Good morning, everyone, and welcome to Grupo Televisa Second Quarter 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, Carmencita. Good morning, everyone, and thank you for joining us. With me today are Antonio Gonzalez, CEO of Cable; Alex Penna, CEO of Sky; Patricio Wills, Head of Televisa Studios; and Carlos Ferreiro and Antonio Lara, Corporate Vice President of Finance and Administration, respectively. Let me start by saying that Mexico's economic activity recovered strongly in the month of April and May expanding by more than 20% year-on-year, largely due to robust growth in manufacturing and the services sectors. Apparently, the better-than-expected momentum experienced at the end of Q1 was carried over into the second quarter, aided by declining COVID-19 cases, rebounding activity in the U.S. and improved sentiment. The economic recovery is expected to continue, supported by further easing of social distancing measures with vaccination of the population gradually growing over the next few quarters. Mexico will also benefit from positive spillovers related to robust U.S. GDP and income growth, potentially contributing to accelerate activities related to tourism, exports and flow of remittances, stronger terms of trades and the lag effect of monetary easing. The Mexican economy was hit hard by the COVID-19 pandemic last year, reducing GDP by 8.5%. However, in 2021, GDP is expected to grow at around 6% after the latest upward revisions, recouping most of what the Mexican economy lost in 2020. Our Content business which has operated with limited interruption throughout the pandemic has been the main beneficiary of the robust economic rebound. The private sector has remained quite active advertising their products and services as has been the case over the last couple of quarters. While the reopening has had a positive impact in economic activity, the unemployment rate deteriorated in April to 4.7% compared to 3.9% in March. So we have been cautious with promotions both at Cable and Sky.…

Thank you, Alfonso. During the second quarter, 16 of the top 20 programs of Mexico's broadcast television were produced and submitted by Televisa. This includes telenovelas, drama, newscasts and comics. Televisa’s top three programs during the second quarter included ¿Qué le pasa a mi familia?, La rosa de Guadalupe and [Pequeños Gigantes], with audiences between 59% and 70% higher than the top rated programs of our closest competitor. So, to hallway, Televisa’s audience were 89% higher than those of the second largest broadcaster, while audiences at our flagship network Las Estrellas were 151% higher than those of our closest competitor. This shows that the audience gap with our closest competitor continues to increase compared to 74% and 112% higher audiences, respectively, during the first quarter, given the solid ratings of our programming. During the second quarter, our main newscast has seen 5% higher audiences than the all -- two newscasts on free-to-air TV combined. In addition, the best program of our second network Channel 5 was among the top 20 with similar audiences than the average of the top four programs in the flagship channel of our main competitor. This demonstrates the strength of our content across all our channels. During the second quarter, Univision's audience share remained well above that our main Spanish language competitor. We believe this will keep helping us to benefit from the economic recovery in the U.S.

Thank you, Patricio. Now, let me turn the call over to Antonio, CEO of Cable. José Antonio González Anaya: Thank you, Alfonso. For the second quarter of 2020, the Cable division posted year-on-year revenue growth of 5.9%, while `operating segment income increased 7.8%. Our Residential segment revenue grew 6.4%. Our Enterprise segment which accounts for around 15% of total Cable revenue grew 4.3%, in part due to the timing of revenue recognition. The accumulated year-to-date revenue grew 9% year-on-year. Our Cable business keeps growing with higher average revenue per user in new sales and a strong improvement in the product mix. We added almost 60,000 revenue generating units for a total of 14.3 million RGUs during the quarter. As anticipated, net additions have slowed during the -- have slowed returning to pre-pandemic levels. Last year, demand for our services accelerated significantly because of the social distancing measures to prevent the spread of COVID-19. During 2019, we added 812,000 RGUs, while the same number for 2020 was 1.36 million. This basically means that RGU new net-adds in 2020 were an outlier. Broadband continues to be the highest margin service. So, we will continue to enhance the product offerings for this. We added 31,000 broadband RGUs during the quarter for a total of 5.6 million. For the 9th consecutive month we have been number one in the Netflix ISP Speed Index confirming our trustworthy and competitive service. We continued to observe good results in voice RGUs. They surpassed the number of video RGUs since the fourth quarter of 2020. We have been very successful at upselling this service to our customers. We had 31,000 net video disconnections during the quarter, largely due to customers prioritizing broadband services and looking to reduce their monthly bills. We are strengthening our customer retention programs with…

Thank you, [Pepe T]. Now let me turn the call over to Alex Penna CEO of Sky.

