Megacable Holdings

Good morning and welcome to Megacable's second quarter 2022 earnings conference call. With us this morning from Megacable, we have Mr. Enrique Yamuni, CEO, Mr. Raymundo Fernandez, Deputy CEO, and Mr. Luis Zeta, CFO. Let me remind you that the information discussed in today's earnings call may include forward-looking statements on the company's future financial performance and prospects, which are subject to risk and uncertainties. Megacable undertakes no obligation to update or revise any forward-looking statement. I will now turn the call over to Mr. Enrique Yamune. Sir, you may begin.

Good morning, everyone, and thank you for joining us today. During the second quarter of 2022, the country continued to face a complicated economic scenario, highlighting an inflation rate that continues to rise, increases in Banxico's reference rate, and a GDP annual growth expectation below 2%. These factors are being reflected in the economic activity and in purchasing capacity of the Mexican families. In that context, Megacable maintained double-digit revenue growth compared to the second quarter of last year, and a very attractive EBITDA margin, remaining the highest in the industry. These results were mainly due to a successful commercial strategy, including subscriber growth across the mass market with a higher ARPU. In addition to bandwidth capacity increases reflected in a better and more reliable service, coupled with the concrete measures to maintain an efficient cost structure. the previously mentioned offset and increased churn rate mainly due to the economic conditions. It's important to clarify that although we continue to advance in our efforts towards entering new cities, these results does not yet include a relevant contribution from new territories as we expect the bulk of subscribers growth from our expansion plan towards the second half of the year. Sorry. Also, It is worth mentioning the growth trend of the ARCO as we continue to offer additional services to enhance the user's experience such as the XView platform and also contribute with additional revenue from the same number of subscribers on top of the rate increases we did during the month of March. To share more color on XView of quarter, I'm sorry. To share more color on XView at quarter end, 65% of our subscriber base already enjoys the best multi-platform video services with unmatched video quality, speed, and a friendly user interface. Innovation has always been part of Megacab's culture, and XView Plus is proof of that. It is a great service complemented by a new fiber infrastructure in the largest cities, and a robust HFC technology for the rest of the footprint. On the corporate side, connectivity remains the main growth engine for the segment, as Metro Carrier and MCM posted double-digit revenue growth. This is mainly due to the adoption of connectivity and mobility solutions that benefit work out of the premises, a trend that should continue to develop in the coming periods. Yes, like the mass market, our corporate segment will also have a growth boost in the second half of the year with the entrance of the new territories, both metrocarrion and all our potential markets will significantly increase due to the Megacarly 2024 project. All the previously mentioned resulted in double-digit growth in revenues, another record high figure for a single quarter. Additionally, EBITDA margins remain at very attractive levels as a result of the cost control strategies that are part of the company's culture from the very beginning. Looking ahead, we are confident that our business remains well positioned to achieve our annual growth targets in terms of revenues, EBITDA, and subscribers. despite ongoing inflationary pressures in a softer economic outlook. During the quarter, we carried out our first public debt issuance for 7 billion pesos, which will be used primarily to accelerate our expansion plan and, secondly, to refinance our short-term debt. These issuance will further strengthen our balance sheet and support the endeavors that we are executing. Sharing some color on our project in development, regarding our GPON evolution initiative, we are in the final migration process. Most of the milestones that we set for this initiative have already been reached, so we can say that we successfully completed this plan. In this regard, I would like to comment that we are delighted with the positive response of our subscribers to this service upgrade. and we will continue to seek to exceed their expectations and provide them with high-quality service to the deployment of state-of-the-art communication technologies. Regarding the MEGA 2024 initiative, we continue to execute according to the plan. During the past nine months since we announced the project, we have laid the foundations of a robust infrastructure that will enhance growth for many years. Our primary focus has been on site acquisitions. Permits fiber deployment and CTCs and house construction. However, we have already started operations in approximately 10 additional cities, and there are many more to come. It is also relevant to reiterate that in this new market, we will follow a pricing strategy consistent with our usual approach of offering services that meet the needs of users at affordable rates. We are confident in our superior infrastructure and services to gain market share in these new cities without detriment to our profitability. As we have done in the past, we will seek to win new subscribers as well as to retain our current ones by offering the best balance of pricing, bundling, and service quality. We will also look to identify and seize opportunities to grow, as well as to improve our service, making the best use of our flexibility and capacity to adapt in the face of a challenging environment. I will turn the call now over to Raimundo to discuss our operational performance. Raimundo, please go ahead.

