Earnings Call Transcript - AMX Q3 2023

Operator, Operator

Good morning. My name is Daisy and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Movil Third 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. Thank you. Now I will turn the call over to Ms. Daniela Lecuona to begin, Head of Investor Relations. Please go ahead.

Daniela Lecuona, Head of Investor Relations

Thank you so much. Good morning, everyone. We're very happy to host this call this morning to discuss our third quarter financial and operating results. We have in the room Mr. Daniel Hajj, CEO; Mr. Carlos Garcia Moreno, CFO; and Mr. Oscar Von Hauske, COO.

Daniel Hajj Aboumrad, CEO

Hi. Good morning. Thank you, Daniela. Thank you for being in this third quarter financial and operating report. And Carlos is going to make a summary of the results.

Carlos Garcia Moreno, CFO

Thank you, Daniel. Good morning, everyone. Well, buoyed by strong US economic data, particularly on employment levels and recently also on consumer spending and lingering inflation concerns, 10-year dollar interest rates shot up by approximately 80 basis points over a 10-week span in the third quarter to 4.6% at the end of September, driving another bout of dollar strengthening. By the end of the quarter, there was practically no more hope that interest rates would decline in the latter part of the year and there was instead preoccupation that the Fed was still not done raising interest rates. As you can see in the market, the rates have continued to go up through today and they are about to close to reaching 5% on the 10-year tenure. We added nearly 3 million wireless subscribers in the third quarter of which 2 million were postpaid clients, 1.2 million in Brazil, 460,000 in Austria, which includes IoT devices from A1 Digital, 104,000 from Colombia, and 93,000 from Mexico. On our prepaid platform, we had net additions of 950,000 clients during the period. Eastern Europe led with 210,000 clients, followed by Brazil with 193,000, Colombia with 173,000, Argentina with 93,000, and Mexico with 81,000. In the fixed line segment, we gained 223,000 broadband accesses with 65,000 each from Argentina and Brazil. Voice lines and PayTV units decreased by 160,000 and 58,000, respectively. At the end of September, our subscriber base totaled 306 million wireless subscribers, of which 119 million were postpaid clients. Additionally, we had 73 million fixed-line RGUs, which includes 32 million broadband accesses, 13 million PayTV clients, and 29 million landlines. Year-on-year, our postpaid base increased 3.7%, prepaid 0.7%, and fixed broadband accesses 3.2%, with fixed voice lines falling 2.6%. Third quarter revenue reached MXN204 billion, a 3.3% year-on-year reduction in Mexican peso terms, with service revenue falling 4.3%. As has been the case throughout several quarters, these figures reflect the appreciation of the Mexican peso versus all other currencies in our region of operations, reducing the Mexican peso value of our international revenue. At constant exchange rates, service revenue growth expanded 3.8% and EBITDA 5%, reflecting the effect of tower sales in Mexico and Peru that took place in the period and one-off events in Austria. Correcting for these, adjusted EBITDA was up 3.9% just about the same rate as service revenue as you can see on the slide. On the fixed-line platform, service revenue remained on trend, increasing 2.2% year-on-year, having risen from the 0.2% pace seen in the second half of last year, whereas on the mobile platform it rose 4.8%. Brazil attained a positive fixed-line service revenue growth of 0.1%. In Mexico and Colombia, fixed-line revenue decelerated, remaining stable in Austria and surging in Eastern Europe to 21% and in Central America to 5%. In both cases, it was the most rapid pace in at least one year. The slowdown in Mexico from 5.6% to 3.6% had to do with corporate network services. In fact, broadband revenue actually accelerated to 8.2%, which is its best showing in a decade. In several countries, Brazil, Peru, Colombia, and Central America, we had among the highest, if not the highest, net broadband additions in the past three years. Others including Mexico, Austria, Peru, and Central America posted their most rapid broadband revenue growth in at least one year that can be seen in the chart with Brazil and Eastern Europe sustaining strong growth rates. This led to our consolidated broadband revenue expanding at the fastest rate in more than two years, which was 6.4%. Our operating profit stood at MXN42 billion in the quarter, a 6.7% year-on-year reduction in Mexican peso terms, which partly stems from the EBITDA decline mentioned before, but also from a 17% increase in depreciation of rights of use associated with tower leases. Our comprehensive financing cost totaled MXN30 billion, including an MXN8.8 billion net interest expense, which was 3.9% lower than that registered a year before. Net income amounted to MXN2 billion. It was equivalent to MXN0.03 per share or $0.04 per ADR. Year-to-date, our net income totaled MXN58 billion, 2.9% lower than that registered the year before.

