Grupo Televisa SAB (TV) 2004 Q3 法說會逐字稿

Good morning everyone and welcome to Grupo Televisa’s Third Quarter Teleconference. 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. It applies to everything discussed in this 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.

Good morning. We’re pleased to have you with us for this discussion of Grupo Televisa’s Results for the third quarter 2004. With me today are Jose Baston, Corporate Vice President of Television, and Salvi Folch, our Chief Financial Officer.

First I will take you through the highlights of our financial results for the quarter and will review the outlook for the rest of the year. Then Pepe will proceed to talk about operating results of our television segment. After that we’ll be glad to take your questions.

Televisa continued to deliver outstanding results during the third quarter. On a pro forma basis including Sky Mexico consolidated sales increased 13% to 7.6b pesos, outpacing the Mexican economy and setting a new third quarter record. Operating income before depreciation and amortization increased 24%, reaching 2.8b pesos, and a 36.4% margin, the highest ever reported by the Company in any third quarter. In addition, all of our business segments grew during the quarter.

Our Television Broadcasting businesses continued to show strong momentum during the third quarter. In fact, television broadcasting sales to our traditional customers experienced double-digit growth for the third quarter in a row, increasing 11% to 4.3b pesos. This growth was driven by the overall pick up in the Mexican economy, the transmission of the Olympic Games, which generated sales of 262m pesos, the transmission of the Cup America soccer tournament and a 12.3% increase in local sales. In addition, excluding the costs associated with the Olympic Games, we reduced costs and expenses of television broadcasting business by 100m pesos during the third quarter. As a result, our operating income before depreciation and amortization increased 21% to 2b pesos, reaching a record third quarter margin of 46.9%.

Our Programming for Pay Television and Programming Licensing businesses also experienced considerable growth, both in sales and in operating income before depreciation and amortization during the third quarter.

Programming for Pay Television sales increased 15%, to 210m pesos, and operating income before depreciation and amortization expanded 72%, to 93m pesos, reaching a 44% margin. This growth was driven by an increase in subscription fees and advertising revenues from Mexico, combined with low programming and operating costs.

Programming Licensing sales increased 8%, to 447m pesos, and operating income before depreciation and amortization grew 16% to 154m pesos, driven by an increase in royalties from Univision, which amounted, to $25.7m, and by higher exports to Latin America, Europe, Asia and Africa.

We are also pleased to report that our Publishing business continued its positive trend during the quarter. Sales increased 9.6%, to 511m pesos, and operating income before depreciation and amortization grew 15%, to 102m pesos. This reflects an increase in both magazine circulation and advertising sales in Mexico and abroad.

In addition, our Radio division continues to improve. Sales and operating income before depreciation and amortization increased 28% and 86% respectively during the third quarter, driven by sales associated by the transmission of the Olympic Games and by growth by advertising sold during our newscasts.

Before we review the results of our Paid Television businesses I would like to briefly go over some of the highlights of the transaction we announced last week.

DirecTV group announced that its Mexican operation, Grupo Galaxy Mexicana, or DirecTV Mexico, continued to lose significant amounts of money and was not projected to be profitable in the foreseeable future. Therefore, it concluded that it was a failing business and decided to shut down its operations in Mexico. They also stated that they will temporarily maintain their service in Mexico to provide their customers enough time to switch to the paid television service provider of their choice.

To ease this condition and in an effort to provide an alternative, DirecTV Mexico has sold its subscribers lists to Sky Mexico. The ownership of Sky Mexico will change as a result of this transaction. Continuing Sky Mexico’s leadership position and its growth prospects, both Televisa and News Corporation have agreed to acquire a Liberty Media 10% equity stake in Sky Mexico.

Televisa will by two-thirds of such stake for approximately $48m and News Corporation has agreed to acquire the remaining portion. Additionally News Corporation will receive an option to buy up to 15% equity stake in Sky Mexico, depending on the number of subscribers that switch from DirecTV Mexico and remain Sky Mexico customers.

As a result, Televisa’s share in Sky Mexico could be marginally reduced from 60% to 57% and News Corp’s stake could increase from 30% to 43%.

Shifting now to our DTH businesses in Latin America. We have sold our 30% interest in Sky Multi Country. This transaction will release us from our path 6B satellite transponder guarantee, for which Televisa had previously taken reserves. As a result, we are reversing these reserves and receiving a one-time lump cash benefit of 360m pesos.

