Megacable Holdings

Good morning. Welcome to Megacable's second quarter 2024 earnings conference call. This morning, we have Mr. Enrique Yamuni, CEO, Mr. Raimundo 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 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 Yamoni. Sir, you may begin.

Good morning, everyone, and thank you for joining us today. I want to start by commenting on the three strategic verticals of the company, which have determined the actions we have been taking to meet our objectives over the last few quarters. First, consolidate the legacy territories, strengthen our presence to state of the art technology, including the evolution of the HFC footprint to remain the operator with the largest market share. In this regard, during the quarter, we migrated an additional 1.7 thousand kilometers of network for 37.7 thousand kilometers since we announced this initiative. This effort, along with the entrance into new territories, has allowed us to reach 72% of Fiverr footprint in our network, allowing us to meet the current and future bandwidth demands of the market. It is important to note that in these territories, our penetration remains above 40%. Thanks to our efficient strategy of shielding and retaining our subscribers. Second, the expansion of the company towards duplicating its size in terms of infrastructure, revenues, and EBITDA generation. I am pleased to announce that after 24 months of execution following the approval of this project in late 2021, we're ahead of our initial expectations with nearly 7.2 million additional homes passed as of quarter end, meaning more than 80% more footprint with penetration levels according to our plan. These efficient investments have represented more than 770,000 additional broadband subscribers, still with the possibility of adding many more in the coming periods. There is no doubt that we are on our way to becoming a national leader of the industry. Now that we have slowed down in our construction phase, we are focused on increasing the penetration in these new territories, supported by the best infrastructure, dedicated customer service, a truly innovative video service, and attractive rates. And third, a healthy financial profile, maintaining a solid balance with a reasonable leverage ratio. In that regard, I would like to emphasize that we anticipate an investment reduction as we approach the completion of our ongoing projects. As of this moment, we are dedicated to completing our current initiatives in capturing the value of the investments we have carried out over the last periods. The company does not foresee any other relevant projects for the coming years and will be focused on maximizing cash flow generations in the short term. Even with the execution of the after-formation projects, the company is paving its way to sustained cash generation in the coming periods. In addition, as of this moment, we are already improving significantly in that direction since the EBITDA minus capex figure for the first six months of the year is very encouraging sitting at 2.2 billion pesos, or 14% of the real revenues for the period. On the debt side, it is noteworthy that although this quarter the leverage ratio increased as we had anticipated, it remained one of the lowest in the industry. This figure reflects our unmatched balanced position despite the investments carried out and is expected to decrease following the slowdown in the investment level. In addition, as we committed to value generation and value distribution, I would like to point out that last May, we paid dividends of 2.7 billion pesos, maintaining our position as one of the top five companies with the highest dividend yield in the country. Moving to results, the period was marked by challenging macroeconomic environment, including high interest rates, persistent inflationary pressures, and FX rate volatility, which in turn has led to greater caution among consumers in addition to a highly competitive market. Despite this challenging context, we managed to continue adding subscribers highlighting that the broadband and unique service figures for the period, it is important to mention that the slower pace of net ads on a sequential basis is mainly due to a weak start of the quarter due to the pricing quiz we carried out in March, which coupled with the vacation period reflected in a higher churn rate for April, thus decreasing the amount of net ads. We have already seen a significant improvement in May and June. Therefore, we can certain that this one-off is behind us and expect an normalized performance for the next common periods. I would like to mention that regarding our ESG commitment earlier this month, we published our first integrated annual report, which covers our environmental, social, governance, and economic progress during 2022-23 on the GRI and SASB frameworks. Thank you once again for your continued trust and support. I look forward to seeing you and sharing further progress next quarter. Rest assured, we are proactively managing all factors under our control to remain well positioned to face temporary setbacks and seize opportunities to accelerate growth. Now I will pass the call to Raimundo who will discuss our operational performance in more detail.

