Good morning. My name is Elliot, and I will 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. Now I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.

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

Thank you, Daniela. Thank you, everyone for hosting the first quarter of ‘23 financial and operating report and Carlos is going to make a summary of the results. Go ahead, Carlos.

Hello, everyone. Thank you, Daniel. Good morning. Throughout the first quarter, dollar interest rates were volatile, hovering between 3.4% and 4%. Sentiment in the U.S. has been a mix of relief and concern with inflation appearing to be under control, yet anxieties persist about the potential inflationary consequences amidst what seems to be an increasingly hot labor market and fears of contagion stemming from the fall of significant banks in the U.S. and Europe. The value of our local currencies vis-à-vis the dollar reflected this volatility, although they all ended up nearly the same against the dollar, except for one that didn't. In the first quarter, we gained 1.1 million wireless subscribers, of which 1.9 million were postpaid clients. Almost half of the new postpaid additions were primarily from Brazil, along with smaller contributions from Austria, Colombia, and Peru. On our prepaid platform, we saw net disconnections of 754,000 clients, primarily due to Brazil disconnecting 1.4 million, including 1.6 million former Oi subscribers who were not generating traffic. Organically, we have solid growth regions including Colombia with 354,000 additional subscribers and Brazil and Argentina each adding approximately 200,000 subscribers. In the fixed-line segment, we have 313,000 broadband subscribers. In some countries like Mexico and Brazil, these represent the best numbers we have recorded for broadband in a long time. We ended March with 301 million wireless subscribers, of which 116 million were postpaid clients and 73 million fixed-line RGUs, including 31 million broadband accesses and 13 million Pay TV clients. We observed an acceleration in mobile growth, with our postpaid base increasing by 8.7% year-on-year, and a 6% increase in our prepaid platform. On the fixed-line platform, broadband accesses increased by 2.6% but Pay TV was practically flat, having recovered from a 2% decline the previous year. First quarter revenue was up 1.7% to 209 billion pesos despite service revenue declining by 2.2% in Mexican peso terms due to the appreciation of the peso against most of our operating currencies. EBITDA totaled 83 billion pesos in the quarter and increased by 3.2% in Mexican peso terms. Correcting for foreign exchange effects, service revenue was up 6.3%, which is a slightly faster pace than in the prior quarter. This represents the top rate of growth we've seen in over a year. The growth rate brings EBITDA growth to 5.8% after adjusting for profits obtained from the sale of telecom towers in the Dominican Republic and Peru. As you can see, the trends have been very favorable for revenue and EBITDA growth, both of which exceeded the forecasts we provided during our investor day in October 2021. On the fixed-line platform, service revenue grew at 1.8% at constant exchange rate, marking better performance over the previous year, primarily due to a strong expansion of broadband revenue at 9.6%. On the mobile platform, revenue grew by 9.3%. Mobile service revenue accounted for 62% of total service revenue. While we observe a slight deceleration in mobile revenue growth, there is an upswing in fixed-line revenue growth, resulting in a total service revenue growth of 6.3%. The improvement in fixed-line service revenue mainly came from Mexico, Brazil, and Colombia.

Thanks. Carlos, I guess the first question is a specific one, so I apologize I usually ask larger macro questions. 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?

I think what is happening in Mexico is that in the fourth quarter, during Christmas last year, we sold a lot of equipment and we had some disconnections because people often just change their equipment without becoming new subscribers, which explains the higher sales and fewer new subscribers. However, we are performing well in selling equipment, generating good profit and revenue there. Also in Mexico, postpaid is starting to grow again, with around 85,000 new postpaid subscribers. Our 5G network is performing well, and we're bringing 5G to prepaid as well, which is yielding positive results for equipment sales and net adds in Mexico.

Daniel, just an overall question, I guess in the U.S., the replacement cycle is lengthening, people are holding on to their phones longer. 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? Are people holding their phones longer? Are you seeing more upgrades in your markets because of your network investments?

Our ARPU is growing in Mexico; users are utilizing more prepaid and, especially on postpaid, users are upgrading their plans to better ones for 5G. We are not seeing a significant change in user behavior compared to previous quarters. While some people are contemplating their buying decisions due to economic conditions, our financing options for handsets are helping drive sales.

To clarify, there is a notable focus on our equipment revenue, but we are growing nearly twice as fast in Mexico's service revenue. This is a testament to a well-executed blend of equipment sales and financing. The margins on equipment and financing are good, translating to robust profitability.

In addition, we've noticed that the increase in handset imports in the market has grown, but with heightened interest rates, we see a reduction in the imports of handsets, which makes way for increased equipment sales.

Can I assume that if you're financing a phone to a prepaid customer that if that customer does not recharge their phone each month, you'll require full payment of the phone? Or can they continue to make their finance payments on their phone without recharging?

We are beginning to finance users in prepaid, not on a large scale yet, but we are finding ways to mitigate risk such as locking the phone for non-payment, which encourages customers to keep paying. Our delinquency rates are lower than expected, indicating this model is beneficial for us.

The other question was just on target leverage, since your share repurchase was a bit lower in the first quarter. Have you changed your view on target leverage given the interest rate environment?

We executed approximately $100 million equivalent in share buybacks in the first quarter, and as we’ve stated in prior calls, our cash flow tends to be quite seasonal. Consequently, our buybacks in this quarter have been lower. It’s important to note that capital expenditures are influencing our cash flow.