The company will also save approximately $11.8m per year from the elimination of our ongoing satellite payment and additional funding requirements for Multi Country’s operations.

Let’s turn now to our expanding carriage rights. We have signed new agreements for the carriage of Televisa’s channels in Sky Mexico. As we have mentioned, Televisa’s content has been the main driver of Sky Mexico’s success. At current subscriber levels, we believe this will generate additional revenue of about $4.5m in the first year alone. Continuing the company’s position and growth prospects we expect this figure to grow significantly in the following years.

As Sky Mexico grows, we expect these numbers to grow accordingly. We have also signed an agreement for Televisa’s channels to be delivered on DirecTV Latin America’s basic service package. Our programming will reach DirecTV’s approximately 800,000 subscribers in Latin America and we estimate it will generate $7m in programming fees during the first year alone. In the US, we will have the carriage rights to include up to 2 channels in DirecTV’s Hispanic package as well as in certain other News Corp platforms around the world.

Finally a broader understanding was reached as well. News Corp and Televisa have agreed that Televisa will be its preferred Mexican partner for various media businesses in Mexico. In addition we both intend to expand our businesses targeting the US Hispanic market.

Once again, we are very excited about this transaction. First of all we are thrilled because of the profits of Sky Mexico and the value it will create for Televisa and its shareholders. Second because we estimate that this transaction will generate approximately $25m per year of additional free cash flow for Televisa.

In summary, we have strengthened Sky Mexico’s competitive position and growth prospects. We have sold our stake in Sky Multi Country and have been released from the satellite guarantees. Even more important, we have secured the distribution of our content in the leading DTH platforms in Mexico, Latin America and the United States.

Moving on to Sky Mexico’s results. Sky Mexico’s gross active subscribers increased 14% compared to the third quarter of last year, to 942,000. Net sales increased 19%, to 1.1b pesos, reflecting the growth in the company’s subscriber base and the positive effect of the elimination of the excise tax. Operating income before depreciation and amortization increased 37% compared to last year’s third quarter, reaching a 36.4% margin.

Shifting now to Cablevision. One of the main problems with Cablevision [indiscernible] is the time it takes to disconnect [indiscernible] to analogue subscribers. This impairs Cablevision’s ability to collect [indiscernible] accounts in a timely fashion and limits our ability to determine whether a customer is willing to pay for the service and as a result whether or not that customer should be cancelled.

In contrast, disconnecting a past-due digital subscriber is automatic. As a result, digitalizing Cablevision’s service will allow us to accelerate the collection process and would let us establish much sooner whether or not a customer should be cancelled. In order to reflect the change, we decided to modify cablevision’s subscriber cancellation policy by reducing the number of days a customer can remain past-due cancelled subscriber from 120 days to 60 days. Cablevision added 18,800 new subscribers during the quarter. However, due to this change in policy Cablevision cancelled 43,500 subscribers. As a result, Cablevision ended the quarter with 340,600 [gross] active subscribers.

Considering the risk of collection associated with the subscribers that were past due for more than 60 days we have already not recorded the revenues associated with those subscribers and therefore Cablevision sales will not be affected as a result of the cancellation policy change.

Moving on to Cablevision’s results. Sales for the quarter increased 6.7% from last year’s third quarter, to 265m pesos, driven by the elimination of the 10% excise tax on telecommunication services as well as higher advertising sales and broadband subscription fees. Operating income before depreciation and amortization increased 13%, to 66m pesos, due to higher programming and installation costs as well as an increase in advertising expenses.

Finally, moving on to consolidated results. Net income for the quarter reached 1.4b pesos compared to net income of 720m pesos during the last year’s third quarter. This increase was driven by an 853m pesos increase in operating income and 729m pesos decrease in equity losses from affiliates, generated primarily by a one-time, non-cash benefit in connection with a relief of our satellite transponder guarantee, to which I referred before.

These positive changes were partially offset by higher costs of financing and an increase in income taxes during the quarter. Our balance sheet remains strong, with over 10.5b pesos in cash and a total debt of 19.5b pesos including Sky Mexico’s 4.4b pesos debt, which is not currently guaranteed by Televisa. S&P recently acknowledged our strong financial profile upgrading Televisa’s local currency corporate credit rating to BBB. In addition, we have continued with our refinancing strategy and liability management, capitalizing on market opportunities to lower Televisa’s costs of debt and to extend our maturities.

