Good morning, everyone, and welcome to the Grupo Televisa’s Third Quarter 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. I will now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Cole. 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. During the third quarter, Grupo Televisa’s consolidated revenue reached Ps.19.3 billion, representing year-on-year growth of 3.6%, while operating segment income reached Ps.7 billion equivalent to a year-on-year decline of 6.7% mainly driven by the amortization of costs related to the transmission rights of the World Cup at Sky. Adjusting for this Grupo Televisa’s consolidated operating segment income has fallen only by 3.1%. Revenue growth in cable and our other businesses segment was partially offset by declining revenue at Sky. Still, as we discussed in our previous earnings call, this is a transformational year for Sky and we’re confident that next year this business will experience a strong rebound, especially at the EBITDA level. Moreover, our expansion plan in cable is working very well this year, allowing us to gain market share of RGUs while keeping our ARPU flat. We expect the solid RGU net adds momentum to continue going forward. The Pepe Antonio and Luis will elaborate on the operating and financial performance of each of our core consolidated segments in their remarks. But before, let me say that even though global financial conditions have tightened economic activity in the U.S. and Mexico remained relatively healthy during the quarter. However, the global economic environment is likely to deteriorate as the hiking cycle continues with interest rates potentially peaking at some point in 2023. As we mentioned three months ago, we will continue to monitor the evolution of macro variables and will not hesitate to act decisively taking necessary measures to preserve free cash flow as has been the case in previous macroeconomic downturns. As a reminder,…

Thank you, Alfonso. During the third quarter residential operations of our Cable segment continued the solid turnaround and strong growth in operating metrics for a full year. Let me provide some highlights for the third quarter. Net adds grew by 320,000 fixed revenue generating units, RGUs, the highest quarter of the year and the third consecutive quarter over 300,000 RGUs. This compares well to an average of 110,000 per quarter in 2021. Gross adds were 1.2 million RGUs, the highest figure in the history of the company, even exceeding the lockdown months during the pandemic. We added 71,000 video RGUs. The full year was positive and record levels of net-adds. Video continues to be a success story. Moreover, our distribution agreement with ViX+ is gaining traction. Broadband RGUs continue to accelerate to 96,000, the strongest quarter of the year and reached 2018 levels. Our product mix remains stable. Triple-play packages account for close to two-thirds of our sales, double sales packages also continue to grow, underpinning our broadband net-adds. This is our highest margin service, so we continue to enhance its product offering. We added 71,000 subscribers, the fourth consecutive positive quarter and the highest quarter of the year. To sum up, the strategies implemented around the realignment and simplification of our product suite, the improvement in the quality of service and customer experience on our homes-passed expansion plan have translated into almost all operating metrics, reaching record levels and/or the highest since 2018, despite the economic headwinds. Now let me turn to some significant developments during the quarter. We implemented a bottoms up simplification of our product design system. The new building block modules allow us to first quickly create and modify new projects, and second, adjust prices at a more granular level rather than complete metropolitan areas. At…

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

In our previous call, I introduced the key highlights of our strategic program and today I will share with you the progress of the describing initiatives as well as an overview of the third quarter operating and financial results. As I explained in that call, the most significant opportunity for Sky comes from improving sales quality by rebalancing channels mix and redefining sales commission model. To this end, during the second quarter, we look – we took control of all digital channels efforts previously mostly led by our dealers. We introduce artificial intelligent tools to optimize digital advertising investment and increase sales, while improving overall customer experience. In only five months of operations, we managed to continue delivering on expectations by increasing sales volumes by 75%, while improving postpaid mixed by 6 percentage points and reducing average subscriber acquisition cost by 19%. Also, regarding sales channels during Q3 radically change Sky sales commission model. In September, we went from upfront payment model to a new customer revenue share model that creates incentives for dealers to enhance product mix while improving customer tenure. Initial results are encouraging. A suspected total growth has went down by 12%, but with a significant improvement in postpaid additions, we went from 11% to 23% postpaid share in October and we expect Q4 to be the first quarter in two years to be postpaid net adds positive. In terms of strategic alliances to increase Sky telecom revenue stream, in our previous call, I mentioned that in second half of this year we would be launching a new mobile service build on AT&T network like an MVNO model. AT&T has a robust and reliable network with competitive 5G coverage and is a leading player in the mobile industry. Also mentioned that our initial addressable market would be…

