Megacable Holdings, S. A. B. de C. V. (MEGACPO) Earnings Call Transcript & Summary

Good morning, and welcome to Megacable's Second Quarter 2021 Earnings Conference Call. With us this morning from Megacable, we have Mr. Enrique Yamuni, CEO; Mr. Raymundo Fernández, 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 risks and uncertainties. Megacable undertakes no obligation to update or revise any forward-looking statements. I will now turn the call over to Mr. Enrique Yamuni. Sir, you may begin.

Good morning, everyone, and thank you for joining us today. The overall performance of the quarter was positive again, both operationally and financially. In this sense, we observed that the demand dynamics remain solid as the environment has not changed significantly compared to what we saw last quarter. Proof of this is that our net additional growth across all service segments in this period were in line versus those recorded in the first quarter. It is a fact that pandemic accelerates the adoption of technologies and services that favor remote work and learning. In that sense, our expectation is that those -- these trends will persist and that the services we offer will continue to be fundamental to these activities. As companies, schools and individuals new day-to-day routine will, in most cases, in both hybrid schemes mixing time in physics purposes, offices and schools with activities from home, maintaining and increasing the need for home connectivity services. Furthermore, we believe that given the economic difficulties faced in recent months due to the pandemic, telecommunications services have gained value and relevance as much more needed services for the users. On the corporate side, connectivity services have been positioning themselves as a productivity driver. These services have been experiencing the same increase in the need to maintain their business sometimes even higher. We have high expectations for this segment as this trend has only just begun with companies embracing more and more IT solutions, propelling higher demand for connectivity. All in all, we are capitalizing on the opportunities that the new models are generating while transforming those aspects of the business that we need to adapt to the new market conditions. Going to our operating and financial metrics, we continue to grow subscribers in the 3 services in the mass market. Highlighting what we achieved on the video side, our HD platform recorded its best quarter ever and has become a very important cornerstone in the company's growth. Over this platform, we will seek to tap into the recent video consumption trends on digital media while integrating it into the linear content that we already offer. The previous mentioned, coupled with the increase in ARPU per unique subscriber when compared to the same period last year, helped us reach a record high figure to the company in quarterly revenues and EBITDA. Under these dynamics, quarterly revenue and EBITDA both posted double-digit growth rate. As a result, the EBITDA margin remained in the certain levels under the current conditions and course of the operation. Now sharing some color on our projects in development. The GPON migration is moving forward, and we have already migrated over 0.5 million subscribers to the new FTTH network. We continue to work on deploying the new infrastructure and speeding up the migration process. We remain convinced that this migration was the right call as the significant increase in bad risk consumption due to the new content trends accelerated also by the lockdown measures neither robust technology platform to render the required navigation speeds as this project guarantees the coming years. Regarding the efforts to expand our network and service coverage, we will continue with our growth plans in specific regions that represent a sustainable and profitable opportunity. Such plans include increasing our presence in some areas of Mexico City, where we seek to cover municipalities adjusting to our current network in the State of Mexico. Likewise, we are expanding our coverage for residential services in some nearby areas of some of our current operations like Zapopan and Monterrey. These territories have attractive market conditions that could represent a good opportunity for the company. The same is valid in the case of the corporate segments, expansion plans to certain cities, including Tijuana, Chihuahua, Aguascalientes and San Luis Potosí among others. In this sense, our growth plans for these cities initially comprise the corporate segment, but we do not discard the possibility of venturing into the mass segment if those markets treat our long-term strategy. Here, it is important to make it clear that we will not take on any endeavor that could be unreasonable in terms of costs or in terms of the market. Every final decision we take to enter or not into a particular region is based on a true market study. To conclude, under economic recovery, amidst COVID-19, we will continue to consolidate the attractiveness of the product portfolio. We have built, including Xview Plus, as we have been doing recently on the corporate side, we expect to continue capitalizing on the positive market circumstances to strengthen our position and continue to deliver excellent results in value to our business associates, customers and shareholders. With this, I pass the word to Raymundo so he can give you more in-depth vision of the operations. Thank you. Raymundo, go ahead.

