Alfonso de Angoitia – Executive Vice President Isaac Lee – Chief Content Officer Adolfo Lagos – CEO-Cable Alex Penna – CEO-Sky Salvi Folch – Chief Financial Officer.

Rodrigo Villanueva – Merrill Lynch Gordon Lee – BTG David Joyce – Evercore ISI Gregorio Tomassi – Itau BBA Carlos de Legarreta – GBM Richard Dineen – UBS.

Good morning everyone and welcome to Grupo Televisa’s Fourth Quarter and Full-Year 2016 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 call over to Mr. Alfonso de Angoitia, Executive Vice President of Grupo Televisa. Please go ahead, sir..

Thank you, Tia. Good morning everyone and thanks for joining us today. With me are Salvi Folch, Chief Financial Officer of Grupo Televisa and the heads of our three key business segments. I decided to change the format of this call by including the operators of our main businesses, so you get a more direct view of what is going on in each of them.

They are Isaac Lee, Chief Content Officer; Alex Penna, CEO of Sky; and Adolfo Lagos, CEO of Cable. Now, starting with our financial results. Consolidated revenues grew north of 9%, both for the fourth quarter and for the full year. Consolidated operating segment income growth was equally strong 10% in the fourth quarter and 9% for the year.

We are very happy with these results taking into account the growing competition in all our businesses. The difficult macro environment during the year and our restructuring initiatives, some of which are still underway. During the year, our content business was able to post solid growth, including a slightly positive growth in advertising revenue.

At the same time, operating segment income grew marginally. Our two distribution businesses, Sky and Cable posted double-digit growth in revenue. Profitability in these businesses was very strong in spite of the peso depreciation, which has a negative impact in their cost structure. Now, let me review briefly the results of our Content division.

Content revenue expanded by 9% during the quarter and by 7% for the year. Operating segment income grew by 5% in the quarter and 1% in the year. Network subscription revenue and licensing and syndication revenue were the main drivers of growth in 2016, but the trend in advertising revenue continued to improve.

2016 was an incredibly important year for our ad sales business. You may recall that in mid-year 2015, we launched a very aggressive initiative to restructure our sales organization including our advertising prices. 2016 was the first full year with the new pricing structure in both the upfront and the scatter markets.

Advertising revenues for the full year grew by 1% and by 4% in the fourth quarter. The growth posted in the quarter was the highest of the last 10 quarters. This result is even more remarkable given the increased macro uncertainty. We are very encouraged by these results.

This outcome validates our thesis that even after the adjustment in the rate card, Televisa’s broadcast networks continue to provide the most efficient and cost effective advertising vehicle. Our goal now is to start showing growth going forward. The results of our upfront is a very good start.

Our advertising customer deposits for 2017 grew by 8.9% in all our key customers participated. Please be mindful that the growth in upfront is not representative of full year advertising growth. It will obviously depend on the strength of the scatter market, which will continue to be driven by overall macro environment.

So, keep in mind that results may continue to be volatile in the following quarters due to economic uncertainty. Our second largest source of content revenue licensing and syndication grew by 18% in 2016. The royalties from Univision, which make up the majority of this revenue line reached $325 million.

This is equivalent to a growth of 4.3% for last year and to a growth of 12% in the fourth quarter. Univision reported 2016 results last week and continued to post strong growth. For the first time ever Univision revenue crossed the $3 billion mark and EBITDA reached over $1.3 billion.

Univision continued attracting Hispanic audiences like no other company. In the 2015-2016 broadcast season, their flagship network finished as the number one network for Hispanics for 24th consecutive year. Today, Univision is the number one Spanish-language network in prime time, in early morning and in total day.

In addition, Univision has a number one newscast, number one cable entertainment network and the number one cable sports network in Spanish. Throughout 2016, Univision continued to strengthen its balance sheet, improve its portfolio of assets and diversified its sources of revenue.