For this purpose, we obtained a committed credit facility for a 7.5 year loan with a Mexican bank for an aggregated principal amount of 2b pesos. Net proceeds will be used to refinance our $200m bond during August 2005. With these transactions, Televisa’s foreign currency denominated debt exposure will be reduced from 70% to 59%.

Moving on to the outlook. We are raising our guidance for the year. We now expect our television broadcasting revenue to increase 5.5%. In addition, [indiscernible] we have kept costs and expenses of our Television Broadcasting segment flat during the year, despite the production and transmission of the Olympic Games. Therefore we expect our Television Broadcasting segment’s operating income before depreciation and amortization margin to exceed 45%.

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

Thank you, Alfonso, and good morning to everyone.

The recovery of the Mexican economy combined with our consistently strong ratings and high quality coverage of special events encouraged our customers to increase [their] spending during the third quarter. Once again, this translated into our double-digit sales growth surpassing last year’s already strong results and setting a new record for the quarter. This outstanding performance is directly related to our consistently high and stable ratings.

In the third quarter, we aired 88 of the top 100 programs in the country, and from sign-on to sign-off we achieved an average audience share of 71.7%. In addition, Televisa proved again to be always the best alternative in all the television offerings in Mexico, and sports is definitely not the exception. During the Olympic Games, we achieved average audience share of approximately 70% and our prime time program “La Jugada Olimpica” was by far the highest rated Olympic program in Mexico, largely due to the popularity of our experienced commentators. We also exceeded our sales and operating income before depreciation and amortization targets for this event.

We continue to lead in all other genres, including news, comedy, game shows, movies and kids programming. In addition, our novelas continue to be a reliable source of ratings and profitability. For example our 8 pm novella, Rubi, was the highest rated program in the quarter, reaching an average audience share of 38.1%. And our [indiscernible] novela “Amy, La Nina de la Mochila Azul” reached an average audience share of 44.3%.

We are confident of our ability to consistently deliver high quality programming and ratings. We are also committed to helping our customers with their sales and marketing objectives. For this reason and after extensive conversations with our customers and total analyses and planning, we decided to change the way in which we are offering our audience through our television networks.

Under the old one, we established a fixed price for time slots, depending on the day of the week, quarter and [channel]. Now we have established our range on a cost of television viewers or [CTN] basis, which is a worldwide industry standard. As a result, our customers will now pay a specific price for every 1,000 people viewing their ad. Furthermore, given the reach and the [diversity] of our audiences, we will offer our customers the possibility of doing targeted ad campaigns where they only pay for the viewers they are trying to reach.

We believe these new pricing plans will provide greater flexibility for our customers, allowing them to reach specific demographics group more effectively. In addition, we will be issuing to our customers to compare our prices against those of our competitors, including all the media alternatives in the country. This new pricing plan will become effective in 2005 and is currently being offered to our customers.

Shifting now to our licensing businesses. Our programming continues to be extremely popular among the US Hispanic community. During the third quarter our novela, Rubi, achieved an average of 20 rating points in during the [indiscernible] 8 pm time slot and our other novelas and programs continued to provide a valuable source of news for the Univision, Galavision and TeleFutura networks. In exchange, during the third quarter we royalties $25.7m in royalties from Univision.

In addition, TuTV, our 50/50 paid TV venture with Univision signed an agreement with Cox Communications to distribute the 5 TuTV Spanish language television networks in the programming package Paquete Latino, which is specifically tailored for Hispanic digital cable customers. TuTV channels now reach 1m Hispanic paid TV subscribers through EchoStar and Cox, and there is a significant growth potential for this business since there are currently more than 3m [indiscernible] Hispanic paid TV households in the United States.

Now we will be glad to take your questions.

Thank you the floor is now open for questions. [Operator instructions]. Our first question comes from Jean-Charles Lemardeley of JP Morgan. Please go ahead.

Yes. Good morning. Just a couple of questions. First, could you share with us what has been the reaction from your clients to your new pricing structure?

And the second question is on Inova. We saw a big [indiscernible] in subscriber additions. What is your expectation for the fourth quarter and going forward into next year in terms of subscriber growth?

Hi Jean-Charles. To answer your last question, we expect a better quarter to be the fourth quarter for Inova and we expect deeper acquisitions of subscribers.

