Conectivity at all time
2016 was a year of change, transformation and growth for our company. This transformation was the result of our customers’ new demands and requirements with regard to the range of services and products that we offer, in addition to the introduction of new technologies, services and content and our on-going incursion into business segments.
These changes have helped us to consolidate our integrated value proposition, grow profitably and make significant advances in our goal of becoming the top telecommunications company in Mexico.
This would not have been possible without the correct implementation our business strategy, which is based on being as close as possible to our customers to meet their needs, improving our standards of service, offering the best possible technology, driving innovation through new products and services, ensuring our human capital is properly trained, expert and highly motivated, and implementing focused sales strategies.
At the end of 2016, we saw a significant 15% increase in RGU’s (Revenue Generating Units), reaching 6,374,839. In terms of our most relevant operating results, we saw an increase in unique subscribers of 8% and RGU’s per subscriber increased by 6%, reaching 1.93.
Our dedication and hard work to achieve a greater presence and share of the business and corporate markets have borne fruit. At the end of 2016, this business unit reported growth of 12%, representing 18% of the company’s total revenue. We firmly believe that our performance in this area will continue to increase thanks to our managed solutions and cutting-edge technology, areas in which we will continue investing.
The performance of our services this year was outstanding, with growth above the industry average and well above the general progress of the economy as a whole
During this period, our video service increased its subscriber base by 5%, while Internet and Telephony services grew by 22% and 31%, respectively. These indicators help us visualize the transformation process and the improvements we made throughout 2016, and they are clear proof of our competitiveness in the dynamic telecommunications market.
One of the characteristic factors of 2016 was the speed and efficiency with which we met the needs of our subscribers; this helped us to improve our customer satisfaction indicators. We have 24/7 service and monitoring teams, helping us to ensure on-going innovation and improvements.
Our strategy focuses on meeting the needs of our customers through cutting-edge technology, quality service and the best content, all at a competitive price. In order to achieve this, we continue investing in broadband growth, offering greater speed at a lower price, packaging products to offered integrated services, providing on-demand entertainment, maintaining a flexible and adaptable company, and developing and training all our employees to ensure that they improve every single day.
We constantly monitor our strategies to ensure they are properly implemented and attain the desired results. It is not the goals that are important but rather the steps that we can take to offer better service, be more competitive and keep our customers happier.
We are a widely-recognized brand and the first option for the market after the analog switch-off. We are a company that is characterized by our daily focus on a range of areas, including: efficiency, flexibility, ability to adapt to change, capacity for decision making and the implementation of new strategies.
Below you will find an outline of the results we achieved during 2016:
In 2016 the new Next Generation Video interface was launched, which is navigated in a webtype guide and offers additional services to users.
Video
In 2016, we reached a total of 2,971,181 subscribers, which is a 5% year-on-year increase. Average Revenue Per User (ARPU) was MXN $219. Our revenue in this business unit grew by 14%. The growth recorded in this segment during the last quarter of 2015 and the first quarter of 2016 was the result of the analog switch-off, among other factors.
In order to drive profitability and competitiveness, we renegotiated the procurement of our content in Spanish, a process that led to a considerable decrease in cost and a marked improvement in the value proposition we offer our customers as a result of a greater variety of better content. This process led to greater profitability.
After the pilot program in Guanajuato, in 2016 we successfully launched our most innovative product, Next Generation Video (NGV), in Guadalajara, Puebla, Querétaro, Zacatecas, Zamora and Guanajuato. This services uses a GPON network and IPTV technology, known commercially as X-View, offering on-demand entertainment for customers, giving them the option to decide what, when and where to watch their favorite content. The distinctive characteristic of this service is its new interface, which offers a totally innovative subscriber experience, increasing levels of satisfaction thanks to it web navigation guide.
Furthermore, the subscriber has access to additional services, including the possibility to rewind a wide variety of channels by up to 48 hours, live pause, and record their favorite programs on every channel on the cloud, in addition to a VOD section.
X View will be launched in the rest of our markets, reaching approximately 70% of our customers, during the first quarter of 2017.
We also recategorized the content we offer in our packages, ensuring the best programming for our subscribers, not to mention the highest quality, cutting-edge technology and Data Over Cable Service Interface Specification (DOCSIS). This year, 100% of the network is ready for DOCSIS 3.0, which will ensure the network is prepared to transmit highdefinition content.
Internet
We are currently one of the best Internet providers, with 2,227,629 subscribers, 22% more than in 2015. This is the result of our competitive advantage, offering the best speed and most competitive costs to our customers. We achieved an ARPS of MXN $184, which represents an increase in revenue for this business unit of 28%.
Internet growth has been a key factor in driving the majority of the packages we offer. This is the most in-demand product because of the quality it offers, a variable that has always set us apart from the competition. We offer our basic package customers an increase in Internet speed from 10 to 20 MB at no extra cost, exceeding that offered by the competition.
