Grupo Televisa, S.A.B. (NYSE:TV) Q4 2022 Earnings Call Transcript

Grupo Televisa, S.A.B. (NYSE:TV) Q4 2022 Earnings Call Transcript February 24, 2023

Operator: Good morning, everyone, and welcome to the Grupo Televisa’s Fourth Quarter and Full Year 2022 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 discussed in today’s call and in the earnings release. Please note this event is being recorded. I would now like to 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, Chuck. Good morning, everyone, and thank you for joining us. With me today are Pepe Antonio Gonzalez, CEO of Cable; Luis Malvido, CEO of Sky; and Carlos Phillips, CFO of Grupo Televisa. Last year was marked by several milestones, both at Grupo Televisa and TelevisaUnivision, which we are confident will allow us to deliver sustainable top-line growth and free cash flow generation in 2023 despite challenging global macroeconomic environment. At Grupo Televisa, we finished last year with almost 19 million homes passed after passing around 1 million new homes through the throughout the year, and delivered more than 1.2 million fixed RGU net adds in cable, or over three times the RGU net ads we had in 2021.

We ended 2022, with almost 16 million fixed RGUs. Moreover, we are confident that our wide geographic footprint and solid competitive position will allow us to keep delivering strong RGU net adds in 2023. We redefined our sales commission model and rebalanced our channel mix ups guide, which will allow us to materially improve sales quality going forward. This will help us stabilize our subscriber base, and overall revenue streams at sky, while materially reducing OpEx and CapEx intensity. We expect sky’s free cash flow generation to improve significantly beginning in 2023. We also announced the plan to simplify further our equity story. By spinning off our other businesses including the Soccer Team America, the Estadio Azteca, the gaming operations and publishing and distribution of magazines, creating a new controlling entity that will be listed on the Mexican stock exchange.

We keep making progress on our corporate optimization process, including a headcount reduction of approximately 3% of our workforce. This will help us maintain our solid profitability levels in 2023. And we reduced our total leverage by around $800 million, allowing us to have significant savings related to net interest expenses. At TelevisaUnivision on January 31st, we closed the merger of our content assets with Univision solidifying the world’s leading Spanish language media and content company, our business without comparison in the global media landscape, exclusively focused on the massive market opportunity that exists with a global Spanish speaking audience of almost 600 million people. On April 1st, we launched our completely redesigned and enhanced advertising video on demand AVOD service ViX featuring the world’s most expensive Spanish language video offering with over 100 channels video on demand and over 40,000 hours of content in its first year, including our classic novel as mega hits, news content, software and new and exclusive original programming.

ViX AVOD has already been in the market for three quarters and we are very encouraged as users and engagement metrics have been exceeding our initial expectations. The Qatar World Cup was a major contributor to the success of ViX in Mexico and Spanish speaking Latin America, as it was a key event to attract millions of monthly active users or MAUs to our platform. During the World Cup, the service saw peak streaming activity with more than 5 million devices for a single game with zero technical issues, which is remarkable for a service as young as ViX. We are very happy to disclose that ViX is now the largest Spanish language streaming app in the world with more than 25 million MAUs on its free tier alone. On July 21, we launched our subscription video on demand SVOD service VIX+ in the U.S. Mexico and most of Spanish speaking Latin America, giving subscribers access to the broadest, most premium Spanish language content ever offered on an network service, featuring more than 10,000 hours of ad-free premium entertainment programming in its first year and up to 7,000 hours of live sports.

While ViX SVOD has only been in the market for less than two quarters, we are very excited about the opportunity that we have

Operator: Pardon me. It seems that our speaker has disconnected. Please hold momentarily while we reconnect our speaker. We have reconnected our speaker. The floor is yours.

Alfonso de Angoitia: Thank you very much. Chuck, I don’t know what happened, but sorry for that. So at TelevisaUnivision, on January 31st, we closed the merger of our content assets with Univision, solidifying the world’s leading Spanish language media and content company, a business without comparison in the global media landscape, exclusively focused on the massive market opportunity that exists with the global Spanish speaking audience of almost 600 million people. On April 1st, we launched our completely redesigned and enhanced advertising video-on-demand, AVOD service, ViX, featuring the world’s most expensive Spanish language video offering with over 100 channels, video-on-demand and over 40,000 hours of content in its first year., including our classic novels, mega kits news content, soccer, and new and exclusive original programming.

