Grupo Televisa SAB (TV) 2003 Q2 法說會逐字稿

Good morning ladies and gentlemen and welcome to the Grupo Televisa 2nd quarter 2003 teleconference. At this time, all callers are in a listen-only mode, and the floor will be open for your questions and comments following today’s presentation. Before we begin, I would like to draw your attention to page 7 of the press release, which explains the use of forward-looking statements. Please familiarize yourself with this section, as it also applies to everything discussed in this conference call. Now I will turn the call over to Grupo Televisa’s CFO Alfonso de Angoitia Noriega. Please go ahead sir.

Thank you. Good morning and welcome to Grupo Televisa’s conference call to discuss our results for the second quarter of 2003. With me today is José Antonio Bastón Patiño, our corporate vice president of television. First, I am going to take you through our financial results for the quarter. Then, we will review the outlook for the rest of the year. Afterwards, Pepe will discuss our operating results related to our television division. When Pepe is finished, we will be glad to take your questions.

We are very pleased to report that our results for the second quarter were even better than we had originally expected. On a consolidated basis, our sales increased 5.9% as compared to last year’s second quarter, to a total of 5.73b pesos, and we reached an unprecedented consolidated EBITDA of 1.99b pesos, which represents a double-digit increase of 34% over last year’s second quarter, and a margin expansion of 700 basis points, from 27.5% to 34.8%. This is the highest consolidated EBITDA that the company has generated in a single quarter in its more than forty years of history. This exceptional growth was driven primarily by our television broadcasting segment, where political advertising campaigns for the mid-term election, which exceeded our expectations. The huge success of Big Brother 2, and the 22% growth in local sales boosted our television broadcasting sales by 8.2% to a total of 3.7b pesos. Revenue expansion, coupled with our strict cost and expense controls, allowed us to generate 1.68b pesos in EBITDA, which represents an increase of 25% over last year’s second quarter, and an EBITDA margin of 45.1%. It is important to mention, that excluding last year’s World Cup, and this year’s political campaigns, sales grew 4.9%.

Our programming, licensing, and pay-television segments also experienced considerable growth in sales and EBITDA. Programming, licensing, sales, and EBITDA grew 12.5% and a remarkable 138% respectively, driven by a solid increase of 27% in royalties coming from our new agreement with Univision, which enjoys our content on an exclusive basis, which has been key to their success. Also higher export sales in Latin America, and a smaller allowance for doubtful accounts. Pay television sales increased 11.3% and EBITDA climbed 83.3%, driven primarily by strong signal sales in Mexico. Our publishing segment sales dropped marginally during the second quarter, due to the translation effect of foreign currency sales, that resulted from the appreciation of the Mexican peso in the period. We also experienced a flow-down in circulation in advertising sales outside Mexico, as a result of currency devaluation in Chile, Argentina, Venezuela, and Columbia. On the other end, advertising sales in Mexico continued to grow, due to the improvement in our magazine portfolio mix, our enhanced marketing efforts, and our new, more experienced sales force. Moreover, EBITDA of our publishing segments increased during the quarter to 109m pesos. This represents an increase of 14.2% over the second quarter of last year, and an EBITDA margin expansion of more than 350 basis points, from 21.6% in the second quarter of 2002, to 25.2% in this quarter. It is important to mention that during the first six months of this year, sales and EBITDA of our publishing segment have grown 3% and 11.7% respectively, when compared to last year, reversing a three-year declining trend.

Given the challenges we have faced in our radio company, I am pleased to report that sales in this division increased 35.2%, as compared to last year’s second quarter, and we were able to generate a 7m peso EBITDA contribution. Improved programming and ratings, as well as mid-term election political advertising, were the main drivers of growth during the quarter.

As we had predicted at the beginning of the year, television sales continued to decrease during the second quarter, due to the subscriber losses we experienced in 2002, and the first half of this year. However, we were able to reduce the impact on its EBITDA by reducing our cost of sales and slashing operating expenses. Cablevision’s new management team is implementing changes to reverse the downward trend in subscribers. Specifically, we are accelerating our plans to switch our service from analog to digital, which will effectively reduce piracy, and increase our current penetration rate. We are finalizing negotiations with several suppliers, and we expect to start switching the service in the fourth quarter of this year. As a result, we expect to start seeing positive results from this strategy in the first quarter of 2004.

