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

Good morning, and welcome to Megacable's Third Quarter 2021 Earnings Conference Call. With us this morning from Megacable, 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 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.

Thank you. Good morning, everyone, and thank you for joining us today. This quarter's results consolidated the positive operational strength in terms of net additions. Not only we were able to continue to grow, but also to post the highest figures of the year. This achievement reflects the company's resilience dealing with a challenging environment, including increased competition. This resilience comes from our advanced infrastructure, rapid execution and high level of adaptability to new market trends. The demand for our services in the mass market remains at high levels, prove that the changes we experienced on our day-to-day activities, including the accelerated adoption of connectivity, are here to stay. This is reflected in a stable churn rate and increased gross adds. We continue to capitalize on these opportunities by offering the best service to edge technology at the best market rate. We have been able to grow in terms of both unique subscribers and RGUs, which during the quarter, have surpassed the 10 million mark. The corporate segment continues to expand, recording the third consecutive period with revenue growth, highlighting Metrocarrier, which continues to reach record high revenue figures with Ho1a is on its way to improving its 2020 performance with double-digit growth. In terms of financials, our revenues are higher than ever. Reaching record high figures this quarter, which coupled with one of the highest EBITDA margins in the industry, have allowed us to maintain a very healthy financial profile with a very comfortable balance sheet. To wrap back on the results, the company is going through one of its best moments in the quarterly results for this period to sustain the decision we have made in the last couple of years and validate the projects and challenges we have undertaken. Moving into the projects that reflect the company's vision for the following years, first related for the evolution of our Video service, XView Plus has received a wide level of acceptance from our subscribers, because Video content consumption needs are being covered, given the growing amount of content supplied from different sources. We have successful -- I'm sorry, we have successfully consolidated linear alteration of TV, a new generation of TV service that allows the subscriber to go back in time and record future events in the linear channels, catch up service in a native library of content, plus all the possibilities that external OTPs can provide. Secondly, on GPON migration process, we continue to successfully advance on completion of this project that will improve our infrastructure in the region migrated to GPON and in the HFC footprint that will take advantage of investments already made. This project will ensure to the company the required capacity to reach higher bandwidth that the market will demand in the coming years. Early in the quarter, and as a part of our growth plan, we started to offer services in certain regions of cities like Mexico City, Monterrey and Zapopan. The rapid entrance to these markets was possibly given the existing infrastructure and our execution capacity due to a greater extent to a high capable team as we complement the operation in those specific territories with additional resources. We will be able to gain a relevant position in these markets. And, finally, the third line of our vision for the future in which the company is going to take it to the next level, we are glad to announce a multi-year program that will represent the evolution of our footprint as we prepare ourselves to deploy a fiber network in several new markets among various cities. This plan includes operations in the mass and corporate markets through the deployment of a state-of-the-art GPON network that will allow the company to continue delivering our connectivity services to new territories -- not the existing -- new territories. We will continue with the inertia that we already have to cover the demand of a market that continues and will continue to grow, by almost doubling the size of this company in the coming years. These territories have been -- through these or carefully selected on the basis of the market characteristics and return on investments objectives of the company. To elaborate on that, we want to ensure that the markets we are targeting really represent a growth opportunity for the company. We will not enter saturated markets that do not make sense, and we are privileging, above all, value creation through incremental contribution to revenue and EBITDA. Our distinctive knowhow high developed over many years will help us to efficiently and effectively deploy infrastructure that will not available -- was not available in past years due to its high cost, but that now represents the best options, not only in terms of costs, but also in terms of technology for the future. We are thrilled about the opportunities and chances that we have ahead of us with the execution of this project, but we are confident on the capacity of the company and in the qualified collaborators that will take this plan into reality. Leveraging on our innovation and adaptation capacity, together with our effective execution, we will continue with solid foundations to support an incremental generation of value for our shareholders, the market and the subscribers, as well as to our working associates. With this, I conclude my remarks, and I pass along words to Raymundo, please go on Raymundo.

