In the midst of the pandemic, like its competitors, the fixed services company implemented a business expansion strategy with the aim of reaching more users and expanding its fiber optic network. During and after the pandemic, the demand for this service increased considerably due to the need to maintain work, school and entertainment activities.
In the first three months of this year, Totalplay made an investment of 59,227 million pesos, which represents an increase of 21% compared to the same period of the previous year. This investment was mainly used for the acquisition of fiber optics, telecommunications equipment and the cost of obtaining new subscribers, among other assets.
In addition, in the context of operational growth in the company, higher expenses were observed in areas such as personnel, advertising and promotion, maintenance, and operation of the call center. Although these investments have been partially offset by the economies of scale derived from a broader user base, the upward trend in the injection of capital will change in the future.
Eduardo Kuri, CEO of Totalplay, quoted in the company’s financial report for the first quarter of this year, said the company experienced a 39% decline in profits. This drop was due to a 15% increase in the costs and expenses associated with the sale of equipment, memberships, rental of links and other interconnection services necessary for the operation of the network. However, this situation was partially offset by the efficiencies generated through the renegotiation of content costs.
According to data from the Federal Institute of Telecommunications (IFT) corresponding to the fourth quarter of 2022, the industry generated total revenues in the amount of 155,634 million pesos. Within this scenario, Totalplay’s participation in said revenues was limited to 5%, as it currently has only 17% of the fixed internet market, in contrast to Telmex, which holds 40%.
Jesús Romo, an analyst at the GlobalData consultancy, believes that, although Totalplay’s contribution to total industry revenue is not yet significant, the change in strategy adopted by the company is not limited solely to this factor. It can also be interpreted as part of a cycle within your business expansion plan.
“Now the company must see in greater detail where to invest, look at where the market is going to begin to focus capital in certain places and begin to recover part of what they have already invested to consolidate their business,” considers the expert.
Currently, fixed operators such as Totalplay face greater challenges to increase and consolidate their user base. Although triple play packaging worked for companies for a while, after the pandemic they must find other options to capture the attention of users.
“The scope (of triple play) is already moderating, the attraction of new homes is now one of the issues of these companies and perhaps the strategy goes here as well,” concluded Romo.