Grupo Televisa SAB (TV) 2011 Q3 法說會逐字稿

Good morning, everyone, and welcome to Grupo Televisa's third quarter 2011 conference call. Before we begin, I would like to draw your attention to the press release, which explains the use of forward-looking statements and applies to everything we discuss in today's call and in the earnings release.

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

Thank you, [Elta], and good morning. We're pleased that you have joined us for this discussion of Grupo Televisa's third quarter 2011 results. With me today is Jose Baston, Televisa's President of Television and Content, and Salvi Folch, our CFO.

First I'll take you through the highlights of our financial results for the quarter, then Pepe will present the operating results of our Television segment. After that, we'll be happy to take your questions.

The third quarter was a strong quarter, especially considering the difficult comparison to last year. Consolidated revenue grew by 8.1%, reaching MXN16 billion, and consolidated operating segment income grew 11.7% to MXN4.6 billion.

Our Broadcasting business delivered strong and solid organic growth [and] maintained strong margins. During the third quarter, Broadcasting grew 2.4%, reaching MXN6 billion. In other words, the investment in advertising by our core, long-lasting client base remains strong, and Televisa's over-the-air networks continue to be their preferred advertising [vehicle].

Operating segment income grew 4% and is on track to meet our broadcasting margin guidance of 46%. Broadcasting is, as you all know, only one of the ways in which we monetize the value of our content. The alternative ways of monetizing our content have grown at an even faster pace. The faster they grow, the more evident it is that building a presence in multiple platforms and across geographies has become a key strategic move for Televisa.

For example, Televisa networks grew 15%, and exports, driven by growth in Univision royalties, grew 30%. Together, these two segments now account for close to one-fourth of our content revenue. In total, the revenue that we derive from monetizing our content grew during the third quarter by 6.6%.

Televisa networks grew 15% during the quarter. As we are the largest provider of content of paid television platforms in Mexico, Televisa networks continued to benefit from the ongoing expansion in Mexico state television penetration. Televisa Networks also benefited from its rapid growing advertising business. We're excited about the increased penetration of paid television in Mexico not only because we have an opportunity to capture many of those new subscribers as our own video, voice and data customers, but also because we're very well positioned in terms of both pay television channel offerings and our total advertising inventory.

In spite of additional investments [in new] content for this business unit, its strong operating leverage allowed us to deliver operating segment income growth of close to 21% during the quarter.

Sales in our export business increased by 30% to MXN1 billion, and operating segment income grew 48%. Our Export business continues to benefit from the new long-term agreement with Univision. Royalties from Univision reached $58 million, or a growth of 38%. The growth came from the new terms of our agreement and also from the continued success in Univision's business. Our exports to Latin America faced some challenges during the quarter, but we compensated those by the success of our [co-production] initiatives in China and Brazil and incremental revenues from our recent announcement with Netflix.

Sky continued adding subscribers at a rapid pace. During the third quarter alone, it added 238,000 subscribers, which is more than the subscribers added in each year from 2006 through 2009. As a result, Sky closed the quarter with more than 3.8 million subscribers. While it is true that the average revenue per subscriber is coming down, this results not from price discounting on our existing customer base. Instead, it's the result of an aggressive expansion of our customer base, supported by new and differentiated pay television offerings.

Since the launch of our low-cost offering, we now have more than doubled our subscriber base. During the quarter, top line revenue grew 8.2%. The comparison to the same period in the previous year is unfavorable because, during the same quarter last year, Sky derived some pay-per-view revenue and advertising revenue from the World Cup.

In addition, during the third quarter, we aired exclusive matches of five international soccer tournaments, including Copa (inaudible) and Copa America. These investments are aligned with our strategy to remain the leading provider of exclusive sports content to pay television customers. As a result, margins were slightly lower this quarter but, at 5%, remain well above the industry average worldwide.