Thank you, Luis. Before wrapping up, I want to share with you that yesterday our Board of Directors approved a proposal to spin off all businesses that are part of our other businesses segment except for the [indiscernible] and infrastructure, which will remain at Televisa given the TelevisaUnivision merger. These businesses include our soccer team America, the Estadio Azteca, the gaming operations and publishing and distribution of magazines. Through the spinoff, we would create a new controlling entity that would be listed on the Mexican Stock Exchange and that would have the same share holding structure of Televisa via distribution of the stock of that entity. This plan will allow both Televisa and the new entity resulting from the spinoff to focus on their respective business models and growth opportunities, enhancing their ability to generate better conditions for access to capital financing sources and investors that are aligned with each of those businesses. We expect that the reorganization would be completed by the first half of next year, which would be subject to several conditions, including obtaining all required corporate and regulatory authorizations and the approval of the spinoff by Televisa shareholders meeting. Year-to-date, the spun-off businesses account for around 7.4% of our consolidated revenue and approximately 3.4% of EBITDA. In closing, despite a more challenging macroeconomic environment that initially expected, Bernardo and I continue to be laser focused on the execution of our strategies to achieve our medium term goals and create shareholders value, both at TelevisaUnivision and Grupo Televisa. At TelevisaUnivision, solid operating and financial performance during the first nine months of 2022, with year-on-year revenue growth of 9% midterm elections in the U.S., the Qatar World Cup and the successful launch of our global streaming platform should allow us to deliver double-digit revenue growth for the second consecutive year, which has allowed us to finance our digital transformation strategy and the launch of our two-tier global streaming platform. And at Grupo Televisa, the ongoing strong RGU net adds momentum driven by our expansion plan should contribute to accelerated residential revenue growth at cable over the coming quarters. While Sky and the enterprise segment of cable have been facing challenges, we are convinced that the strategies under implementation will contribute to improve their operating and financial performance in 2023. Now we’re ready to take your questions. Cole, please provide us with instructions

Certainly. And we will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from David Joyce with Barclays. Please go ahead.

Thank you. First on the cable business, if you could please provide some more color of where you are in terms of your network upgrades, how much more you expect to do this year and next year. And related to that, given you’ve had some very strong net adds in some of your new passings, how have the competitors been responding? Like, where are they in your markets in terms of their upgrades be it América Móvil, Totalplay, [indiscernible] And then secondly on Sky, I was just wondering when you would be done with cleaning up the subscriber base or is that one prepaid model that you shut down earlier this summer, taking – mostly take care of that for you. Thank you.

Thank you, David. Well, as to your last question, I’ll ask Luis to answer it, but before as to your first question Pepe Antonio you can go into further detail, but we’re very happy with our expansion strategy. I would say that, it’s starting to pay off as you saw we had record gross additions and we are experiencing high penetrations in the new cities. So as Pepe Antonio mentioned just as an example, penetration in a very large new city will reach 12% this year and will reach 20% in other medium size cities, which is great. And we have accomplished this maintaining ARPU flat, which has not been the case of our competitors. So Pepe Antonio can expand on this and then Luis can take your last question.

Thank you. Thank you, Alfonso. As you said, our expansion plan is on track and our ARPU is stable. That’s the goal we set a year ago to increase and solidify our market share in the market. As you saw, the operating metrics are very, very strong. Gross ads are in record levels, which means we’re near our sweet spot in pricing and in product offering. Regarding our expansion to selective locations, our philosophy is when we’re going into new areas, we’re going with fiber, and that has been going well on our penetration numbers are increasing healthily. In the numbers we have last year and in our expanded expansion plan, so to speak for this year. So we are very happy with that. And we are in our areas where some of our competitors are responding, we’re upgrading quickly. As you know, all of our new investments are in fiber, but in our HFC network, we’re expanding most of our network is fiber deep and we’re expanding to DOCSIS 3.1 to allow us to go into 1 giga in speed to make sure that we can compete with anybody who comes along. And we have been doing this for quite a few years now. So we think we’re ready and we feel confident that this is working well.

