Grupo Televisa SAB (TV) 2005 Q3 法說會逐字稿

Good morning everyone and welcome to Grupo Televisa's third quarter 2005 conference call.

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 and applies to everything we discuss in today's call and in the earnings release.

I will now turn the call over to Mr Alfonso de Angoitia Noriega, executive vice president of Grupo Televisa. Please go ahead sir.

Good morning. We're pleased to have you join our discussion of Grupo Televisa's results for the third quarter of 2005. With me today I've got José Bastón, corporate vice president of television and Salvi Folch our chief financial officer.

First I will highlight our financial results for the quarter and give you our outlook for the rest of the year. I will also review some aspects of our recently announced project in Spain. After that Pepe will discuss the operating results of our television segment and then we'll be happy to take your questions.

Televisa continued to deliver strong results during the third quarter. On a consolidated basis and pro forma for the accounting changes in our publishing distribution segment, sales increased 8.8% from last year's third quarter to 8.1 billion pesos. Operating income before depreciation and amortization reached 3.4 billion pesos, a 19.2% increase over last year's third quarter and our margin reached an all time record of 42.2%. Net income rose 8.1%, from last year's third quarter to 1.6 billion pesos, driven primarily by a 24.6% increase in operating income. This was partially offset by an increase in income tax and a decrease in equity income from affiliates.

Now I will take you through our segment results. Sales of our television broadcasting business increased 3% to 4.5 billion pesos despite the unfavorable comparison arising from last year's transmission of the Olympic Games during the third quarter. As a reminder, sales for the '04 Olympics amounted to 271 million pesos. Without considering that effect our sales during the third quarter grew 9.7% year over year. In addition we continued to experience considerable operating leverage. As a result our operating income before depreciation and amortization increased 6.9% to 2.2 billion pesos enabling us to reach a record margin in the third quarter of 48.7%.

In our paid television networks business sales rose 30% to 283 million pesos, and operating income before depreciation and amortization increased 46% to 141 million pesos. This growth had three drivers. The first is the consolidation of 2TV which contributed 22.4 million pesos to our sales and 10.5 million pesos to our operating income before depreciation and amortization during the quarter.

Second we saw an increase in sales to Sky and Cable platforms in Mexico.

The third driver is the recent addition of five of our channels to Direct TV Latin America's basic package which reaches more than 800,000 subscribers in the region.

Sales of our programming export business increased 0.5% to 465 million pesos, an operating income before depreciation and amortization increase of 7.5% to 171 million pesos. These increases resulted from higher programming sales in Latin America and also higher royalties paid to the company under the Univision Program License Agreement which amounted to $27.8 million in the third quarter of 2005 compared with $25.7 million reported in the third quarter of 2004. These were partially offset by a 43.7% peso negative translation effect of foreign currency denominated sales and by lower export sales to Europe, Asia and Africa.

In our publishing business the strategies we began implementing in 2002 have delivered outstanding results. During the last three years, sales and operating income before depreciation and amortization have increased at a compounded annual rate of 9.3% and 15.4% respectively. In the third quarter we continued this trend. Sales increased 17.6% to 623 million pesos due to increases in both circulation and advertising in Mexico and Latin America. In addition operating income before depreciation and amortization increased 17.9% and the margin reached 20%.

Sky Mexico continued to deliver strong results. We added 32,800 subscribers in the third quarter bringing Sky's total subscriber base to 1,216,600 subscribers compared with 942,500 subscribers in the third quarter of 2004. As a result sales increased 32% to 1.5 billion pesos, and operating income before depreciation and amortization increased 58% to 694 million pesos enabling us to achieve a record margin of 43.7%. It is important to note that during the third quarter Sky Mexico had special revenues associated mainly with two soccer events, the Confederations Cup and the [Lewis] Cup that amounted to 84 million pesos. These non-recurrent revenues helped to boost Sky's third quarter margin.

We have announced that Sky's uplink services will be switched from our current uplink facility in Miami to Direct TVs uplink facilities in California. This change will bring additional cost savings and will allow Sky to benefit from technological synergies with Direct TV.

Looking ahead we expect Sky's superior content and in particular Sky's exclusive broadcast of 34 out of the 64 games of the 2006 Soccer World Cup to continue driving subscriber growth.

In Cablevision we added 16,605 subscribers in the third quarter bringing Cablevision 's total subscriber base to 406,262 compared with 340,581 in the third quarter of last year.

