Cablemas 2Q06 Net Revenue and Adjusted EBITDA Up 30.8% and 35.2% YoY

Cablemas 2Q06 Net Revenue and Adjusted EBITDA Up 30.8% and 35.2% YoY

MEXICO CITY, Aug. 16 /PRNewswire/ -- Cablemas, S.A. de C.V., (Cablemas), the second largest cable television operator in Mexico based on number of subscribers and homes passed, today announced results for the three- and six- month periods ending June 30, 2006.

Cablemas CEO Carlos M. Alvarez Figueroa commented, "With increases in net revenue, operating profit and adjusted EBITDA, Cablemas continues to post strong results."

"This quarter we again increased market penetration, with YoY subscriber- increases of 20.3% and 64.7% in cable television and in high-speed Internet, respectively. In addition, our recently established joint venture with Axtel expanded the number of IP telephony lines by 54% QoQ to 15,316. In July, we achieved another milestone in our strategy of rolling out new services when we received thirteen fixed local telephony concessions in Mexico. These will allow us to offer triple play services independently, rather than through a third-party carrier."

Financial and Operational Highlights(1)
(in million Mexican Pesos)
2Q05 2Q06 % Chg. 1H05 1H06 % Chg.
Financial
Highlights

Net revenue 427.6 559.1 30.8% 838.4 1,083.6 29.3%
Operating
profit 75.6 125.0 65.5% 170.8 246.9 44.6%
Adjusted
EBITDA(2) 155.7 210.5 35.2% 320.5 421.3 31.5%
Net income 31.6 14.0 -55.5% 102.0 63.5 -37.7%
Operating
margin 17.7% 22.4% +469 bps 20.4% 22.8% +241 bps
Adjusted
EBITDA
margin(2) 36.4% 37.7% +124 bps 38.2% 38.9% +65 bps
Net income
margin 7.4% 2.5% -487 bps 12.2% 5.9% -631 bps
Total Debt 1,128.0 1,994.5 76.8% 1,128.0 1,994.5 76.8%
Net Debt 1,084.7 1,562.2 44.0% 1,084.7 1,562.2 44.0%
Total Debt/
LTM Adj.
EBITDA(2) 1.9x 2.7x 1.9x 2.6x
Net Debt/
LTM Adj.
EBITDA(2) 1.8x 2.2x 1.8x 2.0x
EBITDA/ Net
interest
expense 4.4x 3.2x 4.9x 3.7x

Operational
Highlights

Homes
passed 1,647,536 1,841,921 11.8% 1,647,536 1,841,921 11.8%
Cable
Television
subscribers 546,402 657,144 20.3% 546,402 657,144 20.3%
High-speed
internet
subscribers 87,336 143,828 64.7% 87,336 143,828 64.7%
IP Telephony
lines - 15,316 NA - 15,316 NA

1 Unless otherwise stated, all financial figures discussed in this
announcement are unaudited, prepared in accordance with generally
accepted accounting principles in Mexico, expressed in millions of
constant Mexican pesos as of June 30, 2006, and represent comparisons
between the three-month period ended June 30, 2006, and the equivalent
three-month period ended June 30, 2005.

2 Adjusted EBITDA is calculated by adding amortization and depreciation,
net comprehensive financial results, net other income, special items,
total income tax and asset tax, total employee statutory profit sharing,
effects from associated companies and minority interest to net
income/loss.

SECOND QUARTER 2006 CONSOLIDATED RESULTS

Net Revenues

Net revenues increased 30.8%, or Ps.131.5 million, during 2Q06 to Ps.559.1 million.

-- Cable Television: The 21.2%, or Ps.76.2 million, growth in cable
television revenues was principally due to a 20.3% YoY increase in the
number of subscribers to 657,144, with a penetration rate of 35%.
Average monthly cable television revenues per subscriber (ARPU) rose
0.8% to Ps.228.7. This was primarily the result of increased revenue
relating to the World Cup soccer tournament. Average monthly net churn
rates for cable television fell to 2.2% for 2Q06 from 2.4% in 2Q05.
-- High Speed Internet: The 44.6%, or Ps.25.7 million, rise in high-speed
Internet revenues resulted mainly from a 64.7% increase in the number
of subscribers to 143,828, with a penetration rate of 10%. This was
partially offset by a 14.9% decline in high-speed Internet ARPU to
Ps.199.6, as lower price/ lower-speed Internet (128 Kbps) increased at
a faster rate than higher-speed Internet (512 Kbps) subscribers.
Average monthly net churn rates for high-speed internet rose to 4.1%
for 2Q06 from 3.4% in 2Q05.
-- IP Telephony: IP telephony revenues for 2Q06 from the IP telephony
joint venture with Axtel S.A. de C.V. introduced in 3Q05, were Ps.22.9
million, or 4.1% of total revenue. At June 30, 2006 there were 15,316
IP telephony lines in service, up from 9,936 IP telephony lines as of
March 31, 2006.

