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

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 risk 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, Esau. Good morning, and thank you for joining us. As we close 2024, it is worth remembering that Mega's vision is to be the best telecommunications company in the country. And we have made strategic decisions that clearly bringing us closer to this goal. Our progress is driven by 2 strategic [access]. First, the modernization of our network in legacy territories, which reinforces our position as the best option in the markets where we have presence. And second, the deployment of fiber in new regions, which has enabled us to build a nation-wide state-of-the-art network. By advancing in both areas, we continue to consolidate Mega as a benchmark in the telco industry, equipped with the best technology, a strong focus on value creation and commitment to efficient use of resources. This strategy has allowed us to achieve key milestones at quarter end among which I would like to highlight the following. We continue to expand our footprint within a few steps of our target of 9 million new homes passed and 50,000 new kilometers deployed since announcement of our expansion plan in October 2021. Subscriber growth remains strong with net additions in broadband posting our best full year performance ever. Both quarterly and full year EBITDA figures achieved double-digit growth with this quarter making the highest quarterly figure in the company's history. Our EBITDA margins for both the quarter and full year exceeded market expectations, demonstrating that our strategic initiatives are effectively driving sustainable operating profitability. As a percentage of revenues, CapEx continued to decline, reaching its lowest quarterly CapEx to revenue ratio since second quarter of 2020. Lastly, leverage continued to decrease sequentially remaining among the lowest in the industry. In newer territories, we are experiencing steadily improving margins as customer penetration ramps up, with our infrastructure in these regions now fully operational, we are well positioned to convert new subscribers into long-term customers and capture additional value. Turning to subscriber trends. In 2024, we recorded our highest ever full year performance. This strong growth driven by robust demand for our broadband solutions highlights our ability to attract and retain customers even in a highly competitive market. Regarding financial performance, our mass market segment boosted growth with more people increasingly choosing a reliable Internet and competitive price bundles. While our corporate segment, particularly ho1a faced unfavorable comparison, our diversified portfolio continues to drive balanced growth across all customer segments. Speaking of the corporate segment, we recently announced the integration of ho1a, Metrocarrier, and MCM into MCM Business Tech-co, effectively January 2025. This strategic consolidation enhances operational efficiency, optimizes business services and strengthens our position in B2B ecosystem by providing comprehensive solutions in connectivity, cloud, cybersecurity, and infrastructure among many other business lines. Starting in 2025, results will be reported under MCM Business Tech-Co providing greater transparency in supporting sustainable growth as an increasingly digital landscape. Now let's turn to profitability. In the fourth quarter, we achieved a strong EBITDA performance with higher margins. For the full year, EBITDA growth was robust and our margins surpassed 2023 levels. These results reflect the strength of our operating model and disciplined execution, even as we incur expansion costs in new territories. This progress not only strengthens our financial foundations and supports our ongoing subscriber and network initiatives but also reaffirms that our overall strategy is on track to deliver sustainable value and lasting competitive edge. We expect EBITDA margins to continue raising as penetration is in new territories increases, promotional tariffs normalize and our legacy markets maintain their strong and stable performance. One full year CapEx to revenue -- our full year CapEx to revenue ratio finishes below guidance, with a quarterly ratio reaching the lowest level since the second quarter of 2020. This reflects both a significant lower expansion spending and a higher revenue curve as our major expansion efforts wind down. We expect a lower CapEx to revenue ratio to the year of 2025. From a financial perspective, sustaining EBITDA growth and a lower investment as a percentage of revenues are key to achieve cash flow generations and realize our vision of becoming Mexico's leading telecommunications company. Fostering sustainable growth, enhancing operational efficiency and creating long-term shareholder value. In that line, I would like to highlight that before dividends we were only able to generate cash flow to 2024, a trend that we expect to continue in the coming period. As we enter 2025, we have one of the strongest balance sheets in the industry. Our net debt-to-EBITDA ratio remains the lowest in the sector, given us the flexibility to compete to complete expansion projects, invest in our network and pursue strategic initiatives. We expect further improvement in this ratio as EBITDA strengthens and external financial needs decline. Ensuring that we maintain the financial agility to drive our long-term growth strategy, while maintaining a solid balance sheet. While we are not currently pursuing large-scale new investments, we remain committed to maintaining an efficient capital structure that allow us to seize attractive opportunities aligned with our strategic plan. With the building phase of our expansion nearly completed, we are transitioning into a phase of scalable, high-margin growth, our priorities remain clear. First, sustaining subscriber momentum; second, closing the margin gap between newer and legacy territories as expansion markets mature. And last but not least, accelerating free cash flow by reducing capital intensity to boost our capacity to unlock shareholder value. In conclusion, 2024 highlighted our ability to perform and deliver results despite a complex environment from intense competition to macroeconomic uncertainty. Our financial strength, operational disciplines and customer-centric strategy position us for continued success in the coming years. I will now give the voice to Raymundo for an operational update.

