2020 Annual Report
2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS
MEGACABLE.
Megacable Holdings, S.A.B. de C.V. and Subsidiaries
Notes to the consolidated financial statements
For the years ended December 31, 2020 and 2019
(Thousands of Mexican Pesos)
These financial statements have been translated from Spanish, the original language and for the convenience of foreign/
English-speaking readers.
(1) Group information-
Megacable Holdings, S.A.B. de C.V. (the "Company" or "Group") is a variable capital company incorporated under Mexican law, as
well as its subsidiary Mega Cable, S.A. de C.V. (Mega Cable). The Group is controlled indirectly by the Bours and Mazón Families
and the Trust held with Mexican development bank Nacional Financiera, S.N.C. The subsidiary Mega Cable also controls a group
of companies engaged in the installation, operation, maintenance, and use of Public Telecommunications networks that distribute
cable television, internet and telephone signal systems, and business solutions provided for the business segment. The Group is
listed on the Mexican Stock Exchange and has a presence in more than 26 states across Mexico. The Group has determined that
its normal cycle of operations starts on January 1 and ends on December 31 of each year.
The Group's headquarters are located at Av. Lázaro Cárdenas 1694, Col. Del Fresno, Zip Code 44900 in Guadalajara,
Jalisco, Mexico.
The accompanying consolidated financial statements include the Group's figures, including joint ventures and associates, as
at December 31, 2020 and 2019, in which the Group exercises significant influence and control, respectively. (See Note 2b)
Telecommunications Reform
On June 11, 2013, the Official Gazette of the Federation published the Decree reforming and adding various provisions to
Articles 6, 7, 27, 28, 73, 78, 95, and 105 of the Mexican Constitution regarding "Telecommunications," which establishes
the obligation for Congress to issue the single Legal Order on regulatory convergence for the use, operation, and
exploitation of the radioelectric spectrum, telecommunications networks, as well as the provision of broadcasting and
telecommunication services.
The Federal Telecommunications Institute (IFT or "Institute") was created on September 10, 2013, and the Decree issuing the
Federal Telecommunications and Broadcasting Act (the "Law") was published in the Official Gazette of the Federation on July
14, 2014, along with the amendment and repeal of various Telecommunications and Broadcasting provisions. The Decree
entered into force on August 13, 2014.
In compliance with the Eighth Transitory Article, Section III of the constitutional amendments decree, the IFT Plenary in its
V Extraordinary Meeting approved the resolution on preponderance and established various measures for the Preponderant
Economic Agents (PEA) in the telecommunications and broadcasting sectors, respectively, to keep from affecting free trade
and competition, through Agreement P/IFT/EXT/060314/76, which affected the Group with the corresponding measure and
asymmetric interconnection charges for calls ending in the network of the PEA in telecommunication services TELCEL/
TELMEX/TELNOR.
Furthermore, said Resolution established, in Appendix 3, the measures that allow an effective unbundling of the local PEA
network so that other telecommunication companies can access the physical, technical and logical means of connection
between any terminal point of the public telecommunications network and the access point to the local network belonging
to said agent. Thus, on February 27, 2018, through Agreement P/IFT/270218/130, the final plan for the implementation of
functional separation of the PEA was approved, which, after changes approved by the Authority, had a September 30, 2019
deadline for migration of personnel, transfer of resources and transfer of network and infrastructure elements, thus giving
rise to the functional separation of Telmex and Telnor.
Consequently, through the implementation of the final functional separation plan and the application of different measures
imposed on the PEA, on March 4, 2020, the IFT approved the concession titles for Red Nacional Última Milla, S.A.P.I de C.V.
and Red Ultima Milla del Noroeste, S.A.P.I de C.V, companies created to provide services for the PEA's telecommunications
wholesale division. Thus, as of March 6 of said year, these companies began operations independently from Telmex and Telnor.
In accordance with the Preponderance Resolution and the Law, the Institute Plenary has adopted different general
Administrative Provisions and resolutions, including the Minimal Technical Conditions and Cost Models used to determine
the Interconnection rates annually since 2015, and the applicable rate for 2021 was published in 2020. Similarly, the
reference offers of the Preponderant Economic Agent in the telecommunications sector, which include Wholesale Services of
Dedicated Links, Infrastructure Sharing and Local Loop Unbundling, as well as the Measures imposed biannually to the PEA
and the approval of different cost models, allow to determine the prices for the services of Dedicated Links, Unbundling and
Sharing Infrastructure, which allow MEGA CABLE to request and/or dispute rates in the services offered, as well as the use
of the available infrastructure of TELMEX and TELNOR and Red Nacional Última Milla, S.A.P.I de C.V. and Red Ultima Milla del
Noroeste, S.A.P.I de C.V.
As for the Group, in January 2016, MEGA CABLE was granted a single concession title which considers national coverage
within its content, valid of 30 years, which allows the provision of any type of technically-feasible telecommunications service,
allowed by the infrastructure to be provided in any part of the Mexican territory (and only requesting, where appropriate,
the necessary radio spectrum). This title establishes the obligations corresponding to the dealers, such as: registering the
services that they intend to provide; information on passive and active infrastructure, transmission media and rights of way;
coverage programs, investment, quality and coverage commitments; not engaging in discriminatory practices; establishing
and publishing a Code of Business Practices; having parental control regarding programming directed at children and
adolescents; providing information to the IFT and allowing verification at the facilities; filing the audited financial statements,
and others.
Legal Framework - Regulatory Interconnection of Networks with Other Operators 2020 and 2019.
Since 2015, the dispute over interconnection rates has been performed mechanically and with prior knowledge of the terms
of the resolution issued by the IFT, since in the last quarter of each year, the Institute publishes the interconnection rates to
be applied the following year. Therefore, the applicable rates were interconnection disagreements between operators were
established during 2020 and 2019:
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