In contrast, our other pay television business in Nova continues to perform remarkably well, fueled by our exclusive programming, aggressive marketing, and excellent customer service. Gross active subscribers increased 11.9%, compared to the second quarter of last year, to 809,000. Revenues climbed 5.7% and EBITDA jumped a remarkable 34.4% to 297m pesos. Nova has generated more than 1b pesos of EBITDA during the last 12 months. As a result, it has not required shareholder funding for the last five quarters, and does not expect to require additional loans or capital contributions from its shareholders in the second half of 2003.

A significant increase of 488m pesos in our operating income, driven by our strong results, combined by a 753m peso decrease in our other expenses and restructuring charges and with a 417m peso increase in equity in income from affiliates, allowed us to increase our income from continuing operations from 76m pesos in the second quarter of 2002 to 1.3b pesos in this quarter. This huge increase in profitability helped us compensate last year’s 1.16b peso gain from the sale of our music recording business, and as a result, our net income for the quarter reached 1.26b pesos.

Our balance sheet continues to be strong with more than 10b pesos in cash, a net debt of only 4.2b pesos, at the end of the second quarter, and with 43% of our total debt maturing after 2011. In May, we obtained the five-year bank loan of 800m pesos to refinance the remaining portion of a high-yield bond. The terms of the loan were very attractive to Televisa, since we obtained a fixed rate in pesos of only 8.9%, and were able to marginally improve the currency mix of our debt.

As part of our share re-purchase program, which started in February of this year, to date we have bought back 23.2 million CPOs, for an aggregate amount of 352m pesos. In addition, on June 30th we paid a 550m peso dividend to our shareholders.

In respect to the use of cash we have accumulated, I would like to set the record straight. First, we will continue to analyze investment opportunities related to our core business in the future. However, I think our track record speaks for itself. We have been very conservative and have only made investments that maximize value. You know we have even resisted many temptations before the bubble burst. Second, we are not currently planning to buy additional shares of Univision, nor bonds convertible into those shares. Third, we are not currently analyzing the purchase of SBT in Brazil. Fourth, we are fully committed to our buy back program. Fifth, in the case that we do not find attractive investment opportunities, as may very well be the case this year, we would propose next year and in the years to come, the payment of dividends in amounts higher than the one paid this year.

Moving on to guidance, considering our first and second quarter results, we believe we are on track to meet our full year guidelines for television broadcasting and consolidated EBITDA margins to be at 40% and 30% respectively.

Now I would like to turn the call over to Pepe.

José Antonio Bastón Patiño: Thank you Alphonso, and Good morning to everyone. During the second quarter, Televisa aired 85 of the top 100 most watched programs, and we continue to sustain the highest ratings on audience shares across the board. From sign-on to sign-off, we achieve an average audience share of 71.6%, and in prime time we achieve an audience share of 72.6%. Our highly successful Telenovellas (ph) continue to fuel our prime time lineup. In some cases, (indiscernible) of the entire viewing audience. During the second quarter, our 9 p.m. novella “Las Villa Del Amore” (ph) achieved an average audience share of 42.8% and our 8 p.m. novella, “Nina Nada Amadamia” (ph) reached an average audience share of 41.7%. In addition, we continued to target the teenage and children demographics with our novellas classic “Quatro Cinco Seis” (ph) and the “Pokas bulgar” (ph) with excellent success.

During the month of June, we launched a new 9:00 novella called “Amore El” (ph) and a new 8 p.m. novella called “Bello Denobe” (ph) to replace the highly successful novellas “Dias Enamore” (ph) and “Nina amadamia” (ph). The initial results from these novellas are very promising, since they are already capturing close to 40% of the audience share, with less than one month on the air.

