Good morning. My name is Candace, and I will be your conference operator today. I would like to welcome everyone to the América Móvil Fourth Quarter 2023 Conference Call and Webcast. I would now like to turn the conference call over to Ms. Daniela Lecuona. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today in our fourth quarter operating and financial review. We have on the line Mr. Daniel Hajj, CEO; Mr. Carlos Garcia Moreno, CFO; and Mr. Oscar von Hauske, COO.

Good morning, everyone. Welcome to América Móvil's Fourth Quarter of 23 financial and operating report. Carlos Garcia Moreno is going to make out the summary of the results. Carlos?

Thank you, Daniel. Good morning, everyone. Well, the fourth quarter of 2023 turned out to be an extremely volatile one, with interest rates surging in the first month of the quarter to record highs not seen in over 16 years. This was in continuing with the trend that began early in the third quarter as inflation pressures brought about new increases in reference rates by the Fed. The yield of ten-year Treasury notes, which had stood as low as 3.75% in mid-July, shot up to 5% in exactly three months. But then things turned: new inflation readings appeared to be softer and the Fed put out the message that no new action on reference rates was expected for at least the remainder of the year. A huge rally in interest rates followed, with the ten-year Treasury yield plummeting back to where it had been in mid-July. We added 3.9 million wireless subscribers in the quarter, including 2.7 million postpaid clients. Brazil contributed 1.8 million new contract clients, while 329,000 came from Austria, 124,000 from Argentina, and 109,000 from Mexico. The prepaid platform registered net additions of 1.3 million clients in the period with Colombia gaining 456,000, Mexico 308,000, Argentina 278,000 and Central America roughly the same amount, 269,000. On the fixed line segment, we obtained 386,000 broadband accesses. Mexico was the leader, adding 165,000 accesses, followed by Brazil with 60,000 and Argentina with 51,000. Looking at the base, the postpaid base was the most dynamic one, increasing 7% year-on-year, followed by fixed broadband accesses, which were up 4.1%. Prepaid subscriber base rose 1.2%, while Pay TV accesses fell 1.8% year-on-year. At constant exchange rates, service revenue was up 3.7%, in line with the pace registered in the prior quarter. As adjusted EBITDA reaccelerated to a 4.6% recurrent in the quarter. So we basically maintained the pace that we had on service revenue from the third quarter, and we managed to reaccelerate adjusted EBITDA to a 4.6%. Mobile service revenue expanded 4.2%, much in line with the prior quarter, and on the Fixed-line platform grew 3.0%, continuing the accelerated trend of sales throughout the year. This was the fifth consecutive quarter with positive growth on both platforms and ensured that for the full year 2023, revenue increased on the two platforms, mobile and fixed. Mobile service revenue growth remained stable in Mexico at 4.5%, whereas in Brazil it slowed down from the prior quarter to 7.1%. In Central America, mobile service revenue growth accelerated to 10.7%. Revenue from corporate networks led the way on the fixed-line platform, expanding 8.1% from the year-earlier quarter, followed closely by broadband revenue that posted a 6.6% increase. PayTV revenue declined slightly, 1.1%, its smallest decline in over a year. Corporate networks revenue growth was strongest in Eastern Europe, again, you can see this on the chart, at 30.2%; Colombia, 21.6%; Ecuador, 19.5%; and Mexico and Peru, with slightly more than 14% each. In Central America, it accelerated to 6.6%, having posted every quarter over the last year faster growth rates than the preceding one. Now importantly, Argentina has gone through a period of high inflation the last several years. Since 2019 it has been subject to the accounting guidelines applicable to hyper-inflationary countries, with all the accounting variables expressed in real terms at constant Argentine pesos. For consolidation purposes in our financial statements, with no other economy considered hyperinflationary within América Móvil; those Argentine figures expressed in constant Argentine peso terms at the prevailing prices at the end of the period must be converted into Mexican pesos at the exchange rate observed at the end of the period, per IFRS rules. Given the magnitude of the Argentine peso depreciation, the application of the above-mentioned norm generates unusual effects. In particular, as you can see on the slide as well, revenue actually decreases by 3.7 billion pesos when Argentina is included in our results, and EBITDA is also reduced by 1.4 billion pesos. We have a completely unusual and counterintuitive situation whereby the inclusion of Argentina does not lead to adding a small amount or a smaller amount than what we had before; it actually leads to a net decline in revenues and EBITDA. Again, this is per the IFRS growth that we are subject to. Other than the above-mentioned unusual accounting effects, the inclusion of Argentina generates 8 billion pesos in foreign exchange losses and overall results in an 8 billion pesos downward impact on net income to 16.8 billion pesos. So in Argentina, we would have posted 28 billion pesos in net income, and without Argentina, net income goes down. So that's basically what we had. Cash flow-wise, our net debt increased by 21 billion pesos, and complemented our operating cash flow, and it helped us cover our capital expenditures in the amount of 156 billion pesos, shareholder distributions totaling 40 billion pesos, of which 14 billion pesos were share buybacks and 11.8 billion pesos in labor obligations. So that's the summary, and I would want to pass the floor back to Daniela.