Thank you, Alfonso. At Sky, revenue increased by 1% year-on-year during the quarter, but the operating segment income fell by 3.4%, driven primarily by the amortization of certain sports events, such as the UEFA Euro 2020 and the America’s Cup 2021. Sky added 19,000 RGUs with 3,000 video subs during the quarter, mostly driven by bundles with our Blue Telecomm Broadband Service. On the broadband side, we added 9,000 RGUs during the quarter, reaching a total of 707,000 broadband RGUs. In the aggregate, including our MVNO service, which had 8,000 RGUs during the quarter, we closed with approximately a total of 8.2 million RGUs. Our Sky Sports package is gaining traction, but at a softer pace than initially expected. As the economy keeps strengthening and unemployment rate declines, we would expect the pace of adoption of this package to accelerate. As a reminder, this is a prepaid package, including exclusive sports content, such as the Spanish League, the English Premier League, and many other key sports properties, as well as all free-to-air channels and Televisa’s suite of payTV channels.

Thank you, Alex. Regarding CapEx, year-to-date, we have invested $555 million, of which $406 million have been invested in cable. As discussed during the call of the first quarter, our CapEx target for 2021 includes $850 million in cable, or $200 million more than what we invested in 2020 given that we will pass 2 million homes with fiber, $250 million in Sky and $75 million in content and other businesses. Before we close, I want to share with you that on June 21st, we unveiled at Univision our plans for a comprehensive global streaming service, which includes both free ad supported and premium subscription based options to launch in the United States and Latin America in 2022. The two tier streaming service will offer a differentiated product proposition, vast content scope, expansive library and more Spanish language originals than any other streaming service. Our streaming platform will be fueled by full access to Televisa’s deep content library and iconic IP, as well as an ambitious slate of new originals produced by the leading creators in the Spanish speaking world. The best of the existing PrendeTV, VIX, Univision NOW and Blim services will be transitioned and unified into one global service and brand. Brand, pricing and specific launch date for the service will be announced following the close of the Televisa-Univision merger later this year. The ad supported tier will be anchored by Univision's current free Spanish language streaming service PrendeTV and Televisa’s Blim AVOD platform. This free tier will feature an upgraded broadcast quality content proposition including select originals major studio films, premium Spanish language titles and expanded live sports offering and a unique 24x7 new service. In total, the free tier will have over 100 linear channels, and over 40,000 hours of wholly-owned and acquired content that will…

[Operator Instructions]. We have a question from the line of Marcelo Santos with JPMorgan.

I have 2. The first is, if you could comment a bit on the new Blim that you launched, I think, in the end of May, if I'm not mistaken? Is there any preliminary information that you could provide on how that's going? I think it already follows the 2-tiered system. And the second one is regarding Sky's broadband adds. There was a deceleration versus previous quarters. Is this mostly related to the reopening? Could you please comment on what to expect on the broadband of Sky?

Marcelo, yes, I can comment on Blim. We did launch an AVOD tier within the platform. We did a soft launching of that platform during the quarter. And we're seeing that the traction is excellent in terms of usage, in terms of stickiness. Just in this soft launch, we got to 300,000 users, and we believe that we can achieve quite easily more than 2 million users by year's end. We will be launching this officially in the next 3 weeks. And this will be a complement of our SVOD platform. Basically, that SVOD platform is based on Televisa content. And there, we have gotten to 1.3 million subscribers. So as I was saying, the stickiness, the usage is there. There a lot of users that want to watch the Televisa content and we're happy using our library to be able to get to those usage levels and to those -- and on the SVOD platform to get to those subscriber levels. As we mentioned, we will integrate that into a single platform within the Univision and Televisa merger to be launched in 2022. And I'll ask Alex to answer the second question.

Hi, Marcelo. Yes. As you know, our broadband service, it's being offered over the Altan network. And Altan has already defined what portion of the network is going to be dedicated to broadband and the -- what part is going to go for the cellular service. And having said that, yes, in the second quarter, there has been a combination of lower sales of broadband service combined with slightly higher cancellation that resulted in the net adds that were lower than the first quarter of this year and much lower than the second quarter of last year. Therefore, what we -- having said that, what we could expect going forward in terms of growth of broadband services, it's going to be more in line with what we saw in the current quarter.