Table 1. Revenues by Service Offering
2Q05 2Q06
% of % of % Chg.
Total Total
Revenue Revenue Revenue Revenue
Cable Television 359.3 84.0% 435.6 77.9% 21.2%
High-Speed Internet 57.5 13.5% 83.2 14.9% 44.6%
IP telephony 0.0 0.0% 22.9 4.1% N/A
Advertising 9.5 2.2% 16.7 3.0% 75.3%
Other(1) 1.2 0.3% 0.6 0.1% -44.9%
Total Net Revenue(2) 427.6 100.0% 559.1 100.0% 30.8%

1 Includes revenue relating to rental and sale of cable decoders and
charges relating to customer's change of residence.

2 All net revenue figures are net of value-added taxes and other taxes on
sales.

Table 2. Number of Subscribers and Revenue per Service Offering
% Chg. in
2Q05 2Q06 Subscribers
Minibasic 116,724 158,373 35.7%
Basic(1) 414,909 484,151 16.7%
Superbasic(1) 48,920 44,927 -8.2%
Premium (1) 25,527 27,620 8.2%
Hotel 14,769 14,620 -1.0%
Total Cable Television 546,402 657,144 20.3%
High-Speed Internet 87,336 143,828 64.7%
IP Telephony lines 0 15,316 NA

1 The number and percentage of Basic subscribers includes Basic,
Superbasic and Premium subscribers due to the fact that all Superbasic
and Premium subscribers must also be Basic subscribers.

Table 3. ARPUs and Churn Per Service Offering
2Q05 2Q06 % Chg.
Homes passed 1,647,536 1,841,921 11.8%
Cable Television
- Revenue 359.3 435.6 21.2%
- Subscribers 546,402 657,144 20.3%
- ARPU 227.0 228.7 0.8%
- Avg. Monthly Churn 2.4% 2.2% - 20 bps
High-Speed Internet
- Revenue 57.5 83.2 44.6%
- Subscribers 87,336 143,828 64.7%
- ARPU 234.6 199.6 -14.9%
- Avg. Monthly Churn 3.4% 4.1% +70 bps
IP Telephony
- Revenue 0 22.9 NA
- Lines 0 15,316 NA
- ARPU (without migration fee) 0 426.3 NA

Operating Profit

Operating profit for 2Q06 increased 65.5%, or Ps.49.5 million, to Ps.125.0 million, driven by a 34.9% increase in gross profit, partially offset by an increase of 18.7% in SG&A. Operating margin rose to 22.4% from 17.7% in 2Q05.

Table 4. Operating Profit
2Q05 2Q06
Million % of Million % of % Chg.
Ps. Revenues Ps. Revenues
Service revenues 427.6 100.0% 559.1 100.0% 30.8%
Cost of services 209.7 49.0% 265.0 47.4% 26.4%
Gross Profit 217.9 51.0% 294.0 52.6% 34.9%
SG&A 142.3 33.3% 169.0 30.2% 18.7%
- Selling 41.9 9.8% 57.9 10.3% 38.1%
- Administrative 90.3 21.1% 100.2 17.9% 10.9%
- Amortization and
depreciation 10.1 2.4% 11.0 2.0% 8.8%
Total operating profit 75.6 17.7% 125.0 22.4% 65.5%

Cost of Services

Cost of Services for 2Q06 increased 26.4%, or Ps.55.4 million. As a percentage of revenues, however, cost of services fell 160 basis points to 47.4%, from 49.0% in 2Q05. The increase in cost of services was primarily due to:

-- A Ps.21.0 million, rise in programming costs, principally related to
increases in cable television subscribers and certain additional
programming costs incurred in connection with the 2006 World Cup
soccer tournament.
-- A Ps.15.1 million increase in IP telephony costs related to the start
up of this service in November 2005.
-- A Ps.5.1 million increase in technician salaries and maintenance
expenses, principally related to an increase in the number of
technicians employed (1026 technicians as of June 30, 2006 as compared
to 853 technicians as of June 30, 2005), as well as severance packages
paid during 2Q06.

