America Movil SAB de CV (AMOV) Q3 2021 Earnings Call Transcript

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America Movil SAB de CV (AMOV)
Q3 2021 Earnings Call
Oct 20, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning [Technical Issues] and I'll be your conference operator today. At this time, I would like to welcome everyone to the America Movil Third Quarter 2021 Conference Call and Webcast.

[Operator Instructions]

Thank you. Now, I will turn the call over to Ms. Daniela Lecuona, Head of Investor Relations.

Daniela Lecuona -- Head of Investor Relations

Thank you. Good morning, everyone. We're very pleased to join this morning to discuss our third quarter results. We have on the line Mr. Daniel Hajj, Chief Executive Officer; Mr. Carlos Garcia Moreno, Chief Financial; and Mr. Oscar Von Hauske, Chief Operating Officer.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you, Daniela. Thank you everyone for being in the call. Carlos is going to make a summary of the third quarter results.

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

Thank you, Daniel. Good morning, everyone.

During the third quarter supply shortages were prevalent in several industries at a global level, helping inflation data continue to surpass estimates in the U.S. and other countries. The market consensus appeared to shift in favor of the Fed and other monetary authorities moving more rapidly than anticipated to ease the expansion of the monetary base and set the base for interest rates to begin to rise. In this context 10-year interest rates on U.S. Government Notes experienced a marked correction just prior to the end of the quarter, helping strengthen the U.S. dollar versus most currencies, including the euro and several Latin American ones, closing the quarter higher vis-a-vis all of them.

Regarding operations in the third quarter, we added 4.2 million wireless subscribers, of which 2.2 million were postpaid clients, ending September with 302 million subscribers, 7% more than a year before. Roughly half the new postpaid clients came from Brazil with Colombia contributing 313,000 subs, and Peru 262,000. Chile and Austria each contributed 140,000 subscribers -- postpaid subscribers. Mexico led the way in prepaid with 577,000 net adds, followed by Brazil with 307,000 and Argentina 270,000. Colombia, Ecuador, the Central American block and our European operations each obtained around 200,000 new prepaid clients.

On the fixed-line platform, we had PayTV net disconnections in Brazil that more than offset the net gain we had in the other countries. At the end of the quarter, the fixed PayTV accesses were down 5% from a year before, whereas Colombia's were up 6%, and in the rest of our subsidiaries, they were up 3%. For America Movil, there was a 2% reduction overall [Technical Issues]. And for broadband accesses, Argentina added almost 50% year on year, followed by Peru and Colombia with approximately 10% each. In the aggregate, America Movil's broadband accesses increased 3% over a year ago.

Our revenue totaled MXN253 billion in the quarter, that's 2.6% decline in nominal peso terms on account of the appreciation of the Mexican peso versus other currencies in our region relative to year on year. At constant exchange rates, service revenue increased 4.5% year-on-year, twice of our costs and expenses, leading to 7.5% percent increase in EBITDA that totaled MXN87 billion. Peru, Eastern Europe, the Dominican Republic and Mexico where the countries [Indecipherable] was fastest from 15.6% in Peru to 6.4% in Mexico. Central America, Colombia, Puerto Rico and Austria, all delivered growth in the 4% to 5% range.

Mobile service revenue expanded 5.9%, with fixed mobile devices and 5G services playing an increasingly important role in some countries. While fixed-line service revenues increased 1.6%. In both cases, mobile and fixed, it was their best show in several quarters, if we compare for the low second quarter '20 base that affect the yearly comparison in mobile.

In the third quarter, both prepaid and postpaid mobile revenues increased around 6% [Phonetic]. The comp that you see in chart, it has to do with the distortion in the annual comparison mentioned before as prepaid achieved the slowest point in the second quarter 2020. Mexico and Brazil, both increased their mobile service revenue 9%; Peru posting 15.8%. In the Caribbean, Puerto Rico and Dominicana saw revenue increases of 14.5% and 7.7%, respectively. Our European [Technical Issues] recorded nearly 11% growth, the value accretion of Macedonia and Serbia all registering better than 10% increases. At nearly 7%, Austria's revenue growth was buoyed by 5G services and fixed-mobile devices.

