Operator: Good morning, everyone, and welcome to Grupo Televisa's Q3 2026 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 would now like to turn the floor over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer, Grupo Televisa. Please go ahead, sir.
Alfonso de Angoitia: Thank you, Elsa. Good morning, everyone, and thank you for joining us. With me today are Francisco Valim, CEO of our telco operations, and Carlos Phillips, CFO of Grupo Televisa. Before discussing our Q3 operating and financial performance, I want to share with you our excitement regarding the agreement reached with AT&T to acquire its wireless telco business in Mexico for a purchase price of $2 billion. This transaction will materially strengthen our competitive position and offer significant value creation opportunities, as we will have a unique platform for fixed mobile convergence, bundled offerings, cross-selling opportunities, and operational optimization, leveraging Televisa's existing content and broadband subscribers footprint. After closing, our combined assets would include over 24 million wireless, 5.7 million broadband, and 6.3 million video subscribers.
Alfonso de Angoitia: From a revenue standpoint, we would have around $8 billion per year, equivalent to around 23% of the total telecommunications market in Mexico. As previously disclosed, we are pursuing this acquisition through a 50/50 partnership with Fintech Holdings. At closing, each of us will contribute $400 million in equity, and the remaining $1.2 billion will be funded through a five-year non-recourse loan. Following the acquisition of AT&T Mexico, Grupo Televisa's balance sheet will continue to be strong, as our net debt to EBITDA will only increase to 1.9x from 1.6x at the end of Q3. We expect the transaction to be concluded in Q1 2027 after receiving regulatory approvals, and we will account for it as an investment in a joint venture by using the equity method.
Alfonso de Angoitia: Having said that, let me turn the call over to Valim, as he will discuss the operating and financial performance of our consolidated assets.
Francisco Valim: Thank you, Alfonso. Good morning, everyone. Let me start by saying that I am very encouraged by the opportunity that we have ahead of us. Full-service telcos have been a reality in Latin America for over a decade, providing very successful due to massive economies of scale and fixed wireless convergence of both services and network. Now, let me walk you through the operating and financial performance of our cable operations. We ended September with a network of over 20 million homes after passing around 8,000 new homes during the quarter. In addition, year-to-date, we have upgraded over 4.3 million homes to fiber-to-the-home technology, ending Q3 with around 67% of our total footprint passed with fiber-to-the-home.
Francisco Valim: In the third quarter, our monthly churn rate remained below our historical average of 2% for six consecutive quarters due to our focus on value customers and the continued implementation of customer retention and satisfaction strategies. Still, our broadband gross adds were similar to those of the second quarter, leading us to deliver another quarter of around 9,000 broadband net adds. In video, we lost about 48,000 subscribers in the third quarter. The acceleration compared to an average of around 34,000 disconnections over the last four quarters may have been partially driven by the end of the FIFA World Cup in July. Our mobile net adds of 68,000 subscribers during the third quarter remained solid, but slowed some compared to an average of about 83,000 net adds over the last four quarters.
Francisco Valim: The new law requiring all mobile users to register their phone lines with photo IDs and their official identification may be causing a generalized temporary slowdown in the Mexican mobile market. However, we are well-positioned to face this new environment, as our mobile users are postpaid, making their registration automatic. During the quarter, net revenue from our residential operations of MXN 10.6 billion was essentially flat year-on-year, partially driven by phase-out of the extra revenue coming from the World Cup subscription. Net revenue from our enterprise operations of MXN 1.1 billion increased by 6.8% year-on-year, as we have been signing new deals with public and private customers. Moving on to Sky's operating and financial performance, during the third quarter, we lost 250,000 revenue-generating units, mostly coming from prepaid subscribers that have not been recharging their service.
Francisco Valim: While disconnections at Sky continue to be robust, we saw an improvement compared to the average disconnection of 290,000 revenue-generating units over the last four quarters. Sky's third-quarter revenue of MXN 2.4 billion declined by 25.5% year-on-year, mainly driven by a lower subscriber base. However, the pace of decline slowed some relative to a year-on-year contraction of 22.6% in the H1 of the year. To sum up, segment revenue of MXN 14.1 billion fell by 3.8% year-on-year, while operating segment income of MXN 6 billion increased by 5.6%, showing sustained momentum of the growth rebound experienced over the last three quarters, driven by an OPEX decline of 9.7%.