During the fourth quarter, Univision successfully concluded the renewal of the distribution agreements with AT&T and Comcast. The royalties from Univision will continue to grow and importance for us, not only because they are dollar-denominated, U.S.

domiciled and a perpetuity at the election of Televisa, but also because of the step-up in the royalty rate by close to 40% in just 10 months and the continued strength of Univision. Finally, network subscription revenue expanded by 22% in 2016, partially helped by the depreciation of the peso. During the fourth quarter, the figure was closer to 6%.

As a reminder, the lower pace of growth in the quarter is explained by the carriage dispute with Megacable and the loss of that revenue. Now in terms of operating segment income in our content division, it grew by 1.3% during the year and 4.7% in the fourth quarter.

This was possible in spite of a higher cost base, the dispute with Megacable that I referred to, and our decision not to renew the contract with Netflix. The margin reached for our content division during 2016 was around 40%. And for 2017, we will aim to achieve a similar margin.

So I repeat, in 2017, we believe that we will accomplish around the 40% EBITDA margin. I will now turn the call over to Isaac for a discussion of Content ratings and strategy.

As you know, last month, we announced an expanded relationship with Univision by integrating the content development and production efforts of both companies under a single leadership of Isaac. We are very excited to have him join our team and to strengthen the relationship with Univision.

After the Content segment, we will follow with a discussion of Sky, Cable and our other segments. And at the end, we’ll be very happy to take your questions..

Thank you, Alfonso. Good morning to everyone. Let me start by addressing the performance of our production. There is no denying that our Content has not been performing as expected and our ratings have significantly come down. Understanding the problematic and reversing the trend would be the focus of our Content strategy.

This is an effort that Televisa initiated in 2016 and continues to be under way. Last year was like no other. There were a number of new formats and storylines tested. And while the results were not all as expected, it is an unavoidable part of launching new Content offerings while seeking the shows that will perform well.

We have learned throughout this process and we’ll be taking this into account on our 2017 strategy. We are stepping up our efforts to turn ratings around. During 2017, we will be focusing on reinforcing our prime time, which is the core of our ad sales and international licensing business.

We would rethink the whole creative process, significantly expanding research to improve our understanding of the audience and make sure that we are delivering the content they want and pairing new creative talent with a proven and well-established thing that we have to help us evolve with the audience.

We will balance our traditional daily series format with faster paced more relevant stories, including the highly popular Ag Crime Series, a genres very much demanded by the audiences to-date. While continuing to strengthen our offerings in other non-traditional genres, such as comedy and daily shows.

Televisa has a massive reach across its portfolio and platforms. We would be leveraging all of them to promote and position our key content priorities in a very targeted way. We also see an opportunity to strengthen Televisa’s digital presence to help bring new audiences and drive viewers to all our networks.

In addition to our focus on revamping our content offering an operation, we will remain committed to our new advertising sales strategy, focus on expanding the appeal of our pay-TV networks and finding other sources of Content revenue internationally. Along the process, we will run a lean forward looking and successful content production powerhouse..

Thank you, Issac. Now let me turn it over to Adolfo Lagos, CEO of Televisa’s Cable operations..

Thank you, Alfonso. Good morning, everyone. During 2016, our Cable business posted a strong growth on topline, 12%. This growth was achieved primarily by increasing the number of customers and the services for a customer. Growth in operating segment income was even stronger at 16% with a margin of 41.5%.

This was the highest on record and close to 400 basis points, higher than just two years ago. Excluding our Enterprise business, the margin for the cable companies was even higher, reaching 42.8%.

The increase in our margins was possible due to the aggressive cost savings program implemented and acceleration of the integration of our five cable assets. As of the year end, we reached 9.7 million revenue generating units or RGUs, of which 4.2 million were video, 3.4 million were data and 2.1 million are voice.

This is just a fraction of the class of 213 million homes that our cable network reaches today. Also, our share of fixed voice and data customers in the market is only 11% and 21% respectively, while the incumbent still holds close to 60% of the market. So, there is room to grow.

During the quarter, our total net ads were lower than in the past few quarters. This resulted mainly for three factors. First, let me speak about the integration and network revamp of our cable companies.