On the fixed-line platform, broadband and corporate network revenue expanded 5.6% and 4.6%, respectively. And PayTV revenue fell 5.2%, with clients in Brazil continuing to revise down the cost of their PayTV plans reflecting a greater share of content coming from streaming services as opposed to the traditional multi-channel offerings. On the fixed-line platform revenue growth was noteworthy in Peru, close to 20%; Colombia, 9.8%; and Eastern Europe 9.2%. The Bulgaria 15.5% growth and Belarus and Serbia expanding 20%. Not included in the charts of Argentina, even with high inflation, but it's fixed service revenues has risen almost 9% in real terms, after inflation.

Our EBITDA margin jumped to 34.6% from 33.2% in prior year, and this was our highest EBITDA margin in nine years. Mexico, Central America, the Dominican Republic, Peru, they were all behind this margin expansion, having the first three of them registered 3 percentage point improvements, beginning with Mexico and Peru 2.5%.

We obtained an operating profit of MXN47 billion in the third quarter. It rose 4.7% in peso terms and 10.4% at constant exchange rates in relation to the prior year as depreciation and amortization charges declined 2.5% in peso terms. Our comprehensive financing cost amounted to MXN25.1 billion, it was 12% more than a year before, mostly driven by an MXN11.6 billion foreign exchange loss which resulted from the appreciation of dollar in the quarter that we mentioned at beginning.

Our net interest expense was down 12%. At MXN15 billion -- MXN15.8 billion, our net profit were down 16% from the prior -- from the year-earlier quarter. It was equivalent to MXN0.24 per share and $0.24 per ADR.

In the nine months to September our cash flow helped us cover capital expenditures of MXN91 billion, distribute MXN37 billion to our shareholders by way of dividends and share buybacks. The latter by the way amounted to MXN22 billion. Just to give you a reference, last year by this time of the year, the share buybacks has been about MXN1.5 billion. So, this year we are having MXN22 billion.

We have capital pay down MXN14.5 billion in labor obligations and reduced our net debt by MXN38 billion in cash flow terms. At the end of the quarter, our net debt stood at MXN588 billion or MXN488 billion if we exclude leases. The lag amount was equivalent to 1.55 times, with the EBIT of the last 12 months. This is the EBITDA after leases I'm talking about. So 1.55 times. Net debt excluding leases compared to EBITDA after lease. Relative to December, the debt in the balance sheet was down MXN59 billion.

Okay. So with that, I would like to pass the floor back to Daniel and open for Q&A. Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you, Carlos. We can start with the Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Marcelo Santos from JPMorgan. Marcelo, your line is now open.

Marcelo Santos -- J.P. Morgan -- Analyst

Hi, good morning. Thanks for taking my questions. I have actually two questions on broadband. The first is in Mexican broadband where you put a good number of adds. Could you speak a little bit more on how these adds comprises to the fiber adds. And second -- and still in that question, if you can comment on the Mexican broadband competitive environment?

The second question is on broadband in Brazil, where for the third consecutive quarter, you have been losing subscribers. We saw what you discussed in the Investor Day regarding your network being upgraded and being prepared to offer higher speeds, but how -- what do you expect to happen with the subscriber trends in Brazil? Do you think you'll revert these losses and start growing more of the market out, not losing. Could you please make some comments regarding Brazil broadband? Thank you very much.

Daniel Hajj Aboumrad -- Chief Executive Officer

I'm going to start with Brazil and them I'm going to -- Oscar can give his comments. But on Brazil, what I just want to tell you is that we have been improving and upgrading our network, fixed network and our mobile network. And not only in fiber, we have been growing, fiber, this year we're going to be 2 million -- around 2.5 million to 3 million home passes -- maybe we're going to end with 5 million home passes with fiber. But in our cable network, we upgrade all our cable network and almost every place in Brazil, we can give one gig of capacity. What I can tell you is that, our network -- our cable network is as competitive as fiber in terms of the speed.

And so I wanted to ask Oscar if he can give his comments on our networks in Brazil and what we're doing with the broadband. Oscar, please.

