Grupo Televisa SAB (TV) 2012 Q3 法說會逐字稿

Good morning, everyone, and welcome to Grupo Televisa's third quarter 2012 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 will discuss in today's call and in the earnings release.

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

Thank you, Elsita, and good morning. We're pleased that you have joined us for this discussion of Grupo Televisa's third quarter 2012 results. With me today are Jose Baston, President of Television and Content; and Salvi Folch, our Chief Financial Officer.

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

During the third quarter, consolidated sales increased 8.7%, and operating segment income margin expanded 90 basis points to 41.7%. Net income increased 44.8% to MXN3.2 billion.

Revenue in our Content businesses grew by 4.4% to MXN8.3 billion during the quarter and the margin reached 50.6%. Our Advertising business, the largest component of Content revenues, faced a difficult quarter which resulted in a marginal year-over-year growth of only 1%.

However, our other two sources of Content revenue continued to deliver double-digit growth. Network Subscription revenue expanded by 22%, and Licensing and Syndication revenue expanded by 11%.

For the full year, we're maintaining our guidance for Content revenue growth of between 7% and 8%.

The growth and success of Sky was stronger than ever. It had record revenues of MXN3.7 billion and record operating segment income of MXN1.7 billion. During the quarter, Sky added over 330,000 new customers, reaching 4.9 million. This is more than in any other quarter since we launched the Company.

It means that Sky is adding close to 4,000 new customers every single day. This is the third consecutive 12-month period in which Sky has grown close to 1 million new subscribers per year.

The main driver of growth continues to be our low-cost offering, but the sale of premium services, such as high definition and DVRs, are helping Sky maintain a strong high-end customer base. Even considering all the growth, we continue to put a lot of focus on profitability of Sky. Operating segment income margin reached 46%, which is far above that of other DTH operators worldwide.

Our Cable and Telecom segment delivered strong results, also growing double digit during the quarter to MXN3.9 billion. Over the past three years, we have made important investments in upgrading our cable plant. In Mexico City alone, the number of nodes has expanded from 1,500, as of March of 2009, to close to 16,000, as of the third quarter of 2012.

The majority of our network is now fiber to the curb. We're well underway to complete the deployment of DOCSIS 3.0 technology, and about 97% of the homes can subscribe to double and triple-play services.

These investments continue to pay off; revenue generating units expanded by 135,000, of which a bit more than half resulted from new data services.

There is plenty of room for more growth. The existing infrastructure in our Cable Companies puts them in a very good place to benefit from more adoption of high-speed data services in Mexico.

We closed the quarter with 2.3 million cable video subscribers, but only 55% of them had a data service, and less than 33% of them had a telephony service. For that reason, we expect voice and data services to remain the main drivers of growth in the top line.

The margin for our Cable operations, which includes Bestel, our fiber optics network, reached 36.8% during the quarter.

Our Publishing business grew by 2%, and the operating segment income margin remained at a healthy 15%. Circulation revenues were strong both in Mexico and internationally, but advertising revenues faced some challenges, just like the rest of the industry globally.

Total revenue in our Other businesses segment contracted by 4.4%. During the second quarter, we sold one of our three soccer teams and, during the third quarter, we decided to shut down our distribution operations in Chile as a result of structural changes happening there. Both of these measures make the comparison to the third quarter of 2011 more difficult.

Within this business segment, our Gaming operation continued to performed well, with revenues and margins expanding gradually and consistently.

Moving on to our capital expenditures. During the third quarter 2012, we invested approximately $228 million, of which $126 million were invested in Cable and Telecom, and $73 million were invested in Sky. This is in line with our cash CapEx full-year guidance of $850 million.

In regards to Iusacell, the performance of the company continues to improve. Our capital injection of last year has gone into the reduction of debt, and the expansion of the network. But the majority has gone into growing Iusacell's customer base, including investment in handset inventory.

As customary for this industry, the bulk of these investments are accounted for as operating expenses, which explains the net loss during the quarter.