Telephony
In terms of telephony, we currently have 1,176,029 subscribers, representing a growth of 31% compared to 2015. It is important to highlight the fact that there has been a downturn in the industry, which means we have a greater share of the market.
In this area, our growth is the result of offering packages in which all our services are unlimited, of the highest quality and competitively priced, in addition to an aggressive and well-implemented sales strategy.
In this sector, we offer our subscribers a product called WiPhone, which offers them access to their landline from their cellphone.
Business and corporate segment
2016 was an important year for the growth of the business and corporate segment. We continue to consolidate this market in terms of connectivity, managed serviced and cloud services, through MetroCarrier, MCM, Ho1a and PCTV. In this segment, to the end of 2016, revenue stood at MXN $3.085 billion, an increase of 12%. This segment currently represents 18% of our total revenue. MetroCarrier continues to play a pivotal role in helping us meet the goals we have set for ourselves.
Revenue
To the end of 2016, we reported a 17% year-onyear increase, reaching MXN $17.002 billion from services stemming from improvements to our operations, packaging, outstanding acceptance and requests for our Internet product, and continuing growth of the business segment.
The EBITDA margin for cable operations was 44.7%, while the Consolidated EBITDA margin was 41.0%, reaching MXN $6.966 billion.
NET INCOME
Net income was MXN $3.865 billion to the end of 2016, an increase of 24%.
Balance sheet
Megacable’s balance sheet remains stable, and, despite it being one of the companies with the least leverage in the industry, the company continues to generate cash.
Total assets reached MXN $32.575 billion to the end of 2016, representing an increase of 12% or MXN $4.122 billion, stemming mainly from an increase in our investments to consolidate our network and to acquire technological tools, areas that ensure our privileged position to capitalize on market growth opportunities in the future.
Short-term liabilities stand at MXN $4.921 billion, 8% less than in 2015 as a result of the renewal of syndicated loans, which matured in July 2016, for MXN $2 billion with a maturity date of July 2019. The MXN $4.921 billion includes a credit for Ho1a for the CFE project totaling MXN $884 million, which will be liquidated during the first quarter of 2017. This means the company’s net debt, not including this credit, stands at MXN $1.612 billion instead of MXN $2.496 billion, i.e. 0.23 times the company’s EBITDA instead of the 0.36 times reported.
Total liabilities reached MXN $9.398 billion, an 8% increase compared to 2015, the result of an additional US $30-million loan and an increase in the business credit we offer our suppliers.
The company’s total equity increased by 14% in 2016 as a result of accumulated revenue of MXN $18.585 billion, continuing the double-digit growth trend of the company’s book value.
1,049
New jobs were
created in 2016,
equivalent to a
growth of 6.6%
Capital investments
In 2016, a total CAPEX investment of MXN $5.092 billion was made, representing a 35% year-on-year increase. This investment has been earmarked mainly to increase Internet speed and offer greater coverage and content.
Our strategies have been modified and adapted to a constantly changing environment, especially in terms of the consumer habits of our subscribers and of society in general. This is why we focus on investing in user-friendly technologies that allow us to develop services that meet their expectations and needs in terms of content, quality and accessibility.
Our 54,000-kilometer network currently covers 7.9 million households, both figures representing an increase of 5% compared to 2015. Our capital investment compared to our revenue is one of the lowest in the industry, where the average over the past 3 years has been 25%.
Market performance
The company’s operating and financial results meant our share price performed satisfactorily. The share price, at the end of December 31, 2016, was MXN $69.41, an annual increase of 8%. We have a total of 1.721 billion Series A shares, of which, to the end of December 31, 2016, 1.717 million were in circulation.
At Megacable, we have a free float of 35% as the investing public have 600 million shares through 300 million ordinary stock certificates (2 shares each).
Our People
Our human capital is a fundamental part of the company, which is why, during 2016, we developed plans and programs to drive development and training, helping our employees attain skills, grow, become more productive, and, as such, earn more. All of this has a positive impact on customer service and operational efficiency.
During 2016, 1,049 new jobs were created, an increase of 6.6%. We closed 2016 with 17,059 employees.
The implementation of our strategy, which is based on years of experience and our knowledge of the market, and which focuses on generating value for our customers and the company by providing quality services at competitive prices using the most advanced technology and ensuring the highest quality content, is the basis for our constant growth and profitability. We also have a privileged position within the market, not to mention a solid capital structure and balance sheet, and highly trained and committed staff, enabling us to see the future with optimism, certain that we will achieve our goals and become the best telecommunications company.
Sincerely,
Enrique Yamuni Robles
CEO
Manuel Urquijo Beltrán
Secretary of the Board of Directors