Daniel Hajj Aboumrad, CEO

Thank you, Carlos. We can start.

Victor Tomita, Analyst

Hello, good morning all and thanks for taking our questions. Two questions from our side. The first one is on capital allocation. Given your healthy leverage position and cash flows, even considering your increased CapEx budget, do you have any plans to in any way further increase cash deployments? So maybe by further increasing CapEx on fiber or by further increasing equity stakes in specific businesses as you did in Austria or by carrying out further M&A or even by increasing buybacks following the recent decline in share prices seeing that you already seem to have increased buybacks based on the third quarter? The second question from our side would be on corporate networks. You highlighted that there was an increase in relevance of corporate networks in your global revenue mix. Could you give us a bit more color on which types of corporate offerings have been driving that growth and on what their economics and margin profile is like compared to the more traditional consumer-focused telecom offerings? Thank you very much.

Carlos Garcia Moreno, CFO

Thank you, Victor. Well, on the allocation of resources, there is really nothing we are looking at on the M&A front as we have mentioned before. I think we're not looking at increasing anything more our CapEx certainly this year. But as regards the distributions, as you point out, we have been accelerating our buybacks. I've been reiterating on various calls that our free cash flow is very cyclical and we basically tend to get most of our free cash flow in the last three, four months of the year. So that's typically when we would want to increase our share buybacks. If you look at the distribution or share buybacks so far this year, we spent about $100 million in the first quarter and $50 million in the second quarter, $272 million in the third quarter. And so far this month, we've increased an additional $70 million. So, basically $350 million between the end of June and until so far in October. Obviously, in addition to this, we have already paid $200 million of dividends and we have another payment of the same magnitude that we will be expecting in the middle of November.

Daniel Hajj Aboumrad, CEO

What we discussed over the last year is that we have a budget of $24 billion for three years, specifically for 2022, 2023, and 2024. We are adhering to that budget. This year, we slightly increased our capital expenditures. Although we haven't finalized our budget for next year, I believe we will meet our goals. The increase we made this year might be reduced next year. Essentially, that's our thought process. We do not anticipate any additional capital expenditures for 2024. Therefore, we are within budget and believe we can achieve our targets. On the corporate network, I think that's a segment that we are doing well. We are increasing in all the countries.

Oscar Von Hauske, COO

The first step is managing the network for our customers, and we've implemented SD-WAN technology to facilitate this process. By moving customers to SD-WAN, we are integrating security and cloud services as part of our offerings. Additionally, we provide what we refer to as horizontal solutions, such as data lake as a service and AI as a service within our cloud platform. We have developed a cloud broker that is agnostic to the type of cloud chosen by the customer. If a customer prefers a hyperscaler or another cloud option, they have access to a dashboard for easy management of both. We are also entering the private wireless network space, focusing on vertical solutions tailored for industries like mining, retail, and manufacturing, which have been positively received in the market. We recognize significant opportunities in this area as it enhances customer efficiency and productivity. With ongoing digital transformation, these offerings support that progression, and we anticipate a promising trend in this market shortly. In summary, we are not limited to traditional connectivity products like broadband, fixed, or wireless services; we are providing a range of new services to all our B2B customers.

Carlos Garcia Moreno, CFO

Another is that we are fully convergent. So in our offering, we offer as well mobile and fixed altogether to the customers.