ViX AVOD has already been in the market for three quarters, and we are very encouraged as user engagement metrics have been exceeding our initial expectations. The Qatar World Cup was a major contributor to the success of ViX in Mexico and Spanish speaking Latin America, as it was a key event to attract millions of monthly active users or MAUs. During the World Cup, the service saw peak streaming activity with more than 5 million devices for a single service as young as ViX. We’re very happy to disclose that ViX is now the largest Spanish language streaming app in the world with more than 25 million MAUs on its free tier alone. On July 21st, we launched our subscription video on demand SVOD Service Bigs Plus in the U.S., Mexico, and most of Spanish speaking Latin America, giving subscribers access to the broadest, most premium Spanish language content ever offered on SVOD service, featuring more than 10,000 hours of ad free premium and entertainment programming in its first year, and up to 7,000 hours of live sports.

While ViX SVOD has only been in the market for less than two quarters, we’re very excited about the opportunity that we have ahead of us. ViX was awarded Apple TV’s app of the year in 2022 globally, the first Spanish language app to receive this recognition, and Google placed best app of 2022 in Mexico. Our content factory continues to produce hits that resonate in both the U.S. and Mexico, and is now powering our market leading streaming platform as well as our linear networks. In the U.S., our share of Spanish language primetime audiences increased to 62.4% in 2022 from 62.2 in 2021, despite the fact that our closest competitor had the Spanish language World Cup exclusive rights and that it programmed several franchise series during the fourth quarter of the year.

Moreover, our share of total primetime audiences in the U.S. went up to 6.4% in 2022 from 6.1% in 2021. In Mexico, our free to air audiences on primetime beat our closest competitor by 105%. This allowed us to grow our share of audiences in Mexico by 2 percentage points. In mid-2022, we closed another incredibly successful U.S. upfront, volume grew double digits to the highest levels we have produced in seven years despite having tough comps from last year’s upfront. For the second consecutive year, pricing held in line with the market in the high single digit range. Importantly, we grew in both linear and streaming. Unlike other media companies, we were able to leverage growth in ratings and audience on linear. Demand for ViX came from our existing linear advertisers where the bundle rate approached an outstanding 70%, as well as for new digital first advertisers.

Capturing this digital-budget where there is secular growth in ad dollars is a huge opportunity for us as we’re executing on it. Our early success is also solid proof of the quality upgrade we made with this new product, and new brand. All in advertising commitments in the U.S. increased in the mid-teens leading us to be optimistic about our advertising revenue growth prospects in the US. Finally, we have successfully concluded upfront negotiations with our customers in Mexico with a plan growing by mid-single digits year on year, making this upfront the largest in absolute terms in our history. We see this as a solid upfront outcome giving the global economic slowdown and tough comps from last year due to the World Cup. We are confident this upfront will help us deliver advertising revenue growth in Mexico for a third consecutive year, evidencing the strength of our advertising platform.

Moving on to Grupo Televisa’s consolidated financial performance. In 2022, consolidated revenue reached Ps.75.5 billion representing year on year growth of 2.2%. While operating segment income reached Ps.28 billion equivalent to a year on year decline of 4.7%, mainly driven by theorization of costs related to the transmission rights and production of the quarter results consolidated revenue reached Ps.19.1 billion representing a year on year increase of 1.6% while operating segment income reached Ps.6.7 billion equivalent to a year on year contraction of 9.9%. Also cost primarily by the non-recurring cost and expenses related to the World Cup at Sky. Adjusting for this Grupo Televisa’s full year and fourth quarter 2022, consolidated operating segment income which had fallen only by 1.5% and 2.6% year on year respectively.

Revenue growth in cable and our other businesses segment was partially offset by declining — by the clients of revenue at Sky. However, as we have discussed in previous earnings calls, last year was transformational for Sky and we are confident that in 2023 this business will experience a strong rebound, especially at the EBITDA level. In addition, our expansion plan in cable worked very well last year, allowing us to gain market share of RGUs, while keeping our output flat. Pepe Antonio and Luis will elaborate on the operating and financial performance of each of our core consolidated segments in their remarks. Now let me walk you through the TelevisaUnivision 2022 results released yesterday morning. The Company’s full year performer revenue increased by 13%, year on year to $4.7 billion, marking the second consecutive year of double digit revenue growth.