In addition, our leading 10:30 p.m. newscast, lotichero (ph) with Del Conquacindo Pesoria, (ph) and our diverse lineup of comedy shows such as “Laura Pico” that are based on the parody among others, are further boosting our ratings. The reality show genre proved again to be very successful in attracting advertisers. The second addition of Big Brother surpassed last year’s commercial success. Sales and EBITDA increased by 48% and 240% respectively. A few weeks ago, we introduced a new reality show called “Fear Factor” and the preliminary results are encouraging. Above all, we are very satisfied with our financial results. As Alfonso mentioned, Televiso broadcasting sales grew 8.2% to a total of 3.7b pesos. This revenue expansion, together with our continued effort to control costs, allowed us to generate a record of 1.68b pesos in EBITDA, which represents a margin expansion of 600 basis points from 39% to 45%, and a double-digit increase of 25% over last year’s already strong second quarter, which resulted from the revenues generated during the world cup.

I am also pleased to report that the royalties from our program and licensing agreement with Univision continue to grow. During the second quarter, royalties from the Univision increased 27% in dollar terms, from 19.6 to 24.9m dollars. Driven by growth in revenue of Univision and Gallavision (ph) and the royalty we recently started to receive from the Telephoto Renobook (ph). Now we will be able to take your questions.

Thank you. The floor is now open for questions. If you do have a question, you may press the number “1” followed by “4” on your touch-tone telephone at this time. If at any point your question has been answered, you may remove yourself from the queue by pressing the “#” key. We do ask that while you pose your question, to please utilize your handset to provide optimum sound quality. Once again, that is “1” followed by “4” on your touch-tone telephone at this time. Our first question is coming from Matthieu Coppet of UBS, please go ahead with your question.

Good morning Alfonso, Pepe, I have two questions. The first question is, (indiscernible) on the fact that it seems that the company is going towards free cash flow quicker than expected. Are you expecting not having any new CAPEX this year, and will this change your free cash flow projection for the company for 2003? My second question is how much local spending and local advertising did you get in the second quarter, and what was the location which increased sales spending in spot for the third quarter? Thank you very much.

Okay Matthew, your second question, the total political advertising we had was for 650m pesos, and it was 150m pesos during the first quarter and 500m in the second quarter. Now as to your question about the CAPEX, CAPEX will be as we have suggested, or as we had announced, it will be the same amount we have mentioned.

Thank you very much. On (indiscernible) country, do you have any assumptions for the CAPEX for this year, or any change?

Yes, it is from 15 to 20m, but I would say it will take 20m.

Thank you very much.

Our next question is coming from Rene Pimentele of Deutsche. Please go ahead with your question.

Good morning Alphonse and Pepe. Congratulations on your results. A couple of questions first for Pepe is, on “Fear Factor” when will you be launching this, and is this a production that you are going to be doing with Andemo (ph) too?

José Antonio Bastón Patiño: Yes, the program has been launched already yesterday. We are the third program. It is being aired Wednesdays at 9:00 p.m. on channel 5, and yes it is part of agreement in the Andemo (ph) company.

Do you expect you will have the same type of ratings that you did with Big Brother the first time?

José Antonio Bastón Patiño: No, definitely no. First of all, this is a weekly show, once a week. It is only an hour show, and normally with the reality shows we use start to grow the audience based on the knowledge of the people that go into a house, for example with Big Brother. With this show we are expecting the ratings that we are having right now, which is close to 15 points. The kind of audience that we are reaching with these programs are very attractive to clients, and we think that this program will help to keep the margins that we are looking for in our television division.

Okay, thank you. And a question for Alphonso, the expense for the acquisition of Televisa, will we see this until the third quarter?

Yes, we signed the agreements, but since that company is a spinoff of TC, we have been unable to close on it. You will see the closing and the payment in the third quarter.

For 83m dollars, right?

That is correct.

Okay, thank you. And just one last question. In terms of cost associated to the political spending, or the advertising that you sold, do you have an estimate of how much it was?

I don’t have it with me, but I mean it was very small. As you could see, we reduced our costs on the television side of the business in 73m pesos, which is 4.2%, and that is a mix, I mean, excluding the World Cup, we also had the comic show at 10:00 p.m., which we didn’t have last year, we had the expense related to the coverage of the war, the political campaign coverage, and also local programming expenses.

Right. Thank you very much Alfonso.

Our next question is coming from Patrick Grenham of Citigroup. Please go ahead with your question.

Good morning. I have two questions. Firstly, on TC, could you go through any plans you have for the restructuring of TC, and the TS acquisition? Second issue is just on your local advertising revenues, how much were they in the quarter? Thank you.

