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Good morning and welcome to Mega Cable's second quarter 2020 earnings conference call. With us this morning from Mega Cable, we have Mr. Enrique Yamuni, CEO, Mr. Raymundo Fernandez, Deputy CEO, and Mr. Luis Zetter, CFO. Let me remind you that the information discussed in today's earnings call may include forward-looking statements on the company's future financial performance and prospects, which are subject to risk and uncertainties. Megacable undertakes no obligation to update or revise any forward-looking statement. I will now turn the call over to Mr. Enrique Munez. Sir, you may begin.

Good morning, everyone, and thank you for joining us today. The second quarter of 2020 was marked by the challenges arising from the measures deployed to contain the COVID-19 spread, highlighting the significant economic slowdown, reflected in the loss of more than 900,000 formal jobs as of June 30. According to that data provided by Instituto Mexicano del Seguro Social, 12 million including informal jobs as indicated by . In the four months in which we have experienced the pandemic, our everyday life has suffered significant and sudden changes which we initially thought would be a lot more gradual. In this sense, it is important to highlight the resilience of the telecom sector, which is considered essential as connectivity has become a fundamental component of our daily lives, whether it is for educational, professional, or recreational purposes, mainly in the current situation where people are encouraged to stay at home and performing remotely. This, together with the timely investments in incremental capacity that we have been carrying out of several quarters, which is necessary to support the increased demand for bandwidth, contributed to our quarterly operations dynamism, hosting a resilient performance amid the current cycle. Turning to our quarterly results, total subscribers went up in the three services of the massive segment. supported by our strategy towards the sale of triple plate bundles. In the same line, unique subscribers continued with a strong pace, resulting in higher IGUs per unique subscriber rate. The previously mentioned coupled with the contribution from additional services supported a sustained growth in the R2 on our annual basis. Revenues for the quarter increased in its annual comparison as the income obtained from massive market segments and additional services offset the impact recorded in the corporate segment as these presented some projects post-spotments. Following a tight expense control and cost efficiencies implemented, we were able to increase the profitability metrics when compared to last year. as reflected by a higher consolidated EBITDA margin for the quarter and for the first half of 2020, even in this challenging environment. Regarding the special projects that we have been carrying out, we moved forward with the Network Evolution Project, a fund migration endeavor that will directly influence our competitiveness in near future and ensure the successful continuity of the business as we maximize the value of investment made in past years. We continue to prioritize the most important projects of the company, carefully analyzing those that are considered essential and postponing or modifying those whose contribution to productivity is not essential at this time. I would like to take the opportunity to remind you that the incorporation of the NVNO service in our offer will bring forth a valuable opportunity to strengthen the commercialization of Guadalupe Play packages as we have consolidated a highly competitive offer with disruptive breaks that is pretty much aligned to the arising consumption trends. Likewise, I would like to highlight the achievement of a significant milestone as our submarine cable is already 100% active, allowing us this period to generate important savings as we will no longer have to disburse excessive connection fees in benefits of our developed line. Enhance our service portfolio to the offering of more megabytes at attractive prices and diversify our revenue mix as other carriers would probably access our Sumo and Cable towards the payments of wholesale rates. In addition, as anticipated at the end of May, we settled a dividend payment for 1.5 billion pesos reaffirming our commitment to deliver value to our investors, even at the face of the prevailing environment. Nevertheless, it is worth noting that our liquidity remains in healthy levels, allowing us to build on solid grounds towards the upcoming periods. In this pandemic, our main priority continues to be the safety of our collaborators, clients, and their families. We're taking all necessary measures to keep our workplaces sanitized, as well as providing materials and personal protective equipment according to the established protocols. Now, I will hand over the call to Roy Mendez.