Yes. Thank you, Carlos, and I think we can start with the Q&A.

Thank you. Our first question comes from Vitor Tomita of Goldman Sachs.

Two questions from our side. The first one would be on the CapEx side. If you could give us an update on your plans for CapEx and if you plan to maintain that 2022-2024 CapEx envelope of $24 billion after some higher CapEx in 2023? And the second question from our side would be on Colombia, if you would have any comments on recently announced regulatory changes in Colombia and on how that might affect your strategy for that country?

Over the past three years, from 2021 to 2023, we have invested about $25 billion. This investment has allowed us to expand our capacity in 4G and 4.5G, as well as to implement 5G in many countries. For example, in Brazil, we have 5G in over 200 cities, and in Mexico, more than 120 cities. We've purchased spectrum over these three years to support our 5G initiatives, as well as invested in submarine cables for redundancy and increased data capacity. Additionally, we've expanded our home passes significantly across Latin America, upgraded our copper infrastructure to fiber, and continued to implement fiber in new developments. In the business-to-business sector, we've increased our data center capacity, leading to strong revenue growth. Overall, our investments over the last three to five years have positioned us well, and this year we plan to reduce our capital expenditure from last year’s $8.6 billion to $7 billion. Our budget allows for this reduction while ensuring continued growth in each country in Latin America and Europe, including further development of fiber and 5G in areas where coverage is currently lacking. Regarding Colombia, we are encountering some regulatory changes that we find unfavorable. However, we plan to proceed with our investments there and are closely assessing the impact of these regulations but remain committed to our growth strategy. We acquired 5G frequencies last year and intend to deploy 5G this year. Despite strong competition and numerous market promotions, we believe we can sustain our presence and continue investing as needed in Colombia.

Very clear. Thank you very much.

Our next question comes from the line of Walter Piecyk of LightShed.

The Movil ARPU growth has been pretty steady in Mexico. I'm just curious if that can sustain going forward. Also, I see Brazil had some growth. And on Colombia, are there lessons learned there that things that you're doing in Mexico and Brazil to, I guess, either increase usage or otherwise get people on postpaid, whatever the factors are that are driving that ARPU growth that can be implemented in Colombia?

In Mexico, our ARPU is growing by 3.1% for prepaid compared to postpaid. This growth is not due to price increases, as we haven't raised rates in Mexico. Customers are upgrading their plans, which leads to more contracts for new and higher tier plans that include 5G. The increased use of data is contributing to this growth. A 3.1% rise in ARPU is positive, particularly since Mexico already has the highest ARPUs. In Colombia, the last couple of years have seen intense competition, with many new players offering generous data in their plans. This has prompted us to improve our offerings, but some customers are downgrading their plans in response to having more data at lower rental costs. I believe this trend is now behind us, having peaked in the middle of last year, and I'm hopeful that we will see ARPU growth in Colombia this year. In Brazil, we are performing well with a 7% ARPU growth, expanding our postpaid subscriber base significantly, and doing well in the machine-to-machine and corporate segments. We've successfully consolidated our subscribers, which has been beneficial, and we are gaining market share through number portability in Brazil.

Regarding the capital expenditures of 8-6 million, a part of that likely pertains to the acquisition of intangible assets. However, it's unclear whether this refers to spectrum or software. Could you clarify the general breakdown of the 8-6 million between spectrum or software and true telecom infrastructure or fiber? Furthermore, is the decrease from 8-6 million to 7 million primarily due to the absence of spectrum or intangible asset purchases? Any additional details on the components included in the 8-6 and the 7 would be appreciated.