In addition over the past 12 months we have more than doubled our broadband customer base from 20,324 to 51,779. This subscriber growth as well as the effect of a 6% price increase we implemented in March of this year, led us to a 30.7% increase in sales to 358 million pesos in the third quarter. We also reduced programming costs during the quarter. As a result operating income before depreciation and amortization increased 83% to 124 million pesos and the margin reached 34.7%.

The growth we have experienced in Cablevision subscriber base has been driven primarily by the conversion of our system from analogue to a digital format. In the areas where we have switched to digital format we have seen our subscriber base increase at least 35% and in certain areas up to 80% with an ARPU growth of 25%. We were originally planning to complete the digital conversion by the end of 2006. Given the results we have seen however we have decided to accelerate our conversion to digital format. For this reason Cablevision's 2005 CapEx requirement will increase from $35 million to approximately $45 million reducing our 2006 CapEx needs by the same amount. In return we expect Cablevision subscribers growth to accelerate throughout the coming year.

We also continue to see growth in our radio division. Third quarter sales rose 5.2% driven by growth in advertising time sold during our news and sports programs as well as by sales generated by our affiliation agreement with Radiorama. In addition operating income before depreciation and amortization doubled from 5.6 million to 11.3 million pesos driven by growth in sales and decreasing operating expenses.

Sales in our other businesses segment increased 10.9% to 318 million pesos due to strong sales in our soccer and internet businesses; sales in our internet business driven primarily by SMS. The growth in sales was partially offset by a decrease in sales in our feature film business.

During the quarter Televisa paid in full its 200 million 85/8 Senior Notes due in August 2005 using cash on hand. With this payment Televisa has no other material debt amortization until 2007. As part of our stock repurchase program in the third quarter, we repurchased 10 million CPOs for an aggregate amount of approximately $32 million. Year to date we have repurchased over $86 million and in total we have returned more than $470 million to our shareholders through dividends and stock repurchases.

Moving now onto the outlook for the year, we expect our full year television broadcasting sales to increase 5% and our operating income before depreciation and amortization margin to exceed 47%.

I will now turn to our project in Spain. We recently announced that we are participating in a consortium that has submitted a bid to the government of Spain to obtain a free-to-air television concession in this country. We expect the resolution and award of the concession to be announced by December 2. No payment is required for the concession.

Spain presents an extremely attractive investment opportunity for Television given its size, growth potential and potential synergies with Televisa. With an average annual GDP growth of 3.7% during the last ten years, Spain is one of the fastest growing economies in Europe in the European Union. Its advertising market is valued at approximately EUR6.1 billion of which close to EUR2.7 billion or 44% is allocated to the television industry. In addition the television advertising market in Spain is one of the most dynamic and profitable in Europe and has grown 7.6% per year during the last three years. For this project we are joining forces with content production and audio visual services companies Grupo Arbol and Mediapro the leading suppliers of prime time content in Spain along with other smaller producers of content. Grupo Arbol and Mediapro not only bring an experienced management team to the project but also have relevant experience in the Spanish television market.

Now I will turn the call over to Pepe.

José Bastón: Thank you Alfonso. Good morning everyone and thank you for joining us.

The success of last year's Olympic Games presented a tremendous challenge for this year's third quarter since the revenues related to such an event represented over 6% of the sales of the third quarter of 2004. We faced a difficult challenge and delivered great results; not only regenerating sales assisted to the difficult comparison but growing our broadcasting sales 3% when compared to last year. The result was mainly based in our strong programming which continued to generate high audience share and very good revenues. Worth mentioning that this was achieved while maintaining the financial discipline that we have demonstrated over time. We are on track of achieving the aggressive goals that we have set at the beginning of the year both in terms of audience share and financial measures.

During the third quarter we launched [inaudible] a unique show that combines reality and philanthropy. TV stars [learn] with people who have special needs in order to have their dreams become reality. This show aired on Sunday evenings has become a phenomenon in Mexico capturing an average 48.7% audience share during the quarter. We have recovered our long-lasting leading position on Sunday night's audienceship.

The success of our programming is attributable to our high quality production methods and standards and to our innovation capabilities. Expanding on innovation I want to take this opportunity to explain two strategies that have given us very good resource during 2005; product placement and the creation of a multimedia experience around some of our shows. First I will address product placement.

During 2005 we have worked very close with our clients to develop together their advertising strategies. Product placement has been a tool widely used by our clients since it provides a lot of flexibility and allows them to link their branch to our shows and talent. We will continue to work with our clients to find the alternatives that address their advertising needs. Turning over to the creation of a multimedia experience around some of our shows I will explain to you a concept that we have exploited surrounding our soap opera [Triveldi].

