Q3 2025 Grupo Televisa SAB Earnings Call

Speaker #4: Good morning , everyone , and welcome to Grupo delle Tvc's . Third quarter 2025 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 discussed in today's call and in the earnings release .

Elsa: Good morning, everyone, and welcome to Grupo Televisa's Q3 2025 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 discussed in today's call and in the earnings release. Please note this event is being recorded. I would now like to turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead.

Speaker #4: Please note this event is being recorded . I would now like to turn the call over to Mr. Alfonso de Angoitia , Co-Chief Executive Officer of Grupo Televisa .

Speaker #4: Please go ahead .

Speaker #5: Thank you . Elsa . Good morning , everyone , and thank you for joining us . With me today are Francisco Valim , CEO of cable and Sky , and Carlos Philips , CFO of Grupo Televisa .

Alfonso de Angoitia: Thank you, Elsa. Good morning, everyone, and thank you for joining us. With me today are Francisco Valim, CEO of Cable and Sky, and Carlos Phillips, CFO of Grupo Televisa. Before discussing our Q3 operating and financial performance, let me share with you what we believe are the key milestones achieved this year, both at Grupo Televisa and TelevisaUnivision. At Grupo Televisa, let me touch on four major achievements. First, our strategy to focus on attracting and retaining value customers in Cable has allowed us to grow our internet subscriber base in the first nine months of the year compared to the end of 2024. Second, we keep executing on implementation of OpEx efficiencies and the integration between izzi and Sky to extract further synergies.

Speaker #5: Before discussing our third quarter operating and financial performance , let me share with you what we believe are the key milestones achieved . This year , both at Grupo Televisa and Televisa .

Speaker #5: Univision . At Grupo Televisa , let me touch on four major achievements . First , our strategy to focus on attracting and retaining value customers in cable has allowed us to grow our internet subscriber base .

Speaker #5: In the first nine months of the year , compared to the end of 2024 . Second , we keep executing on implementation of OpEx efficiencies and the integration between easy and Sky to extract further synergies .

Speaker #5: This has already contributed to expanding our consolidated operating segment income margin by 100 basis points . In the first nine months of the year to 38.2% , driven by year on year opex reduction of around 7% .

Alfonso de Angoitia: This has already contributed to expanding our consolidated operating segment income margin by 100 basis points in the 9 months of the year to 38.2%, driven by year-on-year OpEx reduction of around 7%. Third, we continue to keep a disciplined CapEx deployment approach to focus on free cash flow generation. So far this year, we have invested MXN 7.5 billion in CapEx, which is equivalent to 16.8% of sales. In Q4, CapEx deployment should remain at similar levels to those of Q3. Still, our CapEx budget of $600 million for 2025 implies a reasonable CapEx to sales ratio of less than 20% for the full year. We have been able to achieve this mainly because we have had successful negotiations with suppliers, resulting in more favorable terms.

Speaker #5: Third , we continue to keep a disciplined CapEx deployment approach to focus on free cash flow generation . So far this year , we have invested $7.5 billion in CapEx , which is equivalent to 16.8% of sales in the fourth quarter .

Speaker #5: CapEx deployment should remain at similar levels to those of the third quarter . Still , our CapEx budget of $600 million for 2025 implies a reasonable CapEx to sales ratio of less than 20% for the full year .

Speaker #5: We have been able to achieve this mainly because we have had successful negotiations with suppliers, resulting in more favorable terms during the first nine months of the year.

Alfonso de Angoitia: Fourth, during the first nine months of the year, we have generated around MXN 4.2 billion in free cash flow, allowing us to prepay a bank loan due in 2026 with a principal amount of around MXN 2.7 billion. This debt repayment comes on top of the $220 million principal amount of our senior notes already paid on 18 March. Additionally, at the end of Q3, Grupo Televisa's leverage ratio of 2.1x EBITDA compared to 2.5x at the end of last year, mainly driven by our free cash flow generation. At TelevisaUnivision, I will mention 3 key milestones. First, engagement and growth for ViX remain solid, with strong momentum across both our free and premium tiers.

Speaker #5: We have generated around $4.2 billion in free cash flow, allowing us to prepay a bank loan due in 2026 with a principal amount of around $2.7 billion.

Speaker #5: This debt repayment comes on top of the $220 million principal amount of our senior notes , already paid on March 18th . Additionally , at the end of the third quarter , Grupo Televisa leverage ratio of 2.1 times EBITDA compared to two and a half times at the end of last year , mainly driven by our free cash flow generation and at Televisa Univision .

Speaker #5: I will mention three key milestones. First, engagement and growth for Vicks remains solid, with strong momentum across both our free and premium tiers.

Speaker #5: Moreover , the Gold Cup semifinals and finals and the compelling entertainment and sports slate that included the third season of La Casa de Los Famosos , Mexico and our broadcast of Liga mX and the NFL helped drive a high single digit increase in Maus and robust demand for advertisers on Vicks .

Alfonso de Angoitia: Moreover, the Gold Cup semifinals and finals and the compelling entertainment and sports slate that included the third season of La casa de los famosos México and our broadcast of Liga MX and the NFL helped drive a high single-digit increase in MAUs and robust demand for advertisers on ViX. Second, the efficiency plan to reduce operating expenses at TelevisaUnivision by over $400 million in 2025 is delivering outstanding results. In the first 9 months of the year, our total operating expenses have declined by around 12% year-on-year for total savings of around $300 million. This shows a disciplined execution of our cost savings initiatives, including lower content, technology, and marketing costs, and the normalization of our DTC-related investments.

