Good morning, and welcome to Alfa's business update conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions given at that time. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Hernan Lozano, Vice President of Investor Relations. Mr. Lozano, please go ahead. Thank you, Melissa. Good morning, everyone, and thank you for joining us on short notice for a discussion on Alfa's proposed spin-off of Axtel. Additional details can be found in our press release, which was distributed yesterday, along with a summarized presentation. Both are available on our website in the investor relations section. It is my pleasure to participate in today's call together with Eduardo Escalante, Alfa's CFO, Carlos Jiménez, Alfa's Senior VP of Legal and Corporate Affairs, and Adrián de los Santos, Axtel's CFO. Let me remind you that during this call, we will share forward-looking information and statements which are based on variables and assumptions that are uncertain at this time. I will now turn the call over to Eduardo. Thank you, Hernan. Good morning, everyone, and thank you for joining us today. Yesterday was an exciting day at Alfa with the announcement of a decisive step forward. We remain fully committed to transferring value to our shareholders by following a balanced approach that includes cash dividends, share buybacks, and most importantly, our transformational efforts to address Alfa's conglomerate discount. As you have heard on our quarterly calls, we have made significant progress at strengthening our balance sheet, posting sequential improvement in the consolidated net leverage ratio every quarter since Q4 2020. This is a key metric as we strive to simplify our conglomerate structure. Since we announced the beginning of this journey, our businesses have also grown stronger and implementing initiatives to boost their underlying value, such as the Octal acquisition by Alpek. In addition, our comprehensive efforts include enhancing business independence after the Nemak spin-off. Sigma recently formed an advisory board, and Alfa corporate expenses are rapidly decreasing as shared service capabilities are transferred to the operating subsidiaries. The proposed spin-off of Axtel is yet another game-changer event in Alfa's path towards reaching its full value potential. Despite strong fundamentals and operating performance, Alfa's valuation continues to be penalized with a high conglomerate discount. The announced transaction further simplifies Alfa's corporate structure. Therefore, we expect it will continue to unlock the company's extraordinary underlying value. As we advance, Alfa shareholders gain autonomy, holding their current Alfa shares plus separate stakes in Nemak and potentially Axtel. In addition to unlocking value at the Alfa level, we believe this is also an attractive means of maximizing value for Axtel shareholders. As a fully independent business, Axtel should be valued on its own merits and growth prospects. Similar to the other Alfa subsidiaries, Axtel has demonstrated its ability to operate fully separated from the parent, establishing a strong position in its industry. Over the years, the company has assembled the largest neutral fiber optic network in Mexico, effectively adapted its service offering to evolving customer needs, and successfully monetized non-core assets and legacy businesses. Axtel has an extremely talented team to build upon its solid track record, driving strategic alternatives to boost growth without the overhang from Alfa's transformational process going forward. Let me now provide a quick overview of the proposed transaction, which is virtually the same structure and process followed for the spin-off of Nemak in 2020. The Alfa board authorized and recommended the proposed spin-off to be executed by forming a new entity called Controladora Axtel as the spin-off company and listing its shares on the Bolsa Mexicana de Valores. Alfa would transfer its entire share ownership of 53.9% in Axtel to Controladora Axtel. Alfa shareholders would receive one share of Controladora Axtel for each of their Alfa shares and maintain their Alfa shares. For reference, this is the same process we followed during the Nemak spin-off. Under the proposed spin-off, Axtel board of directors and management would remain the same, and the company will continue getting all our support to ensure a smooth transition. Once the spin-off is completed, Alfa will no longer have an equity ownership in Axtel. Instead, Alfa shareholders would gain full autonomy regarding their stake in Axtel, just like they did with Nemak. A few comments on timing. This process formally kicks off with the announcement calling for Alfa's extraordinary shareholders meeting issued yesterday. The meeting and potential approval of the proposed spin-off by Alfa shareholders will take place on July 12th. The spin-off is also subject to customary contractual and regulatory approvals or notifications. Among other requirements, Controladora Axtel will need to complete a registration and listing approval process with the National Banking and Securities Commission, CNBV. Upon completion of the CNBV process, Alfa would issue a share distribution notice to its shareholders and distribute the new shares. Alfa will work with all the relevant parties to complete the spin-off process as soon as possible. As a reference, the Nemak spin-off took approximately four and a half months from the call of the extraordinary shareholders meeting until the first day of trading of Controladora Nemak. Summing up, we remain fully committed to advance in the successful execution of Alfa's orderly transformation by maintaining a consistent and balanced approach. As always, we will keep the market informed as important developments occur. Thank you very much for your interest. This concludes my remarks. I will now turn the call back to Hernan. Thank you, Eduardo. We can now begin the Q&A session. Operator, please instruct participants on how to place their questions. Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Thank you. Our first question comes from the line of Andrés Coello with Scotiabank. Please proceed with your question. Yes, thank you very much. Two quick questions. The first one is, why are you creating an intermediate vehicle to distribute the Axtel shares? Why not distributing the Axtel shares directly to the Alfa shareholders? I just wanna understand the mechanics in the decision of listing a temporary vehicle. My second question is, if this proposal changes in any way Axtel's intention to monetize the infrastructure or other assets, or if the M&A processes will continue in play? Thank you. Thank you for your question, Andres. Let me ask, Carlos to answer the first part of the question. Andrés, good morning. The rationale behind the route that we decided, which is what is called in Mexico as an escisión, the closest thing, it's a spin-off in English. It's the route that it's contemplated by the law. Ley General de Sociedades Mercantiles, which is the corporations law in Mexico, as well as the securities laws. We thought that the best route for us and for our shareholders was the route that was contemplated by the law without looking for other potential routes that will not have completely grounded on the laws and regulations of Mexico. Understood. Let me ask Eduardo to answer the second part of your question regarding Axtel's intention to monetize assets, Andres. Thank you. Thank you, Andres, for the question. Let me tell you how we see the process from Axtel's point of view, including the monetization aspect of it. We think the independence from Alfa for Axtel and particularly the independence from this unlocking value process has a significant value and flexibility for Axtel, as it eliminates the overhang from the sales established that it had. I think Axtel will be now in a position to pursue strategic alternatives to boost its own growth. Significant opportunities that we find today in the market. In the last few months, as we discussed in the last call, the negotiations for the outright sale evolved towards active discussions for potential partnerships in some high value added services in the telecom industry between Axtel and some interested investors, for example, in cybersecurity and cloud. The way we see it, that is the main avenue going forward for Axtel. Having said that, if there is still investors interested in buying important portions of Axtel, that would be now an issue for Controladora Nemak, not for Alfa anymore. It would be at the time a negotiation and a decision by Controladora Nemak and its own shareholders. Okay, thank you. I said Controladora Nemak. Sorry about that. Thank you. You're welcome. Thank you. Our next question comes from the line of Jamie Nicholson with Credit Suisse. Please proceed with your question. Hi. Thanks for taking my question and for holding the call. I'm wondering if you've had any recent discussions with your rating agency about the implications of the spin-off, in particular, if you think it could cause a triggering event at Axtel and if there's any implications in terms of a ratings perspective for Alfa. Thank you. Sure, Jamie, thanks for the question. I will make some comments regarding it, and then I will turn it to Adrián also to address the Axtel side. Yes, we did. We have had conversations with the rating agencies. Both Alfa and Axtel were present in those conversations. I think the proposal was well received by the agencies, judging by the reaction. We do not foresee any change in Alfa's ratings since Axtel represents a small portion of our results, and we continue having Sigma and Alpek within our portfolio. Furthermore, we have expressed our commitment to maintain our investment-grade ratings for all three parties, Alfa, Alpek, and Sigma. On the Axtel side, my read is that Axtel was already evaluated, mostly as a standalone operation since we announced the starting of this restructuring process in Alfa two years ago. From my point of view, we do not foresee any change in the ratings. Let me turn it to Adrián to see how he sees this process. Good morning, Jamie. We have continuous conversations with rating agencies. Every quarter, we review the performance and results. We had together with Alfa a meeting prior to the announcement, and we will continue conversations with the information as it comes out and obviously in July after we have the second quarter results. In our view, Axtel has been evaluated as a standalone company. Nonetheless, we will continue with the conversations and have that open dialogue as always with rating agencies. Okay, great. Thanks. Just to clarify, what is the time period following the completion of the spin off, during which, there's a potential for a triggering event? What's the time period that you have to avoid a downgrade? Is it like 30 or 60 days? Could you repeat the question, Jamie, please? I was just wanting clarification on if there is a triggering event for a change of control for a ratings downgrade. Like, when would the ratings downgrade have to happen? Would it be within 30 days of the spin-off or 60 days of the spin-off? I'm not exactly clear how the triggering event language