Thank you, Enrique, and good morning, everyone. In an increasingly competitive environment, Megacable has always relied on its operational strength to remain the best option in the market. Those qualities allow us, not just to keep up-to-date with the current trends, but at the forefront of these services we offer, and therefore, to continue delivering results on challenging environment. Performance during the third quarter of 2021 continues to be favored by the solid fundamentals of the mass segment and further recovery of the corporate segment. In this sense, our value offer enable us to take advantage of the demand for connectivity services that comes from the interim conditions of our new day to day, including home office and distance learning. Our sales strategy focused mainly on the sale of attractive pay-for-play bundles boosted unique subscribers to reach 4.1 billion, an annual increase of 6% that equals 245,000 net additions, of which roughly 80,000 were added this quarter. On the same line, third quarter '21 RGUs rose 10% annually, totaling 10.2 million, while RGUs per unit subscriber increased from 2.41 to 2.49. In the breakdown by service, Broadband totaled 339,000 net adds or up 10% growth when compared to the same quarter of last year to reach over 3.7 million subscribers. On a sequential basis, 105,000 net adds were recorded, the highest figure since the first quarter 2018. At the end of the quarter, the number of subscribers with speeds of 30 megabits or more have increased more than 150% when compared to pre-pandemic levels, and this trend is only going to increase. We are looking at a market that continues to grow, and Megacable is growing faster than the market. Regarding Video subscribers, they went from 3,360,000 in the third quarter of 2020 to 3,515,000 this quarter, with net adds of 155,000 or up 5% growth on a year-to-year comparison. Quarterly net adds, [ nearly threefold ] when compared to the previous quarter of 2021, going from 24,000 in the first quarter and 21,000 in second quarter to 59,000 net additions in this quarter. As Enrique mentioned, our new generation platform, XView and XView Plus, continues to benefit from a solid demand absorption, posting 1.2 million net annual additions and 203,000 net sequential additions to stand at 2.3 million set-top boxes as of September ending. Our XView Plus service came as a revolutionary solution to combine linear TV with an unmatched integration capability. This platform currently delivers over 70 million of interactions monthly. Our interactive visuals continue to be a significant aggregator to an already very complete solution and with the integration of external adds now offset the premium bundles. Turning to Telephony. This service reported net addition during the period of 129,000. Therefore, Telephony subscribers reached the 2.9 million mark in the third quarter with 423,000 net additions year-over-year. Separately, the MVNO service reported a remarkable figure of 19,000 net additions for the quarter, thus having the record drive to reaching almost 350,000 lines as of September 30, 2021, out of which 89% are postpaid services. On the churn rate, while as a result of this high degree of satisfaction reached by our customer approach and quality of services, this indicator remained virtually unchanged on a sequential base, with rates of 2.0% at Broadband, 2.3% in Video and 2.5% in Telephony. This accomplishment gains further relevance when considering the current environment of rising competition and represents a hard proof of the solid position that Megacable has gained in the market that serves. Consequently, ARPU per unit subscriber for the third quarter totaled 411.5 increasing 2% on annual basis and almost in the same levels as of the second quarter of 2021. The above mentioned is explained by a lower contribution given additional discounts as subscribers adopt triple pay bundles. Break it down by service ARPU increased 3% and 6% on an annual basis at Internet and Telephony, respectively, while Video went down 3% year-over-year. In relation to the corporate segment, revenue from both Metrocarrier and Ho1a remained on its growth trend with annual growth rate of 9% and 13%, respectively. On the Metrocarrier side, connectivity services continue to be the main growth driver. And this period, coupled with the recovery in the hospitality segment. On the other hand, a year-to-year recovery is observed in Ho1a as a result of a better outlook in the private investment. MCM revenue posted its third quarter sequential growth, standing only 3% below of its annual comparative. On the GPON migration, this process continues to advance, and we are aiming at the first quarter '22 for conclusion. These players will undoubtfully expand our competitive advantage for the next few years, improving the overall experience of the subscribers. As Enrique first mentioned, we have established a plan to be executed on the next years that will significantly increase the Megacable's footprint. The company is fully committed to taking it services and infrastructure to the next level in terms of coverage. These investments will be [ designated ] to ensure that Megacable will be a leading player in the industry for many more years, delivering the best possible service through the best infrastructure. And just to be clear, the goal of this project is not to evolve, but to expand the footprint of the company. Innovation, adaptability and a fast and efficient execution has always been part of our culture and the projects and deployments that we have ahead of us will reflect this values. To conclude, quarterly results have confirmed that we are on the right track, and the projects ahead of us are aimed towards securing the future of the company. We will continue to execute as we have over the last few years with a responsible and intelligent exercise of investment, our focus on cost efficiency and the maximization of opportunities. With this, I conclude my remarks. Now, I would like to hand the call over to Luis, who will share further color on the financial results. Luis?