Victor Tomita, Analyst

Very clear. Thank you very much.

Daniel Hajj Aboumrad, CEO

Thank you.

Eduardo Ruby, Analyst

Hi, everyone. Thank you very much for taking our question. I would like to know if you could provide an update on the Mexican regulatory environment, discuss the Proponent revision and if there is additional regulatory risk for AMX, particularly on the concession given what happened in airports? And another one, if you could discuss also the spectrum prices, if you see any additional risk there too? Thank you very much.

Daniel Hajj Aboumrad, CEO

Well, on the regulatory side, I think, to make a little history, we have been having 10 years of having these regulatory measures, 10 years accomplished all the measures that IFETEL has been putting us. And not too much to say. Only, I think that we expect and we think that these regulatory measures should relax in the future. At the end of the day, what the markets need is investment and what the customer wants is quality, price, and coverage. So all these things you cannot put measures on that. So what is happening in the last 10 years. And I think in Mexico, in a lot of our products, we have the preference of our customers. And we hope that the IFETEL takes a very deep revision on what is happening in the market and we relax the measures that we have.

Walter Piecyk, Analyst

Thanks. Hey, Daniel. And if I look at Mexico, obviously you had good unit growth and ARPU was also very strong in '21 and '22. But this quarter shows a little moderation there. Is that just kind of coming out of the pandemic or are there economic issues that we need to consider in terms of Mexico? Obviously, ARPU is still growing and service revenue is still growing, wireless service revenue specifically. I'm just curious about your thoughts on some of the moderation of that growth and how we should think about that going into future quarters?

Daniel Hajj Aboumrad, CEO

Well, I think what you are saying is right, it's moderation. We are still growing our revenues in Mexico. I think the moderation is more on the prepaid than on the postpaid. So maybe it has to be a little bit with this acceleration of the economy. I don't know. We don't know exactly what it will be, but I can tell you that we have a very good 5G network, good coverage. We are working very hard on controlling the cost platform all around. And I think also could be a little bit on the market. Our competitors could be doing some promotions. So I still feel very comfortable with what we're doing in the mobile products. And by far, we have the best perception to the customers in terms of coverage, quality, price, attendance, and digitalization. So all these things will help us a lot in how the customer is making the decision. As I said, the moderation that we're having is more on the prepaid side than on the postpaid side.

Carlos Garcia Moreno, CFO

Just to add something here, Walter. The ARPU growth in Mexico was 1.5% year-on-year. However, if you look at postpaid, it was actually strong, at 3.1%. As Daniel mentioned, the moderation was a little bit more on the prepaid side, while the postpaid remains quite firm, not very different from what we have seen in prior quarters.

Walter Piecyk, Analyst

And you believe, Daniel, that the competitor promotions might be affecting prepaid more than indicating a decline in economic usage of those services?

Daniel Hajj Aboumrad, CEO

Yes, I think so. That's what I think.

Walter Piecyk, Analyst

Okay. Okay. Just a similar question. If you look at the equipment revenue line, that actually looked stronger. Meaning, like if you do the math on it, looks like maybe people in Mexico are buying more expensive phones. Is there anything you can tell, I mean, because that would suggest that the economy is pretty good, that people are buying or upgrading phones. So just curious on any thoughts you have on your equipment revenue line? And why that might show some decent growth?

Daniel Hajj Aboumrad, CEO

Yeah, I think on the equipment revenue, we're doing good. What is happening is not only Telcel, the ones, I think we have been having a lot of imports of handsets. And this has been thus accelerating a little bit. Some brands do not like, let's say, Samsung do not like that Samsung phones will gain not through their office in Mexico but through other countries. So I think that's a little bit on that. And I think they are cutting and reducing these imports. So that's why you are seeing that there are more sales on equipment this month.