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

Well, Brazil, as you mentioned, we've been investing to getting the fiber closer to the customer, and then we will see that we [Technical Issues] is fully resilient for the market speed needs. Even -- it's a very competitive market and has been changed, I mean the traditional telco has been upgraded its networks. As you know the ISPs start coming outside of a network, but now they are getting some series team of networks. So, it has become a very, very, very competitive market in the speed and in prices.

So what we've been doing is that we have the network ready to deliver the speeds of the market's need. Even we launched as Daniel mentioned 1 gigabit speed across all the network. But we believe the speed of course is a fact, but not only speed, our new proposal has Wi-Fi Mesh included in the product with two hotspot that the customers could do the right architecture to distribute the speed across their houses.

And we have the best NPAs in years. We've been implementing a lot of processes to improve the quality of services in the network and in the services. So, it's a very competitive market. We believe that with these new products, we will get gain in the next quarters. So, I think we are ready with the quality, with the network. We've reshaped the organization in order to be in a more competitive market. So, we believe that we could get new apps in the next quarters.

Daniel Hajj Aboumrad -- Chief Executive Officer

To add a little bit more on Brazil, just we're growing in the broadband revenues in Brazil around 5%. So, we're still growing and I think we're doing good. We're going to talk a little bit more on the PayTV business where we have in Brazil a lot of piracy. But in the broadband business, the competition in Brazil is changing, it's getting more competitive, all this environment, but we feel that we have a very good network, we can compete. We can do bundles and we have a very good network to compete there.

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

And in Mexico, we've reshaped our offering in the market. Even we launched recently 1 gigabit speeds as well in Mexico. We mentioned that the bundles with the streaming providers has been working pretty good. So I think we reshaped as well the commercial organization. We are doing a strong migration for customers from copper to fiber. So, we'll continue to do that and we will adapt to the market conditions to market our products. So I think it was a good quarter and we believe that we could continue the -- do the effort in the next quarters.

Daniel Hajj Aboumrad -- Chief Executive Officer

We are also improving our network distribution at our own stores and focusing...

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

At digital.

Daniel Hajj Aboumrad -- Chief Executive Officer

Our digital platforms and we're focusing more on the sales of all these fiber that we have. So that's more or less what is happening in Mexico.

Marcelo Santos -- J.P. Morgan -- Analyst

Perfect. Very, very comprehensive answers. Thank you very much.

Operator

Our next question comes from Leonardo Olmos from UBS. Leonardo, your line is now open. Your line is now open, Leonardo Olmos.

Daniel Hajj Aboumrad -- Chief Executive Officer

We're not hearing.

Operator

Yes. We will take the next question. So, our next question comes from Fred Mendes from Bank of America. Fred, your line is now open.

Fred Mendes -- Bank of America -- Analyst

Hello, good morning, everyone. Thanks for the call. I had two questions as well. The first one is a follow-up from the answers you guys just mentioned. You mentioned that at broadband it reduced by 5%. I just wondering if there is a big difference between the FTTH and the cable growth. I understand is that, one of the new project you guys are going to is FTTH, so just wondering if there is a big difference there. That will be the first question.

And then the second question, also Brazil. When we look at the mobile segment, ARPU was flat, part of the quarter. Just if you see room for further ARPU increase or we are starting to see a little bit more of a competition. So, is it more about market share instead of ARPU? Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

I think that the mobile market is a little bit different than the broadband market. In Brazil, the mobile market is where the four competitors that we have today and in the broadband market, there is a lot of people putting fiber. So, it's a little different market, but I think in the mobile we're doing very good. We have been gaining, we're growing 8% to 10% revenue per year in mobile, increasing postpaid, doing bundles and I think in the mobile, we're doing good. We have been doing good for the last two years and still doing good for this quarter, and I hope that the next one, from the next year, we can do better.

And in the broadband, as Oscar said, there's lot more competition -- as Oscar mentioned, we're launching today 1 gig of speed in all networks. So, if it's fiber or if it's cable, we don't have any difference. We have been improving our network in Brazil. We have been putting a lot of technology to give 1 gig to any of the customers. So of course, we are growing a little bit more in the new areas where we putting fiber. So, we're growing in fiber because we're putting new areas, new places, new...

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

City.

Daniel Hajj Aboumrad -- Chief Executive Officer

New cities. But we are also, where we have cable, we're also growing with new customers. We're losing some, growing in the other one, so well that's the competition that we have today in Brazil.