Speaker #5: Second , the efficiency plan to reduce operating expenses at Televisa Univision by over $400 million in 2025 is delivering outstanding results in the first nine months of the year .

Speaker #5: Our total operating expenses have declined by around 12% year on year for total savings of around $300 million . This shows a disciplined execution of our cost savings initiatives , including lower content , technology and marketing costs .

Speaker #5: And a normalization of our DTC related investments . And third , looking at Televisa , Univision's leverage and debt profile , the company ended the quarter at five and a half times EBITDA and improvement from 5.9 times in the fourth quarter of 2024 , driven by growth .

Alfonso de Angoitia: Third, looking at TelevisaUnivision's leverage and debt profile, the company ended the quarter at 5.5x EBITDA, an improvement from 5.9x in Q4 2024, driven by growth. Moreover, so far this year, TelevisaUnivision successfully refinanced $2.3 billion of debt. As discussed in our Q2 earnings conference call, the company successfully issued $1.5 billion of new 2032 senior secured notes and refinanced over $760 million of Term Loan A, now due in 2030. In addition, more recently, TelevisaUnivision extended its $500 million revolving credit facility and its $400 million accounts receivable facility. These transactions strengthened TelevisaUnivision's balance sheet, enhanced its liquidity, and extended its maturity profile with its nearest maturity now almost 3 years away.

Speaker #5: Moreover , so far this year , Televisa , Univision successfully refinanced $2.3 billion of debt . As discussed in our second quarter earnings conference call , the company successfully issued $1.5 billion of new 2032 senior secured notes and refinanced over $760 million of term loan .

Speaker #5: A now due in 2030 . In addition , more recently , Televisa Univision extended its $500 million revolving credit facility and its $400 million accounts receivable facility .

Speaker #5: This transactions strengthened Televisa , Univision's balance sheet and enhanced its liquidity and extended its maturity profile with its nearest maturity . Now almost three years away .

Speaker #5: Deleveraging remains a core strategic priority for Televisa . Univision and management remains committed to further strengthening the capital structure of the company over the coming quarters .

Alfonso de Angoitia: Deleveraging remains a core strategic priority for TelevisaUnivision, and management remains committed to further strengthening the capital structure of the company over the coming quarters. Having said that, let me turn the call over to Francisco Valim, as he will discuss the operating and financial performance of our consolidated assets.

Speaker #5: Having said that , let me turn the call over to Alim as he will discuss the operating and financial performance of our consolidated assets .

Speaker #5: Thank you, Alfonso. Good morning, everyone.

Francisco Valim: Thank you, Alfonso. Good morning, everyone. As Alfonso mentioned, we had an excellent quarter in this Q3. First, let me walk you through the operating financial performance of our cable operations. We ended September with a network of almost 20 million homes after passing around 20,000 new homes during the quarter. Our monthly churn rate has remained below our historical average of 2% for 2 consecutive quarters as we continue to execute our strategy to focus on value customers while working on customers' retention and satisfaction. Our broadband gross adds continue to improve on a sequential basis, allowing us to deliver 22,000 net adds during the Q3 compared to net adds of around 6,000 in the Q2 and disconnections of about 6,000 in the Q1.

Speaker #6: As Alfonso Noriega mentioned, we had an excellent quarter in this third quarter. First, let me walk you through the operating financial performance of our cable operations.

Speaker #6: We ended September with a network of almost 20 million homes . After passing around 20,000 new homes during the quarter . Our monthly churn rate has remained below our historical average of 2% for two consecutive quarters .

Speaker #6: As we continue to execute our strategy to focus on value customers while working on customer retention and satisfaction . Our broadband gross ads continue to improve on a sequential basis , allowing us to deliver 22,000 net ads during the third quarter compared to net ads of around 6000 in the second quarter , and disconnections of about 6000 in the first quarter .

Speaker #6: In video , we also experienced a strong growth in the first two quarters of the year and managed to reduce churn . Therefore , we lost about 43,000 video subscribers during the third quarter , compared to 53,000 cancellations in the second quarter and 73,000 disconnections in the first quarter of the year .

Francisco Valim: In video, we also experienced a strong gross adds than in Q1 and Q2 of the year and managed to reduce churn. We lost about 43,000 video subscribers during Q3 compared to 53,000 cancellations in Q2 and 73,000 disconnections in Q1 of the year. We expect this improving trends to continue growing forward, influenced by our recently announced multi-year partnership with Formula One to provide live coverage of all Grand Prix via Sky Sports channels available through izzi and Sky. Beginning Q4 of this year and through 2028 season, Formula One is the one of the fastest-growing and most passionate sports events in Mexico and around the world, we definitely see this as a competitive advantage relative to our peers.

Speaker #6: Moreover , we expect to see improving trends to continue growing forward , influenced by our recently announced multi-year partnership with Formula One to provide live coverage of all Grand Prix via Sky sports channels available through easy on Sky beginning in the fourth quarter of this year and through 2028 season .

Speaker #6: Formula one is the one of the fastest growing and most passionate sports events in Mexico and around the world , and we definitely see this as a competitive advantage relative to our peers .

Speaker #6: Moving to mobile , our net adds of 94,000 subscribers during the quarter continue to gain momentum , beating the 83,000 net adds of the second quarter and doubling those of the first quarter .