Thank you, and good morning. Thank you, Enrique, and good morning, everyone. As Enrique just mentioned, during the second quarter, new challenges emerged from the health contingency. In the telecom sector, new opportunities also appeared, such as the surge of internet demand, as well as the need for paid TV entertainment from both current and new subscribers. In this sense, despite the considerable rise in bandwidth demand, our network performed fast and reliable, reflecting the company's technology edge and high quality of our service, results of the investments we have done in the last period. In this context, Megacable recorded net addition of 206,000 subscribers in the Internet segment over the last 12 months, of which 83,000 were added this quarter. That's probably 3.2 million of active subscribers for this service. As the demand for higher speeds continues to rise, the company is ready to take on this challenge with the state-of-the-art infrastructure. As of June this year, the percentage of subscribers with the speeds of 50 megs or more have doubled when compared to a year ago, and our network has absorbed this volume without a struggle. In relation to the video segment, as of June 2020, we reached close to 3.3 million subscribers, recording net annual and sequential additions of 44,000 and 28,000 subscribers respectively. XView was able to beat the 1 million subscriber mark as of quarter end, recording 455,000 net additions when compared to the same quarter 2019, and 202,000 sequentially as a result of a very successful marketing campaign. We are preparing for the launch of the next generation of this platform, which will undoubtedly improve the user experience and drive growth in this segment. Likewise, our HD service reported 167,000 net additions in a sequential basis, already surpassing the 1.2 million subscribers. Meanwhile, the telephony segment posted 2.3 million subscribers at quarter end, rising 280,000 subscribers on an annual basis and 82,000 quarter over quarter. On the MVNO side, Our differentiated offer and extensive marketing approach, which geared towards the sale of attractive bundles rather than the individual services, enabled us to reach 44,000 lines at the end of the second quarter, leaving us in a good position to reach the first milestone we established. All in all, unique subscriber rose to more than 3.7 million at quarter end, representing an annual increase of 2%. In addition, REUs grew 7% in an annual basis, totaling 8.8 million. REUs per unique subscriber was 2.37 as of quarter end. It is important to know that a more selective sales strategy and higher quality services, coupled with a new way of watching TV, such as XView, have positively contributed to boost customers' loyalty as attested in the stability of the short rate of the three mass segment services, even at the face of COVID-19. Turning to the ARPU, ARPU per unique subscriber went from 396.5 pesos in the second quarter of 2019 to 405.7 pesos this period, a 2% annual increase driven by our triple-plate package approach reflected in a higher number of REUs per subscriber, the pricing upward adjustment carried out at the end of 2019, and the contribution from additional service. On a sequential basis, output per unique subscriber decreased due to the implementation of promotional rates, contingency support packages, REU growth, and a comparison effect given that there was no rate increase during this quarter, as we usually do every year. All the above mentioned, once normalized, will help us pick up the growth trend we had from previous quarter. Regarding individual ARPU, we recorded mixed results, as internet and video remain at the same level of the second quarter 2019, while telephony decreased 4%, following the offer of cheaper packages and retention strategy, since certain clients have experienced the effect of the harsh economic environment. In relation to corporate services, Revenue decreased 9% in an annual basis as some clients decided to delay decisions of projects given their uncertainty environment. In this sense, OLA and MetroCardio recorded a decrease when compared to the second quarter of last year in the amount of 24% and 13% respectively. This is primarily explained by the delay in renewal of services and support contracts of OLA in the government segment, which have a major weight in revenues. Additionally, There has been a delay since last year in the implementation of new projects without the backlog, given the instability in demand. Now, regarding MetroCarrie, the main impact came by the cancellation of the Mexico Conectado project, as well as delayed investment decisions, mainly in the infrastructure sector. In the other hand, MCN grew 9% during the quarter, reflecting a more stable customer base with a higher component of recurrent revenues. Before concluding, our commitment to remain at the forefront continues, as we have already reported a good progress on the development of our GPON network evolution project, as well as the second generation of XView. This later will allow us to further strengthen our market position and differentiate us from the competition. As Enrique said, we recently launched our Submarine Cable project, an important milestone that we have been carefully planning and executing for approximately two years. This project is already generating additional revenue, cost savings, and subscribers growth for the company. Additionally, it will become a launching pad for metro carriers in this region, benefiting the carrier enterprise and mass segments. With this, I conclude my remarks. Now I would like to hand the call over to Luis, who will shed broader color on financial results.

Thank you, Raimundo. Good morning and welcome, everyone. Consolidated revenues for the second quarter totaled close to 5.5 billion pesos, which represented an increase of 2% when compared to the same quarter of 2019, excluding the non-recurrent revenue recorded in the same period of last year. At high revenues from the massive segment, we're able to offset the corporate telecom performance. Second quarter massive segment revenues posted a 5% climb when compared to the same period of 2019, following a 7% growth in broadband, 2% in video, and 11% in telephony, which were all supported by a wider subscriber base. Corporate telecom revenues scored 9% lower revenues comparing year over year, as MCM growth was not able to offset the lower dynamism in Metro Carrier and NOLA, as Raymundo has explained. On a revenue breakdown-wise, 82% of total revenues came from the mass market, while the remaining 18% came from the corporate telecom. Cost of services for the quarter remained almost flat versus that of 2019. Cable operation costs increased 5% mainly due to dollar depreciation, while the enterprise side equipment costs were reduced as a result of lower sales in OLA when compared to the same quarter of last year. SG&A were basically flat to the second quarter of 2019. Consequently, consolidated EBITDA rose to $2.7 billion, a slight increase of 1% per serving a solid margin of 49.8% EBITDA for cable operations, total $2.5 billion, with a growing margin of 51.2%, excluding the non-recurrent items recorded in the second quarter of 2019, of course. Consolidated EBITDA grew 4% when compared to the same quarter of last year, while EBITDA for cable operations increased 3%. Despite these positive dynamics, net profit for the quarter reached $1 billion and a 15% increase when compared to the second quarter of 2019. This is primarily explained by the non-cash effect of a higher depreciation and amortization that followed the investment deployed over the last 12 months. Together with a higher net comprehensive financing results, given the effect of the Mexican PESA fluctuation against the U.S. dollar, the company position in this currency created a financial loss opposite to the effect in the first quarter of the year, which represented a decent gain. At quarter end, Companies net debt stood at 5.4 billion pesos, increasing 1.7 billion pesos on a sequential basis, partially reflecting the lower level of cash available, given the fulfillment of certain commitments we had with our suppliers, as agreed since the first quarter of the year, and the dividend payment conducted this May. It is also relevant to mention that during the quarter, we carried out the amortization of roughly 350 million pesos. The sum of the above mentioned led to a net debt to EBITDA ratio of 0.51 times and an interest coverage ratio of 22.7 times. Still very convenient figures. In terms of capex, during the second quarter, the company invested 1.3 billion pesos, equivalent to 24.5% of the quarterly revenues. This investment level does not yet reflect a large amount of the network evolution project vital to our future operations, which is expected to pick up in the second half of the year. To conclude, before the prevailing state of the COVID-19 propagation curve in Mexico and surrounding economic uncertainty, we do not have enough elements to accurately measure the impact of the pandemic towards the second half of the year. And consequently, we are not in position to provide any guidance at the moment. Nevertheless, as you can see in our quarterly results, we are capitalizing on stable demand, the internet services brought by the pandemic, thus reaffirming the solid underlying fundamentals of our operations and business model. With this, I conclude my regard. Now, let's turn back the call to open the line for Q&A.