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses (including depreciation and amortization) increased Ps.26.7 million, or 18.7% YoY to Ps.169.0 million. As a percentage of sales, however, SG&A declined 310 basis points to 30.2%, from 33.3% in 2Q05. The increase in SG&A principally reflected:

-- A 38.1%, or Ps.16.0 million, increase in selling expenses to Ps.57.9
million, principally related to the 204 person increase in the size of
our sales force (1,006 salespersons as of June 30, 2006 as compared to
803 salespersons as of June 30, 2005).
-- A 10.9%, or Ps.9.8 million, increase in administrative expenses to
Ps.100.2 million. As a percentage of revenues, however, administrative
expenses declined to 17.9% in 2Q06 from 21.1% in 2Q05, reflecting
economies of scales. Administrative expenses in absolute values
increased principally due to:
- An increase in office expenses of Ps.7.9 million, principally due to
higher corporate office rent, server rental expenses, software
maintenance expenses, and employee training expenses.
- An increase of Ps.2.2 million in telecommunications and travel
expenses, related to an increase in phone bills and travel expenses
and principally resulting from internal audit field network
operations, operational controls and inventory management.
-- Amortization and Depreciation rose 8.8%, or Ps.0.9 million, to Ps.11.0
million for 2Q06 principally due to an increase in office equipment
assets. As a percentage of revenues, amortization and depreciation
fell 40 basis points to 2.0% from 2.4% in 2Q05.

Adjusted EBITDA

Adjusted EBITDA for 2Q06 increased 35.2%, or Ps.54.8 million, to Ps.210.5 million, principally reflecting the improvement in operating income as discussed above. Similarly, the adjusted EBITDA margin increased 124 bps to 37.7%. The following table sets forth the reconciliation between net income to adjusted EBITDA:

Table 5. Adjusted EBITDA
2Q05 2Q06 % Chg.

Net income (loss) 31.6 14.0 -55.5%
Add (subtract):
Amortization and depreciation 80.1 85.5 6.7%
Comprehensive financial results, net 28.6 46.4 62.1%
Other (income) expense, net (2.5) 1.1 -143.3%
Special items 11.6 33.1 184.2%
Total income tax and asset tax 10.4 11.7 12.6%
Employee profit sharing 2.5 1.6 -35.4%
Effects from associated companies (6.9) 16.7 -344.5%
Minority interest 0.1 0.3 184.6%

Adjusted EBITDA 155.7 210.5 35.2%

-- Depreciation and amortization increased 6.7%, or Ps.5.4 million, to
Ps.85.5 million, principally due to the 17.8% net growth in the
company's fixed assets (network and other assets).
-- Special Items included: i) Ps. 14.7 million for IPO expenses and ii)
Ps.12.6 million of accelerated depreciation in 2Q06, associated with
the costs of cleanup, removal and rehabilitation of the portion of the
network affected by Hurricane Wilma. Cablemas is still finalizing its
review of the final monetary damage and possible lost revenues
resulting from Hurricane Wilma and may submit additional claims to its
insurers in the future.
-- During 2Q06, Cablemas reported other expenses, net of Ps.1.1 million
compared to an income of Ps.2.5 million in 2Q05.
-- During 2Q06, the company recorded a Ps.11.7 million provision for
income taxes and asset taxes, compared to Ps.10.4 million in 2Q05.
-- Employee profit sharing declined 35.6% to Ps.1.6 million, from Ps.2.5
million for 2Q05.

Comprehensive Financial Results, Net

Comprehensive financial results, net resulted in a net expense of Ps.46.4 million for the three months ended June 30, 2006, which is Ps.17.8 million, or 62.1%, greater than the net expense of Ps.28.6 million for the corresponding period in 2005. The higher net expense primarily reflected an increase in interest paid due to the 76.8% rise in outstanding debt from Ps.1,128.0 as of June 30, 2005 to Ps.1,994.5 million as of June 30, 2006, which was partially offset by a gain in swap instruments.

Table 6. Comprehensive Financial Results, Net

2Q05 2Q06 % Chg.
Interest income -0.2 -8.1 3912.4%
Interest expense 35.6 73.0 104.8%
Financial instruments (gain) 0.0 -22.8 n/a
Foreign-exchange (gain) loss, net -8.5 -10.6 24.0%
Monetary position loss (gain) 1.7 14.9 774.7%
Comprehensive financial results, net 28.6 46.4 62.1%

Net Income

For 2Q06, Cablemas' net income decreased Ps.17.6 million, to Ps.14.0 million, compared to Ps.31.6 million in 2Q05. The decline in net income mainly reflects higher interest expenses, loss from associated companies and one-time special items.