Thank you, Raymundo. Good morning, everyone. During the third quarter, the consolidated revenue rose 9% year-over-year to MXN 6.1 billion. Once again, a new record high for the quarter, driven by the solid performance recorded at our 3 mass services, coupled with the contributions from the corporate whose recovery is increasingly visible. In this sense, in line with the higher subscriber base, revenue for Broadband, Video and Telephony posted annual growth rates of 14%, 2% and 27%, respectively. Thus, posting an annual growth of 10% in the mass segment revenue. Separately, the corporate segment revenue increased 7% on an annual basis, primarily supported by the 9% climb in Metrocarrier, following higher business connectivity revenues, likewise 13% growth at Ho1a, contributed to offset the slight growth of 3% at MCM. Therefore, in the revenue mix, 83% of the consolidated revenue came from the mass market and 17% from the corporate segment. On cost and expenses, following the growth recorded in the mobile business and the recovery of Ho1a in the corporate segment, which implies a lower margin, the third quarter cost of services was up 10%. Similarly, SG&A increased also 10% when compared to the third quarter of 2020, following the expansion of the subscriber space. All in all, quarterly consolidated EBITDA went up 8% year-over-year, amounting a little over MXN 3.0 billion, thus reaching a 49.1% margin, while EBITDA for cable operations climbed 9% when compared to the third quarter of 2020 to reach more than MXN 2.8 billion with a 50.6% margin. On a year-to-date basis, consolidated EBITDA margin remains close to 50%, still in line with the company's expectation for the year. On the other hand, the EBITDA margin of cable operations stood at 51.3%. Below EBITDA, over 70% of the growth in depreciation and amortization was caused by the increase in depreciation related to higher CapEx. The rest is to reflect an impairment on the company's investment in ALTAN Redes. CFR is also above normal figures due to a onetime effect to the tax authority. In that line, net income reported and annual contraction amounting MXN 964 million, mainly following a higher depreciation component that includes the impairment previously mentioned, coupled with the increase on the CFR and a higher tax rate compared to 2020. Excluding the 2 extraordinary items, above mentioned, net income is growing 9% when compared to the third quarter of 2020. Moving into the balance sheet. As of September 30, net debt amounted close to MXN 4.3 billion, 13% below than that registered at the same date the previous year, explained by the combined effect of a lower gross debt and a higher cash and cash equivalent balance. Consequently, both net debt-to-EBITDA ratio and interest coverage ratio reached 0.37x high and 15.3x, showing our healthy financial position. During the third quarter of 2021, investment represented 34.9% of quarterly revenue, totaling a little over MXN 2.1 billion, mostly deployed in the GPON migration process and the progressive expansion of our network. For the 9 months of the year, total investment reached more than MXN 6 billion, representing 33.3% of the same period of revenue. To conclude, Megacable is backed by solid operating and very strong financial fundamentals that enable us to capitalize on opportunities and endeavors to strength its competitive position. As we move forward with the plans for the following years, we are confident that each quarterly report will bring confidence to our stockholders and confirm that we are taking the right path towards future value creation. With this, I conclude my remarks. Now let me turn back the call to the operator to open the line for questions and answers.

[Operator Instructions] Our first question comes from the line of Alejandro Gallostra with BBVA.

I would like to get started with your initial remarks. Probably you're announcing the expansion of your network into new territories, apparently aiming to double the size of the company. Could you please elaborate when you plan to start this expansion? And how long it will take and how much additional CapEx it will require? And also if -- you will be entering these new territories with FTTH, and if you plan to upgrade your -- all your current network to FTTH before proceeding with this footprint expansion?

Alejandro, thank you very much for your question. Yes, we already started to the big expansion. We started expansion in the easiest areas for us, which is the vicinities of our networks -- our core network. In -- here in Guadalajara, we're expanding to Zapopan, in Mexico City we already have certain areas of the surrounding the Mexico City territory in Tlalnepantla and Zumpango, and all those -- as you know, we operate in [ Deluca ]. So we are expanding our network in Mexico City also -- ae have started already 4 months, 5 months ago. And we are doing also the same in Monterrey. In Monterrey, we have a very large backbone of fiber with Metrocarrier. So we started to do popularity in that city also. We already started. And now we are going to complete new territories, new cities, that makes sense for us. Cities that are not -- that are -- we consider underserved, but we have an opportunity to have a very good market share penetration. And yes, it's going to be a state-of-the-art FTTH. We will -- I mean, we have a big -- how would you say, inertia -- energy, that we are already building a lot of our FTTH. And we have the capacity, so we want -- we will keep that capacity. We will keep the same contractors in our crews also. And take advantage of that, we did build 24,000 GPON network in the past -- in 18 months -- about in 18 months. And so we will take advantage of that capacity to expand to new territories. And we already doing it in those cities that I mentioned that we have already started in some other cities. And Raymundo will clarify more about that.