What’s the driver of that? The third quarter, it’s because the summer is very slow. And is it because the second quarter was stronger? Is that why you’re seeing such a big, a sharp slowdown?

I don’t see it as a sharp slowdown when compared to last year. I think comparing to last year it was a good quarter, but September is always a difficult month because people need the money to buy things for the schools, for the kids, etc. But we expect the fourth quarter to be a better quarter.

And do you have anything that’s going to be driving that in terms of special programs or events that people want to sign up for?

No. I think another thing that happened is that we did not have reality shows such as “Big Brother” during the third quarter and I think that has now become a very important driver for subscriber growth for Inova

Okay.

Although we’re going to have a reality show during the fourth quarter.

Okay.

Jean-Charles, based on your first question, since we changed the way that we have been selling our advertising for a very long time, what we see right now is that our clients are analyzing their buying. That’s exactly what we’re going through right now.

I heard some feed back from some of the agencies that basically the industry was not ready for this because they feel optimizers were not programmed for this and that you already had some clients that were signing up on your old air time pricing. Is that true?

Well. That’s definitely not true. As I explained during my words, we did this based on a lot of studies and of course some of the studies were a lot of conversations with our customers. I think that what we’re going through right now is that they are really taking more time to make the decision of the buy based on the new way that we are selling.

That’s exactly what’s going on. I think that timing is right and I think that the programs that we have and that the demographics that we have are the demographics that they are looking for. So I think that they are going to be the analyses of their buy. That’s it.

Thank you.

Thanks.

Thank you. Our next question is coming from Patrick Grenham of Citigroup. Please go ahead.

Good morning. Just again a question on the new sales system. Is there an element -- because your TV broadcasting sales have been so strong -- is there an element of working off, or is there any effect on the change of the system on the third quarter sales?

And are you getting a level of acceptance from the corporate customers that you would expect? Are your customers taking the change in the system as a positive view, or what reaction are you seeing so far in the market?

And then the next area of questions I was hoping-- Your Cable TV business still isn’t adding digital subscribers. You seem to be stuck at that mid-70,000s in terms of digital subscribers. Do you have targets for how many digital subscribers you’ll have to the end of 2005 and how you’re going to get there? Thanks.

To answer your first question. The third quarter did not have anything to do with our new sales plan. The results of the third quarter are mostly based on the sales of the Olympics as well as the Cup America and the Euro Cup. Now what we’re seeing right now is that they are -- again, absolutely, [indiscernible] -- the corporate clients are now, the main clients are just analyzing the buy. It’s too early to call right now. We are just waiting for the-- We shall be presenting this on a one-on-one basis with most of our clients and what they are asking for is to please wait for them to really analyze our new sales plan.

Add that to [indiscernible], as we have announced previously we have a digitalization plan for 100% of the network for the subscriber base from now until the end of 2006. So by then we will have digitalized 100% of our base. This is a huge effort on the part of the company but, as we have mentioned before, I think that the main problem that the company is suffering is piracy. And the only way to avoid piracy is digitalizing the signal. So we are doing that. We have this plan. It’s going to cost us around $70m. So that is the plan, and we are going forward with it.

Okay. Thank you.

Thank you. Our next question is coming from Whitney Johnson of Merrill Lynch. Please go ahead.

Okay, Alfonso and Pepe, I have two questions. The first is with regard to the quarter. Can you give us a breakdown of what percentage of your revenue came from – percentage of the television broadcasting came from Copa America and what percentage was from local sales?

And the second is with regard to margins. You’ve now pretty much closed the gap on television broadcasting with [Tevias Tecker]. However, given your scale, one could argue that your margins should be higher than [S Tecker] so how much room do you think you have to further expand your margins, and actually I’m going to throw in a third question.

Now that you’ve completed negotiation with News Corp., with Direct TV, etc, in terms of getting this acquisition done, will management time be freed up to focus on some of your other businesses, like cable, like publishing, to really orchestrate a turnaround there?

Hi, Whitney, yes, as to – I’ll start with local sales. Local sales represented 14.4% of those television broadcasting sales. Then –

It was Ps.119m of our third quarter sales.

Ps.119m.

Okay, and Pepe, what was that in 3Q of 2003? Was there a Copa America in terms of [copying] that?

Well, there is not a Copa America last –

Okay, so this was just incremental? Okay, got it.