Thanks, Enrique. Good morning, everyone. This quarter marks the end of a year defined by important trends that will drive the results of the company in the next periods. The slowdown in our construction pace and consequently, also in the investments for this year as expected by the company, the focus on achieving a higher penetration in the new territories, thus resulting in a healthy and sustainable subscriber growth. And finally, the reflect of the above, mentioning an accelerated revenue and EBITDA growth. As we get approached the initial goals set for this project, we are excited about the growth and value we can generate once all objectives are fully achieved. Moving into results. By year-end, our network infrastructure reached nearly 102,000 kilometers of last-mile network, a 9% increase over 2023 extending coverage to 17.4 million home passed, a 13% annual growth. Complementing this achievement as of December 2024, we have already operated 40,000 kilometers of network to FTTH technology since the start of this transition. The kilometers of migration plus our 35,000 kilometers of expansion ensures that our infrastructure meets the growing demand for bandwidth-intensive applications across both enterprise and consumer markets. Currently, 75% of subscribers are served by fiber, up from 63% in the fourth quarter of 2023, a critical milestone as we evolve into a fully fiber-based company. This transition enables superior quality and position us to capture untapped demand and underserved regions. Turning to subscriber growth. We added 162,000 net unique subscribers this quarter, bringing our total base to 5.5 million. For the full year, we added 574,000 unique subscribers, a 12% annual increase, demonstrating sustained demand for our bundled offerings and reinforcing confidence in our long-term strategy. Breaking this down further, Internet subscriptions grew by 13% year-over-year to 5.3 million, represent a 590,000 net additions for the year, including 167,000 this quarter, driven by our ongoing FTTH upgrade and expansion efforts. In fixed Telephony, we now serve 4.8 million subscribers reflecting a 17% annual increase with 685,000 net additions for the year, including 175,000 this quarter. Meanwhile, our MVNO segment continued the recovery that started early last year, growing at a 28% annual rate as of quarter end to reach 554,000 subscribers having added 121,000 throughout the year and 42,000 only in the fourth quarter. Turning to video. Our strategic initiatives are showing tangible results, while traditional pay-TV subscribers declined by 7,000 in the fourth quarter, substantially better than the loss the market anticipated. This marks a significant stabilization compared to previous quarters as we limit annual losses to just 2%, proof of our digital focus approach. As of this quarter, 90% of our video subscriber use XView Plus, our advanced future-rich platform that now serve 3.5 million users. This represent a 19% year-over-year growth with 553,000 net additions during the year, including 115,000 in the quarter. These platforms not only mitigate churn, but also represent the best of content integration in the market. In this context, RGUs reached 14 million, a 10% year-over-year increase, driven by a steady growth in the Mass segment. RGUs per unique subscriber stood at 2.52, down from 2.57 in the fourth quarter of 2023. Churn rates for Internet video and telephony improved compared to both third quarter '24 and fourth quarter '23, standing at 1.7%, 2.1% and 1.9%, respectively, mainly due to the seasonality effect in the sequential comparison. ARPU per unique subscriber was MXN 421.6 remaining at the same levels, both sequentially and in a year-to-year comparison, an outcome of balancing retention and promotional efforts with value optimization. Regarding customer satisfaction, the company has made significant improvements over the last 3 years by focusing on best-in-class technology and services tailored to the subscriber needs. Our NPS, Net Promoter Score is now approaching the optimal level, and our subscriber rating for our service reached a record high in 2024. We will continue to make strategic adjustments to align with our customers' preferences. The results of our Corporate Telecom segment, now known as MCM Business Tech-Co, remained flat year-over-year, but improved sequentially largely due to the exceptional performance of ho1a in the fourth quarter of 2023. For the full year 2024, this segment's revenue grew 5%, driven by a strong performance in Metrocarrier and ho1a as well. This reflects resilient demand for high-margin, low latency services supported by our expanding fiber network, which remains essential for businesses undergoing digital transformation. Individually, Metrocarrier grew annually, driven by a better performance in the Corporate segment. Meanwhile, ho1a face an annual decline impacted by a challenging 2023 baseline due to special projects delivered at the end of that year. However, sequential trends show growth. Overall, our operational results show momentum and progress across our core product lines. We added significant subscribers, improved churn rates and network footprint expansion. And even when market competition and macroeconomic headwinds persist, our commitment to operational efficiency, product bundling, service enhancements and strategic infrastructure investments position us to maintain, grow and strengthen our market presence despite those challenges. Thank you. I will now hand the call to Luis for the financial review.