Yes, Alejandro, and expanding on what Enrique explained, we want to take advantage of everything that is playing. Right now, we see an increase in the demand of our services. It is not the same 10 years ago that it is right now when broadband needs that we call that Megacable is a big necessity. It's an essential company. And it's not Megacable. It is the need of the broadband both for enterprises and businesses. So the market continues to increase, and will do that in the years to come in Mexico. We manage and we have access to the best technology. Right now, the cost of technology to be deployed, let's call it, FTTH is way more efficient than what we did or what we have as an option 20 years or 15 years ago. Third, we believe that we have proven to run this organization in a very efficient manner with the highest margins in the industry. And of course, we managed that with a low ARPU. So looking into those conditions, we have decided to continue -- not continue to expand the footprint of the company to new markets. It is very important to understand that the GPON project was a project aimed to do evolution of the existing network because we say this and we make more efficient the existing CapEx. The CapEx that we're taking away from those cities that are GPON is taken on the HFC network that we have. So we're taking the best of the 2 worlds. The HFC networks has managed to be able to be very competitive. We have a 40% increase of bandwidth last year when we started this terrible pandemic period. And we managed with the HFC networks in those areas to manage to provide that bandwidth to subscriber. So in terms of our evolution of the network, we're very happy with the FTTH, but we're happy also with HFC. The years to come on the CapEx, it will be for the expansion of the company. If we go to new markets. And as Enrique said, we will continue to be very careful where to go, but we want to take advantage of those 4 advantages, if I can say it again, that we have as an organization, okay? So that -- I hope Alejandro can answer the expansion on the FTTH is going to be in markets and the existing of the networks will be still FTTH and HFC, at least for the years to come -- in the 2 years, 3 years, 4 years to come, and the CapEx will go to the expansion of the company.

And if I may, we will mostly cover this CapEx with our own cash generation. We although have a strong balance sheet, and if needed, we will -- if we need to accelerate or we will use the balance sheet if needed. So we think the CapEx will continue to be in a good range, and we will still generate cash. And that's how we plan to cover for this expansion.

It seems that this is -- what you're announcing today is a more ambitious plan than what you've been stating in previous calls where you said that you were going to enter new regions. But not only, this is -- it seems to be a more ambitious plan. Should we think about Megacable going nationwide now? And how much CapEx it will require?

It is an ambitious plan that we have. But as Enrique said, we already have existing footprint for Metrocarrier in the main cities nationwide. We also have massive services in the main 2 cities, which is Mexico City and Monterrey and already expand our network to Zapopan. What we are doing is replicated the 24,000 kilometers that we're building in between these 18 months, as we speak for the [ evolution ]. But taking that capacity to other markets and expand them. So we believe we can do it around the next 3 years to 4 years, pretty much. That's what we're planning to do. It might be before. It might be some problems on the way. But we're ready, and we have the experience, and we're proving that with the GPON projects that we can both from a company that builds 3,000 to 4,000 per year to 13,000 kilometer -- 12,500 or 13,000 per year and now continue to do that in new markets and even improve that. We believe we can do that. And like we said, which was very, very clear on that part, we managed to provide that with the CapEx that we have and achieve CapEx in the lower -- in -- not in the lowest the levels that we have, and we have experienced as of this year. If we need to get into our balance to have more, we will do, but we expect to finance all this with the existing level of CapEx that we have. Luis you might add in fact a little bit, but…

Yes, we will keep on -- for the first years on the 30s. But after 3 years, 4 years, we will reduce CapEx to go basically to low 20s and even could be below 20% after that.

So this is a higher guidance -- higher CapEx to sales guidance than you were getting before. And when you say doubling the sites of the company, and I think you mentioned that you mean doubling revenues or subscribers or homes passed?

It is all integrated, when we say doubling the size. Think about the 10 million home pass that we already have, I'm seeing company in the next 2 years to add 9 more million home passed. Double probably kilometer subscribers and everything, but just take that -- some measurement in terms of home passed, going from 10 million to 18 million, 19 million that's pretty much what we see and who knows, maybe more.

Our next question comes from the line of Marcelo Santos with JPMorgan.

The first question is regarding the expansion plan. So how would you deal with -- how do you think about overlapping fiber? Is this new fiber that you're going to lay in new regions going to be in places where there is no fiber yet? Or do you -- I just wanted to understand how this competition with other fiber players will take place? That's the first question. And the second, just to clarify, you said the first 2 year CapEx will be in the 50% range of revenues and then go down to low 20s. Just wanted to get that number clarified?

