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Good morning. My name is Mariama, and I will be your conference operator today. At this time, I would like to welcome everyone to the América Móvil Second Quarter 2020 Conference Call and Webcast. [Operator Instructions]
Now I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.
Good morning, everyone. Thank you for joining us today to discuss América Móvil's Second Quarter 2020 Financial and Operating Results. We have today on the line Mr. Daniel Hajj, CEO; Mr. Carlos García Moreno, CFO; and Mr. Oscar Von Hauske, COO.
Thank you, Daniela. Thank you, everyone, for being in the second quarter 2020 financial and operating report, and Carlos García Moreno is going to make a summary of the results. Thank you.
Thank you, Daniel. Good morning, everyone. Well, towards the end of the first quarter, with financial markets in disarray as the employment numbers in the U.S. collapsed, threatening to worsen the economic contractions stemming from lockdown measures aimed at controlling the spread of the COVID-19 virus, the Federal Reserve announced a huge monetary quantitative expansion program. This decisive action gradually stabilized the financial markets, allowing for new issuance of securities throughout the second quarter and quelled the excess demand for U.S. dollars that had resulted in its appreciation vis-à-vis practically all other currencies. Since then, substantially all Latin American currencies began to recover with the notable exception of the Brazilian real, which declined an additional 4.8% versus the dollar. At any rate, the Mexican peso, the Colombian peso and the Chilean peso, all of which have dropped sharply in the first quarter, ended up appreciating 3%, 7.9% and 4.1%, respectively, in the second quarter in which practically all our region of operation was under lockdown. The confinement measures adopted throughout our region of operation had an important impact on our commercial activities, partly on account of the closure of shops and customer care centers and partly because they generally curtailed the mobility of population and hence the demand for mobile services.
Altogether, we lost slightly more than 5 million subscribers, 500,000 in the postpaid segment with most operations seeing a reduction in their postpaid base with notable exceptions of Colombia and Telekom Austria. And we had 4.6 million disconnections in the prepaid segment in which all our operations registered net disconnections, save for TracFone in the U.S. and Colombia, both of which added slightly more than 200,000 clients each. Prepaid disconnections were more important in Mexico, 1.7 million subs; Peru, 1 million; and Ecuador and Guatemala at approximately 450,000 each.
In contrast, on the fixed-line segment, we gained 450,000 new broadband clients with every operation posting an increase in clients, except for Telekom Austria. There were, however, disconnections of voice lines and PayTV services, particularly in Brazil, which accounted for 190,000 PayTV disconnections out of 250,000 for the group as a whole.
We ended June with a total of 358.5 million access lines, which includes 277 million wireless subscribers and 81 million fixed-line RGUs. It is of note, that our Colombia operation managed to increase access lines in all fixed and mobile products during the quarter.
Our second quarter revenues totaled MXN 252 billion, up slightly from the year-earlier quarter, 0.6%, in spite of equipment revenue falling 27%, as service revenues increased 6.5% in Mexican peso terms on account, for the most part, of the depreciation of our reporting currency versus the dollar and the euro over the year, which was approximately 15%. Save for TracFone in the U.S. and Puerto Rico, all our operations saw marked reductions in their equipment sales as a result of the confinement restrictions but also because of our more restrictive conditions for handset financing in most operations.
At constant exchange rates, excluding Argentina, given its hyperinflationary accounting methodology, service revenues were up 0.8% with those generated on the mobile platform rising 2.3% and those coming from the fixed-line one declining 1.7%. The deceleration in service revenue growth from plus 5% in the first quarter to plus 0.8% in the second resulted from the direct impact of the confinement measures put in place throughout division and its economic fallout.
At 2.3%, mobile service revenue growth slowed down sharply from the fast pace observed in the first quarter, 8.4%. Brazil and Colombia were the top performance in terms of mobile revenues with increases of 8.8% and 4.8%, respectively.
On the fixed-line platform, the impact of COVID was more limited with the pace of decline of revenues going from minus 0.7% in the first quarter to minus 1.7% in the second quarter, mostly on account of falling PayTV revenues. In Colombia, fixed-line revenues actually accelerated to 9.9%, up from 9.5% the prior quarter.