Growth in Cable and Telco continues to be strong. The growth of video revenue generating units, or RGUs, continues solid across the three cable companies, and data and voice RGUs growth was very strong at 27% and 30% respectively. Our Cable and Telco business added a total of 542,000 new RGUs during the quarter compared to 484,000 the prior quarter. As of the third quarter, total RGUs reached 3.7 million, which is equivalent to an increase of 17% compared to the third quarter of last year. This resulted in a top line revenue growth of 13% for our Cable and Telco segment, and this revenue growth was achieved together with margin expansion.

Operating segment income grew close to 27%, reaching a margin of 35.3% for our Cable and Telco segment, which includes Bestel and of 39% of our three cable companies. Margin improvement was particularly strong in Bestel, with the growth being driven by lower interconnection rates and the expansion of its customer base.

The penetration of voice and data services among our video customers keeps on expanding. We expect this strategy to continue delivering overall subscriber growth and the expansion in the revenue per customer.

Moving on to Publishing and other businesses, most of our other smaller operations performed well. Publishing revenues grew 3%, and Operating segment income grew 33%. With our other business segment, which includes online radio, soccer and gaming, revenue growth ranged from high single to high double digits.

Moving on to CapEx, with regard to our capital expenditures during the quarter, we invested approximately $194 million. This investment is in line with our full year guidance of $850 million.

Finally, I would like to briefly discuss our $1.6 billion investment in Iusacell. As per the disbursement plan set under the terms of the transaction announced this past April, we made a payment of $150 million during the quarter. We have provided the relevant authorities with all the information that has been requested, and, as before, expect the conversion of our debt investment into equity to be approved in due course.

Thank you for your time and attention. As always, we appreciate your interest in Televisa. And now, I'll turn the call over to Pepe.

Thank you, Alfonso. Good morning, everyone, and thank you for joining us.

Let me begin by recognizing that, over the last few quarters, the media industry has been populated with new terms such as cord-cutting, cord-shaving, and over-the-top television. We are aware that these and the proliferation of new platforms have created some uncertainty regarding the shape that the industry might take over time. I can assure you that no other company's positioned better than Televisa to benefit from the evolution of our industry and its ongoing convergence with telecom.

First of all, we have a very high level of vertical integration from the moment the content is produced to the moment that it's transmitted in its multiple windows. Our scale and consistent success of our content is another very important part of our formula. We produce more than 70,000 hours of content for over-the-air television and our 17 pay TV networks every year. As a result, we have assembled a very extensive library of content that has already proven successful.

In terms of the (inaudible) distribution alone, we have more than 50,000 hours of our content ready to take advantage of new platforms. Most importantly, and unlike most broadcasters around the world, we own the content that makes us so successful. According to research by [Kagan], during 2010 to 2011 season, the four mainly US language broadcasters only own between 31% and 57% of their primetime hours, and this statistic includes co-productions, a strategy that results in rights and windowing restrictions for US broadcasters.

In sharp contrast, we own the vast majority of the content that we broadcast from our flagship channel, Canaldos. That's not only on primetime, but the 24 hours of the day. For all of our four over-the-air networks, during the last quarter, our own productions accounted for close to 80% of our broadcast EBITDA. This is the content that makes Televisa so successful. It's content that we can monetize in the manner that we deem most appropriate, from advertising in over-the-air television to advertising our Pay TV networks to affiliate fees to video on demand to virtually any audiovisual platform that may emerge, always using the windows that we think will be best for our group.

Along these lines, we are carefully exploring the means to best grow our presence and commercial participation in the digital industry. For example, last July, we reach a multi-year content licensing agreement with Netflix for Mexico and Latin America. We were careful to structure the deal in a manner that provides some of the best available Spanish language content to Netflix on a non-exclusive basis while protecting the appeal of our content through all of our platforms. We found it to be an attractive deal that complements our current delivery platforms and extends the branding of Televisa to all of Latin America.

We continue to achieved our audience goals in Broadcast TV and have increasingly focused on the quantity of ratings rather than only the absolute total number of rating points. As a result, we have been able to deliver the audiences that advertisers seek, and, in doing so, reach our revenue targets. Our commercial goal should be, at the end of the day, to maximize our share of advertising revenue in over-the-air television.

