Megacable Hldgs Sab Ord

Good morning and welcome to Mega Cable's first quarter 2022 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 perspectives. and prospects, which are subject to risks and uncertainties. Mega Cable undertakes no obligation to update or revise any forward-looking statements. I would now like to turn the call over to Mr. Enrique Yamuni. Sir, you may begin.

Thank you, and good morning, everyone, and thank you for joining us today. During the first quarter of 2022, the macroeconomic environment remained complex. At the quarter end, the estimated GDP growth remains below 2%, leading to a more conservative annual growth estimate for 2022 from the original 8%. In addition, the estimated annual inflation rate at the quarter end is higher than 7.3%, almost reaching 8%, while the economy activity recorded zero growth in the month of February. However, and in spite of, even in the challenging environment, the company continues to see growth opportunities as bandwidth demand continues to rise due to the adoption of trends like streaming and gaming in hybrid work schemes continue to be adopted, supporting the need for connectivity. As this trend remains, there's room for growth in the telco industry. It is in that context that Megacali continued recording net ads across the three services of the mass market in significant year-over-year growth. In unique subscribers also, we had very good growth. Results that were also reflected in solid financial figures as the company reached double-digit revenue growth when compared to the same quarter of last year. also supported by extraordinary contribution from the corporate segment. The financial growth has supported by the prevailing necessity for our services in a market that should continue to grow. In that sense, in March, we carried out speed upgrades to all our subscribers. As the company is aware of the increasing bandwidth requirements, It is important to mention that these migrations were supported by the network investments we have carried out over the last periods. Related to our MVNO product, the company interest is to grow in this business unit, and the AT&T partnership that we announced during the quarter follows that line, as it would allow the company to strengthen its service in specific territories. This does not mean that Megacable would not use or support Altan anymore, as we will remain Altan's shareholder, clients, and suppliers. We're proud of our efficiency in terms of capital expenditures. As of this quarter, the organic capex to revenue rate remains in the low 20s before special projects. which led us to be optimistic about the levels we could reach from the current mid-30s overall once we conclude with the initiatives we are executing. As for the projects we are developing and regarding the next generation video service, XViewPlus continues to post interaction rates higher than 70 million per month. Furthermore, during this quarter, we were able to fully integrate two of the most popular and most viewed platforms to XView Plus, which were Disney Plus and Star Plus, which will significantly contribute to the subscribers' preference for our service. Also, Megacable continued to make steady progress in the network evolution project, which includes GPON migration, which is practically completed with an advance of more than 90%, as well as the increase of bandwidth capacity for the remaining HFC territories, with DOCSIS technology. It is because of these investments that we were able to duplicate the capacity for our network in both territories. Regarding Megacable 2024, we continue to advance in the rolling out and activation of new kilometers, and we are currently going to the construction stage, which, like any other project of this magnitude, has been facing some minor setbacks. the project continues to move in the right direction. It is really important to highlight that the inherent benefits of MEGACABLI's 2024 project will become increasingly tangible over the second half of the year. If you recall, this initiative of entering new markets will allow us to double the size of the company in terms of revenues, EBITDA, and Homespass. Also, Due to the company's strategy to guarantee its supplies in advance, there has been no significant delay in the reception of equipment and material. As this was ordered by anticipation, we have already received some of the materials we will be using in our expansion plan for this year. On another note, Megacable has always committed to the development of the communities in which it operates. to practices that support social participation and environmental awareness. In that line, I'm pleased to announce that we recently received the Social Responsibility Distinction by the CMEFI. This distinction represents the first milestone in many to come regarding ESG practices. Also, I would like to announce that at the General Ordinary Shareholders Meeting held yesterday, shareholders approved a dividend payment of 2.4 billion pesos representing 20% of 2021 consolidated EBITDA in line with our dividend policy. The payment will be carried out in one installment on May 26. To conclude, since we have practically completed our network evolution project during the following periods, most of our efforts will be focused on the megacablet 2024 project execution. We are convinced that this initiative will gradually accelerate our results over the second half of the year, despite the delays faced in some cities as we see new markets aligned to our standards of quality and profitability. I will turn now the call over to Raimundo to discuss our operation performance. Raimundo, please go ahead.

