Megacable Holdings

Good morning, and welcome to Megacable's third quarter 2020 earnings conference call. With us this morning from Megacable, we have Mr. Enrique Yamoni, CEO, Mr. Raimundo Fernandez, Deputy CEO, and Mr. Luis Zetter, CFO. Let me remind you that 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 risks and uncertainties. Megacable undertakes no obligation to update or revise any forward-looking statement. I will now turn the call over to Mr. Enrique Yamuni. Sir, you may begin.

Thank you very much. Good morning, everyone, and thank you for joining us today. In the middle of the economic slowdown caused by the health contingency, Megacable continued to benefit from Advancing to capture the demand of the new normal, which has recently increased the connectivity needs arising from the expansion of our office and remote school programs. In this regard, during this period out stood the kickoff of Aprende en Casa, the school program that aimed to replace face-to-face classes to online lessons. which coupled with the vast numbers of customers who adapt their daily routines to the home office mode have heavily driven our internet business in the mass market to an all-time high, being this the first time that we posted a larger number of internet than video subscribers. Consequently, total subscribers maintain its upward trend, recording a rising demand for all services. R2 per unique subscriber increased when compared to the same period of last year, while in the numbers by service, a slight decrease was recorded, as some of these new clients are not yet paying full rates, and most of them were either added in the second part of the quarter. Under these dynamics, Quarterly revenue increased year over year, while EBITDA recorded a solid double-digit growth and a new record high figure for the company. This result was driven by cost and expenses efficiency, giving our continuous effort towards a lean organization in our ability to adapt to the market circumstances. This is reflected in the annual improvement of the EBITDA margin which exceeded the expected forecast of the consensus of analysts. In the corporate segment, recovery is now more visible. As the companies in the connectivity segments have posted revenue growth, we continue to work hard to get this segment back on its feet and to reduce the exposure towards government-related revenues. Now, given some color on our projects in development, The Euponymia migration process advances as planned, as we have started to migrate some of them to our new FTTH network, some of our customers. Likewise, I would like to take a moment to contextualize the magnitude of this project, as it represents a significant investment that will allow us to migrate about 50% of our subscribers to a private home network. before the end of 2021, while significantly increasing the bandwidth capacity of the rest of our HFC network, thus boosting our competitive position for the following years. On the other hand, our XView Plus platform development is also concluded, and preparations are underway for its launching towards year end. We are quite positive on this project, as we will be capable of further stimulating the commercialization of triple and quadruple play packages toward our NBNO platform. Here, it is important to note that in line with the timely development of our projects, mostly those from final stages, we expect to post the second half of the year CapEx figures significantly above than that of the first six months. to reach our target set for 2020. However, these present investments will help us improve our service to a more efficient use of our infrastructure and better and more reliable services in all our products and packages, resulting in a significant decrease in capacity intensity for the medium and long term. Wrapping up, despite these satisfactory results, we keep minding the difficult economic background, having a close watch on our strategy metrics, such as ARPU and churn rates. But we seek to be ready before any arising challenge. Also, we believe that this new reality changed for good the way we live, and the increasing use of the telecom technology is here to stay. is the move up of our services in the priority of the family's budget and the business community. I will now turn the call to Raimundo Fernandez for further explanations.