And at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions. Our first question is from Luis Yates from

Krampus, please proceed with your question.

Thank you. Hi, guys. Thanks for taking my questions. I hope you're doing well. Two questions on my side. The first one is on ARPUs and the sequential decline that you explained. How should we think about it going forward? Should we expect another decline sequentially as people perhaps trade down to more ARPUs economic packages or most of the impact already happened. And perhaps we could see a reversal, especially because part of the impact had to do with the contingency package that you put in place that probably no longer is there. And I guess a related question to that is, you know, whether you're planning any price increases to compensate for that in the second half of the year. So that would be my first question about ARPUs. Then the second one is on the corporate segment. You mentioned on the press release that, you know, in June you started to see some early signs of recovery, not enough to compensate for the quarter. But I was just wondering going forward whether those encouraging trends that you saw in June continue into the third quarter and whether that means, that sort of recovery means that you're actually growing now on a year-over-year basis or just declining less than what we saw. Thank you.

Sure, Rhys. This is Raimundo. Thank you for both questions, really good questions. Regarding the ARPUs, yeah, we feel that on a sequential basis, we can reverse the trend by doing everything you are saying. Let me explain to you that during the contingency period of second quarter 2020, we could not do the normal rate increase that we have for the period. as well as all the subscribers that have a promotional that were part of the growth tax for the first quarter and some of the fourth quarter. Normally, after you have three or six months of promotion, we take them to the regular price that they have. We felt that it was not the right thing to do for our subscribers during the most important part of the pandemic. to do the rates increase or to do the promotional update of those rates increase. So we have an effect of lower output for those new subscribers that we have in the past months that we have. Besides that, we have, on a very small percentage, we also have some of the contingency packages where we lower the... the ARPU, or the price that they were paying, is very low. Really, our subscribers felt that what they really needed is to do an effort and try to pay for that. So we managed to have a low churn by also providing some contingency packages. But all of our subscribers paid. So what you see there in terms of churn, which is low, is because The rest of the subscribers that remained with us, they all were paying. So all those makes, they finished by third quarter and fourth quarter. So we do have, coming into the future, rate increase. We are taking our subscribers that have the promotion that did not have the effect of going to the regular rate they have to pay, which they did in 2019. they are taking back, and we are updating our subscribers with contingency packages to the regular packages on the third quarter. So I would say ARPUS will do a reverse on the trends that you have. Of course, like Luis was saying in his speech, we don't have a magic ball to tell you what's coming into the future. You know, the economic of the pandemic is there, but it's been compensated by the need of our product, both entertainment and product. So it looks good in our opinion, management opinion, but there's always some uncertainty related to the future coming in 2020. Regarding second questions about the corporate, Yes, we do see June, at the end of the quarter, it was a better end of the quarter on that part. It was hard to do the sale of the presentation of our products to new subscribers during the main peak of the pandemic, which was April and May. June was way better. But also, I want to explain what happened with the corporate. Corporate, Metro Carrier, If you see the results for the second quarter, they were not that bad or below what we were having in the first quarter. What we did have was a terrific second quarter 2019, where we had the effects of government projects, like the one that we were saying in Mexico Conectado. Once we finished that and we take that away from from our results, it seems like second quarter metro credit still remains at around $460 million, $465 million for the third quarter, which is pretty much what we have in the first quarter on that part. OLA is on a different part because OLA depends more on new projects to continue to increase revenues in that part. And those new projects, they were postponed, like Enrique was saying on that part, both in the corporate segment and government segment. And we expect that to pick up in third quarter and fourth quarter as well. But yeah, it hit mostly on the corporate segment. What we got was hit by OLA. You can see that MCM pretty much remain in the same levels of revenues that they were having in the first quarter. They even increased a little bit to the first quarter. So it's really focused on projects, very specific and special projects that depend on OLA more than Metro Carrier and MCM. So we are confident that this will overcome for the second half of 2020 as well on that part. We did not have any big government projects on a state-related, we did not have that part. We expect to pick up in the majority of the states or federal for the second half that relate to OLA. So I guess that answers the two questions, but open to any remarks, Luis.