Francisco Valim: Moving to mobile, our net adds of 94,000 subscribers during the quarter continued to gain momentum, beating the 83,000 net adds of Q2 and doubling those of Q1. Our innovative MVNO service developed by ZTE offering enhanced user experience is already making our bundles more competitive and allowing us to increase our share of wallet from our existing customers. During the quarter, net revenue from our residential operations of MXN 10.6 billion, which accounted for around 91% of total cable revenue, decreased by only 0.7% year-on-year. This marked the best quarter of the last 2 years at our residential operations from a revenue growth performance standpoint and compares well to a decline of 3% in H1 of the year.

Speaker #6: Our innovative MVNO service, developed by ZTE, offers an enhanced user experience. It is already making our bundles more competitive and allowing us to increase our share of wallet from our existing customers.

Speaker #6: During the quarter, net revenue from our residential operations was $1.6 billion, which accounted for around 91% of total cable revenue, and decreased by only 0.7% year on year.

Speaker #6: This marks the best quarter of the last two years at our residential operations. From a revenue growth performance standpoint, it compares well to a decline of 3% in the first half of the year.

Speaker #6: On a sequential basis . Net revenue from our residential operations grew by 0.4% , potentially signaling an ongoing gradual recovery during the quarter .

Francisco Valim: On a sequential basis, net revenue from our residential operations grew by 0.4%, potentially signaling an ongoing gradual recovery. During the quarter, revenue from our enterprise operations of MXN 1.1 billion, which accounted for around 9% of our cable revenue, increased by 7.7% year-on-year. This also marks the best quarter of the last 3 years of our enterprise operations from a revenue growth performance standpoint and compares favorably to growth of 3% in Q2 and a decline of 4.5% in Q1 of this year. Moving on to Sky's operating and financial performance. During Q3, we lost 329,000 revenue-generating units, mostly coming from prepaid subscribers that had not been recharging their services.

Speaker #6: Revenue from our enterprise operations of $1.1 billion , which accounted for around 9% of our cable revenue , increased by 7.7% year on year .

Speaker #6: This also marks the best quarter of the last three years of our enterprise operations. From a revenue growth performance standpoint, it compares favorably to growth of 3% in the second quarter and a decline of 4.5% in the first quarter of this year.

Speaker #6: Moving on to Sky's operating and financial performance during the third quarter, we lost 329,000 revenue-generating units, mostly coming from prepaid subscribers that had not been recharged.

Speaker #6: Their services . In addition , beginning in the second quarter , we started to charge an installation fee of $1,250 to all satellite pay-TV subscribers to increase the return on investment .

Francisco Valim: In addition, beginning Q2, we started to charge an installation fee of MXN 1,250 to all satellite pay-TV subscribers to increase the ROI for this service. This translated into a slowdown of video gross addition for Sky that has been steady over the last 2 quarters. Sky's Q2 revenue of MXN 3.1 billion declined by 18.2% year-on-year, mainly driven by a lower subscriber base. To sum up, segment revenue of MXN 14.7 billion fell by 4.4% year-on-year, while operating segment income of MXN 5.7 billion declined by only 0.7%, making it the best quarter of the year as we appear to be very close to reaching operating segment income stabilization.

Speaker #6: For this service . This translated into a slowdown of video gross additions for Sky that has been steady over the last two quarters .

Speaker #6: Sky's second quarter revenue of $3.1 billion declined by 18.2% year on year , mainly driven by a lower subscriber base . To sum up , segment revenue of $14.7 billion fell by 4.4% year on year , while operating segment income of $5.7 billion declined by only 0.7% , making it the best quarter of the year .

Speaker #6: As we appear to be very close to reaching operating segment income stabilization, our operating segment income margin of 38.5% extended by 140 basis points year on year, mainly driven by the efficiency measures that we have been implementing and synergies from the ongoing integration between Easy and Sky.

Francisco Valim: Our operating segment income margin of 38.5% extended by 140 basis points year-on-year, mainly driven by the efficiency measures that we have been implementing and synergies from the ongoing integrations between izzi and Sky. Regarding CapEx deployment, our total investments of MXN 3.6 billion account for 24.3% of sales during Q3. It is in line with our updated CapEx budget for 2025 of $600 million. Finally, operating cash flow for Cable and Sky, which is equivalent to EBITDA minus CapEx, was MXN 2.1 billion in Q3, representing 14.2% of sales.

Speaker #6: Regarding CapEx deployment , our total investments of $3.6 billion account for 24.3% of sales during the third quarter . This shows a material sequential increase in CapEx deployment , but it is in line with our updated CapEx budget for 2025 of $600 million .

Speaker #6: Finally , operating cash flow for cable and Sky , which is equivalent to EBITDA minus CapEx , was $2.1 billion in the third quarter , representing 14.2% of sales .

Speaker #5: Thank you . Valim best quarter of the year . Indeed . Now let me take you through the visa , third quarter results .

Alfonso de Angoitia: Thank you, Valim. Best quarter of the year indeed. Let me take you through TelevisaUnivision's Q3 results. The company's Q3 revenue of $1.3 billion declined by 3% year-on-year, while adjusted EBITDA of $460 million increased by 9%. Excluding political advertising, revenue fell by 1% year-on-year, marking a sequential improvement compared to both the Q1 and Q2 of this year. On the other hand, also excluding political advertising, adjusted EBITDA increased by 13% year-on-year, underscoring the scalability of a profitable DTC business and the sustained impact of cost reductions initiatives launched at the end of last year. Moving on to the details of our revenue performance. During the quarter, consolidated advertising revenue decreased by 6% year-on-year or 3% excluding political advertising expenditure.