During the quarter, our Pay TV networks division continued to improve its channel offering. Televisa Networks launched in Mexico a network called Tiin that targets young teenagers. This network provides one of the most attractive demographics from a commercial point of view. We are aiming high and expect it to compete aggressively against more established networks in this genre. As I've also mentioned, we already have the most comprehensive content offering for Pay TV platforms, and this network steadily ramps up our portfolio of channels, reaching complementary audiences with a totally new line of products.

Another example of our ability to choose the best window [and strategy] for our content lies on our ability to profitably produce content for pay television. In doing so, we first amortized the cost of its development for these later transmissions on over-the-air television and other platforms. We have successfully secured this model with a new show that is being transmitted over our broadcast channel [five], reaching complementary audiences with a new and innovative line of products.

Televisa's productions continue to be a key factor in Univision's outstanding performance and allow it to compete effectively with the four main broadcasters regardless of language. Univision reports that, thus far in 2011, it ranks as the number two broadcast network among adults ages 18 to 34 and averages more viewers in the demographic than any other of the top three networks.

Season-to-date, Univision is one of only top -- is one of only two top five -- is one of only two top five networks to show season-to-season increase among adults. In addition, Univision benefits from a unique business model. The content that we provide is proven successful in Mexico before [it is] selected for [its transmission] by Univision in the United States. This gives Univision a very high rate of success when launching shows already shown by Televisa in Mexico. In contrast, over the past five years, English language broadcasters [updated] close to 700 pilots from more than 15 production houses. The large majority of these pilots did not make it beyond the first few episodes.

One of the most important benefits to Univision for our new programming agreement is the access to our content for digital platforms. We were encouraged to see that Univision recently entered in a multi-year content agreement with Hulu, a successful online video service for the US market.

Finally, we continue to work with Univision to help it grow its business by assisting it with the assembly and launch of new Pay TV networks and by better exploring advertising and product placement opportunities. For example, Univision now is part of every key (inaudible) meeting in the production of [Anovela]. We explore the commercial opportunity of our productions in both markets and make the necessary changes to maximize its potential. This is the beginning of a working relationship that will continue to mature and yield even better results for both Televisa and Univision shareholders.

Thank you very much for your attention, and now we will be ready to take your questions.

(Operator instructions.)

James Rivett with Citi.

Good morning, guys. I've got a couple of questions, if I can. The first is on the really strong performance of the Broadcast business this quarter in terms of the revenue growth. You've described it as kind of the success of some of your TV products, but I just wanted to know whether, given the strong growth you've seen and the improving trends that you should expect in the fourth quarter, whether you're feeling -- whether you should think about [taking] up your guidance for this business, going forward.

My second question is on Pay TV exports, which saw a really strong growth in the non-Univision revenues this quarter, which I guess is -- quite a lot of that is attributable to Netflix. Is there any sort of one-time payment within that number, or is that the new level that we expect, going forward?

And just finally an update on the timing for the closing of the Iusacell deal. And I know you said talks are ongoing, but if you could give us a little bit more detail, that would be great. Thank you very much.

Well, we're going to stick with our guidance. We have seen good results in our ratings, going to your first question, but we know perfectly that the guidance that we're looking for is the one that we're going to stick on because of what we have seen in the economy and the market -- how the market is -- it's been going on right now in Mexico.

Yes. As to exports, we have the new sales -- the new contract with Netflix, so that affected, of course, the non-Univision part of that component, of that item.

Great. And on Iusacell?

About Iusacell, yes, well, as I mentioned before, the Competition Commission, James, continues to review the transaction. It has taken quite a long time. They have made four different requests for additional information. We have complied with all those requests and have filed all the information that has been requested from both us and our partners.

Now, we continue to be positive about the approval based on the fact that Televisa has no participation in the wireless industry. And also, I mean, based on the fact that Iusacell is small in that industry, Iusacell has about 4.5% to 5% market share of the wireless industry in Mexico. And also considering the authority's interest to increase the level of competition and quality of service in this segment, we anticipate that this transaction will be approved.

Great. And just coming back to the Netflix question from earlier, is there any one-time payment within that number that you saw this quarter, or is that the new level that we expect, going forward?