The deceleration in mobile service revenue growth was practically identical in prepaid and in postpaid with revenues observing an improving trend as confinement restrictions began to be lifted. In prepaid, revenues were affected by the lockdown measures as clients sometimes found it difficult to effect recharges as most shops were ordered shut, including our own customer care centers. The impact on revenues was felt more strongly in countries where prepaid services are more prevalent, including Mexico and the Dominican Republic.
In postpaid, revenue growth slowed down as clients switched to lower-cost plans in anticipation of the economic difficulties they were to face. In various cases, small and medium-sized enterprises that had to close under the confinement restrictions sought to discontinue the service or reduce its cost, even if that represented a more limited availability of data services. We tried to stay close to our clients and help them find plans better suited for them given the economic difficulties that many were undergoing and to ensure also that they will stay current in their payments. In percentage points, the decline in postpaid growth rates was steepest in Ecuador and Panama.
Equipment sales plummeted early in the crisis, bottoming in April, as you can see in the chart, but climbing back rapidly during the remainder of the quarter. Fixed-broadband services continued to lead the way within the group with revenues increasing 7.3%, very much in line with the pace seen the prior 2 quarters. With only one exception, all our operations posted fixed-broadband revenue increases in the quarter. Our less mature fixed-line operations, including those in Ecuador, Peru, Argentina and Costa Rica, all performed well with the pace of growth picking up speed.
Second quarter EBITDA totaled MXN 82.6 billion, was up 5.9% in Mexican peso terms, with the EBITDA margin climbing 1.7 percentage points responds to 32.9%. At constant exchange rates, it increased 3.3%, reflecting in part the impact of new commercial arrangements by TracFone in the U.S. that brought about reductions in network costs to be applied from January 1.
Our operating profit jumped 10.5% to MXN 40.9 billion and helped bring about a net profit of MXN 20 billion in the second quarter after allowing for financing costs of MXN 11 billion, which were 6.3% lower than in the year-earlier quarter. Our net profit, equivalent to MXN 0.30 per share and $0.26 per ADR was up 40% on the same quarter of last year.
At the end of June, our net debt totaled MXN 765 billion, up from MXN 677 billion at the close of 2019, which reflects among other things an increase in the values of dollar and euro-denominated debts vis-à-vis the Mexican peso. It stood at 1.89x EBITDA under our prior methodology of EBITDA. In cash flow terms, our net debt came down by MXN 8.3 billion in the 6 months to June. In addition to the above, our cash flow allowed us to cover capital expenditures in the amount of MXN 63 billion and to devote MXN 6.2 billion to fund labor-related obligations.
In Mexico, service revenues came down 2.1% mostly on account of mobile service revenues that fell from a 10% growth pace in the first quarter to minus 2.5% in the second quarter with fixed-line service revenue showing a very slight decline quarter-over-quarter.
In Brazil, postpaid revenues proved to be very resilient, observing an 11.8% increase on the year-earlier quarter. Although down from the [ reason ] of the first quarter, you have nonetheless quite a remarkable pace. Fixed-broadband revenues stayed on trend, presenting practically the same pace of growth in the first and second quarters. All the above has bring about an outstanding jump in EBITDA, which was up 10.7% year-on-year with EBITDA margin reaching 40%, which is the highest we have in Brazil.
Finally, in Northern Colombia. It was the only operation to grow net adds in mobile, fixed line. And in addition, it managed to present increasing revenues on both the mobile and fixed-line platforms at 4.8% and 9.9%, respectively.
With this, thank you very much for listening to the call, and I will hand the floor back to Daniel Hajj. Thank you.
Thank you, Carlos, and we're going to start with the Q&A.
[Operator Instructions] Your first question comes from Walter Piecyk with LightShed.
Just a question on the -- obviously, the very strong performance of margins of TracFone in the United States. You talked about a repricing going back to January, so I assume that the margin would benefit from some catch-up from the first quarter. So when we think about Q3, where you don't have the kind of the benefit of the first quarter, what should the margins look like in that U.S. business? And can you talk a little bit more about kind of which carriers gave you that benefit? Or is it across the broad base and the competition that's in the market?