Thanks, Enrique. Good morning, everyone. I'm glad to provide an update on our progress this quarter, which has seen advances driven by our expansion strategy while recording consistent results across our legacy territories. In this regard, we have achieved significant milestones in network expansion, At the end of this quarter, the number of home paths surpassed the 16.5 million mark, marking a year-over-year growth of 23%, with 557,000 homes added this period alone, putting us closer to our goal of duplicating the size of the company in terms of infrastructure. Our distribution network now extends over 98,000 kilometers, close to the 100,000-kilometer mark, showing our commitment and scalability to reach more and more Mexican homes and SMEs. This performance was achieved despite a more moderate pace of construction, in line with our expectations, which contributed to a reduction in the capex-to-revenue ratio, as we had anticipated for 2024. This, coupled with EBITDA growth, positions MEGA to drive sustained cash generation during the following years. On the technological front, during the first half of the year, we have upgraded 2.8 thousand kilometers of our network from HFC to FTTH, which translates into a fiber footprint now covering 71% of our network, up from 55% last year, reinforcing our transition to a predominantly fiber-based carrier. Moving into results, our unique subscriber base, which surpassed the 5 million mark in the first quarter of the year, rose to 5.2 million at the end of this quarter, growing 10% year over year. Over the last 12 months, we added 487,000 net subscribers, 88,000 of which from this quarter alone. In a competitive landscape, our subscriber growth faced some short-term headwinds, including the rate increase carried out in Merge and an economic slowdown. The internet segment posted a 12% growth year-over-year, adding 515,000 net subscribers, 91,000 this reported period. Also, and as a result of the investments we are deploying to improve our service through state-of-the-art technologies, during the quarter we were recognized as the first Latin American operator to reach speeds of 1.1 terabits per second on a fiber link through the double DM technology. In addition, OACLA, a recognized company that offers speed tests, recognized MEGA for offering the best speeds and consistency in several states of our country. Even with a subscriber base with a lower average speed demand, we're certain that we're moving in the right direction in terms of technology deployment. Our video subscriber reached 3.9 million, recording a slight increase of 1% year-over-year with 23,000 net additions on an annual basis, despite recording a net loss this quarter. It is important to mention that this is expected behavior, since this is a more mature market when compared to broadband. Nevertheless, 167,000 net additions were recorded on our XView platform this quarter, which remains as the cornerstone of our video value proposition. On a year-over-year basis, the subscribers of this platform continue to grow at a rate of 22%, reaching 3.2 million. Telephone subscribers grew by 16% year-over-year to 4.4 million, adding 603,000 net subscribers, 110,000 this quarter. Our MVNO services now total 469,000 subscribers, of 20% year-over-year, with 78,000 net additions this year, including 8,000 over this quarter. Shown rate experienced an increase, particularly in the video segment, which rose from 2% in the second quarter of 2023 to 2.6%. In the case of internet, the shown rate slightly grew from 1.9% to 2.1%. The increased shown rates were also influenced by the effect of the March tariff adjustment and the vacations period, coupled with a less favorable economic performance. In this regard, despite a competitive environment and the slowdown in subscriber growth, ARPU per unique subscriber increased to 421.9 pesos. ARPU performance varied across the segments, with the internet and video segments growing by 5% and 3% respectively, while telephony and MVNO services saw decreases of 5% and 6% respectively. Let's move into the corporate segment. We record a 7% growth this quarter. Notably, Ola increased 27% significantly, outpacing its performance from last quarter. MetroCar also showed growth at a 10% rate, both of them mainly as a result of better performance in the corporate segment. MCM saw a decline of 11% mainly in the corporate messaging service, consistent with last quarter's performance, and PCTV remained stable without any significant changes. In conclusion, this reporting period reflects our commitment to strategic growth and technological innovation. updated before a challenging landscape. All in all, we have expanded our network, increased our subscriber base, and are poised to complete our expansion plan with a smaller figure of one pass to add towards year's end. Moving forward, we will focus on reducing short rates, enhancing customer satisfaction, and broadening our service offering to sustain traction and deliver exceptional value. Thank you for your attention. I will now hand over the call to Luis, who will provide a detailed analysis of our financial performance.