Thanks Enrique and good morning everyone. The quarterly results continue to reflect the value offering of the company with net app growth both in terms of ad views and unique subscribers which has been translated into double digit revenue growth and the highest margin in the industry. I would like to highlight the bandwidth incremental capacity in both our HFC and GPON technologies, which have allowed us to carry out the process to improve the speed of all our subscribers. This migration resulted in having the majority of our subscribers at the end of the quarter getting speeds of 50 megs or more, compared to 13% before the migration. We continue with a clear commitment to improve customer service, and this is a clear example of that. Moving on to results on an annual basis, unique subscribers grew 4.8%, giving the net addition of 190,000 subscribers, of which 26,000 were incorporated this quarter, resulting in a unique subscriber base of almost 4.2 million. Following our triple and quadruple play packages commercialization strategy, RU's increased 7.9% from 9.8 million in the first quarter of 2021 to 10.5 million this quarter. Additionally, RU's per unique subscriber amounted to 2.52 this period compared to 2.45 in the same quarter last year. Breaking down by service, Internet shops amounted to 3.9 million, in line with the 303,000 and 59,000 net additions recorded for the year and the quarter, respectively, representing growth of 8.4% and 1.5%. In the video segment, subscribers increased from 3.4 million in the first quarter of 2021 to 3.5 million this quarter. representing 106,000 net additions. On a sequential basis, the number of subscribers recorded a slight increase, maintaining practically the same levels. XView Plus platform subscribers amounted to 2.6 million, in line with the more than 1.1 million net additions of the last four months, of which 155,000 were recorded this quarter. Regarding the telephony service, Subscribers increased from 2.7 million in the first quarter of 2021 and 3.0 million in the fourth quarter of 2021 to 3.1 million this quarter, representing a growth of 13% and 2%, or 362,000 and 58,000 net additions, respectively. The MVNO service subscribers only increased from 428,000 in the last quarter to 432,000 this period. During this quarter, a change in the subscriber recognition policy was made, establishing that after a certain period of not recharging the services, the line will be disconnected. As a result of the vote, there was a one-time effect on the number of net additions of the MVNO platform, since only 4.2,000 net additions were recorded this quarter. Excluding this effect, approximately 70,000 net ads should have been recorded. Nevertheless, it should be noted that this item has no impact on the revenues of this service, which can be clearly seen in the 9% growth of the ARPU of the mobile service when compared to the same quarter of last year.

Turning to ARPU per unique subscriber,

This recorded an annual growth of 2.7%, reached 422.4 pesos, driven by an increase in most of the ARPU services. In this regard, on an annual basis, ARPU increased 2% for internet and 4% for telephony. Meanwhile, video remained virtually at the same level of last year. Shown rates remained practically flat to the previous quarter, due to our retention campaigns, since economy is not at the best. Additionally, it is important to know that despite the solid growth registered in our subscriber base over the last two years, shunt rate levels are even below than the pre-pandemic period. In the corporate telecom segment, the efforts made to align the operation to current market conditions are increasingly reflected in results, as MetroCarrer and OLA recorded double-digit annual growth rates of 20% and 18% respectively, while MCM increased 8%, representing the strongest growth in the last 10 months. With these results, the corporate telecom segment is once again at pre-pandemic levels. We anticipate that this growth trend continues in the coming periods. Hand in hand, with increased operational traction to be generated in Tijuana, Mexicali, Chihuahua, Aguascalientes, and some other cities where Metro Carganola has recently kicked off operations. To conclude, I would like to emphasize that the company's strategy remains oriented toward providing an attractive value offering featured by its quality of technology edge. All the above leverage on operating efficiency through the execution of our three flagship projects, the network evolution, our NGV video platform, and MEGA 2024 for the expansion towards new territory. 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, everyone, and welcome.