FIRST HALF 2006 CONSOLIDATED RESULTS

Net Revenues

Net revenues increased 29.3%, or Ps.245.3 million, during 1H06 to Ps.1,083.6 million.

-- Cable Television: The 20.9%, or Ps.147.8 million, growth in cable
television revenues was driven by a 20.3% increase in the number of
subscribers, despite a 0.8% decline in cable television ARPU to
Ps.226.9. This decline in ARPU was primarily the result of a 35.7%
increase in Minibasic subscribers, who pay lower monthly fees, while
Basic subscribers increased only 16.7%. Average monthly net churn
rates for cable television fell slightly to 2.3% in 1H06 from 2.6% in
1H05.
-- High-Speed Internet: The 47.1%, or Ps.51.5 million, rise in high-speed
Internet revenues resulted from a 64.7% increase in the number of
subscribers, partially offset by a 13.8% decrease in high-speed
Internet ARPU to Ps.207.9. The decrease in ARPU was mainly the result
of a change in subscribers mix towards lower speed internet packages.
Average monthly net churn rates for high speed Internet rose slightly
to 3.5%, from 3.3% for 1H05.
-- IP Telephony: IP telephony revenues totaled Ps.39.5 million, or 3.6%
of total annual revenue. IP telephony ARPU for 1H06 was Ps.489.3. This
does not include migration fees paid to Cablemas by Axtel for new
subscribers, which, if included, would rise to Ps.710.2.

Table 7. Revenues by Service Offering
1H05 1H06
% of % of % Chg.
Total Total
Revenue Revenue Revenue Revenue
Cable Television 705.8 84.2% 853.6 78.8% 20.9%
High-Speed Internet 109.4 13.0% 160.9 14.8% 47.1%
IP telephony 0.0 0.0% 39.5 3.6% N/A
Advertising 20.5 2.4% 27.9 2.6% 36.3%
Other(1) 2.7 0.3% 1.7 0.2% -37.9%
Total Net Revenue(2) 838.4 100.0% 1083.6 100.0% 29.3%

1 Includes revenue relating to rental and sale of cable decoders and
charges relating to customer's change of residence.

2 All net revenue figures are net of value-added taxes and other taxes on
sales.

Table 8. Number of Subscribers and Revenue per Service Offering

% Chg. in
1H05 1H06 Subscribers
Minibasic 116,724 158,373 35.7%
Basic(1) 414,909 484,151 16.7%
Superbasic(1) 48,920 44,927 -8.2%
Premium (1) 25,527 27,620 8.2%
Hotel 14,769 14,620 -1.0%
Total Cable Television 546,402 657,144 20.3%
High-Speed Internet 87,336 143,828 64.7%
IP Telephony lines 0 15,316 NA

1 The number and percentage of Basic subscribers includes Basic,
Superbasic and Premium subscribers due to the fact that all Superbasic
and Premium subscribers must also be Basic subscribers.

Table 9. ARPUs and Churn Per Service Offering
1H05 1H06 % Chg.
Homes passed 1,647,536 1,841,921 11.8%
Cable Television
- Revenue 705.8 853.6 20.9%
- Subscribers 546,402 657,144 20.3%
- ARPU 228.8 226.9 -0.8%
- Avg. Monthly Churn 2.6% 2.3% - 30 bps
High-Speed Internet
- Revenue 109.4 160.9 47.1%
- Subscribers 87,336 143,828 64.7%
- ARPU 241.3 207.9 -13.8%
- Avg. Monthly Churn 3.3% 3.5% +20 bps
IP Telephony
- Revenue 0 39.5 NA
- Lines 0 15,316 NA
- ARPU (without migration fee) 489.3 NA

Operating Profit

Operating profit for 1H06 increased 44.6%, or Ps.76.1 million, to Ps.246.9 million, principally as a result of a 31.3%, or Ps.135.03 million, increase in gross profit. This more than offset the 22.6% increase in SG&A.

