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

Good morning, and welcome to Megacable's Second Quarter 2022 Earnings Conference Call. With us this morning from Megacable, we have Mr. Enrique Yamuni, CEO; Mr. Raymundo Fernandez, Deputy CEO; and Mr. Luis 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. During the second quarter of 2022, the country continued to face a complicated economic scenario, highlighting an inflation rate that continues to rise. Increases in Banxico's reference rate and a GDP annual growth expectation below 2%. These factors are being reflected in the economic activity and in purchasing capacity of the Mexican families. In that context, Megacable maintained double-digit revenue growth compared to the second quarter of last year and a very attractive EBITDA margin remaining the highest in the industry. These results were mainly due to a successful commercial strategy, including subscriber growth across the mass market with a higher ARPU. In addition to bandwidth capacity increases reflected in a better and more reliable service coupled with the concrete measures to maintain an efficient cost structure. The previously mentioned offset an increased churn rate mainly due to the economic conditions. It is important to clarify that although we continued to advance in our efforts towards entering new cities, these results does not yet include our relevant contribution from new territories as we expect the bulk of subscribers growth from our expansion plan towards the second half of the year. Also, it is worth mentioning the growth trend of the ARPU as we continue to offer additional services to enhance the user's experience, such as the Xview platform and also contribute with additional revenue from the same number of subscribers on top of the rate increases we did during the month of March. To share more color on Xview of quarter, I'm sorry, to share more color on Xview at quarter-end, 65% of our subscriber base already enjoys the best multi-platform video services with unmatched media quality, speed and a friendly user interface. Innovation has always been part of Megacable's culture and Xview Plus is proof of that. It is a great service complemented by a new fiber infrastructure in the largest cities in a robust HFC technology for the rest of the footprint. On the corporate side, connectivity remains the main growth engine for the segment as Metrocarrier and MCM posted double-digit revenue growth. This is mainly due to the adoption of connectivity and mobility solutions that benefit work out of the premises, a trend that should continue to develop in the coming periods. Just like the mass market, our corporate segment would also have a growth boost in the second half of the year with the entrance of the new territories. Both Metrocarrier and all our potential market will significantly increase due to the Megacable 2024 project. All the previously mentioned resulted in double-digit growth in revenues, another record high figure for a single quarter. Additionally, EBITDA margins remained at very attractive levels as a result of the cost control strategies that are part of the company's culture from the very beginning. Looking ahead, we are confident that our businesses remains well positioned to achieve our annual growth targets in terms of revenues, EBITDA and subscribers, despite ongoing inflationary pressures in a softer economic outlook. During the quarter, we carried out our first public debt issuance for MXN 7 billion, which will be used primarily to accelerate our expansion plan and secondarily, to refinance our short-term debt. This issuance will further strengthen our balance sheet and support the endeavors that we are executing. Now, sharing some color on our projects in development. Regarding our GPON evolution initiative, we are in the final migration process. Most of the milestones that we set for these initiatives have already been reached. So we can say that we successfully completed this plan. In this regard, I would like to comment that we are delighted with the positive response of our subscribers to this service upgrade and we will continue to seek to exceed their expectations and provide them with high-quality service to the deployment of state-of-the-art communication technologies. Regarding the Mega 2024 initiative, we continue to execute according to the plan. During the past 9 months, since we announced the project, we have laid the foundations of a robust infrastructure that will enhance growth for many years. Our primary focus has been on-site acquisitions, premises -- permits, fiber deployment and CTCs and house construction. However, we have already started operations in approximately 10 additional cities and there are many more to come. It is also relevant to reiterate that in these new markets, we will follow a pricing strategy consistent with our usual approach of offering services that meet the needs of users at affordable rates. We are confident in our superior infrastructure and services to gain market share in these new cities without detriment to our profitability. As we have done in the past, we will seek to win new subscribers as well as to retain our current ones by offering the best balance of pricing, bundling and service quality. We will also look to identify in sales opportunities to grow as well as to improve our service and making the best use of our flexibility and capacity to adapt in the face of a challenging environment. I will turn the call now over to Raymundo to discuss our operational performance. Raymundo, please go ahead.