Thank you, Raymundo. Good morning, everybody. First of all, like every year, it is important to clarify that all the comparative figures related to 2023 use in this report correspond to the 2023 audited financial statements, which were published on April 30 of 2024. And could defer from the numbers reported in the quarterly report a year ago. This year, we achieved record revenues, strengthened our balance sheet and improve our profitability when compared to 2023. These results demonstrate our ability to perform with financial discipline. Quarterly total revenues reached MXN 8.5 billion, an 8% year-over-year increase driven by robust demand in our Mass market segment. This segment grew 10% year-over-year, driven mainly by the contribution from territory expansions, while the organic territories continue to grow. Regarding our Corporate segment, although it faced a high base comparison coming from the exception and fourth quarter of 2023 in ho1a. It remained at a similar level this quarter, growing sequentially with a 5% growth on a yearly basis. It is important to highlight that, as Enrique mentioned, following the integration of Metrocarrier, MCM and ho1a into a single business unit. These results will -- of these 3 companies will be reported on a single line that starting with the 2025 results. All in all, 2024 revenues totaled in the neighborhood of MXN 33 billion and made a 10% increase over 2023. Contribution from the Mass segment stood at 83% in 2024, while the Corporate segment represented 17% of consolidated revenue. Cost of services and SG&A in the fourth quarter rose 3% and 10% year-over-year to MXN 2.3 billion and MXN 2.4 billion, respectively, mainly attributable to the pressure following the cost of labor due to increase in minimum wages, we have experienced over the last few years. Full year costs increased 6% and SG&A 14%, yet we maintained strong profitability. Fourth quarter EBITDA reached MXN 3.7 billion with a margin of 44.3%, an improvement of 70 basis points sequentially and 100 basis points year-over-year. This performance is especially notable when considering historical seasonality, where fourth quarter margins have traditionally softened. The operational efficiencies achieving newer territories and stability of our legacy markets allow us to grow full year EBITDA by 10% year-over-year, reaching MXN 14.6 billion with a margin of 44.5%, exceeding that of 2023 by 10 basis points. Net income for the quarter was MXN 524 million. Impacted by higher depreciation from recent network upgrades and increased interest expenses due to a larger debt, All of the above, in line with the strategic investments we have carried out. For the full year, net income totaled MXN 2.4 billion reflecting the cumulative effects of the same investments. Even when these numbers reflect an annual decline, it is important to contextualize these results within our growth strategy, as the investments we make, whether in fiber optic infrastructure or customer acquisition are paramount to securing long-term market leadership and high-margin revenue streams. Capital expenditures for 2024 totaled MXN 10.3 billion, the lowest amount of the last 3 years, representing a ratio of 31.5% of revenue, the lower guidance of 32% to 34%. It's important to mention that this amount was achieved despite the weakness of the Mexican peso that was observed throughout the second half of the year. This investment ratio follows our focus on the final steps in the construction phase of our expansion project. Similarly, in the fourth quarter, our CapEx to revenue ratio improved to 29.2%, down from 33.5% in the previous quarter, as we seek to significantly decrease CapEx intensity. Our balance sheet remains robust. Net debt ended at nearly MXN 22 billion with a net debt-to-EBITDA ratio of 1.5x. Among the lowest in the industry, having a significant improvement from the 1.54x posted in the third quarter. Overall debt is denominated in Mexican pesos. Likewise, our interest coverage ratio stands at 5.2x, ensuring ample liquidity to meet obligations. This financial flexibility allow us to navigate macroeconomic uncertainties, while still retaining the option to capitalize on strategic opportunities. In summary, 2024 was a year of strategic execution, expanding revenues, enhancing margins and recalibrating investments for sustainable growth. Moving forward, we will continue balancing disciplined capital allocation with targeted growth opportunities. Thank you for your trust. I will now open the floor for the questions.