I think we have a very strong quarter in TracFone, not only in the carrier cost. I think we have also a very strong performance in sales, in net adds. I think we have more than 200,000 net adds in the quarter. So I think with all the -- what the U.S. is giving, our prepaid market is growing good, and we have a very good quarter. The -- we have discussions and revisions with our cost carriers, the cost of service. And we have a reduction in the cost of the service. And we have been negotiating that through -- all this year, at the beginning of this year and starting from 1st of January. So we finished in the second quarter but starting first quarter, so I think you are going to see also benefits in third and fourth quarter, as you are saying also. So we're working with all of them, reviewing with all of them. And well, that's mainly what I can say.
So Daniel, did the margin -- was the margin helped from some catch-up credits from kind of backdating the pricing from the first quarter? Or is that really the new margin that you're going to operate at this 15%?
No. We're catching what we have in the -- let's say, we have around $130 million that we put from this in the second quarter,: a $65 million from first quarter, $65 million from second quarter. So that's more or less -- those are the numbers, and I think we're going to have more or less the same in the third and in the fourth quarter.
Your next question comes from the line of Rodrigo Villanueva.
Yes. I have 3 questions, if I may. The first one is if you could please elaborate a little bit more on the potential alternatives to create value from your towers. Would you be considering a spin-off as you did with Telesites [indiscernible] transaction? Also, are you considering to do this with the vast majority of the 60,000 towers you currently own? Then I can ask the follow-on questions.
On the towers, Rodrigo, the only thing I can say and the only thing that we have today is we have -- we own 60,000 towers in Latin America and in Europe, and we are analyzing the different alternatives to give value to the shareholders, as we said, and to reduce our debt. So we don't know if there's going to be spin-off or we're going to sell them. We still does not know exactly if there's going to be in all the countries or only in some of the countries. So we are analyzing. We are today analyzing what is the best thing to do to -- for all these assets and to give value to our shareholders of these 60,000 towers that we have. Nothing -- I don't -- it's not because I don't want to say anything else. It's because we still doesn't have anything. We are really, really analyzing different alternatives on that.
Understood, Daniel. The second question is related to Huawei. We have seen several countries around the world, including Brazil, continuing to stop using Huawei equipment for 5G networks, maybe from increased pressure from the U.S. government. Do you think this could be extended to other Latam markets? And could you please share with us any potential strategic alternatives that could reduce the negative implications for AMX from a potential Huawei ban in Latam?
Well, we are not hearing anything today. Still, until today, we are not hearing anything about ban Huawei in the rest of Latin American countries. We have hearing something in Brazil, but nothing formal, okay? So still hearing some news but nothing formal from the government. So that's the only place where we're hearing something.
They are talking about 5G. So still, we haven't had and we haven't taken a decision in 5G. So all 4G, 3G, there's nothing. That's everything. It's okay. So still, we don't know what to do. There's another vendors there. There's Samsung also, Nokia, Ericsson, so still a lot of competition. So if there's a ban on Huawei, we still have other vendors that we can use. So I think Huawei is an excellent technology. But still, we don't know if there's going to be something in the other Latam countries.
Understood.
Sorry. In Austria, we're using Nokia, so I don't think there's a problem there. So in Europe, we are in 5G. The only country where we already because we are making testings and we're doing something in 5G. But the only decision that we already take is Nokia in Austria, so there's no problem over there.
Understood. Dan, and the final one is regarding operating performance in Colombia. As Carlos mentioned, it was pretty strong, particularly considering the COVID crisis. And I was wondering if this has to do with Telefónica's lack of willingness to invest in Latam, excluding Brazil. And you would expect the competitive environment to change now in Colombia, considering the Novator Partners acquired the operations of Avantel.
Well, I think we have been doing big improvements in Colombia through the last 2 years. Colombia has been improved, not only in one segment. We're improving in postpaid. We're improving in prepaid, in corporate customers, in PICs, in broadband, in TV. It's the only country where we grow in TV also. So we have been improving a lot through the last year, 2 years maybe, 2 years starting to work very hard. And the last year, we have been improving. We changed a lot our organization. We have been investing good over there, so I don't think it's only one thing. I think we're making a lot. You know that we have the option in the beginning of the year, we win some frequencies, and we're going to have a new competitor that is warm and well. With new competitors, maybe it's going to change a little bit. There's going to be more competition in the prepaid and postpaid in the mobile side. I'm sure it's going to be more competition, but I think we are prepared. We have a very good brand. We have good distribution. We have very quality capacity, so we are prepared to compete in Colombia, Rodrigo.