During the first quarter of 2022, consolidated revenues recorded an annual increase of 10%, totaling 6.6 billion pesos, driven by the double-digit growth obtained in the corporate segment, as well as by the higher subscriber base achieved in the mass segment. In that way, corporate telecom segment revenues increased 16% from 2017, $911 million in the first quarter of 2021 to $1.1 billion this quarter, its best performance of the last two years, following the growth of 20%, 18%, and 8% recorded by Metro Carrier, OLA, and MCM, respectively, due to the greater dynamism in the corporate segment and higher revenue in the connectivity sector. Likewise, The mass segment revenue amounted to 5.4 billion pesos, 9% higher than the same period last year. In line with the performance registered in all services, where broadband increases 10%, video 3%, telephony 18%, and mobile 124%. As a result of all the above, the company's revenue mix was integrated by 83% from mass segment and 17% from corporate segments. As a result of all the above, all the company revenue mix was integrated by 83% from the mass segment and 17% from the corporate segment. Turning to cost and expenses, the cost of services increased 12% this quarter from $1.5 billion in the first quarter of 2021. to 1.7 billion pesos, following the higher operation volume and a higher mix in the equipment sales in OLA, with the corporate segment and the increase of the mobile services business. In the mass market, likewise, operating expenses were up 13% on an annual basis, amounting to 1.6 billion pesos.

Quarterly consolidated EBITDA

amounted 3.2 billion pesos, and annual growth of 8%, implying a sequential increase of 150 basis points in the EBITDA margin, which stood at 49.2% EBITDA for cable operations, totaled 3.1 billion pesos, increased 8% year-over-year, and recorded a margin of 50.8%. During the quarter, net income reached 1.2 billion pesos, 6% more than the figure recorded in the same period of 2021, with a net margin of 17.8%. Moving into the balance sheet, net debt was up in its annual sequential comparative to 4.8 billion pesos in the period, in part because the commercial credit terms from the G-point migration are getting duped. although Megacable has a solid cash level and leverage remains at the very comfortable levels. In virtue of the aforementioned, the net debt to EBITDA ratio was 0.39 times and the interest coverage ratio was 15.89 times. Both remain at very healthy levels. It is important to note that even when a portion of the debt matures next July, the company is already analyzing various financing alternatives to select the one that best meets its needs to strengthen its financial position. In addition, I would like to emphasize that Megacablet's adequate liquidity levels will allow the $2.4 million dividend payment as I mentioned, as well as to continue with the investment in activities as planned. In this regard, CAPEX reached 2,340 million pesos in this quarter, mainly due to the network expansion plan and GPON migration. This investment will be reflected in growth for the coming periods. Lastly, although our outlook is positive for the remainder of the year, we will continue to closely monitor the evolution of the main operating and financial metrics to maintain an orderly and sustainable growth Sorry. With this, I conclude my remarks. Now, let me turn back the call to the operator to open the line for Q&A. Operator.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you'd 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. Thank you. Our first question is from Marcelo Santos with JP Morgan. Please proceed with your question.

Hi, good morning. Thanks for taking my question. I have two. The first is if you could comment a little bit more on the pace of broadband ads. It was a little bit below your peers, and given that you have an aggressive goal of doubling the network, how could we see these ads picking up, and what was the reason for the little bit softer ads? And the second question is about the increase in churn. I understand you wrote in the release it's still below pre-pandemic levels, but is the cost more economic-related? Or is it more competitive related? Thank you.

Sure. Thank you, Marcelo. Good question both.

