America Movil SAB de CV

BMV:AMXB

Q2-2025 Earnings Call

[Operator]

Good morning. My name is Nadia, and I'll be your conference operator today. At this time, I would like to welcome everyone to the América Móvil, Second Quarter 2025 Conference Call and Webcast. [Operator Instructions]. Thank you. Now I will the call over to Ms. Daniela Lecuona, Head of Investor Relations.

[Daniela Lecuona, executive]

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

[Daniel Hajj Aboumrad, executive]

Thank you, Daniela. Welcome, everyone. Carlos is going to make a summary of the second quarter results.

[Carlos Jose Garcia Moreno Elizondo, executive]

Thank you, Daniel. Good morning, everyone. Well, the second quarter was characterized by significant uncertainty associated with the tariffs the U.S. government seeks to impose on merchandise imports. While this uncertainty did not have much of an impact on interest rate volatility during the period, the 10-year Treasury notes ended the first quarter at 4.21% and the second quarter at 4.23%, it did weigh on the value of the U.S. dollar, which during the period fell against most currencies in our region of operation, 7% versus the Mexican peso, 5% versus the real, 2.9% versus the Colombian peso, 2.1% versus the Chilean peso and 8.2% versus the euro.

We added 2.9 million postpaid clients with Brazil contributing 1.4 million, followed by Colombia with 199,000 and Mexico with 102,000. On the prepaid platform, we recorded net disconnections of 1.1 million subscribers with each of Brazil, Chile, and Central America is connecting approximately 500,000 clients each. While Colombia added 229,000 subscribers, Argentina, 251,000 and Mexico 83,000. Altogether, we gained 1.7 million wireless subscribers in the quarter between prepaid and postpaid.

In the fixed line segment, we gained 462,000 broadband accesses, including 231,000 in Mexico compared to 155,000 in the prior quarter, 66,000 in Brazil and 51,000 in Central America. Voice lines and PayTV units declined by 164,000 and 61,000, respectively, during the quarter. At the end of June, we had 404 million accesses, of which 137 million were postpaid clients and 71 -- 78 million were fixed line RGUs. Year-over-year, our postpaid base increased 6.8%, was the fastest-growing pay accesses and fixed broadband accesses increased by 4.5%. Those accesses constitute our main drivers of revenue growth.

In Mexican peso terms, our second quarter revenue totaled MXN 234 billion. That's a 13.8% year-on-year increase, which partly reflects depreciation over that period of the Mexican peso versus most of the currencies in our region of operations. We're talking about the second quarter versus the second quarter of 2024. At constant exchange rates, we posted our strongest revenue performance in over a year. I think, in some report I saw that over 12 years -- in 12 years, a 7.9% increase.

Our revenue expansion was broad-based across business lines and across countries with service revenue growth moving up to 7.3%, as can be seen in this slide, and that of equipment revenue to 12.5%. It's important to note that practically all our subsidiaries registered faster growth sequentially, practically all of them. On the mobile platform, postpaid service revenue expanded 9.5%, also the best result in over a year, with prepaid revenue growth recovering to 3.1% from 0.9% in the preceding quarter.

The rebound in prepaid revenue growth was driven by Mexico with prepaid ARPU climbing 2.2% in the quarter after posting a 2.5% -- 2.2% decline in the first quarter. As can be seen in this slide, prepaid ARPU growth mirrors the growth rate of private consumption in the country, which likely bottomed in the first quarter.

On the fixed line platform, corporate networks revenue and PayTV revenue were up 15% and 10.1%, respectively, representing also the best performance in several quarters, with broadband revenue decelerating slightly sequentially to 8.2% from 9.8%. Mexico and Colombia were the country that had the greatest impact on the sequential acceleration of revenue growth as can be seen here in this slide.

EBITDA came in at MXN 92.4 billion. It was up 11.2% in Mexican peso terms and 5.1% at constant exchange rates, improving sequentially from the prior quarter. And I think, again, something to note is that EBITDA margins were nearly flat sequentially across the board, practically in all countries. Margins were flat sequentially. Our operating profit came in at MXN 47 billion. That's a 4% increase from the year earlier quarter as the depreciation of right of use associated with tower leases jumped 24.5% on account of the consolidation of the Chilean operation and certain effects associated with the accounting methodology applicable to Argentina as a hyperinflationary country.

