Megacable Hldgs Sab Ord

Greetings and good morning, and welcome to Megacable's fourth quarter 2021 earnings conference call. With us this morning from Megacable, 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 forelooking 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'll now turn the call over to Mr. Enrique Yomun. Sir, you may begin.

Thank you very much, and good morning, everyone. Thank you all for joining us today. This quarter represents the end of another challenging year in which the health issues that we have been facing since 2020 prevailed. and in which we observed a slower economic recovery than first anticipated. However, the company continues to demonstrate its ability to adapt and execute based on the need of our subscribers. This allowed us to record quarterly need net ads in the three services of the mass segment, as well as double-digit growth in revenue EBITDA and net income in the financial side. including the best quarterly revenue figure for the corporate segment in the last two years. The preference of our subscribers is reflected on solid churn rate and ARPU quarterly figures going down. As the company remains focused on offering competitive services at an attractive rate, such as our broadband service that continues to be considered essential in our new generation video platforms. It is important to highlight that we continue to grow in the video segment, even above market levels, with XView Plus being an important contributor to this increase, as more subscribers are using the integration and interactive capabilities of the platform, reaching approximately 75 million monthly interactions. The subscribers' growth in our culture of tight cost control are the main drivers for the results in revenue and EBITDA, with each quarter, which each quarter continues to register record figures, as a consequence, we probably maintain the highest margins in the sector. On the other hand, the corporate segment continues to perform, given the good results in OLA and Metro Carrier. This period represented the best quarter figure for this segment since the end of 2019. We are confident that this growth trend will continue and the performance of these businesses will benefit from the geographical expansion of the company. Despite the softening of social distancing measures, the momentum of the business segment supported by the strong demand for connectivity services validates our strategy of investing in the expansion of our footprint into higher potential markets. Speaking of the investment in the project that we are carrying out of the Network Evolution Project is close to be completed. The migration of these territories to a state-of-the-art technology has allowed us to strengthen the service we provide and to secure our position in a very competitive environment. As we have stated before, this project represents a milestone for the evolution of the company's services. In the same line, we are also advancing in our strategy to enter new markets. We have already started to activate some of these tranches, and we are optimistic about the results that we have seen so far. The contribution to revenues and subscribers growth coming from the new footprint should be a major boost to growth generation in the coming periods. The capex figure for the quarter is in line with the projects the company is executing. These strategies will be also reflected in revenue and subscriber growth, as well as the expansion of the corporate segment to new territories, and in the case of the migration initiative to GPON technology, savings on investment in future careers. To conclude, we are very satisfied with the quarterly results, and the projects achieved in our strategic growth plans. We have a lot of work to do. at the site of the opportunities and challenges that await us in 2022. In this sense, we expect that the outlook and trajectory of our businesses in 2022 and coming years will continue to be positive, especially in terms of the additional contribution coming from the expansion into new territories. I will turn the call over to Raimundo to discuss our operational performance. Raimundo, please go ahead.