Francisco Valim: Our operating segment income margin of 42.6% expanded by 380 basis points year-on-year, making it the best quarter of the last three years in terms of profitability, driven by the efficiency measures that we have been implementing and the synergies from the ongoing integration between Izzi and Sky. On a sequential basis, profitability expanded by 80 basis points. Regarding CapEx deployment, our third-quarter total investments of MXN 3 billion accounted for 21.3% of sales, mostly in line with CapEx intensity of the H1 of the year, despite a fiber-to-the-home upgrade of 4.3 million homes previously discussed. Finally, operating cash flow for Cable & Sky, which is equivalent to EBITDA minus CapEx, was MXN 3 billion in the third quarter, accounting for 21.3% of sales.
Alfonso de Angoitia: Thank you, Valim. Now let me walk you through TelevisaUnivision's Q3 results. The company's revenue of $1.4 billion increased by 9% year-on-year. Excluding the impact from the appreciation of the Mexican peso, TelevisaUnivision's Q3 revenue grew by 6%, driven by our exceptional results in Mexico, especially associated with the World Cup. During the quarter, Mexico's revenue surged by 51% year-on-year to $665 million, driven by a strong conclusion of the FIFA World Cup. While in the US, revenue of $715 million fell by 14%, reflecting anticipated domestic advertising softness. While revenue growth was strong during the quarter, total operating expenses increased by 14%, or 11% excluding the appreciation of the Mexican peso. This planned increase reflected the anticipated sports-related costs associated with the World Cup transmission in Mexico and Latin America. As a result, adjusted EBITDA of $461 million was essentially flat year-on-year.
Alfonso de Angoitia: Moving on to the details of our revenue performance, during the quarter, consolidated advertising revenue decreased by 5% year-on-year. In the US, advertising revenue was 24% lower, reflecting broader linear market softness in our business and lower ViX advertising revenue, both of which were impacted by competitive sports programming on peer networks that had the World Cup. Still, our core linear commercial fundamentals remain stable as our market share reflected a 200 basis point sequential improvement. As we enter the Q4, we are well-positioned, supported by a strong lineup that includes the Latin Grammys and the final of Liga MX's Apertura tournament, among others. Moreover, our upfront revenue commitments for the upcoming cycle remained steady year-over-year, and we are seeing revenue growth from our recurring sports slate and strong demand for our premium network inventory, driving mid-single-digit increase in price.
Alfonso de Angoitia: In Mexico, advertising revenue increased by 19% year-on-year, driven by the strength of both our linear and direct-to-consumer platforms. Following a record-breaking World Cup, we effectively monetized our residual advertising inventory and impressions through the conclusion of the tournament, extending this momentum through our free-to-air coverage of the Mexican national team. Our results were supported also by a compelling entertainment and sports lineup, notably the fourth season of "La Casa de los Famosos México" and our broadcast of Liga MX, the NFL, and Formula 1. During the quarter, consolidated subscription and licensing revenue increased by 30% year-on-year, driven by approximately $90 million in World Cup sub-licensing revenue in Latin America and a continued growth in ViX's premium tiers. In the US, subscription and licensing revenue declined by 4%, reflecting lower third-party content licensing revenue that was partially offset by pricing growth on ViX.
Alfonso de Angoitia: In Mexico, subscription and licensing revenue increased by 156%, driven by the World Cup sub-licensing revenue and growth within ViX's premium tier. ViX significantly exceeded acquisition and engagement targets for the World Cup, with cohorts retaining above-modeled expectations. Performance was anchored by "La Casa de los Famosos," which continues to be our most successful franchise, consistently generating significant revenue over the investment. Moving on to the balance sheet, TelevisaUnivision ended the quarter with $753 million in cash, driven by the timing of advertising upfront collections in Mexico. In addition, we have around $690 million of available capacity under our credit facilities. CapEx for the quarter was $28 million compared to $25 million last year, but we continue to expect full-year 2026 CapEx to be consistent with that of 2025.