As of the third quarter, Iusacell ended with 6.8 million mobile customers. This is equivalent to a growth of 35% from the third quarter last year.

We're making good progress in terms of our goal of increasing market share in mobile. So far, Iusacell market share has expanded from 4.4% a year ago, to slightly more than 6% as of the third quarter. Obviously, we are aiming much higher. We want to reach a market share of 15% to 20%. The telco industry in Mexico is expected to generate MXN35 billion in revenue by 2015, with over 60% of them coming from mobile services.

It will be challenging, but we think that we have the assets and the will to succeed. Additional capital may be required. At this moment, and based on our expectations, we estimate that Iusacell will have additional capital needs of approximately $800 million in total within the next three years. Such additional capital will come in the form of debt, either guaranteed or not, or in the form of equity. If it comes as equity, the capital contribution by each of Iusacell's two shareholders will be 50/50.

But injections of capital into Iusacell will be subject to a number of factors. The two most important ones are the ongoing performance of the company, and the prospect for an improving regulatory environment. A change of regulatory framework is important, not only for Iusacell, but also for the country as a whole. Everybody knows that a competitive telecom industry is essential for the growth of Mexico's economy. The country needs, desperately, a level playing field in the telecommunications' industry.

In closing, we believe that one of Televisa's main attributes is the combination of highly complementary assets. In Mexico alone, we reach more than 29 million homes with our free-to-air channels. 11 million of those homes also receive at least 14 of our pay-television networks. Close to 7 million of them subscribe to a video package from Sky, or one of our cable operations. And 12 million have also elected to have a broadband service, a telephony service, or both.

Thanks to this strategy, in the last 10 years the Company has been able to deliver a compounded growth rate in revenue of over 12%, and in operating segment income of over 16%. We will continue to work hard on delivering strong results.

Thank you for your time and attention. And now I'll turn the call over to Pepe.

Thank you, Alfonso. Good morning, everyone, and thank you for joining us. As Alfonso just told you, while Advertising revenue remained practically flat, Licensing and Syndication revenue, and Network Subscription revenue, grew both double digits, allowing us to deliver a solid top line growth of 4.4%, and a growth in operating segment income of 6.6%. Once again, this quarter shows the importance of having multiple sources of content revenue.

A number of factors seem to have limited the growth in our advertizing sales businesses.

First, we believe that the shift of advertizing budget from this quarter to the first half of 2012 was greater than we anticipated. Second, the transition in our billing methodology from cost per [1,000] to fixed pricing added an additional level of complexity to negotiations. And third, sales to local governments remained weak.

During the quarter, our content continued to perform extremely well in all of our free-to-air channels. As before, Televisa produced and transmitted a large minority of the most successful shows on Mexican television. Our pay-TV networks continued to perform extremely well. All the metrics in this business improved. We grew by over 4 million new subscribers, reaching 32.5 million. Most of the growth came from new subscribers in South America, but we also benefited from the ongoing growth in the Mexican pay-TV penetrations.

Also, the number of channels per subscriber expanded from 5.4 channels, a year ago, to 5.9 channels each. As a result, our Network Subscription revenue grew by 22.2% during the quarter. Similarly, our Licensing and Syndication revenue continued to deliver solid growth, expanding by 11.3% during this quarter.

Royalties from Univision, which comprised a majority of this line of revenue, reached $62 million in the second quarter (sic - see report page 3 "third quarter"), a growth from $58.2 million in the third quarter of 2011. Besides that, Univision continues to be the third most watched network during prime time among adults, regardless of language.

Also, sales to the rest of the world performed very well, growing by close to 18%. The biggest contributor to growth in networks was Latin America, which more than compensated for a challenging environment in Europe.

As part of our goal to continue diversifying our sources of content revenue, we continue to tap into many other opportunities. For example, we plan to grow our presence in Brazil by launching a new co-production. In the United States, we have continued with the productions of shows for the English-speaking market, based on our scripts. Additionally, our venture with Sony is heading to the right path as we launch our first co-production in Arab territories.