During the past few years, we have been immersed in a high CapEx investment cycle and in catcher the opportunity that we have in this market, which is highly concentrated. We are facing a race against time to build a solid network and gain market share. We have now concluded the upgrade in the major cities, we’re about 80% completed.

2016 was particularly busy with several integrations and the rollout of our flagship offer, the EC product.

This process required many challenging initiatives including operating the network, replacing over 50 legacy offers with a single unified offer, laying off over 1,000 staff where we had redundancies, launching a single IT platform, aligning network technologies and capabilities from five different companies and converting analog video users to digital amongst any others.

These initiatives were inevitable and will, at the end of the day, allow us to maximize profitability and offer a consistent level of service across our network. As I just mentioned, these steps have already resulted in a margin expansion of close to 400 basis points from 2014.

However, we have paid the price in terms of higher churn rates in all cities affected. Some of these changes are still underway, while we hope to conclude them this year. Second, there have been relevant changes in the competitive environment in 2016. During that year, the incumbent finally reacted and reduced prices aggressively.

This impacted our ability to continue adding new customers at the same pace as before. And third, there have been important changes in the macroeconomic environment. During 2016, Mexico’s economic outlook began deteriorating. The impact was especially harsh in our border towns and in the regions of the country that depend heavily on oil production.

In addition, during the fourth quarter with a further deterioration in the value of the peso, an important pricing and important price increases in basic services, such as gas and electricity. This will impact this possible income from many of our clients during 2017.

All of these factors are making us more cautious going forward and we’ve already taken many steps to address it. For example, in order to avoid further service disruption during 2017, we will be focusing on eliminating the negative impact of our integration initiatives and have reduced the pace of change in the remaining series.

Also to restore our competitive edge, we have revamped our key offerings in broadband, increasing speeds at very competitive prices, at the levels where we believe the incumbent cannot follow us. And third, in addition, we have strengthened our credit filters to prepare for a slower economy.

We implemented this filter during the fourth quarter and early results show a relevant slowdown in the pace of gross additions, but this should eventually have a positive impact in the level of disconnects. We expect to see solid results by the second half of the year.

Please keep in mind that in the meantime, the next couple of quarters, we may continue to suffer the side effects of integration and stricter credit filters. The opportunity for us to continue to be significant and we are well poised to take advantage of that.

According to statistics of the OECD, as of last June, Mexico is a country with the lowest penetration in data services among the 35 countries of the OECD. Those statistics show that Mexico has 30 fixed line data subscriptions for every 100 inhabitants.

In constraint to the average data penetration of the other 34 countries, in the sample, which is twice as big. By the way, half of the fixed data subscriptions in Mexico are still connected via DSL. So, this is also a very big opportunity for us in capturing existing data customers as soon as they start demanding faster speeds.

So far, we have made very good progress, but we still only have 21% share of data customers in the country. So, for us, this is just the beginning. Thanks, Alfonso..

Thank you, Adolfo. Now, moving on to Sky. Let me turn it over to Alex..

Thank you, Alfonso. During the fourth quarter, we surpassed the milestone of 8 million subs. The addition of over 740,000 customers in 2016 contributed to a growth in revenue of 14%, the highest of the last four years. This is remarkable given the many years of posting strong topline growth.

The growth in 2016 also resulted from a higher than normal prepayments or recharge rate in our flagship pay-TV offer exited during the first and second quarters of 2016. As you may recall, these resulted from the transition from analog to digital transmission of broadcast signals. That was concluded in December 2015.

Please keep in mind that this effect may result in a difficult year-over-year comparison during the first half of 2017. Our prepaid customers now account for about 40% of Sky’s revenue. So, the recharge rate has increased in importance for Sky. Last December, we increased the price of our prepaid offer from MXN185 per month to MXN199 per month.

This increase will partially help us compensate for the devaluation of the peso and the impact that has on our cost base. In terms of operating segment income, full year growth was 10.3% and fourth quarter growth was 9.3%. For the full year, the margin reached 45.1% and 44% for the quarter.

While today Sky only offers pay-TV services, it is the company best positioned in Mexico to take advantage of the local loop unbundling of the incumbent Telecom Company.