Your next question comes from the line of Alejandro Gallostra from BBVA.
My first question is related to the mobile business. You mentioned a deceleration in mobile revenue growth that was similar in both the prepaid and postpaid segments. However, I would have expected them to behave differently, with postpaid most probably being more defensive. So perhaps if you could give us a further explanation of why this was the case in your opinion or maybe provide us with additional breakdown.
And then my second question is related to the broadband operations, which have proven to be very resilient this quarter, but the performance has been quite different among countries. And perhaps you could explain the differences in the performance of the broadband operations in Mexico and Brazil, for example.
Yes. Well, I think prepaid and postpaid are different markets, and they are behaving different. Well, if you compare, let's say, Mexico and Brazil, I think Mexico, we have more than 50% of our service revenue in prepaid and 40% on postpaid. So that's why we have been more hit in the revenues because, at the beginning, April and May, prepaid people, we have a lot of stores closed. We have in Mexico -- well, all around Latin America, people were not out of their houses, so it was different -- very difficult to sell over there. And in a lot of countries, in April, we gave some packages to help people with this pandemic. So let's say an example in Mexico, we gave a package call AMIGO CONTIGO that we give free calls for 15 days for free, and there's around 28 million packages that we do in April. And April, May and in June starts to grow a little bit, to recuperate in the prepaid side. Different in Brazil. In Brazil, only 20%, 25% of our revenues are prepaid, and the rest are postpaid.
Then what is happening in postpaid, postpaid is different. People is starting to reduce their plans. If they have a MXN 500 plan, they want to go to a MXN 400 plan or reduce their gigs or they are taking -- they're being careful with their money. So we are seeing some reductions on the rent of their plan.
So that's -- and in the other side, what you are going to see is that you're going to have a lot of bad debts in the postpaid. So there's going to be people who are going to stay without a job and maybe they are going to cancel and not paying you some of the bills. So that's more or less how we feel it's going to behave, prepaid and postpaid, all through Latin America.
In the broadband, I think all around, we're doing good. Telmex do good here. 64,000 in the 3 months; Brazil, 100,000 broadband subscribers. Colombia, we also do very good. All overall, we have been growing our net adds of broadband. But Oscar, if you can talk a little bit more on the broadband side, please.
Sure. Given the pandemic and the pushing the people work from home, their requirements of bandwidth in the homes has been increasing very much. So the people in the home is doing -- taking classes and working from home and a lot of streaming of video and gaming. So that -- I think that pushed the product, and that's what Daniel mentioned, we are getting these net adds. And not only net adds, our customers are asking for more bandwidth in all the countries.
Thank you, Oscar.
Yes.
Your next question comes from the line of Marcelo Santos from JPMorgan.
I have two. The first, could you please provide some view on how things evolved during the quarter? You mentioned a little bit how, like, in April and May, prepaid was lower. So could you expand a bit and talk how prepaid, postpaid evolved and how things ended in June, just so that we could get a feeling of how the trends should shape up for the third quarter? This is the first question.
The second good question would be regarding your appetite for M&A, so whatever you could -- good color you could provide on that. We have some assets on sale, especially in Brazil. So if you could provide some update on that would be very good.
Yes. Well, in prepaid and postpaid, I think what you -- let's talk especially in prepaid. As I said, people staying home in April and May, so we're -- the reduction in sales of the prepaid cards were higher than what we're seeing in June and July. So as the economies are open and starting to be more open and we have more stores and then the retails are open, we are seeing that prepaid is starting to grow a little bit from what we have seen in April and May. So that's all overall in Latin America.
Still, some countries are opening faster than the other ones. Other ones are opening and then returning to close a little bit. So still, we are a little bit uncertain of what -- when we're going to have all the economy open -- totally open as we used to have at the beginning of the year. So it's different.
In the postpaid side, as I said, people is reducing their ARPU, trying to take care about their money, their rent. They don't want to pay if they don't use it. They are staying at home, so maybe they use more the WiFi, and that makes them feel that they don't need the x amount of gigs that they have in their plan. So that's why they are reducing a little bit. But I think all overall, everything is going to return as what we used to have at the beginning of the year. It's going to take a little bit of time, take time also for the economies to recover, to open, but I think everything is going to return.