[Operator Instructions] Our first question comes from the line of Marcelo Santos from JPMorgan.

I have 2. The first is regarding CapEx. So you mentioned in the prepared remarks that you should have lower CapEx to revenue ratio in 2025. Could you expand this a bit more like, give a bit more granularity of what we could expect for '25, '26 for the next couple of years? If you could, that would be great. And the second question is regarding churn. You also mentioned in the prepared remarks that there was a sequential decline due to seasonality. But if you look on a year-over-year, it also declined. So is there something else -- is this some initiative you did internally? Is this something on the market? If you could just discuss a bit the churn dynamics?

Sure, Marcelo. Luis, you want address the CapEx.

Sure. Well, as you know, we have been targeting a reduction in CapEx ratio to revenues. And that's consistent with the view we have today. And by 2025, we expect the CapEx below 30% of revenues and also reducing in 2026 and then on 2025 -- and 2027, sorry. So we think that we will be -- by 2027, we will be in low-20s.

Let me complement what Luis is saying regarding CapEx, Marcelo, for the sake of everyone there. We have a lower CapEx over 2024 than 2023, for sure. We slowed down the CapEx not because we stopped growing the projects of the company. Actually, let me review what we promised at the end of 2021, we said we were going to double the size of the company in terms of infrastructure and subscribers and EBITDA. And what we saw in 2022 is that company has the capacity, both financially and execution to accelerate those investments. So during 2022 and mostly '23 at the beginning of 2024, but mostly '23, we built a huge amount of million of home pass. We were targeting to go to 9 million home pass in the expansion project, and we reached 8 million just in 2 years. So the slowdown is a consequence of a strategic decision by the management and support by the Board to increase -- to speed up the process of building. So that's the reason why we decreased as we promised in all the conference that, that was going to happen. And it's going to continue to be like that because we wish the majority of the home pass that we promise. Of course, we will continue to grow on that part and continue to invest. And as Luis was saying, according as the increase of the revenue curve will continue to occur and we keep a very conservative CapEx not constrained by expansion, but because it's the pace that we want to do, we will be below 30s and will continue to decrease across the years to come. So that's the view of the CapEx within the company, and we're very happy that we delivered what we promised we were going to do in terms of leverage of CapEx. Okay. The other one, Marcelo, was it the churn? The churn has a double effect, and you read it really well. It's not only seasonality, normal seasonality is low, but we have a very good end of the year. What we have, and I addressed that in my opening remarks, is that we've been improving our Net Promoter Score. We have 75% of the network in fiber. We have the lower ARPU or price in the market for good or for bad, but we have it with a great product and customer satisfaction improvement. So altogether, that's reflect on the low churn that the company has compared to 2 years before, and we feel it's a healthy churn level for a company that is growing the amount of subscribers that we are growing.