Thank you, Enrique, and good morning, everyone. In the second quarter of this year, we continued to successfully capitalize on market opportunities with product suited for the needs of our subscribers. On demand market, our attractive packages include a new and unmatched video platform as well as higher growth balance feeds and very accessible rates. While on the corporate side, the connectivity services we offer have been positioned as a productivity driver for many businesses that have adopted IT solutions, a trend that is now only getting started. We previously mentioned coupled with smart investments in network infrastructure has resulted in surpassing 4 million unique subscribers with growth across the 3 services in the mass market. and record figures in revenues and EBITDA with double-digit growth. All this, while churn rates remained relatively stable and below pre-pandemic levels at 2.0%, 2.2% and 2.5% for broadband, video and telephony respectively, does support the subscriber growth. Net additions of unique subscribers for the last 12 months climbed to over 314,000, out of which more than 32,000 were added this period, reaching for the first time the 4 million unique subscriber market. Regarding our use, we reached 9.9 million, 13.2% more than the 8.8 million of second quarter 2020 as we continue to grow in the 3 mass market services. This growth was also reflected in the RGUs per unique subscriber, which went from 2.3 in the second quarter of 2020 to 2.46 this reported period. These results were driven by the performance obtained at broadband, which posted net annual and sequential additions of 419,000 and 58,000 subscribers, respectively, to reach 3.6 million subscribers. As Enrique mentioned, the demand for a stable, highest fee connectivity at competitive prices remains strong as individuals, households and enterprises continue transitioning to hybrid [indiscernible] of physical premises and home office perpetually all educational training and employment activities. In that regard, about 60% of our subscribers received speeds above 30 mb or half fiber services compared to just 35% at the end of June last year. Moving on. Video subscriber amounted to 3.5 million at quarter end, 196,000 subscribers more on an annual basis and 21,000 more quarter-over-quarter. We continue to grow subscribers to a larger extent to a very competitive offer as well as a state-of-the-art solution to combine our traditional video offer and new consumer trends through platforms such XView Plus. In this regard, active users of XView Plus reached over 2 million subscribers at the end of the quarter, adding 984,000 subscribers compared to the same period last year and 656,000 against the previous quarter, its best performance in its initial deployment, which speaks on the value that this platform has provided to our users. We are enthusiastic about all the possibilities that this platform will further provide to our video segment in terms of integration and functionality. This is the reason why we will continue evolving great efforts to create the strategic alliances with content providers to ensure subscriber enjoy a wider variety of content at any time. Separately, the Telephony segment posted 2.8 million swaps as of quarter end with 538,000 net adds on a yearly basis and 78,000 sequentially. Mobile services segment recorded 47,000 net additions this quarter on a sequential basis. maintaining its upward trend and surpassing the 250,000 subscribers. In terms of ARPU. During the quarter, the ARPU per unique subscriber was MXN 412.8, up 2% on an annual basis and practically in line with the previous quarter. Turning to ARPU by segment. Internet and telephony increased 3% and 6%, respectively, compared to that of second quarter of 2020, while video decreased 3%, the rise from the opening of triple play deals, which represents higher discount to the individual contribution of services. On a sequential basis, ARPU across all segments remain relatively stable. On the corporate telecom segment, revenues surpassed over MXN 1 billion in the second quarter 2021, increasing 6% over the same period last year, largely in supported by the recovery of Metrocarrier and ho1a. Regarding Metrocarrier, connectivity services to carriers were the main driver for the period. while revenue coming from the data center is starting to pick up. On the ho1a side, the reactivation of private initiative investment played an important role supporting the growth of revenue coming from the corporate channel. Finally, MCM posted sequential growth, and we expect to see better figures from here on. Regarding the GPON migration. More than 0.5 million subscribers have been migrated to the new FTTH network over the cities where this process is being carried out. We continue to diligently work despite the delays and challenges we have been facing. With all the attention and resources of the company focused on quality execution, we are sure that the outcome will be positive for our subscribers. Wrapping up, Megacable's operational performance remained positive with growth rates in the mass and corporate segments. Our infrastructure continues to handle the sourcing traffic without major issues. And our sales and collection model ability to adapt quickly to the new needs of our subscribers greatly contribute to post stable retention rate. With this, I conclude my remarks. Now I would like to hand the call over to Luis, who will shed broader color on financial results.