Thanks, Enrique, and good morning, everyone. Our operational performance for the quarter include subscriber growth across the mass market, mostly related to successful commercial and sales strategies as reflected in the highest figure of gross adds for the broadband service in the history of the company, coupled with an increase in ARPU, which helped to offset inflationary pressures that are impacting churn rates. Here, it is important to underscore that the entry into the new market is not yet fully reflected in our operating results as we are still in the process of deploying and activating the required infrastructure. However, the 428,000 new homes passed is record high. This means that the boost from this expansion project in terms of subscriber and RGU growth will materialize during the second half of the year. Even in this context and with a difficult economic environment, the company managed to continue reaching historical revenue figures at very attractive EBITDA margins, proof of the strength and resilience of our business model and the preference of our subscribers. Moving to results. Unique subscriber reached 4.2 million at the end of this period, increasing 4.2% versus the second quarter of 2021, which translate into 169,000 net additions. By segment, Internet subscribers grew 7.3% compared to the second quarter of 2021, totaling 3.9 million, resulting in 264,000 net additions. As of quarter-end, approximately 14% of our broadband subscribers already received their service through fiber technology. While following this bit increase carry out in the first quarter, over 50% of our subscriber base has a 40-megabit service [ or higher ] compared to 15% a year ago. Video subscribers reached 3.5 million, growing 2.5% versus the second quarter of 2021, adding 86,000 subscribers. Our Xview Plus platform continued to grow, growing from 2.1 million subscribers at the end of the second quarter of 2021 to 2.7 million this period, an increase of 31.4% or 647,000 net additions. It is also worth noting that near 90% of our subscriber base is digital through more than 5 million of set-top boxes. The telephony segment recorded 3.1 million subscribers, growing 11.7% compared to the second quarter of 2021, implying 328,000 net additions. The MVNO service subscribers totaled 434,000 with 178,000 net additions versus the same quarter last year, maintaining its upward trend. Here, it is important to note that we continue to disconnect the lines that are not recording any traffic according to the company's [ portfolio ]. The company's growth in gross adds was accompanied by increases in churn rates with broadband at 2.7%, video at 2.6% and telephony at 2.9%. The main factors influencing these connections, as Enrique mentioned, had to do with the economic headwind affecting overall demand, rate increases, a post-pandemic period where people are starting to go out and spend on other activities and the more competitive environment in the industry. Megacable will continue to focus on gaining, retaining and recovering subscribers in the base of a robust portfolio of products tailored to the subscriber needs. At the end of the quarter, RGUs totaled close to 10.6 million, 6.8% more than the 9.9 million of the second quarter of 2021, driven by subscriber growth in the 3 mass segment services, also reflected in the RGUs per unit subscriber, which went from 2.46 in the second quarter to 2.53 this reporting period. Consequently, the ARPU per unique subscriber was MXN 427.3, recording a significant growth of 4% compared to the second quarter of 2021. This was mainly due to the focus on the marketing of triple play packages, rate increases in first half 2022 and the contribution of additional services such as the Xview platform. Turning to our mobile segment, the majority of these services had a positive performance. Broadband increased by 4% compared to the second quarter, video by 2%, MVNO services by 15% and telephony declined by 2% compared to 2021. Including the mobile services, we reached more than 11 million RGUs. In the same basis, ARPU per unique subscriber would have been MXN 439. Now, going to the corporate side. Metrocarrier recorded a remarkable 18% growth when compared to the second quarter of 2021 as a result of new connectivity projects. On the other hand, all faced difficult comparison due to important projects we had in the second quarter of last year and are now concluded. As Enrique comment, regarding the expansion of the company, we are moving forward with our plans despite a challenging environment, the supply chain management current issues, including shortages and delivery delays have not been affected significantly. However, we are monitoring the situation closely to identify and correct any situations that may arise. Wrapping up, we will continue to focus our efforts on pushing forward the expansion plan, of which we will commence with commercialization phase on a larger scale in the second half of the year under a pricing and marketing strategy in line with our approach to profitable and sustainable growth. From an operational standpoint, these efforts will be complemented by actions that are geared towards preserving and building our subscriber base, social deployment of robust communication and marketing campaign by offering accessible bundles with great value. With this, I conclude my remarks. Now, I would like to hand the call over to Luis, who will share further color on the financial results.