I’m sorry, which was your second question?

Just on how big the local advertising revenues were in the quarter.

Okay, hold on a second, as to the acquisition of TS, as we explained, last time, considering our tax planning, it was very important to buy this company. TS is a spinoff of Grupo TC, which is, as you know, our controlling shareholder. So TS being a spinoff is now, before the acquisition owned by the TC shareholders. The losses that the TS has are capital losses that under our ruling we obtained can be use to offset any income, so that is why they are so valuable for Grupo Televisa at this point. So we will, as we announced, close this transaction for 83m in the third quarter. We expected to finalize all the paperwork in the second quarter, however, we could not, so it will definitely be closed in the third quarter. Now I am glad you asked this question, because I don’t think that we explained the whole process correctly last time. We determined the price of TS projecting the taxes that Grupo Televisa would be obligated to pay from 2003 to 2008, and also considering the acquisition of TS, and this projection was then compared on an annual basis with the taxes that Grupo Televisa would pay, considering such an acquisition, and the comparison resulted in savings of about 2b pesos, so considering the price of 83m dollars, the net present value of this investment is in excess of 560m pesos. The exact amount of the annual savings, as well as the term of offset of TS tax losses will depend on the income actually obtained by the group in the future, and it doesn’t mean that GT will not pay taxes, it means only that we will pay the minimum tax, which is the asset tax.

Okay, and are there any other plans for further acquisitions of TC, or any restructuring at the TC level?

Well, not currently. But it gives me the opportunity to talk about all the speculation that – of TC has caused. And I am glad that you raised this question about TC because it gives me the opportunity to explain it in further detail. Maria --, who is a shareholder of TC and also Imbulsa (ph), put a hold (?) on there which Emilio – will be required to purchase the shares of TC. First, I would like to mention again, that we do not feel under any pressure by this issue, and we have plenty of time to find a solution. I truly believe that it should not raise any concerns to any of GT shareholders. The causes under which the put can be exercised are very extreme, and are described in the 20-F, this includes acceleration of our debt, and other causes of that magnitude. The only relevant cause, or the only relevant trigger of the put is TC undertaking to list its capital stock on the Mexican stock exchange by July 2005. This condition was established when Imbulsa and Maria – and Budu Savala (ph) made their investment. Like any other investor, they thought of having an exit strategy. They wanted liquidity at some point in time for their investment, and this is the only reason why such a put was included. There is no guaranteed return on investment on the part of Emilio or TC or anything of that sort, and these two shareholders of TC have never expressed an interest in selling. Listing TC on the Mexican stock exchange would not be a difficult thing to achieve and that would fully comply with the put clause, however, we believe that in such listing would not be the best solution for all the shareholders. We also believe we have enough time to analyze all the possible alternatives, so there is no need to rush and find a way of complying with the put. However, once again, I would like to re-iterate that the easiest solution would be to list TC and that would get rid of the put, so that we don’t see an issue here.

Alright, so what you’re saying is, if you can’t find a solution by 2005, the last resort option would be to just list TC.

Which also is the easiest option, however, I don’t think we have time to start the other alternatives, which would be beneficial to everyone. I don’t think we should rush and list TC. But you are right in the sense that in the end, if we were to list TC on the Mexican stock exchange, that by itself gets rid of the put. So I repeat again there is no guaranteed return or anything of that sort. It is just a put to provide liquidity to those two shareholders. As to your last question, 14.5% of the television broadcasting sales were local sales.

14.5%

Yes.

Right. Thank you very much.

Our next question is coming from Dan Kakowski of Schroders. Please go ahead with your question.

First of all, congratulations on the results, they are extremely good. Secondly, I have got three questions, so I will ask them one by one. Considering results in the first half, which were very strong, how conservative does your guidance look at a margin of 40% on the broadcasting assets and 30% consolidated?

We are always very conservative, and we are sticking to the 40/30 EBITDA margins on a consolidated basis in television broadcasting for the year.

Second question is on Nova. It seems it’s been self-sufficient for the last five quarters, and you’re not looking to invest any further capital in 2003. Does that count for 2004 as well?

Well, hopefully yes.