So I take care of your second question. Let me go a little bit backwards to answer your question directly. So in the beginning of the year around 90% of our growth trends were coming from a door-to-door channel, our master dealers and distributors. Probably this channel with an incentive based on from payment was appropriate for a growth period. But since the last couple of years where we stopped growing and we are protecting our base this was bringing more churn than growth. So we needed to replace this commission scheme. And we believe that with the change in the channel mix that I already mentioned, on top of that, the change in the commission scheme, we will be bringing healthier customers, higher ARPU and customers stay longer with us. This is very important because our outlook for next year is churn going down, significantly down, not only in postpaid, but also in prepaid. And at the same time, we’re receiving significant amount of CapEx, as I mentioned, going down over 20% or two digit – sorry, high two digit in CapEx for next year. So to your question, we will have still some churn coming from prepaid in the first half of the year because that prepaid takes over 200 days to be considered churn after the customer topping up. But focusing on these customers that we’re on the last call promotion I mentioned in previous call that they were around 250,000. We expect to finish the cleanup of these customers by the end of this year that means during Q4. And I will repeat, even though we are cleaning up this 250,000 customers this year, it will have no impact on first underlying churn and second EBITDA or revenues.

Thank you very much.

And our next question will come from Carlos Legarreta with Itau. Please go ahead.

Hi, gentlemen. Good morning. Thanks for taking the questions. I have two brief ones, actually. The first one regarding the share buyback program, we know that you started sharing buyback talk at the end of August. I’m just wondering how aggressive you’re willing to be in this regards, given where the share is currently trading at. And secondly, with the spinoff, if we could – if it would be reasonable to expect to continue seeing further decreases in corporate expenses. I mean, I know the business is not productively vague at the consolidated level, but perhaps what you said, Alfonso a little under 10%, I just wonder if that’s something reasonable.

Yes. Thank you, Carlos. As to our buybacks of stocks – of our own stock, as you have seen, we have been doing it. We believe that it’s a great opportunity for us. So we have been doing two things, reducing leverage and taking advantage of market opportunities in terms of the debt. And as I mentioned in my remarks, we have reduced leverage with cash on hand by $800 million, taking advantage of those opportunities and buying back stock. We will continue to look at both of them and continue to do both of them. As to the spinoff, I guess conceptually as a result of the Televisa-Univision merger. And after that, it didn’t make a lot of sense to keep the other businesses under the Grupo’s umbrella. So we want to simplify the Grupo Televisa story and simplify basically Grupo as a cable and telecom operator. And then what I saw is that those businesses made more sense to – I mean, in terms of having them as a separate company. And that will allow them to have a more strategic focus and flexibility being a separate and independent company. Of course, I mean this group will have a dedicated management team. So, I think this will be a smaller company, but it’ll be a very nice sports and gaming company, which makes sense. It’ll be traded on the Mexican stock exchange, so it’ll be a public company. So that’s the rationale behind that. And of course, I mean, as we mentioned, it’s around 7.4% of consolidated revenue and approximately 3.4% of EBITDA.

Thank you. That makes a lot of sense. But do you think, it could make sense to assume a reduction in the corporate expense, say from the performer level X content to expect a further reduction in corporate expense given this spin up?

I think you’re safe to assume that. Yes.

Thank you so much.

And our next question will come from Alejandro Chavez with Credit Suisse. Please go ahead.

Hi Televisa team. Thanks for taking my question. I think following up on Carlos’ question, I was wondering if you can share more about perhaps if this new spin-off company will receive any debt and how the spin-off would impact dead metrics if it would have any impact. Anything you can share on that front would be useful? And perhaps a little bit more on the, on the strategic rationale, why or why not keep the Sky within the Televisa umbrella? Thanks.