Luis, you might clarify the CapEx before.

Yes, the CapEx investment and the percentage to revenues is going to be on 30 -- 3-0.

Mid-30s.

midterm, mid-to-low 30s, right? And will go down after 3 years, 4 years to low 20s and even could be after that, even below 20%.

And the first one that you -- yes, go ahead Marcelo.

No, no, it was good to say thank you for the first question -- first answer.

Okay. And then going back to your first question regarding the expansion. Well, we do compete right now with FTTH in our markets. The markets where we're going have some FTTH and some HFC still. And some of them are still corporate or DSL. We -- as I said before, we believe we manage a write FTTH network with the right video products in terms of the XView platform. And we have the power of these 24,000 employees and organizations that we are already working in those areas to be able to expand and to manage efficiency. Our ARPU -- were used to run low ARPUs to expand the company and still managed above 50% margin levels. So, yes, some of the markets will be in FTTH market that has coming from -- there are 2 or 3 companies in the market. It doesn't make any sense to talk to them. But as you know, it's Totalplay, you can tell that, but we believe we can go to those markets and some selected periods where there's only HFC or copper, and some of the big areas will have FTTH too. But based on our experience and our knowhow, we believe we can capture an important part of the market share and it still makes a great return for our shareholders.

And just one question, a follow-up. You said you're going from like maybe 10 million homes passed to 18 million, 19 million. What's in for that?

What Marcelo, I didn't understand?

You mentioned that you would be doubling the size of the company, going from 10 million homes passed to 18 million, 19 million homes passed. What would be the timeframe for that? How long, more or less? Is it 3 years, 4 years to achieve all of that?

3 years to 4 years to achieve that. I can talk more, but I will tell 3 to 4 years.

Perfect.

Enrique pushing it into 3, but they want to say 3 years to 4 years.

No, I'm pushing to 2.

To be realistic, as we said, that will be an important effort from the company. But these past 18 months build the right infrastructure in terms of construction, power, materials, logistics, equipment, people, management, and we feel confident we can achieve this, as I said, in 3 years.

Now that we have the engine ready is just to release it.

Our next question comes from the line of Fred Mendes with Bank of America.

I have 2 questions. The first one, if you are seeing -- if you have some kind of customer satisfaction indication or something in this line, that when you measure the customer satisfaction for fiber versus cable, there is a significant difference. Because, obviously, as you fiber more and more of your network, you would assume that over time, your churn should reduce. This is the first one. And then the second one, we are seeing a decrease in ARPU in the Video segment. Is this due to the bundles and eventually you are giving more discount there or that's just market conditions, and that's bigger as we move forward?

Sure, Fred, good question, both as all have been. We do have seen a slight increase in customer service-related to KPIs. However, this is not a relevant event yet left. We think that the real difference could be observed once a major part of our subscriber base starts to demand more bandwidth or higher speeds. That's when we should be able to get a difference, which is, of course, what we expect to see in the coming years. It is too soon to see. Regarding your second question and what will be the reason to see the ARPU -- the Video ARPU. There are several reasons behind this trend. First, our Video subscribers migrate from a single play or double play to our triple play package. The, overall, ticket that each subscriber pays is definitely higher. However, given the discounts that are applied to the triple play bundles, the contribution to each individual service is lower than what they have on a single or double player, those affecting the [ young ]. In addition, I believe we are excluding the adoption of new subscribers of lower packages, while the premium packages are still being affected by OTT plan. All these will be offset by a higher number of subscriber traffic, but also with the revenue coming from additional services so effective. So we have some items and external factors that affect the lower ARPU Video and some that affect positive. The main of all is the ticket that the subscriber pays is definitely higher on a triple play, vut effective discount that goes to be.

Our next question comes from the line of Alejandro Chavelas with Credit Suisse.

Most of my questions have already been asked. Just one on the ALTAN impairment. If you can comment a little bit on why did you decide to do this impairment? How much was the decline in stake? And, generally, more color on that impairment? And do you think perhaps the ALTAN situation could affect your ability to operate in mobile going forward?

Sure, Alejandro. Yes, we have to recognize this due to really our internal auditors and the situation I -- well, external auditors, of course and the situation that was publicly announced by ALTAN. So this is something that has to be booked on the value of our investment. And we continue really closely watching and following the happenings on the ALTAN side. We think that the company will rebound and in the long term will be a rate investment. But this is just an accounting topic that given the situation that is public that we really have to impact our book. But we don't foresee an immediate change in that, but we see a long term recovery from ALTAN. I don't know Enrique or Raymundo if you want to?

