Grupo Televisa, S.A.B. (NYSE:TV) Q2 2024 Earnings Call Transcript

Grupo Televisa, S.A.B. (NYSE:TV) Q2 2024 Earnings Call Transcript July 24, 2024

Operator: Good morning, everyone, and welcome to Grupo Televisa’s Second Quarter 2024 Conference Call. Before we begin, I would like to draw your attention to the press release which explains the use of forward-looking statements and applies to everything that we discuss in today’s call and in the earnings release. I will now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Alfonso de Angoitia: Thank you, Elsa. Good morning, everyone, and thank you for joining us. With me today are Francisco Valim, CEO of Cable and Sky; and Carlos Phillips, CFO of Grupo Televisa. Before discussing our second quarter operating and financial performance, let me remind you the key corporate goals and strategic pillars Bernardo and I outlined for Grupo Televisa and TelevisaUnivision since the beginning of the year and the progress we have achieved so far. First, the corporate restructuring process at our Cable segment, led by Francisco Valim, intended to improve profitability, optimize CapEx, increase free cash flow generation, and positioning us well to achieve sustainable revenue growth over the coming years. The key measures implemented so far have already allowed us to improve profitability by almost 400 basis points relative to the third quarter of 2023, and we are confident that our EBITDA margin will continue to expand gradually over the coming quarters due to ongoing efficiencies.

Moreover, during the first half of the year, operating cash flow for our Cable segment, which is equivalent to EBITDA minus CapEx, was over MXN6.4 billion, growing by almost 50% year-on-year and accounting for around 27% of sales. This implies that the operating cash flow margin of our Cable segment has increased by close to 1,000 basis points so far this year. The second half of the year is expected to be heavier in terms of CapEx deployment, but we are cutting our 2024 CapEx budget for our Cable segment to $590 million, including $30 million for the reconstruction of our network in Acapulco, which we expect to be reimbursed by the insurance company. Therefore, we estimate that the organic operating cash flow for our Cable segment will increase by around 16% year-on-year in 2024.

The second pillar is the acquisition of AT&T’s minority stake in Sky, which we accomplished at very attractive terms to integrate it with our Cable segment and materially strengthen our competitive and financial position of the combined company. On this front, we have already implemented a new organizational structure for the combined company that allowed us to retain top talent and optimize duplicated roles. We have also started to implement synergies and efficiencies across several areas, including commercial, sales commissions, programming, IT, technology, finance and marketing, among others. This integration will also allow us to standardize regions, sales channels and commissions, have better customer base management, increase productivity, achieve cross-selling and upselling, improve penetration of triple-play services, reduce churn.

It will also allow us to leverage Sky’s exclusive sporting content in Cable, further differentiating our video package from those of our competitors. Evidence of this is that for the first time, we already offered the Euro Cup 2024 to both our Sky and izzi video customers. All-in, we are confident that our restructuring and integration process, most of which already occurred in the second quarter of this year, will allow us to deliver OpEx savings of approximately MXN400 million in the third quarter relative to the first quarter of 2024. Longer term, we continue to forecast savings of around 15% of Sky’s combined annual OpEx and CapEx. The third pillar is related to the conclusion of the spin-off of Ollamani and its listing on the Mexican Stock Exchange under the ticker symbol AGUILAS.CPO on February 20th.

This spin-off was not only intended to streamline Grupo Televisa’s operations and simplify our asset structure, but also to unlock value for our shareholders through this new company that currently has a market cap of around $330 million. Under the Grupo Televisa’s umbrella, we estimate the value assigned to the Ollamani assets was significantly lower. And our fourth pillar is to turn our direct-to-consumer business ViX profitable during the second half of this year. Our DTC business is growing and scaling and our most important metrics kept trending in the right direction with most of them ahead of plan. We added users and subscribers, grew engagement, reduced churn and generated significant marketing savings driven by our efficient customer acquisition funnel through our free tier.