Alfonso de Angoitia: Looking at our leverage, we ended the quarter with a net debt to EBITDA of 5.5x, in line with the prior quarter. Our Q3 performance demonstrated our continued commitment to delivering solid operational results. We achieved sequential quarter-over-quarter improvement in both revenue and EBITDA, as the momentum granted from the FIFA World Cup across Mexico and Latin America was able to offset the softness that we experienced in our US advertising business. Going forward, we remain prudent on the US advertising market. Still, we are focusing on three operational priorities to face these headwinds. First, accelerating new client activations at scale. Second, driving monetization across ViX and social through revamped digital go-to-market strategy. Third, most importantly, deepening client and agency relationships to ensure that the team delivers against their Q4 targets.
Alfonso de Angoitia: To wrap up, Bernardo and I are confident that Grupo Televisa's strong telco competitive position, particularly after the agreement reached with AT&T to acquire its wireless business in Mexico, position us very well to consolidate our undisputable position as the second-largest telco operator in our country and to create greater value for our shareholders. Now, we are ready to take your questions. Elsa, could you please provide instructions for the Q&A?
Operator: At this time, we will begin the question-and-answer session. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, to ask a question, please press star and one. Our first question today comes from Marcelo Santos from J.P. Morgan. Please go ahead with your question.
Marcelo Santos: Hi. Good morning. Thanks for taking my questions. I have two. Both are on broadband. The first, if you could please provide us an update on the competitive dynamics. We saw several players decelerating ads at the same time, so just wanted to get your view on this. The second, linked to your residential revenues. I understand they decelerated because there were the World Cup packages that were off, but when you compare versus the Q1, they also decelerated, and you were in a trend of kind of improving those revenue trends. So just wanted to Maybe the two things have the same reason, so just want to get your take on this. Thank you.
Alfonso de Angoitia: Thank you, Marcelo, for your question. I can say, and Valim can take over and basically talk about the rest of your questions. I would say from the competitive dynamics, it is a very competitive market in our country, and we are seeing this every day, both in terms of speeds, in terms of prices. So, it is very dynamic and very competitive, and that is what you are seeing if you look at the results of our competitors and our own results. So, Valim, can you touch on this, please?
Francisco Valim: Sure. So, Marcelo, like you, we have seen in many mature markets, the broadband market, as penetrations tend to increase, which is the Mexican case, you see a lower pace of growth because there are not that many new subscribers that do not have the service and then become a user of the service. So, to have a low single-digit growth in this industry is what is expected moving forward. You see all markets, Brazilian market being a good example, just low single-digit growth. Here, the Mexico market is obviously evolving to get to that point. We, being the premium player with the highest ARPU, obviously we have less room for revenue growth, but we still grow our revenue. The decline, when you compare to the H1 and H2, is because we started the FIFA World Cup campaign in January 2026.
Francisco Valim: Yes, we had the H1 that was basically loaded with FIFA World Cup packages that we are selling to our customers, because they were in addition to the existing packages. So, we had the H1 that was a little more loaded than the H2 for the FIFA World Cup reason. But as far as the dynamic is concerned, we see a convergence of growth towards low single digits, just very quickly. You have seen that already with Telmex, with Totalplay, with us, and Megacable also declined in their growth. So, very quickly, we will all grow to very similar growth rates.
Marcelo Santos: Okay. Very clear. Thank you very much.
Operator: Our next question comes from Emilio Fuentes from GBM. Please go ahead with your question.
Emilio Fuentes: Hi. Thank you for taking my question. I have two, if I may. First, given that AT&T will be accounted under the equity method, how should we think about the recognition of potential synergies? Could some benefits flow directly into Izzi's EBITDA, and how do you plan to provide visibility into their contribution? Second, and related to my first question, do you plan to disclose AT&T's standalone financials, including EBITDA, CapEx, and free cash flow? Could we expect pro forma financial metrics or synergy targets to help us assess the contribution over time? Thank you.
Alfonso de Angoitia: Hi, Emilio. Well, as to the synergies, we are planning on implementing those synergies from the get-go as soon as we close the deal, which will happen most probably in January 2025. We are planning to do that through services agreements, and Valim can expand on that. As to your second question, today, AT&T Mexico reports using US GAAP, so we have a lot of work to do to convert that into IFRS. Let us close the deal and, of course, we will start to operate the company. We are not planning on making public the financial information of AT&T Mexico for the time being, not in an initial phase, and then we will evaluate as we start operating the company. Valim, can you expand on this, please?