No. This will -- I mean, it offset some reductions in sales in other parts of the world, so you will continue to see throughout, I mean, the following years the payments from Netflix. So it depends. I mean, if -- we will have that component, and that is the payment from Netflix. So if sales around the world improve, you'll see a larger number, of course.

Great. Thanks very much.

Thank you.

Michael Moran with Morgan Stanley.

Good morning, everyone. Just to follow up on the broadcasting segment, a couple of things. You obviously still haven't recovered any revenues from your large client that you lost earlier this year. So if we were to try to normalize for that and for the World Cup, is it fair to say that, kind of on a normalized basis, your revenue growth in that segment is hovering around 6% or 8%? I'm just trying to gauge kind of what we should be thinking about for next year.

And specifically also, next year is a presidential election year in Mexico. Historically that has helped your results in Broadcasting, and I know that there's been a change in legislation that might limit your ability to benefit there. But I was wondering if you could give us a little bit more color on whether or not that still could be a contributing factor to your results in 2012. Thank you.

Yes, thank you for the question, Michael. Yes. As to the latter part of your question, I mean, it's too early to determine what we can expect for next year.

Regarding the elections, as a result of the federal electoral reform that was passed some years ago, we do not sell political advertising. As a matter of fact, just the opposite, we have to deliver free advertising minutes on television to all political parties in all of our channels, which is going to limit our inventory, especially during the second quarter. And also next year, as a result of the elections and the electoral process, during that period we cannot sell advertising to any political body or agency, so that will affect us a little more. So, I mean, that will be the result of the electoral reform and the electoral process, limit -- I mean, that will limit our inventory and, during that period, we cannot sell advertising to any political body or agency.

And as to upfront negotiations, which is, I mean, something that is ongoing, at this point we still have -- we don't have good visibility, so it's too early to say what will happen next year.

Alfonso, just to clarify your comment on the political campaigns, it sounds -- the way you're phrasing this is that it actually could be a negative on your business. And I just wanted to clarify if that's the proper takeaway. I'm assuming that, if you have less inventory, you'll have a little bit more pricing power with your other advertisers that would more than offset any loss of inventory related to the political campaigns. Is that fair, or should we really be thinking that there's a negative impact here from the presidential elections?

Yes, hopefully that will be the case, but, I mean, we're of course sure that we'll have less inventory because of the amount of minutes that we have to deliver to the political parties and political agencies, and also because of the lack of any political advertising in terms of any body of the government or any state government buying advertising during that period. So, I mean, it's less inventory because of the amount of minutes that they're taking, and that we cannot sell advertising to any political body or agency during that period.

As to the first part of your question, of course I think the results of the sales of television broadcasting during this quarter were fantastic because we're missing the largest advertiser, as you well know, and also because of the difficult comparison with last year where we had the World Cup. So I think the third quarter of this year we had great results, in my opinion, in television broadcasting.

Right. And it seems like some of that came really from better spot sales, and it seems also, based on what I have in the model, that the fourth quarter would be even better in terms of spot sales. Is that fair? Is that one of the reasons why your margin was also a little bit better in the third quarter? I know you flagged cost cutting, but I'm wondering if whether or not the spot sales is also contributing to your better profitability in broadcasting.

Yes, definitely spot sales was a very important part of it. It has a lot to do with the content that we had, though, in this quarter, which were we had a lot of special soccer tournament, Copa America, the World Cup of 17-year-old and under. So we had events that we don't have normally in our programming chart, so definitely the spot sales grew importantly during the quarter.

Great. Thank you very much.

Thank you, Michael.

Tomas Lajous with UBS.

Good morning, gentlemen. Thank you very much for the call. I have two questions. The first one is for Alfonso. Alfonso, you brought on additional 1% of broadcasting media partners in the quarter. Should we expect more of this? Was it opportunistic? I mean, are you seeking to go much beyond the contracted 40% stakes that includes the -- convert the options and the 5% you got last year? Are you trying to go to over 50% in BMP?

