Message from the CEO

During 2020, changes that we expected to take place in the medium or long term, took place in a blink, in light of the new challenges stemming from the public health crisis. This emergency had a negative effect on the global economy, while on a domestic level we experienced an economic downturn and a negative GDP growth rate, both of which affected consumption levels; however, the needs of consumers changed, with telecommunications services, among others, becoming a priority.

The main changes were the accelerated adoption, in a matter of days or weeks, of the home office, distance learning remote healthcare, e-commerce, mobility restrictions, a lower use of automobiles and many other trends.

At Megacable, we recorded positive growth in our financial and operational statements for the services we offer the market, and we successfully consolidated major projects. In 2020, we made significant investments that enabled us to offer our customers the best possible connectivity and entertainment services, allowing us to grow and consolidate our position as a fundamental partner, above all motivated by the changes in the daily routine of people given the aforementioned.

To the end of 2020, we had a total of 3,932,609 unique subscribers, an 8% increase in a year-on-year comparison, while Revenue Generating Units (RGU’s) grew to more than 9.5 million, a 13% increase compared to 2019. This led to a rate of 2.43 RGU’s per unique subscriber.

For Megacable, 2020 was a year of projection and acceleration. The Company’s financial results were positive, recording growth of 4% in consolidated revenue compared to 2019, reaching Ps. 22.383 billion.

In terms of results by segment, Internet recorded growth of 9%, stemming from increased demand for this service during lockdown and the Company’s competitive offering. The Video segment saw a 3% growth in revenue, while the Telephony segment recorded 15% growth.

Following our infrastructure deployment strategy, we activated optic fiber rings between Guadalajara and Puebla, in addition to applying new border routes using proprietary fiber optic cables.

In 2020, we began installing a submarine cable in the region of Baja California, which will connect this region with the rest of the country, providing video, voice and high-capacity data services. Through this infrastructure deployment process, we have been able to drive improvements in both our data services and grow as a provider to other telecommunications companies, as well as creating huge cost-savings for the Company.

We also launched our mobile service, which combines our quadruple play offering with positive results and exponential curves. By 2021, we expect to have fully consolidated this business unit.

In terms of the video segment, we have been working on developing our XView+ platform, which is based on the Android TV platform, integrating linear content and virtual platforms into one hub, allowing users to easily find what they want to watch. The launch of this platform is scheduled for February 2021 and was carried out succesfully.

RESULTS BY BUSINESS SEGMENT

At Megacable, we know that the needs of our customers are constantly changing and becoming more and more sophisticated, which is why we strive every single day to drive innovation in our services in order to offer them a better experience.

CORPORATE TELECOM SEGMENT

In 2020, our Corporate Telecom segment recorded revenue totaling Ps. 3.602 billion, representing a year-on-year decrease of 8%. This was the result of the COVID-19 pandemic which, among other things, led to the postponement or cancellation of investments in new projects for this market, as well as the closure of a great amount of businesses, either temporarily or definitively, during the year.

However, the public health crisis caused by COVID-19 also accelerated the adoption of technologies by companies to allow them to continue operating remotely, which is why our connectivity services became an essential part of their operations. In light of this outlook, in 2020 we focused on investing in and consolidating innovative businesses within the corporate sector.

MetroCarrier, our connectivity service for the corporate market, recorded a 2% increase in 2020, while MCM also posted a 5% growth rate for the same period.

For this market, we offer solutions that provide support to companies that are adopting new forms of remote working. Our integrated service portfolio facilitates business continuity without the need for people to be physically present at an office. We offer efficient and secure connectivity that is underpinned by equipment and connection stability in order to provide the same connection that employees use in their own offices (with access to office network resources, permanent VPN’s, monitoring and redundant links).

Ho1a Innovación, our division that specializes in developing and adopting information technologies to boost corporate communication, registered total revenue of Ps. 624 million, which represents a decrease of 41% as a result of the extraordinary results posted in 2019 and the economic and social impacts of the COVID-19 public health crisis.

We are aware of the fact that as technology advances so do the risks posed, which is why guaranteeing the integrity of IT systems and the data they contain is of fundamental importance. Through Ho1a, we provide a Security Operations Center (SOC) that monitors the networks and data security 24 hours a day in order to ensure it is protected.

Furthermore, we have forged strategic alliances with companies that include Cisco, Microsoft and Avaya, in order to offer collaborative software (Microsoft Teams, Cisco Webex, Avaya Spaces, Google Workspace) and ensure we provide an integrated service.

In terms of infrastructure, our on-going technological deployment, in addition to new solutions and the improved quality and capacity of our network, has allowed us to position ourselves as the best option within the corporate segment. Furthermore, our submarine cable and the data center services we offer have allowed us to bolster our portfolio and offer companies quality and value-added services.

Our investments in nodes and fiber have driven our growth within the market given the growing importance broadband now plays in both social and economic terms.

We also continued rolling out improvements to our FTTH networks (Fiber To The Home), preparing the ground for the activation of our GPON network in twelve cities and increasing node capacity using HFC technology in the rest of the territories in which Megacable operates.

Furthermore, We continued consolidating our investments in long-distance infrastructure throughout 2020. We built rings from Guadalajara to Puebla, that go through the northern part of the Bajío region (Jalisco, Guanajuato, Querétaro and the State of Mexico), and from Guadalajara to Puebla, which pass through the southern part of the Bajío region, which encompasses the states of Michoacán, Morelos and Mexico City.

We also increased our border routes through an investment that enabled us to deploy proprietary fiber optics in order to increase the capacity and efficiency of our network. Through this strategy, each state has increased the numbers of highway optic fiber infrastructure kilometers.