Grupo Televisa S.A.B.

Ladies and gentlemen, this is Stop Raider. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Alfonso de Almeida, Alfonso de Almeida, Alfonso de Almeida Thank you for watching! Thank you for watching! Good morning, everyone, and welcome to Grupo Televisa's fourth quarter and four-year 2021 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, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Tamia. Good morning, everyone, and thank you for joining us. With me today are Pepe Toño González, CEO of Cable, Luis Malvido, CEO of Sky, and Carlos Phillips, CFO of Grupo Televisa. Before reviewing Grupo Televisa's operating and financial performance, I'm delighted to share with you some exciting news about Televisa Univision after effectively closing the merger on January 31st. It has been almost one year since we announced a transformative combination of Televisa's media and content business with Univision to create a new company, Televisa Univision. This union has created the world's leading Spanish language media and content company, a business without comparison in the global media landscape that will exclusively focus on the massive market opportunity that exists with a global Spanish-speaking audience of almost 600 million people. We are very fortunate to have a group of amazing partners that came together to help create this unique platform and pursue our digital transformation strategy. Wade Davis, CEO of Televisa Univision and founder of ForgeLight, Eric Sinterhofer at Searchlight, and SoftBank, Google, and Rain. Those teams have helped us a lot. In preparation for this merger, both Televisa and Univision have made significant progress transforming their businesses across all dimensions. Both teams have built upon our brands and deep connection with our audience to deliver levels of viewership these two companies haven't seen in years. Univision's portfolio of television networks had the highest audience share since 2014, and Televisa's content performance and audience delivery in Mexico was equally impressive. Univision completely reinvented its ad sales business, and both companies experienced above-market advertising revenue growth in 2021. and most importantly, we have completely transformed our organization, strengthening our already exceptional teams. By merging Televisa's content and media business with Univision, we have created an unprecedented platform. Televisa Univision now reaches over 60% of the respective television audiences in both the United States and Mexico, holding leading positions in both markets. We reach over 100 million Spanish speakers every day across television, digital, streaming, and audio. We have the most prolific long-form Spanish language content engine in the industry and the most powerful Spanish language library and intellectual property. Televisa Univision is already delivering results that neither company could have achieved independently. And we're just getting started. One of the most exciting things created by this historic merger is the largest ever Spanish language global streaming platform. With the assets and resources of Televisa Univision, we are on the cusp of launching something extraordinary. The history, the brands, the reach and trust with our audience, the content engine and library of the combined companies have come together with two new ingredients. A massive capital commitment of several hundreds of millions of dollars for Spanish language content, multiples of what any other service spends in the language, and an extreme conviction in the opportunity for the world's first large-scale streaming platform to exclusively serve the Spanish-speaking world. As we announced on February 16th, VIX, our new streaming brand, will be the first of its kind global streaming product with two very distinctive experiences, advertising video on demand or A-Bot and subscription video on demand or S-Bot, all in one single app, easily accessible for everyone across all major platforms in the United States, Mexico, and 19 countries across the rest of Latin America. The benefit of having two tiers in one app is that we will be able to easily upsell our premium service to ABOT users while SBOT subscribers will be able to enjoy these distinctive experiences each with its unique content proposition seamlessly. The ABOT tier VIX launches on March 31st and promises our users a linear-like experience that includes live news and sports and a significant amount of entertainment content across all genre. Available in the form of linear channels as well as video on demand. All advertising supported and importantly, for free. At the same time, the SBOT tier VIX+, which will launch in the second half of the year, is a premium paid experience. Our mission and our promise is to deliver compelling original content produced in the Spanish language. and since this is our only focus, we want to be the Spanish-speaking world's go-to platform. Between these two experiences, VIX and VIX+, in our first year alone, we will have an unprecedented offering of more than 50,000 hours of free and premium content. In the subscription service specifically, we will launch at least one high-quality new movie or series every week for the entire first year. VIX Plus will feature content developed exclusively for us by some of the master storytellers of Spanish language content, including one of the industry's most respected and popular artists and producers, Salma Hayek and her production company Ventana Rosa, U.S. superstar singer and actress Selena Gomez, Peruvian writer and literature Nobel Prize winner Mario Vargas Llosa, Spanish author Maria Duenas, and Mexican comedian Eugenio Derbez, among many others. We are very excited about the achievements we've had so far since announcing the merger and look forward to sharing with you the future success of Televisa University. Three strategic factors lead us to believe and have confidence that we are much better positioned than other traditional media players migrating to streaming. And that will deliver on our digital transformation strategy. First, we have a sizable traditional media business growing double digits and generating strong free cash flow to fund the lounge of our global streaming platform. We have the largest Spanish language content factory in the world that can produce premium content in a cost-effective way. We also have the most powerful Spanish language library and intellectual property. And last but not least, we have a world-class executive team, and we have built one of the best streaming teams in the industry. Over the last 12 months, we far exceeded our initial growth expectations. and our prospects for 2022 look equally as impressive. On a platform basis, Televisa Univision's revenue for 2021 reached around $4.2 billion, representing year-on-year growth of almost 15%, while EBITDA reached more than $1.6 billion, equivalent to a year-on-year increase of approximately 11%. We expect a strong revenue growth trend to be sustainable in 2022, driven by several factors, including, one, record audience share and great upfront performances, both in Mexico and the United States. Two, additional partnerships to launch our content on digital multi-channel video program distributors. Three, the monetization of the World Cup, and four, the launch of our global streaming platforms. We expect EBITDA to remain relatively stable this year as we invest in the strong foundation for our next phase of growth, including launching our global streaming platform, acquiring streaming users, and delivering higher revenues. With that, let me spend some time on milestone achievements. Last year, the Mexican economy expanded by around 5% year over year. The improving economic environment helped Thank you for joining us. Our cable segment also performed relatively well, and our initiative to expand our fiber-to-the-home FTTH footprint by 2 million homes in 2021 has already started to show initial results. On the other hand, an increase in out-of-home activities led to softer net additions of revenue-generating units, or IGUs, at Sky and lower prepaid recharges. At the same time, Sky experienced elevated costs related to the higher number of live sport events that were canceled in 2020, putting significant pressure on margins. All in, our full-year consolidated revenue reached 103.5 billion pesos, representing year-on-year growth of 6.3%, while operating segment income reached 43.5 billion pesos, equivalent to a year-on-year increase of 7.3%. Turning to our fourth quarter results, consolidated revenue reached 28.8 billion pesos representing a year-on-year increase of 3.7% while operating segment income reached 12.3 billion pesos equivalent to a year-on-year growth of 3.1%. Bernardo and I are pleased to see that most of our assets delivered We are also confident about the opportunities to keep growing in 2022. Now let me address the fourth quarter financial results in our content division. Advertising revenue increased by 7.2% as the economic rebound has been driving up marketing activity and advertising spending across the private sector. Most of our clients are looking to position their brands, products, and services In front of their consumers and Televisa's solid ratings during the fourth quarter, particularly on prime time, created a great advantage. During the fourth quarter, royalties received from Univision of $110 million were relatively flat year on year. Univision's solid operating performance during the fourth quarter was particularly offset by tough comps given heavy political and ad spending in the same period of 2020. In sum, during the quarter, content revenue increased by 4%, while operating segment income grew by 1.3%. Our content margin contracted to 47.1% due to the difficult comp associated with more production of content. In 2020, the COVID-19 lockdowns led us to have lower content production costs, Live programs such as sporting events were canceled and we broadcasted several reruns. Moving on to the full year, content revenue grew by 10.2% year on year, mainly driven by an increase in advertising sales of 17.2%. In 2021, our advertising sales reached 19.2 billion pesos and were close to pre-pandemic levels. Operating segment income in our content business was up 11.5% compared to 2020, translating into a 38.3% margin. This is an increase of 40 basis points from 2020 and the highest margin since 2016. Regarding our upfront, I am very pleased to say that our negotiations with our customers have successfully concluded. We expect advertising deposits to grow by around 13% year-on-year, representing the best upfront performance on Televisa's history. We are optimistic that this will help sustain advertising revenue growth at a solid pace in 2020. During 2021, our main newscast had great audiences, and we're very proud of this achievement. In the U.S., Univision's ratings on linear television were the only ones to grow year on year during 2021, allowing it to increase its overall portfolio share with Spanish language and total television in the United States. We're very proud to report that the strength of Univision's ratings has been driven by Televisa content, which currently occupies most of Univision's prime time programming grid. These audience metrics in Mexico and the United States are evidence that Televisa's strategy to revamp its content production, which was implemented a couple of years ago, has been very successful. Now, let me turn the call over to Pepe Toño, CEO of Cable.