Table 10. Operating Profit
1H05 1H06
Million % of Million % of % Chg.
Ps. Revenues Ps. Revenues
Service revenues 838.4 100.0% 1,083.6 100.0% 29.3%
Cost of services 406.5 48.5% 516.7 47.7% 27.1%
Gross Profit 431.9 51.5% 566.9 52.3% 31.3%
SG&A 261.1 31.1% 320.1 29.5% 22.6%
- Selling 75.0 8.9% 107.7 9.9% 43.5%
- Administrative 164.6 19.6% 187.0 17.3% 13.6%
- Amortization and
depreciation 21.5 2.6% 25.4 2.3% 18.1%
Total operating
profit 170.8 20.4% 246.9 22.8% 44.6%

Cost of Services

Cost of Services for 1H06 increased 27.1%, or Ps.110.3 million, to Ps.516.7 million. As a percentage of service revenues, however, cost of services declined to 47.7% from 48.5% in 1H05. The increase in absolute value resulted from:

-- A 20.5% increase in programming costs derived from the 20.3% growth in
cable television subscribers.
-- A Ps.25.4 million increase in IP telephony costs.
-- A Ps.23.1 million increase in maintenance and salaries and fees mainly
due to the increase in technician employees to 1,026 from 853 in June
2005.
-- A Ps.20.8 million increase in depreciation due to a Ps.421 million net
increase in fixed assets (network and other assets) during the period.

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses (including depreciation and amortization) increased 22.6%, or Ps.58.9 million, to Ps.320.1 million, during 1H06. As a percentage of service revenues, however, it declined to 29.5% from 31.1% in 1H05. The absolute increase principally reflected:

-- A 43.5%, or Ps.32.6 million, increase in selling expenses to Ps.107.7
million for 1H06 principally due to the increased number of sales
personnel in Cablemas' cable television and high-speed internet sales
and call centers. The number of sales employees increased from 802 at
the end of 1H05 to 1,006 at the end of 1H06.
-- A 13.6%, or Ps.22.4 million, increase in administrative expenses to
Ps.187.0 million for 1H06 principally due to a Ps. 14.7 million
increase in office expenses, relating to software maintenance,
training and rent and an increase of Ps 4.6 million in telephone and
travel expenses. As a percentage of service revenues, however,
administrative expenses fell 230 basis points to 17.3%, from 19.6% in
1H05.
-- A 18.1%, or Ps.4.0 million, increase in amortization and depreciation
to Ps.25.4 million during 1H06 reflecting an increase in office
equipment assets by Ps 28.7 million.

Adjusted EBITDA & Margin

Adjusted EBITDA for 1H06 increased 31.5%, or Ps.100.8 million, to Ps.421.3 million, primarily as a result of the improvement in operating income as discussed above. Similarly, the adjusted EBITDA margin increased 65 basis points to 38.9%.

The following table sets forth the reconciliation between net income and adjusted EBITDA:

Table 11. Adjusted EBITDA
1H05 1H06 % Chg.
Net income (loss) 102.0 63.5 -37.7%
Add (subtract):
Amortization and depreciation 149.7 174.4 16.5%
Comprehensive financial results,
net 43.6 87.0 99.5%
Other (income) expense, net 1.0 8.3 716.5%
Special items 14.2 45.7 221.0%
Total income tax and asset tax 34.9 37.0 6.0%
Employee profit sharing 2.6 2.5 -3.8%
Effects from associated companies (27.7) 2.6 -109.5%
Minority interest 0.1 0.3 140.4%

Adjusted EBITDA 320.5 421.3 31.5%

-- Depreciation and amortization increased 16.5%, or Ps.24.7 million, to
Ps.174.4 million, principally due to the 17.8% net growth in the
company's fixed assets (network and other assets).
-- Special Items included Ps.25.3 million of accelerated depreciation in
1H06 associated with the costs of cleanup, removal and rehabilitation
of the network affected by Hurricane Wilma and Ps.14.6 million in
connection with the IPO expenses.
-- Other expenses, net increased by Ps.7.3 million to Ps.8.3 million,
reflecting the net effect of the sale and purchase of certain assets.
-- Employee profit sharing declined 3.8% to Ps.2.5 million, from Ps.2.6
million for 1H05.
-- In 1H05 Cablemas reported a Ps.27.7 million gain from associated
companies compared with a loss of Ps.2.6 million in 1H06 from the
associated companies (principally PCTV).

Comprehensive Financial Results, Net

Comprehensive financial results, net, for 1H06 increased 99.5%, or Ps.43.4 million, to an expense of Ps.87.0 million from an expense of Ps.43.6 million in 1H05. This primarily reflected a Ps.64.6 million increase in interest expense resulting from the higher level of outstanding debt. This was partially offset by a ps.5.5 million gain from interest rate swaps and a Ps.15.7 million increase in interest income.

