América Móvil - Earnings Call - Q2 2025

Transcript

Operator (participant)

Hello everyone. The América Móvil second quarter 2025 conference call and webcast will begin shortly. If you would like to ask a question, please press star followed by one on your telephone keypad. Thank you for your patience. 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. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. Now I will turn the call over to Miss Daniela Lecuona, Head of Investor Relations.

Daniela Lecuona (Head of Investor Relations)

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. Óscar Von Hauske, COO.

Daniel Hajj (CEO)

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

Carlos García Moreno (CFO)

Thank you, Daniel. Good morning, everyone. 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 US 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 disconnecting approximately 500,000 clients each. Colombia added 229,000 subscribers, Argentina 251,000, and Mexico 83,000. Altogether, we gained 1.7 million live subscribers in the quarter between prepaid and postpaid. In the fixed segment, we gained 462,000 broadband accesses, including 231,000 in Mexico, compared to 155,000 the prior quarter, 66,000 in Brazil, and 51,000 in Central America. Voice lines and Pay TV 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 78 million were fixed-line RGUs. Year-over-year, our postpaid base increased 6.8%, which was the fastest-growing by 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 the depreciation over that period of the Mexican peso versus most of the currencies in our region of operations. We're talking about a 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 reports I saw that it was over 12 years, in 12 years, a 7.9% increase. Our revenue expansion was growth-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 the first prepaid ARPU climbing 2.2% in the quarter after posting a 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 network revenue and Pay TV 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 countries 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. 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-on-year quarter, as the depreciation of rights of use associated with tower leases jumped 24.5% on account of the consolidation with Chilean operations 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 six 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. We covered MXN 2.7 billion in labor obligations. Our net debt-to-last-12-months-EBITDA stood at 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-à-vis the US dollar. As I mentioned before, in cash flow terms, net debt actually fell over the quarter by MXN 7.3 billion. That should come to our reduced leverage, not greater leverage. The greater leverage is basically on account of exchange rate movements. Okay.

With that, I will pass the floor back to Daniel, and maybe we can open it for Q&A.

Daniel Hajj (CEO)

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

Operator (participant)

Of course. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. The first question goes to Marcelo Santos of JPMorgan. Marcelo, please go ahead.

Marcelo Santos (Senior Sell-Side Equity Analyst)

Hi, good morning. Thanks for the opportunity for asking questions. I have two. The first question is about the Brazilian mobile environment. If you could comment a bit, you had a strong performance with revenue acceleration. I just wanted to hear your comments on the main drivers of that. 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. Thank you very much.

Daniel Hajj (CEO)

Hi, Marcelo. 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 have 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 increased our sales force, stores, and all the, let's say, all the commercial area. We have been increasing that. We have been doing good plans. Also, our Claro Flex program has been very successful. Overall, we are doing good. Customer care is doing also, we have been a good performance, digitalizing everything. Our NPS has been growing very good. People are thinking of a very good service when we talk about Claro. 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, the market is responding very good. That's what we have been doing. We have also our Nubank. It's still small, but our agreement with Nubank has been good. They are looking for good customers. That's also something that has been helping us. Convergence is important. A lot of our fixed customers have also our postpaid or prepaid or vice versa. Overall, I think we have a very strong performance, and we have been executing very good in Brazil. 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 two different entities: the Comisión Nacional Antimonopolio, the new regulator for antitrust matters, which will be responsible for the imposition and revision of asymmetric regulations to preponderant and dominant agents. The other one will be the Comisión Reguladora de Telecomunicaciones. The new telecommunications regulator will assume the powers and responsibilities of the former IFT. 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 a 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 a spectrum for commercial service. That one's something that we have a lot of questions. All the spectrum is going to be with similar terms. The fourth is the new obligations relating to have the identity of all users of telecommunication services for activating and maintaining activated all the telecom service, including mobile and prepaid. That would be a lot of work to do. That is more or less the changes and the relevant things that we see in the new telecom law.

Marcelo Santos (Senior Sell-Side Equity Analyst)

Perfect. Thank you very much for the comprehensive answers. Just one follow-up. In Brazil, do you have any particular comments 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 (CEO)

No. 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. 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.

Marcelo Santos (Senior Sell-Side Equity Analyst)

Perfect. Thank you very much.

Daniel Hajj (CEO)

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

Marcelo Santos (Senior Sell-Side Equity Analyst)

Thank you.

Daniel Hajj (CEO)

Thank you.