Pro forma EBITDA of $1.7 billion was $4 million higher than last year, fully absorbing the peak year of streaming losses. With review TelevisaUnivision’s 2022 overall results as a remarkable achievement considering the launch of ViX and ViX+, which illustrates the power and uniqueness of our combined assets as well as the focus and discipline of our execution. Moving on to the fourth quarter, TelevisaUnivision delivered very robust operating performance with revenue of $1.5 billion, growing 22% year on year, while EBITDA of $504 million increased by 5% despite higher streaming investments following the launch of ViX. During the quarter, the very strong revenue growth at TelevisaUnivision was driven by sublicensing the World Cup rights in Mexico and other Spanish speaking Latin American countries that contributed with almost $150 million and solid increases in consolidated advertising and recurring subscription and licensing revenue of 10% and 9% respectively.

In the U.S., advertising revenue increased by 14% year-on-year, reflecting growth in both linear and streaming, as well as record political revenue that increased 80% compared to the 2018 mid-term election. In Mexico advertising revenue growth of 4% year-on-year slowed compared to an increase of 10% in the first nine months of the year, despite solid World Cup advertising revenue. This reflects the fact that in 2021, advertising revenue was pushed forward towards the end of the year, when advertisers returned to the market following COVID driven pullbacks. Still, it is worth mentioning that the World Cup advertising revenue in 2022 increased by 9%, relative to that of the 2018 World Cup. Excluding revenue associated with the sublicensing of the World Cup, subscription and licensing revenue increased by 9%, driven by growth in both the U.S. and Mexico.

In the U.S. growth of 4% was mainly driven by the inclusion of big subscription revenue. In Mexico growth of 20% benefited from strong content licensing revenue. The inclusion of big subscription tier and linear subscription price increases, while linear subscribers grew modestly. For the full year, cash flows provided by operating activities at TelevisaUnivision were $343 million, despite absorbing significant investments in the Company’s new streaming service mix, including new original premium content, sports rights, marketing and technology. To sum up, we keep executing on our strategy to optimize and modernize our traditional media business, while creating a market leading streaming platform with superior economics and less than a full year of operations.

This has allowed us to deliver another year of stellar performance at TelevisaUnivision. In the near-term, despite macro headwinds, we have a fantastic setup into 2023. There is significant long-term opportunity ahead, and we believe that we have the right team, the right assets and the right strategy to seize it. Now, let me turn the call over to Pepe Antonio, your CEO of Cable.

Pepe Antonio Gonzalez: Thank you, Alfonso. Residential operations of our cable segment achieved the banner year in operating metrics and quality of service. Let me provide some highlights for the fourth quarter and the full year 2022. Net ads grew by 301,000 fixed revenue generating units RGUs. The fourth consecutive quarter over 300,000 RGUs for a total of 1.2 million fixed net adds during the year. Gross adds for the year were 4.8 million fixed RGUs the highest figure in the history of the Company even exceeding the lockdown year of 2020. We are at 53,000 video RGUs for a total of 292,000 video net ads in the year. This is the highest full year game since 2015. And with this game, we are very confident that this will continue forward.

The positive trend in broadband RGU net adds continued with 78,000 for a total of 335,000 broadband RGU net adds in the year, the highest game since 2018, excluding the pandemic. Our product mix remains stable. Triple-play packages account for close to two-thirds of our sales. Double-play packages continue to grow, which underpins our broad and net adds. This is our highest margin service, so we continue to enhance its product offering. We added 61,000 subscriber, the 5th consecutive positive quarter for a total of 246,000 subscribers added in the year, the highest gain since 2020. To sum up, the strategies implemented, and the alignment and simplification of our product suite, the improvement in the quality of service and customer experience, our homes passed expansion plan has translated into a banner year in almost all operating metrics reaching record levels or second only to 2020.

We implemented a bottom up simplification of our product design systems. The new building block modules allowed us to quickly create and modifying new products and adjust prices at a more granular level. At the same time, this simplification provides more flexibility to our customers to pick their preferred combinations. We are going back to basics. With EC, it’s easy to choose your package. The year long strategy to improve our quality of service that included the digitalization of our customer experience, fiber training of our technicians, well focused investments to improve our network and strengthening of our best-in-class customer service call center is starting to pay off. Our net promoter score reached its highest levels in 2018 and on broadband and pay TV, the net satisfaction score place us at the top of our competitors for the first time.

We consistently remain at the top of the Netflix Speed Index. According to the Federal Telecommunications Institute, EC continues to have the lowest complaints for 10,0000 customers in all services versus our cable competitors and our average response time is the best by far, and has remained so for the past 2.5 years. We surpassed our original 700,000 new homes-passed coal for 2022 and finished with 875,000 without adjusting our CapEx. This is on top of the 2 million homes-passed we took last year. I’m glad to report that by the end of the year, we reached 12% penetration in a major city and close to 20% in several medium ones. The goal we set a year ago in our residential operations was to regain RGUs and subscriber growth to solidify our market share, while keeping our ARPU stable.