Thanks, Enrique. Good morning, everyone. As Enrique mentioned, the fourth quarter has been an extension of the excellent operating results that we have been recording throughout the year. Our focus continues to be the growth in both the mass and corporate segments and to achieve a high operating efficiency through a clear emphasis towards network evolution, the development of our video service, and the expansion into new territories. The previously mentioned, together with the constant development of our network, has helped us to position our services in the preference of these subscribers. This growth trend led us to reach close to 4.2 million unique subscribers at the quarter end, increasing 6% versus the fourth quarter, which translates into 220,000 net additions year on year, out of which 52,000 correspond on this period. By segment, The demand for bandwidth, as trends like streaming and gaming become more popular, and the fact that for many families this service is considered essential for day-to-day work and learning, have created an opportunity which the company continues to take advantage of with quality services. Broadband subscribers rose to more than 3.8 million, recording net additions of 324,000 and 81,000 compared to the fourth quarter 2020 and third quarter 2021. Video subscriber rose to more than 3.5 million, recording 127,000 net ads for a 4% growth when compared to the same quarter of last year. On a sequential basis, 24,000 net ads were recorded. Our XView platform continues to grow. going from 1.2 million subscribers at the end of the fourth quarter of 2020 to 2.4 million this period, an increase of 107.5%, or roughly 1.2 million net additions. The telephony segment recorded a little over 3 million subscribers, going 15% and 3% compared to the fourth quarter of 2020 and third quarter of 2021, respectively, and implying 404,000 net ads and 97,000 in December. The mobile subscriber totaled 428,000, with 83,000 net additions versus the previous quarter, maintaining its upward trend. The positive impact of our marketing endeavors and high level of customer satisfaction, despite a highly competitive environment, is reflected on stable short rates that remain below pre-pandemic levels. with broadband at 2%, video at 2.2%, and telephony at 2.4%. On a sequential basis, video and telephony show rates decreased, and broadband remained practically unchanged, also contributing to subscribers' growth. At the end of the quarter, REUs doubled 10.4 million, 9% more than the 9.5 million of 2020, driven by subscriber growth in the three mass segment services, also reflected in the REU's per unit subscriber, which went from 2.43 million in 2020 to 2.51 this reporting period. ARCU per unit subscriber stood at pesos 422.6, a significant growth of 4% compared to the last quarter of 2020, while on a sequential basis, it increased pesos 11.1, achieving the highest growth since the end of 2019. This was driven by the increased focus on the sale of triple-play packages, rate increases, seasonality, and the contribution of add-on services, such as the XView platform. Turning to our book by segment, all services grew on a sequential and annual basis. Broadband increased 3% and 1% compared to the fourth quarter of 2020 and third quarter of 2021, respectively. Video 1% and 3%. while telephone increased 9% and 2%. Now, regarding the YIP on migration, client perception in relation to this process has been positive, as evidenced by the evolution of churn rates, as we have improved network performance and set the appropriate infrastructure to continue growing for several years. With respect to corporate segment, the revenue figure was the highest for acquirers in the end of 2019, reflecting the growth trend we have seen in the recent quarters. This was generated mainly by OLA, which achieved 25% growth during this quarter in light of more dynamic public and private segments. In addition, MetroCard grew 20% in the same period, supported by revenue coming from small and medium enterprises. Moreover, MCM revenue posted growth when compared to the previous quarter and the same quarter of last year, as it continues its recovery trend. Towards 2022, the growth of the company will be leveraging both in the existing footprint and the new territories. Our high-quality and attractive commercial proposal will be our differentiators in very competitive markets. With this, I conclude my remarks. Now, I would like to hand the call over to Luis, who will shed broader color on the financial results.