In terms of the pace of the net ask for broadband that you comment, what we try to do is to continue to pace as we said in our remarks. We want to have a healthy growth in terms of revenues and subscribers. During the quarter, we trained our commercial strategy in this boat sense. Competition came, as you know, with some of the offers in the middle of the quarter. Pelmex, one of them, total play and easy. Easy doesn't count because it's a very small portion of our system. But for the rent, they came. So we adjust also our strategy in that part by the end of the quarter because we felt that our offer that was aimed to increase revenue was too conservative. So part of the acceleration of the net access came from a much more strict commercial strategy that was solved and put more effort into the end of the quarter. That's not the only reason. Also, we felt that the economy in the market is a little bit tight, and that's why we needed to adjust. At the end, my message is that we grew during the quarter in line, revenues net up in what we call a healthy level. The other reason that affects us is that we put all our efforts in the construction of kilometers for the MC 2024. As you can see, the number of compas during the quarter was below what we were building before. And that's because it's not the same to expand the existing territories than to go to new territories. We need to build sites. We need to build operation offices. We need to have the materials. And as Enrique said, even though a project of this magnitude can face some difficulties, We were expecting that. We were struck online with that. But the effect is that, that the number of subscribers and the market that we're taking will come for the second half of the year, not that much this. So it's a combination. The second one is the short, and you asked whether it's economy and competition. As I said, we strain our retention significantly. commercial promotions and offers to the subscribers. We are more aggressive in retaining subscribers because we feel also that our subscribers are facing some of the economic inflation and problems that are over there. Of course, some may come from competition, but the majority is more from the economy since we have the lower ARPU in the systems where we are. According to us, we continue to provide growth even though it's lower, you can expect that to be fixed as soon as our projects of MC 2024 will materialize in new kilometers and the new aggressive campaigns will come back to the market. I don't know if I answered your question.

Yes, yes. Thank you very much. Thank you.

Thank you. Our next question comes from Andres Toello with Scotiabank. Please proceed with your questions.

Yes, thank you very much. Luis, we saw that capex-to-sales this quarter was at approximately 37%. I'm wondering if you are confirming guidance for the year at 40% of sales, capex-to-sales, and probably you have any thoughts for next year, for 2023, in terms of capex. And Raymundo had a question for you too, if I may. We are seeing in the webpage that the coverage of the FTTH footprint in Mexico City now reaches a very large area of the northern part of the city. It seems that you are now very close to many important areas like Polanco, like Lomas, like Roma, like Naucalpan. So I'm wondering what are your plans for Mexico City for a year if we can expect more coverage in Mexico City before the end of the year. Thank you very much.

Thank you for the question, Andres. And the CAPEX says we continue with our projections, and we think that we will be in the high 30s this year, basically the CAPEX. And for the following years, again, we think that, again, 2023 will be high or capex intensive in 24, reducing in 2025.

Let me ask Andres on Luis' comment. What we really like to address is that our existing organic or existing areas, capex, is in the low 20s, which is a very healthy capex of revenue. The amount that you are seeing of that 37% of what Luis is telling you that we feel is going to be between mid-30s to high-30s, more on the high-30s, is because we have all this MC2024 expansion that, of course, is taking capex, is taking cash flow from the company, but will be materialized in our view of doubling the size of the company in the future making the same efficient company that we are in our market you know migrate to new market so so we're going through that process of having a high capex with no no subscribers coming from that capital but again the low 20s is a very very healthy capex for a telco company here in latin america that will be the the extra comment I would like to do. And thank you for looking in our footprint. We're very proud of that. And you can see that we are growing. What you see is the growth of kilometers that we have that are in the process to be activated and terminated. And like one of your comments, it takes some time now to develop that network that we have. big plans for Mexico City. We cannot be out or left out of the largest city in our country. You will continue to see the expansion of the network. I would like to keep to ourselves whether it's going to be Polanco and the upper economic levels. We will cover as well as upper economic levels. We will cover all the areas where we feel that we have a the best potential to grow in terms of kilometers, kilometers compact, and the status of competition so far. We are doing very well in those cities, but as I said, the process, as Enrique mentioned that, the process of building 2024 will be first in the second semester. Again, we would love to be, and we will increase and double and triple the amount of kilometers we have in Mexico City.