Francisco Valim: Sure, Alfonso. The idea here is you will see lots of synergies flowing both ways. By that I mean, on the revenue side, obviously more bundled packages will be implemented, and that will be reflected on both sides. Together, we go from around 24 million subs that AT&T has, around 10 million subs that Izzi has, with very complementary services. There will be Izzi subscribers that will have AT&T services, and there will be AT&T subscribers that will have Izzi services. You will see that synergy materializing on the revenue side on both companies right from the get-go. On the cost side, like Alfonso mentioned, we have a very robust agreement with our 50% shareholder in AT&T that allows us to implement all of the cost synergies that you would see. That, again, materializes on both ends.
Francisco Valim: The relationship will be basically arm's length, but obviously, because of the bigger size, you need less people to do the work for both companies. They will also materialize on both P&Ls because of what I just described. We are sure we will reduce the price at AT&T level, but we also are sure that we will benefit from some of that reduction in terms of having more scale at the Izzi level. You have to think about the back office synergies as if it were a shared services kind of an agreement. That is the kind of a synergy that reflects on both sides.
Francisco Valim: We easily see revenues on the revenue side, which are more easily explained and understood, and also on the cost side, thinking as if we were a service center providing services for both, and then you would see the reflect of that scale materialized on both sides.
Emilio Fuentes: Thank you. Very clear.
Operator: Our next question comes from Phani Kanumuri from HSBC. Please go ahead with your question.
Phani Kanumuri: Hi. Thanks, everyone, for taking my question. The first one is on your cost control. This quarter, you have a very strong margin of 42.6%. Can you tell us what are the drivers for these cost controls that you are doing, and where do you expect the margin to trend over the next few quarters? The second question that I had was on the AT&T deal. Apart from the MXN 400 million equity infusion, do you expect any further contributions into AT&T deal going forward? A kind of related question to that, what do you expect to do with the remaining cash? Because even after paying the MXN 400 million, you do seem to have a lot of cash on your balance sheet. Thank you.
Alfonso de Angoitia: Thank you for your question. As to your first one, we are very excited about the 42.6% margin, and this has to do with all the efficiency measures that Valim has been able to put in place in Izzi and Sky, which have been really great, if you see the numbers and the trends. Also, he has implemented the integration of Sky and has been able to execute on the synergies involved in merging those two companies, and Valim can expand on those and how he sees the trends. As to the MXN 400 million that we are investing in equity in the AT&T deal, I would say that we do not expect to make additional contributions of equity for the time being.
Francisco Valim: On the margin, I think that the 42.6% is, considering that we have Sky embedded into those numbers, and by definition, a pure video player has lower margins given the cost of content, it is a very high margin for this business. So, we are not expecting to increase profitability, but we think that this is a good number considering that we have Sky. Obviously, if you discount for the Sky margin, our margin is even higher if you only consider our B2C business. Just to emphasize what Alfonso de Angoitia said regarding the capital contribution, the plan is for AT&T to be on a standalone capital structure that will be able to finance itself moving forward.
Phani Kanumuri: Thanks. Just a follow-up there. So, even if you put MXN 400 million in cash, you still have a lot of cash on hand. Any plans to use the cash?
Francisco Valim: Yeah.
Alfonso de Angoitia: As we have done in the past, we are ready to take advantage of opportunities in our sector. Also, we have been reducing our leverage. Those are two things that we will focus on going forward.
Phani Kanumuri: Excellent. Thank you, everyone, for clarifying the questions.
Alfonso de Angoitia: Thank you.
Operator: And our next question comes from Luca Brendim from BofA. Please go ahead with your question.
Lucca Brendim: Hi. Good morning, everyone. Thank you for taking my questions. I have two from my side here. The first one, can you give us some color on the other expenses that were higher in this quarter? You mentioned the impairment that was a one-off, but you also mentioned the legal and financial advisory costs. Are those also one-offs, or could we see more of that in the coming quarters? The second one, can you give us some color on the CapEx? It was lower than in the previous quarters despite a lot of upgrades on fiber. So, I wanted to understand if you guys see some upside on this side, if CapEx could remain closer to the levels we saw this quarter in the upcoming quarters. Thank you.
