I think we have inflation in some countries, and we're going to see what we... Right now, I think something that is helping us in Latin America is the appreciation of all the currencies. So there's a lot of costs related to dollars, and that is helping us there. So... Still, we are focusing in the market, and doing that, we are working a lot in cost control. So, we're working very, very strong on cost controls. Of course, we can decide in each country what to do if we want to give new plants or take out promotions or put more control on the cost. So that's something that we can decide depending the market, depending the competition, depending the currencies, depending a lot of things. So, of course, we have the availability of doing a lot of things, no?

As you know, the demand for telecom services is more inelastic than what you see in other segments. So there's always potential for some redistribution of the wallet, the expenditures of the consumers over time.

Thank you. And then just last question related. I mean, does any of this, in terms of kind of how you're – I mean, obviously you haven't changed CapEx for the year.

um does anything change kind of your view on your capital return policy or is it kind of the same that you've laid out pretty consistently over the last several quarters you know i think uh yeah i i don't think that there's anything more to add since uh uh we came out with our uh meeting term outlook in the uh in our investor day back in october uh i think uh You know, the cap is very stable. We're not seeing anything major in the M&A front, but we have already failed with oil. And, you know, the leverage policy, the leverage objective is already set in our goal. So, nothing more to add there, but in terms of what we – Thank you.

I think we currently have no further questions. So I'll now hand you back over to Daniel Hash for closing remarks.

Well, thank you for being in the call. Thank you very much.

Thank you all. Thank you all. Goodbye.

This concludes today's call. Thank you for joining.