Yes, thank you, Alejandro. So the spun-off company will not have that originally or as part of the spin-off. And as to, I mean, as I mentioned, we’re trying to simplify the Televisa story, the Grupo Televisa story, and it will remain as a cable and telecom operator. And in that simplification and that streamlining of this Grupo Televisa story, we’re talking basically about easy as a cable operator and Sky as a telecommunications and video DTH operator. So that makes sense to have that as part – these two companies as part of the group. And it also, as I mentioned before makes sense to create a gaming and sports company that will be traded separately and will be considered just a distribution of the shares or a dividend in essence.

That’s very clear. Thanks a lot.

And our next question will come from Soomit Datta with New Street Research. Please go ahead.

Hi there. Yes, thanks very much. A couple of questions please. First of all, on cable you talked about some shifts in the pricing model, I think more granularity in terms of pricing, a bit more modular which, sounds interesting. I guess in broad terms, how are you thinking about price increases going forward? Are you able to – does this new model allow you to do that? But in a sort of less kind of nationwide fashion? Are you still keen to kind of increase prices? You talked about finding a sweet spot in terms of gross ads. So be interested in your perspectives there, please. And then a second one, if I could please on Televisa-Univision on the content business. I appreciate you are not in a position to give any subscriber numbers yet, but I’m just interested where you’ve had take up from ViX Plus users. So the subscription service, what has been the kind of behavioral response? So you talked about 50% of customers moving from the kind of AVOD platform, and then moving on to ViX Plus, are they staying on the ViX Plus? Are they signing up for one or two months and then churning off? Are they also using kind of AVOD while they’re on ViX Plus, be just interested in any kind of qualitative comments you can make around that behavioral usage. Thanks very much.

Thank you, Soomit. What I can say, and Pepe Antonio can expand on your first question that has to do with pricing. On cable is that there’s not a national market of cable nor national pricing of cable. And that’s why we have restructured the company to gain flexibility in terms of local pricing. So competition has intensified us. We have all seen, and it’s really important to have flexibility in terms of determining the prices on a regional basis and it being able to move in that sense quickly and efficiently. What I can say also, I mean, is that our expansion and our growth has not been at the cost of prices. As I mentioned before ARPU has remained flat, which has been great. And I’ll ask Pepe Antonio to expand on this question, and then I’ll go to your question that has to do with TelevisaUnivision.

Yes. Well, thank you. As Alfonso mentioned, what we did this on a modular basis, it’s a way to create products before the products were created from the beginning to end. And this was very cumbersome and time consuming. And now the way we create our product is very intuitive, in which you have a module for broadband and module for video and module for streaming, and you can add the different modules and combine them. So this gives us flexibility in our product offering, but also we’re able to change price. We are able to adjust our offers at the hub level instead of at a city level. And when you think of a city that would make sense, but a city will include Mexico City, which is a large share of our market. So we’re very happy with this new increased flexibility. We haven’t moved our prices this year. Our ARPU has remained stable. And moving forward, we will continue to look as we have at market dynamics, how our operating metrics are performing, what our competitors are doing. As you know, inflation in Mexico has been increasing by about 9% year-on-year like in the rest of the world. It’s an inflationary year. But we will remain and we will follow our competitors to see what we do in the future.

