America Móvil B de C : Q2 2023 Transcript

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Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-07-12

Q2 2023 Earnings Call

Company Participants

Carlos Garcia Moreno Elizondo, Chief Financial Ofcer Daniel Hajj Aboumrad, Chief Executive Ofcer

Oscar Von Von Hauske Solis, Chief Fixed-line Operations Ofcer

Other Participants

Bloomberg Transcript

Carlos de Legarreta, Analyst

Chelsea Colon, Analyst

Fred Mendez, Analyst

Leonardo Olmos, Analyst

Unidentifed Participant

Vitor Tomita, Analyst

Walter Piecyk, Analyst

Presentation

Operator

Good morning. My name is Nadia, and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Movil Second 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 Mr. Daniel Hajj, CEO of America Movil to begin. Thank you.

Daniel Hajj Aboumrad

Thank you, Nadia. Welcome, everyone. Thank you for being in the America Movil second quarter of 2023 fnancial and operating report. Carlos is going to make a summary of the results. Carlos, please.

Carlos Garcia Moreno Elizondo {BIO 1713687 }

Thank you, Daniel. Good morning, everyone. During the second quarter, US dollar interest rates remained as volatile as they had been in the frst quarter. With infationary pressures stronger than anticipated earlier in the year, the reduction of interest rates by the Fed originally expected to take place in the latter part of 2023 appeared increasingly

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-07-12

improbable, giving rise to an upward trend in medium- and long-term rates throughout the latter half of the quarter that has continued in July.

We added 2.2 million wireless subscribers in the second quarter, including 1.5 million postpaids. Brazil contributed 632,000, Austria 267,000 and Colombia 171,000. Prepaid net subscriber additions stood at 787,000 with Brazil and Mexico adding almost 200,000 each, and Colombia 185,000.

On the fxed-line segment, we obtained 331,000 broadband accesses including 140,000 in Mexico, practically identical to the fgures in the prior quarter which emerged [ph] as the second consecutive quarter with strong broadband net additions. 78,000 in Argentina and 45,000 in Brazil. The growth of our mobile subscriber base stayed basically on trend with the postpaid base expanding 8.3% and the prepaid one 5.3%. On the fxed-line platform, broadband access growth picked up a bit to 3% while PayTV accesses remained roughly fat.

Second quarter revenue was down 4.6% year-on-year to MXN203 billion in Mexican peso terms with service revenues falling 4.2%. As in the prior quarter, this refected the appreciation of the Mexican peso versus other operating currencies in the period. Correcting for foreign exchange efects, service revenue increased 5.0% at a slightly slower pace than that of the prior quarter.

EBITDA was down 3.8% in Mexican peso terms to MXN78.7 billion in the quarter, representing a 38.9% EBITDA margin. At constant exchange rates, it expanded 5.6% in the period, refecting the greater operating leverage of the company. With EBITDA growing faster than revenue, the reduction in infation rate we have seen in most countries as well as the appreciation of most Latam currencies and the euro vis-a-vis the dollar have recently contributed to this through their impact on costs.

Service revenue growth continued to advance on the fxed-line platform, moving up to 2.3% at constant exchange rates from 1.8% in the prior quarter. On the mobile platform, it slowed down to 6.7% from 9.3% in the prior quarter. The improvement of fxed-line service revenue growth was observed in three of our four principal markets, Mexico, Brazil and Austria. In Mexico, it was driven by both corporate network services and fxed broadband services. In Brazil and Austria, by the latter. Importantly, the downward trend of PayTV revenue appears to be coming to an end. In the quarter, they were down 1.3%, the lowest decline in several quarters.

The deceleration of mobile service revenue growth stems principally from the normalization of mobile revenue in Brazil exactly a year after the integration of revenue from former Oi mobile clients acquired by Claro. The uplift in terms of revenue growth provided by former Oi clients has come down to 0.8% from 6.4% a year ago. In addition to the above, we also had somewhat slower growth in Mexico and Colombia.

EBITDA yearly increases were in the neighborhood of 9% in Brazil, Eastern Europe, Peru and Ecuador followed by Mexico at 5.1% and Austria at 4.3%. Our operating proft in the quarter MXN40.3 billion pesos was down 2.9% year-on-year with our net proft nearly

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FINAL

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-07-12

doubled from the earlier quarter to MXN26 billion pesos, mostly on account of greater foreign exchange gains.

In the frst six months of the year, capital expenditures totaled MXN64 billion and distribution to shareholders MXN3 billion, including share buybacks. In cash fow terms, we reduced our net debt by MXN4 billion in the period. All the above was funded by our operating cash fow and by proceeds from the sale of certain shares and payment received of the sale (inaudible) of our interest in platform.

Our net debt excluding leases totaled MXN356 billion at the end of June, having come down by MXN25.8 billion from the end of December on the back of the appreciation of the Mexican peso vis-a-vis other currencies, particularly the dollar. It was equivalent to 1.43 times EBITDA. So with this summary of our results, I would pass the foor back to Daniel Hajj for the Q&A session. Thank you, all.

Bloomberg Transcript

Daniel Hajj Aboumrad

Thank you, Carlos.

Questions And Answers

Operator

Thank you. (Operator Instructions) Our frst question comes from Vitor Tomita of Goldman Sachs. Vitor, please go ahead. Your line is open.