Yes, ALTAN, it's a company that has a social orientation also. And it is to be capitalized and it will be capitalized, because it's part of the plans for the global connectivity of the Mexican government for a remote basis. The quality of the shareholders is very good. We have -- there are very good shareholders there. One of the main shareholders through the development banking system of the Mexico and also the COMTEL, which is the entity that promotes the telecommunications development or investment in telecommunications from -- in the Mexican government, which -- that entity did put the frequencies into the corporation, which ALTAN an is now paying for those frequencies because they got the Mexican government is shareholders, is a partner in this joint venture. So we think that in the long run, the viability of ALTAN is pretty much warranted. And we are not a big shareholder there. We can't be a big shareholder because we are a user of the network. And we don't see for the -- for now, the risk to keep using the ALTAN network to provide to -- for our MVNO. Although, we do have some relations with other MVNO companies in Mexico. So we are covered in the case that -- in the remote case that ALTAN could be at risk. But we feel confident that we will be, in any cases, able to keep our MVNO in touch with good customer perspective. We do also have good margins there and almost no CapEx. So it's a good business in the long run.

Perhaps just a follow-up of my colleague's questions, is there a region in particular where you see an opportunity for expansion, I don't know, for example, in the or in the [ Mexico ] Japan or the south somewhere, do you -- where you see a big opportunity for the expansion that you're planning?

Well, we would not like to disclose existing a, but I can tell you that it will come on the side where we already have network coverage. Expanding Mexico City, Monterrey and Zapopan is for sure areas where we're going to be. And the rest to build 9 million home passed, it covers everything from [ Mexico ] to the North to the Southeast part of Mexico in the selected areas where we see that there is more opportunity. And of course, looking where we can compete better in those areas. There is good economy. And we were confident that we can capture that because of the organization we have. We have already all plan, but those are plans that we would like to keep it this way. We might disclose later, and you will see where we're building, what we're building. But right now, we would like to keep it 9 million home passed, that gives you an idea of the size of the investment, the time that it will take and the number -- everything subscribers from EBITDA will come if you just take those 9 million home pass and try to apply the efficiency we have in the pack, that will tell you why Enrique was clear about how our goal to double the size of the company.

[Operator Instructions] Our next question comes from the line of Andres Coello with Scotiabank.

I think you already talked about CapEx. And as you know, CapEx is something that is concerning investors a lot. That's probably why your shares are down almost 40% since 2018. The CapEx outlook is concerning. But I wanted to get your view on EBITDA -- EBITDA growth. In 2020 -- I mean, in 2021, you grew EBITDA by around MXN 1 billion per year. So you went from MXN 10 billion in '19 to MXN 11 billion in '20, and you are heading towards MXN 12 billion in EBITDA for 2021. So I was wondering if with all these investments, you believe that you can continue growing EBITDA by around MXN 1 billion per year or perhaps a little bit more than MXN 1 billion per year. So in other words, we already have your view on CapEx, but it will be good to have your view on revenue and EBITDA growth.

Yes, Andres, and thanks for the question. And you're right, you're possibly right on -- I mean, you're perfectly right on the numbers and the expectations you have for the future. And yes, we foresee a higher growth in EBITDA than the 1,000 you're seeing right now. So yes, we don't -- we are not willing to give guidance per se. As you know, we want to be more generalistic on that. But for sure, it's going to be much higher than 1,000 per year.

Yes. We're not talking about doing mid-size kilometers and for home passed. We are talking about increasing the size of the company significantly, [indiscernible] years to come, and that will take -- if we continue to manage the levels of margin that we have or slightly below that, that surely will take you -- Andres to double the amount of that EBITDA one this project is already finished, and we continue to build the project.

So you're expecting to double the size of the network also double the size of EBITDA in the long term? That's your view, right?

I would say that the -- naturally, the EBITDA is going to grow very much in the percentages that we grow the number of homes passed plus -- the depending on how successful we're going to be in the penetration in the market share that we can take in these areas. We are confident that the market is growing, and it will keep growing, and we are confident in the quality and the capacity of the company to add value to the market. We are by far the company that adds more value to the subscriber than the market. So it shouldn't be much different in those new areas. There's going to be better areas than others. But in the mix, we think that we can achieve pretty much the same results that we have currently in our footprint.