works. Jamie, we think it's a 30 or 60-day period. Let us get back to you on that. Okay, thanks. Thank you. Our next question comes from the line of Jean Bruny with BBVA. Please proceed with your question. Hi there. Thanks for taking my question and for the call. Just maybe a quick one on the overall picture on your overall value strategy, and maybe what will be the following steps. My understanding was when you're presenting the strategy back in 2020, you wanted to monetize on the Axtel sales in order to reduce your holding debt. My understanding is that is not going to take place. So what will be next, probably after focusing on Axtel spin-off maybe in 2023, what can we expect? What measures are you going to take in order to reduce the debt? If we can have an idea now on the spin-off of Alpek, which would be after that. Thank you very much. Sure. Jean, thank you for the question. We plan in Alfa to take full advantage of optionality and timing flexibility. Let me first say that we do not have any specific time. No time has been set for any next step. We think the extraordinary results from Alpek provide ample flexibility to define the next steps. Having said that, it is important to mention that Alfa remains fully committed to maintaining a consistent progress on all three fronts. Strengthen our balance sheet, enhance the business independence of our subsidiaries, regardless if they are still within the portfolio and to strengthen the businesses. We'll continue working towards that. What to expect? I think you should expect, first of all, to have Alfa early and foremost fully focused on successfully completing the Axtel spin-off. It is important for us that as we did with Nemak, this is a successful both for Axtel as well as for Alfa, and the shareholders of Alfa are satisfied with the process. Second, and also very important, Alfa is fully committed, as I already mentioned, with the investment grade rating both at Alfa as well as Alpek and Sigma. We will not do any moves that puts pressure or puts the investment-grade ratings at risk. We plan to follow a balanced capital allocation approach regarding the unlocking value process. That includes the debt reduction at the holding level, as well as continue transferring value to our shareholders via dividends and buybacks as we have done this year so far this year. We will provide information on next steps when we have some definite determination. We do not have a time set for a spinning of Alpek or doing anything else. We will continue working together with our board in analyzing what the best next steps are in order to unlock value and transfer it to our shareholders. Very clear. Thanks, Pepe. Just maybe a quick follow-up. You mentioned in your filing that you expect a tax benefit of about MXN 4.3 billion, if I'm not wrong, from the spin-off of Axtel. What does it mean exactly for you? I mean, when can we expect this impact? I believe it's non-cash, so if you can just go through this very quickly. Thanks. Sure, Jean. Yeah, the spin-off is considered the equivalent of a sale for Alfa per Mexican tax code. There is no tax impact for Axtel. So it is only the Alfa side is impacted. As you mentioned, we do estimate that the spin-off will result in a taxable loss, which will become a deferred income tax asset. At this time, we cannot be certain the amount of the loss, since it will depend on the price of the Axtel shares on July 12, if and when the spin-off is approved and executed. What we presented, the MXN 4,300 million is an estimate using the share prices of Axtel for the last few days. Really will depend on what happens going forward. As you mentioned, it is a non-cash item. Okay, great. Thank you very much. Thank you. Our next question comes from the line of Alejandra Obregón with Morgan Stanley. Please proceed with your question. Hi, good morning, Alfa team. Thank you for the call, and for taking my question. It's actually a very simple one, regarding Sigma. Can you remind us of your covenants for the debt in Sigma? Particularly, can you elaborate on the first maturity that, if I'm not mistaken, is close to MXN 700 in 2024. Do you have any plans or are perhaps thinking of refinancing this first maturity for 2024 at the Sigma level? Thank you. Thank you for your question, Ale. Give us just one second. Thanks. Thanks, Alejandra, for the question. We took some time to look up some of the information. In all honesty, we were not expecting a question from Sigma, but let us find your basis. Yes, the first significant maturity that we have in Sigma is a 144A bond that Sigma has in euros, roughly EUR 600 million. We are already working towards the refinancing of this bond. Today we are looking at both options, do a bond either in euros or in U.S. dollars. We are looking at the alternative of doing some financing the renewal through to some bank and other financial loans. We still haven't decided how we are going to move forward. Certainly these are volatile times regarding the cost of money. We'll continue working on that. We expect to have something and be able to inform you within a few weeks. We haven't made the decision. Regarding the covenants, we continue working with Sigma to maintain the net leverage below 2.5x. That is our target. That is well below the bank covenants that we have. We do not expect any problems here. Thank you very much. That was very clear. Gracias. Thank you. Our next question comes from the line of Alejandro Ceballos with Credit Suisse. Please proceed with your question. Hi, Alfa team. Thanks for taking my question. Congratulations on the