Therefore, we are confident that we are on track to deliver the major milestone of a profitable DTC business in the second half of this year, only two years after launching the service compared to four years to five years from our peers. Having said that, let me turn the call over to Valim as he will discuss the operating and financial performance of our consolidated assets.

Francisco Valim: Thank you, Alfonso. Good morning, everyone. First, let me walk you through the operating performance of our Cable operations. We ended June with a network of 20 million homes after passing around 71,000 new homes during the quarter. In the second quarter, we continue to execute our strategy to focus on value customers rather than volume, while working on customer retention and satisfaction. However, price increases implemented in the month of April led us to experience a short-lived increase in churn, leading our second quarter broadband net adds to remain sequentially stable at 10,700. In video, we disconnected 65,600 subscribers during the quarter as in April, we canceled the video package called Afizzionados.

Over the coming quarters, we expect to gradually deliver stronger net adds as we keep focusing on churn reduction. During the quarter, net revenue from our residential operations decreased by 3.8% year-on-year, as our subscriber base was 5.7% lower due to the cleanup that we did in the third quarter of 2023. We lost some revenue given to the cancellations of the Afizzionados video package and because of the ongoing negative impact from Hurricane Otis in Acapulco, given that a still relevant amount of our customers are not paying their bills yet. On the other hand, net revenue from our enterprise operations increased by 4.4% year-on-year. Now, let me walk you through Sky’s operating performance. During the second quarter, Sky’s product portfolio was under review from the content and pricing standpoint translating into a softer commercial activity.

Therefore, we lost 262,000 revenue-generating units, mostly coming from prepaid subscribers that had not been recharging their service. However, we expect the integration with our Cable segment to gradually contribute to reduced churn, driven by having a better customer base management and cross-selling and upselling opportunities. Sky’s second quarter revenue of MXN3.9 billion fell by 13.3% year-on-year, accelerating from the 12.3% revenue decline experienced in the first quarter, mainly driven by the softer commercial activity. Still, during the second half of the year, we are looking to reactivate our commercial strategy, particularly after integrating our product portfolio, commercial regions and sales channels. To sum up, segment revenue of MXN15.8 billion fell by 5.8% year-on-year, while operating segment income of MXN6.0 billion declined by 7.7%.

Our operating segment income margin of 37.7% contracted by 80 basis points year-on-year, mainly driven by inflationary pressures in labor and content-related costs, but expanded by 90 basis points sequentially due to the ongoing efficiency measures that we have been implementing since the third quarter of 2023. Regarding CapEx deployment, our total investments on MXN1.8 billion during the second quarter fell by 51.1% year-on-year. So, our CapEx to sales ratio of 11.2% was over 1,000 basis points lower than that of the second quarter of 2023. Finally, operating cash flow for Cable and Sky, which is equivalent to EBITDA minus CapEx, was MXN4.2 billion in the second quarter, increasing by 37.8% year-on-year and accounting for 26.6% of sales. This basically means that our operating cash flow margin increased by 840 basis points year-on-year.

During the first half of 2024, we have invested around $220 million, equivalent to a CapEx-to-sales ratio of 12%. This amount represents less than 28% of our 2024 CapEx budget disclosed at the beginning of the year. A more efficient CapEx deployment focused on higher investment returns leads us to feel confident there our CapEx requirements for the full year will be significantly lower. So, we are cutting our 2024 CapEx budget to $720 million, including $590 million in Cable with $30 million for the reconstruction of the network in Acapulco, which we expect to be reimbursed by the insurance company, $120 million in Sky, and $10 million of corporate purposes.