On M&A, well, if you are talking about Oi in Brazil, we are aware, and we're interested in the assets. So for us will be a good fit. We do Nextel. I think in Nextel, we have all the synergies done. I think through the -- mostly of the synergies done. I think at the end of the year, we're going to have almost all of the synergies done, except for the towers that we need to reduce some towers that we already have, extra towers that we already have. But all the rest of the synergies, we have been doing very good. The frequencies that we get are very good also, help us to have more capacity. And if we can do with Oi to have more customers and capacity also will be good. So we are interested, and we're going to participate in the Oi auction for the mobile side.
Your next question comes from the line of Diego Aragão with Goldman Sachs.
Yes. I guess the first question is still regarding your performance in Brazil. Can you walk us through the main pillars for such a strong performance in mobile? I mean if we would compound this growth, such as, like, the postpaid net increase, the prepaid recharge, upgrades, downgrades to plan, how do see year-on-year growth would be compounded? This is my first question.
Can you repeat it because I don't hear you very well? Can you talk a little bit louder, please?
Yes. Can you hear me well?
Sorry. Yes. A little bit better, yes.
Okay. Yes. So I was wondering if you can walk us through the main pillars for your performance in the Brazilian market, in particular to mobile business. If you can compound the growth, such as like the postpaid leads in terms of like the prepaid recharge, upgrades and downgrades to plans and compound how your year-on-year growth what this -- in this quarter would be very helpful.
Yes. I think in Brazil, we're doing great. I think we have a great platform. It's -- I cannot not only talk about mobile. I think our mobile platform is great. We have been increasing capacity, doing more coverage. Speed is very important in Brazil, and we're moving also and doing a lot of things in the network to give a very good speed, 4G, 4.5G. So we're investing, and we're doing very good in Brazil.
Also in the fixed platform, we have also a great platform. We have 30 million households passed, a lot of broadband, PayTV, great platform of PayTV. And also, we have very good management in place and good strategies for that. So all overall, we are doing good.
And in this quarter, we also reduced -- and not only in Brazil, in all América Móvil, we have been increasing and reducing -- increasing efforts to reduce cost and expenses. So I think that's something that we have been doing very well and help us to gain market share. Let's say, in Brazil, in postpaid, in the first quarter, I think their revenues were growing 15% year-over-year. So it was an excellent first quarter. I think second quarter is still very good, growing -- I think it's around 8%. I don't remember exactly, but only in...
11.8%.
Sorry, 11.8%, so still working and doing very good. We're making our bundles with PICs broadband and TV. So we have a good platform, and we're investing there, and we're managing very well our company. Nextel give us also good frequencies to give more capacity and speed to the customer. So all overall, I don't think there's only one thing. I think all overall, we're doing very good.
Okay. And I guess my second question is related to your margins, if you can -- if I can just follow up on these. When I look to the region, there are like several, let's say, moving parts that lead you to believe that margins have some room to expand. For instance, you mentioned easing competition in some of the markets, right; industry consolidations; even like the rising of infrastructure players in Latam; and lastly, but not least, let's say, digitalization trend. So I would like to hear from you, how do you see these trends impacting América Móvil? And how much do you expect to benefit in terms of margins going forward?
I think Carlos wants to answer? Or do you want me...
Can you -- excuse me, because I could barely hear you. Can you please repeat?
I can tell you a little bit about the margins. I think margins grow in terms of percentage all around Latin America because 2 things. First, we have less -- the service revenue was mainly growing, and the equipment revenue was reducing a lot. So that's why the margins grow. Especially, let's say, in Mexico, the margins grow because equipment revenue were down.
The other important thing is that we're, as I said, reducing and making big efforts to reduce cost and expenses, very important. We are moving a lot more to digitalize all our network, our sales, our -- we're trying to do everything digital. So we're working very hard on IT on that, and it's also going to reduce expenses.
And well, as you said, M&As in Latin America, well, we're seeing a new competitor in Colombia. But then in Brazil, maybe if Oi is going to be sold then sell, then there's going to be less competitors in Brazil.