And we have achieved that for the full year. Our ARPU has remained stable. Going forward, the stronger operating metrics in the residential segment will begin to translate gradually into revenue growth acceleration. In residential segment, revenue growth was 0.9% for the fourth quarter and 2.5% for the full year. On EBITDA, we continued implementing cost containment efforts including headcount optimization despite a growing client base and higher sales. Better procurement practices and lower construction costs that have allowed us to surpass our new homes expansion plan without adjusting CapEx. This allowed the EBITDA margin to remain stable at 42.9% for the year at the residential segment. Enterprise operations, which account for around 13% of total cable revenue, faced strong headwinds in both revenue and profitability, including a tough comparison base for the fourth quarter for ’21 was the highest the best quarter in the history for Enterprise because of the non-recurring — project.

Revenue fell 4.9% year-on-year. EBITDA figures were also affected by this. We are implementing a structural adjustment in the Enterprise segment that will cause cost and CapEx to improve margins and profitability during 2023, including a significant headcount reduction synergies with the residential segment on expand on external plant maintenance and network monitor. Over the coming quarters, we expect residential RGU net ads to remain solid at similar levels to those of the last few quarters, while residential segment revenue growth will continue to improve gradually. And there are still challenges with the growth in the enterprise segment, although, we would expect to begin to incorporate new projects going forward. Before turning the call back to Alfonso, let me say that we are confident that the expansion plans to selective locations in €˜21, as well as the expansion plan during this year has allowed us to deliver solid operating results and should continue to do so in 2023.

Alfonso de Angoitia: Thank you, Pepe Antonio. Now let me turn the call over to Luis Malvido, CEO of Sky.

Luis Malvido: Thank you, Alfonso. So, you may recall Sky is undergoing a comprehensive transformation process. Today, I will provide you with an update on the progress and accomplishment so far. I will also give you an overview of Sky fully operational and financial performance. In 2022, we place spatial focus on improving return on investments. To this end, we replace several low performing products such as Sky Vasco with Sky Silver HD, and we are also making radical changes in channel mix and commission model for dealers. Both initiatives are already showing improvements on acquired customers’ value. Furthermore, recently we launched a prepaid premium package called Prepago Gold that offers an extended channel line-up and featuring Sky’s exclusive sports content.

With this product, we aim to upsell high value prepaid customers and initial results are promising. Additionally, I’m happy to announce that early this year we signed a reselling contract with DC, Mexico leading internet provider. This collaboration will enable Sky to offer high speed broadband service that is both reliable and competitive to those of our customers looking for an integrated offer. Beyond EC coverage and especially to prepaid customers, we will continue offering six wireless broadband service in partnership with Altan. As I announced in our previous call, during Q4, we launch a new mobile service built over AT&T network replacing the non-performing Blue Telecom cell MVNO of Altan. The value proposition is building on both partners strength.

It bundles a very competitive voice and data price point for mobile service, together with an attractive upgrade in Sky Video content. This year, we are starting to see promising growth and by the end of this quarter, we expect to have over 15,000 customers. To leverage on Sky’s strong brand awareness. We have decided to further expand the brand Sky to all our new products initially mobile and broadband. This brand consolidation will result in a stronger product portfolio with a streamline and effective communication. With regards to our content offering, during the 2022 FIFA World Cup in Qatar, Sky stood out as the sole platform with complete coverage of all 64 matches and made history by becoming the first pay TV operator in Mexico to broadcast live events in 4K, and greatly contributed to our positioning as a leading sport providing in the country, as well as gathering valuable customer information through mandatory registration.

Now, let me provide you with an update on our commercial strategy. As previously mentioned, Sky is focusing on improving sales quality through a channel mixed and all new sales commission model. As announcing Q3, we implemented a major change in Sky Sales Commission model transitioning from an app from payment system to a new customer revenue share model. This new approach provides incentives for dealers to improve product mix and enhance customer tenure. I will now shift to discuss our operating performance. During Q4, we experienced a significant increase in postpaid additions fueled by incentives generated by the new sales commission model and incremental demand from the World Cup. Meanwhile, postpaid churn decline. As a result, we experienced positive postpaid nets for the quarter for the first time in two years.