Thank you, Raymundo. Good morning, and welcome, everyone. Driven by the revenue improvement recorded at all mass services, coupled with a steady recovery in the corporate segment, the second quarter consolidated revenue climbed 11% on an annual basis to reach MXN 6.1 billion, marking a new record high for a single quarter. The quarterly mass segment revenues grew year-over-year, following the 17%, 3% and 32% annual growth rates achieved at broadband, video and telephony services, respectively, supported by a wider subscriber base and pricing adjustment. Corporate telecom increased 6% versus that of the same quarter of last year, reflecting more favorable market dynamics that offset the slow recovery in heavily COVID-affected sectors. In this context, mass market stood for 83% of total revenue and corporate reached 17% participation. On the other hand, the cost of services recorded an annual increase of 12%. The growth above revenue levels is mainly explained by a higher operation rate in ho1a, with a higher component of sales of equipment as well as the costs related to the MVNO business in the mass market. Following the same trend, SG&A was up by 11% in the same period mainly explained by higher general expenses, given the increase in some inputs like gas and electricity. Given the higher revenues and efforts towards operating efficiencies, consolidated EBITDA increased 11% on an annual basis, amounting to MXN 3 billion with a margin of 49.6%, similar to the levels recorded over the last quarters, while EBITDA of cable operations reached MXN 2.8 billion with a margin of 61.2%. On year-to-date figures, the consolidated EBITDA margin remained at 50%, even recording a margin expansion compared to the same period last year. On the other hand, the EBITDA margin of cable operations also registered higher levels than those of 2020 to stand at 51.6%. Consequently, Mega posted a net income of MXN 1.1 billion, up 9% against the same period last year. In addition to the aforementioned factors that supported our operational performance, this item benefited from a favorable comprehensive financial results, which more than offset a higher tax effect. Moving into the balance sheet. As of June 30, 2021, the company net debt was MXN 4 billion, roughly MXN 1.3 million (sic) [ billion ] higher than the MXN 2.7 billion recorded last year, mainly explained by the lower cash balance following the MXN 2.2 billion dividend paid carried out this quarter, which was partially compensated by a stronger cash flow generation. Compared to the same period last year, net debt is MXN 1.4 billion lower, mainly due to strong cash generation despite the fact that the last year's dividend payment was lower than this year. Our financial position remains sound and stable with liquidity and leverage levered compared more favorable against the industry. Net debt-to-EBITDA ratio stood at 0.35x, and interest coverage ratio was of 15.3x. Both indicators standing at healthy levels. On the investment front, quarterly CapEx amounted to MXN 2 billion, which represents 33.5% of the quarterly revenue. Majority of these resources deployed to move forward are our network growth plan, mainly the GPON transition as well as the organic growth of the network towards new territories and subscriber's equipment. The investments that we are carrying out are of vital importance for the present and future growth of the company. They are the results of an in-depth analysis, seeking to maximize value creation and return of investment. To conclude, we are confident that our financial position is strong enough to successfully weather the effects of the pandemic and count on the required resources 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.

[Operator Instructions] Our first question is from Fred Mendes with Bank of America.

