Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Megacable Holdings SAB de CV (MHSDF, Financial) reported significant revenue growth, with a 10% increase in consolidated revenues for the third quarter, reaching MXN8.2 billion.
- The company achieved a record quarter in terms of subscriber growth, adding 581,000 internet subscribers year-over-year, surpassing the 5 million subscriber mark.
- The internet segment grew by 13% year-over-year, contributing significantly to the expansion of unique subscribers.
- Megacable Holdings SAB de CV (MHSDF) maintained a strong financial position, reinforced by the reaffirmation of their AAA credit ratings.
- The company's infrastructure now covers more than 100,000 kilometers, marking an 11% year-over-year increase, supporting nearly 17 million home passes.
Negative Points
- Net income decreased to MXN500 million this quarter, primarily due to higher depreciation from recent asset additions, increased interest expenses, and foreign exchange losses.
- The company's EBITDA margin was impacted by temporary operational costs associated with expansion projects and a higher contribution from lower-margin segments.
- Traditional pay TV subscribers decreased slightly, reflecting market trends favoring digital platforms.
- The ARPU (Average Revenue Per User) is under pressure due to a higher mix of promotional rates and a shift towards double-play bundles.
- The company's non-cable EBITDA has not grown in recent years, indicating challenges in the corporate segment and the need for strategic improvements.
Q & A Highlights
Q: Can you explain the significant increase in gross ads this quarter and its impact on margins? Also, how is the competitive environment affecting broadband churn?
A: The increase in gross ads was driven by successful back-to-school campaigns and promotions in expansion projects. We aim to maintain growth at around 150,000 per quarter. This growth impacts margins due to the high cost of new customer acquisition, but our organic territories maintain a strong 49% margin. The broadband churn remains stable at 2%, which is a good level given our aggressive market promotions. We continue to capture market share effectively. - Raymundo Fernandez Pendones, Deputy General Director
Q: Is there room for ARPU to grow as expansion decelerates, and can you elaborate on the margin dynamics in cable operations?
A: ARPU is influenced by the mix of double and triple-play subscribers and promotional periods. We expect a slight increase in ARPU as more subscribers exit promotional periods. Margins in organic territories remain stable at 49%, but overall margins are affected by the lower-margin expansion territories and increased commercial efforts. - Raymundo Fernandez Pendones, Deputy General Director and Luis Antonio Zetter Zermeno, CFO
Q: How are customers reacting to the "more for more" pricing strategy, and what is the long-term outlook for margins as broadband becomes more predominant?
A: Customers are responding well to increased speeds and higher prices, as they value the enhanced service. We aim to provide 100 Mbps speeds, supported by our extensive fiber network. As broadband becomes more central, we expect margins to improve due to higher broadband margins compared to video services. - Raymundo Fernandez Pendones, Deputy General Director
Q: Can you discuss the sustainability of the strong free cash flow generation this quarter?
A: The strong free cash flow is sustainable, supported by strategic negotiations with technology partners for longer payment terms. We expect to maintain this level of cash flow generation moving forward. - Luis Antonio Zetter Zermeno, CFO
Q: With declining capex and leverage, what factors will determine your capital return strategy?
A: Our current focus is on completing the expansion project and strengthening our financial position. In 2025, we will evaluate options such as share buybacks or increased dividends, depending on market conditions and company performance. - Raymundo Fernandez Pendones, Deputy General Director and Enrique Robles, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