Speaker #5: The company's third quarter revenue of $1.3 billion declined by 3% year on year , while adjusted EBITDA of $460 million increased by 9% .

Speaker #5: Excluding political advertising , revenue fell by 1% year on year , marking a sequential improvement compared to both the first and second quarters of this year .

Speaker #5: On the other hand , also excluding political advertising , adjusted EBITDA increased by 13% year on year , underscoring the scalability of a profitable DTC business and the sustained impact of cost reductions .

Speaker #5: Initiatives launched at the end of last year . Moving on to the details of our revenue performance during the quarter , consolidated advertising revenue decreased by 6% year on year , or 3% excluding political advertising expenditure in the US , advertising revenue was 11% lower as growth in Bics continued to partially offset linear declines within Vicks .

Alfonso de Angoitia: In the US, advertising revenue was 11% lower as growth in ViX continued to partially offset linear declines. Within ViX, the Gold Cup semifinals and finals helped drive a high single-digit increase in MAUs and robust demand from advertisers. In Mexico, advertising revenue increased by 3% year-on-year, primarily driven by private and public sector ad sales that powered ARPU growth for ViX. Results this quarter benefited from a compelling entertainment and sports slate that including the performance of the third season of La casa de los famosos México, dramas such as Monteverde and Amanecer, and our broadcast of Liga MX and the NFL. During the quarter, consolidated subscription and licensing revenue increased by 3% year-on-year, driven by ViX's premium tier and higher content licensing revenue.

Speaker #5: The Gold Cup semi-finals and finals helped drive a high single digit increase in Maus and robust demand from advertisers in Mexico , advertising revenue increased by 3% year on year , primarily driven by private and public sector ad sales that powered ARPU growth for Vicks .

Speaker #5: Results this quarter benefited from a compelling entertainment and sports slate that included the performance of the third season of Casa de Los Famosos, Mexican dramas such as Monteverdi and Amanecer, and the broadcasts of Liga MX and the NFL.

Speaker #5: During the quarter , consolidated subscription and licensing revenue increased by 3% year on year , driven by premium tier and higher content licensing revenue in the US , subscription and licensing revenue grew by 11% , supported by Vicks , and results included a mid-single digit increase in linear subscription revenue and higher content licensing revenue due to timing of content delivery in Mexico , subscription and licensing revenue fell by 17% , excluding the impact of the renewal cycle , subscription and licensing revenue in Mexico grew by 5% , driven by Vicks .

Alfonso de Angoitia: In the US, subscription and licensing revenue grew by 11%, supported by ViX, and results included a mid-single digit increase in linear subscription revenue and higher content licensing revenue due to timing of content delivery. In Mexico, subscription and licensing revenue fell by 17%. Excluding the impact of the renewal cycle, subscription and licensing revenue in Mexico grew by 5% driven by ViX. To wrap up, Bernardo and I remain confident that our focus on value customers, efficiencies, and ongoing integration between izzi and Sky at Grupo Televisa and further integration and operational optimization at TelevisaUnivision, now that our DTC business has gained scale and achieved profitability, will allow us to create greater value for our shareholders throughout this year. Now, we are ready to take your questions. Operator, could you please provide instructions for the Q&A?

Speaker #5: To wrap up , Bernardo and I remain confident that our focus on value customers efficiencies and ongoing integration between Asia and Sky at Grupo Televisa and further integration and operational optimization at Televisa .

Speaker #5: Univision . Now that our DTC business has gained scale and achieved profitability will allow us to create greater value for our shareholders throughout this year .

Speaker #5: Now we are ready to take your questions. Operator, could you please provide instructions for the Q&A?

Elsa: Our first question comes from Marcelo Santos with JP Morgan. Please go ahead.

Speaker #4: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad.

Speaker #4: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Speaker #4: At this time we will pause momentarily to assemble our roster . Our first question comes from Marcelo dos Santos with J.P. Morgan . Please go ahead .

Speaker #7: Hi. Good morning. Alfonso, thanks for taking my questions. The first question is if you could comment a bit on the CapEx outlook for 2026.

Marcelo Santos: Hi. Good morning, Alfonso, Francisco Valim. Thanks for taking my questions. The first question is if you could comment a bit the CapEx outlook for 2026. How do you see this trending? The second question is regarding the insurance claim you received. Was that related to Hurricane Otis, and is there something left to be received? Thank you very much.

Speaker #7: How do you see this trending? And the second question is regarding the insurance claim you received; was that related to Hurricane Otis?

Speaker #7: And is there something left to be received ? Thank you very much .

Speaker #5: Thank you, Marcelo. Alaska, to answer both questions.

Alfonso de Angoitia: Thank you, Marcelo. I'll ask Francisco Valim to answer both questions.

Speaker #8: We gave Marcelo . We gave a guidance of around $600 million . And we should be , you know , just within that that range .

Francisco Valim: We gave, Marcelo, we gave a guidance of around $600 million, and we should be, you know, just within that range. Regarding the insurance claim, I think that's the last portion of the claim on the Hurricane Otis situation. We shouldn't be seeing anything more from that event.

Speaker #8: Regarding the insurance claim , I think that's the the last portion of the claim on the Otis Acapulco situation . So we shouldn't be seeing anything more from from that , from that event .