Thank you very much, Alfonso. During the fourth quarter of 2021, our cable segment saw an important turnaround in operating metrics. It was the strongest quarter in the year in NetApps, coupled with a solid financial performance and strong profitability. In NetApps, the fourth quarter closed with 2,001,000 fixed revenue generating units, or RGUs, and 17,000 mobile RGUs. It was the strongest quarter of 2021 and the highest since the second quarter of 2019, including the pandemic quarters. The year closed with 14.6 million RGUs. The result was largely driven by both the realignment of some of our flagship products, as well as the Homes Past expansion plan we implemented last year. Our table business keeps growing due to our higher levels of sales and an improved product mix, which also brings a higher average revenue for users. In video, we turned it around and had the first positive quarter since the second quarter of 2019, including the pandemic quarters. We reached an inflection point and added 11,000 video RGUs during the quarter, thanks to our improved product mix from the product realignment process. Today, 75% of sales are triple play and the strengthening of our retention programs. In broadband, we added 58,000 RGUs, the second strongest quarter of the year for a total of 5.7 million RGUs. Broadband continues to be the highest margin service, So we will continue to enhance its product offerings. Now for the financial metrics. During the fourth quarter, our cable segment delivered year-on-year revenue growth of 4%, while operating segment income increased 8.3%. Our residential segment revenue grew 4.8%, while our enterprise segment, which accounts for around 15% of total cable revenue, increased 10.4%, mainly due to the timing of revenue recognition. For the full year, Revenue growth at our cable segment was 5.8%, and operating segment income grew 7.3%, reaching a margin of 42.2%. We expect that the full impact of our strong operating results to materialize in the coming quarters. During 2021, capital expenditures reached $855 million, equivalent to 36.1% of sales. These investments allow investors allow us to successfully achieve our plan to pass 2 million homes, ending the year with 17.8 million homes passed, of which more than 65 are passed by either Fiber to the Node or Fiber to the Home. By the end of the fourth quarter, we have successfully launched Fiber to the Home services in the cities of Guadalajara, Toluca, Durango, Mazatlan, and recently, Tepic. This will help us to accelerate RGU's net ads from 2022 onwards. Before turning the call back to Alfonso, let me say that we are convinced that the expansion to selective locations makes a lot of sense for EZ. We have a nationally recognized brand, exclusive content, and high-quality service with competitive offers. Thank you very much.