I have 2 questions here. The first one regarding the dynamics of price. In the second Q, you mentioned that 60% of persons are now receiving speed of fiber 30 megabits versus 35% last year, right? So in that case, you will increase your price presently like 4%, look at your churn and your net add. Given this higher quality product that you are delivering to your clients, don't you think that there is room for further price increase? This would be my first question. And then my second question, just trying to understand the XView also had a very solid performance, almost doubling year-over-year reaching to the clients. I just want to understand the benefits of having the XView for the company in terms of churn, in terms of margins? So what will this bring in terms of benefit given this very solid increase for XView?

Luis, did you get the question number one?

Fred, the dynamics of possibility of price increase on broadband, especially with the deployment of GPON evolution with the adoption of fiber.

Fred, this is Raymundo. If I understood what Luis is saying, too, for what you put -- on question number one, you were talking about the dynamic of pricing of the broadband that -- and in general, with the services. We believe ARPUs should slightly go up per unique subscriber, the same way and the same trend that we have. And there are so many reasons to affect that ARPU. One of those is the dynamic of the price increases. We normally have price increases in some of the products and some of the packages. We carry out across the nation several packages according to the needs of and the conditions of that market. So we conduct price increases once a year, sometimes twice, normally below inflation or similar to inflation and according to competition and to the conditions as we say. We believe we have some room to increase, but it will reflect in the same matter that you -- been reflected in our ARPU in the past. Why? Because as we continue to grow, let me put you the example of video. Video has a decrease of 3% on the ARPU of that particular segment. As we continue to increase on triple play, the price of video by itself on a single basis or dual basis is higher than in triple play. So they ARPU per unique in video seems to be decreased, but the contribution to the triple play partnership high in that part. So XView, of course, has a dual need, and I will try to answer second question with the first one, has a dual purpose. One is to increase ARPU by being a good aggregator of products like Netflix, Amazon, now HBO Max and the ways that we have plus the regular and traditional video service that we have with a much more reliable platform, but also will contribute to maintain levels of churn in the levels that it has by providing a good quality and brand new product. So at the end, we will have some room for rates to increase according to competition and according to market, but we will continue to have the conservative policy that we show in the past. So you can expect a slightly increase in the unique ARPU. I don't know if I answer both questions with my comments, Fred, or you want to extend a little bit on what I'm saying? And probably Luis will tell you.

No. very, very clear. And then just a follow-up to make sure that I understood correctly. So basically, I mean, what you're saying is when you look at the internet and the broadband service, actually, your price increased higher than what it's been, right? But since that you're giving discounts on the triple play, then that does not necessarily reflect this higher price increase over then because you are looking at the full picture. Is it a correct statement?

Yes, you could say that. You could look it that way. What we try to do normally is we look at the market prices of the individual products, and we're trying to assign to them the right market price. And of course, each of the products have different costs. As we all are aware, the cost of video is way higher than the cost of providing broadband and telephony. So we do not keep a similar margin for different products. We do it the way it should be. According to the market conditions, the price of video is $20 or $15, whatever it is and the costs, this is what we try to reflect. So when we make to triple play, if video comes to that triple play, it is hitting that discount. So it's not hitting broadband as much as it's hitting video since the base of video was before and were converted to broadband. Now we have more subscribers on broadband in the larger cities. So you will expect to carry a more steady cost and ARPU for the next subscriber going into the future. But you can assume what you're saying is correct about broadband.

Our next question is from Marcelo Santos with JPMorgan.

The first question is, if you could please provide the next milestones for the GPON project. So when should things happen and what things should happen from now on? And second to, if you could reiterate your CapEx outlook for this year and the next couple of years in face that -- given that the GPON project's going to fade away? So what level should CapEx settle down?