Speaker #7: Thank you . Just one question . The CapEx asks is 2026 . So for next year , you .

Marcelo Santos: Thank you. Francisco Valim, just one question. The CapEx I asked is 2026, so for next year.

Speaker #8: 2026 . No , 2026 is so far away . Marcelo . No no no . I don't know , just yeah . Let's finish 2025 and then we can talk about 26 .

Francisco Valim: No. 2026?

Marcelo Santos: For this year.

Francisco Valim: No. 2026 is so far away, Marcelo. No, no. I don't know.

Marcelo Santos: Yeah. Okay.

Alfonso de Angoitia: Let's finish 2025, and then we can talk about 2026.

Speaker #8: Yeah .

Speaker #9: Okay . Thank you . Thank you very much .

Marcelo Santos: Okay. Thank you. Thank you very much.

Speaker #4: Our next question comes from Matthew Harrigan with Benchmark. Please go ahead.

Elsa: Our next question comes from Matthew Harrigan with Benchmark. Please go ahead.

Speaker #10: Thank you . You've actually reached a point in the US when you look at the entire TV industry , there's more consumption on streaming than on linear .

Matthew Harrigan: Thank you. You've actually reached a point in the US when you look at the entire TV industry, there's more consumption on streaming than on linear, and I know your linear is much more durable than your English language peers. You've got tremendous local programming positions, particularly in news and some of the largest US DMAs. Are you really taking a lot of or, you know, hopefully eventually almost all the news content on local stations and the distinctive content on the local stations and moving that to ViX over time? You know, it feels like it would be a shame to, you know, lose the local identity you have with those stations because of, you know, eventually linear is gonna fall off even for Hispanic audiences.

Speaker #10: And I know your linear is much more durable than your English language peers , but you've got tremendous local programming positions , particularly in news and some of the largest US dmas are you really taking a lot of our , you know , hopefully eventually , almost all the news content on local stations and the distinctive content on the local stations and moving that to Vicks over time , because it feels like it would be a shame to lose the local identity .

Speaker #10: You have associations because of eventually linear is going to fall off , even for Hispanic audiences . And then secondly , you know , clearly it very dynamic situation in the US and Mexico , right now .

Matthew Harrigan: Secondly, you know, clearly a very dynamic situation in the US and Mexico right now. Are you doing anything more on the VC side, you know, in relation to advertising for investments? Also, I can't help but ask, you know, what's your general perspective on the US and the machinations with the administration on the tariff side and the prospects for nearshoring and everything going on? I know this is kind of ridiculously open-ended question, but just any thoughts on the stability of the economic relationship with the US? Thanks.

Speaker #10: Are you doing anything more on the VC side in relation to advertising for investments ? And also , I can't help but ask , what's your general perspective on the US and the machinations with the administration on the terror side and the prospects for Nearshoring and everything going on ?

Speaker #10: I know this is kind of ridiculously open ended question , but just any thoughts on , on on the stability of the economic relationship with the US ?

Speaker #10: Thanks .

Speaker #8: Yeah . Thank you , Matthew , for your questions . I think as to your first one , local news is very important for us .

Alfonso de Angoitia: Yeah. Thank you, Matthew, for your questions. I think, as to your first one, local news is very important for us. We are very strong in the local places where we produce news and local programming. We are exploring the possibility of including that in our streaming platform. We haven't yet included all of that content, we're exploring that. The good thing is that, as I was saying, the local content is very strong, very popular. As to your second question, we have made media for equity deals with great companies, with great startups.

Speaker #8: We are very strong in the local places where we produce news and local programming. We are exploring the possibility of including that in our streaming platform.

Speaker #8: We haven't yet included all of that content , but we're exploring that . Good thing is that , as I was saying , the local content is very strong .

Speaker #8: So very popular . As to your second question , we have made media for equity deals with great companies , with great startups .

Speaker #8: We have assembled a great portfolio, I would say, and more companies are coming to us as they realize the importance of our platforms.

Alfonso de Angoitia: We have assembled a great portfolio, I would say. More companies are coming to us as they realize the importance of our platforms. This is because of the strength of our platforms. We can position and grow their products and especially their brands when they're launching. Companies like Kavak, like Rappi, have become our ambassadors. At the beginning, they had doubts about the strength of linear television and most specifically in Mexico. Now they have become ambassadors of ours. We will continue to do these deals as we generate value with unsold inventory. These companies become regular clients. It's basically a funnel for these startups to grow, to position their brands, to position their products.

Speaker #8: And this is because of the strength of our platforms . We can position and grow their products and especially their brands when they're launching companies like like Rappi have become our ambassadors at the beginning , they had doubts about the strength of linear television , and most specifically in Mexico , but now they have become ambassadors of ours .

Speaker #8: We will continue to do this deals as we generate value with unsold inventory . And these companies become regular clients . So it's basically a funnel for these startups to grow , to position their brands , to position their products and we take equity , which is great , at very good valuations .

Alfonso de Angoitia: We take equity, which is great at very good valuations, and then they become regular clients. This is basically unsold inventory. We're very happy with the portfolio we have been able to put together. We'll continue to do this. As to your last question, I think that the Mexican government, President Sheinbaum, has done an extraordinary job in dealing with the negotiations, the trade negotiations. I think that Mexico and the US are key partners. If you look at the border region, it's one of the largest economies in the world by itself. The border, the legal border crossings that happen every day are in the millions. I mean, it's an integrated region, it's an integrated economy.