Table 12. Comprehensive Financial Results, Net
1H05 1H06 % Chg.
Interest income -0.5 -16.2 2852.9%
Interest expense 65.3 130.0 98.9%
Financial instruments (gain) 0.0 -5.5 n/a
Foreign-exchange (gain) loss, net -9.5 -19.0 99.0%
Monetary position loss (gain) -11.6 -2.3 -80.0%
Comprehensive financial results, net 43.6 87.0 99.5%

Net Income

Net income for 1H06 fell 37.7%, or Ps.38.5 million, to Ps.63.5 million, down from Ps.102.3 million in 1H05. The 44.6% increase in operating profit to Ps.249.9 million was offset by higher one-time charges, borrowing costs, and deferred taxes.

CAPEX

Capital expenditures for 1H06 rose 61%, or Ps.239.8 million, to Ps.632.7 million from Ps.392.9 million in 1H05. This increase in capital expenditures principally relates to investments incurred to expand and upgrade Cablemas' network.

As of June 30, 2006 Cablemas had a network of 12,145 km, of which 79% was bidirectional and 87% was operating at or greater than 550 MHz. As of June 30, 2005 Cablemas had a network of 11,275 km, of which 70% was bidirectional and 83% was operating at or greater than 550 MHz.

DEBT STRUCTURE

Consolidated gross debt as of June 30, 2006 totaled Ps.1,994.5 million, all of which was long-term. Consolidated gross debt increased YoY by 76.8%, from Ps.1,128.0 million as of June 30, 2005.

Net debt, which is calculated as total debt minus cash and cash equivalents, increased YoY by 44.0% to Ps.1,562.2 million, from 1,084.7 million as of June 30, 2005. As of June 30, 2006. Cablemas had a cash balance of Ps.432.3 million.

Table 13. Debt Indicators
1H05 1H06 % Chg.
Total Debt 1,128.0 1,994.5 76.8%
Short-Term Debt 224.2 - -100.0%
Long-Term Debt 903.8 1,994.5 120.7%
Cash and Cash Equivalents 43.3 432.3 898.4%
Total Net Debt 1,084.7 1,562.2 44.0%

Leverage
Total Debt/ LTM Adjusted EBITDA 1.9x 2.6x
Total Net Debt/ LTM Adjusted EBITDA 1.8x 2.0x

Interest Coverage
Adjusted EBITDA / Net Interest Expense 4.9x 3.7x

Cash flow from operations during the first half of the year decreased 26.0%, or Ps.54.6 million, to Ps.202.6 million due to a decrease in financial instruments (Ps. 125.6 million).

Net borrowings in 1H06 decreased Ps.8.4 million to Ps.136.3 million. Capex for 1H06 increased Ps.270.2 million, to Ps.634.1 million, principally related to the upgrade and expansion of Cablemas' network.

Table 14. Cash Flow
1H05 1H06 Change
Cash at the beginning of the period 52.2 774.5 722.3
Net Income 102.0 63.5 (38.5)
+ Depreciation and amortization 149.7 174.4 24.7
+ Change in Working Capital (32.1) (2.0) 30.1
+ Other (9.5) (80.4) (70.9)
Cash Flow from Operations 210.1 155.5 (54.6)
- Capex (392.9) (632.7) (239.8)
- Other 29.0 (1.4) (30.4)
Net Investing Activities (363.9) (634.1) (270.2)
+ Debt 144.8 136.3 (8.4)
+ Other -
Net Financing Activities 144.8 136.3 (8.4)
Cash at the end of the period 43.1 432.3 389.1

KEY DEVELOPMENTS

Cablemas Awarded Thirteen Local Fixed Telephony Concessions in Mexico

On July 31, 2006 the Ministry of Communications and Transportation (SCT) granted the company local fixed telephony concessions in thirteen of the main cities in which it currently operates.

These concessions will allow the company to add telephony to the suite of directly-provided services, which already include video and internet. To roll out telephony services in these cities, Cablemas will enter into interconnection agreements with telecommunication firms.

This month, Cablemas' expects the SCT to issue the Convergence Agreement where in the rules of fair competition between telecommunication firms and cable operators in terms of interoperability, interconnection and number portability will be defined.

SECOND QUARTER 2006 EARNINGS CONFERENCE CALL

Date: Thursday, August 17, 2006
Time: 11:00 AM US EST - 10:00 AM Central Time
Dial Information: (866) 831-6224 (U.S.) or (617) 213-8853 (international)
Passcode: 29091806
Tape Playback: Starting Thursday, August 17, 2006, at 1:00 PM US EST,
ending at midnight EST on Thursday, August 24, 2006.
Dial-in Number: (888) 286-8010 (U.S.) or (617) 801-6888
(international). Confirmation Code: 82330933.