It has a very well recognized brand, a loyal customer base of more than 8 million households and the sales distribution and operating infrastructure to provide voice and data services on a national scale.

During 2016, we carried out the test that the resale of the incumbents voice and data packages and ran a proof of concept of Internet and voice services into of its central offices with a limited set of subscriber lines. The original rules did not work, so we filed many complaints with the regulator.

Several changes were made in the new offer addressing some of our concerns, was published these past December. We still have to see if a reliable and profitable business can be developed. However, we trust that the regulator is committed to guaranteeing that local loop and bundling becomes truly effective and achieves its intended purpose..

Thank you, Alex. Now moving on to other Businesses. Growth in revenue and operating segment income during 2016 was very strong. Revenue expanded by 9% reaching close to MXN9 billion, an operating segment income grew by 38%.

Within this segment, our soccer and gaming businesses performed well while our publishing business continued to face the same structural challenges as the rest of the industry.

Finally, I would like to explain the drop in our net results for the full year, which was mainly impacted by a number of non-recurring and non-cash items and also by a difficult comparison to the prior year. First, there is not much we can do about the depreciation of the peso.

So, we have placed an intense focus on controlling our costs and expenses where we can. During 2016, as part of an aggressive cost cutting initiative, we laid off over 1,000 people in our Cable segment, close to 600 people in our Content segment and over 200 people at the corporate level.

This resulted in a severance expense of close to MXN900 million in the year. Second, also during 2016, we incurred about MXN800 million in legal advisory and consulting services.

Third, in addition, we recorded a non-cash expense of close to MXN550 million by disposing of old infrastructure in our cable companies as we continued to upgrade those networks. The comparison to 2015 is also difficult because we recognize income that year of about MXN7.5 billion due to the exchange of Univision debentures into warrants.

Now, talking about the future. We have an exciting year ahead of us. As I mentioned earlier, we believe that we can maintain margins in our Content segment at around 40% in 2017 similar to those of 2016. This is in sharp contrast to the contraction in margins that our Content business had experienced for the last few years.

We believe that we can achieve this in spite of the depreciation of the peso and the expanded – an expected increase in inflation. But this is only possible, because of the cost-cutting initiatives we have already put in place. In addition, we believe that growth in the upfront is very good news. At close to 9% is one of the highest on record.

Advertising on free-to-air continues to be the most important way for our clients to reach their customers. Also, we have a great portfolio of assets. Over the recent years, we have been consolidating the cable industry, transforming Sky and diversifying our sources of content revenue.

Today, cyclical advertising revenues account for less than 25% of consolidated revenues and our distribution businesses contribute with more than half. And finally, as we announced from the beginning of last year, capital expenditures are now coming down.

Our guidance for capital expenditures in 2017 is approximately $1 billion and the main reduction is in our Cable division. The breakdown of our forecast for 2017 is of approximately $150 million for our Content and other businesses, $300 million for Sky and $550 million for our Cable business.

Therefore, CapEx in our Cable division during 2017 is expected to be around $400 million lower than in 2016. The reduction in the Cable division is possible. Thanks to the conclusion of the rebuilding phase in our cable systems.

However, we have made plans for additional reductions to our investments as a result of the peso depreciation and the strong importance that we’re placing on achieving a solid return on invested capital.

More specifically, we have postponed the rebuilding of some smaller networks in certain markets where we believe the potential is somewhat limited in this macro environment. Please note that this reduction does not change the strategic potential of this business for us.

To the contrary, this decision will dramatically change the cash flow profile of our cable business in a positive way. In the meantime, we will continue to benefit from the large investments we have already made in the network. In closing, during 2017, the macroeconomic environment will play a bigger role than ever.

It has already been two consecutive years with a steep decline in the value of the peso. Now, we are also facing higher macroeconomic uncertainty. Last month, for example, the index of consumer confidence was reported to reach the lowest level of record, posting a year-over-year decline of 26%. Having said that, we are very well prepared for 2017.

In the last two years, we have taken many steps, some painful and all necessary to continue positioning our businesses for strong results in an environment that changes every day.