Okay, and then the last question is on the restructuring charges. You had restructuring charges of 95m versus about 491m in the first half of last year. Are restructuring charges going to be a thing of the past, or should we expect restructuring charges to continue at this sort of low level?

One hundred percent of the charges this year were severance payments. Mostly in the television, radio, and internet businesses. There were personal layoffs and restructurings, of that sort. So maybe you will continue to see that line item, that has to do severance payments, however, it will go down significantly in the time to come.

Excellent. Thank you very much.

Our next question is coming from Rajeev Bhaman (sp) of Oppenheimer Funds. Please go ahead with your question.

Hi, I just had a quick question on Innova and what sort of impact have you seen from the shutdown of, or the bankruptcy of, Direct TV Latin America, and what sort of further impact do you expect to see over the next year or so?

Hi Rajiv, I think the Chapter 11 situation of Direct TV, both in Mexico and Latin America was driven by Innova’s success, in our success mostly in Mexico, and I think because of that situation, they have lost a lot of programming, and that is driving subscribers toward Innova. I think the situation in Latin America is more difficult. I think Direct TV has better countries and more subscribers than we have, for example, Puerto Rico is a good place for them, where they have control of the market. However, going back to Innova, as you have seen we have been growing each quarter in terms of subscribers and we believe that trend will continue. However, since our partner NewsCorp has virtually bought Hughes and Direct TV, some type of combination will happen in the near-term.

Would you suggest before the end of the year?

I would hope that, however, it depends on the closing of the deal in the U.S., and then passing the Dept. of Justice and SEC approvals, etc., so we are highly dependent on that process going forward. They have told us that they do not expect this to take longer than the third quarter this year, so immediately after that we would engage in negotiations. As we have always, said it makes a lot of sense to have one single platform in Mexico, and to consolidate that business, so there are many variations and permutations as to what can be done. Direct TV, because of the reasons I mentioned, has been losing subscribers every quarter, so they have had a huge turn, so hopefully we will be able to capture some of those subscribers.

That’s terrific. One further question regarding programming licensing, I’m sorry if you already mentioned this, but could you break down the programming licensing sales by network, how much Telefutura (sp) contributed, and how much the rest of – contributed?

Rajiv, I would love to do it, but however, since Univision is not reporting the segment over the network separately, they have asked us not to provide the details. The total royalty was 24.8m dollars in the second quarter, however, because of that situation, I would prefer to not give the results separately.

Okay, thank you.

Our next question is coming from Chris Recouso (sp) of Bear Stearns. Please go ahead with your question.

Good morning guys, I have a couple of questions. Specifically in terms of going back to the topic that seems to be the bane of your existence, in terms of use of cash. Considering you guys are sitting on something like 960m in cash, and a very small 407m of net debt, I know that you mentioned Alfonso, very briefly, that you were looking at possibly a larger dividend down the road, is there a dividend yield perhaps that you guys are targeting? I believe that the small dividend that you gave out recently was something slightly below 1% dividend yield. Is there some kind of a yield going forward, that we maybe can model?

Hi Chris. I think at this point it would be very difficult to say. I think we will be prepared to do that in the first months of the coming year. As I mentioned, we don’t have any prospect of large – or something of that sort, and I don’t think we will see anything this year, so what I can say is that, if that is the case, we will propose a much larger dividend for next year, and for the years to come, especially next year. But I would not be prepared to talk about the particular yield.

Okay, and you had also mentioned briefly that although --, I believe has a shelf registration of something like 1.1b out there, there had been rumors that perhaps you were going to take up a 50% stake in convertible form on that shelf registration. You are definitely not interested in that actually?

Yes, as I mentioned we are not looking currently into buying shares of Univision nor bonds convertible into those shares. I think since that LaVisia (sp) company attracts a lot of attention in the press, especially in the gossip press in Mexico, and they reported this story that we were going to buy 500 million of the Univision convertible, which is absolutely false.

Okay, and just two quick follow-up questions, if you can just very quickly give me the inflation adjustment on revenue for the quarter, and also one clarification, I know that we speak a lot about the TC put (sp), but you also mention that there is actually no guaranteed profitability or level on the put, so isn’t it actually formally correct to suggest that this is a registration right, if push comes to shove, not necessarily a put?