In the meantime, we will work hard on reaching our full-year guidance for Content revenue of between 7% and 8%. And we will continue to expand the value of our Content operation.

Thank you so much for your attention, and now we are ready to take your questions.

Thank you. (Operator Instructions). Andrew Campbell, Credit Suisse.

I have two questions related to Iusacell. My first question was regarding the affiliate company loss that was reported during the quarter, would it be possible to quantify specifically how much of that was related to Iusacell? And also, as a related question, I was wondering if the debt that still remains at Iusacell, if there's foreign currency exposure? And the reason that I'm asking that is because we'd like to get a sense of how volatile the bottom line may be, and the affiliate company contributions in the coming quarters. Thank you.

Hi, Andrew. As to your first question, the loss of Iusacell during the third quarter was MXN235 million. So that's what you can see reflected on share of losses of jointly controlled entities. And this amount was partially offset by the absence of a loss in La Sexta, which we had last year. As you may remember, we exchanged our interest in La Sexta for a participation in Imagina during the first quarter of 2012, so you no longer see the loss in La Sexta, and that offset the loss of Iusacell.

As to your second question, part of the debt of Iusacell is dollar denominated. As part of the restructuring of the company we reduced its indebtedness so we can -- I don't have the information in front of me but, of course, we can get it to you.

Okay, super. Thank you very much.

Michel Morin, Morgan Stanley.

Just a follow-up on the previous question on the affiliates, Alfonso, on Univision specifically, could you talk about your relationship with the management of the company and what role Televisa is playing in helping to run that company?

And then on Iusacell, touching on your prepared remarks you said that regulatory changes would be a prerequisite for investing or committing additional capital. Can you elaborate a little bit more on the changes that you think are necessary, what specifically you'd like to see? And then what if you don't get those changes, does that change your perspective on your ability to be successful with Iusacell? Thank you.

Hi, Michel. Yes, to your first question, Univision has an outstanding management team. Randy Falco, Univision CEO, is world class as an executive. He has great experience in the industry. He's doing a fantastic job transforming the company and putting together a great team of professionals.

Very recently, Randy hired Keith Turner, who's Univision's new President of Ad Sales and Marketing. He comes from the NFL and previously from many, many years at NBC. With this, a renewed focus has been placed on bringing new advertising clients and brands.

In terms of retrans negotiations, which is a very important component of their sales, Univision has made very important progress there. Tonia O'Connor has done a fantastic job there. We expect Univision to continue having this success in that front, especially since now they have access to all their very strong pay-television networks. So in general, we believe that Univision is taking all the right steps under Randy's leadership.

And in the meantime, we continue to help Univision mostly by making sure that we produce and we get to them the best content for over [their] television, pay-television networks and, of course, online content in which Pepe works with them closely and is, basically, part of the Univision team.

As to your second question, thank you for that question because, for Iusacell's success, it's very important that we see action in Mexico in terms of regulatory changes. We need regulatory reform that levels the playing field in the telecommunications industry, and we need that right away. These reforms have to let all the participants in the industry compete basically on fair terms.

These are reforms that would improve mobile penetration, reduce costs, and expand service offerings. So far this has not been the case; we have not seen this in Mexico happening. This is very evident just looking at the current financial conditions of most telecom operators in our country.

These are well run companies, in my opinion, but operating under uneven competitive conditions. Many developed markets that had a dominant operator in telecommunications faced a similar challenge. This is not new. Authorities in most of those countries, especially in Europe, took a combination of steps in order to foster competition, and also to promote a healthy development of their telecommunications industry.

The telecommunications industry, as everybody knows, is vital for the growth of a country and it's vital for education, for health services and for communications of the population in general. So these measures include asymmetric regulations, because you have to consider the size of the participants in the market.