Great. Thanks a lot, Raimundo, for the call. And one follow-up, if I may, given the strength you've seen on the subscriber growth, both internet, video, and phone, I was wondering if you could share with us whether so far in the third quarter you continue to see that resiliency on the mass market or whether you started to feel the negative impact from the lower economic activity that we're seeing throughout the country.

Well, as we said, we cannot tell you going to the future, but yes, we can tell you that we do not feel so far any impact. What we feel is that the product, the network that we have has managed the increase of bandwidth and entertainment. We are very, very happy with the one million subscribers of the XView. and going forward, we're very happy of the advance that we have in the G-PON evolution project and the XBO2 platform. So the answer is we haven't seen so far any impact or anything to worry about the market. On the other hand, we're very happy to what we see in all our markets going forward.

Great, thanks a lot for your answers, and stay healthy, guys. Thank you. Our next question is from Arturo Alanga from Itaú.

Please proceed with your question.

Hi, good morning, Enrique, Raimundo, and Luis. I'm happy to hear you guys are doing well. Two questions. First, regarding the balance sheet, in the current absence, we saw a big hiccup in account receivables and prepayments. In particular, I think the increase was related to prepayments of suppliers, around 1.3 billion pesos. I was wondering if you could comment what that increase is related to. And then second, just your general opinion regarding what we can expect in churn, in particular regarding the benefits that Mexican banks are granting credit card payments, and I understand a smaller percentage of your customer basis is postpaid, but on that sense, do you think that's a risk that exists once the grace period for the banks ends towards late September this year? Those would be my questions. Thank you.

Sure, Arturo. Thanks for the question. And the first one, the increase you see on the balance sheet in the and the assets is basically the down payment that we gave out for the GPOM project, which is there and is running. So that's basically the explanation for that. I don't know if that's or you want more detail on that, but basically it's a very straightforward answer. It's straightforward on that part.

And the churn? The second part related to the churn, as I said before, we don't know the combination of the need for the broadband compared to the economic impact of the pandemic. What we can tell you is that so far the need for our products has overcome by far the economic problem that might arise from the massive market. Also, I can tell you that within the massive market, we have the impact of the SMBs. The micro businesses in Mexico are considered part of the massive market that we have. We have a bad April and May. As you are aware, they all fall. It closed the stores in the small restaurants, and that right now, we have a great response of those people reconnecting and paying what they didn't have. So some of our results for the massive market in the second quarter are impacted by the micro-businesses, which are not considered part of MetroCarrie. Those ones are also... with a very low churn, and more than that, they are reconnecting more than we have disconnected in the past. So we're very confident that churn, it might have to increase because of economics, but so far what we see is that the need for the product may be market, may be effort to pay for our services. Remember that we have one of the lowest outputs in the industry. So that's why we have such a strong penetration in the lower economic levels, and that's why we have such a small storm at this moment.

So that will be the answer.

Thank you very much. And just on the first part, is it in any way related, prepayment with the exchange rate? Is that any consideration in why you decided to prepay some of the suppliers, or does it really have nothing to do with that? Well, sure, Arturo.

And it was two reasons. One is that that was part of the agreement we had with our suppliers. And, of course, the second one is that we had the opportunity to have, let's say, a low exchange rate at that point in time. We had some cash that we accumulated with low cost in terms of exchange rates that we used for that purpose.

Okay, perfect.

Thank you very much for taking my question. Sure, thank you for your answers. Our next question is from Juan Alba from Credit Suisse. Please proceed with your question.

Hello, good morning. Thank you for taking my question. My first question, if I may, is just if you could please elaborate a little bit more on the positive performance of the MCM company and also How sustainable is that, and how sustainable are the margins for the non-cable segment?

Evita. That's my first question, thank you. Sure, Juan. It's very sustainable.

MCM is a carrier-to-carrier company, so the need for bandwidth in that segment has been growing. It hasn't been decreased. That's why we are very steady in the revenues of NCM of that part. We do have some of the final corporate customers that they are asking us for delaying some payments or getting an extension of the period, of the compromise period that they have. So what we have in MCM is a combination of carriers increasing the bandwidth and some customers asking for more time to pay on that part. So at the end, as I said, MCM already posted $284 million for the second quarter, which was higher than the first quarter. So it's sustainable, and we're happy with the results of MCM. Regarding the mass market, the margins, yes, we're also happy with the results of the margins, and we can expect those to continue to be in those levels going forward.

What we have seen in the mass market, it has surprised us, and I'm pretty sure it has surprised other service providers. people have prioritized the payment of broadband and home entertainment because they spend so much time at home now, and it will stay that way at least until the end of the year. We don't see any way of going back to normal in school or work. I think a lot of people will still do home office for the rest of the year. And maybe in the way of how we see life has changed dramatically and accelerated a lot of changes that we were seeing slow in the future. It just suddenly happened. So we think it has surprised us because The levels of churn have dropped, and the quickness of the payment when we disconnect somebody, maybe it would take them three days or a week to pay for the reconnection. Now they are doing it within hours. It's been a very pleasant surprise for us. We were ready to do a lot of things to prioritize the retention of subscribers. We have not had to do so many measures for that because we think that the subscribers and people at home are really needing the connections that we provide. we have been able to provide a very good quality of service with no saturation of their network. And the network has not suffered any contingencies in that aspect. So we are very, very happy how the network has been performing and the customer too.