I don't have the specific details on that. However, I believe we have already secured the necessary spectrum. This year, we mainly need to renew the spectrum in Ecuador and possibly in two or three other small countries, but we've acquired all the necessary spectrum in Argentina, Mexico, Colombia, and Brazil. The reduction in our expenses this year will primarily come from wireless and fixed-line infrastructure, transport networks, and IT. The IT budget will remain relatively consistent for transport since we have already implemented significant improvements, including fiber to the node and updated technologies for our backbone and transport systems. This progress has allowed us to reduce capital expenditures on new 5G sites and other developments, as we have upgraded much of our old copper infrastructure. A portion of our capital expenditures is variable, which means it fluctuates based on sales. We anticipate growth this year similar to what we experienced last year, and our budget for fixed broadband is even better than last year's. Our primary focus for spectrum this year will be in Ecuador. The 700 megahertz we acquired in Colombia and Argentina was in 2023; we already had the spectrum in Mexico and Brazil before that. Therefore, we do not foresee any significant spending on spectrum aside from Ecuador this year. All these factors contribute to our reduced capital expenditures of $7 billion.

If I could get one more question. If not, you can just move on to the next caller, but regarding Telekom Austria, is it really essential to keep this asset in the portfolio? Considering the longer term, if there's a chance to exit that market and focus on Latin America, I would appreciate your updated thoughts since revenue is not growing on the Movil side. I'm just interested in your perspective on the importance of Telekom Austria going forward.

I believe Telekom Austria is performing well across all the Eastern European countries, and we're seeing strong growth in those markets. These countries are roughly comparable in size to Austria, and while we anticipate further growth potential in Austria, we are committed to staying with the company. We acquired an additional 8% of shares last quarter, bringing our total ownership to about 60%. We are increasing our stake and are pleased with the strong cash flow from the company.

I think it is important also, Walter, to mention that the country has been fully deregulated after having been subject to a symmetric regulation for about 30 years. A little bit of what Daniel is mentioning is that they want to drive more investment into the sector. I think that there's a lot to be done still on the fixed line side on fiber. There's still a lot to grow on fiber. But it's a very good market; B2B is excellent. We are providing many services not only into Austria, but also out of Austria into Eastern Europe and into Germany, for instance, which is very ordered and it's been going surprisingly well. So I think that there are many very positive things that we can say about the overall investment in Europe on Austria in Europe.

Our next question comes from Marcelo Santos of JPMorgan. Please go ahead.

I have 2. The first question would be on Mexican broadband. Could you talk a bit more about the nature of the strong print in Mexican broadband adds? What is it more on higher gross adds or lower churn? Is there a regional angle or some areas growing faster than others? So I just wanted to understand a bit more this very good broadband add in Mexico. And the second question is on CapEx. Very clear that the CapEx for this year should be $7 billion. Is this a good indication for the years to come? Do you think that is a sustainable level for the coming years, around $7 billion?

Yes, regarding Mexico's broadband, we have been actively transitioning from copper to fiber, and currently, 81% of our customers are connected via fiber. This means we have successfully reached our entire customer base with fiber to the home. Additionally, we have introduced unique packages in the market that offer symmetrical speeds, which provide great value for our customers. We have also created bundles that include streaming video platforms with the broadband service, which have been well received. Furthermore, we have revamped all installation and repair processes to improve customer experience, which has contributed to strong net additions. We believe we will continue to see a good level of net additions this year.

It's too early to provide specifics on CapEx right now. I believe we will reach the $7 billion mark. For next year, we don't anticipate significant spending on spectrum. Considering all the new technologies and digitalization we have implemented, I think we are in a solid position this year. I can't predict next year, but I can confidently say that we have the best network across Latin America, which gives us a competitive advantage. We are making substantial and worthwhile investments.

Our next question comes from the line of Andrew Sellers of UBS. Please go ahead.

Hi, everyone. The first one is about margin in Mexico. I know you had some one-timers next quarter. But do you see the margin expanding closer to what we had in 2022 fourth quarter and which factors could drive this potential expansion? I just want to know how the company is feeling about our current levels of margin in Mexico EBITDA? And the second question is about Argentina. So besides the translation effect, what other factors are you guys monitoring in the country? I'm talking about profit here, such as the factors for your customers, maybe higher delinquency rates or lower frequency of charges to pay. Is this going to do an agency?

Yes, we cannot hear your question. Your line is not so good, Andre. I'm sorry.

Yes. The first question is about margin in Mexico. Do you have information on the market margin there?