Operator (participant)

The next question goes to Gustavo Farias of UBS. Gustavo, please go ahead.

Gustavo Farias (Associate Director)

Hi, everyone. Thanks for taking my questions. I have two on my end. The first one, if you could comment on the outlook for Mexico ahead, how you're seeing economic activity trending and how the competitive environment is in the country, especially for mobile, but also for broadband. My second one, we're seeing a lower increase in CapEx this quarter. I wonder if the target for the full year stands around MXN 7 billion. Thank you.

Daniel Hajj (CEO)

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. No changes on that. There's a lot of questions about what will be the next year and the next one. 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. I don't think there's going to be any change on the way we are going to invest in the next one or two years. That's something that a lot of people have been asking us. We have been doing a lot of investments in the last years.

That will help us to reduce and maintain what we have been doing this year. That's, I think, good news for all of us. In Mexico, you want to talk there? I don't think there's new 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. Some of them are more aggressive, other ones less aggressive. The competition in the market is the same as last year, this year. There's a lot of competition in the Mexico market. 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.

What we discussed last quarter is that the reduction on revenues on prepaid mostly is because it's related to the economy, the disacceleration of the economy, and it's rebounded a little bit today. We hope that the next quarters will be also better. 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. We're doing good. In the big side, we increased to more than 200,000. It's a very good growth for Telmex. We hope we can sustain and will do good in the next quarters also. We are accelerating also in the PIX side.

Gustavo Farias (Associate Director)

Perfect. Thanks for the answers.

Operator (participant)

The next question goes to Phani Kanumuri of HSBC. Phani, please go ahead.

Phani Kanumuri (Equity Research Analyst)

Yeah. Thanks for taking my questions. The first one is regarding the labor obligations. This first half, you had paid much lower than you had paid last year. Do you expect the outflow to be lower in the labor obligations? The second question is regarding. Yeah. Hello?

Daniel Hajj (CEO)

No, you want Carlos to say something?

Carlos García Moreno (CFO)

Okay. No, I'm just paying attention to your stuff so that you understand. Part of the obligations that we have, basically Telmex's, are paid out of a pension fund, a pension cash. And part of the payments are made out of pocket. This changes throughout the year. Okay. 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. That's what I would say. How much we take out of our fund in a given quarter or how much we pay out of pocket, that can vary during the year, depending on market conditions and the like.

Phani Kanumuri (Equity Research Analyst)

Okay. 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/or Ecuador, Uruguay. Are you seeing a changing competition there?

Do you think the markets are becoming much more rational on a general level?

Daniel Hajj (CEO)

Yes. As markets consolidate, I think there will be more rational promotions, and the market will be more rational. It's what we hope and we expect. I think in the Latin market, with all the sales that Telefónica, but the sales that Telefónica 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, 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. It's different in each market. We hope that in the markets where it's consolidating, it will be more rational, the competition. Yes.

Phani Kanumuri (Equity Research Analyst)

Okay. Thank you. Thank you for that.

Daniel Hajj (CEO)

Thank you.

Operator (participant)

The next question goes to Walter Piecyk of LightShed Partners. Walter, please go ahead.

Walter Piecyk (Partner and TMT Analyst)

Thanks. 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. I am just wondering if that was the reason you were doing better. In addition, I think Bait this week talked about maybe getting to the postpaid market. I am 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. Just if you can comment on what is going on in the market this quarter as it relates to Bait and how you anticipate competing against whatever they are planning to do on postpaid.

Daniel Hajj (CEO)

I think the first thing is for us that we have been improving the prepaid is, as I said, I think the economy is doing a little bit better. As the economy will do better, I think we will increase more. That's the first thing. On Bait, I cannot talk too much about Bait because I don't understand their numbers. If they 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. It's very difficult to compare quarter by quarter with Bait. I think something that I see that is important is when you are a new entrant, when you have nothing, it's easy to start to grow. When you have a base, an important base, then it's important to maintain the base. It's more difficult to grow. It's important to maintain the base.

I think it's maybe what is happening with them. As I told you, very difficult to understand their numbers. I don't know their numbers. It's not clear. In our case, I can tell you that we have been growing. We have a very good network, much better than all the other ones. Coverage also, very good coverage. That economy and all these things are making that our prepaid start to grow again. Yeah. Hello?

Operator (participant)

Thank you, Walter. The next question goes to Vitor Tomita of Goldman Sachs. Vitor, please go ahead.