Thank you. And if I may, one follow-up regarding the competitive landscape in the mass market. How are you seeing that, the competitive landscape? And should we expect any price increases, generalized price increases, to be on hold until 2021? Or how are you seeing that front? Thank you.

Well, the market is very competitive. It has always been very competitive. In broadband, we have very good companies in front of us, like Telmex. And in some other cases, we have other broadband providers with fiber, some with fiber, some with HFC, others with copper. But we've been performing very well. And the customer has stayed with us. And we expect to keep that way. And what was your other question? I mean, it will continue. Competition will continue to rise, I think. But we are very well prepared to face that.

And, Juan, let me point, which is very important for us, as you and Arturo were talking about, the pace that we did and that. We continue to do the follow-up of the G-PON evolution project. as well as to the second part of the XView Plus NGV or next generation videos that we have. We will continue to provide our subscribers with the best technology and the best products. The new NGV Plus that will come in the second half will completely provide our subscribers with a new integrated experience on the set-top box for all the different apps that there are in the market. The way that they will search and interact with the subscriber with a much more powerful user interface and with a much more robust search guide. It will integrate the content coming from all the different vendors. Those vendors, as you all are aware, the Netflix, the Amazon, the HBO, the business coming to the market, the quality of income is increasing. Like Enrique was saying, we believe that this pandemic changed the way we perceive life and we live. Some will be temporarily, but some will be forever. The way that people learn to use a stream, video conferences, education at a distance, And the hours that they spend on the fixed unlimited broadband that we provide, we're very confident that we are in good position. Our network proves that it can get higher speeds with the same balance sheets that we have right now. And still we continue to evolve to be much more efficient. better and ahead of everybody else on the part. So even though we have the telness and we have the total play and we have results from other companies and competition from each in other markets, we've been competing with them and still providing good results. Also, all our subscribers that you can see there and the churn that you see All our subscribers are healthy and in good position. We provide them with the right product and package that they can pay. And we were very careful during the quarter not to allow subscribers to stay with no payment in our base. We want healthy. We needed to have all the CPEs for the subscribers that they couldn't afford to pay or they didn't want the service. So we were very careful. So we're in very good position for the second half. a a for both for margins and for for for the competitive landscape that is coming you know our balance sheet also allow us to do what what i'm saying it does allow us to continue to invest in the ngb and it does allow us to continue to invest in the in the yip so so we're very happy and confident

Yeah, we are more convinced now that the move we decided to do, migrating our main markets to FTTH, was the right move. And moving all that HFC equipment to the other 50% of the network to increase, to double the capacity and have a much better network performance. in the other 50% of the network, that was the smartest move we have ever made in our network. And we are going on with that. We won't stop that, and it will be finished in about 14 months.

Thank you very much. Thank you very much for all the answers. Thank you, Juan. Our next question is from Andres Soweto from Scotiabank.

Please proceed with your question.

Yes, thank you for taking my question. Well, as you know, Total Play reported revenue growth of 36% in the second quarter. Total Play is now around 82% the size of Mayacable, and it seems that if Total Play continues to grow at this pace, within a year, Total Play could be bigger than Mayacable, right? And that's a big issue. However, Mexico is a very big country and I have three specific questions for you. The first question is if you believe that or if you have seen total play growing in your territories or are they growing in other territories? I think that's my first question. My second question has to do with what you just said. We know that you are migrating your network into FTTH and I was wondering in areas where you already deployed at FTTH, are you seeing better results compared to TotalPlay? Meaning, in the same streets where you are migrating to Fiverr, do you see your market share more protected in those areas? Also, do you believe that by deploying Fiverr or by migrating to Fiverr in those areas, can you keep TotalPlay from actually building into those streets in order to discourage them? And finally, my third question to you is regarding branding. It seems to me that the brand cable, the word cable, could become stigmatized if we continue to see fiber growth. So I was wondering if the company could even think about changing its name to MegaFibra from MegaCable. I mean, a big transformation in technology. And those are my two questions. Thank you.