Alfonso de Angoitia: Yeah. Thank you, Luca, for your question. I will ask Carlos Phillips to answer the one that has to do with other expenses and the non-cash impairment of this quarter, and I will ask Valim to answer as to the CapEx trends.
Carlos Phillips: Yeah, Luca, to your first question, that is correct. The other expenses, most of it is a non-cash, non-recurring expense. It had to do with the carrying value of technical equipment. We had to do the impairment, so that is just an accounting adjustment. It is a one-off. The other expenses, as you can see, most of the increase was non-cash in our other expenses. The increase in the legal and others are also non-recurring. As you have seen, we have had a lot of recent transactions with the convertible and with the M&A and all these things, which we do not do them every day, so we expect them not to be recurring as well.
Francisco Valim: In terms of the level of CapEx, it is basically due to a fluctuation between quarters regarding how much imports comes or goes. Basically, we are expecting it to end the year in the low 20s. It should not change that trend. The difference between one and the second, third quarter is basically just a function of imports and when material comes into the country for us to deploy the fiber network. We do not see nor a trend, nor a reduction. It is just, Q4, there will be a little catch-up on that. At the end of the year, it will be in the 20-plus range anyway.
Lucca Brendim: Very clear. Thank you for the answers.
Operator: Our next question comes from Matthew Harrigan from StoneX. Please go ahead with your question.
Matthew Harrigan: Thank you. Congratulations again on the AT&T deal and what you have done with the margins internally really attest to the potential there as well. You answered pretty much my questions on AT&T, so actually I will just pivot to Univision. On the political side, clearly Hispanics are swing vote, and they seem to have more volatility maybe than some other demographics, which are pretty hard set, the MAGA people and conversely on the Democratic side. It feels like it is going to be pretty much a biannual annuity, even though you have got all the Musk spending, the 200 million this time around. Obviously, not all that is going to you.
Matthew Harrigan: But when you look at your tech stack and your capabilities with ViX and social and all that, are you finding that you can add a lot of value to candidates and the various markets by virtue of targeting and just a lot of sophistication and understanding the fairly diverse Hispanic demographic in the US, or is it just kind of old-fashioned, massive on-air tonnage? I know it is kind of indiscriminate because in the US you are getting I live in Denver, I am getting advertisements for Florida Senate and gubernatorial races on football. Anyway, I am kind of rambling, so just look forward to your answer. Thanks.
Alfonso de Angoitia: Yeah. Hi, Matthew. We have a very good offering in terms of our stations and our network in the United States. As you know, we are the number one Hispanic company. So, throughout all the station groups-
Matthew Harrigan: You are cutting out, or I am cutting out.
Alfonso de Angoitia: Yeah, I do not Can you hear me?
Matthew Harrigan: Hello?
Alfonso de Angoitia: Yeah, can you hear me, Matthew? Hello?
Carlos Phillips: Matthew, you are the one cutting out.
Operator: This is the operator, Matthew. I do believe that line is, your line is cutting out.
Alfonso de Angoitia: Matthew?
Matthew Harrigan: Well.
Alfonso de Angoitia: Are you still with us?
Operator: Matthew, if you're-
Alfonso de Angoitia: Okay
Operator: unable to hear us, I will be muting your line. Matthew's line has been muted.
Alfonso de Angoitia: I'll answer the question, then we can go to the next question, and maybe Matthew can connect with us later. We have a very good offering in what has to do with political in the United States. In some areas, the elections are going to be extremely competitive. Throughout not only the network, but the station group, we can get to most of the regions where that is happening. We're very happy with the offering, both in terms of linear television and also digital, going down to the stations and to the cities, counties, et cetera, where these elections will be held. We're very happy with our offering. As the elections are competitive, I think we're going to be having very good results. Daniel Alegre, our CEO, is very focused on this, and he's directly in charge of all the elections process.
Alfonso de Angoitia: We are very happy with the prospects, hopefully we will have good results in what has to do with political in the US.
Operator: With that, ladies and gentlemen, we will be turning the floor back over to management for any closing remarks.
Alfonso de Angoitia: Well, thank you very much for participating in this call, please call us if you have any additional questions. Have a great weekend.
Operator: With that, ladies and gentlemen, we will be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
