Grupo Televisa SAB (TV) 2003 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Grupo Televisa fourth-quarter and full-year 2003 teleconference. (OPERATOR INSTRUCTIONS). Before we begin, I would like to draw your attention to page nine of the press release which explains the use of forward-looking statements. Please familiarize yourself with this section as it applies to everything discussed in the conference call, as well as to the earnings release.

Now I will turn the call over to Mr. Alfonso de Angoitia, Executive Vice President of Grupo Televisa. Please go ahead, sir.

Thanks. Good morning. We are pleased to have you with us for the discussion of Grupo Televisa's fourth-quarter and full-year 2003 results. With me today are Jose Baston, Corporate Vice President of Television, and Sally Faulk (ph), our Chief Financial Officer.

First, I will take you through the highlights of the full-year 2003 financial results, and we will review the outlook for 2004. Then, Pepe will take you through the operating results of our television segment. After that, we will be glad to take your questions.

I am very pleased to report that despite the slow pace of economic recovery in Mexico, the strength of our business segments and our disciplined management practices allowed us to exceed our goals and achieve record-breaking results during 2003. Consolidated sales for the year increased 5.1 percent to 23.5 billion pesos, and we reached a record consolidated EBITDA of 7.5 billion pesos, which represents an increase of 19.4 percent over last year. As a result, our consolidated EBITDA margin reached 32.1 percent, achieving our initial guidance for the year by over 200 basis points.

Our overall performance was driven by our television broadcasting business with high ratings of political advertising for the mid-term elections. Strong local sales and an effective national sales strategy boosted revenues by 5.4 percent to 15.4 billion pesos. In addition, we managed to keep costs and expenses flat during the year, which allowed our EBITDA to increase 14.7 percent to 6.5 billion pesos and our EBITDA margin to reach 42.5 percent. As a result, we exceeded our initial guidance for the year by 250 basis points, and we generated the highest EBITDA that our television broadcasting business has achieved in any given year in the Company's more than 40 year history.

I also want to highlight that during the fourth quarter our television division showed great momentum with sales increasing 5.1 percent over last year and EBITDA margins reaching 44.1 percent. Our programming for paid television business continued to experience growth in sales, as well as margin expansion. Sales increased 10.7 percent to 699 million pesos, and EBITDA grew 43.7 percent to 154 million pesos, driven by an increase in signal and advertising sales in Mexico combined with lower operating costs.

In addition, our programming licensing business sales increased 11.6 percent to 1.6 billion pesos, and EBITDA expanded 108 percent to 498 million pesos, driven by a 23 percent increase in the royalties we received from Univision which amounted to $96.1 million. This outstanding growth is a direct result of the renegotiation of the programming licensing agreement that we reached two years ago. Partially offsetting this increase in royalties was a marginal decrease in exports outside the United States, especially in Latin America where the region continues to suffer from a weak economy.

Our publishing segment also achieved positive resorts during 2003. Sales increased 2.9 percent to 1.7 billion pesos, and EBITDA expanded 19 percent to 346 million pesos. Magazine circulation and advertising sales in Mexico continue to grow, driven by our improved magazine portfolio mix, enhanced sales and marketing efforts, and our growing magazine subscription business.

In addition, we continue to take advantage of the synergies that exist among our media assets. During the fourth quarter, for example, we published the Sticker (ph) album for kids based on the characters and story often incredibly popular novela for kids called Alegrijes y Rebujos, to which Pepe will refer, and results were amazing. We sold 1 billion albums and approximately 58 million Stickers. These kind of magazine television combinations reenforce our novela program among television viewers and at the same time are important sources of business for our publishing and publishing distribution segments.

I am also pleased to report that sales in our radio division increased 28 percent, and we were to generate 22.5 million pesos EBITDA contribution during 2003. Improved programming and ratings together with political advertising for the mid-term elections were the main drivers of growth in this segment. Over the past two years, we have taken important steps to improve the profitability of our publishing and radio businesses, and we are beginning to see results. However, there is still much to be done, and we will continue to work hard to improve the financial results of those divisions.