Luis, if you agree, let's -- I will answer the first one and you do the second one. Okay. Regarding GPON, we're very happy with GPON. It is a very aggressive project. I'd like to say that this is the network evolution project and one of that is to set this technology called GPON that we will continue for years to come to evolve our network. The network is a breathing entity. So it will always have to be operated and work on that part to keep with the demand for higher bandwidth that our subscribers have. What we agree on the first step is what we disclaim is to have 12 cities with GPON projects. As we sit right now, we already migrated 500,000 out of the 1.3 million that we were planning to migrate. So you can say that we are at 40% pretty much of the GPON project. we expect to finish this first step. Well, we're going to try to finish by the end of the year because we have a much more better quarter than we have before. That's why you have so much of the migration. But probably, we will maintain probably 15% of that for the first quarter of 2020. That's the milestone of the first step of the GPON project. The rest, we will continue to deploy part of the GPON in some of the areas where it makes economic sense, and we will reuse what we are taking away from the GPON area to a much more smaller task. So what you can see is that the company will always have the best bandwidth and the best products. And on a conservative way, we will carry and try to keep our CapEx over revenue on a free cash flow basis for the company at all times. Luis, can you also explain a little bit more about the CapEx?

Sure. Raymundo, thanks. And Marcelo, thanks for your questions. Regarding CapEx, as we've mentioned in our previous calls, for 2020, we expected to get to $400 million in CapEx, and we didn't reach 2020 because we fell behind a little bit on the GPON project, and that carries to 2021. For 2021, we expect it to expand our CapEx investment beyond the 2020 $384 million that we expect. So for this year, we are basically on target for those to reach above $400 million and maybe above that $400 million because we are trying to finish this year the GPON project as Raymundo explained. The chipset delays in the world are not helping a little bit on that, but we are going to try to reach as much as possible. We could be on top of the $400 million and maybe beyond that. And for the future, as we explained also in the past, we were thinking on reaching the low 20s by 2024. So 20%, 20-plus percent over our revenues. But in this case, our -- the competition is getting tougher and the delays in the project, we may be reaching to that situation a couple of years later.

So you can expect a decrease in the percentage of CapEx, Marcelo, that will always be, but it will be -- it will take us to reach those levels what we've been saying and what we foresee to reach the levels of the low 20s, it will take us probably a couple of more years. And so instead of going to 2024, it will reach probably 2023. That one thinking about expanding a little bit, operating the network, doing the GPON project and so on and on. We look more in the mid 25% around the mid-20s by 2024, and then decrease to low 20s by 2026. That will be more of the milestone that we see for the CapEx project

On the long term.

For the long term, being very, very [indiscernible].

Our next question is from Andres Coello with Deutsche Bank.

Yes. Actually, this is Andres Coello with Scotiabank. I have first my question on M&A. About 6 months ago, so Enrique, you said that Megacable was looking at Axtel's infrastructure division, but not Axtel as a whole. So I was wondering if Megacable remains interested or is looking perhaps at the Axtel opportunity? Also asking retail, what are your thoughts on Red Compartida? As you know, Red Compartida filed for [indiscernible] or bankruptcy here under Mexican law. And I was wondering if Megacable could be interested in increasing or takeover or perhaps passing its relationship with Red Compartida? And I have an additional question.

