Abogados de Inmigracion

"That's our goal and we're on target so far but we [normally] have a steep increase in our sales budget in the last six months of the year, so we'll see if we reach that," Parsa said.

Parsa said the company was seeking to increase Ebitda margins by 15% this year in its prepaid business following a slump in 2004.

He attributed the prepaid unit's weak Ebitda margins to heavy expenditure in advertising in 2004, which was met with a flat dial-up market.

This was exacerbated by an aggressive campaign by rival Prodigy to migrate dial-up users to broadband, the launch of Prodigy's own prepaid product and lower than expected PC sales due to stagnant economic growth.

Todito is planning to improve Ebitda margins this year by targeting Prodigy's prepaid subscriber base. The company also launched an accelerator product this week that accelerates the speed of navigation.

SEPARATION OF BUSINESSES

This week, the owners of Todito agreed to split the firm into two independent companies with shareholder TV Azteca (NYSE: TZA) taking 100% of Todito's network of sites and the UCNCI university becoming the sole owner of Todito Card's prepaid businesses. Parsa remains CEO of both companies.

According to Parsa, the split will be beneficial for the portal, as TV Azteca will see 100% of the fruits of its investment in advertising. The outlook for Todito Card will be slightly more risky as it will have to budget its own advertising.

"I think it's slightly riskier for Todito Card to be a stand alone without TV Azteca associated with it. But I think it's risk reward. If we make it work as we have in the past... I think it's potentially a very good business to be in," Parsa said.

COMPETITION

Rival ISPs Terra and AOL left the market and other competitors such as Yahoo's internet franchise and Televisa's ISP Esmas failed to compete with the front-runners. So the ISP market has been reduced to a duopoly, according to Parsa.

Telmex has strong advantages over Todito, such as large advertising resources, the last mile, and the ability to charge directly on a user's phone bill.

However, Todito would compete with Telmex on pricing and service and in particular the Todito Max subscriber service that allows prepaid customers to pay with their credit cards, Parsa argued.

"Telmex has a lot of advantages that you can't underestimate, but I think we do as well and it's just a question of competing well against them. We'll never beat them, but I think to be number two in such a large market is a good position to be in," according to Parsa.

The company's business strategy for 2005 is to grow and retain the user base, he said, adding the company had a big problem with churn due to the nature of the product.

He also said Todito aims to hit sales targets and increase operating margins by lowering costs as well as reaching breakeven in its US business.

The company expects to generate US$3.5mn in cash flow from the prepaid business in 2005 and Parsa sees cash flow growing at a very high rate over the next five years given the low penetration of internet in Mexico.

Parsa believes that "dial-up is here to stay", at least for the next five years, given that most Mexicans do not have the resources to pay for an "always-on" connection. This is the case with paid TV in Mexico, he added.