announcement. Just a brief two questions. One is, why now? Why specifically now the Axtel spin-off? Is it just that the tax opportunity was there, and this was the right time to take it? Or did you also feel that there was an opportunity from the market side to recognize the sum-of-the-parts? Like, what was your thinking behind the timing? The second one is, clearly now the leverage will come from the cash flow generated from Sigma and Alpek. So I was wondering if you perhaps now under this new plan, do you have an idea of how quickly the company could reduce its leverage in the following years? Like any target that you have to reduce leverage at the holding level, now that you have a clearer view of what's ahead? Thanks. Sure, Alejandro. Regarding timing, we thought this was the appropriate timing. First of all, we weren't able to monetize the company. As you know, we have been trying to do so. Since we were not able to do that, we look at this other option. And also we feel this is the appropriate time for Axtel. The senior management is in place already. And they are ready to start working on some strategic projects in order to retake the path of growth in Axtel. We decided for those reasons that this was the appropriate time. Certainly we still have significant pressures in Alfa, given the very large conglomerate discount that we continue having for Alfa stock price. In our own calculations, the Alfa price has a discount versus the sum of the parts of roughly 45%. That continues putting pressure into our process. We'll see what happens going forward. We think this is a positive move both for Alfa and Axtel, and hopefully our stock price can react positively to it. Regarding leverage for Alfa, I think the rate by which we'll be able to decrease the debt at the holding level will have a lot to do with how we balance the approach between reducing debt, dividend payouts, as well as buybacks. We haven't decided, our board has not decided the rate at which these different variables will be going forward. We plan to move with the three, as we have been doing for the last few months. We have been able to achieve a reduction in terms of the net leverage at a consolidated level in Alfa. The last quarters. In fact, every quarter since the end of 2020. We have also been able to pay $196 million in dividends this year, as well as do buybacks for 62 million shares year to date. Again, it really will depend on how we balance these three fronts. Thanks so much. I heard you. Thank you. Our next question comes from the line of Carlos Legarreta with GBM. Please proceed with your question. Hi. Thank you. Good morning. Just a question I think perhaps for Adrián. As you know, the Axtel stock will likely face an overhang from after the spin-off, you know, because of the forward selling. I just wanna know if you guys are willing to exercise the share buyback fund, you know, to prop up the price of the stock, and if there's any intention of increasing that, down the line. Thank you. Hi, Carlos. Yeah, we always analyze the market conditions and the availability of space under our share buyback program. If needed, if we think it's appropriate, yes, we will use our program. If any of these things occur, if there is a distortion in the market due to that, we will consider using the program. Thank you, Adrián. Thank you. Our next question comes from the line of Andres Cardona with Citigroup. Please proceed with your question. Hi. Good morning, everyone. Thanks. My questions have been asked. Thank you, Andres. Thank you. Our next question comes from the line of Alejandro Azar with GBM. Please proceed with your question. Hello. Good morning, Eduardo, Carlos, Hernan. Just a quick one on dividends. At the same time that you have increased dividends at the subsidiary level, you have increased it at Alfa's. All the leverage of the holding net debt has happened during that time. Is Alfa willing to cut its dividends in the next year to have a you know a better or a healthier balance sheet or a better chance to decrease the holding net debt? The second one is, from your point of view, what is the target or the net leverage ratio that Sigma as a standalone entity, including the holding's net debt, should have for you to proceed with an Alpek spin-off. Thank you. Sure. Thank you. Thank you for the questions, Alejandro. Regarding next year, the dividends of Alfa next year, no decision has been made. I think it really will depend on the results of Alpek and Sigma this year and next year. If Alpek, as we expect, continue with very good results, that gives us flexibility going forward. We do expect also Sigma to have positive results next year. That would be a function of those results. It would also, as I already mentioned, be a function of how our board decides to balance the debt reduction at the holding level, as well as the dividend payout for Alfa and buybacks, which of course the buybacks depend on the stock price of Alfa going forward. It's really too early to tell. We'll continue working towards analyzing the best alternative for shareholders. Regarding the target today, the target for Sigma is to be below 2.5x net leverage, and that is the same target we expect to maintain when and if any move regarding Alpek is done in Alfa. We will never put significant pressure on Sigma doing a move with Alpek. We will be extremely careful and committed to maintaining Sigma in a very healthy level. I would say 2.5x. Eduardo, one more if I may. Should we think that the spin-off of Alpek should be expected, you know, as soon as, or, I don't know, March 2024 when