Also, we're seeing the elimination of handset exclusivities and unlocking SIM cards, among others, so there are many measures that have to be taken. This is not inventing a recipe. We have to look at what has happened in the developed countries, mostly in Europe where in all of those countries they have declared a dominant participant and they have basically unbundled networks and taken steps in order to level the playing field.

So Mexico, in my opinion, is clearly falling behind, and a combination of these measures has to be implemented and has to happen as soon as possible. And that would be a very important component of our decision to invest more capital into Iusacell or not.

Excellent. Thank you very much, Alfonso.

Mauricio Fernandes, BofA Merrill Lynch.

On Iusacell, I appreciate the sharing the potential for capital need there and what the requirements are, as well as the number of subscribers. I was wondering if you could share with us some more information about revenues and EBITDA on Iusacell, as well as on the size of the debt as we are right now, post the restructuring that happened? That's one question.

And the second, it seems you are on track to deliver the guidance for the full year on the Content part of the business. I was wondering if you could share with us what kind of risks do you see to not achieving that or, and on the other hand, over-achieving that into the fourth quarter? Thank you.

Hi, Mauricio. As to your first question, performance of Iusacell continues to improve. We ended the third quarter gaining market share, as I explained before. We grew our subscriber base by 35% from a year ago, so we believe that we're in the right path, even considering the regulatory environment and considering that the playing field is not level.

However, Mauricio, during this phase of the turnaround for Iusacell, and for competitive reasons, we don't think that it's a good idea and we don't think that it's in the best interest of the company, nor of its shareholders to share more information.

We will disclose more financial and operating -- we will not disclose more financial or operating metrics other than the ones we have already made public. I know it's a frustration for the investors in general and for the analysts. We understand that, but it makes no sense, at this point, to be sharing information and to be sharing that information, not with you, which we would have no problem, but with our competitors in Mexico.

If you consider that the playing field is not level and we really need the regulatory changes, to be sharing information and metrics, and also, for example, the commercial strategy of the company, doesn't make sense to us. We believe that our shareholders are best served if we maintain this information private, of course for the time being, and until we see what happens on the regulatory side of the business.

We will, of course, share with you if our views on the long-term prospects of the company change and if we see that the regulatory changes are not coming. And we will share immediately with you what our plans for Iusacell are, if that is the case. We hope that that will not be the case.

It makes a lot of sense for Mexico to have a more dynamic telecommunications industry. It makes a lot of sense for the growth of the country and for the enhancement of other services that can be provided through the telecommunications sector to have those rules changed and to have a level playing field in the industry.

But in general, I know and I understand your frustration but, for the time being, we don't want to signal the market as to -- our competitors in the telecommunications market, as to what is going on with Iusacell and its plans and its prospects and its more detailed number information.

And, Mauricio, in the guidance of Content, we are definitely working very hard. We think that this quarter that just ended is not a typical quarter, and we hope so, of course, but we believe we can achieve our guidance of between 7% and 8% on a yearly basis.

I appreciate that. And, Alfonso, on the size of the debt, I'm not sure if that's going to be or has been disclosed for now?

Yes, there we can share -- I don't have the information with me. Of course, we reduced the debt as part of the restructuring of the company and part of our capital infusion was used for that purpose to reduce the debt. At this point, the total debt of Iusacell is $850 million. However, I don't have the breakup as to what is dollar denominated and what's not, so that we can share offline with you but the total size of the debt if $850 million.

Okay, I appreciate that. Thank you.

Soomit Datta, New Street Research.

Just a couple of questions; first of all on Cable, please. There was a good performance overall in the business, but there was a bit of a slowdown looking at the revenue growth in TVI, and I just wondered if you could perhaps shed some light on that? I think that some of the KPIs were, or rather the net adds was fairly low so it looks to be adds-driven, but I wondered if you could help me understand that a little bit?