Our integral financial costs were down significantly on account of our having registered MXN 11 billion in foreign exchange gains. This helped us post a net profit of MXN 22.3 billion in the quarter. Our net profit was equivalent to MXN 0.37 per share and $0.38 per ADR. In cash flow terms, our net debt fell by MXN 7.3 billion in the 6 months to June. In that period, our CapEx amounted to MXN 54.9 billion.

Our shareholder distributions to MXN 9.4 billion, and that's including MXN 8.7 billion in share buybacks, and we covered MXN 2.7 billion in labor obligations. Our net debt to last 12 months EBITDA stood at 1.66x (sic) [ 1.56x ], a slight increase over the prior quarter, mostly on account of the appreciation in the second quarter of the Mexican peso and the euro vis-a-vis the U.S. dollar.

As I mentioned before, the -- in cash flow terms, net debt actually fell over the quarter by MXN 7.3 billion. So that should point to a [indiscernible] leverage. The greater leverage is basically on account of exchange rate movement. So with that, I will pass the floor back to Daniel, and maybe we can open it for Q&A.

[Daniel Hajj Aboumrad, executive]

Thank you, Carlos. And let's open the Q&A.

[Operator]

[Operator Instructions] The first question goes to Marcelo Santos of JPMorgan.

[Marcelo Santos, analyst]

I have 2. The first question is about the Brazilian mobile environment. If you could comment a bit, you had a strong performance with revenue acceleration. Just wanted to hear your comments on the main drivers of that. And the second question would be if you could comment a bit on the recently approved regulatory changes in the Mexican telco framework. Just wanted to hear your considerations.

[Daniel Hajj Aboumrad, executive]

Marcelo, well, I think talking about postpaid in Brazil, we're doing very good. We are growing. We have been some quarters growing revenue, doing good in postpaid. All of these things has to be with a very, very strong and good quality network. We have been improving our network and putting more coverage all around Brazil. We have also increasing our sales force, stores and all the commercial area, we have been increasing that.

And we have been doing good plans. Also, our Claro Flex program has been very successful. So all overall, we are doing good. Customer care is doing also -- we have been a good performance, digitalizing everything. And our NPS has been growing very good. People is thinking of a very good service when we talk about Claro. And I think that's what we need to do. It's not only price, it's not only the commercial area, it's not only quality. When you do all the things together, then the market is responding very good.

So that's what we have been doing, and that's what -- we have also Nubank. It's still small, but our agreement with Nubank has been good. and they are looking for good customers, and that's also something that has been helping us. Convergence, it's important. So a lot of our fixed customers has also our postpaid or prepaid or vice versa. So all overall, I think we have a very strong performance, and we have been executing very good in Brazil.

So that's more or less what you could see. I see for the next -- no big changes on the next quarters in Brazil. I think we are doing very good. In the telecom law, what I can tell you is that the new telecommunications law and antitrust law are substantially similar to the original proposal sent by President Sheinbaum to Congress. Under the new law, we will be regulated by 2 different entities. The Comisión Nacional Antimonopolio, the new regulator for antitrust matters, which will be responsible for the imposition and revision of a symmetric regulations to preponderant and dominant agents.

And the other one will be the [indiscernible]. The new telecommuniciones regulator will assume the powers and responsibilities of the former IFT. And if you -- I can tell you some relevant -- most of -- some of the most relevant changes that we see. The first one is increasing the fines regulators may impose -- that's one. Potential discounts on payments for the use of spectrum in exchange for coverage obligations in remote areas and highways. That's very good for us.

The third one, similar terms for public and private concessions for obtaining spectrum for commercial service. That one is something that we have a lot of questions. So all the spectrum is going to be with similar terms. And the fourth is the new obligations relating to have the density of all users of telecommunication services for activating and maintaining activated all the telecom service, including mobile and prepaid. So that would be a lot of work to do. And that's more or less the changes and the relevant things that we see in the new telecom law.