Shifting now to our pay television businesses. Innova, our DTH business operating in Mexico, continued to perform remarkably well fueled by its exclusive programming, aggressive marketing and excellent customer support. Gross active subscribers reached 156,000, revenues climbed 7 percent to 3.8 billion pesos, and EBITDA increased 23 percent to 1.2 billion pesos. Innova has consolidated its position as a DTH market leader with a market share of over 80 percent. On top of its excellent result, Innova recently announced its debt, achieving interest payment reductions from 12 7/8 to 9 3/8 and reducing its foreign exchange risk through a coupon swap. To put it in simple terms, Innova's coupons were at 12 7/8 in dollar terms a year ago, and now those coupons are 10 1/4 in pesos. We are very pleased with Innova's performance and the value it is creating for Televisa, and we remain extremely excited about the Company's future prospects.

I want to take this opportunity to welcome Mr. Alexander Pena as the new Chief Executive Officer of Innova.

Cablevision, our other pay television business, continues to experience the effect of a declining subscriber base. However, by controlling costs and expenses, Cablevision was able to generate an EBITDA of 301 million pesos and an EBITDA margin of 30.6 percent during 2003. During the fourth quarter, Cablevision's EBITDA grew 16.1 percent to 84 million pesos. In addition, Cablevision recently started switching its current analog subscribers to its new digital service.

As we mentioned during our last conference call, this project will stimulate subscriptions because pirates will be unable to receive the signal once we switch to the digital transmission. Importantly, this project will be implemented in stages over the period of two years and will be funded by Cablevision's own resources and operating cash flow. We expect to have preliminary results from the first stage of this project by midyear.

On a positive note for both our pay television ventures, the Mexican Congress recently eliminated the 10 percent excise tax imposed on pay television services. As a result, effective January 1, 2004, revenues from Innova and Cablevision are no longer subject to that tax.

Televisa's net income increased an outstanding 368 percent to 3.6 billion pesos driven by a 1.2 billion peso increase in operating income, a 1.8 billion peso decrease in nonoperating expenses, and a 1.2 billion peso decrease in equity losses from affiliate parties, partially offset by a decrease in income from discontinued operations. As we explained in the press release, during the fourth quarter, we recognized a nonrecurring charge of 165 million pesos to reflect impairment in the value of our paging business, which has lost more than 70 percent of its subscriber base in less than three years.

Our balance sheet is stronger than ever with more than 12.2 billion pesos in cash, a net debt of only 2.7 billion pesos, and a very comfortable and more efficient schedule. This was recognized by Fitch, who upgraded Televisa's debt ratings last September, and more recently by Moody's, who increased its outlook on Televisa's ratings from stable to positive.

During 2003, we generated over 6 billion pesos of free cash flow after maintenance CapEx. This includes a working capital inflow of approximately 1.7 billion pesos, mostly related to an increasing cash deposit from the upfront advertising plan. For 2004, we expect to maintain our momentum generating over 4.5 billion pesos in cash flow from operations after maintenance CapEx.

I am also very pleased to announce that we will propose to our Board during our next meeting the payment of a dividend in excess of 1.5 billion pesos to be paid during the second quarter of 2004.

Moving onto the outlook for 2004, we will face a difficult comparison during the first half of the year, especially during the second quarter, due to the absence of political advertising that we received in 2003. However, we are committed to make up for the shortfall and achieve a marginal increase in our television broadcasting topline for the full year. In addition, despite the costs associated with the production of Olympic Games and other special events, unionized personnel salary increases and higher prices of utilities, we expect to keep overall costs and expenses flat during 2004, which should allow us to maintain our television broadcasting and consolidated EBITDA margins at current levels.

In 2004, our CapEx will amount to $110 million, including 35 to 40 million for Cablevision and 70 to 75 million for property, plant and equipment. Additionally, we plan to invest $17 million in our DTH venture in Latin American.

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

Thank you and good morning to everyone. 2003 was an excellent year for television businesses. First, I would like to touch upon some of the highlights of our television broadcasting business. We continued to sustain the highest ratings and audience shares across the board. From signon to signoff, we achieve an average audience share of 71.8 percent, and once again we dominated prime time with an average share of 72 percent.