So all overall, it's moving in some directions in one country, in other directions in other country. But all overall, I think our margins can go the way we have been having the margins growing a little bit and growing our EBITDA also.
But I don't know, Carlos, if you want to say something else.
Okay. No, Daniel. I think -- I don't really have anything more to add. I think it's important only to note that, as Daniel said, there were very significant efforts of reducing our costs. So some of them are permanent. Anything that has to do with digitalization, simplification, all of that is permanent. Already having being under more of a situation, maybe ones that we are facing, it is more urgent to think about some cost reductions, so we have been very conscious on that. Then there something that also came down inevitably because of the confinement, marketing expenses and the like, everything that is more commercial related. Those are temporary reductions will also come down for some time. But we are seeing -- Daniel said if you look at EBITDA margins, it increased particularly everywhere, and that partly has to do also with the reduction in the equipment revenue. We had impacted all markets, save for the U.S. and Puerto Rico.
And one more thing that I want to add is also it's going to depend a lot on the economies, okay? The -- let's see how the economies all around Latin America are going to behave. So let's see how does this pandemic is going to result for -- till the end of this year and the next one. So it's important, that.
Your next question comes from the line of Fred Mendes with Bradesco.
I have 2 questions on pretty much the same line here. I just want to get a better understanding of these strong net adds for Telmex, especially on broadband, 63,000. Just other companies already reported results, and then their net adds were also quite strong on the second Q. So my impression here is that the penetration of this service is increasing. So just trying to confirm with you if it is correct, instead of more like gaining market share from other places, looks like the size of the market is increasing. And then also, if you can give us a breakdown of the net adds, if it's more towards FTTH or if you're still being able to gain clients with copper. This will be my question.
Okay. Oscar, you want to answer that?
Yes, yes, yes. But, yes, you're totally right. I mean has been an increase on penetration, and we are getting net gains from fiber, as you know, and as well from copper. So I would say half or half coming from fiber and coming from copper or you are totally right. What we've been seeing in the market is that the penetration is increasing.
Perfect. Perfect. And if I just -- if you allow me just for a follow-up. I do understand that close to 25% to 30% of your network today in Mexico, it is already FTTH. Just wondering if you have -- will not be a guidance, but just an estimate of -- if you plan to continue to aggressively grow this network or if now the main focus would be more towards deleveraging the company instead of deploying CapEx towards FTTH?
Well, within the situation that we are living, we are focused, really, on migration of customers and improve the penetration of the network in the next month.
Your next question comes from the line of Maria Azevedo with Santander Bank.
My first question is a follow-up on the CapEx you just comment. What is the CapEx strategy for 2020? And specifically in Brazil, do you see room to be a little bit more rational and cut the spending this year to the 20% you mentioned on the first call.
And the follow-up question would be on 5G. You launched the first initiatives in Brazil. Do you think the 5G market appeal is going to be on consumer mobility? Is there room to charge a premium for 5G services or -- and do you see it as a substitute to fixed wireless assets? How is going to be the 5G strategy for the company?
Thank you. On the CapEx, we have been reviewing that. I think we are going to reduce the CapEx from the -- our forecast that we have for this year, yes, we're going to reduce it. Still, we don't know exactly how much we're going to reduce that. We're still reviewing and seeing how does the traffic is going to behave. And also the sales, because part of our CapEx is on CapEx related to the sales of net adds, new customers. So also, we're going to see how much. We are not cutting anything there, so we're going to see how much and how those -- that is going to behave. So still, we don't know. We are a company that moves fast, and we're flexible. So we're going to use and do what is necessary to do. But we think that we can reduce CapEx from the forecast that we have this year. So that's mainly.
In 5G, I think, yes, we're doing something in Brazil, and 5G is going to work. It's a very good question. I hope we can mark up and sell a little bit more at a higher price, the 5G than 4G and 3G, but it's also going to depend a lot on competition and what those -- and customers. And also, 5G is going to work for the fixed wireless assets. So that's what the intention is, and we're going to do that all around Latin America. So that's what we have.
Just as a quick follow-up. In terms of capital allocation priorities, would you also consider a potential network spin-off? And how do you see those network sharing deals happening in Latam?