Well, the margin in Mexico is just the same as last year. I think we have a very good margin over 40. And I can tell you that in Mexico, it's a lot of promotions, big competition in mobile and in fixed. And what we're doing is we are really cutting costs, doing a lot of digitalization for the cost side and having good plans, and that's more or less what we're doing. I think we can sustain this margin for next year. We are growing in Mexico, something that it's been very good in 2023 against 2022 is our postpaid basis starting to grow very good in 2023. So that allows us to have better customers, high ARPU customers. So that's something that is doing good in Mexico.

Only to add to what Daniel is saying, I think it's important to focus on the adjusted EBITDA metric. If you correct for the sale of Telmex towers that took place in the last quarter of 2022, then the margin collected for this was 40.2%. It has increased for the year to 40.6%. On that basis. So we had an increase of margins in Mexico. And I think that we will continue to increase in this question.

And on Argentina, I don't know what's your question on Argentina.

Yes, I want to know in broader terms here about Argentina. Do you see some factors that we need to monitor, such as impacting customer of everything that's happening in the country, higher delinquency rates, lower frequency of the charges in prepaid? Do you see any of that? Or is it too early or detail?

In Argentina, I believe our operations are improving. We are experiencing growth and are able to increase some prices due to inflation. We've seen significant growth in fixed broadband over the past two years, and our Pay TV segment has also been expanding. The performance of our mobile operations in Argentina is strong, with RGUs increasing by 26%. We now have 3.2 million RGUs in Argentina and 4.4 million in wireless. Overall, we're making good progress. I hope that with the recent changes, Argentina can move towards a better economy. We continue to invest and take necessary actions there, as we see Argentina as very important for us. In the coming years, we expect to see a much stronger economy in Argentina compared to the present.

Thank you. Our next question comes from the line of Phani Kanumuri of HSBC.

The first question is that in line with your CapEx guidance, we can expect an increase in cash flow. What would be the use of the cash flow? Are you looking at deleveraging or giving it back to the shareholders? So that's the first question. The second question is regarding Chile. How long do you think it will become a self-sustaining operation by itself? And how much equity infusion would likely be needed in Chile going forward. Thank you.

Okay. So on the first question, the cash flow, as we have said, until now, we don't expect to reduce our leverage further. I think that we want to remain in a band between 1.3x and 1.5x net debt to EBITDA. So that's one of the objectives. We don't have anything on M&A currently in our plan. So essentially, this means that whatever the sales cash flow is, will be distributed back to shareholders.

And on Chile, I think all the synergies we have been working in the company, all the synergies have been doing very well. The operations improving. And well, the management, we're reducing costs, we're putting a much better network. We're doing capacity. We're doing a lot of things in Chile, and we're working for the long term, and I think we can position the company together. It's a company over $1 billion. So it's big enough to compete and to be a competitive company in Chile.

It is a company that has many advantages, as have been pointed out. It has some challenges as well. It's a difficult operating environment, and there's plenty to do over the next 2 to 3 years. But as Daniel says, we are focused on the long term, and we expect that long-term this will be a good investment.

Our next question comes from the line of Fred Mendes of Bank of America.

I have two questions as well. The first one is about Telcel, specifically regarding ARPU. Do you believe the ARPU there is where it should be, or is there potential for a more aggressive pricing strategy, particularly for postpaid? I recall Daniel mentioned that the ARPU increase was primarily in prepaid, so I'm curious if you anticipate a more aggressive pricing strategy for postpaid in 2024. The second question is about the mobile market in Brazil. Other players have provided guidance for real growth over the next three years, especially through price increases. Do you think this trend aligns with our internal expectations for Brazil over the next two years, focusing on real growth in mobile driven by price increases? Or do you think someone might try to capture market share by being more aggressive on pricing, making the market more challenging as we look ahead to next year in Brazil?

Let's discuss the ARPUs in Mexico. I can tell you that we have the best 5G network, and we're observing that 5G subscribers are using more data and upgrading their plans. This trend is evident throughout Latin America. As more people transition to 5G, they are opting for better plans. Additionally, we face significant competition and numerous promotions. However, I believe our ARPUs in prepaid are performing well, with prepaid growing around 4% and postpaid increasing about 2%. Overall, the situation looks stable, and with our network quality, many customers are choosing Telcel. Number portability is also moving positively. Overall, we are managing well, although we are facing strong promotions from Altan and other competitors in Mexico. As for Brazil, I don't entirely understand your question regarding expected growth in postpaid.