Thank you, Raymundo. Good morning, and welcome, everyone. Consolidated revenue reached MXN 6.7 billion in the second quarter, an increase of 10% derived from the subscriber growth achieved in all business segments during the last 12 months, particularly in Internet and video. The mass segment revenue for the quarter was up 9% year-over-year, totaling MXN 5.5 billion. Revenue for all services increased on an annual basis with broadband, telephony and video growing 11%, 9% and 5%, respectively. The corporate segment total revenue was MXN 1.2 billion in the second quarter of 2022, 15% more than the same period last year, driven by a strong quarterly performance in connectivity services. Metrocarrier posted a revenue growth rate of 18% versus the second quarter of 2021, while MCM rose 15%. PCTV climbed 22.5%, while all our revenue remained at the same level as in the second quarter of 2021. Cost of services for the quarter stood at 12% year-over-year, reaching MXN 1.8 billion. This was due to the overall growth of the company, including higher bandwidth capacity and the growth of the MVNO businesses. In the same way, SG&A increased 13% versus the same period last year, totaling MXN 1.7 billion, mainly due to the inflationary pressures and higher wages and electricity costs, coupled with the expansion of the company. Consolidated EBITDA for the second quarter amounted to MXN 3.3 billion, an increase of 8% compared to the same period of 2021 with a 48.8% margin, the highest in the industry. Net income totaled MXN 1 billion in the second quarter of 2022 compared to MXN 1.1 billion in the second quarter of 2021. This is a result of higher depreciation component following the investment that the company has carried out over the last couple of years and an increased tax rate. Moving into the balance sheet. As a result of the combined effect of higher debt and lower cash levels, net debt went from MXN 4 billion in the second quarter 2021 to MXN 7.8 billion in this period, given the dividend payment carried out during the quarter in the amount of MXN 2.4 billion and the increased deployment of resources to drive our entry into new markets. The net debt-to-EBITDA ratio stood at 0.62x and the interest coverage ratio was 13.28x, both remaining at very healthy levels. It is worth noting that proceeds from our first debt issuance are allowing us to strengthen our maturity profile. As a portion of these resources will be used to refinance debt, the local notes are not yet considering their balance sheet as they were issued by mid-July, thus after quarter-end. We are pleased with the success and great acceptance of displacement among investors as it was oversubscribed, which underscores their confidence and trust in our competitive positioning and our ability to continue growing with financial strength stability as reflected in the highest credit ratings assigned by Fitch and HR firms. On the investment front, quarterly CapEx amounted MXN 2.8 billion. This represented approximately 41.9% of the subscribers' total revenues and was mainly allocated to the ongoing business expansion project. On a full year basis, CapEx accounts for 38.8% of total revenue. To conclude, the strong financial performance achieved this quarter sets the company on the right track and gives the confidence to move forward in the sound execution of our expansion project. It is important to note that we will remain proactive approach to mitigate further impact of inflationary headwinds on key cost components. With this, I conclude my remarks. Now, let me turn back the call to the operator to open the line for Q&A.

[Operator Instructions] Our first question comes from Marcelo Santos with JPMorgan. Our next question comes from [ Ricardo Avido with JVM ].

Given the current inflation and supply chain disruptions, could you update us on the cost per home connected and expected return of your expansion plan? Additionally, as the second question, you've been entering some cities like Acuna and Aguascalientes, which already have 3 major competitors. Could you explain your strategies in these cities where there's more competition?

Luis, do you want to go over the return?

We are still considering that the cost per homes connected will remain surrounding the $200. So the inflation costs are still yet to be impacted in the future line. So we'll be between $200 and $210, $215 per homes connected.

And the return on investment?

The return on investment, we still depend on the penetration but with the projections that we have, it will still be between 15% and 18%.