And then just on the Mexican regulation discussion, I wondered if you could give a sense as to what likelihood you felt there would be of some positive regulatory changes in your favor? And generally speaking, there aren't many examples that I can think of, in either Europe or anywhere in the world, where a market has gone from symmetric termination rates to asymmetric termination rates. Normally, it's gone the other way around, so I just wondered what your confidence was on that outcome? Thanks very much.

Hi, Soomit. As to TVI, it had a poor performance during the quarter. It was impacted as a result of technical issues with its infrastructure. We're in the process of digitizing the whole network, especially in the metropolitan area of Monterrey. So this was reflected in a higher churn rate. My team is very aware of this problem and we are addressing it, but it's more as a result of the digitalization of the network, and that was the effect. I think that the fourth quarter is going to be a much better quarter for TVI.

As to asymmetric regulations, as you have seen in Europe, there was a huge change many years ago. And first of all, what happened in all of the countries in Europe was that there was a definition as to who the dominant player was, and the dominant player was declared as such as dominant.

So in those countries, basically after the declaration of domination, of a dominant player by the authorities, what happened was that asymmetric rules were imposed. That is the case of Spain, as far as I remember, Belgium, Italy, and some others. So it's clear that one of the steps that was taken in Europe, and also in certain other parts of the world, was to declare a dominant player and then establish asymmetric rules and asymmetric rates.

Another important measure that, in our opinion, has to be taken is that the authorities declaring a dominant player have to forbid exclusivities in terms of handsets because that, of course, is imposing limitations on the competition.

Another thing that has happened throughout Europe is bundling of the local loop, in order to foster competition. Of course, this happened in Europe many years ago. Why? Because in those years it's when the authorities declared a dominant player, and one of the effective things that they did, basically, was to unbundle, in all the countries in Europe, the local networks. So I think it's essential for the leveling of the playing field to take this series of steps in order for smaller companies to be able to compete.

It doesn't make any sense for a country such as Mexico, of the size of Mexico, to have only one player in the telecommunications industry. And I believe that if we don't change the rules of the game that is what will happen. That we'll end up with one single player.

Okay, that's clear. Can I just ask as a follow-up, and this is maybe hard to quantify, but the termination rate cut last year, which was quite material, did that not materially help you, or was that just, at the end of the day, a minor support and clearly not enough, you feel?

That was helpful, Soomit, but what happens is that those rules were symmetric. First, you have to consider the size of the competitors and the size of the dominant player in a country such as Mexico. And what has to happen is that, in our opinion, is that asymmetric rules have to be passed, because if you don't consider the relative size of the competitors then it's impossible to move forward. So that was helpful, of course, but it's not resolving the problem of having the dominant player selling below interconnection rate to retail.

We believe that the recipe that we're not inventing, it's part of what happen throughout Europe and in other parts of the world, is basically to consider the dominant player as such, as a dominant player and then establish asymmetric rules. So basically, in summary, those rules were helpful. The reduction of interconnection rates, that was helpful. However, since it was symmetric and not recognizing the relevant size and potency of the competitors, then basically, it doesn't solve the problem.

It doesn't solve, on the other side, the problem of the club, what we have called the club effect, of the dominant player selling below the rate that it charges for interconnection to its competitors.

Okay, that's great. Thank you.

Dan Kwiatkowski, UBS.

I've got two questions. One is on Iusacell again; I'm sorry to keep going on about it. In terms of the -- you made losses of MXN235 million in the quarter, do you think that is a quarterly run rate that will be sustainable, or do you expect the losses to increase as you continue to grow in the short term?

The second question was in terms of dividends. Does the investment in Iusacell preclude you from making extraordinary dividends, given your balance sheet?

Thank you for your question. As I mentioned, performance of Iusacell continues to get better. We ended, as I mentioned before, the third quarter gaining market share. We want to get to a 15% to 20% market share in order for that company to be sustainable in the long run, so we are investing heavily in the turnaround of the company.