And as to margins, Whitney, I think that our margin was extraordinary, you know, having a 47% EBITDA margin is very high, and as a matter of fact, if you exclude the Olympic Games as a whole, the margin is even higher. The margin ex Olympic Games would be 48%, 47.9%, so I think that is a very high margin and now our big challenge is to maintain it.

Okay, so agreed. I’m just wondering, hoping that maybe there is even more that you can do, but your view is at this point, you’re basically going to have to maintain it and there’s not really a lot of upside unless you can grow your top-line? Is that [inaudible]?

Yes, the big challenge and we’re working on that, of course, is to grow the top-line and grow EBITDA in terms of amounts, but I think that 47% margin is pretty reasonable.

It is good. Okay, and then the last question in terms of management time being freed up, I guess senior management time being freed up to focus on some of the businesses that still aren’t performing at par?

Yes, well as you know, we formed an Office of the Chairman of Grupo Televisa, and now we’re focusing in that office more in opportunities. We have closed the recap in the first quarter of this year for the Televisa [Centro] situation. We have closed the deal with Direct TV and of course, we’ll be announcing other things pretty soon.

Okay, terrific, thank you.

Thank you. Our next question is coming from Vera Rossi of Morgan Stanley. Please go ahead.

Hello, my question is on local sales. You mentioned that today is 14.4% of revenues. Where do you expect to see local sales as a percentage of revenues two years from now?

I think as you know, in the United States, local sales are a percent, about 40%. However, it’s a different market. I think in Mexico it takes time to develop those markets. Of course, it’s not only developing the market but forming the sales forces in each one of those markets and going after smaller clients, which takes time. You have to convince clients that it’s worthwhile advertising on television in those local markets. Some of these companies don’t even know the way to produce their commercials, etc, so it takes more time. So by the end of 2006, we would expect this number to be in the 25% approximately.

Of television broadcasting revenues?

Yes.

Okay. And one more question on Univision, the royalties for Televisa. This year, what is your guidance for this year, and if you have an idea for 2005 as well, it would be great. Thank you.

Yes, we expect to receive from Univision about $105m this year, and we don’t have a guidance for next year.

Okay, thank you.

Thank you. Our next question is coming from Jessica Rees-Collin from Merrill Lynch. Please go ahead.

Hi, I have three questions related to your US activities. First on that Univision license, it looks like it was up only 4% in the quarter versus 19% in the second quarter. I was just wondering if you could comment on what happened?

Second, could you discuss when your channels get launched in the US on Direct TV, and you mentioned that [indiscernible] will focus on US [expansion]. I was wondering if you can comment on what kind – do you mean Spanish language, and is it other media besides television?

And then finally, right now, are you exclusive to [Ecostar] on satellite, and if you are, when does that exclusivity roll off?

Hi, Jessica, to start on your last question, we had an exclusive deal for Ecostar and that is about to end, so we will be able to reach an agreement to do a deal with others such as Direct TV, of course. As to Univision, you’re right. It grew about 3.8%, and this was a result of the Copa America, and they had very important sales related to Copa America. However, under the current program licensing agreement, they don’t pay us the royalty on special events such as Copa America, so that’s why you see that 3.8%.

Okay, thanks.

And as to the channels on Direct TV, we would include those channels in Latin America immediately. I think we’re starting in November with the five channels for 800,000 subscribers in the region, and in the US, we would start next year.

And is it just – can you follow up on what kinds of things you would do with News Corp.? You said you’re targeting together [USS Banex]?

Yes, we’re developing some business plans together, so I would not like to disclose at this point until we have a final understanding and a final plan, which opportunities we’re talking about.

Thank you.

Thank you. Our next question is coming from Gordon Lee of UBS. Please go ahead.

Hi, good morning. A couple of questions, just first on the Direct TV, on the programming licensing and also on the carriage fees to be charged to Sky Mexico. Should we – I guess you partially answered the question in the previous response, but should we expect that to start coming through the income statement in the third quarter?

And then the second question is just related to your interest expense. You know, [your auditing] points out that it jumped largely because of consolidation of the Sky Mexico debt, but it actually jumped quite a bit versus the second quarter as well, you know, about Ps.20m during which time you also consolidated a Sky Mexico debt, so if you could just elaborate on that, it would be helpful. Thank you.

I think after your last question, it also includes both Sky Mexico, a higher inflation and also, since we have shifted some of our debt from dollars to pesos, we’re paying higher interest rates. However, of course, we don’t have that FX exposure.