We are 89th of the top 100 programs in Mexico, and the top 21 programs were aired by Televisa. Our novelas continue to provide strong ratings and revenues throughout the year. Our 9:00 PM novela, Amor Real, was the highest-rated program in the year, with an average audience share of 41.1 percent. Our 8:00 PM novela, Nina Amada Mia, achieved an average audience share of 40.4 percent, and our children novela called Alegrijes y Rebujos captivated young audiences, achieving an average audience share of 39.8 percent during the year, generating interesting revenues inside businesses like live concerts and record sales.

Our reality shows have again proven to be tremendously popular and profitable. Our second edition of Big Brother VIP aired in the fourth quarter captured an average audience share of 38.6 percent during our Sunday nomination and eviction shows and reached an unprecedented EBITDA margin of 76 percent.

Ratings from our comic strip in the 10:00 PM slot increased 12.8 percent, achieving an average of 25.6 rating points in 2003. Our prime-time newscast captured an audience share twice as large as our nearest competitor. Channel 5 was once again the preferred place to view blockbuster movies. During the year, it aired 46 of the top TV rated movies.

Channel 4, our local Mexico City channel, continued to drive our local sales growth. In 2003, local sales on a national basis increased 11.5 percent and accounted for more than 13 percent for our television broadcasting sales. Importantly (inaudible) deposits for the 2004 advertising plan increased by 5 percent to 12.3 million (ph) pesos, a strong accomplishment given that the Mexican economy is expected to grow less than 3 percent during 2004.

Our operating results will make up the political advertising shortfall we face in 2004 and put us on track to achieve our goals for the year.

Shifting now to our programming licensing business. Our programming continues to be tremendously popular among the U.S. Hispanic community. According to Nielsen, our novelas rank among the top-rated programs among U.S. Hispanics. In fact, during 2003 our novela, Entre el Amor y el Odio, achieved an average of 24 rating points during the division's 9:00 PM timeslot. And our novela, La Via del Amor, achieved an average 21.6 rating points during the division's 8:00 PM timeslot. Moreover, according to Nielsen, more than 5 million U.S. Hispanics view our novela, Nina Amada Mia.

During 2003, Televisa provided approximately 34 percent of Univision's programming, including most of its prime-time -- virtually all of (inaudible) programming and a significant portion of the (inaudible) programming. In fact, our content is already allowing the newly created TeleFutura network to change Telemundo's position in certain timeslots.

In exchange, Univision paid Televisa $96 million in royalties during 2003, and we expect this figure to become an increasingly important portion of Televisa's cash flow in the years to come. In addition to licensing our content, our programming for pay television business produces a package for Spanish-language television channels for pay television viewers in Mexico, the United States, Latin American and Spain. During 2003, sales of this segment increased 10.7 percent to 699 million pesos, and EBITDA grew 43.7 percent to 154 million pesos, driven mainly by strong sales in Mexico.

In addition, last year the Company launched (inaudible), a 50-50 joint venture with Univision to distribute a package of Hispanic language television network for digitized cable and satellite delivery in the United States. This joint venture distributes five channel networks, five cable networks, including two movie channels and three channels featuring (inaudible), celebrity lifestyle interviews, and entertaining news programming.

In the third quarter of last year, we closed an agreement with EchoStar to distribute our challenge to pay television system in the U.S., and we are in the process of closing additional distribution deals with other major players in U.S. pay television market.

Now we will be glad to take your questions.

(OPERATOR INSTRUCTIONS). Jean-Charles Lemardeley, J.P. Morgan.

Good morning. I had a question regarding the SKY and prospects of SKY in Latin America. I had seen press reports yesterday that basically SKY and DirecTV has reached an agreement to merge their platforms in Latin America. What does that mean for your multicountry platform?

Well, as you know, we own 30 percent of multicountry together with News Corporation with (inaudible) and Liberty Media, which operates the businesses that we have in Latin America. We have about 80,000 subscribers in Chile and Colombia. We are working on seeing the prospects of that business and looking as to what that merger would mean for us, but I don't help further details.