About Cablemas

Cablemas is the second-largest cable television operator in Mexico based on number of subscribers and homes passed. As of June 30, 2006, Cablemas' cable network served over 657,144 cable television subscribers, 143,828 high- speed internet subscribers, and 15,316 IP telephony lines, with over 1,841,921 homes passed.

Cablemas is the concessionaire with the broadest coverage in Mexico, operating in 46 cities throughout the country's oil, maquiladora and tourist regions as of December 2005. Cablemas has consistently introduced innovative products in Mexico and is the only cable operator in the country to provide a "Triple Play" bundled service package of cable television, high speed internet and IP telephony. More information about Cablemas can be found at http://www.cablemas.com/.

This document may contain certain forward-looking statements concerning Cablemas' operations, performance, business, financial condition and growth prospects. These statements are based upon beliefs of management as well as a number of assumptions and estimates, which are inherently subject to significant uncertainties, many of which are beyond Cablemas' control. Actual results may differ materially from those expressed or implied by such forward- looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the Mexican economy, including changes in inflation rates or exchange rates, changes in political conditions and government policies in Mexico, increased competition, regulatory developments and customer demand. These statements are made as of the date of this press release and Cablemas undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise in light of these risks and uncertainties, there can be no assurances that the events described or implied in the forward-looking statements contained in this document will in fact transpire.

CABLEMAS, S. A. DE C. V. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2005 and 2006
(Constant Mexican pesos as of June 30, 2006)

Assets 2006 2005

Current assets:
Cash and cash equivalents $432,273,254 43,139,090
Trade accounts receivable 35,631,893 12,145,192
Other Receivables, Net 288,105,229 184,037,802
Cable and Comunicacion de
Morelia, S. A. de C. V.
(Associated) 23,486,551
Prepaid expenses 38,486,973 25,323,322

Total current assets 794,497,349 288,131,957

Inventory of components of
signal distribution systems, net 352,210,746 205,674,091

Investment in associated companies 67,478,492 49,509,790

Property, signal distribution
systems, and equipment, net 2,620,357,965 2,285,290,672

Deferred employee statutory profit
sharing 4,016,298 2,091,561

Goodwill, net 973,477,884 1,020,001,374

Intangible asset from pension and
seniority premium plans and
severance compensation for reasons
other than restructuring 21,827,509 16,371,742

Other non-current assets, net 164,490,931 78,659,849

$4,998,357,174 3,945,731,037

Liabilities 2006 2005

Current liabilities:
Current installments of:
Bank loans $0 198,828,591
Obligations under capital
leases 0 29,277,439
Notes 59,293,587 0
Financial instruments 86,674,763 3,243,803
Accounts payable 304,296,381 195,109,158
Accruals 70,880,894 34,573,883
Accrued liabilities 21,926,056 20,284,510
Taxes payable 15,733,572 8,729,629
Employee statutory profit
sharing 2,159,103 2,826,483

Related parties 28,839,541 45,243,337
Subscriber deposits and advances 43,512,202 55,021,892

Total current liabilities 633,316,098 593,138,726

Financial instruments 0 0
Corporate bond 1,994,527,500 0
Commercial paper obligations 0 826,240,000

Bank loans, excluding current
installments 0 53,214,702
Obligations under capital leases,
excluding current installments 0 25,165,591
Pension and seniority premiums
plans and severance compensation
for reasons other than
restructuring 44,251,876 29,107,771
Income tax 10,476,602 10,800,316
Deferred income tax 323,372,605 264,145,942
Deficit in Associated Company
investment 0 5,536,639

Total liabilities 3,005,944,680 1,807,349,688

Stockholders' equity
Majority stockholders' equity:
Capital stock 697,840,041 697,840,041
Additional paid-in capital 1,087,838,457 1,087,838,457
Retained earnings 415,667,350 353,659,787
Valuation effects of
financial instruments -202,662,612 -3,243,803
Effect for labor obligations -1,328,808 0
Cumulative effect on deferred
taxes 3,226,074 0
Result from holding non
monetary assets -9,634,908 0

Total majority stockholders'
equity 1,990,945,594 2,136,094,482

Minority stockholders' equity 1,466,900 2,286,867

Total stockholders' equity 1,992,412,494 2,138,381,349

Commitments and contingent
Liabilities - -
$4,998,357,174 3,945,731,037

CABLEMAS, S. A. DE C. V. AND SUBSIDIARIES
Consolidated Statements of Income
Six months period as of June
(Constant Mexican pesos as of June 30, 2006)

2006 2005

Service revenues Ps 1,083,642,647 838,365,922
Cost of services 516,700,703 406,451,526