That's right. And Ricardo, what we discussed what our expansion plan that we announced third quarter last year calls from looking into doubling the sites of the company by next 5 years in that part. That's a big investment that we have and that accounts to cover the majority of the cities in Mexico. We understand that some of the cities have strong competition as we are facing right now in our [ bundle ]. But let me tell you why we do that. We have the highest margin and we have said this several times. So we are a well-run strict cost-oriented company. In that part, we have a great product, our Xview Plus platform with Android TV and OTT device is like state-of-the-art and has proven to be of a great success for the company. We have the balance sheet to do it and we believe we can capture a very decent penetration rate of those areas so we can achieve the goal of doubling the company. Regardless of those cities, as we described and Enrique commented in his remarks, we finally just opened those cities, but really, really at the end of the second quarter, you can see most of you note the increase of homes passed, that's a great news for everybody because that will bring a further view that we are working on the expansion plan and materialize. But you can see that our Aguascalientes [indiscernible]. If I can recall our announced date was [indiscernible] at June 30 and our Aguascalientes on July 7. So really, we still don't have those systems with subscribers. But we can tell you that we will continue to grow in terms of what Luis is telling you. We expect above 15% return on everything that we invest. We keep a very low CapEx over connected homes passed and EBITDA margins of 48%, 49%, 50% that we have so far. So we don't see a reason why not to be successful in the future to come. The majority, it will be -- the subscribers will come from third and fourth quarter, mainly from fourth quarter of this year. And of course, 2023 will be a materialization of everything that we're talking about. That's pretty much our plan. We call it MC 2025 -- '24, because that's where we're building infrastructure in the next 3 to 3.5 years. So we can double the size in the next 5 years. It took me longer to answer your question, but the majority of you are wondering about the expansion plan, and we can go any further if you want. I hope I answered your questions on the panelist as well.

Just a quick follow-up. Would you be willing to provide any guidance in revenues, EBITDA for the second semester of this year?

Well, no, we'd rather stay where we are. We can tell you about the expansion plans and everything. We don't like because of holding [indiscernible] but I would say that the growth that we are having and we're expecting it will be met. We have disclosed that before. And as of today, we would not like to give any straight guidance on that part.

Our next question comes from Andres Coello with Deutsche Bank. Our next question comes from Vitor Tomita with Goldman Sachs.

A couple quick questions from our side. The first one is if you could give us an update following up on the previous question on how the competitive environment for mass market services has evolved over the quarter in your key regions? And a related question or second question would be regarding the higher churn rates seen in mass market services in this quarter. You already mentioned the key drivers, but could you give us a bit more color on this, particularly on whether this higher churn was driven by any particular region or particular client profile or by any particular competitor? And on whether we could still see some additional disconnections in the third quarter.

Thanks for the question, Vitor, as well, it's an obligated question for us to answer. Let me tell you what happened during the quarter. As I said, we have 4 factors for the increase in churn and the results of net additions. Those ones were the economic situation, the increase in rates that we had in March at the end of the first quarter. We have an increase in rate, coupled with the economic situation. We have also the post-pandemic effect of our subscribers that they were from home office in the majority to start going out and spending in all the things and of course, competition. Those 4 issues put pressure on the churn. But let me tell you that there are some regions more affected than other ones, of course, because economic changes in everything. But it is related as we see to increase in rates and the economic situation that we have. We were able to offset this because our force, our sales force is increasing. So the number of gross adds continue to increase on that part. So that will bring us into the future coming with a much more robust and is still a good level of gross adds that will certainly bring expansion to subscribers of what we have. The competition and why I tell you about the economic situation and the increase in rates because we felt that across the different markets, whether we have or not competition. So even though we have a market where we have easy and total play, other ones where we have total play, those markets were already there before the second part. What we did different was the increase in rates, which we felt that economic situation this year that we did not have on the pandemic part of 2020 and 2021. I don't know if that answered the question.

Our next question comes from Alejandro Gallostra with BBVA.

I have a question regarding your homes passed, you have passed 550,000 -- almost 550,000 new homes during the first half of this year. And I would like to know in how many clusters you have passed these new homes? The average size of these clusters and the geographic location and cities of these clusters, the geographic locations were using these opportunities? And also it would be helpful to know what is your target of homes passed for this year?