As to your first question, you will start to see the results of the payments that are going to be made by Sky Mexico to Televisa in the fourth quarter.

In the fourth quarter? And the programming fees to Direct TV [La Tam] in the fourth quarter as well?

That is correct.

Perfect, thank you very much.

Thank you. Our next question is coming from Danford Calsi (ph) of Schroders. Please go ahead.

Good morning, I’ve got two questions. One is your customer deposits. It looks like on your balance sheet you’ve still got about Ps.6.2b of customer deposits. To get to your year-end 5.5% growth, it looks like you only need Ps.5.4b of sales in the fourth quarter. Can you explain the difference?

Hi, Dan, yes, about Ps.5b of the amount that you see in our balance sheet is related to advertising and has to placed on television aside from multi-year plans which we have sold to certain clients. So that means that only Ps.5b of those are related to year 2004. Of course, in that amount, you have other amounts that have to do with pre-plans or with advertising sold by the publishing division, by the [Cabalavision] and also by Sky.

Right, okay, so –

So only, I mean, for the whole amount only, Ps.5b are related to this year.

Okay, and so what would you keep [hid] from that if the spot market is actually stronger, then your 5.5% could actually look a little bit conservative?

That is correct. However, you have to consider that we have volume limitations in the fourth quarter.

Okay, okay, excellent. The second question is that obviously you’re throwing off a fair amount of cash, quarter-on-quarter. Can you give us an idea of your investment plans for 2005, possible acquisitions or dividend, or what your current thoughts are on the use of that cash-flow?

As we have always said, we want to grow this company, and we are always exploring new opportunities. At this point, I do not receive any material investments in this quarter. However, if opportunities come up within our core business that are related to the media business and they are not diluted for our shareholders, and that represents a strong growth prospect, we would take advantage of them. So we review opportunities almost every day, but I don’t foresee any big acquisition or anything of that sort happening this quarter. So that means that if we don’t have this type of opportunities, we would pay a larger dividend.

Okay, excellent. And one last additional question – there obviously have been changes in the Mexican gambling laws, obviously not casinos, but what sort of opportunities do you think that presents for you?

I think that represents a huge opportunity, as we have talked about. I think that – I mean, we’re working, actually, on some things related to that. I would not at this point like to discuss in detail what that means for Televisa, but it’s going to be something very important and I think that you will definitely like it. So we will be announcing this, I think, towards the end of November.

Great, thanks very much.

Thank you. Our next question is coming from Jose Ramirez of Deutsche IXE. Please go ahead.

Yes, good morning. Could you give us some idea of how much revenue from the Olympics went into radio? Thank you.

You know, it was an important component of their increase of sales, but to tell you the truth, I don’t have those numbers with me.

Okay, but it was part of the increase?

Yes, yes. [It was] that and the sports programming and the newscast. The sports programming in general, but I don’t have those numbers with me.

Okay, thank you very much.

Thank you. Our next question is coming from Andrew Campbell of CSFB. Please go ahead.

Yes, good morning. I think back in your Televisa plan, the 2006 plan, you’d mentioned you’d expected broadcasting growth at a multiplier of 1.5 times of GDP growth. I was wondering with the new advertising plans that you’ve announced, if you think that looks conservative or if you’re changing data guidance at all?

No, we’re sticking to guidance.

Okay. Is the interpretation of the changes – is revenue neutral, in that case?

Yes, that’s certainly right.

Okay, thank you very much.

Thank you. Our next question is coming from Chris Recouso of Bear Stearns. Please go ahead.

Hi, good morning guys, three questions. In terms of your Olympics, I don’t know if you can break this out, but is it possible to tell us how much of Olympics revenue and EBITDA was truly incremental versus how much substituted what would have been regular strip programming revenue and EBITDA?

The second question is if you can tell us, in terms of your pre-sales, do you have any preliminary idea in terms of how much you’re going for in terms of pricing increases in prime time and in pre-prime?

And the third question actually has to do with Innova. I believe there was some kind of a satellite failure that hit some Mexican companies a week or two ago, and I’m under the impression that Innova does not have something called Business Interruption Insurance against satellite failure. Are you guys looking into that, perhaps to insure Innova, and if so, how much does that cost? Thank you.