Thank you, Pepe Toño. Before turning the call to Luis Maldito, let me remind you that... He was appointed CEO of Sky since the beginning of the year. Alex Pena, who was a great executive for us, decided to retire and Luis took over. Luis is a seasoned executive with over 25 years holding CEO roles, mainly in the Delta sector. He has led publicly listed and private companies across geographies, including Latin America and Central Europe. Before joining Sky, he was chairman and CEO of Aerolíneas Argentinas, Previously, he worked for over three decades at the Telefonica Group, where he held the position of Executive Director of HispanSouth. Luis also spent five years as Chairman and CEO at Telefonica O2 Czech Republic, two years as CEO of Telefonica's wireless operation in Brazil, three years as President and CEO of Telefonica Venezuela, and over six years as Vice Chairman and CEO of Telefonica Móviles de Argentina. Having said that, let me turn the call over to Luis.

Thank you very much, Alfonso. At this time, revenue declined by 4.4% year-on-year during the fourth quarter, mainly driven by lower recharges of prepaid packages due to the decline in home confinement related to the pandemic. Operating segment income fell by 13.9% due to the amortization of certain sporting events and lower revenues. Sky had 73,000 RGUs disconnections, mainly driven by the loss of 80,000 video subs during the quarter. On the broadband side, we added 5,000 RGUs during the quarter, reaching a total of 727,000 customers. The material slowdown in broadband metas is mostly related to the financial difficulties of Altam, our host network, and the expected delays in the coverage expansion. In the aggregate, including our MD&O service, which had 3,000 RGUs during the quarter, we closed with approximately 8.2 million RGUs. For the full year, revenues at Sky declined 0.5, while operating segment income fell by 6.9, driven by, as I said, an increase in the amortization of certain sporting events, resulting in a margin of 38.6%. And now, before turning back to Alfonso, I want to share Thank you, Luis. Welcome to the team.

Moving on, consolidated CAPEX were $1.15 billion during 2021, which was slightly lower than our guidance. For 2022, our CAPEX target of $860 million includes $620 million in cable to pass 700,000 homes with fiber, increase our subscriber base, and support growth. $200 million deployed in Sky and $40 million in our other businesses. Finally, I'm happy to report that our Board of Directors approved the payment of our regular dividend in 2022. This will be presented for approval at our annual shareholders meeting. To wrap up, 2021 marked a historic moment for Grupo Televisa and our industry as we announced the merger of our content and production assets with Univision. Thank you for joining us. and will be a springboard for the upcoming launch of the preeminent Spanish language streaming platform, VIX. At our cable segment, we have laid the groundwork to achieve sustainable growth in the medium term by accelerating the expansion of our FTTH footprint. This should allow us to remain the leading high-speed internet service provider in Mexico. 2022 will continue to be a year with significant opportunities for Grupo Televisa and we will remain focused on delivering solid results for all our stakeholders. Bernardo and I are very optimistic about 2022. First, we will continue to capture the upside from the significant growth potential of Televisa Univision by remaining its largest shareholder with an equity stake of approximately 45%. And second, connectivity is very important in every household, and we are benefiting from this trend, so we will continue to invest and grow in our broadband operations. Now, we're ready to take your questions.

Thank you. If you would like to ask a question, please do so by pressing star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Marcelo Santos with JP Morgan.

Hi, good morning. Thanks for taking my questions. I have two. The first one is if you could please comment a bit on the performance of Blim in Mexico during 2021. Anything you could share would be very interesting. And the second question is if the upfront already includes advertising on the AVOD platform or if it is that purely traditional media. Thank you.