Yes, we will do that this year. Thank you very much. Very clear. Thank you, Luis.

Thank you. Our next question is from Luca Brendam with Bank of America. Please proceed with your question.

Hi. Good morning, everyone. My question is regarding the ARPU for the Internet business. It grew around 2% year over year, despite most of the expansion coming in from fiber that should have a higher ARPU. So I want to know if you can give us a little bit more color on what is happening in the ARPU for the Internet business, if you are having more aggressive offers for new regions, and also if we can expect to see some acceleration on that for the coming quarters. Thank you.

Thank you. Thank you for the question, Luca.

The output that we have, whether it's broadband in general, remember that since we're selling clipboard play and we have an existing base, the discounts that we account to each service can mislead a little bit on that part. We'd like to address our unique ARPU. Unique ARPU is growing pretty much between 1.5% to 2% on a year-over-year basis. Right now, we have 2% over the last year. We did not have it on a strong sequential basis over four quarters because on the fourth quarter, we have the effect of the back-to-school campaign that we were very successful in July, August, and September, that will reflect an increase of the ARPU over that fourth quarter, and not the motion August and September. So we have a remarkable fourth quarter. This one is still 2% above the ARPU that we have on first quarter 2021. You can expect for us to continue to have that trend which will be a slight increase in the output because of everything we are doing. We do not expect the output to increase significantly because we are penetrating the lowest part of the pyramid in the existing markets. And even so, in the new markets, we have an aggressive campaign that won't increase significantly. The output will come from... more products that we sell on the video portal, like apps, XView, that continue to grow, and the migration of speech. We're very proud to tell you, as I said, that now the majority of our subscribers are not in 20 megabits, or even 30, are in 50 megabits. So that proves that our investments on the key point evolution, on the evolution of our network, are not only aimed to new markets, but I aim to protect and to provide a better bandwidth and product to our subscribers. So we have a better product, and ARPUS will continue to increase its life. That will be my message.

And if I may do a comment here, this is Enrique. It's not, that's a paradigm that ARPUS and fiber would, are higher than ARPUs in HFC. The ARPUs come from service and speeds that you can provide, and also the condition of the market. I think that we're doing a good job there, and you remember that we mostly sell packages, and most of them are triple play, so the subscriber gets... very high and very good discounts by getting the deal of the triple play. Over time, I think we will have to move a little bit over to sell more naked internet and products like that as the economy tightens because people will try to be more efficient in their expenditures at home. But so far, we're still trying to push the triple play and the double play. But, I mean, if the market demands, we for sure move to other products like naked internet. Thank you very much.

Okay. That's very clear. Thank you. Thank you.

Our next question is from Alessandro Chavelles with Credit Suisse. Please proceed with your question.

Thanks for taking my question and congratulations on the results. Just one from my side. I was a little bit confused on the one side. You did mention that corporate was already entering several markets, such as Mexicali, Chihuahua, Tijuana, Aguascalientes. So that seems to be on track with the expansion plan. But on the other hand, you mentioned some delays. So, do you mean delays of equipment arriving for other cities that you will enter afterwards, or do you mean construction in other cities? Like, to understand a little bit more that comment. Thanks.

Sure, Alejandro. We're very proud of the results of Cochrane.