As you know, these initiatives have ranged from the restructuring of our advertising sales operation to rationalizing dollar-denominated CapEx in Sky and Cable to implementing aggressive cost-cutting initiatives in our core businesses. In 2017, we will continue to see the benefits of many of these initiatives in our unique portfolio of assets.

Thank you very much for your attention and now we’re ready to take your questions..

[Operator Instructions] And the first question will come from Rodrigo Villanueva with Merrill Lynch. Please go ahead..

Thank you. Good morning, Alfonso. Thank you for the presentation. It was very clear. And I have three questions. The first one is related to Univision.

Now that foreign investors have been authorized to own up to 49% of Univision’s economic interest and 40% of the voting interest, would you consider to raise your stake in that company? That would be the first question. Thank you..

Thank you, Rodrigo. Yes, we are very happy with the FCC ruling. We believe that it’s historical. It was especially relevant that we got it a week before the new administration took over. This ruling gives us optionality, which is great. However, I mean, we’re analyzing as to the possible conversion of warrants into equity.

We’re analyzing different aspects and we’ll be making a decision soon. As to additional purchases of equity of Univision, we have not had any discussions with the Univision shareholders in that respect. As you know, the acquisition of additional equity would not expand our voting or other rights.

So, this is not something that we have discussed with them..

Understood. Thank you, Alfonso. And my second question is related to other expenses. I know that you already gave a lot of information in that respect, but I was wondering if you could give us a little bit more sense on what to expect for 2017? As you discussed, there are approximately MXN2.6 billion in non-recurring expenses, the other expense line.

And if we take that out from 2016, that would imply around MXN500 million of other expenses for 2017. Would it be a good estimates for this year, or are there other potential expenses to be included in 2017? Thank you..

Yes, well, Salvi, why don’t you take this one?.

Well, by definition, other expenses are things that are not related to the normal course of operations of the business. So, it’s difficult to give a forecast of what will happen. What I can say is that usually we have some of the contributions that we make to the Televisa foundation that it’s something that is there every year.

That it’s in the region of about MXN200 million. And I think that with the restructuring that Isaac was referring to that he’s going to review the entire organization. It is likely that there would be some expenses there, but I cannot give you a specific figure of how to predict the number of the year.

We will continue to have some of the non-cash impact on the changes of the network because some of the – all the infrastructure that is being revamped with new infrastructure at a much slower pace, but that will continue to happen.

But we do not expect all of the things that we had this year, like the cancellation of the satellite of Sky or the expenses that we had on the legal front or the peak reduction in personnel. So, we expect to see a sharp decline there..

Especially Rodrigo, one has to do is, as Salvi mentioned with legal advisory and consulting services, which in 2016 were MXN800 million. So, that should have a significant reduction..

Understood Alfonso, Salvi. Thank you very much..

The next question will come from Gordon Lee with BTG. Please go ahead..

Yes, hi. Good morning. Thank you very much for the call. I have a couple of questions both really around the advertising customer deposits and the outlook for the Content business. The first is a bit of an accounting question. So, maybe more, more for Salvi, but I was wondering if you could help us reconcile that close to 9% growth in customer deposits.

With the increase in the customer deposits that we see on the balance sheet, which that number was closer to 6% and if we throw in the long-term customer deposits, it’s actually closer to 3%.

So, I was wondering if there was something else going on that line or whether some of the deposits that were made in 2017 were used by customers in the fourth quarter? And the second question I have related to that is given that 9% growth, I’m a bit surprised that the Content margin guidance is, it’s flat year-on-year given historically the sort of economies and scale or the operating leverage that business carries? So, I was hoping maybe you could give us a little bit more clarity on that as well.

Thank you..

Hi Gordon. Yes. So, I’m glad you asked the first question and Salvi can complement my answer. So, I mean, there is no double counting. We only book as sales exactly advertising that it’s aired on television. In some cases, we do so fourth quarter and upfront as part of a single negotiation, kind of a packaged negotiation.

But both the fourth quarter and upfront are distinct. What we report as client deposits is the balance as of January 1st and what the clients will invest in 2017. So that, that is precisely what we have reported as upfront sales, this growth of around 9%..