Vitor Tomita (Equity Research VP)

Hello, and thank you very much for taking our questions. We have two from our side. The first one is on Mexico's broadband market. We saw an acceleration in broadband net adds this quarter, quite a bit of commercial efforts 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 of provisions being reversed? Thank you.

Carlos García Moreno (CFO)

Talking about the Mexico broadband. First, we increase 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. Now we have 91% of the customer base already connected with fiber. We are delivering a very great speed, very great quality. Another thing that has been working for us is to add into the broadband streaming platforms. We have been adding streaming platforms, all the major ones, and it has been very well received in the marketplace. I believe if this continues, we will see good figures in the next quarters.

Daniel Hajj (CEO)

On Colombia, I think there's a case where we lost related to the content. It's not only for us, it's for all the industry. What we booked is 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. Fewer payments than what we booked today, but that case is closed. We lose, it's booked, it's until December. What we already booked 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. We are not going to see a big payment the next months, but it's a case that is closed.

It's something that we cannot reverse, but it's for all the industry, what I can tell you related to the content.

Vitor Tomita (Equity Research VP)

Clear. Thank you very much.

Daniel Hajj (CEO)

Thank you.

Operator (participant)

The next question goes to Valeria Miranda of GBM. Valeria, please go ahead.

Valeria Miranda (Research Analyst)

Yes. Thank you for taking my question. Focusing on Colombia, how are you seeing the dynamics with the consolidation there has been?

Daniel Hajj (CEO)

The consolidation has to be declared before on September. September, I think, is the time where they are going to decide if they approve or they do not approve this consolidation. If you see, consolidations are always good for the markets. Still, they are separate companies, so we do not know what is going to happen. The consolidation, I think, is good for the markets. Let's see what the regulator or the people who have to decide in Colombia are going to decide. Let's see. Let's wait until September.

Valeria Miranda (Research Analyst)

Thank you.

Daniel Hajj (CEO)

Thank you.

Operator (participant)

As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. The next question goes to Lucca Brendim of Bank of America. Lucca, please go ahead.

Lucca Brendim (Equity Research Associate)

Hi, good afternoon. Thank you for taking my questions. I have two 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 Net Anatel data for the past two months, machine-to-machine adds were really strong. Were there any new strategies on this front? You also mentioned Nubank that is already helping with results. Is it all reported in the postpaid? The second question, can you also give us some color on lease expenses? During the quarter, it expanded at a higher rate than the revenues. We wanted to understand how this line should behave going forward. Should it grow in line with revenues? Should it grow at a higher pace, lower pace? Any color on that would be great. Thank you.

Daniel Hajj (CEO)

The last question, I do not understand. The first question is about postpaid and machine-to-machine. I think machine-to-machine is growing also, but I do not think there is a swap compared to the last quarters. I think it is more or less the same. Important, you have to see revenues. Revenues are very important. In postpaid, we are growing. I think I do not have it here, and I do not have the mix on mobile, machine-to-machine. On revenues, net adds, we have 1.4, almost 1.4. I do not know exactly how many are machine-to-machine and how many are there. Our revenue is growing 9%, almost 10% in postpaid, so it is very good. A lot of this growth is on the real postpaid, not machine-to-machine. If you want the numbers, I think Brazil has the numbers. They report the numbers, or Daniela can give you the numbers.

There is not a big difference between what we have been doing the last year, the last quarters, and what we have right now. As I said, we are doing very good in Brazil in postpaid. We are also doing good in prepaid. Prepaid and in PIX also, nobody is asking on PIX. In PIX, nobody is asking on PIX. In PIX, we are starting to grow. We have been two or three quarters growing our revenue in Brazil, so there are very good news also. Increasing, 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. The second question, what will be the second question?

Lucca Brendim (Equity Research Associate)

Yeah. The second question was on the lease expenses, lease. How do you expect this line to grow going forward, if it should grow in line with inflation or more or less than—sorry, with revenues or more or less than revenues? Also, on the first question, if you can comment if Nubank's numbers are reported under the postpaid for AMX?

Daniel Hajj (CEO)

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

Carlos García Moreno (CFO)

Yeah. On the leases, 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 with the dollar, then you should not expect to see significant changes.

Lucca Brendim (Equity Research Associate)

Perfect. Thank you for the answers.

Carlos García Moreno (CFO)

The appreciation is greater than the inflation.

Lucca Brendim (Equity Research Associate)

Okay. Perfect.

Daniel Hajj (CEO)

Thank you.

Operator (participant)

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

Daniel Hajj (CEO)

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

Operator (participant)

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