How rivals Megacable, Totalplay are investing in Mexico

Two of the leading triple-play providers in Mexico – Megacable and Totalplay – reported mixed financial performances for the third quarter.

While the two rivals saw costs and indebtedness rise compared to the year before, Megacable managed to close the quarter in the black, with 823mn pesos (about US$40mn) in net income. 

The figure was down 12% over a year earlier, which the company attributed mainly to higher depreciation of investments, interest expense and a higher tax rate.

Grupo Salinas’ Totalplay, in turn reported a net loss of 1.84bn pesos, up from 836mn pesos.

Both companies spent more on telecoms equipment and network expansion, notably fiber optics, as competition intensifies.

BNamericas breaks down the performances below.

MEGACABLE

Megacable’s capex amounted to 2.74bn pesos (US$140mn) in Q3, up 14.7% year-over-year. The total disbursed represented 40.7% of the company’s sales for the quarter, Megacable said.

The amount was way higher than the 15-18% capex-to-revenue ratio usually pursued by multinational telcos Telefónica and América Móvil.

Megacable announced last week it plans to invest US$2bn over the next five years to expand its network and enter new cities.

With the investment, the company said it aims to double the number of households it serves. The group has expanded to 11 municipalities so far this year and plans to reach 15 more by the end of 2022, the company said.

Most of its quarterly investment went to the expansion of its fixed backbone and fiber-to-the-home (FTTH) connections. Megacable’s total network now spans 71,458km, an increase of 9.6% over September 2021, it said.

The company also broke the benchmark of 10mn homes passed with fixed networks, at 10.5mn as of end-September, up 13.7% year-over-year.

Around 45% of its internet subscribers receive the service through fiber, the company said, and 54% are served with speeds of 50MB or more, compared to 18% at the end of 3Q21.

Megacable said it ended September with 4.3mn unique subscribers, after net adds of 84,000 in the quarter, a record since the beginning of the pandemic, according to the company. 

Total revenue generating units (RGUs) grew 6.5% to 10.9mn.

RGUs tend to be a more appropriate metric to measure the base of multi-play telcos as a single customer usually subscribes to more than one service.

The churn rate of its three mass segment services declined compared to the previous quarter, but the rates of the internet and video segments increased slightly year-over-year.

The company said this was mainly due to a more adverse domestic and international economic environment.

Overall, Megacable posted 6.74bn pesos in net revenue, up 9.6% year-over-year.

ALSO READ: How and where Mexico's telcos are investing

TOTALPLAY

Totalplay, which claims to have one of the largest 100% fiber optic networks in the country, posted net revenues of 9.30bn pesos, up 28% year-over-year. 

Yet, its total costs and expenses climbed to 5.24bn pesos, from 4.21bn pesos the year before, as a result of a 21% increase in service costs and a 27% increase in general expenses, according to the company.

The cost increase was mainly due to the purchase of content, memberships, link rentals and other interconnection services and licenses for network operation, it said.

Meanwhile, the increase in expenses was attributed to higher personnel, advertising and promotion and maintenance, as well as call center expenses.

Totalplay also reported an increase of 1.11bn pesos related to depreciation and amortization, which it claimed to be the result of user acquisition costs – telecommunications equipment, labor and installation expenses – as well as investments in fiber network coverage.

The company said it reached 5mn subscribers.

According to regulator IFT, Totalplay was responsible for nearly 40% of all the investments of telecom companies in Mexico last year at the equivalent of US$2.16bn.

Megacable, for its part, invested 7.31bn pesos last year, the equivalent of US$369mn, according to IFT.

Grupo Salinas appears as the leading investor in Mexican telecoms, with 42.9bn pesos in capex last year, ahead of Grupo Televisa (19.7bn pesos) and América Móvil (14.1bn pesos).

Recently, Totalplay announced a joint cloud services offering with AWS focused on the corporate segment. Through the alliance, Totalplay's enterprise and government unit will offer AWS-based cloud services to enterprises as it seeks to beef up its B2B line.