Informe del Director

Message from the CEO

Dear shareholders,

I am pleased to present the 2023 Annual Report of MEGA, detailing the most relevant achievements, challenges, and results of this period.

Our focus on technological innovation with the adoption of fiber technology has been fundamental in keeping us at the forefront.

This has been a year of transformation and growth for the Company, marked by a continuous commitment to excellence and innovation, positioning us as a leading company in the telecommunications sector.

It is important to note the economic environment in Mexico, which shows positive indicators such as GDP growth, lower inflation, an increase in minimum wages (mainly at the lower end of the pyramid), and a favorable exchange rate. These factors allowed us to seize new opportunities and accelerate our investment pace, delivering solid results.

550 thousand new unique subscribers in 2023; we are the fastest-growing company in the industry.

From an operational standpoint, we recorded an increase of approximately 550 thousand net additions in unique subscribers, the highest annual figure in the Company's history, closing at 4’945,826. Meanwhile, RGUs² increased 1.5 million new services, reaching 12’717,697. Both saw annual growth rates of 12.1% and 12.3%, respectively.

This year, we made significant investments in infrastructure and technology to expand our coverage and improve the quality of our services. With our Network Evolution and Company Expansion projects, we have one of the best networks in the country, with coverage of nearly 15.5 million homes by years-end. Additionally, we have developed solutions and products to meet our subscribers’ emerging needs, in a constantly evolving digital world.

²Revenue Generating Units

In 2023 alone, we built nearly 4 million homes passed and more than 17 thousand new kilometers of network.

Since the announcement of the project to enter new territories at the end of 2021 until the close of 2023, we have launched operations in 55 new cities, including Aguascalientes, Cancún, Saltillo, Tijuana, Monterrey, and Mexico City, among others. This expansion has allowed us to offer our services in all 32 states of the Mexican Republic and in over 550 municipalities, significantly expanding our coverage and establishing us as a company with national presence.

Furthermore, we have built over six million homes passed and 28 thousand new kilometers of network, representing a considerable advancement in the project's construction phase, even surpassing our expectations. We remain on track to double the Company's size in terms of infrastructure by the end of 2024 or early 2025, and in terms of revenue and EBITDA by 2027, demonstrating our commitment to long-term growth and business strength.

Regarding the network evolution project, we have decided to continue gradually migrating part of our territories from HFC technology to fiber. In the last three years, we have migrated 35 thousand kilometers, resulting in 63% of our subscribers receiving their service through fiber technology by the end of the period.

Financially, total revenues for 2023 reached Ps. 29,871 million, 10% higher than in 2022. This success is largely due to the growth of our subscriber base and a higher ARPU. During the same period, consolidated EBITDA increased by 4%, with a margin of 44.4%. It is noteworthy that the decrease in the consolidated margin compared to previous years is due to the execution of the expansion project. This indicator will improve significantly in the coming periods as we increase penetration in these territories.

It is important to highlight that despite the high investment cycle the Company has undergone in recent years, leverage remains one of the lowest in the industry in Mexico and globally. This reflects financial strength, efficient resource management, and a focus on value-generating investments.

Results by Business Segment

INTERNET AND TELEPHONY SERVICES reached RECORD FIGURES IN NET ADDITIONS DURING THIS PERIOD

Internet

Video

Telephony

Corporate Segment

Mobile Services

In terms of sustainability, this has been one of the most enriching years for the Company, with significant progress in formalizing our sustainability strategy and integrating it into our operations.

We recognize that the path is long and there is still much to do. However, our commitment to reducing our environmental footprint, alongside the investments we have made in fiber technology in recent periods, has resulted in decreased energy consumption. Additionally, we have implemented photovoltaic projects in Guanajuato, Estado de México, Chiapas, Puebla, and Sinaloa as part of our adoption of renewable energy.

I would like to highlight our focus on strengthening our regulatory framework on sustainability and reinforcing our corporate governance. We have created, updated, and/or published the following documents:

Code of Ethics
ESCALA (whistleblowing line)
Sustainability Declaration
Sustainability Manual
Operation of the Sustainable Financing Committee
Sustainable Financing Framework
Sustainability Policy

This has laid the foundation for our first sustainable debt issuance, scheduled for early 2024.

In a highly competitive environment, our operational efficiency, strong financial position, continuous innovation, adoption of new technologies, and highly trained staff have allowed us to differentiate ourselves from our competitors and continue creating value for our shareholders, as we have done for over 40 years.

I want to express my sincere gratitude to all who have contributed to our Company's success this year: our shareholders, employees, investors, subscribers, customers, and commercial and technological partners. Your dedication and support are essential to our continuous growth, and I am confident that together we will achieve all our future goals.

On behalf of the Board of Directors and the executive team of MEGA, I thank you for your trust and commitment. We will continue to work on implementing our initiatives with our characteristic efficiency, aiming to maximize value generation for all our stakeholders.

Sincerely,
Enrique Yamuni Robles
Chief Executive Officer