Thank you, Alejandro. Yes, as you said, we have around over 0.5 million homes passed. We built this year almost the same amount that we built in the full 2021 in the first 2 half -- in the first half of this year. And most of them, the 430,000 came on the second quarter. As we expressed before, all the challenges regarding logistics, materials, pipes, permits as Enrique's comment in his remarks are overcome. And finally, we are able to activate the 430,000 at the end of the second quarter. Those cities, it is public. I mean, we announced Aguascalientes, [indiscernible], some cities surrounding the state of Puebla, more kilometers, some kilometers in Mexico, Monterrey, you want to name it. I mean our plan is to go to expand the company, as we say, and double the size. So really, when you go geography, start looking for everything that we don't have right now. And that's where we are working. These are the first cities, the 10 cities that Enrique said are this. But really, we're working in a much more larger amount of cities for this year to build. As the number of homes passed that we expect, as I said, we don't like to give any guidance. But let me tell you that will be around 2 million to 2.5 million pretty much for this year. Hopefully, we can do better than that. But I will tell you that the stay conservative of 2 million try to look into 2.5 million, something in between and hopefully, we'll surprise you with more as we -- as the ramp-up of the construction unit within Megacable continue to be more productive.

So is it fair to assume that you're deploying one cluster in each city or multiple clusters in some of them? And what's the other size of these clusters?

We're building multiple cities as we speak in different size of cities. That's where we see the opportunity, according to market, competition, size of it. So we have from mid- to large macro cities like Mexico City and Monterey on that part. The customers that we have there, I would like to keep it to myself Alejandro. So it's part of our marketing strategy and where we're targeting. But as we said before, we look in the long run to have a 25% penetration of those market pretty much. Sorry to keep something here, but that's the way, thank you.

Our next question comes from Alejandro Chavelas with Credit Suisse.

Just a couple on my side on costs. The first one is a follow-up from a previous question. You mentioned that costs per homes connected expectations remain the same, but we have seen, for example, fiber costs remain -- well, doubled since 2021. So I was wondering how is that you are keeping the cost per connected home stable? Is it that you bought all the fiber that you need for the 2024 expansion plan in advance? Or how can this be? And the second one is also on costs. What should we expect for the second half of the year in terms of cost growth? Because obviously, new subscribers will take some time to come, that is normal. But the cost of activating these networks, how much could that impact on the cost line?

Do you want to go Luis?

Yes, for the -- Alejandro, thanks for the questions. And let me just point out something that, yes, we acquired in advance a lot of materials, but not for the entire Mega 2024 and as you stated, yes. So that's why I said that with inflation, we expect that to reach between $210, $215 by the end of the project. And that is considering the inflation that is already in the new acquisitions that we will do of materials. But again, I want to point out that is homes connected and that includes the cost of acquisition of the subscriber, right? So for any doubt that it could imply.

And you want me to go. Alejandro, and besides that, what we have found is we understand that there is an increase in the cost and inflation cost of the materials and everything related to the GPON project. But there are other ways we have been efficient on the part that goes to. The way that we do the drop in the connected homes we found a way and we explained that before to have a much more less expensive way to do it in that part. We increased our external plant technicians. So we do it now ourselves with a much more lower cost on that part. We did efficiently our design of the cities where we have and do synergies with what we had before with Metrocarrier. So at the end, we are looking into other ways to overcome the expenses that can come from the increase of materials that we have on that part. That includes cheaper ways of getting CPE device on that part compared to what we had before in the part, regardless of the chipset that they have, okay? That includes also back end with the 10 licenses that you have. So altogether, there are ways that we can overcome, and that's what we do. We look to every single opportunity that we have, so we can correct and adjust those prices. So you can expect to continue to have the investment and CapEx that we announced on that part.

Perhaps on the operating cost for the second half of the year, what should we expect considering the activations?

Well, we -- as we mentioned since the beginning that we were seeing some impact -- a slight impact in our margins, but not really the dramatic thing. So I'm not sure if your question goes on activating, but activating it's considered as part of the cost of the subscriber. And it's just commission. So it goes by every subscriber that we get.

No, I meant the cost of lighting up the network in these new cities, not the commissions of the activations.

It will be the same.

It goes with the CapEx, and...