Thank you, Raimundo. Good morning and welcome, everyone. Consolidated revenue for the quarter reached 6.4 billion pesos, an increase of 12%, derived from the strong performance achieved in all business segments. For the full year 2021, Consolidated revenue was probably 24.6 billion pesos, 10% more than the figure recorded in 2020. The mass segment revenue for the quarter was up 11% year over year, totaling 5.3 billion pesos. Revenues for all services increased on an annual basis when compared to the last quarter of 2020, with broadband, video, and telephony growing 13%, 5%, and 26% respectively, mainly due to a larger subscriber base and a successful bundling strategy. On a year-to-year basis, mass segment revenue for the full year reached 20.4 billion pesos, an increase of 11% versus 2020. The corporate telecom segment revenue reached 1 billion pesos in the fourth quarter 2021, 16% more than the same period last year. Guarola recorded its best quarterly performance in the past two years, increasing 25% year-over-year, while Metrocarrie grew 20%, and MCM revenue rose 3%, maintaining an upward trend. For the full year 2021, corporate telecom segment revenue amounted 3.8 billion pesos, up 8% compared to the 3.6 billion pesos recorded in 2020. The company's revenue mix remains practically unchanged, with the mass segment accounting to 83% of the consolidated revenue and the other 17% esteemed from the corporate segment. Cost of services rose 12% year-over-year in the fourth quarter, mainly due to all the business increase and the MVNO growth. In the same way, SG&A increased 12% versus the same period last year, in line with revenue growth. Cost of services and SG&A were both up 10% on a full-year comparison, also in the same level of revenue growth. Consolidated EBITDA continued its record high trend and reached close to 3.1 billion pesos during the fourth quarter of 2021, an increase of 12% compared to the fourth quarter of 2020, with a 48% margin, while EBITDA for cable operations totaled 2.9 billion pesos, representing a 12% increase and a 50% margin. For the full year 2020, consolidated EBITDA totaled $12.1 billion on a solid 10% growth versus 2020 with a 49.2% margin, while EBITDA for cable operations grew 11% year-over-year to reach close to $11.5 billion with a 51% margin. Net income totaled over 1.1 billion pesos in the fourth quarter of 2021, representing a 22% higher than the same period last year. This is explained by the higher EBITDA recorded during this period, coupled with lower interest expense and the FX gain recorded this quarter, compared to the loss recorded on the same period of last year. For the full year, net income was 4.3 billion pesos, a decrease when compared to the previous year figure. Moving to the balance sheet. As of December 31st, 2021, net debt was 4.7 billion pesos, an increase versus the 3.6 billion pesos recorded at the same period last year, explained by the additional short-term debt described during this quarter for 1.3 billion pesos, aimed at improving the overall conditions of the company's leverage. Net debt to EBITDA ratio stood at 0.39 times, and interest coverage ratio was 14.46 times, both indicators standing at very healthy levels. It's important to consider that all the comparative figures related to 2020 used in the report and this meeting correspond to the 2020 audited financial statements and may differ from the numbers reported in a call a year ago. On the investment front, quarterly capex amounted to more than $3 billion to reach a full year in 2022 figure of $9.5 billion, which represents 38.4% of the company's revenues for the period, 2021. Yeah, sorry, 2021. The majority of these resources are related to network evolution endeavor, which should be concluded during the first quarter of 2022, but continues to a major extent to this CAPEX in the fourth quarter of 2021. This project is a fundamental part of development and evolution of the products and services offered by the company and will generate significant capex savings in future periods. To conclude, we are confident that our financial position is strong enough to continue growing in an increasingly competitive industry that demands carriers to be at the forefront of technology and service. With this, I conclude my remarks. Now let me turn back the call to the operator to open the line for Q&A.

Thank you, 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. 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 start keys. Before we proceed with questions over the phone, We will go ahead and proceed with questions over the .

Thank you. So we have two questions from Compass Group.

The first one is, how is the expansion plan going so far? Do you still think that in two years the company will be doubled?

Yes, the expansion plan is going as planned, as we said and announced last year. We did some of our expansion trials to three markets with a small portion of what we did. That's what we have. We found the good results that we have. And now we are on the planning and working on that expansion plan. We will fill that plan at the second half of this year. That's where we will start getting really the results of the build-out that we're doing. We think that we can double. the company, but not in two years. It will be between three to four years. That's pretty much what we announced last year in our conference call on that part. So that will be our answer.

Okay, and the second is, in terms of capex for the next year, we should expect it to be low to mid-30s of revenues?

Well, actually, for 2022, our expectation is that

CAPEX will be around 40% of the revenues in this year. We have no questions from the webcast at the moment, so let's proceed with the line of questions.

Okay. Thank you. Our first question comes from the line of Marcelo Santos with JP Morgan. Please proceed with your question.

Hi, good morning. Thanks for taking my questions. The first question would be if you could provide some outlook for growth. Sorry about that. For growth during 2022, in the past, you used to discuss things like revenue, EBITDA, or subscriber. And the second question is more specific to the new areas where you put JIP on. Are you able to perceive different churn or different ARPUs in the GPON areas versus the CABO areas. I just wanted to understand if you see some noticeable improvement. Thank you.

Thank you, Marcelo. Well, we are not providing a guidance like a guidance itself, but we would like to share some of our view. For sure, we will be in double digits in revenue and evidence. You can count on that. We have no doubt regarding the company will meet those goals for 2022 on that part. Regarding subscribers, we will also have growth in the three main services that we provide. Of course, broadband being the one that drives the growth the most. We expect to continue to have that trend. And that growth in subscribers, of course, is the one that is going to drive the growth in the double digits of revenue and everything that you can count on. Regarding the new areas, we have a good response on the new areas of what we have. Sure, when you start doing the beginning of the sales on that part, it's a little bit high. But it's below what we have in other systems. So we're happy about the results. That's why we went and we launched the idea of doubling the size of the company. You don't have those results yet. The number of subscribers that we have in those markets is very small in proportion to to the rest of the company, even to the growth of the fourth quarter. It doesn't count more than 20%, 18% of what we grow in the market because we don't have enough kilometers yet built in those areas. Our plan for this year is much more aggressive. As we say, we're going to double the size in three and a half years, between three to four years. That means building a huge amount of kilometers and home paths for 2022. The only thing I would like to say, Marcelo, is that you will expect that growth to come in second half because we are in the process of building all those cities that we announced last year.