Walter Piecyk, Analyst

Got it. And then just one final question. There is a line on the cash flow statement that I believe you call payments of lease liabilities. This is where some of the payments, I think primarily to tower companies exist. I'm just curious how we should think about that going forward. Are there normal escalators that should take that? And for this quarter, I think the number was MXN9.7 billion. So I'm just curious if that line item on the cash flow statement is something that should grow at a similar rate that it has in recent years, I think it's about 10%. Or is there any opportunity to moderate as you've kind of completed a lot of the 5G deployment in many of these markets?

Daniel Hajj Aboumrad, CEO

Yeah, I think you are right. I don't think in 5G, we're going to need the same amount of towers that we need in 3G or 4G. The new tower should be more on coverage than on capacity. And that's more or less what we have been seeing. So I think that will moderate in the future.

Walter Piecyk, Analyst

Great. Thank you very much.

Daniel Hajj Aboumrad, CEO

Thank you. Thanks.

Marcelo Santos, Analyst

Hi. Good morning. Thanks for taking my question. I have two. The first question is about Colombia. If you could please comment on the competitive environment on the fixed market? We saw that you started adding broadband subscribers again, so it was a very strong result. So a comment there would be very helpful. And the second question is if you could provide us an update on the joint venture with Liberty Latin America in Chile and the outlook on potential capital injections that operation might need. Thank you very much.

Carlos Garcia Moreno, CFO

As you mentioned in Colombia, in the third quarter, we did it pretty good. And what we did is that we really changed the way that we go to the market. We did focus on areas that we have a lot of competition. So we started winning share in both areas. We upgraded the network. And as you know, we are building fiber as well in Colombia. So we believe the third quarter is the trend that we are going to see in the next quarters in fixed broadband. And as well, we improved all the quality of services to the customers, time to deliver, time to repair. So we really focused in the third quarter to really change all the structure to go to market for fixed broadband in Colombia.

Daniel Hajj Aboumrad, CEO

And on Chile, well, I think Chile is a very important market for us. And we have a synergy program since we got together with Liberty. And we're doing well. We're advancing our synergies and our revenues and sales are going much better. So we think that we're going to really focus on creating value in Chile. We still think that Liberty will be our partner in the future. We hope so. It's a very good partner. And we're focusing to really get everything, all the cost control, reducing expenses and moving in the market. We're also putting more coverage, better quality, and we're really focusing on making Chile a much stronger company for the future.

Marcelo Santos, Analyst

So could we say that it's on track? You think it's on track or it's above expectations versus what you hoped?

Daniel Hajj Aboumrad, CEO

No, I think we are on track. We don't have a synergy program for six months. I think we have a synergy program for two years, very strong, very focused. And we are on track and we are doing very well. We are happy with the way the company is evolving. We're growing. We have been losing some customers in peaks in the last quarter; we're growing customers. So we are improving and improving every day.

John Ho, Analyst

Good morning, and thank you for taking my question. I would like to clarify the previous inquiry about the joint venture in Chile. Has America Movil contributed any additional capital for the Chile operations during the third quarter? Additionally, Liberty acknowledged in its second-quarter call that America Movil has been making most of the contributions so far. Can we expect this trend to continue? From America Movil's perspective, even though the joint venture is stated to be 50-50 and you have a positive view of Liberty, considering that America Movil has been responsible for most contributions, do you foresee the possibility of taking control in the future? Lastly, could we see an increase in communication from the management of the Chilean joint ventures? Since the JV closed last October, communication has been quite limited for bondholders, and we would appreciate any improvements in that regard. Thank you.