Yeah, thank you, Marcelo. As to Blim, it's a very different platform than what VIX will be. Blim is basically an SBOT platform. However, we launched last year an AVOD version. And it's a good precursor to what VIX will be. We touched the waters in Mexico through BLIM to look at that market. BLIM has been able to deliver more than a million subscribers, which will be transferred to VIX. And in terms of users of the AVO platform, it's an incipient platform since we launched it last year. And I could say that it has Around 4 million users. This platform has delivered exceptional engagement by the users, so we're very happy to see those results. As I have been mentioning, VIX is another platform, both the VIX and VIX Plus, the ABOT and the SBOT platforms will be something very different than what we or Univision launched in the past. In terms of the uptrend, it did include sales of advertising on the ABLE platform on VIX. Perfect.

Thank you very much.

Our next question comes from the line of Alejandro Galastro with BBVA.

Hi. Good morning, Alfonso. Thank you for taking my questions. This one is related to the cable business. We just provided CAPEX guidance for this year, and we can see that the CAPEX for the cable business is substantially lower than the amount that you spent in 2021, and more similar to what we've seen in 2020. Could you please outline your FTTH expansion plans for the next two or three years? With this expansion, will it continue to be new regions? And how many homes do you plan to pass? And what will be the overall traffic requirements to meet those goals? That would be my first question.

Thank you, Alejandro. We will continue to invest in our cable segment, especially on the FTPH front. As I mentioned before, we have a full plan, and I'll ask Pepe Toño to go into that. However, for this year, we're optimizing our CapEx. And, well, Pepe Toño, can you share with us the expansion plan and where we're investing, please?

Yes. Thank you, Alfonso. The first thing I would say is that CapEx in absolute terms for 2022 is basically the same as it was in the prior years, except in 2021. 2021 was an extraordinary year, and it was based on a very ambitious expansion plan of 2 million homes. This surge in investment was needed because Thank you very much. We cover the three largest with either FTPH or Fiber to the node. So we are going back to our stable level of CapEx investment. Every so often we have extraordinary years, like last year or like 15 or 16. The second thing is what Alfonso mentioned. We've been working on improving and making our construction parameters more efficient. That way we will continue our HomePath expansion with higher efficiency and less capital intensity. This will allow us to focus resources in other areas. Moving forward, we're going to continue to be laser focused on upgrading our network as we have in the past. We will be opportunistic on how we do in choosing the places and the areas Thank you very much. So I think with this, we have a good case. We have a nationally recognized brand with a good name that provides us with good footing to continue to grow in the future. Thank you.

That's a good explanation. In terms of homesteads, you should probably expect a lower pace compared to the 2 million homesteads due. Sure, we are...

Absolutely. We are expecting to do 700,000, which is not a small number either. You know, the last year was, as I said, an extraordinary year because we entered very large metropolitan areas in this past year, very successfully, I would say. But, you know, 700,000 is what we're projecting for this year.

Okay, great. Thank you. And the second question, also related to cable, I would like to hear from you about the dynamics that you're experiencing in the new regions that you've been entering with FTTH in the last few quarters last year. In terms of competition, pricing, articles, penetration rates, that would be very helpful. Thank you.

I think the competitive landscape of the cable market has been changing in the last few years. It has become a lot more competitive, so we have to be very efficient and very competitive in our products. In the last quarter, one of the reasons we had a significant turnaround was Thank you very much. to try to get the best in each of the markets. And I think the story of the fourth quarter is perfectly sustainable. I would say that for the first time in over a year did we have positive net ads in video, which is a very good story. And most of our sales are triple play. So the product mix is allowing us to increase our boost solidly and sustainably.

Thank you very much for the explanations.

Our next question comes from the line of Gordon Lee with BTG.

Hi, good morning. Thank you very much for the call and congratulations on the closing of the transaction. A couple of questions. The first, during the quarter in the press release, you discussed a couple of, I guess, were reassessments from the tax standpoint for previous years. I was wondering if you could give us maybe a little sense of the magnitude and more importantly whether that has already been taken care of or whether some of this will spill over into 2022 as well. And the second question is, you know, with the transaction having been closed with the $3 billion partial monetization of your content business likely to hit your balance sheet this quarter, and the fact that Televisa Univision will really fund its own investments with its own internal cash flows. Could we expect at the Televisa level to maybe see more cash being returned to shareholders either via a step up in the buyback or maybe beyond this year, an increase in ordinary dividends? Thank you.

Thank you, Gordon. As to your second question, We're going to be opportunistic about deployment of capital. Of course, we will invest, as we have been mentioning, in FTTH through EZ. That's a priority of ours. And then we will deleverage. We will be paying down debt also opportunistically. So you will see more of that happening very soon. Those are the two priorities, but in terms of buybacks, we have been buying stock, and we will continue to buy stock, and those are our priorities. As to your first question, I'll ask Carlos Phillips to answer it. Hey, Gordon. Thanks for the question.

Regarding your two questions, I guess you're referring to the changes in income taxes for the quarter, and as you mentioned these, These were adjustments that were made for, in one case, it was income tax from prior years, but it was an assessment from the tax authority and we had to do an adjustment. And the second one was a partial write-off of the first income tax that we had from 2014. So both of those items, if those were the ones that you were referring to, are one-offs that we wouldn't expect to continue in the future. Perfect. Thank you very much.