[Marcelo Santos, analyst]

Just one follow-up. In Brazil, do you have any particular comment regarding prepaid? There seems to have been a big shift in trends from first quarter to second quarter. Is there anything extra you could say on prepaid Brazil?

[Daniel Hajj Aboumrad, executive]

No. I think what is happening, I think, in all Brazil, not only for us is that the prepaid is moving to postpaid. So it's helping us a lot on postpaid -- the prepaid, but nothing new. So that's something that we have been working prepaid and postpaid, different strategies, but I think the same results, we are doing good in both.

In prepaid, I don't -- not only in Brazil, Marcelo, but in all the countries, it's very important to see in prepaid revenue growth, not subscribers because subscribers, it's very different. It -- some companies will disconnect after before, we don't know. So what it will be important is to follow the revenue growth in prepaid. And I think in prepaid, we have 10% -- more than 10% growth in Brazil. So very good for us.

[Operator]

The next question goes to Gustavo Farias of UBS.

[Gustavo Farias, analyst]

I have 2 on my end. The first one, if you could comment on the outlook for Mexico, how you're seeing economic activity trending? How is a competitive environment in the country, especially for mobile, but also for broadband? And my second one, we've seen a lower increase in CapEx this quarter. I wonder if the target for the full year stands around MXN 7 billion.

[Daniel Hajj Aboumrad, executive]

Well, the first one is, yes, on CapEx, we are on target. I think it's going to be, I hope, less than MXN 7 billion. It will be like MXN 6.7 billion, MXN 6.8 billion, what we discussed, and that's more or less what we're going to have this year. So no changes on that. There's a lot of questions about what will be the next year and the next one. And the target that we have been having is to have the same percentage CapEx to sales that we have this year to have the next one and the next one. So I don't think there's going to be any change on the way we are going to invest in the next 1 or 2 years.

So that's something that all -- a lot of people have been asking us, and we have been doing a lot of investments in the last years. So that will help us to reduce and maintain what we have been doing this year. So that's, I think, good news for all of us. In Mexico, you want to talk there? I don't think there's different -- when you talk about the market, there's no different commercial or promotions in fixed or in wireless. I think we have the same competitors and some of them are more aggressive, other ones less aggressive. But the competition in the market is the same as last year. This year, there's a lot of competition in the Mexico market.

And I think what we discussed last time and the rebound in revenues is also helped by -- we think that Mexico economy is starting to grow. It's starting to grow a little bit. And what we discussed last quarter is that the reduction on revenues on prepaid mostly is because it's related to the economy, the acceleration of the economy, and it's rebound a little bit today, and we hope that the next quarters will be also better.

So -- the competition is there. We think we have a strong -- as we said, we have a strong network. We have a good revenue and commercial area, good promotions and good distribution, also customer care, and we're doing good. In the Peak side, we increased to more than 200,000. So it's a very good growth for Telmex, and we hope we can sustain and we will do good in the next quarters also. So we are accelerating also in the Peak side.

[Operator]

The next question goes to Phani Kanumuri of HSBC.

[Phani Kumar Kanumuri, analyst]

The first one is regarding the labor obligations. This first half, you had paid much lower than you had paid last year. So do you expect the outflow to be lower in the labor obligations? And second question is regarding -- yes.

[Daniel Hajj Aboumrad, executive]

No, you want Carlos to...

[Carlos Jose Garcia Moreno Elizondo, executive]

On the pension, so that you understand. Part of the obligations we have basically [indiscernible] are paid out of pension funds themselves. Part of the payments are made out of pocket. And this changes throughout the year, okay? So for the full year as a whole, I think you should not expect to see any major changes relative to what we had last year. So that's what I would say, okay? So how much we take pay cut upon in a given quarter, how much we pay out of pocket, that can vary during the year, depending on market conditions and the like.