Alfonso de Angoitia: Thank you, Valim. Valim has been with us for less than a year and is doing an amazing job. Now, let me walk you through TelevisaUnivision’s second quarter results released yesterday morning. The company delivered another quarter of top-line growth with revenue of around $1.3 billion increasing by 3% year-on-year, while EBITDA of $362 million, declining by 3%, but showing a solid improvement over the first quarter as we move towards consolidated EBITDA growth, including profitability in our direct to consumer business in the second half of this year. From an operating standpoint, we achieved several milestones during the second quarter. First, in the second part of the quarter, we improved our competitive position on linear in the US as we aired two major international soccer tournaments, Copa America and Euro Cup.

Second, we made progress bringing new advertisers to our platform in the US, helping them understand and embrace the power of our massive and overlooked audience and unique reach. Third, our programmatic and product placement capabilities tied to our leading share of audience in Mexico have been allowing us to consistently outperform the market in terms of advertising revenue growth. And fourth, in our DTC business, all our major KPIs are trending in the right direction, with most of them ahead of plan, positioning us extremely well to deliver sustainable DTC profitability in the second half of this year, an unprecedented timeline for only two years after launching the service, driven by a superior economic model and relentless execution. Moving on to the details of our revenue performance.

During the quarter, revenue growth at TelevisaUnivision was driven by a solid increase in consolidated advertising revenue of 6%, partially offset by a slight decline in consolidated subscription and licensing revenue of 2%. Consolidated advertising revenue increased by 6% year-on-year, mainly driven by the strength of our DTC business and our solid performance in Mexico. Our audience for ViX’s advertising video-on-demand, or AVOD, tier continued to grow, exceeding the 50 million monthly active users milestone, while generating nearly 50% growth in total streaming hours, far outpacing the growth in users. While we are already monetizing these users through ads, we also have a cost-effective funnel to upsell ViX’s subscription video-on-demand tier, which is great and has a much lower SAC.

In the US, advertising revenue was 2% higher as very strong growth in DTC was offset by some softness in our linear networks. In DTC, we delivered remarkable growth as we were very efficient in monetizing the significantly higher monthly active user base and engagement on ViX with strong sell-through rates of around 90% and material CPM premiums to linear. At our linear networks business, our results were mixed. We saw strength in sports as we aired the two major international soccer tournaments I mentioned before, which delivered very strong ratings in the second part of the quarter. Still, we experienced softness in the CPG, tech and pharma categories along with some pressure from ratings declines during the first part of the quarter that were not fully offset by price.

In Mexico, advertising revenue growth of 13% year-on-year was partially driven by the appreciation of the Mexican peso and because starting this year we acquired some third-party ad inventory, which contributed with 500 basis points of growth that will be accretive to bottom-line. In Mexico, the public sector continued to be impacted by advertising restrictions ahead of the Presidential elections in June. However, this was offset by strength from private sector advertising as recurring clients increased spending. Moreover, we delivered strong advertising revenue growth in our DTC business, supported by the material increase in our monthly active user base and engagement on ViX as well as our programmatic capabilities. FX-neutral advertising revenue in Mexico increased by 10% year-on-year, which is an amazing result.

Consolidated subscription and licensing revenue decreased by 2% as very robust growth from ViX’s subscription video-on-demand tier was offset by linear subscription revenue declines both in Mexico and in the US. ViX’s subscription video-on-demand tier performed exceptionally well this quarter and was a strong growth contributor. The increase in subscribers accelerated and was driven by the direct sales channels, which are higher ARPU subs coming to us with high intent given the appeal of the content we’re producing. We closed the second quarter with 8.4 million subscribers. In the US, subscription and licensing revenue fell by 1%, while in Mexico the decline of 3% was partially offset by the appreciation of the Mexican peso. FX-neutral, subscription and licensing revenue in Mexico decreased by 5% year-on-year.