Perfect. Thank you very much. You're welcome.

Our next question comes from the line of Fred Mendez with Bank of America. Please proceed with your question.

Hello. Good morning, everyone, and thanks for the call. I have two questions as well. The first one, if there was any non-recurrent item or something more specific. Obviously, there's some seasonality here, but that led to a higher capex in this quarter, close to 50% of your revenue. So, you know, there was something else in this quarter. And as a second, is there a major difference? I think I already spoke a little bit about that in the first question. But anyways, a major difference between the capex spent per homes passed or something in the regions where you are entering versus the regions where you already have a presence. Maybe that would explain the hard context. Thank you very much.

No, Fred, it's not like that. There is not a non-recurring island in that part. I mean, it's part of the plan that we have. As we have described, the company has major projects going on. One that is being in the last stage is the GPON evolution that's aimed to the existing kilometers. We announced that we were going to rebuild 24,000 kilometers of GPON over existing areas. the majority or a huge amount of that portion was aimed to be at the fourth quarter of last year. So we are in plan. As we said in our speech, we are almost at the end of that project. That will give us great advantages in saving capex over the future, but mostly a much more robust market proposal to our subscribers and continue to keep lower chance in the markets where we are. So it's not recurring. We haven't got yet to the capex of the expansion. What we have in the new cities is a small test of launch that we did last year. What we are doing is going to start in 2022. And the capex that we foresee is no different to what we have right now in terms of what the cost of per kilometer of the Jeep on, very similar to what we are doing so far. We are covering... I can tell you more than 20 cities of the main cities in Mexico. That's way more small towns surrounding those cities, but you can count over 20 of the largest cities in that part. And the capital that will remain per home pass and per subscriber to be added is very similar to what you see right now. The difference with the GPOM project is that we migrate subscribers to the GPON platform. So we have to change the CPE. And of course, that CPE meaning the set-top box or the model on the subscriber's premises. And we did that because we are reusing also all those in the existing or the rest of the areas that Megacable has. So it was an acceleration of the capex that we were going to have to do in the years to come, and we did it in 2020, 2021. We're very satisfied of the improvement. We promised to deliver the GPON with 24,000 kilometers, and we're very, very close is going to be finished on the first quarter, end of first quarter of this year. So we're very happy of the projects that we have. So CapEx, you can expect that, as Luis said, for 2022, around 40% of our revenues. That CapEx has a huge amount that is going to be set for expansion of the company, and not as the past projects that we did in GIPON that was for the network evolution. This one is completely going. towards expansion of new subscribers in new systems.

Perfect. Very, very clear. Thank you, Henrique. Thank you, Raimundo. And if I may, just one follow-up. You mentioned rebuilding 24 kilometers of fiber in 15 areas. Do you expect that this, where you are rebuilding, I'm assuming will be an upgrade in the network in some cities, do you assume that you can get a hierarchy from these clients or that would be basically a more defensive move? I'm talking about the areas where you already have a presence.

Both. It is a defensive, but it will be part of bringing a hierarchy. All those areas as well as the other ones because we have to remember that the set-top boxes that we are using has a hybrid set of boxes. That means they can be used in HFC and GPON. So the investment that will allow us to continue using the best of the old set of boxes so we can migrate to XView platform, not only the GPON area, but also the HFC area, so customers can acquire the apps all the apps that are in the market and upgrade from a linear to a non-linear video platform. So we will expect that to bring and also will be a defensive. It sure will keep us in the low levels of churn that we have right now going into the future. And remember that we still keep lowest outputs in the industry. So we are in a very strong position to compete with the highest margin Low SRP, good technology, good product, and integration of apps in the majority of the markets where Megacable provides service. Not the new. The new systems will, of course, get the best of the state-of-the-art technology of the GPON platform, but the existing markets are well served in order to compete.