Carlos Garcia Moreno, CFO

Well, thank you. Let me begin with the last part of your comments or question. I think we've heard some of these comments to the effect that maybe the company should improve a little bit its visibility that it provides to the market. We are already talking to the partners so that together we can see to it that from here now on we can provide a bit more color than is strictly necessary from the perspective of the guidelines of the bonds. But we can provide a bit more color on the operations themselves, okay. I believe it's important to note what Daniel said about this being a 50-50 joint venture, which requires both partners to agree on a business plan at the beginning of the year. As Daniel mentioned, this business plan is medium-term, not just for one year, and we are focused on its execution. I think the execution has been progressing well. On the operational side, it’s clear that we are starting to realize some of the expected synergies in the first quarter or even the first half of the year. There were some one-time expenses linked to the merger, such as staff departures, but most of those are now behind us. In finalizing the business plan, we also reached an agreement on the resources needed to execute it, which will require some funding. Therefore, we have established the appropriate mechanisms to ensure the company receives the necessary funding in a timely manner.

Daniel Hajj Aboumrad, CEO

And one more thing about Chile, I want to highlight that we are very pleased with the management team at America Movil. As Carlos mentioned, we will need to restructure and make some personnel changes. However, at this moment, we believe the current management is effectively focused on execution, and we are happy with their performance.

John Ho, Analyst

Has there been any other further capital in the 3Q results for America Movil to VTR, I mean to the joint venture?

Carlos Garcia Moreno, CFO

There hasn't been any capital wasted at the level of VTR, and no equity has been provided. There are financing mechanisms in place to ensure the company receives the necessary funds to execute its business plan. Currently, these mechanisms are designed to provide financing over the period, and we do not expect any changes in stakeholdings at this time.

Daniel Hajj Aboumrad, CEO

And I think one more thing on Chile, we are also really happy about the management that we have there. As Carlos said, we have to structure and to take out some people and put other ones, but right now, we feel that the management that we have there is in place working and focusing on executing that. So that's also something that we are happy about.

Soomit Datta, Analyst

Yeah, hi. Hi, guys. A couple from me, please. One, just on the group prospects for service revenue and EBITDA, your medium-term guidance or your '22, '24 guidance has seen EBITDA running ahead of service revenues. The guidance, I think, is 4% to 6% versus 2.5% to 4%. So service revenues and EBITDA run rate is similar today. I just wondered, do you still see the opportunity essentially for margin expansion? Do you see the opportunity for EBITDA run rate to come in ahead of service revenues as we look forward? That's the first question please. And then the second one if I could on Mexico, I think, you have been resistant to increasing prices over the last few quarters. I just wondered how you are looking into 2024? Do you still think that's the right strategy or is there room to consider lifting prices or do market conditions not allow for that? Thank you very much.

Daniel Hajj Aboumrad, CEO

On the first question, the service revenue is currently growing at around 3.9% to 3.8%, and the EBITDA is also increasing by 3.9% after accounting for one-offs. We have a strong platform in place and are focused on controlling costs and expenses. Each country presents varying circumstances; in some, we've managed to pass on some inflation to prices in certain segments, while in others we haven't. Regardless, we have a solid approach to managing costs, reducing staff, and further digitalizing our operations. Overall, we have a focused strategy for controlling costs within the company. The second question, can you repeat that?

Soomit Datta, Analyst

It was a question on Mexico and on a similar theme, price increases. I just wondered how you are looking at the outlook for potential price increases. On the fixed side, we know your competitors have moved their prices and you have not. I just wondered broadly across wireless and fixed, do you see the opportunity to increase prices at all in Mexico?

Daniel Hajj Aboumrad, CEO

We are not currently considering a price increase. Our focus is on expanding our fiber network, and we have 16 million home passes for fiber. We're enabling all our customers to transition from copper to fiber, and we have already connected 76% of our customers with fiber. I cannot predict what will happen in 2024, but for now, we haven't raised any fixed prices this year.

Soomit Datta, Analyst

Okay, thank you.

Daniela Lecuona, Head of Investor Relations

Hi, Daisy. Can you hear us?

Cesar Medina, Analyst

Great. Thank you so much for taking my question. I have two related questions. The first one is what is your read on the stock performance today after the printing down 6%? And then related to that, if I hear all the commentary around, it seems the following. Service revenue is going well. You have room for margin expansion. CapEx is on a positive trend, if not lower. So is there room to increase or start a discussion of increase in shareholder remuneration given that two-year yields are like over 5%? Thank you.