Thank you and good morning, everyone. In the third quarter 2020, demand for our services continued to increase, particularly in the mass market. As the compelling value of our portfolio and improved technological capacities allow us to seize the opportunities posed by the pandemic, including the back-to-school season under an online modality. To put this in a better perspective, sequential growth additions accelerated during this period compared to the past quarter. In internet, it went from 83,000 in second quarter to 185,000 this quarter. video from 28,000 to 100,000, and telephony from 82 to 243,000 in this quarter. At the end of the period, REU's totaled $9.4 million at 12% growth or $592,000 net ads when compared to the third quarter of 2019. Supported by the company's bundling strategy, and also reflected in the REUs per unique subscriber, which went from 2.3 in the third quarter 2019 to 2.44 this reporting period. Thanks to that strong dynamic, net additions of unique subscribers for the last four months climbed to 224,000, out of which 148,000 were added this period. closing the quarter near the 3.9 million unique subscriber mark. These results were highly driven by the performance obtained at broadband, which posted net annual and sequential additions of 347,000 and 185,000 subscribers, respectively, to reach 3.4 million total subscribers. It is relevant to underscore that Mega already reached the point where it has more internet subscribers than video, making us no longer a predominantly cable television operator, but an internet telecommunication service provider. This business development follows global trends, where the internet becomes the main service to the rapidly growing demand, and to which Mega has answered with greater investment and deployment of the latest technology. In addition, our increased focus on investment in high-speed broadband and related technologies has enabled us to absorb the higher demand from segments requiring higher bandwidth capacity, as reflected in the over 55% growth in Internet subscribers with speeds equal or greater than 50 megabits from September 2019 to September 2020. Moving on, video subscribers amounted almost 3.4 million at quarter end. 138,000 subscribers more on an annual basis and 100,000 more quarter over quarter, attaining one of the strongest growths in our recent history. This performance indicates that this service, contrary to what some may think, still has a growth potential which MEGA intends to take advantage of even more with the upcoming launch of new products and services, most notably XView+. Regarding additional services, as of the end of the quarter, ex-view subscribers totaled 1.1 million as of September 30, 2020, increasing 337,000 net additions over the same period last year, but decreasing when compared to the previous quarter. This slight sequential decrease is attributable to non-recurring one-time factors such as aggressive promotions towards other bundles. Therefore, it is expected to resume its growth trend in the coming months. our HD service reached over 1.2 million subscribers at quarter end, with 321,000 net additions recorded over the last 12 months. These services, besides representing an extra source of revenue, also provide a competitive edge to attract more subscribers and upgrade the packages of active clients. In this sense, we are confident that our enhanced XView Plus platform will contribute to the ARPU's growth over the following quarters. Separately, the telephony segment posted 2.5 million subs as of quarter end, with 438,000 net ads on a yearly basis and 243,000 sequentially. We observed a noteworthy market absorption of the MVNO project, as it recorded 64,000 net additions this quarter. allowing it to beat the 100,000 subs mark with a solid pace to achieve the 150,000 subscriber target set for the first year of operation. Shown rates, on the other hand, remain stable at 1.5%, 1.7%, and 2.1% for broadband, video, and telephony, respectively, reflecting the positive impact of our marketing endeavors and customer satisfaction with our products coupled with an increased need of our services. In terms of ARPU, during the quarter, ARPU per unit subscriber was 406.5 pesos, up 2% in an annual basis, and in the same levels when compared to that of the previous quarter. This performance was mainly driven by a higher number of new subscribers. coupled with prices increases and the contribution from additional services such as it is expected to improve in subsequent periods. ARPU by segment slightly decreased when compared to that of the second quarter 2020. This is basically a result of the high number of net ads with promotional rates, some of which were recorded by quarter end. On an annual basis, internet and telephony dropped 1% and 3% respectively, while video reported a contraction below 1%. On the corporate telecom segment, revenues reached $903 million in the third quarter of 2020, a decrease when compared to the same period of last year. The company has seen a recovery, especially in the connectivity segment. including MCM with a revenue increase of 7% and Metro Carrier of 3%, driven by a higher demand for our services, despite Metro Carriers continuing to be affected in its comparison against last year's figures due to the cancellation of the Mexico Conectado project as of year end 2019. On the OLA side, we have increased the volume of transactions during the quarter, aiming towards recovery. However, we have not been able to increase the average ticket, as this segment continues to be affected by the government austerity policy, while the private initiative continues to be very cautious in terms of carrying out new projects. To conclude, we are certain that the ongoing improvements of our service, the evolution to a fiber-to-the-home network, followed by the upcoming launch of the X-View second generation, will lay the foundation to keep with the increasing demand of high-speed broadband and next-generation video services in the coming years. As such, it should not be perceived as a defensive move towards nowadays competitive environment, but as a future thinking strategy aimed towards meeting the future necessities of our subscribers. We look forward to the operational efficiencies and customer service improvement that we will achieve through the term in the short and medium term, which will surely provide an incremental value to our business. 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.