I don't know, Oscar, if you want to add something?

Fred Mendes -- Bank of America -- Analyst

Okay. Very clear, Daniel. Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Chelsea Colon from Aegon. Chelsea, your line is now open. Chelsea Colon, your line is now open for your question.

Okay, we will go on to the next question. Our next question comes from Carlos De Legarreta from GBM. Carlos, your line is now open.

Carlos De Legarreta -- GBM Research -- Analyst

Hi. Thank you. Good morning. My question is regarding handset sales, particularly in Mexico and Brazil, we saw double-digit decline year-over-year. I'm just wondering if there is -- if this is due to a [Indecipherable] comparison base or perhaps this is affected by the semiconductor shortage. Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Well, if we compare third quarter last year and this -- third quarter of this year, I think in third quarter of last year, we started to sell a lot. So, once we don't do in the second quarter, I think, third one -- people as pandemic and COVID lockdowns start to open, then people start to buy. So it's a difficult comparison. But all overall, I think in all the world, in all Latin America and includes Mexico and Brazil, there is lack of handsets, maybe it's for chips, but also for other components, logistics and -- But there is no doubt that we are suffering a little bit of lack of handsets right now.

Carlos De Legarreta -- GBM Research -- Analyst

Okay. Thank you. For the follow-up, Daniel, if you could talk about the wireless environment in Mexico, I mean, obviously, you have very good results with the ARPU at that level and that growth, it seems encouraging. So, if you could give us more details that will be great. Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Well, I think the network that we have in Mexico is superior to all the other networks that we have here, and people is moving to the best network. So, we're putting a lot big effort in quality, in coverage, in 4.5G speed and that's what people is choosing. So, that's really what is happening.

In Mexico, we have competition, we have two competitors. We are already -- we do everything to be ready for 5G, so we still don't know exactly when we're going to launch 5G, but we are ready to launch also 5G in Mexico. So, we have a good network, plus also very important is we have a very good customer experience. We have the NPS in Mexico, good, high, good distribution networks. We have 400 more or less own stores, plus the retails, plus distributors. So, we are really focused on all of those things. So, Mexico, we feel that we are strong in -- also in the distribution of all our products.

Carlos De Legarreta -- GBM Research -- Analyst

Thank you, Daniel.

Operator

Our next question comes from Gilberto Garcia from Barclays. Gilberto, your line is now open.

Gilberto Garcia -- Barclays -- Analyst

Hello. Good morning, and thank you for the call. I had a follow-up question on the Mexican result, very strong margins. Can you comment if there were any particular drivers for the improvement? And related to that, just to confirm, with the bundle from OTT providers, do you recognize as revenue only your commission from these sales?

And on wireless another follow-up. The performance in postpaid was in contrast to the strong performance in prepaid. Was these related to the lack of handsets? Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Well, I don't know if that being wireless will be totally to the lack of handsets, it could be some the lack of handset, but what we're seeing is that people in Mexico does not want to get a compromising postpaid, but they are moving some of them to prepaid. And we feel also comfortable, they are recharging often and the ARPU is doing well. So, I still think that in Mexico people is a little bit worried about the pandemic and maybe they don't want to have like a contract for 18 months with a rent or something like that. But they are moving to the prepaid and we're doing good. So, that's what we're seeing.

What I understand is that now -- it's only the commission that we're putting on bundles with the OTTs. We're only putting the commission, we're not putting all the revenues.

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

Yeah. That's right.

Gilberto Garcia -- Barclays -- Analyst

Okay. Thank you very much.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you.

Operator

We now have a question from Chelsea Colon from Aegon. Chelsea, your line is now open.

Chelsea Colon -- Aegon -- Analyst

Hi, and thanks for taking the question. I was wondering if you could just put a little more context around your recent M&A announcements in both Panama and Chile. I'm just wondering, from a strategic perspective, what your thoughts were behind on one hand selling the Panamanian business, but then entering into a JV and keeping your involvement in Chile. What makes Chile a more attractive environment to you than Panama in the longer-term?