Speaker #8: And then they become regular clients . And this is basically unsold inventory . So we're very happy with the portfolio . We have been able to put together .

Speaker #8: And we'll continue to do this . As to your last question , I think that the Mexican government president , Sheinbaum , has done an extraordinary job in dealing with the negotiations , the trade negotiations .

Speaker #8: I think that Mexico and the U.S. are key partners. If you look at the border region, it's one of the largest economies in the world by itself.

Speaker #8: The border , the legal boarding that happen every day are in the millions . So , I mean , it's an integrated region .

Speaker #8: It's an integrated economy, so I believe that eventually we'll be able to get to the right deal for Mexico and for the U.S.

Alfonso de Angoitia: I believe that eventually we'll be able to get to the right deal for Mexico and for the US.

Speaker #10: Great . Thank you . Appreciate it .

Matthew Harrigan: Great. Thank you. Appreciate it.

Speaker #4: Our next question comes from Alex Azar with GE. Please go ahead.

Elsa: Our next question comes from Alex Garcia with GBM. Please go ahead.

Speaker #10: Hi .

Alex Garcia: Hi, everyone. Thank you for taking my questions, and good morning. A few ones on competition, Valim, on cable. If you can share a little bit of color on short-term and medium-term dynamics, especially when seeing how competitors are adding 1 million, 1.5 million net adds per year. It seems that in 2, 3 years, the market is gonna be fully penetrated. That would be my first question. The second one is on Sky. With the levels of net disconnections you have year after year, how should we think about the EBITDA contribution in the next couple of years from Sky? Thank you.

Speaker #11: Everyone . Thank you for taking my questions . And good morning . A few ones on competition Marlene on cable , if you can share a little bit of color on short term and medium term dynamics , especially when seeing how competitors are adding 1,000,001.5 million net adds per year , it seems that in 2 or 3 years , the market is going to be fully penetrated .

Speaker #11: So that would be my my first question . And the second one is , is on on Sky with the levels of net , these credentials you have a year after year , how should we think about the contribution in the next couple of years from from Sky ?

Speaker #11: Thank you .

Speaker #8: Thank you Alex .

Alfonso de Angoitia: Thank you, Alex. Valim?

Speaker #6: Alex thank you .

Francisco Valim: Alex, thank you, Alfonso. Well, I agree 100% with you. With this amount of net adds on a yearly basis, the market is very close to being fully penetrated. That's why our strategy is not going after volume, because we know that we'll be fighting for prices at the lower end of the pyramid. Our aim is to focus on the higher end clients. That's why we are the only company in Mexico increasing ARPU consistently across the board. I think that's the focus. We think there's obviously a diminishing returns of this fight for the volumes of subscribers. That's why our strategy moved away from that, and we have been successful in doing that.

Speaker #8: So well I agree .

Speaker #6: 100% with you . with this amount .

Speaker #8: Of .

Speaker #6: Net adds on the yearly .

Speaker #8: Basis , the market .

Speaker #6: is very close to being fully penetrated. That's why our strategy is not going after volume, because we know that we will be fighting for prices at the lower end of the pyramid.

Speaker #6: So our aim is to focus on the higher end clients . That's why we have we are the only company in Mexico increasing our consistently across the board .

Speaker #6: So I think that's the that's the focus . So we think there's obviously a diminishing returns of of this fight for the for the volumes of subscribers .

Speaker #6: And that's why our strategy moved away from that . And we are being successful in doing that .

Speaker #8: Regarding Sky .

Francisco Valim: Regarding Sky, Alex, the way I see Sky is very straightforward. This is a business that will eventually disappear. Why? The penetration of the fiber networks and the amount of OTTs and the availability of a linear TV through cable and fiber operators is something that will obviously position Sky to only subscribers that are outside of those coverage areas. It will, by definition then, keep on declining. How we perceive it? We perceive it as a cash flow from existing subscribers minus the programming cost, minus the technological cost of the satellite and all the is involved in that, and then it generates a positive cash flow. That's the business.

Speaker #6: Alex , I the way . I see Sky is .

Speaker #8: Is very straightforward .

Speaker #6: This is a business that will . eventually disappear . Why the penetration of the fiber networks and the amount of votes and the availability of a linear TV through cable fiber operators is .

Speaker #8: Is something .

Speaker #6: That will obviously position Sky to only subscribers that are outside of those covered coverage areas . So .

Speaker #8: It will .

Speaker #6: By definition, then, we keep on declining. So how we perceive it is as a cash flow.

Speaker #8: From existing subscribers .

Speaker #6: Minus the programming costs , minus the technological cost of the satellite and all the is involved in that . And then it generates a positive cash flow that that's the business .

Speaker #6: And it has been generating positive cash flow. For the foreseeable future, we will continue to see positive contribution from Sky from a cash flow perspective.

Francisco Valim: It has been generating positive cash flow, and for the foreseeable future, we'll receive positive contribution from Sky as a cash flow perspective. Obviously, it has this negative optics on our revenue. You know, the way we see it is we've got to segregate that from everything else and see that as an inflow of cash flow. Everything else is more a stable growing businesses.

Speaker #6: Obviously it has this negative optics on our revenue . But but you know , it's just the way we see it is we kind of segregate that from everything else .

Speaker #6: And see that as an inflow of cash flow, and everything else is more stable: growing businesses.