Yes, Daniel. Basically, I mean, one of the other players in Brazil, they already published our guidance, right, for the next 3 years of real growth, the expectation, and that's coming mainly through price increase. So my question to you guys is if you expect that you're seeing the same angle as to these other players in Brazil are seeing or you believe that eventually the market could get more aggressive with someone trying to gain, let's say, more market share?

I think we want more market share, but we are not going to do crazy things. I think Brazil is a market where you need to do intelligent things. And if there is a possibility to increase prices, we have been increasing prices in the last year. So I think if there's an opportunity and still the inflation allows us to increase prices, we will increase prices. But we're going to compete, and we want to have market share. So both where we want to increase prices because inflation and costs require, but with the network, the 5G, with the coverage, all the investments that we have been doing on the commercial side, I think we can still grow a little bit of market share. And also, we are leaders in ultra broadband, leaders in IPTV. So to do the convergence and to lead in broadband to do all the combos that we're doing there also help us to grow the spread.

The next question comes from Carlos Legarreta from Itau. Please go ahead.

The first question is based on Mexico on the wireless side. If you could talk about the possibility of working prices if the environment allows you to do that, both on prepaid and postpaid. And the second question is...

We don't hear you. Can you repeat that question because also the line is not clear.

Sorry about that. I hope this is better. Could you discuss the possibility of potentially increasing prices for wireless services in Mexico this year for both prepaid and postpaid options? Additionally, regarding Telmex, there seem to be several developments, such as the two-year review of regulatory symmetric measures and possible changes in regulation schemes in Mexico. Given the positive results in broadband services, could you share your thoughts on these matters?

In terms of regulation, we are hopeful for deregulation in Telmex. Currently, we do not offer Pay TV, and our market share across Pay TV, broadband, and fixed services is approximately 30.6%. Given this, we believe further regulation is unwarranted. We anticipate some measures will be deregulated. Our market presence is around 30 to 31%, and we do not expect that to change significantly. Regarding the wireless sector in Mexico, we are uncertain about price increases. We have many postpaid customers on contracts, and we cannot take any action until those contracts are fulfilled. While we are gaining subscribers through contracts, we do not foresee a price increase at this time. Instead, we aim to enhance our offerings, allowing customers to upgrade their plans. This is our focus and strategy for the year in Mexico.

And a follow-up, if I may, perhaps for Carlos. Let me, first of all, congratulate you on the debt issue. And I was just wondering if you could do further ESG-related issues down the road so you can help lower your cost of financing...

I think that we launched this program a few months ago, which is a Global Peso Notes. This is basically to be sold to both global investors and international investors. I think it's got a lot of traction. We intend to become a very, very liquid program, probably the best alternative to notes in Mexico. And yes, I think that we will continue the idea to bring the market 2 to 3 times a year, including the openings of the bonds. And I think that we will definitely be coming back to Mexico the international market with Peso Notes at least once more this year, if not twice.

As a reminder, on the telephone. Our final question comes from Alexandros from GBM. Please go ahead.

I have a quick question about your free cash flow. Over the past three years, you’ve utilized nearly $100 billion in working capital. Could you clarify what is driving those accounts? Which account is the main contributor? How should we anticipate working capital for MX in 2024 and beyond?

No. I mean if you like we can review this separately, but I think generally, our working capital basically breaks even every year. It is very significant. So depending on what numbers you are looking at you might be looking at increases in working capital because it does increase significantly during the first 6 or 7 months of the year, and then it comes down later. So I think we have not had major increases or changes in working capital in the last few years.

To add something on what Carlos is saying, what we have been doing and maybe increased a little bit the working capital is that we are financing a lot of the handsets. So we are going and finance is a very good business. And what the customers, what they like is that they can buy a better handset or a 5G handset. So we are financing that, and that increased a little. Our is a very good business. We finance them, and that will be good.

The other thing to note is if you start out with 2021, then a bad year because we reduced significantly CapEx in 2020 because of the pandemic. And that means that we didn't really have accounts payable that we needed new accounts, so we had an issue because we did have to increase working capital in '21 as opposed to 2020.

Thank you, Carlos and Daniel.

As there are no additional questions waiting at this time, I'd like to turn the conference call back over to Mr. Daniel Hajj for closing remarks.

I just want to thank everyone for being in the call, and thank you, Oscar, Daniela and Carlos. Thank you very much.

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