Perfect. Very clear. Thank you very much. Thanks to you for the question. And our next question comes from the line of Andres Coelho with Scotiabank.

Please proceed with your question.

Yes, thank you for taking my question. The first one is on your B2B segment. Obviously, we saw a very strong growth in corporate. And you mentioned in the press release that contracts with the government were stronger this quarter. So I was wondering if you can give us some color on the performance of the government segment, if it's municipal, state, or federal government. Thank you.

Sure. We did have a good fourth quarter. Just remember, without taking some of the good results from our management team, we do have seasonality in the fourth quarter, too. We do have also an increase in government. The majority of them were coming from federal, not that much state or municipal. We will continue looking for state and municipal, but we have some of the federal. But remember that our results from MCA, Metro Carrier, and OLA, the portion of government sales it is still very low. Low meaning we don't get to one-fifth of the revenues of the corporate sector. OLA is the one that has the majority of that share of the pie, around 40%, a little bit more depending on the quality of OLA comes from sales to different entities of the government. But the company does not depend on that. The good thing is that without depending on that, massive connectivity, and cloud services from MetroCard and MCM continue to grow. And whatever we're selling on OLA, we feel that government is opening projects for the fourth quarter. We hope it will continue to be. And we are a very important company that provides services to the government. We will continue to see that over to 2022. Our expectation is that growth on the corporate segment will continue to be.

Okay, thank you. And one second question regarding your strategy in Mexico City. We saw Mega Cable launching services in four municipalities of the northern part of the city. I was wondering if in 2022 you will work inside those municipalities or whether you will expand to new municipalities in Mexico City this year as well.

Yeah, I saw, Andrés, When we describe the areas that we were going to build as the expansion plan, we always look for areas where we feel the competition doesn't have the strong network. Some of those areas still have copper or HFC coming from other companies, or doesn't have Chiffon coming from the other company or Total Play in that part. In some of the areas, we will compete, of course. We look for penetration. We see the penetration they have. We do our market research, and we see that there is an appetite for a new company that provides better service and better video solution. We are that company. We know that we can perform well. And why we pick those areas is because they make all those criteria. Also, we are... And we have been for a long time having presence in the north part of Mexico City. Maybe it's not Mexico City. It is the state of Mexico where those municipalities are. And it makes sense for us to come from north to south. We have operations. We are efficient to cover that. We have offices. Our network, our existing MetroCard and MCN network goes through those areas. So that's why we picked that, because the number of compas and the competition makes sense for us. Of course, the project to grow the Mexico City, it will take us to other municipalities more in the surrounding areas of Mexico City and not only on the state of Mexico.

Okay. Thank you very much. You're welcome, Andrés.

And our next question comes from the line of Alejandro Chavala with Credit Suisse. Please proceed with your question.

Hi, Melatine. Thanks for taking my question. Two questions. One is on pricing of the existing footprint, considering the inflation pressures that we are seeing. Do you think... What do you think is the original expectation for RP growth for 2022, perhaps losing the digits? And the second one on the GPON project, I understand that in this quarter there is an overlap because you're still investing in what's missing of the GPON project and also starting to invest in the expansion. So I wanted to understand how much of the investment of the – the operating project is still pending, or how much was the effect for the fourth quarter?

Thanks.

Sure. Let me answer you the pricing strategy regarding the ARPU, and then I will fund the answer. I will let Luis to answer you regarding how much of the GPON project is pending and what is going over 2022. Regarding the output, we expect the output to continue to increase, not only for price increasing, but for the increase of RUs per unit subscriber, migration of GPON, the sale of apps on the video platform, and we call it on the video platform. It's been adopted. Netflix, Amazon, HBO Max, and the new Disney Plus that we have in the company on that part will contribute to the increase in the ARPU. So the double digit revenue coming in 2022, it sure will come from new subscribers. It will come from an increase in rates. It will come from an increase in the products that the company has. And all around, that will give us the double digit numbers that you will have. So you can continue to expect higher ARPUs and the double digit revenue going into this year. I don't know, Luis, if you want to answer regarding

Yeah, we are very close to around 85% completion on the G-Point Evolution project. So basically, in this first quarter of 2022, we will see that number coming basically in Q1.

So a number below 1 billion pesos or something.