And let me ask you a second question on the broadband additions. I think the broadband additions during the third quarter were 4x higher than the additions of EC. So I was wondering if your FTTH network is already helping you to accelerate broadband growth? Or is the broadband additions are still coming mostly from HFC areas. Just if you can give you a breakdown perhaps of your broadband additions per technology?

Well, what we can tell you, Andres, is that we are growing broadband as well as the rest of subscribers, both in the FTTH and the HFC network. Really been very clear that, both technologies represents growth for the company.

Our next question comes from the line of Patrick Brennan with Brennan Asset Management.

I had a question on just how you're measuring the return metrics for this new expansion? And can you sort of just talk in broad strokes on sort of the unlevered IRR you anticipate from this -- from the network expansion? And then, any other details you can share in terms of anticipated cost per home passed, any churn expectations? And then maybe importantly, what are you assuming on penetration percentages, especially as you enter a market that has an existing fiber-to-the-home competitor currently? And then I have one follow-up after this.

Well, related to some of the items that you are asking, we really don't like to disclose the cost of -- the cost of our homes passed and that type of investment. We can maybe have a separate conversation to discuss some of the topics that you established. There are some other more general topics that we can talk. But the details on that, we don't like to really to really share it.

Can you just talk -- maybe just generally in terms of maybe the magnitude of difference in terms of penetration for a market that has a fiber competitor versus one that doesn't, would that be possible?

Well, what we can say is that the markets that we compete, and we already have fiber here, we wanted to go -- if we managed to have a very decent and not want to say only decent, but we are the relevant player in those markets whether we have HFC or fiber. We've managed to compete in terms of our knowledge, knowhow and expertise in the market and efficiency of the cover we have. Our Video platform and the way that we manage Broadband is able whether HFC or fiber to compete with them. In those new markets where we go, not all the market have fiber, and the ones that have fiber don't have that many subscribers in that part. So every market will be will be different to compete in Mexico City or to compete in a midsized market where there is no fiber on that part. All of them might have different penetration and different ARPU too according to the size of the market. Those information, as we said, partly would like to keep it to ourselves in that part. But we can tell you that we did the 25,000 kilometers of GPON in these 18 months. You've seen the levels of CapEx that's over there. That's you've seen the levels of EBITDA that we continue to have. Of course, it was an evolution of the network. But we expand also to Mexico City, Monterrey and Zapopan. In the last 5 months, 6 months, we've been working there. We compete in markets strongly with other big competitors like Telmex Izzi and Totalplay. And we're confident we can do the same in this expansion of the company. That's pretty much the message we want to send.

And I guess my second question is just, how do you think about -- I mean, presumably, you see very attractive incremental IRRs on the rollout of this broadband project. But your stock price seems sort of puzzling, trading at half the level as your growth rate. And so presumably, the IRR on a share repurchase would be extraordinary, assuming you're targeting very attractive returns for this expansion. Can you just sort of talk through your thought process on the current stock price, how you think about potential buybacks, if there's any appetite within the family to consider that? And would you think about any incremental -- small amounts of incremental leverage to potentially look at what presumably would be a very high attractive IRR [ purchase ].

Thank you very much, this is Enrique. The company went public to be public, and we do tend to stay public. This -- that's the Board's decision. We think that to buy a stock is a very good opportunity at the price that it is right now. It's a very -- it's very -- it's brilliant opportunity. It's -- we're trading of around 5x EBITDA. Our peers in the U.S. is -- there are around 9 and in Europe and other parts of the world. Mexico [ mostly ] is not performing good. But we think that, that should be temporary. I don't know how temporary it's going to be, but it is not our intention to do a buyback program or -- because in Mexico, it's complicated. The rules are complicated. It's -- if you do that, you -- it's like you're paying a dividend, you have to take taxes on that. We'd rather keep our dividend policy, so the shareholders of the company decide whether with that money they want to go back and buy more stock of the company or other stocks. We think and we really believe that the stock is really inexpensive. I don't want to use the word cheap. But it's nonsense. It's the company -- I mean, a company that grows at almost to double -- lower double digits and has this history of performance, the company has always been cash positive operating. It has always been growing the EBITDA and the revenues. And we are constantly updating our technology. We have one of the best human resources of the industry. But for the knowledge that our people has of the business. And it doesn't make any sense the price that the stock is trading, but that's the market. We don't intend to try to intervene to solve that.

Our next question is a follow-up from Alejandro Gallostra with BBVA.

