This week, we are coming back to our guidance trends analyses, focusing on the Mexican Telcos & Media market. As we have said in our previous guidance analyses, common metrics included in guidance strategies vary from sector to sector, and hence, so do best practices on this matter. The idea is that companies should share the metrics that are most relevant for investors and analysts’ forecasts and model projections.
It is important to note that, as usual, we only consider guidance to be formal guidance if it is properly disclosed, numeric (even if it is a range), and not only broad management comments on a very high-level view of the direction the business is taking. As for the sector classification of companies, we are following the definitions from the BMV (Bolsa Mexicana de Valores).
Telcos & Media – Current formal guidance strategy
Source: Company Materials
Note: the following companies stopped providing guidance in 2020 due to economic uncertainty derived from the COVID-19 pandemic:
- Axtel discussed point-estimate expectations for EBITDA on a quarterly basis in their earnings reports and calls.
- Megacable discussed their range estimates for total revenue, consolidated EBITDA, CapEx, suscriber growth, and segments growth through earnings calls and press releases with variable frequency.
What can we read from this table?
- Currently, only one company in the Mexican Telcos & Media industry provides formal guidance (Televisa). The guidance is exclusively focused on CapEx and is provided as a point estimate. It is discussed both in investor presentations and earnings calls on a quarterly basis.
- Two additional companies used to provide guidance pre-pandemic. One did so on a quarterly basis, while the other did so sporadically. Their expectations were disclosed through earnings reports and calls, or press releases, and the most common metrics were CapEx and EBITDA.
So, what do the largest telecommunications and media companies (by market cap) in the world do?
- AT&T: discloses directional and range-based guidance on HBO and HBO Max subscriptions, free cash flow, CapEx, consolidated adjusted EPS, and revenue growth on a quarterly basis. This is done through press releases, and earnings presentations and calls.
- Comcast: suspended its quarterly point-estimate guidance for EBITDA and CapEx in 2020 as well, but at least maintains its guidance to 2024 for active accounts.
- Verizon: publishes its guidance through press releases, and earnings presentations and calls quarterly. Its guidance includes ranges on service and other revenue growth, total wireless service revenue growth, adjusted EBITDA, adjusted EPS, adjusted effective tax rate, and CapEx.
What should we learn from this?
International companies clearly provide guidance on metrics that flow all the way through the P&L and cash flow statement. They seem in general more comfortable with discussing their operations’ outlook.
Local players vary greatly in size, from smaller niche competitors (some with very thinly traded stocks) to some of the largest Mexican companies. This also contrasts with the size of the international peers that we used as examples, which clearly has an impact on guidance strategies.
Having said that, there is no doubt that there is significant room for improvement in Mexican Telcos & Media companies’ approach to guidance (specially for large caps such as América Móvil, or even Televisa, which could broaden the scope of indicators it provides guidance on). We would ideally expect to see information from the large caps that helps investors and analysts anchor their valuation models.
Notwithstanding size, we still believe that providing guidance is quite relevant for maintaining an open and transparent communication with the market. We think 2022 is a great year for launching (or relaunching) guidance strategies, as the market comes to grips with how the pandemic recovery will continue to play out.
If it’s your first time planning a guidance strategy and you would like to bounce some ideas, let us know! We will be happy to help.
Contacts at Miranda Partners