We kick off new cities. The results that you see on 20% of Metro Carter and 18% of OLA do not consider still significantly those new cities because they were made pretty much on the second part of this first quarter. But it's for real that we are in new cities and launching that. So you can expect corporate to provide and continue to provide good numbers for the rest of the years. Even though we don't want to give you a full guidance on that, I can tell you that you can expect the levels of corporate segments to continue to be pretty much because of the opening of new cities and the good results that we have on the existing ones. So far, regarding the delay of units of equipment and materials, we do prevent this when we announce the MC 2024, which was pretty much on the third quarter of last year. We are on track with minor delays on that, but we are, besides the delays, that are, as I said, minors on equipment and everything because we order those in advance. Of course, we had it before some inventory or projects that we always keep. So we were using that to provide and to continue to do. The delays don't come pretty much from those materials, even though, as I said, it's likely a delay, small delay. but comes also from the operational parts of finding the offices, the sites, building those, getting the permits. That's where we are. In general, we are giving you all the details. You can expect that this project continues to go. If we have some delays, it will be of minor impact of what we promised you before. We feel very, very... happy to tell you that you will see the results on second half. You will start seeing results all over because we're not only building two or three cities. We're massively expanding the operation of Mega Cable in several tens of cities. Several cities. So our operations is hard to imagine, but this is going on. I can assure you that we have I can tell you 40 cities are going into projects at this time. Of minor sizes, big sizes, we like to keep it, but we are very aggressive, and you will feel that because we are serious on that project.

Thank you for the very clear explanation. Perhaps just a follow-up. I don't know if you have shared this, but do you have the penetration of broadband within the expansion regions of Megacable for the 2024 plan that you can share?

Alejandro, I think it's too early to establish the levels of acceptance in the new cities that we are building the network. Remember that we have Mexico City, Zapopan, and Monterrey. has really activated kilometers and operating. So the other, the remainder number of cities is very small. So it will get, I would think it will confuse the analysts and the people in general.

Yeah, I meant for the overall expansion plan, the 2024 expansion plan, the penetration of broadband in the cities that you, the average from the cities that you will enter.

What we expect is what you're talking about. Sorry?

Oh, look, the penetration of broadband in the cities where we expect to go, it varies, but everything is between 55%, 60%, to 70%, depending on the size of the city. Release is around 60% to 65%. We believe as a company that the growth of broadband will continue to be. We for sure will reach the mid-70s to 80% of broadband. Maybe with good economy, we'll go higher than that in the low 80s. That's why we have aggressive marketing campaigns. And what we expect to have on those markets, as we announced and we say, we expect our penetration to be between 20% to 30%. That's what we want to keep of those markets. If we get to 80%, sure, we will get to 30%. If we are in 60%, sure, we will look for 20%. Those are our numbers. We look to be efficient in the markets where we are. We have a much more higher penetration than what I'm telling you, but we are conservative in what we are telling you.

Maybe we will do better than that. Thank you very much for the clear answer. Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from Carlos Legorada with GBM. Please proceed with your question.

Hi. Thank you. Good morning.

More than a question, I would like to have a clarification from the strategic plan that you guys have. It seems to me like last year and during the investor day, you were talking about a horizon of three to four years to double the size of the homes passed. But from more recent conversations, it is my impression that you're aiming to do that faster, in two or three years. Obviously, that has an impact on the CAPEX levels that we will see throughout these years. So I think it will be very important for the market and investors to really understand the intention that you guys have going forward. Thank you.

Thank you, Carlos.

And good point as well as the others. We, as we told you in the first debate, we're aiming to double and decide pre-motion for years. That's the plan that we have. In order to do that, we need to have the network and the cities before that because maturity of those markets to reach the penetration that we expect takes between 12 to 24 months. So we aim with everything we have to build up the number of home paths in the next three years and expect to double the size of the company in terms of revenues, EBITDA, that we announced in the next four years.

So you can count to 12 months after that to start seeing those results for 25 years.

So basically the CAPEX, the majority of the CAPEX will be spent in 2022, 2023, 2024. Maybe we will have some minor capex in 2025 as the last piece of the project, but we are trying to achieve the goals. That's why we call the project Mega Tablet 2024.