Yes, hi, Tomas. Yes, you know we have an option to buy an additional 5% direct equity stake in Univision or the holding company of Univision. And so an opportunity came up as part of the Lehman Brothers liquidation to buy an additional 1%. We decided to go ahead and buy that 1% because of the price, which was pretty good. So that 1% is part of the 5% which we have an option to buy. So when opportunities come up, we'll analyze them, and we'll take advantage of those opportunities. And of course, we can get up to 5% in addition to the 5% we own today of direct equity.

Okay, thank you, Alfonso. And my other question is for Pepe. Pepe, you talked about the content business, very significant opportunities, going forward, especially in digital and in the US. I guess looking at the margin for all the content businesses together, not only Broadcasting but all the content businesses, it's now back up to 50%. What is the opportunity here? Will the extra profitability continue, and should we expect margin expansion for the content businesses, or will this be used to invest in the digital projects and new content?

Hi, Tomas. Well, on TV Broadcasting, we believe we will be able to maintain margins in the mid-40s. We don't see that there is a lot of room for margin expansion in broadcast television. However, on our Exports division, driven by Univision royalties and on the sale of Pay TV channels, we see substantial growth in terms of subscribers, and we believe there will be margin expansion in that area. Those sales will come with a very limited incremental cost, so definitely in that area we see opportunities of margin expansion.

Okay, thank you very much, gentlemen.

Thank you, Tomas.

Andrew Campbell with Credit Suisse.

Yes, good morning. My question is on exchange rates, and in particular if we see a much weaker average peso in the fourth quarter, what the impact would be in particular. I know that in the Pay TV segment that you have exposure to US dollar cost there. So if you could just walk us through a little bit the net impact from revenues and EBITDA from a weaker peso.

Yes, hi, Andy. Well, you would see -- if the peso remains weak, you would see a similar effect to the one you saw in this quarter. Of course, it affects all our sales in dollars, especially our Export business, also Publishing, where about 62% of our sales in Publishing take place outside of Mexico in dollar terms. Sky of course operates in Central America, and that is denominated in dollars, as well. Cable through Bestel has a long distance operation, which is also denominated in dollars, so that would affect us. So, I mean, in general about 20% of the sales of Grupo Televisa are denominated in dollars, so a weaker peso of course would affect those sales.

Now, in terms of our costs and expenses, about 25 percent of our costs and expenses are denominated in dollars. It includes the purchase of programming. It includes payment of satellite services, et cetera. So, I mean, you would also have an effect on costs and expenses.

Now, from the balance sheet [perspective], since we have a net debt of approximately $2 billion denominated in dollars, then of course the depreciation of the peso will affect the balance sheet in that sense also.

Okay, great. Thank you. And my other question was just related to CapEx. I know that it's too soon to have any formal guidance in terms of CapEx for next year, but can you provide us any color directionally on what you think CapEx should do next year just in general terms?

Yes, of course, Andy. Well, we'll be able to provide CapEx guidance for 2012 in the coming quarter. As you mentioned, at this point we're working on that. What I can assure you is that that will continue to be driven by our need to support the accelerated growth of both Triple Play and [DTH] pay television subscribers and all the upgrades that we need to do in terms of infrastructure of our cable companies.

And we will also make investments in digital, as Pepe was explaining. So, of course, we're being diligent about selecting upgrades that have an impact in our ability to grow. So CapEx will continue to be related to the growth of the Company and those services.

Okay. and just the ballpark, from what you can tell right now, do you think it would be generally like around the same level as this year, or is it not possible to say?

Yes, well, we're still working on that, so we'll be able to provide a more precise guidance the next quarter.

Thank you.

Thank you, Andy.

(Operator instructions.)

Miguel Garcia with Deutsche Bank.

Thank you. My first question is regarding the Pay TV, the [service] to Pay TV. You mentioned that Pay TV penetration in Mexico has helped your sales to Pay TV. However, one important player is not buying your content, I think, so far is Dish. Is there any expectation of you guys negotiating with this operator, or have you initiated anything? Have they approached you?