Our goal is to build a stable base of high quality subscribers that allow that company to be profitable and to fund any further investment with its own cash flow from operations. And we believe that this will be a three to four year process. Of course, as I have mentioned, this require the leveling of the playing field in Mexico and the change of the rules.

So we'll see in this process that, as I have mentioned, will be a three to four years what is happening and if we are making progress. So of course, we will only make this investment of the required $800 million in the company if we see that the company's performing better, and also if we see that the regulations have a chance of being amended.

Of course, we believe that the regulations should be amended, because it makes a lot of sense for the country. As I mentioned, to have a single player in the telecommunications industry, in a country such as Mexico, the size and scope of Mexico, doesn't make any sense. There has to be competition and, of course, in order for that competition to be fostered, we have to change the rules of the game. If not, that will not happen.

Great. Then on the dividend question.

On the dividend question, our goal will continue to be maintaining a healthy balance sheet. If an opportunity related to our Content or Telco businesses present itself, we'll look at the rate structure and the right amount of capital for us to contribute. So if an acquisitions becomes available, we'll look at it, and we'll look especially on the telecommunications and the content businesses, which are core businesses now. And, in the meantime, our current dividend policy will remain in place, so we will continue paying dividends as we have in the last years.

Great. Just one further question for clarity, the $800 million of extra capital, you say that's 50/50, so you're net contribution will be $400 million?

Yes. However, that can come in the form of debt or in the form of capital. So that will depend on the company's performance, of course, on the debt that the company has in its balance sheet and what the market has in terms of appetite for lending money to Iusacell. So it depends on how we structure that, but it's in the form of debt or direct capital infusion.

Thanks very much.

Andre Baggio, JPMorgan.

I want to now come back to the question of the Content side. I want to understand a little bit the lower growth and what you refer about anticipating revenue from the third quarter into the [first] quarter, if that's related to the government or it's related to the private companies, so we have a little bit more clarity of what's going on.

Well, as I mentioned before, a number of factors came into play. For example, we believe that there was a shift from some advertising budgets from this quarter to the first half of 2012. Also, we think that the change in our billing methodology, from cost per 1,000 to fixed pricing, that even put an additional burden in our negotiations, and that's because of the IBOPE problem that we went through.

And we also saw that the sales of local governments were very weak, because we also saw that they invested a lot more in the second and first quarters of the year. And, as we have mentioned before, the macro events like the Olympics, didn't contribute additional top line growth.

So we are not very satisfied with this results and we are working very hard, as we have said, to reach our guidance on a yearly basis of between 7% and 8%. So those are the facts that we saw.

Can you explain little bit why would a company like (inaudible) government, because of some have different rules for elections, but why would companies anticipated advertising from the third quarter to the first half '12?

It had to do with elections, we think. As I also said we think that it was a strange quarter, but we have been doing our research, and some of the results that we have seen in our commercial clients have to do with the elections. The reason why they invested more in the first and second quarter was because of the Presidential elections.

That applies to not only the Government but also to the private companies, correct?

That's correct.

Okay. Thanks a lot.

Michel Morin, Morgan Stanley.

Actually, on the Content business, obviously it was a little bit weaker perhaps than some people had thought, but the margins were very robust. So I'm wondering if you could elaborate a little bit on what really drove the improved margin on what should be normally a margin neutral performance with only 4% revenue growth.

And then secondly, CapEx in Cable in particular, you made some comments around the degree to which you've upgraded your network. Should we be anticipating a significant reduction in Cable CapEx, going forward? Thank you.

Thank you for your follow-up, Michel. Basically, what happened on the Content division, seeing what was going on in terms of sales of advertising in Mexico, Pepe took very strong measures in order to cut some costs and expenses. So that's why you say the increase in terms of margin.

Basically, Pepe took those decisions very soon in the quarter, and that's why we were able to even increase the margin, even considering the slow quarter that we faced on the sales side.