Okay. Yes. Thank you for the question, Andres. We are going to be very clear, we are not interested in Axtel's infrastructure. We think that, that would duplicate a lot of our network. We have big networks already on fiber for enterprise services in CDMX and Monterrey. We're building other larger markets where we don't have presence like San Luis, as I explained in my introductory remarks. We're building Tijuana, [indiscernible], Chihuahua, San Luis Potosi. Obviously, we have presence in all our cities like Guadalajara, Maceo, Puebla, Leon, Queretaro. So we have a big backbone and metro rings to serve the same market that still does. Obviously, they are much more old player in that market in the [indiscernible], but we do have infrastructure and we have the level to compete with them currently. So we weren't interested in trying to acquire Axtel. That's in the first question you asked. The second Red Compartida. We believe that Red Compartida has a big opportunity for -- to still be viable. What Red Compartida is asking is for time. I think the model will work. We will back it up. We will invest as industrial partners. We will -- we're willing to keep providing services to Red Compartida and finance those for them. That doesn't mean we're taking a hit. I mean, we already took a hit on our balance sheet because of the value of the company that we did that in 2020 because the auditor thought that we should do that. And -- but we think that the project is viable. We think that the government is backing that up according to the management of Red Compartida. We will wait for the assembly they're going to -- there's going to be an assembly of general shareholders assembly pretty soon. We think that there, we will have more details of what they are planning to do. They are not trying to get [indiscernible], don't know, it's discounts or whatever you call in English of the debt from banks or from vendors. They are trying to get more time. That's it. And I think it's very reasonable in what they are asking and the break is viable. I mean, telecom is the future. Everyone needs spectrum. Everyone needs mobility. And I think that they are in the right business. It's just a more of time for them to make the company -- to take their company to maturity. That would be my answer for the first 2 questions. I believe you have another one?

Yes. Very clear by the way. My second question is on your remarks regarding Megacable entering market -- residential markets in adjacent areas of your coverage Mexico City, Monterrey and other areas. We know that in those areas, especially in Mexico City, Telmex is still bigger than the incumbent cable provider. So it seems that, including Zapopan by the way, Telmex is still the largest player there. But I was wondering, Enrique, if it makes sense to entering these areas as opposed to going into the streets where no one is currently passing homes. And my understanding, maybe you can confirm, is that we have 10 million homes in Mexico not passed by any big network whatsoever. So I was wondering if it really makes sense to duplicate infrastructure as opposed to going into new areas? So I was just wondering about your thoughts in this area?

Okay. Thank you, Andres, very interesting question. Yes, we're on both this. We're going into areas where there is a very low coverage or no coverage at all or just 1 player or 2 players and maybe the community is under served. We are doing greenfields of GPON there. We're also expanding our network wherever we see an opportunity or these other players like [indiscernible] or Totalplay. But we are very careful with that. We do a very in-depth research to do that. We have already started selling massive services in Mexico City in [indiscernible] Mexico, in the areas around our service our current -- where we have had presence for years like Tlalnepantla. So we're doing some areas around Tlalnepantla in the edges between Mexico City and [indiscernible]. We are also starting to sell massive service in Monterrey and Zapopan. It makes sense for us because, I mean, we already have our head in, we have our engineers, we have our crews, we have our monitoring [ NOC ] in place, which is a big central infrastructure that helps us to provide an excellent service. But we're not going massively to everywhere. We're very, very careful, but we will be successful there. We are the best offer, the best company that adds more value to the customer by price and by product. So we're very careful, but we're there, and we will be very smart on where we compete with others -- with incumbents.

And also Andres, and this is Ramundo, in some of those areas where you see our market research that we do, we are very careful to see what penetration is. We're very careful to see what the condition of the technology and the network of the other companies are. So we're bearing with the state of the art extension of our network in the GPON to areas where we believe we can compete. As Enrique said, we already have in those areas, metro urban ring of fiber that connect Metrocarrier and MCM. We have hubs, we have infrastructure that can be connected. And we have GPON that serve both, on a synergy basis, the Metrocarrier and the massive market. So we are not going to overbuild [indiscernible] and being 10 players of fiber in the same build. We're going to be very careful where we put our shareholders' CapEx and the view of the company on that and where we see the opportunities. Regarding other comps that you see, we are doing that, like Enrique said, we have a huge amount of small towns where we're building. But we're being very careful there, too. Economic conditions and security conditions are an issue where you get to those towns, you don't have the support sometimes of the load to back that up. So we're an expert of growing in a small town, but we're also very careful on the big towns like Mexico City and Monterrey where we have our Metrocarrier operation on that part. So to also what Enrique saying -- announced that we're looking for those opportunities to see there. I'm going a little bit and expanding because there are more questions about ALTÁN. The file that ALTÁN has will make it stronger in that part, they will renegotiate that they have mostly with vendors in that part, and will give the company the brief that has to meet the business project that they have before. We are selling ALTÁNA, too. We're a customer of ALTÁN as well as other companies like Walmart, our major MVNOs of that network. And we will continue and we're continuing to commercialize our product that will give the company and that will be -- and we're doing that because we see that the company with that breed that they have now on the financial restructuring will allow them to grow to get to the business plan that they have before. That's why we, as an industrial shareholder or as a MVNO customer, we continue to put the view on the MVNO project going forward as of today as Enrique said. That will be my extension of Enrique's comments, Andres.

