Megacable Holdings

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.