Thank you for follow-up. You mentioned that Ho1a benefited from the recovery in the government segment. However, other companies in the sector continue to experience declines in government revenues. Could you please explain what is the decrease between Megacable and other companies in government revenue trends?

Well, actually, Alejandro, Ho1a pretty well in the private and to -- that part government did increase, but private, we managed to do very well with higher ticket -- average ticket per customer on the private segment, and that we're very -- very happy that on. It's not coming only from government. Ho1a is not a company that depends on government only. Our corporate segment has a component, an important component of government, but is not the key part of it -- on that part. And I can tell you that the growth in Ho1a was very, very similar in terms of private and government. Both were positive. Above double-digit growth in those 2, that's why we have 13%, and we're very happy with that. That we will not depend only on the increase of the government dependency on that part. And still the component that we have the majority of Ho1a, I can tell you that more than 65% of Ho1a revenue comes from private investment on that part, [indiscernible] number, maybe more than 70%. So you can be sure that we have also a company target to the [ TIC ] market that goes to private and government as well.

I understand this. But you're still growing in the government segment. And given the current [ specialty ] plans from the government, how do you manage to grow this segment? And how does that you keep growing more or less, but you still keep growing on other companies in the industry are experiencing a high revenue declines in this segment. How would you explain that?

It is based on the products and what the segment that you're talking about. There's always an sizable, it's not at being to be able to manage a decline of federal government or state. We sell to municipalities, state and federal government. And we say we sell a information technology or big services on that part. We managed to grow Metrocarrier connectivity. But this one, we're talking about Broadband products that goes in terms like security. Security is very important to this whole government. The shop that we have, all the different products that will launch to the market. So our particular segments of the market were more like start. Infrastructure that needs to be updated to couple with this -- with the demand, that cannot wait. That's offsetting and maintaining the network that they use to get. And that's why we can -- those are particular projects. How we do that is because we have a more experienced salesforce we have a very bad 2020. In that part everybody holding projects not that only government or private. And now we're in a better position, there is no way looking into the future that the technology market doesn't grow. There is need for everybody, government and enterprises to be able to secure the information they have, to grow in terms of servers, to grow in terms of collaboration services and licenses, and that's what we are seeing. So maybe that this management you are waiting for. But it's different for somebody really, really big than for Ho1a, which is not the leader in the [ TIC ] market. So we expect to continue to grow as we continue to gain experience in that market.

There are no further phone questions at this time. I'd like to turn the call back over to management to answer any webcast questions.

Okay. We have a question from Barclays. And its consolidation of the cable market in Mexico has not been speculated. Given your ambitious growth plans, it is fair to say you continue to believe you had a better off growing on your own.

I don't know about that. We don't have any perspectives of consolidation so far, but we are not cross to that. I mean, that could happen also. But we do think that this is a smart move of the company, and it's something that we need to do. And we think that we can do a very good case out of it. But we are not close. I mean, with the possibility of consolidation is still open. We -- that there is -- in Mexico, I think that the market is -- has been consolidated in the past, but there's still some room for that. But we think these is a very good alternative for us in case there is an consolidation.

Okay. And we have a second one from [ BBA ]. You mentioned you want to double the size of your company based on home passed. Do you think you can replicate the level of RGUs per unique subscriber and unit subs per home in those new units?

I think that question has already been answered by Raymundo. Most of our sales currently is triple play by far -- around 70 something percent of the total sales that we make, new contracts are triple play. So we think that we can continue with that. Our Video service is extremely attractive. It has -- it's not expensive. And it has a lot of functionalities. I think that is the best Video product that there is in the market in -- I would say, in Latin America, and in most of the world. There is only a handful of companies in the world have the level of service and the user interface that we have in Video -- and our video application is XView Plus. So we think we can continue growing in Video and selling triple play for a long time.

Yes. We have another one. What penetration of the new 8 million to 9 million homes passed do you think you will get in the next 3 years to 4 years. What is the mix of new broadband subs versus market share in these regions.

We don't want to be arrogant here. I think that we would not like to disclose that, but we think that we will be successful in those areas as we have been very successful in the areas where we currently operate. And the time will tell. But I think -- I mean, it's been very well analyzed by our people in the company, and it totally makes sense to do what we are trying to do.

We have no more questions from the web.

This concludes all of the questions for today. I'd like to turn the call back over to Mr. Enrique Yamuni for his final remarks.

As always, it was a pleasure to discuss our results with you and our future plans now. Please contact our Investor Relations department if you have any questions or concerns regarding the company. And I have a beautiful and a wonderful day and weekend. Thank you very much.

Thank you all.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.