your MXN 500 million bond matures? Or, are you thinking to refinance that bond, now that you are not monetizing assets in a sale as one of your alternatives? I wouldn't comment on a time. It would be inappropriate since we do not have a time set for anything regarding Alpek. What I can tell you is something that we are looking at in the case of the Alfa bond is to at least partially have been able to achieve flexibility regarding the financing of it. We think it would have value to have flexibility in order to refinance that and be able to do prepayments going forward. Having said that, the other possibility that we have been exploring is to refinance the bond with a new bond and then in the future look at the opportunity of Sigma reducing some debt. In the consolidation of Sigma and Alfa, have Sigma serve both bonds, the new bond as well as the 144s that we have in Alfa. Again, every option is being analyzed. Thank you. Thank you, Eduardo. Sure. Thank you. Our next question comes from the line of Alejandro Gallostra with BBVA. Please proceed with your question. Hi, good morning, everyone. I have a question about Axtel, probably for Adrián. Now that the sale of infrastructure business has proven difficult, have you or will you consider spinning out infrastructure business so to capture the real value of this type of businesses in the market? Or otherwise, what would be the point of maintaining the service and infrastructure business altogether in Axtel? Thank you. Hi, Alejandro. Good morning. We will focus as Eduardo mentioned in looking to growth in segments in services that have proven to be attractive that are double-digit growth expectations. At this moment, we don't expect to separate the two business units. We will keep them under Axtel. Any spin-off or similar will have implications, including tax implications that are material. Second, the relative size of the two businesses as public entities will be small. We think that together, the two business units under Axtel can provide the support and the combination to growth in existing and new avenues of services that we are exploring. A quick follow-up, Adrián. Spinning off infrastructure business will prevent you from pursuing those growth opportunities? Or how would you pursue those growth opportunities if you had sold this infrastructure business? No, I'm not referring to divesting or selling the infrastructure business unit. Both business units will be under Axtel. That's our plans to date. Okay, thank you very much. You're welcome. Thank you. Our next question is a follow-up from the line of Jean Bruny with BBVA. Please proceed with your question. Hi, it's me again. Just a quick one. Practically, can we expect the results you're going to publish in July to include or not include Axtel? Jean, thanks for the question. The results that you will see at the end of the second quarter will have no change. They will not reflect the spin-off of Axtel. The reason for that is that, according to IFRS, since the approval is expected to be on July 12th, and that is after the closing of the books of the second quarter, the changes in financial statements of Alfa will be reflected in the results of the third quarter. Thank you. Thank you. Thank you very much. You're welcome. Thank you. Seeing that there are no further questions, let's go back to Mr. Lozano. Go ahead. Thank you, Melissa. Let me just give a couple of other questions, a few other questions that came in via our webcast that haven't been answered, in the other sections. The first one is coming from Clemens at IDEO Capital. The question is: Do you still plan to help Axtel in the refinancing of their 2024 notes? Thanks for the question. We really see no difference with the refinancing of Axtel's notes having Axtel within Alfa or outside Alfa. First of all, we will continue supporting Axtel, helping in any way we can. As I mentioned before, Axtel was relatively independent from Alfa and considered a standalone operation regarding its own credit risk. I don't see any difference. I don't know what's your opinion, Adrián, but I think Axtel will continue working towards the refinancing as they have been doing regardless of the spin-off. Yes, I think that's one of the questions on the webcast. We have almost 2.5 years apart from the maturity of the 2024 notes. We are analyzing that maturity with the possibilities to refinance with bank debt. Conditions today are not primed for refinancing with the new bond. We expect this uncertainty to calm down towards the end of the year. We will continue monitoring and deciding what's best in terms of cost and tenure for Axtel regarding the 2024 notes. Thank you, Adrián. I believe this will be the last question coming from the webcast, and this is from Gülen Tüncer with RGA Reinsurance. The question is: What will happen to Axtel's debt? There is really no change regarding the debt of Axtel. The spin-off will be of Controladora Axtel, as we said before, which will own the shares that today Alfa has of Axtel. There's really no change regarding the debt position of Axtel. Going forward, as we mentioned in the previous question, we don't see any change. Thank you. Thank you, Eduardo. Given that we have no further questions, I would like to thank everyone for their interest in Alfa. In case you have any additional questions, please feel free to reach out to us. We would be pleased to assist you. We also extend our best wishes to you and your families to stay safe and healthy. Thank you very much for joining us today. Have a great day. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.