Speaker #8: Yeah . And to add as to your first question , to add on what Valim was saying in Mexico , we have a four player market , but it's a pretty rational market except for Telmex , which has kept its entry price unchanged for , I guess , more than ten years .

Alfonso de Angoitia: Yeah. To add to your first question, to add on what Valim was saying. In Mexico, we have a four-player market, but it's a pretty rational market, except for Telmex, which has kept its entry price unchanged for, I guess, more than 10 years, while also increasing internet speeds and offering Netflix now for free for six months. They don't seem to be really interested in the profitability of Telmex, as they extract value from the lease of fiber owned by other subsidiaries of theirs. The other company, Cable, raised prices by around MXN 30 per month from the beginning of the year. There you can see that the industry is raising prices, except for Telmex.

Speaker #8: While also increasing internet speeds and offering Netflix . Now for free for six months . They don't seem to be really interested in the profitability of Telmex , as they extract value from the lease of fiber owned by other subsidiaries of theirs and the other hand , raised prices by around $30 per month from the beginning of the year .

Speaker #8: So there you can see that the industry is raising prices , except for Telmex Total play also announced a price hikes from April , particularly from broadband customers that are heavy data users .

Alfonso de Angoitia: Totalplay also announced price hikes from April, particularly from broadband customers, that are heavy data users. Even though it's a four-player market, it's a rational market and if you look at the prices and ARPU, we feel comfortable, and we feel confident that this will remain like that.

Speaker #8: So . So even though it's a it's a it's a four player market . It's a rational market . And if you look at at the prices and arppu , we feel comfortable and we feel confident that this will remain like that .

Speaker #11: Okay . Thank you . Thank you both . If I can just add a follow up on on Skype remarks , when you say Skype , probably will disappear .

Alex Garcia: Thank you. Thank you both. If I can just add a follow-up on Sky remarks. When you say Sky probably will disappear, I'm just thinking that there must be, you know, some part of the population that, you know, where fiber is not around and they, you know, Sky becomes the only thing that they can use, especially for video. Do you guys have an approximate of that? I don't know.

Speaker #11: I'm just thinking that there must be , you know , some some part of the population that , you know , where fiber is not around and they , you know , sky becomes the only thing that they can use , especially for , for video .

Speaker #11: Do you have an approximate of that? I don't know, no.

Speaker #8: Yeah, you're absolutely right, Damian. The rural areas where a satellite provider makes sense. I don't know if I...

Alfonso de Angoitia: No. Yeah, you're absolutely right. I mean, there are rural areas where a satellite provider makes sense.

Francisco Valim: No, I don't think they will disappear per se. It's obviously a diminishing volume like we have been seeing and will keep on seeing. Just to give an example, in Central America, we have close to 100,000 subscribers, basically flat because in those areas there are less competitors offering a fiber network or a cable network. It is very stable. Unlike Mexico, where we are all deploying networks and expanding our infrastructure. Yes, I don't think it will disappear, not just there will be a day that will be just shut down.

Speaker #6: Don't I don't think .

Speaker #8: They will .

Speaker #6: Disappear per se . It's obviously a a diminishing volume . Like like you have been seeing . And we'll keep on on seeing .

Speaker #6: But but just to give an example in Central America , we have close to 100,000 subscribers , basically flat because in those areas there are less competitors offering a fiber network or a cable network .

Speaker #6: So and it is very stable and like Mexico , where we are all deploying networks and expanding our , our infrastructure . So yes , I don't think it will disappear , not just there will be a day that will be just shut down .

Speaker #6: I think it will still have , you know , and I think there are , you know , just a 700,000 people living in areas where there is no other option for entertainment .

Francisco Valim: I think it will still have, you know. I think there are, you know, just 700,000 people living in areas where there's no other option for entertainment, and Sky will keep on being a solution. That's why we don't see this as a. I understand some people see this as a problem. We actually see this as a, as an upside, given the fact that we're generating positive cash flow.

Speaker #6: And Sky will keep on being a solution . But , but , but that's why we don't see this as a I understand some people see this as a as a problem .

Speaker #6: We actually see this as an upside, given the fact that we are generating positive cash flow.

Speaker #8: Yeah , I think valine is absolutely right . We see it . We see sky as a cash flow and the more we extend , we prolong the life of the subscribers .

Alfonso de Angoitia: Yeah. I think Valim is absolutely right. We see Sky as a cash flow and, the more we prolong the life of the subscribers, it's going to be an amazing driver for our cash flow.

Speaker #8: It's going to be an amazing driver for our cash flow . Exactly .

Francisco Valim: Exactly.

Speaker #11: Thank you. Thank you both. Very clear.

Alex Garcia: Thank you. Thank you both. Very clear.

Speaker #4: Our next question comes from Ernesto Gonzalez with Morgan Stanley. Please go ahead.

Elsa: Our next question comes from Ernesto Gonzalez with Morgan Stanley. Please go ahead.

Speaker #12: Hi . Thank you for taking my question . Look , I know it's early , but going back to the discussion on blocking penetration in Mexico , do you have any or could you share any expectations for cable growth rates next year for next year ?

Ernesto Gonzalez: Hi, thank you for taking my question. Look, I know it's early, but going back to the discussion on broadband penetration in Mexico, do you have any or could you share any expectation for cable growth rates next year? Do you believe that you can accelerate growth for the unit? The second question is on the sustainability of margins for Cable Sky, but also Televisa and izzi. They were strong in Q3, want to get a sense of how much more room they have to grow going forward. Thank you.