Thank you very much.

You're welcome.

And at this time, we will turn it back to the web for any further questions.

Okay, so we have a question from Fundamenta Capital. Congrats for the results. Can you please give us some color on the gap that's needed for the expansion plan to be achieved from 2022 to 2026?

Well, basically, we have not announced a number. because that will disclose some of the costs that we have, and there are some NDAs with vendors in this regard. But we gave out a number to give you a clue, and that was around $200 per new addition or new subscriber. That includes network, subscriber equipment, everything. That's all included. And basically, that will help you build the number that you're asking.

That one, Martin, as we said, we're going to go double-digit revenues. Around 40% of that is going to be CapEx over 2022. That CapEx is organic and expansion. We are not going on a crazy... and the of getting crazy with the capex. We know our capacity of building. If we can build more, we will do that. But the expectation is to remain at 40% of that. The good thing is also that that 40% covers the expansion of the company, or not only the expansion of the company, but also the organic capex that we have right now. So we're making megacable. looking to, or we have a much more efficient megacable in terms of capex over revenue of the existing area, and we still have enough power to go on a very reasonable ratio of capex over revenue to go for new markets, you know?

Okay, the next question comes from Times Square Capital.

When will CapEx intensity begin to decline? When will it get back to the current levels? Or do you think the current CapEx helps to future-proof the company for the foreseeable future?

Thank you, David, for the question. And yes, both. We think this is future-proof investment. So in the foreseeable future, we see the network being there and compete with everybody, anybody. But also, we can tell you that CAPEX intensity will decline after we finish the expansion in these new territories. We will, of course, once we finish the GPON Evolution project in the current territories, we will have a reduction in CAPEX. And we will focus our cash flow on CAPEX for the new territories. And then by 2025, when we are done basically with the investment, we may see the reduction and more with a higher decline in 2026.

OK. Next one comes from Alpha Sydney. What competitive response have you seen to your entry to new territories? Thank you, David.

Well, what have we seen? As you know, total place expanding footprint. It is pretty much in the majority of the markets that we have. Telmex has been our competitor for a long time, as long as the satellite companies. EC announced the entry into some of our territories, and well, we're ready for that competition. Okay, regarding the new territories, okay, what we have seen is that there is a big appetite, okay, for our service, and that's why we launched. We still don't have enough footprint, and what they have there is they cannot lower the existing ARPU of what they have in Mexico City, Monterey, or here, Zapopan, close to Guadalajara. That's the ARPU they have. What we have in those cities is a higher ARPU ARPU proposal to what we have in our existing markets. What we are is in a very good position. Whoever wants to come and compete and they are doing here, they got to do it with a low ARPU because we have a low one. Wherever we go and compete, we compete over in their systems with a better technology and with a higher ARPU than what we have right now. And we have. the highest margin in the industry with the ARPU that we have in the existing market. So we're very confident and looking forward that not at the beginning of 2022, but sure this will bring very good and positive results for 2022 at the end and 2023 and going into the future. So that's what we see from all the systems. Telmex increased speed. That's what he did not long ago. where they have fiber. They don't have fiber in all the systems. What we do with that, we increase our speed. We have the capacity in the HSC and the GPON areas to do that. So our subscribers will never, they won't have a worse proposal than the competition has. And believe me, our video service, our XView platform, as Enrique said, we surpassed 75 million VOD or video interactions. It's just moving like crazy. I mean, people love our user interface, and they have those 2.4 million subs. That's the reason why we continue to grow in terms of video. The mouth-to-mouth of the new platform is giving us good results over there. So we're in good position regarding the competition.

OK, the next one comes from from JP Morgan. What will be the short-term milestones that we should expect to understand that you are tracking as planned with your new expansion plan? Any HomePass goals for this year or a number of cities? And a second question, how different is your bundling strategy being in this new region? Is Pay-to-Be a big driver for client interest?