On the prepaid side, additions decrease as planned and prepaid churn remains stable. However, since in July, we discontinue one of our prepaid reactivation promotions due to its lack of profitability we recorded a 402,000 additional cancellations in the year, 197,000 of them in Q4. Although, this customer base cleanup impacted the number of cancellations, it had no effect on revenues nor EBITDA. And let me emphasize, we fully completed this cleanup during 2022. In broadband, we experienced a loss of 27,000 RGUs during the quarter due to a combination of declining sales and high churn levels, largely driven by network saturation and lack of networking expansion from Altan. As a result, we lost 409,000 RGUs during the quarter. In terms of financial results, revenues declined 7.7% year on year and operating segment income decreased 24.7% year on year, primarily due to the mentioned lower revenues and the amortization of Ps.930 million from the World Cup Rights.

Excluding this one of effect, operating segment income would’ve fallen 13.8% year on year reaching 36.1% margin. It is also worth mentioning that despite this year on year decline, DTH revenues in Mexico representing three quarters of total revenues have been totally flat for the last seven months, a positive indication of top-line stabilization. On the CapEx side, we close a year with a total of $192 million. This represents a 21% year on year drop and a decrease of 400 basis points in CapEx to revenue ratio from 23% previous year to 19%. Now, this positive result is mainly due to their measures we have taken over the year to improve sales quality, hence return on investment. We experienced this positive trend to continue in 2023, bringing our CapEx to revenue ratio below 17% for 2023 asset.

And before turning back to Alfonso, let me emphasize that 2022 was a transformational year for Sky. The implementation of all statist initiatives together with a non-recurring cost and expenses related to the workup may last year look particularly challenging. Still, we are confident that this year Sky will experience a strong rebound in EBIDA and CapEx will show a double digit drop.

Alfonso de Angoitia: Thank you, Luis. Moving on consolidated capital expenditures were $860 million during 2022. In line with our guidance, even though we exceeded our FTTH homes past target by 25%. For 2023, our CapEx target is $820 million in which includes $620 million in cable to pass close to 1 million homes with fiber, upgrade our network increase our subscriber base and support growth, and $160 million deployed in sky, plus $40 million in our other businesses. Regarding share repurchases, we have invested more than $50 million to buy back shares over the last six months. Going forward, we’re likely to keep repurchasing shares to take advantage of cash in hand and over the undervalued stock. Finally, I’m happy to report that our board of directors approved the payment of our regular dividend in 2023.

This will be presented for approval at our annual shareholders meeting. To wrap up, Bernardo and I are optimistic about the operating and financial prospects for 2023 both at TelevisaUnivision and Grupo Televisa. At TelevisaUnivision we will continue to execute our strategy to create a business like no other. And our stellar performance with double-digit revenue growth for two consecutive years, demonstrates the power of our newly form company. Our content factory in Mexico continues to produce blockbuster content that resonates through our linear networks both in the U.S. and Mexico and is now powering our market leading streaming platform. ViX has been fully lounged and is now the definitive leader in Spanish language streaming in less than a full year of operations.

Growth and profitability in our core business has been more than offsetting the investments we made in ViX, while the strength of our combined assets in the U.S. and Mexico sales lead us to estimate this will reach profitability by the end of 2023. With this, we will achieve what our global streaming peers are projecting will take them four to five years. And Grupo Televisa the ongoing strong rd unit adds momentum driven by our expansion plan should contribute to accelerate residential revenue growth at cable over the coming quarters, particularly as we implement our regional pricing strategy. While sky net enterprise operations in cable faced challenges in 2022, we are convinced that the strategies already implemented will contribute to improve their operating and financial performance in 2023.

Now, we are ready to take your questions. Chuck, please provide us with instructions.

Q&A Session

Operator: Yes, sir. We will now begin the question-and-answer session. And the first question will come from Fred Mendes with Bank of America. Please go ahead.

Fred Mendes: I have two questions. I mean, the first one I know the Intel company it’s relatively small, but I think there was a higher impact in this quarter because when I look at the consolidated growth from cable was 1.4. When I look at the MSO, the growth was 0.9 and the enterprise segment actually declined. So the consolidated growth was significantly higher than when I look at both divisions. So if you can explain just a little bit of the intercompany. This will be my one. And then on the second one, I think, Pepe Antonio also mentioned that prices are relatively stable on cable. But once I look, for example, net adds, net adds were strong. Only net adds on broadband, there was a growth of 6% or 7% but the growth on cable was close to 1%. So just trying to understand the difference between price that is payable, if we are seeing some downgrades in the plan anyways. Just trying to understand the dynamic. Thank you very much.

Alfonso de Angoitia: Thank you, Fred, for your questions. I’ll ask Carlos to elaborate on the first one, as that has to do with into company accounts. It has to do mostly with everything that’s Sky and cable doing together, but he can expand on that.