It is part of our CapEx. And that one is part of the one that we announced. Some of you have asked us about the CapEx, the 42% CapEx that we had in the quarter and the 39% that we have on a cumulative basis. And we disclosed here, and we wanted to make it clear. I mean, that's the level of CapEx that you have when you have an expansion project like the one that we have. The majority of you recognize that, that CapEx will increase significantly as we continue to bring and do the expansion in terms of subscriber and expand our EBITDA. That's our goal. I mean we have a very clear goal. We have the balance sheet to do a great expansion project. That's why we launched the bond in that part. So we can build the home passed that we promised you to do to have the double side. And when this company in the near future, have a larger amount of lowering the EBITDA, you will see that, that CapEx that we're investing right now that might seem high at 42%. It is not significant because we are very well positioned to be the best company decision. We will be a national company with doubling the site with a really, really good ratio of CapEx of revenue with no doubt about everything that we're building on fiber, even the HFC and fiber deep that we have in some markets, I've been thinking about division, and we have a very clear road map of how we can continue to bring subscribers to the Xview Plus platform. We said that remain for both myself or Enrique, 65% of our subscribers are already in the Xview platform. That means entertainment comes on a 2-way platform. It comes on the way of nonlinear TV and multi-platform with all the apps that they can possibly have. And 40% already converted to fiber and continue to increase, but we went to more than 50% of our subscribers with more than 40-megabit from 15% last year. What I want to tell you is that we're putting money where we believe in the future to come, we will continue to have and increase our margins. And you can expect pretty much to remain the same, but CapEx will decrease our revenue because of the larger amount of EBITDA that will come in the next years and months. That's the view that we have, and that's what we are working. We're very happy that we have those 430,000 homes passed that we have in the second quarter. And we expect that amount to increase significantly in the second half. As I said before, if we can -- if we're going to get to 2 million, probably over that, that means we're going to build 1.5 million in the next 2 quarters or 41.7%. That's our view, and that's what we're working for. And thank you for all the questions, Alejandro.

Our next question comes from Andres Coello with Scotiabank.

Well, there was certainly a drop in broadband additions. And I think that there are many theories why this happened. But I think that there is a special concern on Jalisco and specifically in Guadalajara, given the inclination of the city. So I was wondering if you can give us any color on what's happening in the greater state of Jalisco in terms of competitive dynamics, not only Guadalajara, but also you are entering new municipalities in Jalisco, for example, your thoughts on Puerto Vallarta, another important city there. So just trying to understand if you are actually losing customers in Guadalajara. That's my first question. And my second question is, perhaps if you have any thoughts on CapEx for next year? If you can give us what are your preliminary thoughts on how much you're going to invest in 2023?

Thank you, Andres. We lost you -- well, you wanted to make the first question, it's good to hear as well. Let me be straight compared to last year, we have not lost subscribers in the Guadalajara. We don't have any kind of different results that we have in the rest of the company. It is very, very part. We protect, we migrate Guadalajara to fiber, we do have fiber and we have a Xview platform, which is very, very competitive and it's really well accepted by our subscribers. Related to the rest of Jalisco, we control and we have presence in many, many towns of Jalisco. You asked particularly in Puerto Vallarta. As I said, our expansion plan will cover the majority of the large and macro cities in Mexico. And of course, Puerto Vallarta is one of them. It's not 1 of the 10 that we announced. I can tell you we're working that. It's one of the ones that we are working as well as many other cities that we are at the same time. So let's not focus only Puerto Vallarta. If it relates to Guadalajara, I can tell you we have not lost Puerto Vallarta on that part, mainly because we have a good control of the operation and we have the migration of subscribers to fiber in that part. The second question was related to CapEx for next year, if f I can recall. Luis?

The view on the CapEx for 2023. We have not given any type of guidance for the future. But as you recall, we established that for the project, we were going to keep the CapEx as a percentage of revenue around the 30%, mid-30s during the period of the expansion and that continues to be. We have made no change in that projection already.

You can expect this end because the expansion will come in 2022, 2023. So really for us nothing changed. What is going to change is that finally, we're going to have kilometers activated for expansion. And even though it takes longer, it is better to build than to bring these subscribers, of course. But we are working on that one. And we will dedicate the next 18 months for you to see that we're improving in those cities that were activated as we are speaking. The majority of those kilometers will come at the end of third quarter and fourth quarter of this year and of course, 2023. So you can expect the same amount of homes passed for the next year as well.