Just a follow-up to understand the Altan. So is Altan -- do you mean that the capacity they have available for you is more limited because they want to give more capacity to mobile? Did I understand that correctly?

That's correct. They want to dedicate the bulk of their existing capacity over their network to the cellular service.

Our next question is from Luis Yance with Compass.

Two questions on my side. Noticing the slowdown in subscriber growth on the cable side, especially in video, how much of it has to do with the economy still kind of slowly recovering? How much it has to do with your cautiousness in terms of adding subs and avoiding new churn? And how much it has to do with waiting to get the homes passed in some of those new markets and I guess the lag between that and added subscriber growth. And how do we think about -- in terms of timing, when do we expect an acceleration? What would be the biggest driver? So that will be my first question. Then the second question, if you could give us an update in terms of the timing for the Univision merger, whether all the approvals are going kind of in line as expected and whether you expect to close kind of around the same time you were announcing before? And I guess a related question to that would be, you're going to have a much healthier balance sheet. And I guess a lot of it, based on what you've said, means that you're probably going to be investing more. I mean we saw it with the CapEx organically. But I wonder if buybacks come back into the question, M&A comes back into the question. So just thinking forward, as you streamline your operations, what's next for Televisa once you have that stronger balance sheet?

Thank you, Luis. Yes, to your first question, of course, 2020, because of COVID and the effects of the pandemic and also because of the needs of connectivity, was an outlier. So if you compare 2021 second quarter results to the second quarter of last year, of course, you see a slowdown. But I will ask Antonio to go into further details as to the results and what he's seeing, and then I'll take your second question. José Antonio González Anaya : Thank you, Luis. I think there's a couple of reflections. First, the first thing to keep in mind is that in the long run, the in-home connectivity demand is still huge in Mexico. Broadband penetration is still very low at around 60% of the homes. So I think in the long run, we should expect the acceleration to resume new net adds in the medium term. Now as Alfonso said, in the short-term, there are 2 opposing effects. On the one hand, the demand for connectivity, video entertainment and broadband services are returning to the pre-pandemic levels. And this is stabilizing as people are returning to work and children are returning to school, et cetera. To give you an idea of how big this effect is, during 2019, there were 812,000 RGUs added, while the same number in 2020 was 1.36 million, the equivalent of 1.7x. The second effect, the second opposing effect, as you correctly mentioned in your question, is the economy is bouncing back vigorously. So we -- GDP is expected to grow 6% in 2021; and with it, employment, disposable income and the demand for our services. We think this growth will be [uneven], so we expect stronger growth on our Enterprise segment, but we also expect demand on our Home segment to increase. But as such, we are strengthening our sales promotion and customer retention programs to take advantage of these 2 simultaneous effects that are going on. We think that as growth accelerates, and with the increase of 2 million home passes in the rest of the year, this should put us in a strong position to see net adds gradually stabilize in a sustainable path.

And Luis, as to your second question, that has to do with the approval process of Televisa Content and Univision merger, we have made all the filings, both in Mexico and in the United States. The approval is ongoing and is in due course. We expect it to conclude before year-end, so we can close the merger before year-end. As you were saying, Televisa will continue to have a very solid balance sheet. And at this point, our capital allocation priorities are mainly focused on leverage reduction. And of course, we'll always see growth opportunities at our core businesses.

And our next question comes from Carlos Legarreta with GBM.

It's actually 2 questions on cable, please. The first one is, if you could report on the advance on the cable expansion footprint by 2 million. Are we seeing growth from this expansion already? Or will it be skewed towards the end of the year as you finish with the rollout? And the follow-up is, we understand the economics in the fiber connected household are more favorable, this is through higher ARPU, lower churn, lower maintenance CapEx, et cetera. But it would be really helpful to have your comments. And also, if you could disclose what percentage of your current homes passed is enabled with fiber? And what is your target?

Thank you, Carlos, for your question. I'll ask Antonio to take it. José Antonio González Anaya : Thank you, Carlos, for the question. The -- as we -- as I said in the remarks, the construction is going on track. We have roughly just over 500,000 homes passed already, and this will continue for the rest of the year. So, we've already actually begun the sale process in Guadalajara, which is our initial city, just recently, just a couple of weeks ago. As you rightly said, we think that by the end of the year, we will have around 25% of fiber-to-the-home, and the rest of our network will remain cable. But as you know, we have made substantial investments in the last few years. The HFC network is very competitive. Most of it is 3.0, and it's ready to be upgraded to DOCSIS 3.1, which allows us to increase the speed from 100 meg to 1 giga with the 3.1. So, we're very confident that we have a very competitive network, but all the new expansions we're doing in fiber optics for the reasons you mentioned.