Would you consider selling out of that business as you had mentioned in the past?

Yes. Yes, we would.

What about Mexico? Any updates on the discussions there in Mexico?

Well, as we have always said, it would be a great idea to merge the platforms and reduce some type of combination in Mexico. The unified platform will have more than a million subscribers, and that would allow us to do many other things to grow basically faster in Mexico and to achieve, of course, higher sales and higher EBITDA. We are still in talks with News Corporation, and I guess during the first half of the year you will see something coming up.

Thank you.

Whitney Johnson, Merrill Lynch.

Good morning. Two questions for you. First of all, if you look at 4Q '03, what percentage was local sales of the total television broadcasting segment in 4Q '03 versus 4Q '02? The second question is if you combine your costs above the operating line and below the operating line, which for this year were about 13 billion plus the 657 million, how would you expect the costs for '04 will compare? I know you said that you expect us to keep costs flat above the operating line. Can we expect to see costs below the operating flat or actually down, and particularly non-cash costs?

Your first question based on 4Q '03, the percent of local sales compared to the total broadcasting sales was 2.1 percent.

In 4Q '03?

4Q '03.

And what was it in -- (multiple speakers)

Excuse me?

I am sorry. 12.1 percent?

12.1 percent of the total sales for 4Q '03.

For the television segment?

Yes.

What about 4Q '02?

It was 10.6 percent.

(inaudible). And then in terms of the cost?

Yes. As to the costs, (inaudible) operating costs I think television will remain flat in real terms, which means that means that it would be an achievement because we would absorb the costs of production rights and transmission of the Olympic Games, which would be around $10 million. And also the cost of other special events such as some soccer tournaments to be played in Europe.

We would also absorb the 4.5 percent salary increase that we gave to the union three weeks ago to the 5000 unionized employees and also the increase in the prices of utilities. So to maintain costs and expenses flat in real terms, absorbing all those things that we did not have in 2003 would be an accomplishment for us.

Now below the operating line, I think we will be able to reduce those costs significantly during this year as you have seen. The trend has been going down. As a matter-of-fact, it has been reducing quite dramatically, and we expect that that reduction of costs below the operating line to continue.

So you think you can pull this 657 (ph) down further in '04?

Yes.

Terrific. Thank you.

Dan Prikowski, Schroeders.

Good morning and congratulations on your results. Three questions. Can you tell us what you are expecting for your tax rate in 2004 considering you brought some tax losses carried forward?

Yes. I think -- thank you for your question because it is a very good one -- there was a lot of discussion about the purchase of Telespeciales (ph). As you remember, we were planning to use the tax loss carryforwards of Telespeciales (ph) in approximately a two-year period and even a three-year period, but we are very happy that we used 100 percent of those tax losses in 2003. So we have absorbed all those losses, which meant for 2003 that our effective tax rate was at 17 percent, and that compares to an effective tax rate of 28 percent during 2002.

The problem now becomes 2004, because as I mentioned, all the losses from Telespeciales (ph) have been used in 2003. So the price we paid for that company was a bargain. I think for 2004 since we don't have those losses, it is going to be in the region of 24 to 25 percent.

Okay. Excellent. Thank you. The second question is, can you explain exactly what happened in the program licensing? You only had a 2.5 percent increase in Q4 sales, and then your margin was 18.6 percent versus the full-year margin of 30.6 percent.

What happened there is that we had an increase of 24 percent in the royalty of Univision, which, as we mentioned, got to a point where we (inaudible) $96.1 million from $77 million in the previous year. However, we have lower sales in the rest of the world, especially in Latin America. In Latin America, we lost about 24 percent as well. So that is why the increase in the royalty that was paid by Univision got compensated negatively with the losses that we had in Latin America.

And what do you expect for 2004?

Well, if the economies in Latin America recover, we will see a better year for programming licensing.