[Phani Kumar Kanumuri, analyst]

And the second question is regarding the changing competition in different markets. We are seeing a lot of M&A happen in different markets, whether it's Argentina, Colombia and Ecuador, Uruguay. Are you seeing a change in competition there? Do you think the markets are becoming much more rational on a general level?

[Daniel Hajj Aboumrad, executive]

Yes, as markets consolidate, I think will be more rational promotions and the market will be more rational. And well, this is what we hope and we expect. So I think the Latin market with all the sales that the Telefonica -- the sales that Telefonica is having are not for consolidating the markets, okay?

In Argentina, yes, it's consolidating the market. In Colombia, it's consolidating the market. In Peru, it's not -- we're not. It's another one. It's a new entrant, in Uruguay and in Ecuador also, it's a new one. So it's not consolidating. So it's different in each market. So -- but we hope that in the markets where it's consolidating will be more rational competition, yes.

[Operator]

The next question goes to Walter Piecyk of LightShed Partners.

[Walter Piecyk, analyst]

I was hoping you guys could comment a little bit about Bait. I think if I look at this quarter compared to last quarter, in Mexico, particularly in prepaid, you did much better. When we look at the Bait numbers, they did worse. So I'm just wondering if that was the reason you were doing better?

And then in addition, I think Bait this week, talked about maybe getting to the postpaid market. And I'm just curious kind of how you see that kind of playing out. It seems like the model is interesting in terms of them getting usage at grocery stores, I guess, to pay for service. So just if you can comment on what's going on in the market this quarter as it relates to Bait, and how you anticipate competing against whatever they're planning to do on postpaid.

[Daniel Hajj Aboumrad, executive]

Well, I think the first thing is for us that we have been improving the prepaid. This, as I said, I think the economy is doing a little bit better. So as the economy will do better, I think we will increase more. So that's the first thing.

On Bait, I cannot talk too much about Bait because I don't understand their numbers. They said if itel said that they have less subscribers then they said that they have more the ARPUs. I don't know -- I really don't understand the numbers. So it's very difficult to compare quarter-by-quarter with Bait.

What I think, something that I see that is important is when you are a new entrant, it's easy to -- when you have nothing, it's easy to start to grow. But when you have the your base, an important base, then it's important to maintain the base. So it's more difficult to grow. It's important to maintain the base. So I think it's maybe what is happening with them. But as I told you, very difficult to understand their numbers. I don't know their numbers. It's not clear.

And -- but in our case, I can tell you that we have been growing, and it's -- we have a very good network, much better than all the other ones. And coverage, also very good coverage. So that economy and all these things are making that our prepaid start to grow again.

[Operator]

The next question goes to Vitor Tomita of Goldman Sachs.

[Vitor Tomita, analyst]

We have 2 from our side. The first one is in -- on Mexico's broadband market. We saw an acceleration in broadband net adds this quarter, quite a bit of commercial effort in Mexico. Could you give us a bit more color on how you see that acceleration in your broadband volumes in Mexico in the quarter. And on whether this commercial intensity is expected to continue into coming quarters.

Also, my second question would be on the litigation provision you booked in Colombia that affected margins this quarter. Could you give us a little bit more color on that? And particularly on whether the provisioning already assumes a worst-case scenario or whether there is risk of further provisioning depending on how this goes or even if provisions being reversed?

[Carlos Jose Garcia Moreno Elizondo, executive]

Well, talking about the Mexico broadband. First, we increased our sales force in order to be more proactive in the market. Secondly, we reinforce all the retention areas in order to keep the customers with Telmex and now we have 91% of the customer base already connected with fiber. So we are delivering at very great speed, very great quality and another thing that has been working for us is to add into the broadband streaming platform.

So we've been adding streaming platforms, all the major ones and has been very well received in the marketplace. So I believe if this continue, we will see good figures in the next quarters.

[Daniel Hajj Aboumrad, executive]

And on Colombia, I think -- there's a case where we lost related to the content is not only for us, it's for all the industry. And what we booked is this -- we have to pay something right now that is what we book, and then we have some payments to do in the next months until the end of the year.