Daniel Hajj Aboumrad -- Chief Executive Officer

In Panama, I think we were the third competitor, but in the last year, our competition [Speech Overlap] consolidated the cable company and then Liberty also buy and they are strong in mobile and in fixed. So we feel the country -- it's a very important country, but whereas the population are 3 million, 4 million pops. So it's not very big country, so there is not that big space for us to grow. And that's really the reason why we decide to sell the company in Panama. So that is going to take us a lot of years and a lot of money to improve and gain market share and put a fixed...

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

Network.

Daniel Hajj Aboumrad -- Chief Executive Officer

Network. So, that's really the rational and the reason why we decided.

In the other side, Chile is a much bigger country. We're very interested to be in Chile and we are strong in mobile, we're strong in corporate, Liberty is strong in TV, and Broadband, I think, the merge make a lot of sense. They put us in a good position in the market as the size has the other two. So that's the rationale. We are interested in Chile, make a lot of sense, the synergies are going to be very good. And that's the rationale why we do the 50-50 joint venture in Chile.

Chelsea Colon -- Aegon -- Analyst

And do you have any concern over regulatory approvals in Chile?

Daniel Hajj Aboumrad -- Chief Executive Officer

No. As I said, we are going to be the size as the other two. We're not going to be bigger than the other ones. And no, I think we need to give all the information to the authorities there. We already submit that information, and I think there is not going to be any problem.

Chelsea Colon -- Aegon -- Analyst

Great. Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question comes from Leonardo Olmos from UBS. Leonardo, your line is now open.

Leonardo Olmos -- UBS -- Analyst

Hello. Can you hear me now?

Daniel Hajj Aboumrad -- Chief Executive Officer

Yes.

Operator

Yes.

Leonardo Olmos -- UBS -- Analyst

Hello?

Daniel Hajj Aboumrad -- Chief Executive Officer

Yes. Good.

Leonardo Olmos -- UBS -- Analyst

Okay. A quick one, everyone. I want to discuss about the broad financial position that you have. If you could discuss the margin behind the breakdown of buybacks and cash dividends. What had been the logic from this first nine months? And what's going to be the logic in the future? Thank you.

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

Hello, Leonardo. Well, we've been providing an ordinary dividend or goals every year. Sometimes it's somewhere between 5% and 10% for the year. What we have done consistently over the years is that we have distributed whatever excess cash we had by way of share buybacks, so, as to remain at the highest leverage target that we wanted. In the last five years, we were higher than our leverage target and -- that we didn't really have excess cash. We had to reduce our debt.

But now, we are in a position that you have seen in the report where our net debt has come down to 1 -- 1.55 times. And that means that we have now the capacity to already, not even the end of the year, we have still not completed the transaction of the sale of TracFone. We have also the spin-off of the towers ahead of us. So, these two transactions alone would represent a further deleveraging of about $8 billion between the two.

So, we are in a comfortable position -- and to do our share buybacks. So that's -- I think that we would commit going forward that we would remain in the leverage target that we mentioned in our Investor Day, two weeks ago, which is to remain in a band of between 1.2 and 1.35 net debt to EBITDA. And basically, whatever excess cash we have, it is not required for M&A forever, then it should be available for distributions.

Leonardo Olmos -- UBS -- Analyst

Okay. That is clear. Thank you very much and sorry for my connection problems early. Thank you. Have a good day.

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

Thank you, Leornardo.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you.

Operator

We now have a question from Walter Piecyk from Lightshed Partners. Walter, please go ahead. Walter, your line is now open. Okay. Our next question, we now have a follow-up question from Marcelo Santos from JPMorgan. Marcelo, your line is now open.

Marcelo Santos -- J.P. Morgan -- Analyst

Hi, thanks for the follow-up. I just wonder if you could comment a bit on the PayTV behavior that you mentioned in the release that is taking place in Brazil, I believe, people downgrading their plans as they migrate more to streaming. Is this something that you see more on net services or in DTH? And are you seeing this behavior in other countries besides Brazil?

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

Yeah. Well, as Daniel mentioned, the trend of the, let's say, traditional PayTV has been moving to our streaming and that's why we launched in Brazil, Claro Box, that is -- we believe that is a trend that includes the traditional TV and on-demand TV in a simple set-top box, It has been very well accepted in the market but not enough to settle the decline of the legacy.