Looking ahead, we’re making progress towards closing our US upfront at a pace in line with the industry. Early data indicates that this could be the fourth consecutive year in which we outperform the industry and capture market share from English-language broadcasters. Going into this year’s upfront, our main strategic priority was to transition advertisers to Nielsen’s Panel + Big Data measurement methodology. Moving in this direction is very important for us strategically, not only because its benefits will permeate throughout our businesses over time, impacting both the current scatter market and our future upfronts, but because it is the right way to appropriately measure all audiences. To sum up, the strong KPI performance achieved at our DTC business has allowed us to deliver robust revenue growth and has positioned us extremely well to deliver sustainable DTC profitability in the second half of this year.

Moreover, we are confident that our record political year from an ad sales perspective will materially boost our top-line growth during the second half of this year. This should then return our company back to consolidated EBITDA growth for the full year and allow us to continue to focus on strengthening our balance sheet through organic deleveraging and by extending and smoothing out our maturities. To wrap up, Bernardo and I are confident that the strategy to streamline our operations and simplify our asset structure at Grupo Televisa, and the execution of our digital transformation strategy at TelevisaUnivision will allow us to improve our operating and financial performance in 2024. At Grupo Televisa, we are glad that we unlocked significant value to our shareholders through a spin-off of Ollamani, and now we’re laser-focused on integrating Sky with our Cable segment, streamlining our combined operations, strengthening our competitive position and enhancing free cash flow generation.

So far this year, our free cash flow conversion has improved considerably and a more efficient CapEx deployment focused on higher investment returns leads us to feel confident that free cash flow generation for the full year will be pretty good. And at TelevisaUnivision, we’re very excited about the prospects for the second half of 2024. Our DTC business is growing and scaling and our most important metrics kept trending in the right direction with most of them ahead of plan. We added users and subscribers, grew engagement, reduced churn and generated significant marketing savings driven by our efficient customer acquisition funnel through our free tier. We also expect to get a fair share of political advertising in this cycle. Looking forward, we have very clear objectives in place, a profitable DTC business in the second half of the year and to end 2024 with a reduction in leverage.

Now, we are ready to take your questions. Elsa, could you please provide instructions for the Q&A?

Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Vitor Tomita with Goldman Sachs. Please go ahead.

Vitor Tomita: Hello. Good morning, and thanks for taking our questions. Two questions from our side. The first one is if you could give us some more detail on how much the Afizzionados discontinuation and the Acapulco situation impacted MSO revenue this quarter? And our second question would be more on the debt. If you could give us some color on how you think about your debt exposure to the US dollar from a strategic standpoint and how you think about hedging strategy around that debt? Thank you.

Alfonso de Angoitia: Thank you, Vitor, for your questions. I’ll ask Francisco Valim to answer your first question that has to do with Afizzionados and Acapulco, and I’ll ask Carlos Phillips to answer the second one that is related to our hedging strategy.

Francisco Valim: So, the Afizzionados was a product that we had generated maybe 1% of our revenues, but it was generating a significant negative EBITDA. We discontinued the product and we also had — we had no sports rights anymore. So, Afizzionados starting now in July would only become a cost with very little content and especially because our deal with ViX provides with all the content that we had at Afizzionados and much more. So that’s what — that was the decision about discontinuing. So, it was margin accretive, but obviously impacted revenues a bit. As far as Acapulco is concerned, we — what we have done over the last six months after the hurricane, we have built a full fiber network covering 100% of Acapulco. And obviously, as you go there and you see that the city is not back to its full potential, especially in the wealthiest areas, which is called Punta Diamante.

Those buildings are all being rebuilt, and there are thousands of subscribers there that we are maintaining them with — charging them just a little, just to make sure that we keep our relationship, but we cannot charge them full charge because the buildings themselves are being remodeled and reconstructed. So, they are not — there’s no one living there at this moment. So, we have, in response to several thousand clients in Acapulco that we have done that. Our estimation is that towards the end of this year, we’ll see more movement towards having more clients in Acapulco due to the fact that the buildings are being rebuilt.

Alfonso de Angoitia: And Carlos will answer the second question that has to do with our hedging strategy.