This new concept is having very good results and allows us to leverage several of our media assets to promote a program. [Triveldi] [inaudible] we are airing at 7pm from Monday through Friday which targets mainly young audiences. The story deals with the problems faced by a group of teenagers. It has an audience share of approximately 35%.

In May of this year we launched a magazine based on the show bearing the same name. Within three months we have doubled circulation to 142,000 from the initial circulation of 71,000 and increased advertising pages from 16 to 26. We have also brought [Triveldi] to our music and live entertainment businesses, selling more than half a million copies of [Triveldi's] award winning album, launching a second album and promoting 35 concerts throughout Mexico that have gained revenues of over $6 million. We are also selling [Triveldi] verses on DVD and merchandising in Mexico and in the United States with great success.

At the time we launched the show we began promoting our television channels and magazines, SMS services related to [Triveldi] including text messages, ring tones and photographs. As a result we shall deliver more than 2.6 million related text messages and generated more than [19] million pesos in sales.

In summary, viewers can now watch the show on TV, buy the DVD, listen to the music over our radio stations, buy the CD produced by our own record label Televisa EMI, attend the concert. We have all the favorite stars in our magazines or over our internet portal, buy related merchandising and even download text pictures and ring tones to their cell phones.

By leveraging content on all of our assets and turning our products into multimedia experiences we have generated higher ratings and greater revenues. We will continue to develop products that can be exploited on our different media assets.

Looking ahead to 2006 we expect to continue with our revenue growth trend. As you know next year we will have two very important special events, the presidential elections and the FIFA World Cup, of which we will broadcast 30 games. The advertising related to both of these events will enable us to generate significant revenue and further margin expansion.

Thank you and now we will be glad to take you questions.

Thank you. The floor is now open for questions. [OPERATOR INSTRUCTIONS]. Our first question is coming from Gordon Lee with UBS. Please go ahead.

Good morning gentlemen. A couple of questions if I may, first just on Spain. One, I was wondering what exactly you expect to be Televisa's contribution to the venture, not necessarily the monetary contribution but from the day to day management or from the programming aspect, what would you expect to contribute to that?

And also related to Spain I guess is whether your incursion into Spain means that you will also be looking maybe at other markets with new eyes, specifically thinking about Brazil and the arrangement or agreement you have with SBC there. Thank you.

Hi Gordon. I think Spain is a great opportunity as I mentioned, it's a great market, the television business is a great business there. There are basically two private companies that operate with EBITDA margins of 40% and 30% respectively so it's within our core business. Our products, mainly the Telenovelas are popular in Spain. [Armorial] recently was extremely popular in Spain which is one of our top novelas. So I think it represents a great opportunity in our core business in a country that we understand and in a country that speaks the same language.

So the total business plan is EUR500 million out of which since we were loaned 40% we will contribute 200 million and these contributions will go from next year until year 2010. So you won't put 100% of the money in a [book], now it goes until year 2010. And we see a lot of synergies there. I think that we are joining forces with the top producers in Spain, they are great people, they have great talent and great formats. And those formats we can adapt for Mexico, Latin America, of course for the US Hispanic market. We can co-produce many things between Televisa and themselves targeting Mexico and the US Hispanic market as well as co-productions. So there are many many things that we can do. Also in terms of producing content for the Spanish channel in Mexico because the cost of production in Mexico, as you can imagine, is much lower than the cost of producing in Spain. So there are many many things that we can do together using the talent and the content that they have and of course our production capabilities.

What are we going to do in that joint venture? Well we'll have the right to appoint the CFO because since we are going to be the holders of 40% of that company it is very important that we have financial control over it. And of course we will offer to them all these things that I have mentioned in terms of production capabilities in Mexico. And what they are offering to us is their talent, their concepts, their formats to be exploited in Mexico, Latin America and for the US Hispanic market. So there are many many things that will evolve from there.

As to the second point, Brazil is a very interesting opportunity as well. We have an option that goes until year 2008 so we are under no hurry to do anything there. It is a very interesting market, it is a market that is larger than the Mexican market but there we want to look first at what happened as to the macro economic situation, the political situation, what happens to the restructuring of global which is not clear to us at this point. And then once we figure all these things out we will think about making an investment in Brazil. So this is not going to happen soon. It's a very interesting market and it's a market where a product is very popular also but I don’t think something will happen in the near future.

Perfect, thank you very much.