And this is affecting satellite and cable, if it was your question. Well, another one is what Daniel mentioned around the piracy in Brazil. We've been seeing that since we operators started to launch IPTV, it has opened up the possibility to increase the piracy in a level that we've been seeing that three or four times that we have two years ago. So, big part of the market is using this kind of services in Brazil.

And it's very sophisticated operation. They hack all the content through internet or different sources and they deliver to the customer through a set-top box or through a smart TV. And they have the way to collection with PayPal and other sources. So, that's what we've been seeing in the PayTV market.

If you see the decline in the PayTV market in total, year-over- year it has declined around 8% in subscribers and we are declining as well 8% subscribers. So that's what I could tell you.

Marcelo Santos -- J.P. Morgan -- Analyst

Just a follow-up on this question. Is this piracy issue only is restricted to Brazil or is something you're seeing across other countries?

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

Well, mainly in Brazil. We are seeing something in Central America, but I think it's lot of the place, where in Brazil, it's is very, very important.

Marcelo Santos -- J.P. Morgan -- Analyst

Got it. Thank you very much.

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

We are saying -- what we have said in the report is that we are indeed seeing that in some plans where we are providing certain bundles with our streaming services. Those are probably not including the same number of multi-channels that they have in the previous offers, OK? So those are -- there is some [Technical Issues] in that regard. We have some people basically reducing the content that they are having from the established channels that we have and moving more toward the type of bundles that we have in -- sometimes in [Indecipherable] with premium.

Marcelo Santos -- J.P. Morgan -- Analyst

Understood. Thank you very much.

Operator

Your next question comes from Walter Piecyk from Lightshed Partners. Walter, please go ahead.

Walter P. Piecyk Jr. -- Lightshed Partners -- Analyst

Thanks. Sorry about that earlier. Is the TracFone transaction still expected to close by year-end or is there some additional SEC items there?

Daniel Hajj Aboumrad -- Chief Executive Officer

No. We think we can close the TracFone transaction before the year-end. So, we are in target, and I hope we can do it before year-end. Yes, we are OK with that.

Walter P. Piecyk Jr. -- Lightshed Partners -- Analyst

Thanks. And Daniel, is there other -- what is -- what kind of going on that business? I think a lot of times when companies are bought or sold, maybe there is some distractions at the company. And at the same time, in the U.S., I think it sounds like MVNO rates from the operators are more aggressive, meaning at like AT&T is offering better rates to get DISH or may be Verizon's offering aggressive rates.

So I'm just curious, if there's been changes in the market, because I also noticed that Straight Talk lost subs this quarter, that's not typical. I don't think I can't recall the last time if ever that Straight Talk lost subs. So, I wonder if you could give us any -- I know you're selling this assets, so I apologize it's not something that you're going to deal with, but if you can give us any color on what you see happening in that business in the prepaid market in U.S., I'd appreciate it.

Daniel Hajj Aboumrad -- Chief Executive Officer

I think the only color that I can give you is that in TracFone in a lot of the other countries, we are seeing a little bit of problem of handsets. So, we don't have enough handsets to sell there. There is handsets but remember that the handsets that we're selling in the prepaid business are lower-end handsets. So, really the problem in the handset business is more on the low-end or mid-end segment of prices on those handsets than in the high-end prices. So that's what we're facing a little bit in TracFone. And not only in TracFone, in all the other countries also. So, in the low- and mid-end, we're facing some challenges to have enough handsets to sell.

Walter P. Piecyk Jr. -- Lightshed Partners -- Analyst

Okay. Great. And then can I just -- a question for Carlos. The Investor Day was helpful and these new targets for the debt leverage, 1.2 to 1.35, your business is very diversified, it's recurring revenue, you're generating very good free cash flow. I don't think there is FX cycle, you've given very good commentary on kind of M&A opportunity that lack thereof. Why with this low interest rate environment would you take leverage that low? Why not set your leverage targets at 1.5 or 2 or even 2.5, which investment grade companies can sustain, and you could still borrow with very low rate and then use that excess cash to buy stock back?