You are right, but however, if we were not to list TC by 2005, those two shareholders have the right to put their shares to Emilio. But as I mentioned, the easiest solution would be to list TC on the Mexican stock exchange, which is a requirement in terms of liquidity, under those agreements. So I don’t know why this has become an issue, because the easiest solution would be, as I mentioned to list TC, and that would be it. If we were not to list TC, if for any reason, Emilio decided not to list TC by 2005, or find another solution, which would be more beneficial for everyone, then they would have the right to put their shares against Emilio and there is a guaranteed return on their investment.

Yes, I think it because somewhat of an issue because I believe the Imbusa (sp) is sitting on a pretty large, unrealized gain, and in terms of the structure, they switched their TC stake out of Cinca (sp) into Promotory Busa (sp).

That decision to move the investment was 100% tax driven.

Right. Okay. I will get off the line, just as I said the inflation adjustment number, if you have it. Thank you for you patience.

33m pesos

Thank you very much.

Our next question is coming from Whitney Johnson of Merrill Lynch. Please go ahead with your question.

Hi Alfonso, I have just actually several questions, but they are probably quick-fire questions. Can you just give us the number for political expense for both television and radio in the quarter, and then just remind us what World Cup – was to 2Q of 2002?

Yes, the total amount for television was 650m out of which 150 came in the first quarter and the rest in the second quarter. And, in terms of radio, it was 25.5m.

Okay, for political spending and on the World Cup?

On the World Cup? Hold on. It was 377 million.

Okay, so political spending was much better than expected. Now on the cost of sales, for the second half of 2003 versus the second half of 2002, how much do you think it is realistic to expect that it will either increase or decrease in real terms?

You know, it is difficult to say. In the second half of a year, we don’t have any extraordinary items such as the World Cup, however, as we mentioned, we have the comic strip Atem (sp), some additional local programming, especially for Channel 4, so it is very difficult to say at this point, what will happen to costs in the second half of the year. What I can tell you is that we will be very strict in terms of cost and expense controls.

Okay, and your non-recurring restructuring charges that you reported were very, very low for the quarter, which is terrific, and I know you mentioned that they are going to come down in the future. Is it realistic to expect that they will be around 50m pesos in both the third and fourth quarters respectively?

Yes, I think that will be a good amount.

Okay.

That is, as I mentioned 100% related to severance payments.

Okay, terrific, and just a couple more questions. The cash proceeds from the Spanish TTH sale, you listed in your press release were about 27.5m euros, is that also equal to the gain on the sale that you booked in your P&L?

Yes.

Okay, and then that 83m for tax, less carry forwards, where in the P&L is that going to show up next quarter, or do you know yet?

No, I guess we are figuring that out.

Okay, terrific, thank you.

Our next question is coming from Jean-Charles Lemardeley (sp) of J. P. Morgan. Please go ahead with your question.

Yes, Good Morning Alfonso. A quick question going back to TC, on the net debt position of TC, I know the company has around 140 or 150m in debt, but does it have any cash, on it’s balance sheet to this date?

Yes, I think the total net debt of TC, after this acquisition and after the dividends, will be around 50m to 60m dollars.

Does the company have any other assets besides its shares in Televisa?

No, it has it’s controlling stake and also it has a CTO (?) position. A marketable position. So this debt of 50 to 60m is basically irrelevant.

Okay, fine. In terms of the CAPEX outlook, have you revised that number down, it seems like you were reigning in your spending, particularly in the cable at television (sp), so should be expect a lower CAPEX number for the year?

No, as I mentioned before, we are sticking to 110m. Which is 75 to 80m for property plan and equipment and 30 to 35m cable. Although cable is lagging because it hasn’t invested a lot in the third and fourth quarters. It will have much higher amounts.

Okay, thanks a lot.

Thank you.

Our next question is coming from Francisco Rivero (sp) of Santander. Please go ahead with your question.

Congratulations guys. A very, very good report. A couple of questions. The first one is regarding comdevision (sp). You said that piracy is one of the biggest challenges for comdevision (sp), and the question here is are you planning to launch set-up boxes which are qualified, just to force everybody to pay?

Yes, were are planning on moving to digital technology, which for the pirator would make it impossible to watch the signal.