Currently, we're looking at a target CapEx of around $1 billion per year over the next three years. We’re considering increased investment in fiber optics for better connectivity, which should yield better ARPUs, greater broadband penetration, and new subscribers, therefore slightly increasing our CapEx projections.

Hi, good morning, everyone. Thank you for taking the question. The first one is, can you please discuss the telecom separation that has been requested by your competitors? And if there's a risk of IFT taking any action on it?

There has been a lot of noise from competitors in the press regarding this matter. However, we maintain that there is substantial evidence supporting the need for deregulation in the telecom sector. We believe the upcoming review by IFT will provide a valuable opportunity for more relaxed regulations in Mexico. Let's wait until August to see IFT's comments and outcomes.

Thank you. Also, we’ve noticed some cost pressures in a few countries, particularly in Colombia and Mexico. Can you discuss what has happened and your expectations for the remainder of 2023?

In Mexico, the EBITDA margins decreased by around 100 basis points when comparing to total revenue, primarily due to equipment sales. However, service revenue has been growing nearly twice as fast. The perceived margin contraction is mostly based on recent regulatory changes that require us to account for certain expenses differently.

In Colombia, competitive pressures are significant. However, we are starting to see growth in broadband; fluctuations in exchange rates have also contributed to some cost pressures. Overall, we maintain good margins in Colombia, and we intend to compete fiercely in that market.

Hello, can you hear me?

Yes.

What is the timing and goal to surpass 80% FTTH penetration in Mexico? Also, could you provide context for Brazil's FTTH acceleration and is there a mindset regarding fiber overlay there?

Currently, FTTH penetration in Mexico is 69.8%. We're on track to reach 80% penetration next year as we focus on migrating from copper to fiber. We have made significant progress from 62% to nearly 70%.

Regarding Brazil’s situation, we have a well-prepared cable network that supports high-speed delivery. We plan to expand fiber home passes from 9.5 million to 11.1 million by the end of the year.

Thank you.

In recent months, we've seen news regarding new satellite technologies that connect directly to mobile phones in rural areas. What are your thoughts on this technology, and what percentage of your CapEx covers rural areas?

Oscar can provide more insight, but our satellite technology serves as a complement to our existing infrastructure. Many remote towers that are expensive to connect can connect through satellite. In the longer term, we will ensure coverage for more rural locations. It won’t significantly replace our current offerings but will provide additional support.

Indeed, we have worked with Star One for many years, and the new LEO satellite constellations can be used for mobile backhaul in rural areas. We are collaborating with separate satellite providers to enhance infrastructure in these regions.

Thank you for taking my questions. Regarding Colombia fixed competition, we have seen a better trend this quarter in fixed broadband revenues. Can you discuss the competitive dynamics there?

Similar to our strategy in other countries, we are pushing more fiber FTTH in Colombia, which has contributed to revenue growth. We are also seeing improvements on the corporate side with fiber connectivity bringing good results.

We upgraded our cable network to deliver high speeds and have aggressive plans for fiber to the home, enhancing our standing in the competitive landscape.

On the pension fund, we must manage contributions based on what we observe each year. This involves deciding how to balance pension funding between Telmex and within the pension funds. We constantly assess whether to maintain contributions or draw from pension funds based on taxation advantages and funding obligations.

Quick follow-up on corporate revenue: what percentage of your corporate revenue comes from connectivity versus IT solutions?

We provide various services including connectivity and IT solutions to enterprises, making it challenging to segment revenue. Corporate revenues have been on an uptrend for the past three years and we anticipate continued growth.

We’re increasingly enhancing connectivity, and services such as cloud and data services are driving revenue growth, particularly in specific sectors.

Just to provide context, consumer services contribute about 25% of our total service revenue which incorporates a broad range of offerings.

Just a couple of questions regarding CapEx. Given the recent depreciation of the Mexican peso against the dollar, should we expect more efficiency from your CapEx?

We are seeing some markets appreciating, which could help with cost trends, but generally, the cost remains high due to numerous local factors including fiber deployment.

Our decision to increase investment results from seeing substantial opportunities that will yield enhanced revenue and customer growth.

Regarding the performance of Telefo, has there been any thought to move prices up after two years of holding off on increases?

At this moment, we have no plans to raise prices in Mexico as we are performing well with our current sales strategy and seeing ARPU growth across the board.

Thank you, just two quick questions. First, could you explain the reduced share buyback this year compared to previous years? And secondly, can you provide an update on the tower spin-off in Europe?

The first quarter usually brings heavy working capital expenses due to handset payments from the previous quarter. We also intend to increase CapEx by about 4% to 5% this year, which impacts cash flow in this quarter.

We are aiming for a tower spin-off in Europe towards the end of August, as we've received nearly all necessary approvals.

Regarding broadband disconnections in Mexico, were there adjustments on a quarter-over-quarter basis or are these regular connections?

We have been focusing on customer retention, which has positively impacted our churn rates, and we've made competitive offerings that have resulted in strong customer retention and additions. Additionally, we launched a compelling product offering which combines broadband with a leading streaming service, enhancing our market appeal. Thank you, everyone, for joining the call. I want to express my gratitude to Daniela, Carlos, and Oscar for their insights today.

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