Carlos Phillips: And Vitor, in terms of your question about how we view our exposure to US dollars in our debt, as you probably know, a little over 60% of our debt is dollar-denominated at its fixed rate. And from a balance sheet perspective, what we have is a large cash balance, which we also keep in — its majority in dollars, more than 60% of our cash is dollar-denominated. And from the balance sheet exposure as well, you always have to consider our investment in TelevisaUnivision, which is, from our perspective, a very large, valuable dollar-denominated asset. They will also use, from a balance sheet exposure perspective. In terms of the cash flow exposure, what we do is, on a rolling basis, using very plain vanilla hedging instruments, we try to cover our dollar exposure.

To give an example, our dollar exposures for this year are 100% covered, and we are covered up to almost half of 2025 dollar exposure, which we not only consider our coupon interest payments from our dollar debt, but we also consider a portion of our dollar-denominated CapEx when we think about our exposure. The other thing, just to mention in terms of the coverage that we’ve done, is our closest maturities in terms of dollar-denominated bonds, which are 2025 and 2026 bonds, those are being fully hedged into pesos. So, that’s our view in terms of the balance sheet and the cash flow exposure to dollars.

Vitor Tomita: Very clear. Thank you both very much.

Operator: The next question comes from Marcelo Santos with JPMorgan. Please go ahead.

Marcelo Santos: Hi, good morning. Thanks for taking my question. I have two as well. The first is a question on competitive environment. I mean, is the fact that Telmex is not increasing prices going to become a competitive issue? Could this start affecting your net adds for the future? And the second question is behind the CapEx cut. I think you also cut CapEx on Sky and corporate, right? This is the number I had here was higher for both. So, what is the main driver? Is this mostly related to lower subscriber adds, or you’re also reducing something on the maintenance or the deployment? Just wanted to deep dive a bit more on the CapEx reduction. Thank you very much.

Alfonso de Angoitia: Thank you, Marcelo. Francisco, can you take the…

Francisco Valim: Sure. Marcelo, the discussion on Telmex not increasing price, what we did is we focused mostly on clients that have also a video offer. Almost 60% of our net adds is comprised of clients that also buy video. And even though on those that only by Internet we provide them with ViX to almost 100% of our new clients. So, when you do the math, the $389 that Telmex charges for what they are offering and what we are charging with for $450, when you put ViX and you add and subtract, they are very comparable. So, we don’t see that as a major hurdle for the existing price range. And we are also very aligned not only in terms of promotion, but also price list with all of the players in the market in that regards. In terms of CapEx, we’ll start with a thank you.

Yes, we did a great job. Thank you so much. But the idea here is because we’re consolidating Sky and some of the operations of — at the holding level, we are, yes, diminishing the number of, for example, Oracle licenses, SAP licenses and things like that. So, by optimizing all of that and focusing on migrating all systems into the already existing izzi systems, it makes us not pay twice or sometimes 3 times for the same service. And what you see there basically is the reductions we were able to implement over the last six months, but more emphasized on the second quarter of those gains that we have obtained. In terms of network deployment, we are keeping a constant network deployment. We should finish the year with something between 600,000 and 700,000 new homes passed, and therefore between homes passed and sales, that represents just the bulk of our CapEx because we’re able to reduce everything else that was less important because of the synergies that we’re able to generate.

Just to give a simple example, we have — now, all in all, we have more than 5,000 people less than we had in the third quarter of last year. So therefore, Microsoft licenses and et cetera and so forth and so on, less cards, it impacts the entire organization. So I think that’s how you should see it. We are not investing in what needs to be invested, meaning we keep on investing on new subs. On average, we are targeting between 350,000 and 400,000 new sales per quarter. And so — and that is — it hasn’t changed. We have been implementing, in June, for example, was a good month, and July is looking to be a great month. And that doesn’t change in terms of net adds or the acquisition of new clients and also the deployment of new homes passed, like I just mentioned.