Okay. The last question and one that you are always being asked, so at the risk of boring you, your balance sheet now looks pretty under-leveraged with 2.7 billion of net debt. Can you explain to us what your thoughts are on using your strong cash flow in 2004 and beyond?

Yes. As we have said in the past, our main objective is to grow both organically and through acquisitions, especially in the U.S.. The U.S. Hispanic market is very attractive for us. I think we have demonstrated that we know a lot about that market, and our products are very successful in the United States. So as to acquisitions in 2003, we did not identify anything interesting related to our core business at an attractive price. So that is why this year we will propose to pay a much larger dividend.

In the following years, we will do the same. If we do not start anything that is within our core business and that represents a growth opportunity basically in the U.S. market and, of course, that is related to our core business and that is not dilutive to our shareholders, we would pay much larger dividends and/or we would buyback our stock.

Okay. Excellent. Thank you very much.

Rene Pimentel, Deutsche IXE.

Yes, good morning, gentlemen. I had a question regarding your investment, OCESA, and can you give us an upgrade as to how that is developing and what type of margins that see from this business?

Yes. OCESA reached, from the information we got that was made public yesterday, reached an EBITDA of approximately 190 million vessels, although OCESA did not meet its EBITDA objective for 2003, which was $38 million. Remember that we have a guarantee that OCESA gave Televisa in the sense that they have to generate $129 million of EBITDA during 2003, 2004 and 2005. Keep in mind, remember that if they don't meet such a guarantee, there will be an adjustment in the price of the transaction that was completed last year. This means if they don't reach $129 million of EBITDA in those three years, that they will give us cash back, and we will be receiving additional shares of OCESA.

So I think that, as I mentioned, they did not reach the EBITDA target that they had a $38 million. They could only only achieve 190 million. I think that this year is going to be much better for them because they are going to be implementing certain things and be using and exploiting 100 percent of the synergies that they have with us.

Okay. But to get this payment back, you will have to wait until the end of 2005, correct?

That is correct. It is $129 million. That is denominated in dollars, and that is accumulated 2003, 2004 and 2005.

Okay. Perfect. Just to confirm, you mentioned that you made 6 billion pesos in free cash flow before investments in CapEx. Is this correct?

That is correct.

And you have the number including the CapEx and investments for the year?

It is a good question because it allows me to explain the 6 billion. We are very very happy with this generation of 6 billion pesos. Very both surprised and happy. Basically the way of getting that figure is simply adding the change in our cash position, plus several things that we paid during 2003.

Our cash balance increased 3.5 billion pesos during 2003 from 8.8 billion pesos to 12.3 billion pesos. We pay a dividend of 550 million pesos. We invested 520 million pesos in repurchase of shares. We paid 871 million pesos for Telespeciales (ph), this company that gave us the tax loss carryforward to which I referred before. We invested 224 million pesos in our DTH venture in Latin America, and we made the last payment to OCESA of 450 million pesos. That was last payment for the purchase of 40 percent of OCESA. So CapEx was 1 billion pesos, and without CapEx, the free cash flow generation would have been 7 billion pesos.

We believe, by the way, that sustainable annual free cash flow would be around 4.5 billion. During 2003, we have 1.7 billion in inflows from working capital that improve our cash position. So this generation of 6 billion pesos was quite extraordinary, but we believe that going forward a sustainable generation of free cash flow would be around 4.5 billion pesos.

Excluding investments?

Yes.

Okay. Thank you very much.

Chris Recouso, Bear Stearns.

Good morning, gentlemen. Two questions. Essentially follow-ups on several things that have already been asked. The first one in terms of program licensing agreements. Is it still valid to assume that before cost allocations your real margin on that business is something in the 75 to 80 percent rate?

Yes. I think it is around there.

Okay. So it is still 75 to 80 percent as a real margin.

That is correct.

The second question, can you give me a specific breakdown of your other and nonoperating charges for the quarter because you mentioned them for full year in the release, but you did not break out for the quarter?

It's a very long list. Can we give it to you in a separate call?

Sure. Sure. There is no summarized breakdown?

I do not have it summarized. It is kind of long.