Okay. The next question comes from the line of Vitor Tomita from Goldman Sachs.

Two main questions from our side. The first one, regarding the pace of net additions, we saw a strong pace of net additions, especially over the last 2 quarters above historical levels. Do you see room or expect to maintain similar levels in upcoming quarters? And our second question would actually be on mobile, which is usually not a major topic but has seen some fairly strong RGU growth on the MVNO strategy. Could you give us an update on your strategy for that and how you are seeing that business?

Sure, Vitor. Well, the pace of net additions for the -- we have good end of the year, the last 2 quarters, we have a very good pace. We expect to continue to grow. We are aiming at a growth between 100,000 to 150,000 per quarter. That's pretty much what we foresee and that's going to depend on certain strides that we have, whether we are more aggressive and whether we like to continue to have that balancing good subscribers and the subscribers that can create churn. That's why we are targeting growth, aggressive growth, but in between 100 to 150. So you can make your calculations in that part. It is according to the forecast that we have when we start the project. Regarding mobile strategy, we have good strategies according to go to the market and we bundle with the subscribers. We expect to grow also not at that pace, but pretty close to that. So you can expect mobile to grow slightly below what we have in the fourth quarter, and you can annualize that. Our strategy in mobile is to continue to provide a bundled service to existing subscribers. We just sell postpaid. That's why we don't grow as other companies in the prepaid. We like to keep it that way. It is way more manageable and provide a value added to our subscribers. Also, it help us to bundle with the sales channels that we have for the mass market. And so far, it looks like we're positive and getting good results on the mobile on that part.

Our next question comes from Alejandro Lavin from Santander.

So first of all, you have gone like a long way to get solid results, you have gone over the peak leverage of your investment cycle, the CapEx over sales is going down sequentially every year. So congrats on that on this solid execution of this ambitious plan. So my question is now I think one of the main focus could be on improving EBITDA margin, right? So I'm guessing, and let me know if I'm correct. That as these acquisitions or these customers that you have acquired throughout all of this investment program, that you acquire them initially with promotions, but then as time goes by, these promotions are removed and therefore, the prices increases. And the vintage one goes through this step-up in prices, the vintage #2 go through this increase in prices. And all this sums up until that the mix of the ARPU of your consolidated gets a boost from this, and that is when the EBITDA margin will begin to increase I guess, considerably. Does that make sense? And that's the first question of all this organic program and expansion. And number two, if we can get a sense of your -- the trajectory of the EBITDA margin in the next couple of years?

Luis, you go first and then I'll see if I complement something.

Sure, well, as you mentioned, the 2 questions come one, basically. Yes, we have -- we are foreseeing a gradual improvement on the margin. And we have stated that we will go back to the 49% of the 50% that we used to have. But we foresee achieving 47% in 3, 4 years. So yes, this will be a drag gradual improvement on the EBITDA margin and will be composed by all the factors you mentioned in some more. You have to consider the exchange rate, you have to consider also the salary increase or salary inflation that we think is going to continue above inflation. So there are some factors that are affecting the speed of the margin growth that we have, but we are confident that at the end, in 3, 4 years, we will be on margins very close to what we have in the past.