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

Walter, we have a -- always had more of a conservative financial policy as you are well aware of. I think that 1.5, today we have part of our -- but we will consider to be cash, basically market our securities into form of our KPN stock and we would eventually have Verizon stock. So, I think that is not exactly [Technical Issues] don't provide a nice return. I think it's more prudent for us at this stage at least until such space are not monetized to remain below the 1.5 that we had set for ourselves before.

On the other hand, most of our operation you know it's in Latin America and we know that in certain cycles, particularly when there is increases in interest rates in both globally, that can lead to some kind of financial volatility. But, we think its [Technical Issues] to navigate, like a lots of debt whenever we are expecting that there would be some financial -- might be financial turbulence. So, we believe that there is clear period ahead of us where there will be increases in interest rate. And I think that the way we have defined it for ourselves, we are going to be able to sail through this turmoil in a very comfortable fashion and in a very secured fashion.

Walter P. Piecyk Jr. -- Lightshed Partners -- Analyst

Thank you, Carlos. Appreciate that color.

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

Thank you, Walter. Thanks.

Operator

[Operator Instructions] Our next question comes from Alejandro Gallostra from BBVA. Alejandro, your line is now open.

Alejandro Gallostra -- BBVA Latam Research -- Analyst

Hi. Good morning, Daniel and Carlos and Oscar. I have a question regarding margins. You have been posting a great performance here for several quarters in most of the situations. And I want to know how far you think you can go from here, and what will be the main drivers? And also would like to know, do you think that if the telecom industry overall, internationally speaking, do you think if the telecom industry is poised to reach new threshold in terms of [Indecipherable]. Thank you.

Daniel Hajj Aboumrad -- Chief Executive Officer

Well, as you said, I think what we have been doing that for some years, but last year with these lockdown, we decided to increase very hard, all the digitalization of the Company and that is helping us to cost control. And we are really focusing on being very efficient and focusing on cost control.

Also as we said in our Investor Day, we still see a lot of growth in the region. We think that we can grow with more broadband more house connected, more 5G -- ARPU in 5G, increase wireless -- fixed wireless, broadband fixed wireless. And I think it's important, and I think in the region still we have room to grow.

We cannot talk all overall because I think in different countries, we're going to face different things. Now, by an example, a little bit in Brazil we're facing some inflation right now and we don't know exactly we're going to -- how we're going to increase and when we can increase prices because of the competition. But still some growth in Brazil with more broadband that we are putting.

So, in Colombia we are facing a new competition also there. So, all overall in different countries we're facing different challenges. But what I can tell you is that, in America Movil, we have been doing all the investments, the last few years to be asset of our competition, and to have the best net good distribution channels, good digital platforms, very strong in corporate, and good alliances in the corporate to sell more IT products. So, that will give us more market, that will give us more revenue, and I hope that will be more profit. So that's what I can tell you.

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

One thing that is interesting that if I might add to what Daniel has said is that, we are now having practically all of the operations, certainly there is only one exception. They are all delivering growth in both the mobile and the digital platform. They are all delivering growth on both platforms. And this was not the case in the past. In the past, it was either, we were growing mobile, but not on [Technical Issues] platforms. Today we are practically every quarter growing on both platform and that is tremendously helpful from the point of view of EBITDA margin expansion.

Alejandro Gallostra -- BBVA Latam Research -- Analyst

Great. Thank you so much.

Daniel Hajj Aboumrad -- Chief Executive Officer

Thank you.

Operator

We currently have no further questions. I will now hand you back over to Ms. Daniel Hajj, for any final remarks.

Daniel Hajj Aboumrad -- Chief Executive Officer

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

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Daniela Lecuona -- Head of Investor Relations

Daniel Hajj Aboumrad -- Chief Executive Officer

Carlos Garcia Moreno Elizondo -- Chief Financial Officer

Oscar Von Hauske Solis -- Chief Fixed-line Operations Officer

Marcelo Santos -- J.P. Morgan -- Analyst

Fred Mendes -- Bank of America -- Analyst

Carlos De Legarreta -- GBM Research -- Analyst

Gilberto Garcia -- Barclays -- Analyst

Chelsea Colon -- Aegon -- Analyst

Leonardo Olmos -- UBS -- Analyst

Walter P. Piecyk Jr. -- Lightshed Partners -- Analyst

Alejandro Gallostra -- BBVA Latam Research -- Analyst

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