So less payments than what we book today, but that case is close, we lose. It's booked. It's until December. And what we already put is maybe more than half of what we need to pay and the rest is divided in the next months, and we have to pay every month until the end of the year. So we are not going to see a big payments the next months, but it's a case that is closed. It's something that we cannot reverse, but it's for all the industries, what I can tell you related to the content.

[Operator]

The next question goes to Valeria Miranda of GBM.

[Valeria Miranda, analyst]

Focusing on Colombia, how are you seeing the dynamics with the consolidation there has been?

[Unknown Executive]

Well, the consolidation has to be declared on September. And September, I think it's the time where they are going to decide if they approve or they don't approve this consolidation. And if you see consolidation are always good for the market. Still, they are separate companies. So we don't know what is going to happen. But the consolidation, I think it's good for the market. But let's see. Let's see what the regulator or the people who has to decide in Colombia, is what they are going to decide. Let's see. Let's wait until September.

[Operator]

[Operator Instructions] The next question goes to Lucca Brendim of Bank of America.

[Lucca Brendim, analyst]

I have 2 here. First, following up on Marcelo's question, can you please double-click on postpaid net adds in Brazil and break it down, according to Anatel data for the past 2 months, machine-to-machine net adds were really strong. So were there any new strategies on this front? And also, you mentioned about Nubank that is already helping with results. It is all reported in the postpaid.

And then a second question, can you also give us some color on lease expenses. During the quarter, they expanded at a higher rate than the revenues. So we wanted to understand how this line should behave going forward. Should it grow in line with revenues, should grow at a higher pace, slower pace? Any color on that would be great.

[Daniel Hajj Aboumrad, executive]

The last question, I don't understand. The first question is about postpaid and machine-to-machine. I think machine-to-machine is growing also. But I don't think there's a swap compared to the last quarters. I think it's more or less the same. But important, you have to see revenues.

Revenues are very important. And in postpaid, we are growing I think I don't have it here, and I don't have the mix on mobile machine-to-machine, but on revenues, the net adds, we have 1.4 million, almost 1.4 million, I don't know exactly how many are machine-to-machine and how many are there. But our revenue is growing at 9%, almost 10% in postpaid.

So it's very good. So a lot of this growth is on the real postpaid, not machine to machine. So -- but if you want the numbers, I think Brazil has the numbers. They report -- the numbers -- Daniela can give you the numbers. But there's not a big difference between what we have been doing the last year and the last quarters, but what we have right now.

As I said, we are doing very good in Brazil in postpaid. We are also doing good in prepaid and in fix. Also, nobody is asking on fixed. And in fixed, nobody is asking on fixed, but in fixed, we're starting to grow. We have been 2 or 3 quarters growing our revenue in Brazil. So there are very good news also increasing, putting a little bit -- putting more fiber, changing some subscribers to fiber.

Corporate is also growing, but we need to do much more in corporate. Also, I think we have a good opportunity in BMS in small and medium companies and in corporate also to do, and we are focusing a lot there. So that's the second question, what will be the second question?

[Lucca Brendim, analyst]

Yes. The second question was on the lease expenses, lease. So how do you expect this line to grow going forward? This should grow in line of inflation or more or less than -- sorry, if revenues are more or less than revenues? And also on the first question, if you can comment if Nubank's numbers are reported under the postpaid for AMX?

[Daniel Hajj Aboumrad, executive]

It's a good question. I don't know if they have reported on prepaid or postpaid. Maybe when they are postpaid should be postpaid when they are. They are reporting in our numbers also, but I don't know how will report it, but I can check and Daniela will let you know. The leases...

[Carlos Jose Garcia Moreno Elizondo, executive]

On the leasing, several of the lease agreements adjust by inflation. But in many cases, they are dollar based. So to the extent that the currencies are appreciating vis-a-vis the dollar, then you should not expect to see significant changes.

The appreciation is greater than the inflation.

[Operator]

We have no further questions. I'll hand back to Daniel Hajj for any closing comments.

[Daniel Hajj Aboumrad, executive]

No, I just want to thank everyone for being in the call. I think we have a very good quarter. Thank you all.

[Operator]

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