Carlos Garcia Moreno, CFO

Okay, Cesar, you're asking for my thoughts on the current market situation, and I think there is significant stress right now. The 10-year interest rates have risen sharply in recent days, currently around 4.90%, which is the highest level we've seen since rates began to rise. This is happening despite the Federal Reserve indicating that they might not need to raise rates further, as the market seems to be doing that work for them. My perception is that there's considerable stress in the market, leading to a risk-off approach. When investors seek to reduce risk, they often sell liquid assets, and I don't believe America Movil is always viewed as a proxy for other assets due to its liquidity. In my opinion, the current situation relates less to our actual results and more to the market's movement towards de-risking amid this stress.

Daniel Hajj Aboumrad, CEO

And in my view, I think, as Carlos says, he gives his view. My view is that the results were consistent with what the market thinks. And I think the fundamentals are okay. And the business in America Movil is growing and it's okay. So that's my view.

Cesar Medina, Analyst

No, no, I'm with you. So this is why I was just flagging, you know, if you look at the margin trend, revenue trend, is there a scope for you to evaluate perhaps increasing shareholder remuneration?

Carlos Garcia Moreno, CFO

Yeah. So again that takes us back to one of the prior questions. I think that we were saying we typically tend to pace with share buybacks materialized mostly the last third of the year. I had already said that since July, we have had a significant deployment of resources in share buybacks. And we have had, since the end of June till today, MXN350 million in share buybacks, and we're still not done. And obviously, we still have another big payment of dividends worth $800 million or less that will be made in November. But certainly share buybacks, we can continue with them because this is time when we can get the funding, the leverage is where we want it to be. And the cash flow is coming in as we expect it to.

Andreas Indiscernible, Analyst

Hello, thank you for taking my question. I would like to ask about margins in Mexico. Last year, we experienced significant expansions throughout the year, but this year started off quite volatile, showing a considerable margin contraction in the first quarter and again in the current quarter. What is your perspective on the sustainable level of margins in Mexico moving forward? That will be my first question. Thank you.

Carlos Garcia Moreno, CFO

We're looking into this. I have the adjusted margins here, but you'll need to consider them as we've made some tower sales from time to time, which has affected the margin. For instance, in the third quarter of 2022, the adjusted margin was 41.0%, and in the second quarter of 2023, it was 40.9%. This quarter, we saw a decrease from 40.9% to 40.0%. However, I don't see much volatility; margins have generally remained in the 40% to 41% range for adjusted margins over the last five quarters.

Daniel Hajj Aboumrad, CEO

The growth is 5.9%, with 5.1% in the second quarter and 3.6% this quarter. The growth is consistent and not volatile, generally following the increase in revenues.

Unidentified Analyst, Analyst

Understood. What should we anticipate going forward considering the potential rise in minimum wages or a 20% increase in labor costs and the possibility of reducing the labor week by one day? How might this affect operations in Mexico?

Daniel Hajj Aboumrad, CEO

We have already experienced the increase at the start of the year, which is part of our current costs. We've been concentrating on managing costs effectively across all operations. The salary hikes are not limited to Mexico; they are present throughout Latin America. Our aim is to improve efficiency and embrace digital solutions. For instance, at América Móvil, in December 2019, we had 94,000 employees; by 2020, that number dropped to 186,000, then to 181,000 in 2021, 178,000 in 2022, and as of August, we have 176,000. This reduction comes from not hiring new staff, focusing on efficiency, and enhancing the training of our existing workforce. These strategies have helped us manage our costs effectively over the past four years.

Carlos Garcia Moreno, CFO

And I'd just like to stress again that regarding Mexico and sometimes other countries. It's important to normalize from the effect of extraordinary things like the sales towers because they have been important in Mexico over the last year. They've been important this year. And I think you have to correct for that, because the volatility in the margins you're referring to has to do with the tower.