Carlos Phillips: Yes, that’s correct, Fred. As I also was saying, when you look at the inter-segment operations, there was an increase in the fourth quarter that has to do as I also was saying with increased B2B activity between cable and Sky. So that’s the other one. And I’m not sure if your question was directed to inter-segment operations or whether it was within cable. But within cable as well in the fourth quarter, we had an increase between the network operations and the MSO activities intercompany. So that’s the other element that you are seeing within cable, not within the segment of cable.

Alfonso de Angoitia: And as to your second question, I’ll ask — I also have Pepe Antonio the question to expand what I’ll say. But as we all know, cable is a regional business. If you look at the total country, we are looking at stability in terms of prices. As Pepe Antonio mentioned, our ARPU is flat even in this very competitive environment. So, that’s very good news, but he can expand on this.

Pepe Antonio Gonzalez: Thank you, Alfonso. As you said ARPU has been as we think stable. The way to reconcile the differences between the organic growth and the revenue growth, and I’ll emphasize the part that one has to look at the MSOs segment, not at both the MSOs and enterprise because then the difference becomes even bigger. But there is a difference within the MSO segment. And it has to do with other revenue that’s not due to organic. Notably, there is a there is an offset in advertising and there is a share of over the top consumption has increased this year. So that is why that has changed. Now as Alfonso said, this is a regional and a very tactical business, and we are in an inflationary environment. So we don’t see any prices moving downwards at all and that’s why this has remained stable, and we will continue to monitor tactically and regionally moving forward, what to do next and these numbers should converge to about the same in the future.

I don’t know if that was clear.

Operator: The next question will come from Leonardo Ramos with UBS. Please go ahead.

Leonardo Ramos: Hi, good morning, everyone. Hope everyone is well. Can you please say, how much of your cable home’s are connected to fiber to the home? And how do we expect the proportion of HFC and FTTH to be in the future to evolve in coming years? Do you do you have a plan to get to a 100% of subscribers connected to FTTH? That’s my first question. Thank you.

Alfonso de Angoitia: Thank you, Leo. Pepe Antonio will take your question.

Pepe Antonio Gonzalez: Thanks, Leo, for your question. As a matter of policy and guidance, all of our greenfield investments and expansion plans are on FTTH. So all of our new cities, and in fact in within cities, when we have a large expansion plan, we’re doing it through FTTH. We closed the year with 17% FTTH, we expect to close next year by a little over 20% to FTTH. However, it is very important that we’re doing a very — an upgrade and modernization of our HFC network. Today, we have over 10% of our network is DOCSIS3.1, which can provide 1 giga of speed. By the end of 2023, this number will be 40%. So our network, — we — it’s a policy that EC has been following for a very long time to keep the network in pristine conditions.

And our HFC network will be 1 giga, 40% of it will be one gigahertz ready, which is all the speed you need in Mexico. And the FTTH will continue to expand, because almost all of our expansion, over 85% to 90% of our expansion is done in FTTH. I hope that was clear.

Leonardo Ramos: Makes a lot of sense. Thank you. My other question is if you could provide, I know you mentioned that, for example, you just mentioned the ARPU flat in a very competitive environment, very good news. Of course, we agree. Could you please provide more caller on that, maybe on what we don’t see — for example, what we don’t see on your competitors’ websites. Are they providing discounts? Are they calling clients and offering discounts below the line that we cannot see, if you could provide some color or there’s some regions that are more competitive? Thank you.

Alfonso de Angoitia: Thank you, Leo. Pepe Antonio will add to what I have to say, but of course, it’s a regional play. It’s — as he was describing, very tactical. So it depends on particular regions, particular cities, depends on the competitive environment of each locality. So but as you were saying our ARPU is flat, which is great news. And we have seen stability in terms of prices. But Pepe Antonio can give you more color.

Pepe Antonio Gonzalez: Thank you, Alfonso. In some markets, the most competitive markets is when all the players are in, and there are a few cities where that is the case. That’s the most competitive one. But we have kept our offer stable, nationally speaking for the last year and a quarter. And most of our competitors have also kind of done the same. And that’s why I think the ARPU has remained stable in the course of the year. As I also mentioned, last year in Mexico and in the rest of the world was an inflationary year. So that is making us all look at our options moving forward. But I think, we don’t see any — you mentioned them like under the counter or something, discounts. We are definitely not doing that, and we’re not seeing that in our competitors either.

Operator: The next question will come from Marcelo Santos with JP Morgan. Please go ahead.