Thank you. Our next question is coming from Jessica Reif with Merrill Lynch.

Thank you. Alfonso in the press release you discussed a permit for the gaming business. Could you discuss at all what the investment might be over the next two years and what the upside could be?

And also on Sky Mexico, do you have any plans to upgrade to high definition?

Yes as to the gaming, we are finishing Jessica the business plan for gaming as a whole. The total investment between '06 and '07 will be approximately $70 million. However we are finishing the plan and we will have it ready in the first quarter of next year. As we have mentioned, everything that has to do with gaming is very political and we will be very careful in terms of announcing this and we will do that in the first quarter of next year. It is surprising that in Mexico the discussion about gaming has become about legal gaming and permitted gaming and people that have obtained licenses and not illegal gaming which is much larger than the legal gaming. But since it's a very political year we are going to be very careful in what we do in gaming. We see that this business is a great opportunity. If you see what it represents of the GDP in other countries, for example, in the United States in [inaudible] in the gaming industry is about 0.69% of GDP which is a huge number. In Mexico if you use that figure 0.69% of GDP it would be a business that has the potential of being larger than the advertising market of our country. So it has huge potential but we'll announce all our strategy in the first quarter of next year.

As far as high definition, we're not planning in the short run to change the boxes in Mexico, so Sky will not do that in the short run. We're offering high definition services through Cablevision.

Thank you.

Thank you. Our next question is coming from Michael [Copperman] with Merrill Lynch.

Thanks. Could you guys talk, a couple of questions on television broadcasting control. What percentages of the sales came from local? And second of all what categories were strong?

And then if you could talk a little bit about the upfront, what your expectations are, particularly the impact of the World Cup. I know the election spending doesn't come in the upfront but whether or not that’s going to push people to commit more.

And also [inaudible] had mentioned that he was getting started a little bit later this year and I'm not sure if you can comment on that? Thanks.

José Bastón: The local sales are going to be around 12 to 13% same as last year and on the upfront, it is a little bit early to call. We are exactly in the process of negotiations during -- you will see that we will be seeing good results like the mid or the end of November so it's a little bit early to call what is going on with the upfront.

But you don't expect it to close any later than last year?

José Bastón: We were expecting to close by the end of November.

Okay and then would you guys -- do you plan to put through a price increase this year?

Definitely because it's a great year to take advantage of -- we have as you know the World Cup which is a very important event in our country. And also we will have the political advertising so it's a great year to push for price increases.

Okay great. And just finally on the categories, were there any categories that were particularly strong this quarter?

Not really, we didn't see any special things.

Right, thank you very much.

Thank you, our next questions is coming from Jean-Charles Lemardeley with JP Morgan.

Yes good morning. A couple of questions on, back to Spain. First, can you clarify whether the licenses are national? We have been told here it was only for 70% of the population, the territory.

And then your partners there, what kind of formats are they going to be able to make available to you immediately? And are their most successful formats not tied into long term contracts with the other broadcasters in Spain?

And then the other questions are, on Sky, you mentioned there was some non-recurring impacts during the quarter. What would have been the recurring margin?

And then finally what's -- do you have any -- what's the amount of tax assets that you have left at Sky?

José Bastón: Hi, Jean-Charles. As to the coverage in Spain, what the government of Spain offered in this process was a minimum of 70% however what the reality is that the coverage is going to be 86%. And of course the coverage will include all the main cities in the country. So we feel very comfortable about the coverage of this 86%. The 70% just to be clear was what the minimum that was offered by the government.

And then if you take out the non-recurring events for Sky the margin would be around 40%.

And finally, we still have about 10 billion pesos of tax loss carried forward in the case of Sky so we don't expect to pay taxes in the short term.

Okay, and what those formats in Spain that will be made available to you?

José Bastón: Well the formats that the production companies that will be our partners in Spain, we shall talk to them about it and basically of the format that could be adapted to our market will be available to us. Just an example, one of the most successful ones right now is the [Ferrano] and they used to also [inaudible] [Pariavista] and also a formula that we can adapt in some way very easily to our market. Although the idea is as soon as we have this more settled, literally after December 2 we were planning to have a team of our television people with their people to sit down and to analyze each of the performance that they have available that are more than 24 months as we speak right now, plus the ones that we can develop together. So I think that this is a matter of time to sit down and really to know each other better to be able to do the synergies that Alfonso was telling you about.