Alejandro Azar, Analyst

Hi. Good morning, Daniel, Carlos. I'm sorry I joined a little bit late, but I was wondering if you guys mentioned something about the Verizon earnout that I believed the deadline was September of this year. Could you give us some color on that if it's possible? Thank you.

Carlos Garcia Moreno, CFO

Hello. We received a payment for the earnout of MXN3.5 billion, which includes MXN3.3 billion in the quarter. This is part of the total MXN5.5 billion we discussed regarding cash flow.

Alejandro Azar, Analyst

Thank you.

Phani Kanumuri, Analyst

Thanks everyone for taking my question. My first question is on Brazil. It seems that you're growing very well in Brazil and the ARPU is up nearly 12%.

Daniel Hajj Aboumrad, CEO

We can't hear you, could you please speak a little louder?

Phani Kanumuri, Analyst

Okay. My first question is regarding Brazil. It seems that you're doing really well in Brazil and your mobile ARPU is up nearly 12% year-on-year in the third quarter. Is it driven more by price increases or more by volume increases? And how do you expect this trend to go going forward? That's my first question.

Daniel Hajj Aboumrad, CEO

Well, I think on Brazil, we are doing well in market share. We're doing well, as Oscar has mentioned and Carlos mentioned also, we're starting to grow in broadband again reducing the losses in TV, improving by 1.1 million subscribers in postpaid. So we are doing very well in Brazil. The synergies that we have and the control cost that we have, also we have a pass-through on part, not on all our products, but in part of our products, I think at the mid or beginning of this year. So in Brazil, we are doing okay, improving, growing revenues and controlling costs. So that's what we're seeing in Brazil.

Phani Kanumuri, Analyst

Thank you. So the second question that I had is on the Mexico corporate segment. The revenue growth has decelerated this quarter. Is it because it's more of a lumpy quarter or what is driving that revenue growth deceleration in the corporate segment in Mexico?

Carlos Garcia Moreno, CFO

Yeah, well, as I mentioned before, in Mexico, we are doing exactly the same, selling those products, SD-WAN, security, outsourcing of the networks, cloud services, vertical solutions. So we are doing pretty well in Mexico, addressing those markets and it's growing around 12%, the revenues in corporate. So, you know, when you look at Mexico, corporate is growing. Broadband as well is growing 8%, 8.5%. So I think we are doing well in Mexico, and we feel that we continue with that. We have the base of the network. We did the right investments in the network, not only in fiber. We reskilled the people to sell these new set of products. So I think we see this market trend pretty optimistic. One more comment on the other part, what I said, because the issue with our corporate networks revenue, which we mentioned, it's been gaining shares. It's becoming more important in most operations. But it can be sometimes volatile. But sometimes you get a new contract and you book all the revenues at once. But if you look at the full nine months of this year, so we raise the volatility, you have the increase in revenue is 10.3%. So the year to September, corporate network revenue in Mexico is 10.3% larger than the prior year.

Cesar Medina, Analyst

Thank you. Very clear.

Daniel Hajj Aboumrad, CEO

Thank you.

Andres Cardona, Analyst

Good morning, Daniel, and good morning, Carlos. Thanks for the preliminary comments on 2024 CapEx program. Let me ask you about 2023 net working capital, if you can comment about what do you expect for the full year? And if there was any event that explained slower reversion on the third quarter? Thanks a lot.

Daniela Lecuona, Head of Investor Relations

Working capital.

Daniel Hajj Aboumrad, CEO

What is the reversion on working capital? Can you clarify that again? We find it unclear.

Carlos Garcia Moreno, CFO

Andres, I’m not sure if this is the right question, but we have been indicating for a while that our cash flow experiences significant fluctuations due to working capital. In the early months of the year, we need a substantial amount of working capital, and we typically recover it during the last third of the year. So, usually, we start to see a return of working capital as we begin to get back the capital we invested in the first half of the year.