Our next question comes from the line of Leonardo Almos with UBS.

Hi. Good morning, everyone. The first question, I have two quick follow-up questions. The first one is about cable. You discussed homes past in a previous question, and my question is now regarding homes connected. How should we think about homes connected in 2022? Can we expect over 50,000 net ads per quarter again? Thank you.

Thank you. I think what we see and what we expect is to continue the trend we had in the fourth quarter. So we're seeing an acceleration from quarters two and three, and this should be sustainable, and this should be steady with a gradual acceleration. as has been happening. What we are seeing, as I said, is a change in our product mix. So we should expect the speed to be gradually accelerating from the fourth quarter, but at that level. Was that clear, Leonardo?

Very clear. Thank you. Good news. My second question is regarding streaming. So you mentioned that you have around 1 million subs in Blink. They will all be switched to the advertising video on demand, so the regular VIX. Can you provide any type of metrics that we could think and then track regarding the subscription video on demand products? Meaning, is there any way we can think of how many subscribers you potentially think you can have in the VIX Plus? Thank you.

Yeah, well, of course, the total addressable market is huge. It's 600 million people that speak Spanish in the world. That's the addressable market. Of course, we're going to focus, as I mentioned before, our attention first on Mexico and the United States Hispanic market. And after that, the Latin American markets and then other places such as Spain. So that's the total addressable market that we will approach. It's a $7 trillion GDP, as I have mentioned in the past. And the good thing is that $3.5 trillion of those seven are just the GDP associated with the U.S. Hispanic market and Mexico's GDP. So we believe that we have the strength to capture those subscribers. As I mentioned, we're launching... Ava products, so we can upscale, we can upsell the subscription product. Both of them are going to be very attractive. Our main focus, our mission is to deliver, to have a platform that delivers the most important content in the Spanish-speaking world and the most content in Spanish in the world. Also, the most soccer games of the Mexican Soccer League and other relevant tournaments. So, we will have more soccer than any other platform in the world. So, we believe that what we're seeing is really exciting. Of course, we'll start to announce the number of subscribers once we launch the platform, VIX+. So, that will happen in the second half of the year.

Thank you, very good. Just a quick follow-up. About the advertisers, you're having a front very successful for 2022. Is that transferable to the advertising video on demand? Are you having conversations with advertisers to fund this type of, fund or invest in this type of, in the new product? How should you think about the advertising being transferred to VEDS?

Yes. Well, that's a very good question. I think the uptrend was the best uptrend in the recent history of Televisa, as I mentioned. I think that the uptrend had to do with several factors. The first one, better economic activity. The second is that we're experiencing fantastic ratings and audience growth in our flagship channel and also on Channel 5, but especially on primetime, which is where you sell at higher rates. Third, I would say that we have a revamped sales team, sales organization, and that's helping a lot and we're being much more efficient in terms of selling advertising. I could say, fourth, that we're focusing on selling the unique reach that Televisa can deliver to our clients, to our advertising partners. And fifth, Getting to your question, we have included the ABOT product, which looks amazing and is going to be really successful, so clients are now focusing on ABOT. I would say that it's the same in the United States, where the VIX product was included in the up-front sale, and it gained traction, and it's looking great as well in terms of advertising sales.

Sounds great. Thank you very much. Happy Friday for everyone. Thank you.

Our next question comes from the line of Samit Vada.

Hi there. Thanks very much. I have two or three quick questions, please. Firstly, on Friendly TV, can you give any sense to the size of the and subscribers or the user base. I think the narrative has been very favorable, but it would be great to get a sense as to how that is scaling. Secondly, just on the S-Pod launch, I think on the Univision call, I may have misheard this, but I thought Wade mentioned early Q3 launch. Can I just kind of clarify whether that was right or not? And then thirdly, please, just a bit of... Detail on the P&L from Q4, please. I think the other operating line, there was a gain book for it, obviously, which was significant. But if we split that out, there was quite a large negative in there for this quarter. Looks to be kind of, you know, financial advisory, legal fees, some merger costs as well. I think the corporate expense line was a bit higher as well. So it would be great just to get a sense as to what exactly was buried in that number. It seemed a fraction higher than it would normally be. Thank you.

Yeah, thank you. Great question, Sumit, as always. As to your first question that has to do with Prende, I think it's important to mention that our strategy and progress have been hugely benefited by having Prende TV in In the market for three quarters of 2021. With Perende in the market, we were able to put full distribution in place across all platforms. Key MVPDs and major CE manufacturers can get those partnerships up and running. So that has been great because it has helped us a lot in terms of our launch of VIX. With Prende Live, we were able to test different content and programming strategies and also refine the relationship between television and the streaming platform. And we were also able to take Prende through the 2021-2022 upfront, as I mentioned before, and establish premium pricing and build a significant base of advertisers. So they looked at Prende and, of course, they saw the attractiveness of it. And so now we have a very good base of advertisers to bring into VIX. And so we have activated 45% of our linear advertisers on Prende TV platform. And this is great as we prepare to transition them into VIX. So I could say in general that PENDE was a huge benefit for us in getting a head start and refining our strategy. I could say the same thing as to the AVOD product that we launched in Mexico through BLIM last year. And so that is a base that will transition into VIX. As to your second question, as Wade mentioned, The launch will be in early Q3. As to your third question, I'll ask Carlos to answer it, please.