Okay. After the call then. Thanks.

Andrew Campbell, CSFB.

Good morning. I was just wondering in your core advertising business in Mexico, do you feel that there is any momentum building, that you are seeing any signs of the recovery in the economy, and maybe you could give a little bit of flavor for what you have seen for the first few weeks of the year? I was wondering if you think that the guidance you have given for a marginal increase, if that is maybe on the conservative side, given the increase that you saw in the upfront sales?

We see a very good beginning. We definitely have worked a lot around our programming problems to be able to satisfy the needs of our consumer, of our clients, and we put in our guidance we see that the year will be right in line with what Alfonso mentioned based upon our guidance, and yes, the beginning of the year has been real nice to us.

Okay. I am assuming the marginal increase is less than 5 percent. Do you think that -- do you see the risk of that to your guidance being more on the upside?

Yes, I think so. I think you are right. But marginally we mean 1 percent, around 1 percent or lower. It is a challenge because we have to substitute the more than 650 million pesos from political advertising that we received in 2003. We have new clients, new products, as Pepe mentioned, so I think it is a challenge. But as Pepe was saying, we feel that we are in line in the first weeks of the year, in the first months and weeks.

Okay. That is great. Thank you very much.

David Joyce, Guzman Company.

A couple of questions. One, I was wondering will you have any incremental benefit from CoplaAmerica (ph) this summer?

It is part of the product that we are going to use in order to substitute the political advertising that we had during 2003.

Okay. Do you foresee a turnaround in the Cablevision business at any point, or could you describe where those customer losses are going? Are they maybe even going to the Innova platform?

I think in Cablevision become our main challenge. We have to turn that around. We lost 11 percent of the subscriber base in 2003, so I think that you will see better results this year, especially -- another thing would be because of the cancellation of the special tax. That you will see an automatic increase in the sales of Cablevision of around 6 percent as part of the repeal of that tax.

I say that it is a challenge because we have to digitalize the base. Most of those subscribers that we have lost have become pirates, are still receiving the signal, and watching our programs but are not paying, or are going to other sources of programming. So some are going to Innova, but not all of them. We are not seeing a dramatic increase of Innova subscribers in Mexico City where Cablevision is based. So I think you will see a better year 2004 for Cablevision, but it is a challenge.

Just to add something to what Alfonso just said, we are in the process of developing exclusive content for Cablevision. We have seen that that has been a very good strategy of growth for different pay television businesses, and we are in the process right now to work with the Cablevision marketing people to develop exclusive programming for them.

Okay. Third question. I am not certain if you mentioned it yet or not, but can you breakout the local revenue that your stations generate versus the entire networks, or is that something you do not do?

On a yearly basis, 13.2 percent of our broadcasting sales were local. 13.2 percent.

Okay. Thank you.

Vera Rossi, Morgan Stanley.

Thank you. My question is on your option in the company in Brazil, SBT. I want to know what do you need to see in Brazil to exercise this option? And the second question is on Televisa Centro. Do you have any up-to-date on the potential restructuring after (technical difficulty)?

As to your first question, Brazil, we have an option until the year 2008, so we are in no hurry to exercise it. What we are writing to see is how the market develops there. As you know, (inaudible) is in a very difficult situation financially, so we are waiting to see what happens there. Also, what happens to the market in general.

Now we are also still concerned about the macroeconomic situation and how it developed. So since we have this option until year 2008, we are growing to wait a little and see what happens. I think we're going to be conservative in making an investment. It is a great market. We would like to be part of it, but we are in no hurry to do that.

As to Televisa Centro, as we have mentioned, it is something that we have to solve. We have always said that the main objectives are the restructuring that will take place as part of the solution of Televisa Centro will include -- and objectives will be there will be no dilution for any shareholder. We will be very careful with the rights of minority shareholders. That project that I felt in the restructuring will bring no additional debt to Televisa. We will provide liquidity for (inaudible) and for (inaudible), and Mr. Ascalaga (ph) will maintain the control of the company.