And Soomit as to ViX Plus and ViX what I can say is the AVOD part, which is ViX has been live for two full quarters. And as I mentioned before, we’re seeing substantial success with our ad sales effort on that side of the business and onboarding new streaming online advertisers. In Mexico specifically it was an educational process with agencies and with the advertisers because nobody was selling this kind of advertising with the volume that we’re offering. So that is picking up and we’re happy with it. We’re very excited also about the early results we have seen at ViX. We set some very aggressive goals in terms of users and engagement, both of those have been performing better than expected. So we have great momentum. But as to your question, we believe that it is early to draw conclusions on trends from these results. We’re just into two quarters into this journey. So we’re not sharing more specific numbers regarding monthly average users right now as we work to keep growing. Nor we have shared the numbers that have to do with ViX Plus and the subscribers, which is a more recent type of offering. What I can say is that the idea and the concept that we established for the two platforms, which is having a single app has turned out to be amazing in the sense that it allows us to use ViX, the AVOD service as a funnel, as I mentioned and you got the numbers right. 50% of the ViX Plus subscribers are coming from the AVOD funnel. And also it allows us to have a better churn management having everybody in the same app. So we are very happy with having determined that and we’re very happy with the early results.

Thanks.

And our next question will come from Marcelo Santos with JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking my questions. The first question would be about the assets to be spun off. So this would be basically those assets, all the assets that fall under the other businesses. Could you just give us an idea like can you consider those margins levels as normalized levels going forward? What are kind of a CapEx levels that these assets, anything you could help us to shape those assets? And the second question is about the CapEx outlook for 2023. So you said that Sky CapEx is going to have a high double digit decline. What about the other CapEx levels? What is the outlook? Thank you.

Thank you, Marcelo. Yes, as to the spinoff, it includes the other business segment except for the concession and transmission business, which is tied to the TelevisaUnivision deal. So, it includes the Azteca Stadium, the Club America [ph] team, the publishing division and gaming. The most important component of other businesses is gaming. I can say that those businesses very specifically the stadium, the soccer team and gaming have not fully recovered yet from COVID. And we expect to of course that spun of company to have better numbers in terms of revenue and better margins as this normalizes. In terms of CapEx, I could say that the only one of those businesses that requires additional CapEx of magnitude would be the stadium as it has commitments that have to do with the next World Cup that will take place in Canada, the United States, and Mexico. One of the places where that World Cup will be hosted is Aztec Stadium. And it requires substantial CapEx going forward to modernize the stadium. But aside from that we don’t require CapEx of any magnitude as to the other businesses. And as to your second question, I’ll ask Luis to answer it.

So in terms of CapEx, I mentioned we are dropping year-on-year. We study this year because of our change in our model and excluding those we consider bad sales. And we already lowered 20% from previous year, and we expect to have a two digit drop – additional two digit drop for 2023; this is for Sky.

Thank you. I wanted to know the CapEx for the orders as well, like for [indiscernible], can talk about the CapEx for cable. I wanted to know how CapEx outlook for 2023 if possible? Thank you.

Yes. What I can tell you, Marcelo is that we will continue to expand on the easy side, as you saw we have had great results in terms of net additions record results. We’re very happy with that as I have mentioned I think twice we have been able to do that maintaining ARPU, which has not been the case with competitors of ours on that side. And – but it’s too early to say and to talk about CapEx for 2023. We’re finalizing our budgets and of course we’re analyzing each of those markets that I mentioned. And we’ll be ready to share CapEx with you at the beginning of the year.

Perfect. Thank you very much.

And our next question will come from Luke Brandon [ph] with Bank of America. Please go ahead.

Hi. Good morning everyone. Thank you for taking my questions. So two questions from my side. First of all looking at the enterprise business, what should we expect in terms of the profile of the projects we’re taking? Should we continue to see projects with a lower margin, at least in the short-term? And then second one, if you could give us an update on how operations are going in Central America and the extension plans you had for the region? Thank you.

Thank you, Luke [ph]. I’ll ask Pepe Antonio to answer your first question and I guess you refer to Central America in terms of Sky?

Yes, Yes.

Okay. So, and Luis will answer your second question.

Thank you, Luke. Well, what we’re trying to do, and what we have done this year is we partially, and I emphasize the part partially replaced the Red Jalisco project with an expansion of Red Jalisco, which is both good news because it means that our project was well received and we were commissioned another project of smaller magnitudes to include schools and et cetera, et cetera. So what we are trying to do is trying to find projects that are similar in this vein, which remain with high margins. But these are hard to come by. We’re working on that, and we should be able to land one. We’re working on a few prospectuses for those. But as you rightly said, the rest of our portfolio does have a lower margin. So we have to also live with that. That’s the way we’re trying to do and in the process, we’re restructuring the company to make sure we can face these challenges.