So if I understand correctly, you are guiding more or less mid-30s CapEx to sales for next year, correct, mid-30s?

Yes, mid-30s.

Mid-30s is okay.

And one final question, if I may. Of course, we saw this record number of new homes passed in the second quarter. And I'm wondering if something changed structurally that is allowing you to build so many new homes per quarter? In other words, if you actually increase your capacity, your ability to build more homes structurally or if the second quarter was just some sort of timing of prior build-out and which allowed in the second quarter to grow as much? Or is this kind of a new structural which you can grow for homes passed? And if this is what you're expecting so many new homes passed for coming quarters?

No. This is a consequence, Andres of regular build out. When you build a high building, the first thing that you see on the foundation, you don't see anything. Then you see the first floor, the second, the third, and the fourth in 2 weeks and you say, wow, they already have 50% of the buildings in 1 week. It's not like that. I mean we start working since we announced the project last year in the third quarter. That means bringing the materials, bringing the hubs, despite the operational base for operations and employees on those cities. We finally were able to bring those 430,000 homes passed in the second half of this quarter -- this past quarter. What you can expect is that, that machine continues to work and improve in the quarters to come. That's normal part. The amount of homes passed should increase in third quarter and fourth quarter, according to what I said before. That's our plan. It is online right now. I don't see why we could not meet that goal and that's what you should expect in the quarters to come and of course, 2023 as well.

And then it's an engine that is escalating the site, and you will see that in the future.

Our next question comes from Marcelo Santos with JPMorgan.

Sorry for earlier, I got disconnected. I wanted to ask about the comments you made on your prepared remarks. You said you are well positioned to reach the annual growth target in terms of subscribers, revenues and EBITDA. Could you discuss a bit -- give some color on what those targets are? That would be the first question. And the second question is regarding the mobile strategy. You have been adding flat -- have been adding no subscribers or almost no subscribers in the last couple of quarters. Do you plan to stick with [indiscernible]? Do you have other plans that you could execute in mobile?

Sure, Marcelo. Thank you very much for the question. Yes, we're happy with the results of revenue and EBITDA. The 10% revenue growth that we have, the 8% EBITDA for a company of us in these economic conditions is remarkable. At least we think that on that part. So that one comes from some efforts on our part that affects subscribers. That's what we described probably you were disconnected from that. And let me tell you our view of what happened on the part. We increased rate. We need to increase rate to couple with inflation. And every time that we have an increase in rate, coupled with the economic situation with the post-pandemic effect and the competition in some of the market, not all the markets, only on that part, those affect decision. So we did not have an increase in the subscriber significant in the subscriber base because we have an increased churn due to the increase in rates and the economic situation. The good thing is that, as you can see, the gross adds, this increase because we increased our capacity of selling in new and existing markets, both on that part. What can you expect in the future? Well, we hope the churn will decrease slightly on the part, and we couple that with decrease in gross adds, and that will bring the remaining expansion plan and subscriber growth coming from the gross add. As I said, great margins, good dividend and good revenue. That's why we're happy about the results and the metrics of the subscriber was on March increase rates, we have a tough April and May, and we have a good rate June. So if you look at the trend, it looks okay for me. That's what I can tell you without going any further on that. Now the mobile strategy, as you said, as you know, because we went out last quarter, we took and write off some numbers of subscribers because of the prepaid approach that they have, we don't like to pre-pay we are a postpaid company. We like subscriptions on that part. So we're rethinking our slight pre-pay. That's why we slowed down the increase of additions was strongly on the postpaid. And you can expect on that side to continue to be with our plan in some markets. But we are adding AT&T. We haven't been able to launch AT&T. AT&T will bring to us more cities that are [indiscernible] and more cities of cellular phones that we cannot connect because they are not compatible with 28 frequency that [indiscernible] has. So we're still going for the MVNO. We have -- with that part on the other side, we are launching that strongly with AT&T and the contracts that we have, and we expect to recover the growth that we have in the past for third quarter and fourth quarter as well. Those will be my answers Marcelo and thank you for the questions.

At this time, we will continue to ask for our web questions. Please proceed.