Our next question is from Carlos Legarreta with GBM.

I have, I think, a very conventional one and sort of an out-of-the-box one. I'll start with the boring one. With Metrocarrier, you guys are down, obviously, the revenues are down year-to-date. But with the entry into new cities in the second half, should we expect a significant pickup during the second half of the year? And for the second question, just thinking out loud here, but if you could perhaps help us understand if it's in the interest of the control group to perhaps list the company, given how cheap the multiple looks and how it's affected the growth opportunity seems?

Sure, Carlos, thank you for the question. I don't expect for the second quarter, Metrocarrier to have the huge pickup that you're saying because we are in that process, the main results of the expansion to the cities soon to be figured out and released for 2022. We will open operations this year, but it will be mostly by the end of 2021. Still, I think we're very happy about Metrocarrier results. We're very happy that the results come from very steady sectors like carriers release and corporate very few regarding to government is still. So carriers trusting in our infrastructure. We will continue to invest in interurban infrastructure and hubs and places where the carriers will rely on us to bring Metrocarrier back, and you can expect that trend to go into the future, not at the level that you said because of the new cities, but it's going to be a good year for Metrocarrier. And the second one, Enrique or Luis, I don't know if you want to answer, is regarding the list I think that's what Carlos was asking what we are trying to do is?

So I didn't really get the question, but is that buyback stock or the list ...

What you're talking about, Carlos, about buybacks, the lease company?

No, no, no. I'm thinking about a whole tender for the company.

The whole.

But I don't think that's in the conversation today.

No, Carlos. We are very, very focused on what we're saying right now. And we're happy with the structure that we have so far. So we will continue to be the same with what we see right now.

We do some buyback with our funds, but not the whole plan.

Not the whole.

And our next question is from Leonardo Malhado with BTG Pactual. Hello, Leonardo are you on the line, you are connected, you may be on mute?

Hello?

Okay. We can here you.

So for your residential segment, I know that you said that you're working on transitioning 40% of your network to fiber. But I was wondering what your plans are for the rest of your network following the completion of this project? And if your expansion to other residential areas, like you said, do you want to state as like would it still make sense to use any coaxial cable at all in your expansion for those areas, while other players like Totalplay, for example, are only expanding utilizing fiber going forward?

Sure, Leonardo. As I said before, the GPON project that we announced comprised 25,000 kilometers of GPON pretty much, it reaches 26,000 actually. That's what we have. And let's call it first step of a major migration to GPON. But as I said, the network is a breathing entity. That means it needs to be upgraded. What we say is that in fields we will do GPON. In some of the strategic areas that make sense, we will continue to be GPON, and we will reduce the existing HFC that we have of those 12 cities where it makes sense to be reduced. At the end, in the long run, we will be also in the majority of the markets a GPON company in that part. But that will be on a mix of GPON and migration to GPON from HFC as it makes economic sense and according to market conditions. So the next 20 cities will be migrated to GPON in some of these strategic areas. And the rest of those areas will be broadly between the third and the fifth year of that. In the meantime that we continue to use HFC and DCP live on that. But the main of the CapEx that will come from the company, the majority of the capital for not saying 100% of that will be GPON.

The CapEx for network.