Mostly related to CPE equipment that we've installed as soon as you continue to have more subscribers. The main capex that we have right now is in infrastructure, facilities, network, and everything to be able to provide the service.

Exactly. Thanks.

And, I mean, it might be just one quarter might be not enough to understand, but it seems to me like the number of homes passed that you built during this quarter has to really, really pick up in order for you to reach the target of rolling out those home paths in the next three years. Can you comment on this? Do you expect a significant pickup? Or, as you said, perhaps there have been some delays there?

No, sure, Carlos, and we'll look into our numbers. I mean, of course, we count kilometers that are activated. To have the kilometers activated, you just don't need to build a network on the street. You need to have the facilities. Facilities include power, air conditioning, surveillance, security. requires to build the site, requires the operational. That's why you don't see that because we start really building everything that you see this year. When we plan and we design and we get the approval and we announce, that was on the third quarter. Normally, you start seeing new kilometers after six months, but I can tell you that we are not only doing that in one city. We have all the... infrastructure spread among several cities. So you will surely see kilometers in second quarter, but mostly in the third quarter and fourth quarter. That will be where we end. At that time, the problem will be to have all the commercial effort to install that at the same time, you know, everything. But we should have some answers for that too on the other units, not on the building of the construction site. So you will see the revolution coming to the market more on the third and fourth quarter for sure on that part.

Thank you, Raimundo. As always, thanks for the clear answers.

Thank you, Carlos.

Thank you. There are no live questions at the moment. I'd like to turn the floor back over to management for any questions from the webcast.

Okay, thank you. We have a first question from Eric De La Cruz from Select. Could you give us some color of what kind of projects you all are doing?

I mean, networks, cybersecurity, if possible. Sure, let me, we both, Luis and myself, will address that.

I don't know if he wants to say that. OLA is our big solution company in top of the connectivity of MetroCard. It provides secure service and internet for the connectivity of MetroCard, and it's very well-aimed into that, but also into the sale of infrastructure, network equipment. So what big project we have and why is it a good result of all that during the quarter? We increased on the market that did not took that investment in 2020 or 2021. Now we feel that this is investing into the network and the expansion of the capacity that they have into their offices. That means routers, switching, Wi-Fi, security, and everything. The thing that we have with OLA, and we want to push this into more projects on the tech side, and we're working on that. You will see that in the future, but right now the results come more from network equipment. Network has a lower margin. That's what we have during the quarter. some impact, like impact, because we still continue to have the highest margin in the industry, and it's not a bad margin what we have. But the impact that we have in lowering the margin came because we have a huge increase and a good quarter for OLA, as well as we have also for Megamobi, our MVNO service. That's why we have some pressure. But having said that, it looks very well the 18% increase in revenues that we have coming from A little bit of everything, cybersecurity, network, and development of solutions to all our metro carrier and megacable substrates.

The next one? Okay, the next one is from Arturo Langa from Idaho.

On the back of Carlos' question, can you provide more color on capacity intensity over the next four years?

How does that evolution work? I'll let you do it. Luis, that's a good one.

Okay. Well, basically, and we mentioned some on Carlos Legarreta's question. Basically, as we mentioned, we expect these projects to be completed for the highest portion of the CAPEX to be executed in the years of 2022, 2023, and 2024. But also, as Raimundo mentioned, the operating CAPEX or organic CAPEX, we expect that to be on the low to mid-20s for the following year. And we take that as a good time for the CAPEX after we finish the project.

The audio just went down too much. Okay, it went down? Our audio?

The audio went down. Maybe you could repeat the answer, please.

Okay. Can you hear me better now? Yes. Okay.

So we mentioned also to Carlos' question, that the majority of the CAPEX will be executed in the years 2022, 23, and 24. And the CAPEX organic or the operating CAPEX that we have in existing territories was registered on the low 20s. So that we see as a sign that in the future we will keep low to mid-20s for us on organic capex. So that gives us a line of sight for the following years after 2024.