Andres? We want you here in Guadalajara. We'll see what to do in the future with the branding, but it's a good point. We have thought about our branding, our position, our logo. All I can tell you is that we continue to study the best perception for the people and what's the best for the market. I cannot disclose whether we're doing or not that part of our strategy, but it's always in our mind. Don't Don't worry about that, about fiber or cables in that area. Of course, compared to total place, there is always the old company to the new company. And when you say in our territory whether they are growing or not, we are aware of the growth that they have. But we can tell you that in our territory, the growth is not big. In comparison to other regions, it has to have that impact. We are not saying that they don't have subscribers, but they don't have the amount of subscribers on the market share that you see in other parts. Why? I don't know. I don't want to get into that. Maybe we have a lower ARPU. It's tough for them to get here. Maybe we're more aggressive in retention. I don't know. What we can tell you is that every subscriber that wants to be suspended, we call it because of going to competitions, or by any other reason, we do all the effort to retain them. And one of those efforts in the areas where we have the fiber is to migrate them, a speed of the process of migrating them to fiber. I can tell you that after a year of those suspensions, by any means, not only fiber, 82%, 81% of the subscribers that tried to get suspended in that part remained with us. That's why we have been able to lower the churn, not only because of the pandemic, but also because everybody who requires a better package, we provide them with a lower package. We have all different kinds of flexibility by market. to retain the subscribers, and also we can provide them with an upgrade, not only to Fiverr, but there's also some parts where we do an upgrade in HFC2 because they have a legacy set-top box and we need to upgrade to the new one. All that is part of our job, and it's seen that. Compared to TotalPlay or compared to Telmex in Fiverr, it's going to be, at the end, the one that performs the best. We can tell you that the XView surpassing the 1 million and the several millions, more than 40, 45 million of reproductions of videos that we have. It's been a terrific success in that part. And our network performs well. So as long as we continue to identify market opportunities, which the market grows, right now it grows in the second quarter, and we identify those opportunities to continue to grow, and we collect the right amount We believe we're doing the right thing on that part, and we will sure tell you when we decide to move our logo. Our logo, when you see the Megacable logo, it identifies as well as the Coca-Cola logo in all the markets where we are because of all the time that we've been there. It's still the word cable. Well, we'll talk about that over a coffee when you come here.

Thank you, Remindo. And let me just clarify something. When you upgrade a street to fiber, a fiber to home, do you actually knock on people's doors and ask them to change their set of box into FTTH, or do you wait for the contract to be renewed with Toulouse? How proactive are you?

Oh, no, no, no. We go without. We have a strong program as part of the G-PON evolution. Wherever we are activating the branch, of that area, the fiber part of that area, we go straight and we just do the upgrade to the subscriber. That's part of our philosophy of updating it. Of course, we also try and look forward to do upgrades of this service. The original part is if you have a 20, 30 megabits with 100 channels in HD, that's what we upgrade you. We provide you fiber. We give you a promotion with more bandwidth and with more channels and more interaction so you can drive. And hopefully we can get some more revenue coming from the operator of those subscribers, which is intentional also of doing the G-Fund, not to stay in the same level that we have, but take this new generation of video to increase our... But if the question is, if we are going to replace the subscriber equipment once we implement the FTTH, the answer is yes.

We will replace every subscriber equipment that we are moving from FTTH to FPTH. It's part of the .

Okay. Thank you so much. Very good answer. Thank you. Our next question is from Gabriel Menezes from JP Morgan.

Please proceed with your question.

Hi, everyone. Thank you for taking my questions and for the call. Just a follow-up on the GPOM project. When you upgrade the customers, so in the first moment you don't have an ARPU uplift, but you do expect to get an ARPU uplift out of that. Could you give us a bit of color on how much would that be? And if you are as well deploying the GPON in order to capture customers from other operators, is that a mix of both? Which are you focusing more on at this moment? Thank you.

It's both, Gabriel.

We expect to collect customers from the competition in those areas where competition might not provide the service that they were expecting and also bundle with the video platform that we have that is coming from that area. And also, we do expect that our output will reverse and will continue to raise in the future by our use and by individual output. Remember that as we continue to penetrate the market with lower packages, we need to do a mix in between new services to existing subscribers and lower output of new subscribers and then raise raise the lower of the new subscribers later on. That one will bring us an increase in the individual ARPUs slightly, but more on the unique ARPUs coming into diffusion.

All right. Thank you. A follow-up, if I may, on CAPEX. We've seen that you decreased CAPEX in the second quarter. Probably this is I was just wondering if you still plan to meet the guidance for the year you gave on the beginning of the year.

Thank you. Yeah, Gabriel. Yes, what happens, if you recall, is that we reduced the capex not related to the GPOM project. That was by the start of the year. And also with the pandemic, we had a second review on what was essential and what was not. We deferred some other projects that were not essential to be sure that we did not impact the GPOM project, which is our main project for the year and the following year. So, yes, you saw some decrease, but we are still on track for completing the CAPEX expectation for the year. We may be a little bit below the $400 million that we stated, but of course, because of the exchange rate, we will be above the Mexican pesos target that we established. But yes, basically, for the remaining of the year, our target will remain basically the same.

And the message, Gabriel, is we are not decreasing At this point, the CAPEX investment in infrastructure. We are a technology company. On the other hand, the only thing that you see in the results of this second quarter is that we don't have it in the CAPEX. We do have some repayment to the project of the GPON, but we are very well committed to those two projects which are essential, which is to become a really strong, continue to become a strong infrastructure project and with the best last mile of the fiber that we have and the best last mile of the HFC to cover the bandwidth needs of corporates and massive for the years to come and as well as the best video product with the Android technology that is right now state of the art in the market that will integrate the best content. So it's a very robust position that we'll have by the second half of this year.

Thank you very much. Thank you very much. And our next question is from Alejandro Palastro from BBVA. Please proceed.