Till Moewes, Analyst

Hello and thanks for taking my question. It's about Guatemala. You've been fighting to get to more balanced market share there. And I was wondering where you stand currently in the process? How long do you think the remainder is going to take and what additional measures if any should we expect?

Daniel Hajj Aboumrad, CEO

I believe we are performing well in Guatemala. We are making investments and have recently acquired the 700 frequencies, which will help us improve our wireless coverage. With these frequencies, we can enhance the quality of our service and accommodate more customers. In terms of fixed services, we are increasing our fiber deployment and replacing more copper with fiber, allowing us to offer greater speeds to our customers. Our approach in Guatemala has been more focused on quality rather than being aggressive with price reductions. We are concentrating on providing better service and improving speeds by transitioning from copper to fiber and pursuing convergence. Additionally, we are seeing positive developments on the corporate side, leading to improvements in our operations in Guatemala.

Carlos Garcia Moreno, CFO

On the fixed line side, we have been improving. On the service revenue growth, it has been negative, and now we're in positive. But it's been an improvement quarter after quarter for the last five quarters that we can see.

Till Moewes, Analyst

Okay, thank you. Another question, if I may. In Mexico City, Megacable is increasing its penetration. And I was wondering, what do you think, does it mean for the competitive landscape there?

Carlos Garcia Moreno, CFO

Yeah, Megacable, they are building fiber in Mexico. Some of them are overlapping the cable networks, some of them are greenfield. But to be honest, we have a great platform in Mexico. We have 16 million home passes with fiber. As Daniel mentioned, we have 76% of the customers already connected with fiber. Let me add that we've been doing very well to bundles with streaming platforms as HBO, Netflix, Clarovideo. So, we bundled the broadband with these streaming and it has been very well received in the market. So I agree, Megacable is growing with fiber, but I think we have the right network to compete. So we already have fiber. So I think we have a good proposition in the market to compete with the other competitors, not only with Megacable.

Till Moewes, Analyst

All right. Thank you.

Jesus Romo, Analyst

Good morning. Thank you for taking my questions. I have multiple questions regarding the Mexican operation. I wonder if you could provide additional color on the deceleration in Mexico for corporate network services, you know, adding the color of what's happening there or some context? And what's guiding the broadband revenue given that, you know, you do mention in this quarter. What's wrong with the revenue over there? And the second question is for wireless. Just a bit of color of what's guiding postpaid net ads in Mexico and ARPU growth in Mexico? Thank you.

Daniel Hajj Aboumrad, CEO

Well, I'm going to start with wireless. I think what wireless is driving a little bit better ARPU and growth is our 5G network. I think we have more coverage, better quality. And we are really the only one that has been investing in Mexico in 5G. So customers are using that network, using more data and sometimes upgrading their plan to have more data. So that's more or less what we're seeing there.

Oscar Von Hauske, COO

The corporate market is quite different from the mass market. Negotiating projects can take several months. In some quarters, we secure a significant project, while in others we don't. However, we have a strong pipeline in place. This type of selling requires a different strategy; we need to demonstrate the business case for efficiency, cost reduction, and productivity to the customer. It can take time to persuade them. In some quarters, we land a major project, and in others we may not, but we maintain a solid pipeline, which is why we remain optimistic about these markets.

Carlos Garcia Moreno, CFO

Just to repeat what we said before. If you look at the nine months to September, copper network revenue in Mexico increased 10% year-on-year. When you look at longer periods, you can see significant volatility. But what is important is to have a strong pipeline of opportunities.

Cesar Medina, Analyst

Thank you. Very clear.

Daniel Hajj Aboumrad, CEO

Thank you.

Operator, Operator

Thank you. This is all the time we have for the Q&A session today. So I'd like to hand back to management for any closing remarks.

Daniel Hajj Aboumrad, CEO

No, just thanks. Thank you all of you for being in the call. Thank you.

Operator, Operator

Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely day.