Thank you. We have the first one from [ Compass Group ]. How can you maintain margins high in a market with more country players?

Well, because we're having our use. We have a great project that brings us an increasing ARPU when everybody is [ portfolio-ing ] or decreasing, we're bringing more ARPU and increasing revenues and we are having subscribers and keeping the rates of the subscribers. We're increasing the speed of our subscribers and also because our ARPU is low. So we have a low ARPU because we have a high penetration and we continue to be aggressive to look for subscribers. But we will always look to have increasing rates in the market that is allowed. Also, we did migrate and invest everything to some cities to fiber and fiber deep with the HFC [ split denotes ] and migrated to the Xview platform and higher speed. So altogether, that's how we're able to do that. If you see the number of RGUs per unit subscriber continues to decrease. So altogether, we will continue to give us ARPU. On the other hand, management will -- we have always been tied to look for a reduction in cost as much as we can. We continue to invest not only in the last mile, but we continue to invest in the long haul. We are one of the largest infrastructure companies in terms of fiber. So we're building everything to the border with the U.S., better catching or catching, a better CDN, better infrastructure close to our subscribers. So we decreased. If you can see our margin of broadband continued to increase because where we put that CapEx for broadband, we also put it for the cost of long haul and bringing IT services to our subscribers. So it's a mix of everything. We try to put better sales channels with a lower commission costs that you'll see door-to-door sales that we have. So altogether, that's what we do. We have a good cost structure. That's why we have the largest margin in the industry. And we have had that for a long period of time. And even though we have pandemic and not pandemic and now economic situation, we still keep the 49% margin. That's how. Next one.

Okay. The next one, regarding the $200 cost per home connected. Is that a subscriber or a compare?

Just clarify again that, that cost was for home connected. Remind you that homes connected, it means the subscriber part. Okay.

The next one comes from JPMorgan. Can you remind us of your 2022 goals, maybe fees, revenue growth so we can understand how to keep track on progress for this year? Is it fair to assume a similar number of homes passed in the following quarters? I bet we have answered this already to Marcelo. Okay. The next one is how many months or quarters the lag between passing new homes and getting to your target penetration levels in new markets?

Well, we expressed since the beginning that there was a maturity for every segment that is activated every new kilometer that is activated has a maturity period. Of course, we get subscribers since the beginning, but we expect a new territory to mature within the following 24 months.

Okay. The next one from [ CK Advisor ]. Are there any early signs of customer receptivity in the cities that they have just entered in late June early July? Are customers responding as expected?

It is too early to say, and we cannot comment. Do any comments on July, but I'm pretty sure they will be positive.

Okay. And the next one from Patrick Brennan. Mega stock looks nearly [indiscernible] under-valuated from nearly any conceivable valuation metric, especially considering new growth plans with the fiber rollout and the continued growth in our existing footprint. In the past, you have said that you were not interested in share repurchases, nothing stock liquidity concerns and/or some aversion to even modest levels of leverage used by cable companies around the world, including those in emerging markets. As the share repurchase will appear to be widely accretive to long-term value creation at current prices, has there been any change in your thinking on this type of capital allocation?

Not really. As of today, we continue to put the -- all our efforts for the expansion, we continue to think what's best for shareholders that's for sure. But right now, what we believe is the best is to do the doubling the size of the company, we can deliver that, and that's what we're on.

We also updated our figures regarding the stock purchase -- repurchase, and we communicate that to the Board and just to keep it present. We have our next Board meeting by late August, and we will have an update on that by that time. We have another one from [ Timo ]. For MC '24, what is the cost per home passed?

No. But we don't disclose the cost per homes passed. We have kept that. You can make your own numbers, but we keep that for us.

Okay. That's the last one. We have no more questions. So I'll turn it over to Mr. Yamuni for final remarks.

Okay, final remarks. As always, it was a pleasure to discuss our results with you. Please contact our Investor Relations department if you have any questions or concerns regarding the company. Have a wonderful day and expect as always, better and improving results from Megacable as always for the next quarter. Thank you very much, and have a nice week, rest of the week. Bye-bye.

Thank you, everyone, for the question.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation. Have a great day.

Thank you very much.