Okay. Are you referring to using them in Mexico or using them in Spain? I was just wondering in Spain, they are going to continue to sell to Telecinco and the other broadcasters presumably. So I was wondering if they've had some very successful programs I was wondering if those are going to be available for your new channel immediately or if they are going to be tied in for a number of years with the other broadcasters?

José Bastón: The new channel in Spain will be targeted so what will happen there is that of course these two companies will, and the other companies that have joined this effort, the smaller producers will produce not only for this channel, but for the other channels in Spain. As I mentioned, these producers have been delivering very strong results in Spain, those are top rated programs and have been for many many years, [Lossorano] [Medical Familie] [inaudible] etc. So I think that however they will produce for the channel, it's going to be a targeted channel. We cannot go into the precise strategy of that channel because that hasn't been announced but what I can say in general, it's going to have a particular audience target and of course these producers will produce for that specific target.

Okay, thank you very much.

Thank you, our next question is coming from Patrick Grenham with Citigroup.

Good morning, just to go back on the Spain thing. How would you share the revenues between yourselves and the Spanish business? I imagine, are you going to do a revenue sharing arrangement whereby if you sell programming into the Spanish business you'd share the revenues? Or is it just going to be a barter type arrangement, where you will take some of their programs and give them some of yours?

And how would we see the benefit of that in results; in Televisa's consolidated results?

José Bastón: Hi Patrick, we have finalized our association and are forming part of the consortium to present the offer to the Spanish government. However we have not finalized the programming agreement and we are in the middle of negotiating those and that will be finalized, I think, by early December. So at this point I could not tell you whether it is going to be a revenue share, whether it's going to be a straight sale or whether it's going to involve a package of programming or it's going to be program by program.

Okay. Another question is on the World Cup next year and the Sky business. How are you managing the -- I imagine it's a great opportunity to give some good matches over to the Sky business on an exclusive basis to push that business to get subscribers, but that might affect your core TV broadcasting business. How were you thinking about that?

José Bastón: Yes. I think that it will not affect our television broadcasting business. When we made the decision to give Sky 34 games on an exclusive basis out of the 64 games, we were of course taking into account the television broadcasting business which is our most important segment and of course we kept that in mind and it will not affect us at all.

Do you still think you will get that combined 150 million with elections and with World Cup next year?

José Bastón: Well we haven't forecasted any specific amount. What we have said is that if you compare it to La France World Cup there, we sold about $70 to $75 million and during the 2000 election we sold, also in political advertising about $75 million, but we haven't given yet the specific numbers for next year. However, what I can tell you is that by limiting the inventory and by just having on over there, television broadcasting, 30 games, I think that the price of advertising in those games will be a very good one for Televisa.

Right, okay.

José Bastón: So it was not worth it to have the 64 games broadcast over there.

Okay, great. Could you talk -- one last thing. Could you talk a little bit about the digital download business that you're thinking of launching next year?

You mean the SMS business?

Well I thought you were thinking of launching a business on the internet where everywhere outside the US you could download episodes of the novelas?

Yes that is a business that we will launch in the second quarter of next year. And of course it's leveraging on our content and on the library that Televisa has which is of course the largest in the world in terms of content in Spanish and it's just re-purposing our content and using another distribution method for this content to reach people.

Have you any idea how much that could generate in revenues or?

No we haven’t and it's one of the things we are putting together the Televisa 2006/2010 plan and this is going to form part of that plan.

So we'll probably hear about that in December some time?

I think in the first quarter of next year.

Okay, excellent, thank you.

[OPERATOR INSTRUCTIONS] Our next question is coming from Rene Pimentel with Deutsche IXE. Please go ahead.

Yes good morning, a couple of questions. First in Sky, Alfonso you mentioned that you were going to switch the uplink to California. When will this happen and do you think that a sustainable margin for Sky is therefore then above 40%?

The second question on Sky is basically the subscriber growth that you saw this quarter. Are there any subscribers left over coming from Direct TV or was this just organic growth?

Yes I think we will finish the change to the Direct TV uplink facilities by June 2006 and what we see in terms of cost savings are about $4 million per year.

And as to your second question Rene I'm sorry I couldn’t hear it.

The subscriber growth that you saw in Sky. Did you get any subscribers coming from Direct TV or was it just organic growth during the quarter?

No it was basically organic growth. We finished the process in which we took the Direct TV subscribers so in this quarter we finished it with 3,000 subscribers which is kind of irrelevant, so it's mostly organic growth.

Okay thanks. One last question regarding this digital download business that you were talking about. Would you have to offer 50% of this business to Univision or is this something that at this point you are planning at going at by yourselves?