And the other question's regarding the Cable business. You reported a strong margin of 35%. I think there are a couple of reasons there. I don't know how extraordinary those reasons are, like the good Bestel result. Can we think that this is a sustainable margin, going forward, for the business? Thank you.

Yes, hi, Miguel. As to Dish, we have -- I mean, we're not -- there are no negotiations ongoing in respect to the sale of our content to them. And as to Cable, I think if you split Bestel, which is a fiberoptics network business, that has around a 25% margin, and it has become an important component of the Cable and Telco segment. And the cable companies aside from Bestel have a 39% EBITDA margin. So we believe those to be sustainable, both the Bestel EBITDA margin of 25% and the Cable one of 38% to 39%.

Thank you. Just a quick clarification. At the beginning you were mentioning about your relationship with (inaudible) in production in order to, I guess, increase the top line, so get more royalties from them. Do you have any -- I mean, are we already seeing that improvement in the numbers, or this is something you expect, going forward? I'm specifically talking about the top line that this -- I mean Univision will get generating in the US from your--.

--Yes, of course. Yes, of course. If you look, Miguel, at our Exports business, you can see the dramatic increase in terms of the royalty being paid by Univision.

Yes, but a lot of that, of course, is because of the percentage increase. So I wanted to -- if you could separate a little bit [there].

Yes. It's both increase in the percentage and also increase in the operations of Univision.

Okay, great. Thank you.

Rodrigo Villanueva with Merrill Lynch.

Yes, hi, good morning. Alfonso, I was wondering if you could share your thoughts regarding your targets on Iusacell. Have they changed as a result of the MTR cut? And I was wondering if you could provide us with some update on the progress achieved on this company six months after the announcement of the deal. Thank you.

Yes. Hi, Rodrigo. Well, we'd rather not speak about the strategy or the results of Iusacell from the operational point of view until the transaction gets approved. What I can assure you is that Iusacell has put to work the capital injection from Televisa, and we're making sure that it is taking the right steps to meet all the goals that have been set out to be achieved. But that's what I can tell you until the transaction gets approved.

Okay, thank you very much. And another question regarding the [intention of] (inaudible) auction to new broadcasting licenses in Mexico. I was wondering if you could give your thoughts on that respect, if you think it's achievable what they are proposing in terms of timing. Thank you.

Yes. Well, we welcome competition. Competition will only make us stronger. I have not seen the precise calendar of what they're trying to do, so, I mean, basically that's what I would say. Well, I mean, what I can also say is that we have been producing, of course, content successfully over more than 60 years. And Televisa, as you are aware, has the scale, the talent, and the expertise to continue producing that content that has strong appeal both in Mexico and around the world, so we have that strength. But of course, I mean, we welcome competition, and it will make us stronger.

Great. Thank you very much.

David Joyce with Miller Tabak & Company.

Thank you. I was just wondering if you could provide some more color on the margins on the programming investment that you have in the extra -- the soccer events in the third quarter and how we should think about programming seasonally or throughout the next year. Thanks.

Yes. Well, of course, when we have special events, that strengthens our over-the-air television business where we can sell those special events separate from the usual plans that we have at increased and improved rates. It also strengthens the content that we offer through our pay television ventures, especially Sky, that during this quarter had five soccer tournaments and five soccer special events. So that strengthens both television broadcasting in terms of having these special events and being able to sell advertising at a higher rate, and also our pay television platforms where we can, of course, offer those to our subscribers.

On the new network, Tiin, how much of that programming is incremental that's going on there?

Which -- I'm sorry?

Tiin. Well, most of the content that you're going to see in Tiin is content that is part of our library, content that we are using from different strategic alliances that we have with some Argentinean producers, but it will not be any kind of extraordinary additional cost to our Pay TV network operation.

Thank you very much.

Enrique Gomez with HSBC.

Thank you very much. Good morning, everyone. Just wondered if you could provide us a little bit more detail on the ratings. We saw a positive change in the trend on September. I guess this was driven partly by (inaudible) in Mexico. Just if you could provide us more color on that. Thank you very much.