No. We're not considering a network spin-off at this moment. We haven't considered anything there. And well, I think in some places makes sense to have a shared network, in other ones doesn't make sense. Maybe in the rural area where there's going to be a small traffic make a little bit of sense to make share networks in other places where the growth is, and then you have to add in that capacity doesn't make sense for us. But we are not considering to spin off any part of our network.
Your next question comes from the line of Carlos Legarreta with GBM.
Sorry. To go back to the U.S., please. I just want to understand, this new agreement, was it perhaps a result of perhaps a consequence of the M&A between T-Mobile and Sprint? Or what was the origin of this?
Well, I don't think it's related to something special. I think this reduction in cost is related to the market in the U.S. and that our carriers want us to be more aggressive sometimes in the market to have better plans and to react faster to that. So that's mainly what we have. Maybe I don't know if T-Mobile and Sprint merger will help us to do this. I don't know, but it wasn't related to that, okay? We have been discussing this, and we discuss this every year. So every year, we have been discussing new plans, new rates, and that's something that happens this time.
Okay. That's very clear. And if I may, a follow-up perhaps for Oscar. Just the broadband additions of 64,000 don't seem to be a great number given that the past quarter, you guys have more than 100,000. And Televisa reported over 250,000 quarterly additions. Do you think maybe there's a difference in the churn policy that could explain this such large difference between the numbers between you guys and the competition?
Yes. We changed a little bit the policy of -- on collection in order to liberate network, so you are right.
Your next question comes from the line of Ernesto Gonzalez with Morgan Stanley.
Just one follow-up on the margin expansion. I don't know if you could give us more color on what is the percentage that comes from lower equipment sales, how much comes from cost savings -- and on cost savings. How much should we expect to be structural? And how much from temporary items?
Yes. It's -- I don't have it here. I think what we have been having is good negotiations on CapEx. We have been having also reduction on cost of, let's say, sales reduction of cost of -- marketing reduction of cost of all overall, all the cost and expenses related to the operations. We have increased our cost in the bad debt. So in -- we have been having more on collectibles than what we used to have. So what I don't have, country by country. But as I said, we have a very good effort on reducing costs. So I don't know if that's clear, so -- but I don't have it specifically per country and how much per segment, I don't have it here.
Your next question comes from the line of Valentín Mendoza with Banorte.
Congratulations on the results. I have a couple of them regarding your Mexican operations. The first one has to do if you could give us an update on the launching of the 5G. We've seen some headlines that you're ready to launch in Brazil. But I just want to know what are the plans up- to-date for Mexico. And then I have a follow-up, if I may.
Yes. I think in Mexico, 5G is going to be delayed. I think we're going to have some testings, maybe testings at the end of the year, but we're not going to have 5G this year. I think we're going to have 5G until next year. All our network is working excellent and giving every -- with all this lockdown and using also a lot of people using broadband, wireless broadband through -- in their home is working excellent. So I think 5G is going to be moving to next year. We're going to have some testings at the end of this year, but we're going to move 5G till the next year in Mexico.
My follow-up question has to do with your subs. If you could share with us your thoughts on -- regarding the entrance of 2 MVNOs in Mexico, Televisa and Walmex, with a very aggressive commercial strategy. You just -- you have mentioned also that you're seeing some customers switching to lower-cost plans, and I was wondering if you're planning to address this with probably some plans with all-inclusive like they just launched or what your thoughts on this side?
Well, I think if you have 2 MVNOs, well, it's more competition in the market. But we have 2 MVNOs that you know, what, we have been having 6 MVNOs for the last 2 years. So there's another 2 that are coming in this quarter, but we already have like 6 or 7 MVNOs there. It's more competition, of course, but I think we have the best network. If they are entering with Altán, I think still Altán doesn't have the coverage that you need for a mobile service. Maybe they have a good service in their home. But when you go out and move, then I don't think that's the best service. So we have also very competitive plans. We have a MXN 199 plan, unlimited voice, unlimited data -- sorry, unlimited voice, unlimited social networks, SMS unlimited and with some data. So we are also competitive. And of course, more competition, then we're having more competition and -- but I think we're prepared to compete.
Due to time constraints, this was the last question.
I will now turn the call back over to Mr. Daniel Hajj for final remarks.
I just thank everyone to be -- for being in the call. Thank you.
This concludes today's conference call. You may now disconnect.