So, the — we are making sure that we are buying the future of the company and everything else we are optimizing.

Alfonso de Angoitia: Yeah. So, expanding on what Valim is saying, first of all, he has done an amazing job in the year that he has been with us. Second, I would say that most of our CapEx is sales-related, as he was saying. And therefore, if we maintain subscriber growth additions at a reasonable level, which we are on target of obtaining, and then further reduce churn, we should be able to have low-single-digit subscriber base growth in the medium term with less capital intensity. So, having said this, we believe CapEx-to-sales should be around 20% going forward. And in 2023, CapEx-to-sales already declined to 23% from almost 27% in 2022. So, we’re on track of achieving that goal.

Marcelo Santos: Perfect. Just to follow up on the homes passed expansion. I think you added something around less than 200,000 in the first half of the year.

Francisco Valim: Yeah. Typically — yeah. This is how telecom companies typically operate. We approve the budget and we start deploying. So, it will build up through the end of the year. We already are at — by the end of this quarter, we should be very close to 300,000.

Marcelo Santos: Perfect. Thank you very much.

Operator: The next question comes from Carlos de Legarreta with Itau. Please go ahead.

Carlos de Legarreta: Hi. Good morning, gentlemen. Thank you for taking the questions. [indiscernible].

Alfonso de Angoitia: Sorry. Carlos, sorry, we can’t hear anything.

Francisco Valim: Yeah. If you need to send a question, please, you can text it to Rodrigo and then we can…

Alfonso de Angoitia: Yeah, because we couldn’t understand any.

Carlos Phillips: Pick up the phone, Carlos.

Carlos de Legarreta: Can you hear us better now?

Francisco Valim: Yeah.

Alfonso de Angoitia: Yeah.

Carlos de Legarreta: All right. Thank you. So, after streamlining Sky and Cable, what sort of operating cash flow margin are you targeting in the medium term, let’s say, 2025? And secondly, can you give us a sense as to what proportion of your [existing] (ph) broadband subscribers are also ViX VOD users? Thank you.

Alfonso de Angoitia: Yeah. Our CapEx — our operating cash flow margin, we’re targeting for 20%. This is our goal. And as I mentioned before, we’re on the right trajectory to achieving this goal of 20% operating cash flow margin. And as to your second question…

Francisco Valim: In terms of OpEx, we’re targeting MXN400 million per quarter. So, if you just add four quarters, we are at just MXN1.6 billion, MXN1.7 billion if you do the 12 months. In terms of ViX, what we have today is the vast majority of our clients have ViX. We are — ViX is being hard bundled in every package with 60 megabits per second and above.

Carlos de Legarreta: Okay. And can you repeat the comment, Francisco, on the OpEx, please?

Francisco Valim: Yes. We are estimating now for the next couple of quarters, MXN400 million per quarter. And so if you do the math on a yearly basis, if you analyze that, you should be seeing something between MXN1.6 billion, MXN1.7 billion in terms of savings regarding the synergies with Sky.

Carlos de Legarreta: Okay. Yeah. Okay. I think that’s, in fact, in line with what you said before. So, I appreciate that. And just to confirm the CapEx guidance, if you don’t mind. It’s $720 million, the whole budget. And by the breakdown, it’s $590 million for Cable, including $30 million for Acapulco, $125 million in corporate?

Alfonso de Angoitia: Let me — of course, Francisco and the whole company is being much more efficient in terms of the CapEx deployment. So, as I mentioned in the initial remarks, our CapEx requirements for the full year will be significantly lower. So, we’re cutting our 2024 CapEx budget to $720 million. And you’re right, it includes $590 million in Cable, with $30 million for the reconstruction of Acapulco, which, as we have mentioned, we expect to be reimbursed by the insurance company. And $120 million in Sky. And finally $10 million for corporate purposes.

Carlos de Legarreta: Thank you, Alfonso. Just want to double-check that. I appreciate it.