Yeah, as you mentioned, there were a couple of movements that were interesting in the other income line. As you mentioned, there was a positive movement which was related to our sale of Ocesa, which was a positive number. But that was offset partially. because there were also other gains that we had the previous year, including the sale of our radio business and the reimbursement of a legal outcome that we had with another company. So those kind of matched. And in terms of the corporate expenses, you're right. I mean, we did have some non-recurring increases in legal and advisory expenses. We also had, because of the transaction with Univision and the restructuring and separation process, we had a little bit slightly higher than normal severance costs. Those were in the content business, and we also had a little bit more in our cable business. And then there's another non-recurring corporate expense in that line, which is related to one of the previous questions that was about income taxes. Given those assessments, we also had an increase in surcharges related to those income taxes from a couple of years before. But again, most of these are non-recurring in nature.

Thanks. Just a very quick follow-up. Putting that all together, do we think that line will kind of normalize from Q1? Or is there, I guess, a deal close, a bit more to come?

Yeah, I don't know. It should normalize in the sense that we're not going to have another sale of Alcesta in the future. But again, this one is subject to... Thank you very much. Thank you, Sumit.

Our next question comes from the line of Matthew Harrigan with Benchmark Company.

Thank you.

I was curious if you could talk a little bit about your venture capital business since you're one of the top five participants in Mexico now. I know most of it is funded through on-air advertising, and clearly VIX and the involvement of Google and SoftBank help you there perceptually. I know that isn't that large an item at this point, but it does feel like it's an interesting area that sometimes doesn't get a lot of discussion. Thank you.

Thank you, Matthew. Great question, and it's something that we feel really proud about, especially in Mexico, and now we're taking this to the United States through Univision. Basically, media for equity, this model implies exchanging available advertising time slots for an equity stake in high-growth startups or business-to-consumer companies that have not had the opportunity to advertise on free-to-air television and other platforms of ours. We select companies based on their potential, basically, and that are in early stages of development. Usually companies that could not afford strong advertising campaigns on free-to-air television, on paid television and other platforms, but would certainly appreciate good advertising deployment to position their products, to position their brands, to position their companies. So we see this as a great opportunity. First of all, to show the market the relevance of free-to-air television to create and position a brand as top of mind. And also, I would say, to optimize the use of our available inventory. And, of course, this gives us the opportunity to invest in companies with high growth potential without any type of cash outflow. In recent stories of success using this mechanism, we have invested in Kavak, we have invested in Rappi, in Wallah, in Clit, and we're doing this basically together hand-in-hand with SoftBank and in certain other cases with General Atlantic as a partner. They're the ones that identify the opportunities and, of course, do extensive due diligence, extensive analysis as to the opportunities and the industries, the clients, etc. So far, we have closed eight investments in seven companies, four of which are unicorns. And that's why we feel proud of the companies we have identified early on. And Thank you very much. Calak, Rapi, Iguala, Clip, and others. I mean, as I mentioned, four of these have become unicorns, so we're very happy about this venture.

Thank you so much.

Our next question comes from the line of Alejandro Chavales with Credit Suisse.

Hi, Talita, and thanks for taking my question and congratulations on the results. Most of my questions have been asked already. Perhaps just a little bit more color on sky. There was obviously an important loss of subs in video. Perhaps you could tell us what are you doing about it? Do you think perhaps there is a possibility of reducing prices, premium pricing to keep some subscribers? And what are your targets for 2022 in these days? What are you aiming to achieve? Thanks.

Yeah, thank you. I think... What happened in the case of Sky, of the subscribers in that platform, we had challenging quarters as the economy recovered, but mostly as people left their homes. And so the recharge rate on our Betebe product was lower than we experienced when we had the lockups. So, we believe that Sky is a fantastic company. It has a fantastic brand in Mexico. It has a great team throughout all the country. And it has also a great product, especially through BTB, which is a prepaid product that is based on recharges. I think... The Sky product is based on the strength of the content that it has, specifically of the soccer content that we have been able to secure there. So we believe that it's a company that, of course, is challenged, but it's a company that is going to be there for the long run and it has a great market.

Right, thank you. So what you're saying is that perhaps the disconnections were because of people that didn't do recharges for VTV rather than losing, let's say, more pregnant subscribers?

Yes, it was focused basically on recharges, on a lower recharge rate.

Right, so going forward we should expect at least a normalization in this time, no? That is correct. Great. Thank you very much. Congratulations again. Thank you.

Our next question comes from the line of Carlos Ligurita.