Yeah, if you know, on the deposits that we have from clients, they’re not only from the advertising division, there are clients from Sky. There are clients from our Cable division, there are clients from the backbone business and the enterprise business that we have.

So, the 6.1% which is lower, I mean we are not breaking it down business by business, but what we’re saying is the advertising deposits of our clients at December 31, the balance that they had was 8.9% higher than in 2015. Now, the upfront is just a portion of the sales that we do on advertising throughout the year.

Scatter has become increasingly important. I mean, if you see deposits that we got last year and final sales of advertising that we achieved, scatter was really about 25% of our sales. So, notwithstanding that we have a great upfront and it’s a great start. Keep in mind that we still have to go for more than 20% of the sales of 2017.

The margin guidance that is being provided of 40% percent, I think that it is honestly remarkable given the FX depreciation that Mexican currency have had.

The inflationary impacts on many of our costs and the salary increases that will likely take place, even we will try to control them, you can imagine that there is some pressure there on the salary count..

Especially, one has to do with the unionized personnel..

So, I think that actually maintaining the margin of around 40%, I think that it’s a great perspective for our Content division..

That’s very clear. Thank you very much..

The next question will come from David Joyce with Evercore ISI. Please go ahead..

Thank you. Couple of questions. The first is a little bit more on the competition and the satellite and cable side of equation, but more on cable, I guess.

Could you talk about the range of broadband speeds that you’re offering now and what the competition is averaging and whether you’re seeing any impact yet from any fiber build competition?.

Yes, thank you, David.

Adolfo why don’t you take this one?.

Yes, we believe that broadband speed is one of our strengths because of the revamps that we have done on our network. And if it was launched at the starting, end of 2014, we came out with a very aggressive price strategy due to the huge margins as [indiscernible] in this country at that time.

And that has a tremendous impact as you saw the growth from the EC products.

By the end of 2015, the market reacted, the incumbent reacted, prices other side came down significantly, so that everything even doubt and then our dynamics of growth decelerated a little bit, still was very strong growth, but it was not as we get it was before we had that advantage.

Going forward, and into 2017 what we’re doing is that we are regaining our competitive edge. This time leveraging the revamp of our network, leveraging our CapEx investments. So, we’re moving now more on the speed than on prices. Which you know, can be equivalent to be the same thing. You get more speed for less prices, if you want to see it that way.

But we are moving into a territory where we feel more confident than a small difficult for the incumbent to follow us to be competitive at those levels. So, that’s how we’re continuing to maintain our age going forward. And we just launched a new product in January 2017 [indiscernible] for MXN420, which is extremely competitive.

And that’s going to be now our main driver of growth going forward..

Thank you. And different topic on Blim, if you could please provide an update on how that is evolving? Thank you..

Yeah, David, so as you know, we relaunched Blim last year. So far, Bilm has been meeting our expectations. We’re supporting Blim with our new programing. And at the same time, making sure that our linear channels have the right content. So, it’s a windowing strategy. Some of the series, maybe available on Blim before they are transmitted on free-to-air.

But that depends, I mean, we of course, prioritize prime time of our flagship channel and we decide this case by case. So, Televisa has the advantage of being able to monetize its production in multiple windows and create a solid library of content along the way. And we see Blim as another distribution systems, such as DTH, cable or broadcasting..

Great. Thank you..

The next question will come from Gregorio Tomassi with Itau BBA. Please go ahead..

Thank you very much and thanks for the call. My question goes back a little bit on the dynamics of upfront sales for this year and customer deposits. I understand that by the end of 2016 and as part of this change in commercial strategy, the upfront sales are allowed for the first time, the use of those inventories before year-end.

And if this is the case and this was to change, to what extent is the upfront sale season now cannibalizing the scatter market of the end of the year that is coming?.

As I mentioned before in some cases, we do sell fourth quarter in upfront as part of a single negotiation, but they’re distinct. I don’t know. Salvi, can you add on..