Yes. Well, yes, we have a very good beginning of a Sunday night show, but we have always seen these not just about the rating points but instead -- I mean, the total rating points but instead about the quality of those ratings. Furthermore, it is about our ability to convert those rating points into advertising revenue, which is what we have been continue doing very successfully. Besides that, as you have seen in the last decade, our market share in the Broadcasting arena has been totally stable. So as you know, this business is very cyclical, but we have always keep that level of percentage of market share the way we want it, and always developing content that is attractive for our advertisers.

We see a very good trend, as you mentioned in your question, for the last of the year. We think that we're going to close the year with a very good -- a higher market share than probably the average we have had during the year, but we know that this is a cyclical business. And we always try to have the best percentage of -- the best batting percentage that we can, and we have been doing so for at least the last decade. So we are very happy with the results.

Okay, thank you. So you expect a slight improvement in market share by the end of 2011, that's correct?

In the audience, yes, but we're going to keep -- in the revenue side we're going to keep with the guidance that we have been talking about, the 46% EBITDA margin.

Okay. Thank you very much, Jose.

Michael Moran from Morgan Stanley.

Thanks for taking the follow-up. On Iusacell, I know that you'd prefer not to comment too much on the progress and whatnot, but is there anything you can tell us about your plans related to the management and the organization structure at Iusacell, assuming that you do get approval? Would you be looking to work with your partner to bring new management talent to the Company specifically?

And then also, on Univision, there is more talk of a potential recession in the US, or certainly a significant slowdown. And I'm wondering what color you can give us about your ability to grow top line, and also EBITDA, to de-lever the balance sheet there even in a more difficult economic environment. Thank you.

Yes, thanks for the follow-up, Michael. Yes, so Iusacell, once we convert the debentures, once we get the approval for that, we'll actively participate in the Company. It's a real 50-50 joint venture, so all the decisions have to be made by both partners. So once we are equity holders and we convert those debentures, we will actively participate in management.

As to Univision, we believe that Univision has yet to show the full benefit of the new agreement with Televisa for the new launch of the new pay television channels. And also, we have to see the benefits of the monetization of the value of our digital library for the US Hispanic market. So I think there are many opportunities in addition to those ones in the digital front where we have not seen the full benefits of the new agreement. So this will take a few quarters to be fully implemented, but, I mean, we're starting to see the initial results. But there will be a lot, I mean, to be seen there. So I think that the Univision results will continue to improve as they use the full benefits of the new agreement with Televisa.

Great. And just to -- on that final point, the digital opportunities, there was the announcement of the Hulu deal last week, or two weeks ago. Is that the first of these kinds of deals? And I'm assuming that the Netflix transaction that you struck for LatAm obviously does not impede Univision's ability to do a similar deal for the US, correct?

That is correct, Michael. Now, in terms of, I mean, the whole deal that Univision closed, this will improve and increase our royalties because, I mean, under the new agreement, revenues collected from Hulu by Univision becomes part of a total revenue base. So they pay us the royalty based on that total revenue base, so we get the benefit of the Hulu payments being made to Univision as part of that deal.

Okay, perfect. Thank you very much.

Thank you, Michael.

[Andres Coello] with Scotia Capital.

Yes, hello, good morning. I understand that the political parties or government bodies cannot advertise on (inaudible),television or radio during the common election, but they can buy advertisement on magazines, right?

And also, regarding social communication investments by federal and state governments, just to clarify, they will be able to advertise during 4Q '11 and 1Q '12, right? I mean, their restriction to advertise will happen only in the second quarter of 2012, right?

Well, yes. During the electoral process -- I don't remember exactly the -- I mean, the months prior to the electoral process -- I think it's three months prior to the electoral process where you cannot sell any advertising to any governmental bodies. And the magazines have certain restrictions, but, in general, some advertising can go in. However, there have been cases where magazine publishers have been fined because of advertising related or that touches on some points of the political campaigns or political candidates. So of course, we have to be extremely careful with that.

Okay, thank you.

At this time, I would now like to turn the call back over to management for closing remarks.

Well, thank you very much for participating in the call, and [just call] if you need any additional information or have additional questions. Bye.

This concludes today's conference call. You may now disconnect.