Okay. Let me complement. Good point, Luis. Remember, Alejandro, that as I said, we speed up the process of CapEx and accelerate the opening of cities that, that has a fixed cost in 2023 and 2024, that is going to be overcome in the years -- in the future years. Expansion territories are improving margins. All of them are positive in terms of margins already and growing. So we're very confident that's going to come into the future to improve. Organic territories like the ones that we have before the expansion project remains at levels -- at the highest levels of the industry at 48% pretty much on the organic territory. So we haven't lost profitability in the organic. The -- what you see in the margins is coming from the expansion territories. Also, you mentioned about the ARPU. I mean, the ARPU has several factors that affect the ARPU and why the ARPU does not increase significantly, okay. We do -- we do make and take increasing rates over the year. We do that I mean, we have a certain base of subscribers that can handle an increasing rate. But we also have a huge amount of subscribers that come on promotional campaigns for the expansion process that we have. Those subscribers are not affected by increasing the rate and has a lower ARPU than the other ones. I don't want to get you too much into the numbers, but when you add everything around, you get to the ARPU that we have. And we like to have that ARPU and grow that in the future once the expansion project and the expansion of subscribers can materialize and competition will allow us to do that, too. We keep a very competitive price for competition. And since 75% of our subscribers are in fiber, we are able to video at higher speeds with symmetric promotions to them. That's why we're so competitive. So it is a mix of everything within the strategy that we have that makes the ARPU stay or a slightly increase in the coming quarters.

Okay. Understood. That's very clear. And if I may add a second quick question on inorganic growth. I know you're focused on this plan and you're doing very well. But you also mentioned that your balance sheet is an advantage, right, a competitive advantage. And as you keep on advancing with this revenue growth, EBITDA growth and free cash flow growth, you're going to keep deleveraging, right? So I mean in terms of strategic options, what have you brainstormed -- what are the possibilities? I'm not saying short term, but maybe down the road, do you consider or could you reconsider industry consolidation in Mexico, with new players, private players, any kind of players?

Well, we believe that a 4-player market is not optimal. It's not the ideal. That when we can -- we are for sure. We believe also that the time for Mega is a turning point right now where -- I don't know if it was you, Alejandro or Vitor that says that we'll reach peaks in terms of debt and CapEx and margins, yes, we did that. I mean, we're growing. We're preparing this company for whatever can happen in the future. Right now, we are focused on that in terms of the management. I believe 2025 will be the turning point where you will continue to see improving margins and continue to see lower CapEx over revenue, free cash flow generation, increased customer -- increase shareholders' profitability. So we are prepared to do and we will be ready to whatever is available in the market in that part. As of today, we are focusing to the expansion plan, which is going according to what we believe, even though we believe the market should not be a 4-player market, Enrique, I don't know if you want to complement?

Well, I think as I said, sustain that we are -- and the Board is open to any option that is a plus for the company. And if it's a plus for the company, should be a plus for the shareholders. So to maximize value and a more efficient market in a more efficient company. But that will depend on the conditions of the future and what is in the horizon. We think that, as Raymundo mentioned, our 4-player market is not the optimal market. But we're prepared to play in a 4-player market anyway, I mean if it's needed. And we have been demonstrating that. I think that we did make the right decisions 2, 3 years ago -- 3 years ago, 4 years ago. And we're executing the plan that we proposed to the Board. And the Board thought that was a good plan, and we have been complying with that.

What we say is that is not the optimum 4-player, but it's what we have. And I believe that we are navigating in the right way and at the right pace, providing good results, and that's where we are right now.

Okay. Our next question comes from Carlos de Legarreta from Itau.

I only have one question, quite frankly, but I'd love to hear your thoughts about the -- and the reasoning behind the consolidation of the enterprise companies. I think it's great news that you are consolidating the 3 into 1. But I'd love to hear any color on potential synergies, perhaps potential on also targeting different segments or verticals. That will be great?