For network. The CapEx for network. Thank you, Enrique.

So just to confirm, new cities are fiber, new cities that we are greenfield that we are going on into are GPON ...

Even expansion in expansion in current cities is GPON. So what we're doing is relocating the HFC equipment that we are discarding from the GPON project to those areas that will be -- will still be HFC for maybe a couple of years. But we will -- we have -- we're putting in place a program to turn everything GPON over the last 5, 6 years, over the next 5, 6 years, that's for sure. And I mean, HFC is really competitive. We have been very successful competing and fighting competition with existing HFC now that we have. What we're doing is getting that where it's still going to be HFC getting that more competitive in a better shape. We can provide speeds of 500 megs or 1 gig to the home with the existing HFC network. So -- and really, people is using speeds less 100 meg or less. So we're working. We're in excellent shape with HFC and GPON.

And message is we are investing in GPON. That's Enrique, Luis and myself on point that you -- as total play is doing, we are doing investing in GPON. What we're doing is reducing what we have for the best interest of everybody in the short term. That's it.

And that is all the questions for the phone line. I will hand it back to management for any questions on the webcast.

Okay. The first one is from [indiscernible] writing is how the financial situation of some fund raises is going to affect the ongoing business assumption of its new mobile telephone segment? I believe this has been already answered.

It has been answered.

So we'll move to the next one. Is the GPON project still expected to be completed by the end of 2021? If so how much how much will CapEx come down in 2022?

I think we already are answered.

The third one is from corporate advisers. Megacable has generated strong results and resulting cash flows. As you move behind the big CapEx period, the balance sheet will have excess liquidity, and the company will have more cash than it needs. Any thoughts on a special dividend or a stock buyback?

Really, I mean, we -- I mean that's a matter of Board, and we have been very consistent with our dividend policy. I mean, if we -- if this is a problem, that's a good problem, and we will find a very good solution for that, either a higher dividend or investment. I mean, if we find an investment opportunity in the Mexican market, we will take it or maybe, I don't know. Telecom is very evolving. New projects in telecom, there might be some in the future, we don't know. But I mean, we have always found a very good use for money.

And as we said also, CapEx will decrease in the future, but it will take us another couple of years to get to the levels of the low 20s. So in the meantime, we believe the money is better off expanding the network and growing Megacable in a very smart way, like we believe we have done so far. So as Enrique said, this good position we will deal with that as soon as we reach that. But right now, in the next years to come, the short years to come, we will be more focus into network evolution, growing the company, expanding before getting to that to that process.

Okay. The next one comes from Select. And can you give us some color about the mix of core play, triple play, double play and single play?

The majority of our subscribers will be in the triple and double play.

It is already.

It is already. We continue to have -- and as you see, 55% of our subscribers are in triple play or now quadruple play play. Why quadruple? Because the 250,000 mobile continue to grow in that part. We really -- we strongly believe single play will not be part of our stride. In fact we will always have an overplay between broadband and telephony, CPs, CapEx and at the end, [indiscernible] of the data makes sense. It contributes to the package of the subscribers, whether they use it or not. And the adoption of the XView platform can also make very attractively with triple play still in the long term. So 55% to 60% will be triple, 40% will be at least double if you want to see that going forward into the future.

Okay. So we have no more questions. I'll turn the call over to Mr. Yamuni for final remarks.

Thank you very much, and it's a pleasure to discuss our results with you as very often, we are reporting -- almost every quarter, we are reporting positive results. We will -- we're confident that we will continue with that trend. Telecom has changed dramatically over the past 18 months. And we think that we have a unique opportunity ahead of us. We will keep taking it. And having the best performance that we can deliver to our shareholders and our customers and our employees. Thank you very much for your attention. Thank you very much for your interest. Please contact our Investor Relations department if you have any questions or concerns regarding the company. And have a wonderful day and a wonderful also a wonderful weekend.

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

Thank you.