Thanks, Enrique, and good morning, everyone. Our operational performance for the quarter included subscriber growth across the mass market, mostly related to successful commercial and sales strategies as reflected in the high figure of gross ads for the broadband service in the history of the company, coupled with an increase in ARPU, which helped to offset inflationary pressures that are impacting short rates. Here it is important to underscore that the entry into the new markets is not yet fully reflected in our operating results, as we are still in the process of deploying and activating the required infrastructure. However, the 428,000 new home paths is record high. This means that the boost from this expansion project in terms of subscriber and RU growth will materialize during the second half of the year. Even in this context, and with a difficult economic environment, the company managed to continue reaching historical revenue figures at very attractive EBITDA margins, proof of the strength and resilience of our business model and the preference of our subscribers. Moving to results. unique subscribers reached 4.2 million at the end of this period, increasing 4.2% versus the second quarter of 2021, which translates into 169,000 net additions. By segment, internet subscribers grew 7.3% compared to the second quarter of 2021, totaling 3.9 million, resulting in 264,000 net additions. As of quarter end, approximately 40% of our broadband subscribers already receive their service through fiber technology. While following the speed increase carried out in the first quarter, over 50% of our subscriber base has a 40 megabits service of higher, compared to 15% a year ago. Video subscribers reached 3.5 million, growing 2.5% versus the second quarter of 2021, adding 86,000 subscribers. Our XView Plus platform continued to grow, going from 2.1 million subscribers at the end of the second quarter of 2021 to 2.7 million this period, an increase of 31.4% or 647,000 net additions. It is also worth noting that near 90% of our subscriber base is digital through more than 5 million of set-top boxes. The telephony segment recorded 3.1 million subscribers, growing 11.7% compared to the second quarter of 2021, implying 328,000 net additions. The MVNO service subscribers totaled 434,000, with 178,000 net additions versus the same quarter last year, maintaining its upward trend. Here it is important to note that we continue to disconnect the lines that are not recording any traffic according to the company's criteria. The company's growth in gross assets was accompanied by increased insurance rates with broadband at 2.7%, video at 2.6%, and telephony at 2.9%. The main factors influencing these connections, as Enrique mentioned, have to do with the economic headwind affecting overall demand, rate increases, a post-pandemic period where people are starting to go out and spend on other activities, and the more competitive environment in the industry. Mega Cable Hub will continue to focus on gaining, retaining, and recovering subscribers in the base of a robust portfolio of products tailored to the subscriber needs. At the end of the quarter, REUs totaled close to 10.6 million, 6.8% more than the 9.9 million of the second quarter of 2021, driven by subscriber growth in the three mass segment services, also reflected in the REUs per unique subscriber, which went from 2.46 in the second quarter to 2.53 this reporting period. Consequently, the ARPU per unique subscriber was 427.3 pesos, recording a significant growth of 4% compared to the second quarter of 2021. This was mainly due to the focus on the marketing of triple-play packages, rate increases in first half 2022, and the contribution of additional services such as the XView platform. Turning to ARPU by segment, the majority of its services had a positive performance, Broadband increased by 4% compared to the second quarter, video by 2%, NVNO services by 15%, and telephony declined by 2% compared to 2021. Including the mobile services, we reached more than 11 million views in the same basis. ARPU per unique subscriber would have been 439 pesos. Now, going to the corporate side, Metro currently records a remarkable 18% growth compared to the second quarter of 2021 as a result of new connectivity projects. On the other hand, OLA faced a difficult comparison due to important projects we had in the second quarter of last year and are now concluded. As Enrique commented, regarding the expansion of the company, we are moving forward with our plans despite a challenging environment. The supply chain management current issues, including shortages and delivery delays, have not been affected significantly. However, we are monitoring the situation closely to identify and correct any situation that may arise. Wrapping up, we will continue to focus our efforts on pushing forward the expansion plan, of which we will commence with commercialization phase on a larger scale in the second half of the year, under a pricing and marketing strategy in line with our approach to profitable and sustainable growth. From an operational standpoint, these efforts will be complemented by actions that are geared towards preserving and building our subscriber base, such as the deployment of robust communication and marketing campaigns by offering accessible bundles with great value. 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.