Good morning, Enrique and Raimundo, Luis. I have a few questions. First is a follow-up on the On the topic of home deployment, could you give us an update on how long it will take, how many homes you will target, and what cities? My second question is related to the mobile business. Also, if you could give us an update on your expectations and the number of subscribers that you expect to achieve in the next years, and hopefully, a sense of the profitability, the margin that you get in this business. And finally, I'd like to know how confident you are in the ability to return to double-digit growth rates in the corporate business. Thank you.

Sorry, Alejandro. I cashed half of the second question and none of the third one.

Yeah, so let me do, can you?

What about the compass and the size of the Jeep employee?

And the growth in subscribers?

And then on the second question, can you rephrase?

Yeah, sure. The first question is regarding your deployment of the fellow to the home, how long it will take, how many homes passed, you will target, and in what cities. The second is related to your expectations for the mobile business. If you could give us an update on how many subscribers you expect to keep in the following years, and hopefully a sense of the profitability of the business, some sort of gross margin or beta margin, if you can. And the third question is related about how confident you are to return to double-digit growth rates in the corporate business.

Okay. It was a bad connection, but let me tell you. The project that we have with Deepon is half percent of the network that we already have, pretty much, growth numbers. And it's... It's been looked that way because we are reusing also the network that we have in that half percent to build the capacity for the next years to come. In the other half, with mid to small size cities, we'll be covered with the systems that we take from those 50% of the network that we are increasing to GPAT. So in that case, we take a state-of-the-art of the best of the best cities that we have, and we also take the best of the HFC with the splitting the nodes and the best capacity that you can have with the capital that we already invested in the years before. So you can count that around 4 million compas will be what we have with GPON. on that area, and the other 4 million will be with HFC fiber, a combination of fiber to HFC, because remember that when we have HFC and our nodes are very small nodes, that means that our fiber gets practically to the core. So we're always careful that everything that we do will benefit also the corporate segment and the capital that we invest in the future. So we continue to deploy Fiverr in the other 50%, but we do not have to change the set of boxes and the CPA equipment of the subscriber or the drop inside the house on that. But we continue to grow Fiverr in all our systems. and our city, so we have the best infrastructure that you might expect on that part. How confident are we are in the growth of the corporate? We are very confident. We continue to increase MetroCadre and that, and we see that there is no way that government and enterprises will continue to delay the infrastructure and cloud services that they they request from the OLA part. As I said, it was not the best quarter for OLA, but we are confident that we will recover that growth coming in the following quarters. And we're happy with Metro Carrier and MCM at the end. We will look for opportunities and new contracts on the government side. As we said at the beginning, the impact of the canceling the Mexico-Conexado hit metro carrier, but was overcome partially by the results that we have in the enterprise segment. So we're confident that corporate, you can expect better results going into efficient.

And let me try to explain or to clarify the reasons behind the move of the company, of our company, why we decided to go deep on in our main market. HFC is able to provide the same services. I mean, we are providing in our HFC plant speeds up to one gigabyte to a home. Obviously, it's a speed that almost nobody demands, and then we go to 500 megabits, 200 megabits, 300 megabits with HFC. What we decided is that at the end, I mean in the future, we would have to move to fiber anyway because it's the technology that will prevail in the years to come, fiber. So we decided to take out as much as we can The money we have invested in HFC. And the way we found is, okay, we needed to grow the number of nodes to twice the number of nodes we had in the next two to three years in HFC. So we decided to use 100% of those nodes that we have in HFC. 50, 60,000 kilometers of HFC plant in 50% of the plant. They've overlaid, overbuilt the other 50% with a fiber. That way we keep using that HFC technology that is very efficient, is able to provide very good services for the years to come before we take it out. And all our future growth is going to be fiber. That's the reason behind doing the move. And I think it was a very smart move. So we continue to get value out of the HFC and move to the technology that at the end we would finish with, which is fiber.

I don't know if that's clear. Yes, take care. Thank you, Alessandro. And our next question is from Fred Mendez from Bradesco PBI.

Please proceed with your question.

Hello, everyone. Thanks for the call. I have two questions, and I already apologize in advance. I have to enter later the call, so if I repeat the question, my apologies. But basically, I mean, two questions here. I mean, the number one, Since you are deploying your FTTH, I'm just wondering if you see room for an increase in ARPU and consequently margins. This will be my first question. And then on my second question, when I looked to the net ads on Broadband, they were strong, 82K versus historical average. But when I look at the quarter for our competitors, they also reported very strong numbers, especially one of them. So I guess the point here is, if you are okay with this 82, I believe that it could be more. And then on the same line, if we are seeing, due to COVID, actually a higher penetration towards the broadband. So my question is if we believe that the size of the cake, the size of the market, it is increasing on this scenario post-COVID. Thank you.