Yeah, it's part of what Tayo said on that part. Roland, lovely question. What we're expecting... Okay, what we say is that we will double the size of the company. When we announced that, we said that we were going to build between 8 to 9 million home paths. If you consider 3.5 years to achieve that, sure, our goal will be over 2 million by 2022, 2 million home paths. The majority of them are the second half of this year. The number of cities, as I said before, is over 20 of the main cities, but we have a huge amount of small towns and municipalities surrounding those areas and surrounding our existing areas that will be built over this year. So it's a very aggressive plan we're taking that we build those 24,000 kilometers in an 18-month period from the past, from the Japan evolution, so we can achieve this goal for this year to come. Now, how different is the boundary strategy? As I said, it is a strategy that has a higher output than what we have right now, but below what competition has. All of that comes from the best technology, the best video technology. It has all the apps integrated, the Android TV platform, the voice, the Google voice assistant control, and a great speed. And also we're taking advantage of whatever dissatisfaction that might be over those existing markets that doesn't have still diverse technologies. So all together, that's pretty much the plan that we have for the new areas.

OK, the next one comes from AM Advisors. Good morning. One question. What level of penetration is needed in new territories to a positive ROI?

Good morning, Javier, and thanks for the question. And really, it depends on what you call positive. If that means above 1%, well, just having around 15% penetration gives you positive ROI. But our penetration targets goes beyond 20%, reaching almost 30% of the new market. And that's really giving us return of investment in excess of 15%, basically.

Okay, so no more questions over the webcast, but I believe we have one more from the phone line. So, Pleder, please go ahead.

Sure. I believe the last question we have. from Carlos with GBM. Cliff, we'll see what your question is.

Yes, thank you. Good morning. Thank you for taking the question. So I guess the question that nobody has to ask is about the AMX and pay TV. I know that very recently the IFT seems to have delayed that decision, but I do think it could significantly change the landscape in the things like market. So I was wondering, What are your thoughts on this and how could NMX react? I mean, they obviously already said that they would invest more in fiber rollout. So just I want to hear your thoughts on that. Thank you.

Well, first of all, it's ridiculous the amount that they announced of $400 million for the whole country of Mexico. I mean, that's... I don't know who are they trying to... impressed with that figure. Telnet America Mobile has been the company that has invested proportionally the less amount of money in CapEx in the last five years of any other telecom company in the country. So if they thought that with that offer they would get the authorization to provide fake TV, that's ridiculous. I think that the companies that would be mostly hurt if American Mobile gets the KTP license would be the other cellular companies. Because they will be really, I mean, if now they are in a bad competitive position against American Mobile, if American Mobile is able to provide the video service, then they will have another advantage over the current cell competitors that they have. We are prepared. I mean, I think that the waterline companies that operate in Mexico are prepared to win in competition. Competition makes you better. It obviously puts pressure, but it's not something that will I mean, be catastrophic for us. I don't think that they should get it because they have so much power in the market. If you measure that by revenues or by number of customers, especially, they still keep around 70% of the total cell phone market. And half of the total broadband is broadband. And half of the total... fixed telephones in Mexico. I think they're still a very, very preponderant player. I do think that they will, the government or the IFT has to review the measures that they have imposed on them to lever the ground. I don't think that they have been very, very effective. They should do something else. and they should make them comply with those rules. That would be our thoughts on that. I think we are okay as we are right now. And we don't think that the government, and I don't think the government will grab that license in the short term. It should be, I mean, I think that the next year The next review would be in about a year and a half or two years.

Thank you for sharing your thoughts, Enrique. And I believe there should be one more on the webcast.

So I'll hand it over for the webcast questions.

Sure. We have one more for Alfa Cigni. Are you seeking to replicate your store payment network for new territories, or do you anticipate less cash payment in Mexico City?

Well, that's a very operational question on that part. We won't change the way that we operate, the way that we serve our customer Every day is much more on a digital manner, not on a presentation. But we will still serve some of those customers, not only for collection purposes, but for some of the upgrades and sales that we have. It will depend on each of the markets. Mexico City, it will have some presence. And we will continue to collect money from third parties, like banks and other institutions. So we won't have any problem to replicate what we have right now in Guadalajara.

I think that was all. We don't have any more questions.

And if there are no further questions, I'll hand this call back over to Mr. Yamuni for closing remarks.

Thank you very much. As always, it was a pleasure to discuss our results with you. Please contact our investor relations department if you have any questions or concerns regarding the company. And have a wonderful day and a magnificent weekend. Thank you very much. Thank you all. Thank you all. Have a good weekend.