Hi. Thank you, Alfonso and team. Just a couple of questions on cable. First, I was wondering if you could talk about why the margin in the cable segment was so high during this quarter. I mean, that was a positive surprise for sure. And secondly, how should we think about OPEX in the segment for 2022? Thank you.

Thank you very much, Alfonso. Thank you very much, Carlos, for the question. I think that the margin for the expansion and the margin for the quarter is explained by two areas. In one, you know, as I said in my previous interventions, there was a significant turnaround in the NERA, in NERA, in sales. So that increased our revenue. But we're also having some incipient results on cost containment measures that we're doing. We're improving our procurement practices and containing our general OPEX. So all the combination of these two is what increased the margins. For us, procurement practices, you know, very competitive bidding makes a big difference because our capital expenditures are so high, you know, not only in the expansion part, but also for the operating part, for equipment in the homes, etc. So we have instituted some better procurement practices and bidding processes that have allowed us to contain some of the increases in costs. So that's why the margins have increased. Regarding OPEX, the budget for 2022 that we have proposed, we contained OPEX increases more or less to zero. Besides the fact the increases that we have to have in salaries, et cetera, OPEX was constrained to not have any increases and to absorb the growth with our existing number of workers, et cetera. So we hope... and expect this profitability trend to stay the same and gradually improve.

So that should be flat in nominal terms, real terms, just to understand better.

Well, we have salary increases, so I mean, for sure it's going to be flat in real terms, but the way we targeted the budget was we tried to make it flat in nominal terms, other than salaries and expenses that have to increase. You know, there's nothing we can do about salaries and other exogenous expenses, electricity, all the other services that we buy. But all the discretionary OPEX, let's call it that, We put it flat in nominal terms, but if you look at it, you will see some increases, as I think it's normal.

Of course. Thank you for your comments.

Thank you.

Our last question comes from the line of Brett Mendez with Bank of America.

Hello. Good morning, everyone. Thanks for the call. I have two questions, which I kind of follow up as well. The first one on cable, you mentioned that, you know, two reasons for the improvement in the margin. But I was also assuming that as you extend your FTTH coverage, I'm assuming that you charge a little bit more with the higher quality products and you have higher margins. So just wondering if there was no impact on this quarter from the higher FTTH representation and the read-through to 2022. That would be the first question. And then the second question, I'm back to the front on the content, very strong again, 13% year over year. But, I mean, when I look to VIX, and especially to VIX Plus, we understand that the type of content that you'll be doing in the platform is quite different than the content that you are producing now, especially for VIX Plus. So just want to confirm if it makes sense, this line of thinking. Thank you.

Man, can you repeat exactly what the explanation on your margin was? I didn't quite get it, what the addition was. No, perfect. I'm sorry about this. Yeah, I'm sorry about that.

No, no, no worries, no worries. No, the point is, you mentioned in the previous question two reasons why the margins on cable were so much higher on this quarter, right? But I was assuming that, you know, as you expand your FTTH coverage with a higher quality product, you'd be able to charge a little bit more and consequently have higher margins versus, you know, cables. But you didn't mention that as a benefit for the margin. So just wondering, it makes sense that once you roll over your FTTH, this margin should naturally increase because that's a product with higher margins. So just want to confirm.

Well, sure, absolutely. You know, FTTH, where we stand with FTTH, the margins are higher, so let me confirm that. But I think the results for the quarter are not quite done for that, but we should expect, as I said, the profitability to very gradually improve as this goes on. And as our footprint in FPTH increases, our margins should increase also gradually with the corresponding capex that we have to do with it.

Perfect, perfect, clear, clear.

And then the second question about the content as well.

Yeah, I think before touching on the content, let me share with you, the combination of Televisa and Univision is so unique that if you look at it, if you look at the perspective numbers, The core business of both Televisa and Univision, if you look at the upfronts in both countries that are historical, is growing double-digit. So the core itself is growing double-digit, and we generate a lot of free cash flow both in Mexico and in the United States. And this is unique for a content company such as ours, such as a combined one. because then using that free cash flow, we'll be able to finance the expansion into streaming. So the core is growing double digits that generates a lot of free cash flow. And with that, we can invest in the future in streaming. So that's pretty unique for a media and content company in the world. As to content, First of all, let me touch on the experiences. We'll have, as I mentioned, VIX and VIX+. So this will be in the first year, this year, in 2022. And there we'll have an offering of more than 50,000 hours of free and paid premium Spanish language content. This will include all genres, movies, series, Live sports, as I mentioned, more specifically soccer, live news, and of course the current Televisa and Univision hits, as well as access to the huge library that Televisa has of top franchise content and formats from the Televisa's vault. Going to your question in the subscription service specifically, we will launch at least one high quality new movie or series every week for the entire first year. So, as I mentioned at the beginning, VIX Plus will feature content developed exclusively for that platform, and this includes Salma Hayek and her production company, Selena Gomez. We're producing, as we mentioned, one of the best Novelas, written by Mario Vargas Llosa. We have engaged Maria Dueñas, Santiago Limón, the top Mexican comedian, Eugenio Derbez, and many, many others that are producing content specifically for VIX Plus, for that platform. So we'll see a lot of content going into VIX, into the ABOT platform. As I mentioned before, the results that we're seeing in terms of selling targeted advertising on that platform included in the upfront in both countries are great. And then on VIX+, we think that the engagement will be great and we'll be able to capture a lot of subscribers starting this year with this premium content.