Sure, Fred. As we said, regarding FTPH, we believe that the new NGV Plus project, which will bring the Android TV capacity and the integration of the different streams, will allow us to increase the ARPU on that part slightly. But as I said before, since the market is growing with the post-COVID, right now with the COVID pandemic, post-COVID will depend on the economics. I believe that the market will stay on the far and slightly will grow because of it, but slightly. What we believe is that the ARPU will very much stay and grow individually slightly. The unique ARPU will grow, and this will come because of the combination of subscribers that can afford to pay that we will retain with a lower ARPU compared to the subscribers that we will provide advanced services in the video part. So we're happy with the numbers that we have on the trend of slightly increasing individual outputs of video and broadband, not telephony. And also the increase of the unique output will come for sure in the second half of the year. Regarding the net ads, we're also confident of the net ads that we have. Because we maintain a very conservative strategy of saying we are going to keep subscribers that can afford to pay and they are willing to pay, even though it's a smaller amount. We have some contingency packages, but we will not retain subscribers with no payment. We do not know what the policy of other companies will be regarding that one. As you said, the market behaves pretty consistent in all of them. We beat our competitions in the market where we are, and we have a very good growth in broadband and video that we did not have before. And I'm happy that that is a subscriber that is active and paying, even though some of them know what they have. That coming into the future will allow us to to recover those subscribers to the original package that they have or something bigger. So that's why we believe the outputs will recover, not only because of the FTPH, but also because some of those subscribers will come back and pick up the package that they have. Also, because of the enterprise business, the SMB. I'm not talking about metro carrier, Fred. The micro businesses affect us also in the segment that we have in the massive market, those subscribers on the businesses, we provide them with a special non-payment or pay a minimum amount during the dates of April and May. And as I said before, we have a good recovery of those subscribers. In June, the revenue in April and May But we did recover those in June, and they look very good coming into the second half for the micro businesses as part of the massive markets, regardless whether it's FTTH or not at this point. FTTH, like Enrique said, is a project that we just started. It will start migrating subscribers only in the second half and first half of next year. It will last for the next 14 months. And we're very confident we're doing the right thing

the management of this company to provide the best return for the shareholders. Perfect. Thank you very much. Very, very clear. Thank you.

Should we go to those? I see that we have two questions online. Okay, so we have two questions online from Carlos de la Garreta from GBM.

The first one, okay, he says, we think it's a pleasant surprise that there was year-on-year unique subscriber growth, despite the main services being flat or negative. EMV&O seems to lack the scale yet to fully explain the increase. Can you please elaborate?

And the second one is a follow-up, good to hear on the investment in Fiverr, but what about Toxis 3.1 and further development? Good question, Carlos. Thank you for the pleasant surprise. I think it was a trend that we were coming, and also the COVID and the need for the broadband helped us again. On the MVNO, which is good that you asked, we have, we start, as I said, with 6,000 subscribers, 25,000 subscribers at the end of Foursquare, and now 44,000 subscribers at the end of second quarter. We want to, as you know, we're doubling every quarter. I think this is going to be exponential. I do agree that we need to look for a larger scale. That's our position. We don't want to have it, the first milestone was a very close milestone, milestone of 150,000, but was, as he said, to know the market and to know and have a steady subscriber base, mobile, to know what is the mobile devices that they want, how the network behaves in the Alta network. We're very, very happy, and the results of our market survey from the subscribers is that they are happy with the data. The network flies. We're managing the type of devices that they can run into this frequency and that one. So we have to adjust a little bit, a delay because of that. But as a summary, we do agree and we're putting much more effort inside Megacable to have a larger scale. I agree that it should provide and we have the resources and the product to do it. We are going to work strong on providing a higher scale on the MVM. And the other one in terms of the DOCSIS 3.1, we haven't forgot DOCSIS 3.1 on that part, or we haven't forgot remote fiber, remote five, or all these technologies of the HFC. As I said before, what we found is that we had, in order to split the network in 2020, 21, and 22, or 23, we needed to buy more nodes and chassis and infrastructure of the DOCSIS where it makes more sense to buy new GPON and reuse what we have on that part. The nodes that we have in that 50% are DOCSIS 3.1 compatible. The CPEs that we have are DOCSIS 3.1, and the frequencies that we are using for DOCSIS 3.0 and DOCSIS 3.1 are part of the megacable technology deployment. So you can assure that in the other 50% of the network, we are increasing bandwidth in the downstream, in the upstream, with all the best technology that is proving worldwide. What makes a lot of sense for us is that if we were going to buy 400 million,

in cafes or in equipment.

We'd rather do it in the most updated financial technology, which was GFundMe. It was a lot easier to split in all the cities, but this project, which takes a lot of effort from the organization and the team that we have here, and a good confidence from the board in everybody to do it, is the right thing. We're going to have two state-of-the-art technologies with a much more efficient capacity that will last those 400 million for the next 10 years instead of lasting for three or five years if we just stay on that part. So that was the reason behind the GPON project. Also, we continue to be an infrastructure and fiber company. We continue to split the nodes and getting fiber to the core. That's why we're able to provide a much more massive metro carrier in all the cities where we're deploying. So that's our strategy, and we don't plan to move from those two big projects upon an NGB evolution. And thank you for the questions.

There are no more questions in the website, so I'll turn it over to the operator.

All right.

It seems as if we have reached the end of the question and answer session, and I will now turn the call over to Enrique Yamuni for closing remarks.

Okay, thank you very much. As always, it's a pleasure to discuss our results with you. Please contact our Inventory Relations Department if you have any questions or concerns regarding the company. Stay safe and have a wonderful afternoon and a nice weekend. Thank you, everyone. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.