And to your question on Central America. Central America is a big market, 60 million people at least there’s seven countries we are present in 60 million people; 60 million households and we are only 3% market share altogether. That means it’s a big opportunity for us. Of course, being small means we need to go very careful. And our plan is to first replace the current channel distribution that we have there based on only two master dealers. We are settling with our own teams in the five markets we selected of these seven – out of these seven. We introducing local channels, we reinforcing our offer, adjusting our prices, billing in local currency, and more importantly we extended the rights for the La Liga, which means we have a very important content that is very attractive for the region. Doing all this we will – we are sure we will manage to turn around the decline in the business. We need for this new distribution channels, new repairing and installation teams. And we are building on all that by country by country. Our expectation is to turn around the top line decline that has been experiencing – we’ve been experiencing until this year and start growing in 0next year. Year-on-year will be almost flat, slight growth of low-double-digit, but we expect to grow even in revenues starting next year. And of course, for 2024 the growth will be much more visible.

Very clear. Thank you.

And our next question will come from Alejandro Gallostra with BBVA. Please go ahead.

Hi, good morning everyone. I would like to go back to the rationale of spinning off these other businesses. What makes you think that the market will adequately value these businesses separately? Given that it will be a very small company conglomerate with very few synergies in my view. What is it, be better for you to directly sell these businesses to someone else? That’s my question.

Thank you, Alejandro. We have tried to sell as you might remember; we had a strategic decision to sell most of the other businesses. We were able to sell our minority position in OCESA to Live Nation, which was a very successful transaction. We also sold our radio assets. However we believe that it’s quicker for us to do a spinoff of these businesses in order for us to focus a 100% of our attention into Sky, EC and our position within TelevisaUnivision. If you look at sports groups in the United States and in Europe, it’s ideal to have a soccer team and a stadium put together, which makes a lot of sense. And then gaming, which is already part of other businesses is a large, I mean, a large component of that is sports betting. So if you create a group that has all those three components it makes sense. The synergies, of course are more, have to do more with the stadium and the soccer team. And as to the other components, I guess the new company will have to decide what it wants to do with a migration of print into digital with our magazines and also the distribution company of the printed magazines. So that will be a strategic decision for that company. So I think the market doesn’t give, in my opinion, a lot of value to other businesses as part of Grupo Televisa, and that’s why we believe that more value can be generated as an independent company with those components.

Okay. Thank you. Thank you very much for your answer.

And our next question will come from Gill Mervis [ph] with Truist. Please go ahead.

Hello. Thanks for taking my question. I was wondering if the overall slimming down of the business is going to have any other secondary effects we should be aware of like for example, unlocking of significant real estate value that could be monetized?

Yes. I mean that has to do with a Azteca Stadium. As I mentioned, one of the challenges of the new company, of the spinoff company will be to modernize Azteca Stadium as part of the commitments that that company has in respect to the World Cup that will be hosted in Mexico, the United States and Canada. So that company will have to finance that pretty big CapEx and develop that land. So yes, that will unlock probably that real estate.

And your corporate headquarters, that is the right size. And do you still own this massive corporate headquarter companies that you have, and do you think it’s still right sized after becoming a much smaller company?

Yes, we – Grupo Televisa still owns the headquarters in Mexico City, in the area of Santa Fe. And we’re of course optimizing that. Next year EC will move into the Santa Fe facilities rather than renting space in other buildings. So but yes of course, I mean, we’re always considering options in respect to that real estate.

Okay. Thank you.

And this will conclude our question-and-answer session. I’d like to turn the conference back over to Alfonso de Angoitia for any closing remarks.

Yes, Cole. Thank you for participating in our call. And please call, Rodrigo or us with any questions that you might have. Enjoy the weekend. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.