As to CapEx, between Sky and our Cable operation since 2009 we have added a few; as you know, 5 million new RGUs. That figure is almost six times higher than the number of RGUs had in the prior three years. So since 2008, our CapEx has almost doubled.

Naturally, most of the increase in CapEx has been needed to support this explosive growth. We wish the growth in revenue generating units, RGUs, could stay at this levels forever, because it means that the businesses are growing at this fast pace. But most likely, it will slow down over the midterm.

So our investment in cable modems, antennas and receiver boxes will also slow down as the sales in those companies, in the years to come, slow down. But, of course, if it's growth CapEx it's welcome, and that means that the companies are growing for the long run.

Alfonso, thank you for that. And if I may just follow up on the cost-cutting in Content? Should we assume that the cost cuts that were made actually can continue to have a positive impact in the fourth quarter, or is it more specific to the content that was produced in Q3? In other words, is it sustainable?

I think that the measures that Pepe took were specific for the third quarter, as a result of him looking at how the sales of advertising were making progress. This quarter was an anomaly.

I think it had to do a lot, as Pepe explained, with advertising from governmental entities and from the Government being spent more in the first quarter, and the complete absence as a result of the regulatory electoral process in the second quarter. So I think there was a shift more to the first quarter from Government and governmental entities which left us, on the third quarter, with less advertising on that front.

And also, the second anomaly of that quarter was the IBOPE situation which Pepe referred to. So, I think those cost cutting efforts, in what had to do with production, happened in the third quarter just to stabilize the margin, but they were specific for the third quarter.

Perfect. Thank you very much.

Enrique Gomez, HSBC.

Now that you're talking about the growth on your pay-TV businesses, I think many of us were surprised with the subscriber growth on the satellite business. If you could comment a little bit more on that. We have seen that the trend was starting to decrease in terms of subscriber growth, and the last two quarters it has increased again. What's different there, and what can we expect, going forward? Thank you.

Hi, Enrique. We had a fantastic quarter in Sky. We believe that Sky has a great national sales and distribution network, a very good content offering; I would also say attractive pricing and, most of all, it has great service. It reaches every corner of the country and has a very efficient installation fleet. I don't think anyone else in Mexico has that type of distribution and that type of installation fleet.

So Sky will continue to grow at a solid pace. Just in the third quarter, we installed close to 4,000 homes every day, including Saturdays and Sundays. Just to go throughout the Mexican Republic and to install close to 4,000 homes every single day, including Saturdays and Sundays, is a reflection of what I was saying in terms of having a great national sales and distribution network.

They're doing a great job. We're very happy with the performance of the company. However, as I was saying, we believe that the growth will continue at a solid pace because pay-television penetration in Mexico is only close to 43%. The industry analysts estimate that pay-television penetration could reach up to 65%. That represents about 6.5 million homes that could potentially subscribe to a pay-television service.

We have great expectations in terms of the further growth of the country, especially if we pass the reforms that are needed in the country. So if Mexico is growing at a faster pace, this will be great for our Cable and Satellite operations. So we believe that this companies, Sky, and also our Cable operations, will continue to grow at a solid pace.

So it could maybe that your leverage [is better your] distribution network.

That is correct. We have a great distribution network but as I was saying, not only that, but we have a very good content offering. We have put together very attractive packages in terms of pricing, and on top of that all we have great service. I think on the pay-television side of the business Sky's service is fantastic. So I think, considering all those factors, that's why you see that Sky is having such solid results.

Okay. Thank you very much. Are you able to share an estimate for maybe next year on subscriber growth?

Well, not really. We don't like to give you prospects for the business, going forward, but we believe, as I have been repeating, that these companies will continue to grow at a solid pace.

Perfect. Thank you very much, Alfonso.

Ladies and gentlemen, that concludes the question and answer session for today. I will turn the floor over to management for any closing remarks.

Well, thank you very much for participating, and give us a call if you need any additional information.

Ladies and gentlemen, this concludes today's Grupo Televisa's third quarter 2012 conference call. You may now disconnect.