Gross profit 566,941,944 431,914,396

Operating expenses:
Selling 107,661,259 75,022,553
Administrative 187,027,614 164,644,894
Amortization and depreciation 25,367,831 21,473,296

Total operating expenses 320,056,704 261,140,743

Operating profit 246,885,240 170,773,652

Comprehensive financial results:
Interest income 16,237,848 549,902
Interest expense (129,956,714) (65,322,262)
Foreign exchange (loss) gain, net 18,971,995 9,534,178
Financial instruments 5,451,469 -
Monetary position gain 2,331,565 11,645,406

Comprehensive financial results, net (86,963,836) (43,592,777)

Other income (expenses), net (8,271,579) (1,013,122)

Special items (45,727,422) (14,244,526)

Income before income taxes,
employee statutory profit
sharing, effects from associated
companies and minority interest 105,922,402 111,923,227

Income taxes
Current 9,566,415 15,626,451
Deferred 27,408,663 19,271,211

Total income taxes 36,975,077 34,897,662

Employee statutory profit sharing
Current 3,211,163 2,826,483
Deferred (693,552) (236,150)

Total employee statutory profit sharing 2,517,611 2,590,334

Income before effects from
associated companies and
minority interest 66,429,714 74,435,231

Effects from Associated Companies:
Equity in the results of operations (2,620,575) 27,704,379
Gain from purchase of investments 0 0

Total effects from associated
companies: (2,620,575) 27,704,379

Income before minority interest 63,529,815 102,139,610

Minority interest (279,324) (116,186)

Majority interest net income Ps 63,529,815 102,023,424

Basic earnings per share Ps 2.51 4.02

CABLEMAS, S. A. DE C. V. AND SUBSIDIARIES
Consolidated Statements of Changes in Financial Position
Six months ending June 30th 2006 and 2005
(Constant Mexican pesos as of June 30th, 2006)
(Unaudited)

2006 2005

Operating activities:
Net income $63,529,815 102,023,424
Add charges (deducted credit) to
operations not requiring (providing)
funds:
Depreciation and amortization 174,394,007 149,706,280
Increase in allowance for inventory
of components of signal
distribution systems 1,875,600 1,474,766
Effects from associated companies 2,620,575 (27,704,379)
Goodwill deterioration 7,714,346 -
Accruals for pensions and severance
packages 4,616,044 2,797,264
Deferred income taxes 27,408,663 19,271,211
Deferred employee statutory profit
sharing 50,456 (236,150)
Financial instruments (125,643,345) -
Minority interest 415,900 116,186

Funds provided by operations 156,982,061 247,448,604

Net financing from (investing in)
operating accounts:
Trade and other accounts receivable,
net (133,487,045) 8,108,956
Prepaid expenses (14,214,034) (11,243,960)
Accounts payable 147,636,223 3,882,856
Accruals and accrued liabilities 9,752,416 8,863,777
Taxes payable 9,085,306 (54,725,594)
Subscriber deposits and advances (19,655,703) 12,952,578
Employee statutory profit sharing (1,095,310) 41,732
Related parties 505,103 (5,267,077)

Funds provided by operating
activities 155,509,017 210,061,872

Financing activities:
Proceeds from (payments of) bank
loans, net - 165,082,437
Proceeds from corporate bond 136,426,608
Proceeds from notes and commercial
paper obligations, net - (6,527,296)
Income tax (78,575) (85,322)
Proceeds from minority interest - 520,497
Proceeds from financial leases - (14,213,822)

Funds provided by financing
activities 136,348,033 144,776,494

Investing activities:
Inventory of components of signal
distribution systems (212,777,263) (32,814,915)
Acquisition of distribution systems
and equipment (373,522,461) (346,294,111)
Other assets, net (46,380,162) (13,762,090)
Investment in associated companies (1,413,870) 28,997,180

Funds used in investing
activities (634,093,756) (363,873,935)

Decrease (increase) in cash and
cash equivalents (342,236,706) (9,035,570)

Cash and cash equivalents:
At beginning of year 774,509,960 52,174,660

At end of year $432,273,254 43,139,090

Source: Cablemas, S.A. de C.V.

CONTACT: In Mexico - Marilyn Billot, Budget and IR Manager for Cablemas,
+5255-24-54-58-84, marilyn.billot@admCablemas.com.mx; In the United States -
Susan Borinelli, +1-646-452-2332, sborinelli@breakstone-group.com, or Michael
Fehle, +1-646-452-2336, mfehle@breakstone-group.com, both of Breakstone Group

Web site: http://www.cablemas.com/

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