Well, I don't know if you know that, MCM was created, was founded as a company that was going to be serving the market with fiber. And it was a very, very innovative idea at the time because it was back in 1996, '97, I think '99 -- '98 around. And it was basically doing business in Mexico City. And we didn't have a network there, the massive market company that we were. And we were just starting at that time to serve certain market -- certain enterprise market, but basically the carriers market here in Guadalajara, because we had started already to do some fiber. So we kept that company isolated or running by itself for a long time. But now that we have a really big -- I mean with time Mega, we did some fiber rings in Mexico City to expand our enterprise scope. And now we were overlapping a little with that, with MCM. We were using MCM networks for our enterprise market also. But now that we have a really big -- now big [company] or Mass market network as well as fiber rings back bone in Mexico City, we decided it was time to consolidate the 2 companies and then to take advantage of synergies and more advantage of synergies, and it's been good. I mean we are saving money in operations we are saving money in a lot of things. And also, we have more robust offer to the enterprise market as well as ho1a, I mean, ho1a -- we bought ho1a, we bought a majority stake in ho1a about 10 years ago. And then we bought the rest 4, 5 years ago. And now ho1a is 100% owned by us. And that was our -- technology arm, you could say that. So where we were selling software as a service, infrastructure as a service, some solutions, enterprise solutions like accounting services, the software accounting or other things, cybersecurity. And we think that was the right move to have -- everything consolidated in one company in one offer with the same executives going to the customers. And we expect really nice growth in that segment and a much more efficient company for us and for the customers.

Okay. And about potential savings or synergies from this consolidation?

Well, we're saving -- from -- Luis has that number.

Yes. We expect around 15% of the MCM cost and SG&A. And basically because there were some synergies already because we are in the same company, but we expect around 15% of the cost. And that impact on the margin will be below 0.5%. So less than 0.5 point.

That related to the cost like Luis is saying the cost on that part. MCM or Metrocarrier CapEx are very low. But still, there is a synergy in CapEx, too. That is part of the reduction that we have this year. MCM has a network that was overlapping in some territories with Metrocarrier as Enrique said, as we grow to different territories. So now that business unit has only one CapEx and is much more coordinated to that besides the cost and the operation that we already explained. Also, we create the churn in Mexico of Business [Tech-Co] that is the consolidation of connectivity with technologies, IT technologies, information technologies. And that's because every time that we get to new territories and to the organic territories, we have always discussed about competition in the Mass market, but there is a lot of competition in the corporate market, too. Once we get to a border city or we get to one of the largest city and we try to get main redundancy line, we found that they already have 2 or 3 providers for a long time, and they are happy with them because it's redundancy fiber. And it cost would amount of effort to change that unless you provide a differentiated proposal that includes the best of ho1a and MCM that was separate now, it's altogether into a cloud, cybersecurity and different technologies in the IT that complement the connectivity that we have. It is much more robust, so we can continue to present the growth of the corporate segment that we have done for the past years. As you can see, our numbers, we always have growth in the corporate segment. It will continue to be if we are very efficient with the synergies, in the go-to-market, in the cost and the CapEx. So that's the whole rationale.

Our next question comes from Emilio Fuentes from [GBM].

And first of all, congratulations on the results. I would like to hear about your views on the current competitive landscape on the Mass market segment? Clearly, there is a divergence between your 2 main competitors. And I was wondering, if you have any clarity on where is your growth coming from? Is it mostly organic from the expansion of the market or from direct competition?

Thank you, Emilio. Well, Internet penetration is at 80% pretty much in Mexico and it depends on the market that we're talking about. We still believe that penetration of Internet should go above 90% in the years to come. So some markets has room to grow. Other markets are much more mature and has already -- between 85% to 90% penetration. So it costs more effort to bring new subscribers in the market. Our growth comes from everything. We are bringing subscribers from competition. We are increasing in a lower manner but we are increasing subscribers and penetration in the markets where we enter. And also we're growing the organic markets since we migrate really at a good turning point we migrate all our networks to fiber with a good product, as I said before. So we're still growing, even though we have the largest penetration of the markets. We're growing in the organic segment. So the growth of the company comes from everything, organic and expansion and an expansion, of course, we're bringing more subscribers from competition and a fewer amount from growing the market in that part. So it's both.

Very clear. And do you have any like overall remarks on the current competitive landscape that would be helpful and insightful?