Hi, Chris, to your last question, we have seen this very carefully for the Business Interruption Insurance, and together with News Corporation and with Liberty Media at that point, we had decided not to insure the company. It was very, very expensive and it’s a risk associated with the business. However, now with association, with Direct TV and with News Corp, we feel more confident that we can say they will have two spare satellites, so I think that the insurance cost of that is extremely high, and now once we’re in partnership with the Direct TV family we feel more confident that – I mean, it’s the right way to go.

And on the Olympics, as we mentioned, we saw Ps.262m, which is about $23m. And there, what I can tell you is that with the Olympic Games, we grew 11.1% and we grew our EBITDA 21.2%. It’s very difficult to say what’s incremental, because I mean, you will never know which advertisers would have included advertising without the Olympics and which were related entirely to the Olympic Games, but what I can tell you also is good news that aside from the Olympic Games and excluding the Ps.262m of Olympic Game advertising, we grew 4.4% and also, excluding the Olympic sales and costs, we grew our EBITDA 16.1%. And as I mentioned, as a matter of fact, the EBITDA margin is larger, excluding the Olympics. The EBITDA margin, excluding the Olympics is 47.9%. So I think it’s very difficult to say what was incremental but even excluding the Olympics, the Olympic sales of Ps.262m, I could say that – I mean, the growth was pretty strong.

And in terms of pre-sale pricing increases, have you got any idea about what you’re looking for, for prime and pre-prime?

No, it’s all going to depend on the value of each of the clients. I mean, that based on the analysis that they will do, we will be able to tell you exactly what kind of operating [indiscernible] we see.

And just to follow up, in terms of Innova, I remember that you guys migrated your subscribers from [Satmex] over to, I believe, [Path 9] and it took about a year and what was something like $40m. Now, Innova’s obviously a lot larger now, so obviously this is very much a worse case scenario, and the probability’s very low, but if there was a satellite failure, have you guys taken a look at scenario analysis in terms of how much it would cost you to migrate everybody over to another bird, and how long it would take?

Yes, we have a contingency plan. It’s very unlikely, I mean, that that would happen. In most cases when there is failure of the satellites, and it’s not immediate, it takes years for the failure to become a problem, so I think we will have a –- I mean, if you are talking about a catastrophic scenario that the satellite is struck by a meteorite or whatever, that we haven’t contemplated, because this is such an extreme case. However, I mean, if it’s only a satellite failure problem, we have a plan as to what would happen, what spare satellite we could use, and a migration plan.

Yes, no, the only reason I ask is because I think you guys are on a Path 9, and the Path 9 has failed for other people, twice before, so anyway, okay, thank you.

Thank you. Our final question is coming from Rene Pimentel of Deutsche IXE. Please go ahead.

Thank you very much. Good morning, gentlemen, just one question. Actually, two questions, sorry. First of all, now that the transaction with Direct TV and News Corp has been finalized, do you foresee that there will be a consolidation, or a faster consolidation of the cable industry in Mexico, and are you interested in participating in this consolidation and entering other areas outside of the metropolitan area?

And the second question is, you’ll end up the year with a very interesting level of cash. Will you also be considering reducing your debt levels, or are you comfortable with the amount of debt that you currently have on the balance sheet? Thank you.

As to your last question, we feel very comfortable with our debt levels, and also with the maturities and the FX exposure, so I think at this point, we would not be planning on reducing the debt levels materially. I mean, we might be reducing somewhat, I mean, $20m or $30m, but nothing material, and as to your first question, I think that we have always said that we would love to participate in the consolidation of the cable industry in Mexico.

The cable industry is very fragmented. You have, like, 200 systems and some of them are very old systems with bad service to consumers. I think Cabalavision is doing a tremendous effort in digitalizing 100% of the subscriber base of the network. So I think we will be very well positioned in order to participate in that consolidation.

I think that the relevant market for purposes of Cabalavision and the cable sector is not paid television but it’s the telecommunications sector in general. So I have to be seen more as a competitor of the telecommunications sector than a competitor of Sky in the paid television arena.

And to be able to compete in the telco sector, would you have to have nationwide coverage, then?

Not necessarily. However, it would make a lot of sense to have a national network.

Okay, thank you very much.

Thank you. At this time, I’d like to turn the call back over to you for any further remarks.

Well, thank you very much for participating today. For the first time in the history of Televisa, we’re having our board meeting in New York City. We’re very excited about the prospect that we have for the business and we’ll be announcing other things very soon. Thank you.

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