And in each area, we are expanding. And as Antonio had reported, of course, I mean, we look into different criteria, and we're very disciplined about it. So, it depends on a variety of factors going into these areas. It has to do with penetration in those areas with ARPUs and very specifically with profitability. So, we believe that where we are growing, we'll be successful in achieving high penetration levels within a short period of time. So, we're very excited about that expansion.

[Operator Instructions] Our next question is from Matthew Harrigan with Benchmark.

I was curious, would you look at the share of connected TV advertising relative to traditional linear TV in the U.S.? I think it's about 15% to 18%, including Roku, Hulu, et cetera. I mean clearly, if you get that type of ratio in Mexico and in the Spanish market, in the U.S. over time, you're going to be in a great place given your linear TV advertising numbers. Can you talk about where that percentage would be in the Spanish market, in the U.S. and Mexico right now? I assume it's quite small because you're addressing a neglected AVOD market with your product. Congratulations on your numbers.

Yes. So, are you talking, Matthew, about share of advertising or -- did I get that right?

Yes, I'm looking at the ratio of advertising dollars that say, Roku or Hulu and various other companies get in the U.S. relative to the size of a linear traditional broadcast market is about 15%, I mean clearly growing very, very quickly. I assume it's much lower than that in the Spanish language market, both in the U.S. and Mexico. But I think it highlights just what a huge opportunity you have on the AVOD side given that it's neglected. So I assume that that percentage must be in the mid- to high single-digits right now. Can you comment on that subjectively even if you don't have a lot of consultancy numbers or such?

Yes. Yes, you're absolutely right, Matthew. And those numbers are even lower than the ones that you're mentioning. Basically, the SVOD -- I mean the AVOD market doesn't exist, so we are creating it as we speak. And you see the traction even with no advertising and with a soft launch, you can see that it's -- I mean the appetite for the Televisa content on platforms like the one we are launching is huge. If you look at the numbers of usage and people going to YouTube, for example, just to watch episodes of the Televisa programming, those audiences are going to be huge. So, we believe that there is a huge opportunity in the Spanish language from $3 billion to $4 billion by 2024. So, it's a huge market. It's an untapped market. We'll be able, of course, to offer targeted advertising and advertising in general to specific audiences. So, we believe that it is a huge untapped opportunity that will grow substantially. As I mentioned, considering the stickiness of the content and the usage that we're seeing in the Blim AVOD platform, we're very excited about that. Also, what -- we're looking at PrendeTV in the United States, in terms of usage, in terms of stickiness. So we're very excited about putting all these together and launching a single platform in 2022. We believe and we're determined to make this a big success.

Our next question is from Alejandro Gallostra with BBVA.

I have a couple of questions. First is regarding dividends. I believe that Televisa-Univision will not be paying dividends in the near term. So I'd like to know if this deal will change your dividend policy that has been in place for so many years of distributing Ps. 0.35 per share or you will proceed or cancel it altogether? That's my first question. The second question is related to the Televisa-Univision strategy. You've been saying that you expect the Televisa-Univision deal to close by the end of this year, and you also plan to launch your premium video streaming service early next year. But I believe that you are not budgeting for additional content expenses in 2021. So I was wondering if it will have enough time to create a full catalog of exclusive premium content by the time you launch the new streaming platform or if you don't increasingly include that exclusive premium content over time? So any additional color on this will be appreciated.

Yes. Thank you, Alejandro. As for our dividend policy, we will continue with the same one that we have had for many, many years. You have to take into consideration that we have a high-growth and high CapEx business, which is easy, our cable platform. And we expect to continue investing in that platform as we go along and we grow the number of subscribers. So we are going to keep our dividend policy. As to your second question, as I mentioned, we do expect to close the merger between Televisa Content and Univision by year-end. And as to the premium content, what we have done is we hit the road running. So that means that we are already producing the premium content that we will use for the launching of the platform in 2022. So we are already doing that. And we want -- of course, you will see a lot of those productions in year 2022. And of course, more to come. So we are already working on all of those.

And I'm not showing any further questions in the queue, sir.

Well, thank you very much for participating in our call. If you have any additional questions, please call us. Thanks.

And this concludes today's conference call. Thank you for your participation and you may now disconnect.