Well, we are very focused on what we're doing. And as I said, the market is going to grow, it's going to top at 90% or 93% as other countries in Latin America and other parts of the world, so we have still room to go. We expect to catch more of the growth on Megacable. And for the other companies, well, you know what the strategy from Telmex and our competitors. They have some other things to worry about or worry about our expansion. And I believe we have the best offer and the best product to continue to bring the results. We will grow between 100 to 150 for the year and improved margin, and that's -- that's our main part. We don't see why we cannot do what we're promising to do.

Okay. So now we have some questions through our chat from [Jack Lacroix] from [indiscernible] The first one is how does your pricing currently compare to that charged by major competitors for the similar offerings in your region?

We have a very competitive price target slightly below what competition has or below what competition has. That's the way we penetrate in those markets. But we normally carry a lower price than competition. okay? Not lower product, not lower tissues of the product, just a much more aggressive price and still carrying the best margin in the industry in organic territories, and we will bring that in the expansion.

Okay. Are you still on track to reach your targeted penetration rate of 25% for the expansion territories? And are you already reaching this target in the more mature regions?

Good point, we shall address that in our remarks. And the answer is, yes. Yes, we have some of the old territories within the cities. What you have to understand is that every city that we're building, you start building 30% of the city, you grow to 50% to 70% until you reach the full amount of the home pass of that system. So when I mean 25% on the old territories, meaning within the city, the all neighbors that has more than 1 year, 2 years on that part 2 years have already are already reaching above 20% and some of them, 25% penetration. So we're very, very happy of that. You cannot count the penetration generally because as you see in our numbers, we put another 2 million home pass in 2024. So even though we grow subscribers, we increased the amount of home pass higher than what we are increasing subscribers, which is normal.

Okay. Next question. Are you seeing or expecting any threats from satellite or fixed wireless access offerings?

Not if we continue to perform good quality service at the affordable price with limited data throughput. We will continue to be the first offer. As I said, 90%, 92%, 93% is what Mexico should have as penetration of fixed broadband, and we're going and contributing to that goal in Megacable.

Okay? And then finally, from [Martin Nikolov], Holding [FCC]. Congratulations on an excellent quarter. I'd love to hear your thoughts on the capital allocation strategy in the coming years, given that the company is in the end of the expansion cycle in terms of capital intensity.

Good point Martin. As I said before, we're preparing -- this is the turning point of the company in terms of debt, in terms of CapEx, in terms of margins. We are preparing this 2025, we should be focusing in the growth. And we will talk about what's coming later when we continue to mature our projects. We will look for the best for shareholders. And there are few -- some of the things that we can do. But first, we need to deliver 2025 with the growth of subscribers and revenue at the pace that we're promising.

The network we have built and we're building is state-of-the-art. So for the future expansion in higher capacity of the network. What we have to do is some electronics in the back end, nothing that would have to do in the network on the street. So it's going to be much easier and much more cost efficient. And that will happen in the future when we need -- when people need more bandwidth when we increase the penetration of the network by a lot. So we think that what we're doing is very well planned, very well thought. We will have to change at some point some of the [CPUs] for the customers, who knows what's coming. This -- the speed of the changes in the telecom industry are really, really, really fast. And with this AI or artificial intelligence and machine learning and all that, we don't know what's coming in the future, but our network would support that. We may have to change our CPUs in the home for the users, for the subscribers because who knows what we're going to be using. But the network is ready for that. The network is ready for the next 20 years. So we are okay, we feel very confident in that.

And we continue to see CapEx in the future to continue to improve and reach the 20 and below levels that we are all expecting in the future years to come.

Okay. Well, with no more questions in the queue, the question-and-answer session is concluded. I pass the call over to Mr. Enrique Yamuni for final remarks.

Thank you very much, Esau. And as a final reminder please use your, raise your hand button on your [Zoom Call], if you want to ask a question. All right -- I'm sorry, that was signal for Esau. 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 a better weekend. Thank you all very much.