Alfonso de Angoitia: Yeah. Thank you.

Operator: The next question comes from [indiscernible] with Bank of America. Please go ahead.

Unidentified Analyst: Hi. Good morning, everyone. Thank you for taking my questions. I have two here. The first one is a follow-up on the competitive environment. So, you mentioned that your offer for Cable is already in line with competition when you consider ViX and its value added. So, now looking for the future, how do you think about the potential for price hikes? Do you think it’s likely you will be able to do it in the short term or not if it continues to be hard to have price hikes in the sector? And then the second one, are there any other product lines that you see that may be discontinued in the coming quarters like Afizzionados or was that something a one-off and something specific that should not happen anymore? So those are my questions. Thank you.

Operator: Apologies. Luca, the speaker line just dropped. Just give us a moment to reconnect the speakers.

Alfonso de Angoitia: Hello? Luca, are we still with you? Are you still there?

Unidentified Analyst: Yes, I can hear you.

Alfonso de Angoitia: Okay. So, we got disconnected. You were asking about the competitive environment, and there’s where we got disconnected.

Unidentified Analyst: Okay. Yeah. So my first question is on the competitive environment as you mentioned. So, you said that considering ViX and the value it adds, your offer is already in line with competition in terms of pricing, but thinking about the future, do you believe there is space for price hikes or it will continue to be difficult considering how the market is and how competition has been going in the market? And then, the second one, if you — this quarter, you had the discontinuation of Afizzionados. So, I wanted to know if — with the restructuring you’re doing and the consolidation of businesses, if there are also other products that may be discontinued or other revenue lines that may be discontinued in the coming quarters, or if that was something of a one-off and we should not see something similar in other quarters? Thank you.

Francisco Valim: Thank you, Luca.

Alfonso de Angoitia: Yeah, Francisco.

Francisco Valim: So from — I’ll start from the Afizzionados question. Afizzionados was a channel that was created several years ago because of sports rights for the Mexican soccer teams. With the evolution of ViX, ViX now has 100% of the games on its platform. And because we have this bundle with them, Afizzionados became irrelevant. And so, we had to operate this channel, which has basically now very little content. So, we decided to discontinue that. And obviously, there’s an accounting impact on revenue, but an equivalent superior adjustment on EBITDA. So, it was margin accretive, and it didn’t impact the client. So, it was something that we should have done as soon as we lost the right for soccer in Mexico. And we have full coverage using ViX’s platform.

Alfonso de Angoitia: So, in essence, that channel was not contributing any value and it was a money-losing type of thing.

Francisco Valim: Yes. Okay. On the competitiveness of the market, so in — I think that in every telecom market, price is adjusted by inflation, they happen at some rate, okay? What we haven’t been seeing here in Mexico for many years is that we were able to pass-through everything along. As markets become more stabilized, typically what we do is we try to upsell and upgrade clients in terms of products, in terms of speeds, in terms of additional products. So, we have all of those — all of the above in place. And that’s what we think will generate more value to our customers, but also more importantly to — our objective is to reduce churn and make sure that our clients have the best possible service. In Mexico, the only company that can provide the content and quality of network that we provide, it’s only us.

Everybody else has different content. And our network is comparable to most of our competitors in the areas where it matters. So, we see this evolving. So what I’m saying is, I don’t know if we are going to be able to pass-through 100% of inflation in the years to come, but what we’re aiming to is to increase revenue per consumer, or in other words, increase average ARPU using additional services, more products and more services.

Unidentified Analyst: No, very clear. Thank you for the answers.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Alfonso de Angoitia for any closing remarks. Please go ahead.

Alfonso de Angoitia: Well, thank you very much for participating in our call. We’re very excited about the prospects that we see in the business. We have moved a long way and we’re very happy with what we’re seeing for the near future. Enjoy your summer. And if you have any additional questions, please call us.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.