But the question is, these set of boxes, qualify will be only for those who go digital? Because, so far digital clients are a very small portion of the total.

No, the new plan includes everyone having those boxes.

So that means that all clients would be digital?

All the clients. This is going to take from 18 to 24 months, approximately, but I think that it’s the only solution of the company (ph).

And what is the cost of replacing those boxes?

We are, as I mentioned, finalizing negotiations with a supplier, so I think next quarter we’ll have a pretty good picture.

Okay. The other question is are you planning to keep cablevision (sp) as part of your core businesses, considering that Sky or Inova (sp) in Mexico is doing fantastic?

Yes, we are not planning to divest Cablevision (sp).

Okay, and the second question is regarding the due diligence with milvision (sp) regarding frovisa (sp). They are claiming some 30m back. What is your best estimate that you will have to end up paying?

It is very difficult. It is going to be an amount much lower than that. We are still in negotiations with them, with Univision, and it is going back and forth. They have had other things to deal with, such as the approvals from the HCC, Hispanic broadcasting, so I think their management has not focused 100% on this. But I believe it is going to be an amount much lower than that and the accountants on both sides are working on it.

Have you created already a provision for that?

No we have not.

Okay, thank you and congratulations again.

Thank you.

Once again, if you do have a question at this time, please press the number “1” followed by “4” on your touch-tone telephone. Our next question is coming from Eduardo Estrada (sp) of Ocuval (sp). Please go ahead with your question.

Good morning gentlemen, congratulations. Can you explain a little bit more about the situation of your DTA’s joint venture in Latin America and now that the global power has stopped giving financial support to that? And can you talk a little bit about the impact of that in your outdated financial statements? Thank you.

Yes, well thank you for asking that question. As you know, we hold a 30% interest in Multi-country News Corporation and logo each own 30% and Direct TV owns 10% (not sure). I think considering the continued losses of that platform, we do not intend to put more money than the one we mentioned, and I think that we have been very conservative in our 2002 financial statements. We recognize the loss of 82m dollars, to reflect our total guaranteed liabilities in respect to the transponder lease obligations of Multi-Country (sp). So this means that the only funding that you will see is the funding we are putting in respect to those transponder service agreements with Finanset (sp). Once we had recognized this liability, last year in the 2002 financial statements, we believe that we have no further legal or financial exposure in this venture that has not been recognized. So basically we have taken 100% of the impairment of the value of both our investment and the transponder obligations. Now, what has happened, is that one of our partners in Multi-Country (sp) does not agree with the impairment of the value, does agree that we should write that down 100%, and the auditors have requested that in order to prepare stand-alone financial statements for Multi-Country and their U.S. gap (sp), they would need to impair or to take a hit in respect to that value. Under the by-laws of that company, the financial statements have to be approved by 75% of the shareholders, and therefore, since one of the partners doesn’t agree on the value of the impairments, they have basically not agreed to issue the financials, and then simply those financials are not available. And that is why we were unable to include them in our 20-F. However, as I have mentioned, we have been very conservative, I believe extra-conservative, and have written down all the value, so we believe that those financials are basically irrelevant for our shareholders.

Okay, thanks a lot.

Our next question is coming from Neve Fitzgerald of Teacher’s Insurance. Please go ahead with your question.

Good Morning. Thank you for the call. I was wondering what your discussions with the ratings agencies are like, particularly Moody’s in light of the BAA3 rating compared to the sovereign rating of BAA2, and also what your plans are for the dollar debt going forward, would you buying back any debt, would you be issuing more dollar debt?

In terms of conversations with the rating agencies, they are always very interesting and helpful. I think as you can see, we have an investment rating we’d like to move up a notch, and we’re talking to them, so let’s see what happens in the next quarters. As to the dollar debt, we’re looking into that. Maybe we would be planning on issuing something in pesos, but at this point, it is very difficult to say. I think this would happen, if it happens, in the third or fourth quarters. If not, we would, by means of – transactions we would take some part of our debt to pesos.

Okay, but you wouldn’t be looking to issue more dollar debt?

No.

Okay. Thank you.

Gentlemen, there appear to be no further questions at this time. I will turn the floor back over to you for any further remarks.

Well, thank you very much, and we’ll see you next quarter.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time, and have a wonderful day.