Marcelo Santos: The first question is if you could please comment on the progress of the entering to new regions. How is that taking place? And the second, if you could provide an update on the spinoff of the sports and gaming assets, when should we expect that? Is there any new development in that front?

Alfonso de Angoitia: Thank you, Marcelo. Pepe Antonio can touch on and answer your first question, and then I’ll address the second question.

Pepe Antonio Gonzalez: Thank you. As we had a very large 2 million home expansion plan on top of almost another million for 2022, and we’re hoping for another million this year. So this is a continuing a continuous process. On the areas where we have expanded, in one of the major areas we have reached 12% by the end of the year. But in many of the other markets, the smaller markets that we also expanded, we are almost reaching 20%. So, we’re very enthusiastic about these results and our priorities moving forward is to try to look again very tactically and very strategically where we think we can set up the network and penetrate the market the fastest. So we’re very — we’re being very selective on locations via the hub levels. And that’s what we did in 2022 with good results. And we will continue to do that in 2023.

Alfonso de Angoitia: And as to the spinoff of other businesses, we have worked on the financial side to create the performance for the spinoff company. So everything is ready and we have submitted for approval before the Mexican securities commission. So, we believe that this will happen. We can close on that in the first half of the year closer to the summer. But it’s all subject of course to getting that approval and it’s taking longer than we expected.

Marcelo Santos: Just one clarification on the first question. You said that this year you hope to expand is 1.2 million homes?

Alfonso de Angoitia: No, no, close to 1 million.

Operator: The next question will come from Carlos Legarreta with Itau. Please go ahead.

Carlos Legarreta: Just two very quick ones, the first one, perhaps for Luis, you mentioned that you will start offering product services with alliance with BC. So, so I’m just wondering if you can elaborate on that, because that seems to make a lot of sense. Just wondering who are your targets? And what are your expectations? And the second about cable, if you are thinking about rising prices this year for not long.

Alfonso de Angoitia: Yes, Luis and Patton can take the first one. Of course, as you mentioned, it makes a lot of sense for Sky to sell EC’s broadband the product. It’s something that we’re paying a lot of attention and putting a lot of effort into makes all the sense in the world with the client base, the subscriber base that Sky has. So, Pepe and Luis can expand on that

Luis Malvido: I take the first part. We’ve been struggling to protect our customers from the — let’s say, attack from the cable operators. And this is mostly because they offer a bundle. It’s not just about the TV service, but also because pay TV companies, cable companies offer abundant between a cable and TV services that are very attractive for customers. It’s interesting to highlight that around 70% of our post base already passed by some kind of fiber or ultra broadband infrastructure. So we’ve been able to protect our customers mainly due to the content we offer and the customer experience we offer. Having said that, we thought that it would be also important for us to have a bundle working we can offer to our customers particularly and this is part of the answer to our postpaid customers.

A bundle with broaden offer. 40% of our positive base is already passed by EC infrastructure. So, our main goal will be offering these customers a bundle together with DTH offer now putting together in the broadband from EC infrastructure. We believe this is key for protecting our customer base and additionally reducing churn. Of course, we also have some postpaid using ultra infrastructure, which is not exactly a good coverage experience for these customers. And we will be offering these customers that are taking broadband from us, but this is ultra broadband by EC and this is about 90,000 postpaid customers that are already enjoying broadband, but we believe that it will be very attractive for them to have, to move from wireless broadband to a fixed broadband offer by EC.

So all together for Sky, this will be a retention tool, and I’m upgrading and cross selling tool for our customers. And at the same time, we see that this will improve the take up rate in EC and of course the return on investment for them. We will go in a revenue share model in which we take all the commercial activities and EC take all the backend activities including field service and installation. So we are really optimistic on this and as I said the benefit will be for our customers for Grupo Televisa customers.

Alfonso de Angoitia: And Pepe Antonio, we’ll take the question that has to do with price increases.

Pepe Antonio Gonzalez: Before I do that, let me just agree with Luis. That EC, we are very, very, very happy with this initiative. It’s a no brainer. I think this is going to work both what is going to work well for both companies. We have a lot of overlap, where they have customers and we have customers. So I think it’s a win-win situation for both companies and we’re very happy with that. Regarding whether we’re considering price increases. And I said it gives us you know, it’s a tactical business and we’re being very careful as to what the competitive environment is regionally is and we will continue to do so. But we are in an inflationary environment Mexican world had an inflation of close to 8% last year, and an inflation that will be lower but similar this year. So we’re looking at it very carefully and tactically and you will decide and be opportunistic, about price increases, but always keeping, wanting to increase our footprint and our presence on the ground.