What Luis is saying is that if we were not doing the expansion plan that we put in place that we call mega-cably, 2024, our CAPEX levels in the existing areas, original areas of Mega Cable, would be around a ratio of the low 20s of our revenues. And maybe in the future, we would maybe go down below the 20% of the revenues. But the CAPEX we're doing in the expansion plan is taking us to levels of 35%, around 35%, 36% of the revenues, considering that those areas, those new areas will start giving us extra revenues or increasing revenues in a more constant ratio starting the second semester of 2022. So we think that we're on the right track, and we will be in very reasonable ratios of CAPEX to revenues by mid-24, at the beginning of 24, yeah, mid-24, when we are in a much better position of new homes passed, new territories, increase in revenues,

And that will be a very good moment for the company.

We have a follow-up from Arturo.

Can you say that in terms of capital sales at a consolidated level? I believe we have done that. Thank you. Just to understand if the capital is above the 40%, you're running the company accurately. Well, we continue with our plans on... capex and it could reach high 30s. That's our expectation. Maybe we will reach the 40s, but basically for now we will call it on high 30s.

And Arturo, let me compliment Rick and Luis on a much more detail of what we're doing so you can see what the future will look. We have the G-Point Evolution Project as well as increasing fiber in the rest of the systems of mega cable. The GPON network that we have will allow us to migrate also to the next generation of GPON when we need it with very low capex to be invested related to what we're doing right now. What I mean is the network will last for many years to come. The CPEs that we're installing right now that is part of the capex that you see both in HFC or GPON are capex that will be used for the future regardless of the technology. That's a great advantage that we have. Our hybrid set of boxes can be used in HSC or GPON. So whenever we continue to migrate to GPON, the rest of the areas of megacable, we will not have to replace the CPEs that we have in that part. So once we finish building the GPON, the MC2024, The capex should come from acquisition of subscribers. And, of course, companies like us will always have maintenance capex of changing and replacing sector boxes and increasing part of the network. But it sure will look like we will be in the 20s, like Enrique and Luis mentioned on that part. And that will come once we finish all this part in the next four years, five years that we will have, that we will foresee. Right now, we're focused on the high 30s, like Luis is saying. That's where we are because we have special projects like MC 2024 that will short burn cash and capex from us and will bring subscribers at the end of this year and mostly 2023 and 2024.

Okay, we have another question from Marco Bataglia. How many standalone video subscribers do you have? Okay, so standalone video subscribers, we have in the range of 250,000.

And that is the last question from the webcast.

So if not for the questions, I will pass the call over to Mr. Yamuni for final remarks.

Okay. Thank you very much. Enrique?

Yeah, I think I got disconnected.

No, we can hear you.

Okay, thank you very much. I think I'm on the line again. As a final reminder, well, thank you very much for your attending this conference. And as always, we are open to future questions or extra comments that you have. We will be glad to attend you. And thank you very much, and Megacable will for sure continue to deliver good results, and we're prepared for the future, and we will be one of the best, keep being one of the best telecom companies in Mexico and Latin America. Thank you very much for your attention, and we expect to hear from you in the future.

Yes, just adding to your comment, Enrique, and as a closing remark from my part, we have a 5% increase in unique subscribers and a 10%, pretty much 10% increase in revenue. We're a very healthy growth regarding the number of unique subscribers and revenues that we have. We're aimed to the three main projects and the three projects that we mentioned earlier. We're evolving our existing network. We are doing the vault of the video part to the XView with 2.6 million subs already migrated to the way subscribers want to see video, want to watch video in the future, want to watch entertainment, I would like to say. And also we continue to do the MG2024. Thank you for your trust. Those are the three main things that are kept in our mind. you know, growing the revenues, growing the evidence, keeping the margins at the levels that we have, as well as doing those reports that sure will reach double the size of this company in the years to come.

Thank you very much from my part.

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