It's a very good question Rene and it's a question that I cannot answer now, and we are working on that.

Okay thank you.

Thank you. Our next question is coming from Vera Rossi with Morgan Stanley.

Thank you. I have a follow up question on the upfront season. In terms of the take up rate for your new pricing plan, are you seeing a better take up rate this year compared to last year?

And my second question is about Televisa versus TV Azteca in terms of market share of television broadcasting. Are you gaining market share from TV Azteca because you mentioned that you didn’t have any special industry this quarter that had increased in spending and you had a much better performance than TV Azteca during the quarter. Thank you.

José Bastón: Again for the upfront question, it is very early to call. I mean we are -- through negotiations you know that these things takes time and since it is a very very important year for us in terms of events we are not in a hurry. We will give the analysis as soon as we have a better idea of it. Based on market share, we have been keeping our 70% plus market share. I think on an average yes definitely we took from audience from TV Azteca this quarter and we always have told you all our main objective is to be always over the 70% market share.

But just one follow up. What has caused this increase in audience? Is it a new TV show or new soap opera? Is it something on an ongoing basis or is it a one time event?

José Bastón: Well it's both. I mean sometimes you have to do with one program and sometimes you have to do -- normally we have an average of X amount of viewers in each of the time slots of the day. At this time I can tell you of something that was totally extraordinary from other quarters is the program on Sundays which we cover our audience amazingly. We were having almost 52% audience share against TV Azteca's [La Academia] which have been their best program since I remember TV Azteca is on the air. And right now we have more than 75% audience share in that time period so the main recovery will be definitely Sunday nights.

Okay. And in terms of potential for margin expansion on your television broadcasting business, you had a good margin expansion this quarter. Is that related to any political advertising or further cost cutting inside the company?

Well as you saw in our numbers we increased our sales and we kept costs and expenses under control so that was the result. I think that our margin is great. I think if you compare it to most -- on the television broadcasting side of business to any broadcasting company in the world, this margin is pretty good. And as we mentioned the outlook is that we will have an EBITDA margin to exceed 47% in the year. Of course considering what we see for 2006 which is going to be a great year for us because, I repeat, having the World Cup and also the elections, I think that you will see margin expansion in 2006.

Okay. Excluding 2006 because it is a very special year, from '07 on do you expect to have margins above 48%, above the current level? Do you think you still have more room to cut the costs at the company?

Yes, I think not in the magnitude that we have seen but we have kept costs and controls and expenses under control for now almost four years. In real terms they haven’t grown. So I think that demonstrates that we have been able to keep those costs and expenses controlled. That means that the company, the culture within the company has changed a lot and we have imposed a pretty dramatic discipline. And I think that will continue and of course '06 will be an extraordinary year with these two events but we believe that '07 with the new businesses that we are starting will also be a great year for the company. And in any event we expect to have EBITDA margins higher than 45% going forward.

You mean 45% for the whole company or for the television broadcasting business?

No, no I mean 45% for the television broadcasting company after 2006. What I am saying is I am giving you a floor of 45%.

Okay. And on Sky, just for me, to make sure I understood, you had almost 44% margins this quarter because of some special events that happened during this quarter. From now on where do you think Sky Mexico margins will be on a normalized basis?

I think it's going to be around 40%.

Around 40%. So that was like an extraordinary event to have margins at the current level?

Yes, as we mentioned we had the [inaudible] and the [inaudible] which were great in terms of selling pay per view and that’s why we had these margins.

And during the World Cup do you expect to have a margin improvement or is it going to be around 40% as well?

I think it's going to be around 40%.

Okay thank you.

Thank you. Our next question is coming from Gordon Hodge with Thomas Weisel Partners. Please go ahead.

Good morning, just a couple of questions. I think you started selling DVDs of your novelas in the United States. I was wondering if you could comment as to whether that’s becoming a significant source of revenue or a potential source of revenue?

And then also if you could update us as to when the next event or timing event there might be relating to the lawsuit with Univision. Thanks.

Thank you for your question. First the DVD business is a small business, it's not a significant one. It's a nice business because you already have the content and it's just selling this content through other formats. However it's not going to be a significant business.

As to Univision, this process is taking a long time. So as far as I know there is nothing coming up very soon but you know these lawsuits and counter lawsuits and these things take a long time, they take years.

Sure thank you.

Thank you. At this time I would like to turn the floor back over to you for any further final remarks.

Well thank you very much for participating in our call. If you have any other questions please give us a call and if not we will see you next quarter.