Speaker #12: Do you believe that you can accelerate growth for the unit ? And the second question is on the sustainability of margins for cable sky , but also they were strong in the third quarter .

Speaker #12: So, I want to get a sense of how much more room they have to grow going forward. Thank you.

Speaker #6: Well , I think that back to to your point , I think that it's key to understand that obviously , as penetrations grow higher , the level of net adds will diminish for every player in the market .

Francisco Valim: Well, I think that, back to your point, Ernesto, I think that it's key to understand that obviously as penetrations grow higher, the level of net adds will diminish for every player in the market. You have already saw that, as you see quarter after quarter after quarter. We already see a diminishing number of net adds being added to the different players. That's a diminishing return. In other countries like Brazil, for example, where the penetration is significantly higher even than Mexico, you see there's this dynamic as well, and companies find ways by selling more products to the same existing customers to keep revenues growing. Obviously you're not gonna be seeing high double-digit numbers because of the dynamic of the market.

Speaker #6: And and you already saw that as you see , quarter after quarter after quarter , we already see a diminishing number of net ads being added to the to the to the different players .

Speaker #6: So that's a diminishing return in other countries like Brazil , for example , where the penetration is significantly higher even than Mexico . You see , there's this there's dynamic as well .

Speaker #6: And companies find ways by selling more products to the same existing customers to keep revenues growing , growing , but obviously you're not going to be seeing high double digit numbers .

Speaker #6: Because because of the dynamic of the market . But like Alfonso just said , this is a very rational market . Nobody is .

Francisco Valim: Like Alfonso just said, this is a very rational market. Nobody's slashing prices down. The promotions are very reasonable. Everybody is actually making money in this market, like our cash flow generation that we have just presented is significantly, is very significant. I think that's a dynamic in mature markets that you'll see. What happens is you add more products, better products, more speeds, and that's how you keep on increasing ARPU. That's why we think the strategy of going after the high-end customers, they have more disposable income available as opposed to the other end of the pyramid. I think regarding margins of cable.

Speaker #6: Prices down . The promotions are very reasonable and everybody is is actually making money in this market . Like like our cash flow generation that we have just presented is significantly is very significant .

Speaker #6: So I think that that's a dynamic in mature markets that you'll see . And what happens is you add more products , better products , more speeds .

Speaker #6: And that's how you keep on increasing output . And that's why we think the strategy of going after the high end customers , they they have more disposable income available .

Speaker #6: As , as opposed to , to the , to the other end of the pyramid . And I think regarding margins of cable .

Speaker #8: I think he asked about two . But you can ask no , no , no no . .

Alfonso de Angoitia: No, I think he asked about TU, but you can answer.

Francisco Valim: No, no, no. Because also, no.

Speaker #6: Because also no . both both . What's both . So the the idea here is we think that we keep on improving margins .

Alfonso de Angoitia: Okay.

Francisco Valim: Let's both. The idea here is we think that we keep on improving margins. This is a ongoing, never-stopping exercise. That we go internally, and we find that through many different ways, mostly through technology. Obviously, we still are collecting a few synergies from Sky, but mostly through technology and improvement in how we provide services and processes. There is a ongoing effort to increase margins. On, I'm talking about cable.

Speaker #6: This is , this is this is a ongoing never stopping exercise that that we go internally and we find that through many different ways , mostly through technology .

Speaker #6: Obviously , we still are collecting a few synergies from Sky , but mostly through technology and improvement in in how we provide services and processes .

Speaker #6: So there is an ongoing effort to , to increase margins on , on . I'm talking about cable .

Speaker #8: Yeah , yeah . And about I mean , to . Amazing margins . I think that was a result of the cost cutting and the and all that we did in terms of cost and expenses in , in the fourth quarter of last year , which are being reflected in this year , we believe that we have the highest margins in the industry and that has to do with that cost cutting $415 million .

Alfonso de Angoitia: About the, I mean, TU, amazing margins. I think that was a result of the cost-cutting, and the cost and all that we did in terms of cost and expenses in Q4 of last year, which are being reflected in this year. We believe that we have the highest margins in the industry. That has to do with that cost-cutting, $415 million. Also it has to do with owning the largest library of content in Spanish in the world, more than 300,000 hours of content. It also has to do with the very efficient way in which we produce content, especially in our studios in Mexico. That allows us to have these amazing margins.

Speaker #8: And also, it has to do with owning the largest library of content in Spanish in the world: more than 300,000 hours of content.

Speaker #8: It also has to do with the very efficient way in which we produce content , especially in our studios in Mexico , and that allows us to have this amazing margins .

Speaker #8: So I think those margins in the mid 30s are are sustainable .

Alfonso de Angoitia: I think those margins in the mid-thirties are sustainable.

Speaker #12: Really clear. Thank you.

Ernesto Gonzalez: Really clear. Thank you.

Speaker #4: This concludes our question and answer session . I would like to turn the conference back over to Mr. Alfonso de la moitié for any closing remarks .

Elsa: This concludes our question-and-answer session. I would like to sort of turn the conference back over to Mr. Alfonso de Angoitia for any closing remarks.

Speaker #8: Thank you very much for participating in our call and if you have any questions , please give us a call , have a good a great weekend .

Alfonso de Angoitia: Well, thank you very much for participating in our call, and, if you have any questions, please, give us a call. Have a great weekend.

Elsa: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.