Yes, this has not been the first time. It has happened many years before that when clients run out of their balance, especially towards the end of the year. Then, we instead of making two negotiations, we do a single negotiation. And our interest is that clients start using the money before.

Actually, I think that it was great especially in 2016 because starting the negotiations with some of our large clients in September, prior to the U.S. election, I think that it was a strategically – it worked out very well because some of our clients closed before the election because they were running out of money.

And some of their competitors that had not closed were basically under a lot of pressure because other clients had closed. So, I think that it’s part of the strategy. It has really become a cycle win, clients have the money upfront. And when they have a larger balance, they usually are inclined to spend more money.

So, I don’t think that it works against us. We are being very, very disciplined in terms of pricing strategy. So, it’s just part of the sales process..

But if I may with a follow-up on these and precisely on pricing strategy.

Is there a clear difference between what you would call completing your needs for fourth quarter and up from sales for 2017, meaning in terms of pricing, or it gets a little bit mixed because if it gets a little bit mixed, then maybe some of the advertisers would wait until the next upfront season before getting into the scatter market to replenish their inventory for the end of the year?.

Well, clients don’t have a guarantee of how we will be selling the following year. It’s really a strategy that we determine and actually can be client by client basis. So, I don’t think that they can determine before and know exactly what will be the price of the scatter market that they will end up buying.

What happened in 2017 upfront, the one that we close towards the end of last year is that, yes, we did allow them that once that they have closed the upfront, they could start using those deposits, but that does not guarantee that every year we will apply the same prices. We do have flexibility on all the prices that are on the scatter market.

So, that’s something that we do not lose that flexibility. That’s not a right that clients have..

I think Gregorio, it’s part of the negotiation strategy that each client has. It depends on their use of advertising in the fourth quarter and their expectation for the following year. I think that the relevant thing here is that we have been absolutely disciplined in terms of our pricing.

So I mean, you can notice that in terms of the increase in sales that we saw in the fourth quarter and also this year. So that’s the important and relevant factor that we have been disciplined in terms of the pricing..

Perfect. Thank you very much Salvi and Alfonso.

The next question will come from Carlos de Legarreta with GBM. Please go ahead..

Hi, good morning. Thanks for the call. Just very two quick questions please. The first on minority interest, that’s 35% year-over-year, so I know you guys have – the other part on Cablevision and Sky and it seems that there as well, but you haven’t yet fully consolidated to 100%.

So, I’m just wondering what is the change that we’re seeing that explains that the pay-TV platform did very well, perhaps during the quarter, or what could be explained in this big increase year-over-year?.

Yes, Salvi, can you take this one?.

Yes, as you said, on the minority interest, the impact comes mainly from Cable, Sky and if you want, we can go offline on the specific impact of each one of the divisions on the net results and how they affected our net results. As you know, we own 58% of Sky. And on Cable, we have also a minority partner.

So, if you want we can – I will ask Carlos and we will follow-up on the specifics..

Okay. That will be nice.

Just to confirm you are not yet fully consolidate TVI and you have to pay MXN1.2 billion for that remain to take right?.

No, we are fully consolidated TVI. We already have – it’s completely on our books. And what we have left is simply an accounts payable because what we negotiated when we purchased the asset, which is to be paid over time. We negotiated in pesos.

I think that it was a great negotiation looking at what has happened to the FX, since we bought the assets, but it’s fully booked and consolidated on our books..

So, I mean the only minority investment that we have is on the side of Cablevision. And aside from that, we have consolidated 100% of the other assets..

Correct. Thank you very much. And a follow-up question, I mean very recently – so a court apparently is ordering the regulator IFT to issue a new ruling regarding the pay-TV market.

So, I’m just wondering what could be the impact for Televisa in the hypothetical case that the regulator decide that you guys indeed have so-called market power in the segment? Thank you..

Thank you Carlos for that question. I mean dominance on pay television will be decided very soon and we believe that we do not have pricing power, as was determined by the regulator in 2015. The market has changed a lot also from 2015 to this date. The regulator will have to review its decision. The one that it took in 2015.