Perfect. Perfect, Alfonso. Very clear. Thank you.

We did have someone come into the queue. Our next question comes from the line of Guillermo.

Yes. Can you hear me? We can.

Great. Perfect.

Just a couple of questions. The first one may be on cable, given the The ads and what Petonio said, it seems that you had challenges this year, like pushing for inflation, especially with Mexico's 6% inflation. So how comfortable are you for the next year that you're going to be able to pass through at least inflation in the cable company? Then maybe on the second one, you were mentioning something about the use of capital. and being opportunistic. So your bonds are, most of the foreign denominated bonds are trading at both parts, which are the sort of expensive ones and the ones in the local currency, the spread versus the TA is not very far away from current funding conditions. So how would you define which debt to prepay or not? And when we take a look to the stock, especially given the quarter, that adjusting the and the EBITDA decrease of 4%. It seems like Televisa ROIC is close to zero, so no profitability on that part. So how do you define buying your own stock, investing at a 0% ROIC, or more detail on the opportunistic definition that you are mentioning? Maybe you are expecting a structural change in the ROIC of the vehicle. Maybe another question for the big, On the series, the Eugenio Derbez and the one series each week, what's going to be the OPEX for the first year of VIX? Because we are watching Netflix, pushing out $25 billion in OPEX, Disney $60 billion in OPEX. So what's going to be our range in VIX for the first week in terms of OPEX? And just finally, on the investments, the private equity investment that you mentioned, the CAVAC, UALA, etc., Are you doing that through a fund, vision fund, or are you taking an individual risk for those investments? If so, what is the target, the threshold, the IRR that you're expecting in those investments? So four points, the cable, the use of capital, the VIX, OPEX, and the IRR or any other threshold for the private equity investments.

Thank you very much, Guillermo. What we will do in the future is we're looking at our competition all the time. So it will depend on the market environment and how all of this evolves and how the country evolves. I think one of the things that we have done and one of the reasons that we are happy that we see a turnaround in the fourth quarter was we repackaged our products. and we tailored our products regionally and depending on where the demand and the consumer acquisition power was. So I think that was successful and we're going to continue to do this in the future and depending on how the market conditions are, we'll make those decisions as we go along.

As to the repurchase of... That's for the cable, right? Correct.

That's for the cable. That is correct.

Thank you. As to the repayment of debt, I will ask Carlos to answer that question.

Yeah, Guillermo, to your point, I think there's – when we say we're going to reduce debt opportunistically, I think it's a couple of features that we're looking to accomplish. As you can imagine, one of the ones that we want to address is to reduce our interest expense as much as possible. So we'll try to focus part of the debt reduction in – Thank you very much. Thank you. in the most optimal way to reduce our interest charge. We also have to take into consideration the balance at which we will end up in terms of currency as well as the maturity extension that we end up with. So I think it's a complicated answer in the sense that there isn't one factor that we have to take into consideration. We have to take into consideration many, some of which are more in the market's hand than ours in terms of how rates and FX move. But the idea definitely is to reduce our leverage with most of the proceeds from the transaction.

So there is no clear path between bond and stock buyback, but yes, you're going to be tactical, right?

Yes, that's correct. I mean, we are going to be reducing that, that's for sure.

Okay.

As to the OPEX of VIX, I would say that... I mean, Univision has not disclosed what that figure will be. What I can say is that we'll invest hundreds of millions of dollars this year, and those are being, as I mentioned before, financed by both synergies that have to do with a combination of Televisa and Univision, and second, because, I mean, considering the free cash, EBITDA and free cash flow, that the Televisa-Univision combination will deliver. Keep in mind that Univision paid Televisa in 2021 $417 million of royalty in terms of the program license agreement and that will be collapsed into Televisa-Univision on top of the synergies that I have mentioned. This is what I have mentioned in terms of the uniqueness of the company, in terms of growing double digits on the core business and having the free cash flow generation to finance our future, to finance streaming. As to your question that had to do with media for equity deals, We don't do them through Vision Fund or any of those funds. We make those investments directly in the equity of those companies. Of course, I mean, the IRR, it depends on the industry, depends on the company itself, depends on the stage of matureness of the company, et cetera. So, I mean, it's very difficult to have one defined. And that's basically what we're doing there.

At this time, there are no further questions. Do you have any closing remarks?

Well, thank you very much for participating. We're very, very excited about the prospects of Televisa Univision, the launching of the streaming service VIX and VIX+. also about cable and Sky. As to our other businesses, hopefully as a result of the loosening of the restrictions that have to do with COVID, we'll see a much better result this year. So thank you for participating and call us if you have any additional questions.

This concludes today's conference call. Thank you for participating. You may now disconnect.