Operator: The next question will come from Soomit Datta with New Street Research. Please go ahead.

Soomit Datta: Hi, there. Yes, thanks very much. A couple please. Question on bid for Megacable A, as we understand that was rejected. Could you give us an update on how your thinking is being sort of I guess, close to three months since that time? So I appreciate might be difficult tell us exactly what you’re planning, but if you could give us a steer on how you are thinking about the situation, that would be very helpful, please? And then the second one is on TelevisaUnivision kind of really impressive MAUs, the 25 million number, it’d be great to get a bit of a steer on maybe what exactly that definition of MAU is in terms of and people just kind of logging on? Do you need to log on a few times to be defined as an MAU? And what is the usage of those users once they are on and how much was impacted by the World Cup?

And I guess ultimately, is there any way for us to really sort of take that number and think about what it means from a revenue perspective. Any help around that would be super helpful. Thank you.

Alfonso de Angoitia: Yes. Thank you, Soomit, for your questions. Always very good questions. As to your first question, it has to do with Megacable. It’s so frustrating for us when something makes so much sense, but as you may recall, after several years of holding discussions with them, and also their financial advisers. On November 14th last year, we submitted a non-binding offer to the Board. And as you might remember, this considered a stock-for-stock merger of all of our cable assets in Megacable and we included a premium of 19% for Megacable shareholders and that merger meant that Megacable shareholders and Televisa would own 45% and 55% of the combined company respectively. So we felt that, it was a great deal for everybody.

The offer also contemplated that Megacable shareholders would receive a special cash dividend of approximately Ps.15 billion, 1-5. And as you might also remember, we wanted to create a public vehicle, a pure play cable in Mexico. So we offered Megacable to remain as a publicly listed company, as the surviving entity of the merger. And so we strongly believe that, what we proposed was going to deliver great benefits for both companies and of course for our shareholders. This would create by far the leading cable operator in Mexico. As we made public, we estimate the creation of more than Ps.55 billion in net present value for the combined company from — just for synergies of Ps.9 billion annually. And this had to do with, of course, cost reductions, but more specifically in the optimization of CapEx. So unfortunately, on December 12th, the Board of Megacable rejected our proposal.

They said, in their letter that they rejected this proposal in its entirety. So, I think the market clearly understands the industrial logic of what we proposed, and what we offered, and the benefits that this would create. But unfortunately, also, Megacable has insisted on terms and conditions that we strongly believe wouldn’t be in the best interest of Televisa shareholders. And therefore, neither we nor, our Board of Directors are willing to accept those terms. So again, unfortunately, we could not do that deal. As I have been saying, I mean, it made all the sense in the world. It’s so frustrating after so many discussions and years and financial advisors going back and forth. But we now have turned the page and are a 100% focused on executing on our plan, expanding to our selective locations to increase our share of RGUs. We will, of course, be very disciplined in terms of CapEx deployment of our maintaining our ARPU and of course on the pricing strategy in each locality in Mexico.

So, in essence, we have turned the page and now we’re back to executing on our plan, which is looking great. So as to your second question has to do with TelevisaUnivision and what has to do with the launching of our streaming service. The trends that we’re seeing are great. As you mentioned, we reached 25 million MAUs, and this is only in a partial year of operations. I think, it took Pluto five years to get to25 million MAUs. So very quickly, we have become the largest Spanish language streaming service in the world, and we’re very happy about that. We are actively and very encouraged about selling advertising on the AVOD platform. We’re selling that advertising at a premium. And so that’s looking good and we’ll continue growing this year.

And as to the subscriber base, it has also grown rapidly, both in Mexico, in the United States and in Latin America. As to the MAUs, when you go into the platform as a user, and of course you have to provide the platform with data, you become a user. And there if you go in once a month, you consider it an MAU.

Soomit Datta: Okay, thanks. Maybe just a quick follow up on the Megacable situation. So, it sounds like they kind of counter proposed an offer. Can you give us any sense as to what were kind of red lines around that proposal and why it led to nothing from your perspective?

Alfonso de Angoitia: Yes. I think, I wouldn’t like to get into the details. What I can say is that in essence, what there were insisting on asking for were terms and conditions that are not in the best interest of Televisa shareholders, but even more than do not comply with best corporate governance practices for public companies.

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

Alfonso de Angoitia: Thank you very much for participating in our call. If you have any additional questions, please call Rodrigo and our team, and we’ll be happy to answer them. Have a great weekend.

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