And if we’re determined to be dominant on that market, in my opinion, they will have to review the market again. They would have to investigate or go over the details of that market again because the relevant decision was made in 2015.

So, since there have been a lot of changes in this industry – in the pay television industry, the rules that they could impose or the asymmetric regulations that they could establish, would have to be based on new data..

Thank you..

The next question will come from Richard Dineen with UBS. Please go ahead..

Thanks good morning, everyone. And thanks for taking the question. Just a couple if I may. On advertising, I’m just wondering Alfonso, if you can share your insights from your dialog with advertisers.

What’s been the thought process over the past 18 months? The price hike – their initial reaction and then what has brought them to kind of come back to broadcast TV. I guess the reason I’m asking this is, there have been concerns over the structural health of Mexican broadcast advertising. So, your reflections on that question would be interesting.

And then secondly just on cable CapEx that looks like you’re guiding it down about 50%. I’m just wondering, does that reflect any expectation of lower RGUs in the cable business? I think you had mentioned before that the integration was about a third of CapEx.

So if that goes away, I guess, I’m just wondering what is the incremental 20% that would get you to a 50% reduction, if that’s clear?.

Yes. Thank you, Richard. Of course, as we have mentioned in the past, the clients hated our pricing strategy and the increases in prices. We hadn’t raised prices in a very long time, and this was the main thing that had to do with the strategy, with a new strategy. Why did they come back because it’s the most effective and efficient way of advertising.

I think a lot of clients, especially in Mexico, are disappointed as to the results that advertising of digital is providing them and I mean because of the power that especially our flagship channel has, I think that they came back, they reviewed how they were advertising.

And they realized that it was the most effective way in which they could do this. So, we are very encouraged about this. As we mentioned before, I think since we started negotiations of the upfront in September and we closed the largest clients before the U.S. election that helped us a lot.

As you might remember, we negotiate upfront, the upfront season and the clients actually give us the money upfront. So, we have the money deposited in our balance sheet, I mean it’s part of our balance sheet. So, I think that we’re on the right path.

As I mentioned also before, we have been disciplined in terms of pricing and the clients realize that even though we increased the prices sharply, it was, I mean, the best way of advertising their products. As to your second question, let me ask Adolfo to take it..

Thank you Alfonso. Yes, on the capital reduction. I think the answer is quite straightforward and simple. First of all, we have completed almost 80% of all the network revamp on all the series, and the remaining 20% will be deployed at this lower pace. We were going really fast. And as I have explained and now we will lower the pace on the remaining 20%.

The current economic environment makes a lot of sense to do that anyhow. So, this is part of the reduction. We have already completed most of our network investments and that will go down. Also, as we have integrated our five companies now, we have been able to do things.

Now, we have consolidated all the volumes that we are demanding from vendors we’re unifying those negotiations and we also have become much more efficient at recycling our equipment CP expenses from different companies – five different companies have different technologies, different efficiencies.

Now, we have only one much more strengthen one, so we’re much more efficient at refurbishing and returning equipments to our base and that will decrease also that sales expense of sales CapEx. So, the combination of these things makes us being able to reduce CapEx without having any impact whatsoever on our capabilities to grow.

So, we are well-positioned. We have very modern up-to-date network, which can offer up to 100 megabits in all the country, all our properties. And now, we’re able to continue growing with much less CapEx expense, so that’s explanation of that reduction..

Yes, I mean we’re not sacrificing growth. We’re just as a result of the depreciation of the peso, we are placing strong importance on achieving solid returns on the invested capital, and because of that depreciation of the peso, we have to be extremely careful as to where we invest the money and achieve those returns..

Got it. Crystal clear, thank you very much, Alfonso and Adolfo. Thank you..

At this time, we’ve reached the allotted time for question-and-answer session. I would like to turn the conference back over to management for any closing remarks..

Thank you very much for participating in the call. We will be presenting at the Morgan Stanley Conference next week. So, if any of you are there, we will be glad to see you there. And if not and if you have any additional questions, please give us a call. Thanks. Bye..

Ladies and gentlemen, thank you for participating in today’s conference call. You may now disconnect..