Q - Vitor Tomita {BIO 19238819 }

Good morning, all, and thank you very much for your question -- for allowing us to have some questions. The frst question from our side would be on share buybacks. If you could give us an update on how you are thinking about buybacks for the second half of the year, especially considering that we noticed the slower pace of buybacks year-to- date.

And on how further buybacks will be funded given that you mentioned that dividends from Verizon and KPN were a source of funding for shareholder remuneration thus far?

Also second question from us on M&A. Now that you have achieved a more comfortable leverage position and are generating cash consistently, could you provide us an update on your M&A strategy and on which regions could potentially be considered for further acquisitions? Thank you very much.

A - Carlos Garcia Moreno Elizondo {BIO 1713687 }

Okay. Well, on the share buybacks, as we've mentioned in prior calls, we tend to have them organic kind of with our cash fow for the year. The cash fow the frst half of the year is seasonally weak because we need a lot of working capital and then we usually get it

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-07-12

back in the second half of the year. So that's where we have a bit more liquidity that we can engage in more shareholder distributions.

In the case of -- so beyond the issue of the seasonality, that's been there always, I think that this year we have mentioned in the prior calls, we needed to accommodate the increase in CapEx that we had mentioned to you. We had increased the CapEx from MXN8 billion in the original budget to MXN8.5 billion more or less, and that's basically what we wanted to cover before we could actually engage in pulling share buybacks. I think that now we will be going back to normal, I think that we should expect to resume distributions very much along with the recovery of our cash fow.

In terms of our M&A, I think that we are not currently looking at anything anywhere. I think that we have a lot of growth, organic growth to develop and we have been seeing in some of the numbers, some of the fxed-line operations are developing very nicely and we are continuing to have a good growth on mobile. So it's not that we need to buy growth anywhere, I think that there is a plenty to develop organically. Overly, out of regulatory concerns, there's a few entities that one could acquire, certainly in Latin America that's the case. And in Eastern Europe, I think that it's also because there's not that many more assets to buy. So I don't think that we are looking really today at anything outside our footprint. And within our footprint respectively no entities that we could buy.

A - Daniel Hajj Aboumrad

And just to add on what Carlos said is, I think the additional CapEx that we're putting we're seeing good opportunities in Latin America, growth opportunities and that's what we're looking for. So I think this year we can put more fber or other investments in some countries that I think we're going to get good growth. And on M&A, as Carlos is saying, but we are open to see other opportunities, but right now we're not looking to any.

Q - Vitor Tomita {BIO 19238819 }

Very, very clear. Thank you very much.

A - Daniel Hajj Aboumrad

Thank you.

A - Carlos Garcia Moreno Elizondo {BIO 1713687 }

Thank you.

Operator

Thank you. The next question goes to Lucas Chaves of UBS. Lucas, please go ahead. Your line is open.

Q - Leonardo Olmos {BIO 21197412 }

Hi. Good morning, everyone. This is Leonardo actually. Thank you for taking the question. A couple of questions in Brazil. The frst one, if you could comment on the reduction on

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Bloomberg Transcript

Company Name: America Movil SAB de CV

Company Ticker: AMXB MM Equity

Date: 2023-07-12

the B2B revenue, corporate revenue, which sounded like a one-of. But if you could talk a little bit about that. We're seeing very strong growth in other regions in Brazil in the past quarters.

And my second one, we saw yesterday the deal of Vero and AmericaNet forming one of the largest ISPs in Brazil in fxed broadband. We also see news of Felix [ph] talking with Vitol from BTG. So overall, I just want to double-click on Vitor's question on M&A. And if you could talk about either M&A or partnership, what type of opportunities are you looking at specifcally in the fxed market in Brazil? Thank you.

A - Daniel Hajj Aboumrad

Well, I'm going to talk a little bit about Brazil. I think in Brazil, we are doing good. We fnalized all the synergies that we have with Oi. I think we have all the subscribers in our platform, I think where you have the savings that we think that we're going to have. So we do and execute very good on the purchase of Oi. We're growing very good. We have a very good distribution network all around Brazil. We're starting to grow again in fxed, in broadband. So it's very good news. We have two or three quarters growing again in broadband. So things are looking for us is good that the market consolidate. There is a lot of players in Brazil. So it's good we are not seeing any consolidation right now. But we're open also to see what opportunities we can have.

I think the news today is or the -- I don't know if it's a news or not. But what they said is that Vero and AmericaNet are merging is what I hear this morning. So it's good that everybody -- the companies -- these companies need to consolidate and I think it's good for the market, it's good for us. So we are in a very good position. We have been doing good investments. We have been operating well. So we're in a very good position in Brazil.

In the corporate market, I think what is happening, I need to go more deeply on the corporate side. But I think we cancelled some contracts -- cloud contracts that we don't have any margins there. So we cancelled some of them. But we're doing good and we're growing in the corporate market. And what we want is to have a client what -- to have proftable clients in this segment. So that's what we are looking for.

So what -- I don't know, Oscar, if you want to say something else on Brazil.

A - Oscar Von Von Hauske Solis {BIO 2053819 }

No, as you say, in corporate, as you mentioned, we cancelled some cloud contracts. When you look at the rest of the digital solutions, we are growing double-digit in all of them, in network management, in IoT. So we feel that the path overall will continue. And as you mentioned in fxed broadband, we are still growing the last three quarters. We were in negative before. So we operate the network and we are changing all the customer satisfaction, installation in time to refer, so I think we have very good growth in the marketplace.

A - Daniel Hajj Aboumrad

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