As you can imagine with all these things, this project is a challenge. However, it is something that we would feel pressured until 2005. However, as we have mentioned in the past, we want to be proactive and solve it sooner. So I think we are going to surprise you very soon.

So you are keeping your debt in line for like mid '04 in terms of solving this (technical difficulty)-- Televisa Centro is restructuring or coming out with --

Yes. It will definitely be solved in the first half of the year. But, as I said, I think it is going to be sooner than everyone expects.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). Jean-Charles Lemardeley, J.P. Morgan.

I just wanted to go back to the issue of the tax loss carryforwards and the usage of those. Can you guide us through the mechanism because I am seeing that pretax income was 4.2 billion pesos. Your taxes were 700 million reported on the income statement. So can you just explain how you used all the tax loss carryforwards this year?

We basically used them to offset taxable income. It is official that (technical difficulty) basically sales, and that is why during 2003 our effective tax rate was a 17 percent payment, as I mentioned before, when compared to 28 percent in 2002. As I mentioned, since we have used all those tax losses in 2003, we expect the effective tax rate to go up to 24, 25 percent in 2004.

But can you explain exactly how much the saving was this year because, as I remember, in the first quarter when you applied those tax losses, you said they were worth about -- you presented about $620 million in tax losses.

Yes. Well, the saving was huge because we used all those losses. I have not quantified -- we are paying still the minimum tax, the asset tax rather than income tax. It is just -- you can calculate that by calculating the effective tax rate at 17 percent versus 33 percent.

It still does not give me -- well, we can discuss that later on -- but I do not see how you can use all those losses on the 4.2 billion pesos in pretax income. That is the problem I have here.

Okay. Well, if you want particular mechanics, we can discuss them in a separate call.

Thank you.

Mark Stegaliva (ph), Smith Barney Citigroup.

Are you still maintaining your guidance for the EBITDA margins for '04 at 31.5 percent for the consolidated group and 41.5 percent for the TV broadcasting? I also have two more questions.

Yes. What we have said is our guidance is that we will maintain 2003 margins during 2004.

Okay. So basically what they ended with.

Which I mean is 32.1 percent for consolidated and 42.5 for television.

Great. Just going over the upfront deposits that were reported, the 12.3 billion pesos -- I was looking at the balance sheets on page 11. When I add up the customer deposits and advances, it comes to 14 billion. Can you just explain the difference?

There the difference is that you do not only have there deposits from our clients to be converted into advertising and television. But you have other things such as multiannual plans or deposits that are not considered part of the 2004 upfront, which are basically barter sales for technical facilities.

Then you have other -- for example, you have there some amounts that are related to annual subscription payments made by Cablevision subscribers. We have some amounts that are related to publishing, to upfront sales from publishing, upfront plans. Also, from pay television, we have some advertising that was sold in terms of upfront, and we have some money recorded there also. So that is why you see the change.

Okay and just one last question, please. Regarding the DirecTV and Innova merger, can you give us an estimate of the net debts that DirecTV in Mexico has on their balance sheet right now?

DirecTV in Mexico does not have any debt because it is a subsidiary of a U.S. company. All the debt was concentrated at the level of the holding company.

Okay. So basically upon the proposed merger with Innova, there will be no debt coming with that deal from DirecTV?

We are still negotiating, and we have not -- we don't have a final solution. I don't think, by the way, it is going to be a merger, but more a combination or a purchase of subscribers. DirecTV in Mexico has no debt; however, it has a lot of expenses and costs that we would not like to absorb such as satellite costs and the satellite agreement. So I think as part of those negotiations, as far as we are concerned or as we see the negotiation, it would not include any debt being absorbed from DirecTV into Innova.

Great and just one last point. The control threshold of 51 percent will not be broken. Innova will still have or Televisa will still have obviously 51 percent; is that correct?

In any negotiation, Televisa will maintain 51 percent. That is not being discussed. We would be willing maybe to go to 51 from our 60 percent to 51 percent, but we would still control that company going forward.

Great. Thank you very much.

Thank you. At this time, I would like to turn the floor back over to you for closing remarks.

Well, thank you very much for your participation, and we will 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.