Alfonso de Angoitia - Co-Chief Executive Officer of Grupo Televisa Salvi Folch - Interim Chief Executive Officer of Cable Carlos Ferreiro - Corporate Vice Presidents of Finance Isaac Lee - Chief Content Officer Alex Penna - Chief Executive Officer of Sky.

David Joyce - Evercore Gregorio Tomassi - Itau BBA Rodrigo Villanueva - Merrill Lynch Daniel Federle - Credit Suisse Richard Dineen - UBS Soomit Datta - New Street Research Andre Baggio - JP Morgan Alejandro Gallostra - BBVA.

Good morning, everyone, and welcome to Grupo Televisa's Fourth Quarter and Full Year 2017 Conference Call. Before we begin, I would like to draw your attention to the press release, which explains the use of forward-looking statements and applies to everything we discuss in today's call and in the earnings release. I will now turn the call over to Mr.

Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir..

First, we are investing in a number of transformational initiatives to strengthen our Content and consolidate the recent improvement in ratings. For example, we launched recently the first ever television pilot season initiative to expand our Content pipeline by developing new original series by national and international independent producers.

The first phase of the pilot program resulted in more than 100 television projects being submitted by 55 third-party independent production companies. Second, we are also investing in transmitting the soccer World Cup in the second and third quarters of the year. Of the 64 matches about half of them will be transmitted on our free-to-air networks.

And third, our coverage of the election this year will require an additional one-time investment. They will be the most important elections in Mexico's modern history. This election has comprised a Presidential election, the renewal of both chambers of Congress, nine governorships among others.

We want to be the most balanced trustworthy and reliable source of information for the Mexican public throughout this process. This anticipated increase in cost and expenses comes precisely as the Univision royalty rate goes up by 36% to approximately 16.5% [ph] of Univision's audiovisual revenue.

Therefore, the royalty increase will support much of the 2018 investment in our content division. Moving on to CapEx, they will be $885 million during 2017. This is $600 million less than the prior year and $115 million less than our guidance for the year. For 2018, we expect that the amount in CapEx will be similar to that of 2017.

The breakdown of our forecast for 2018 is approximately $550 million for our Cables business, 250 million for Sky, and 150 million for our Content and other businesses. In particular, in the case of the Cable business, CapEx as a percentage of revenue shall be in the high 20s during 2018, down from 55% in 2016. We continue to follow the path of U.S.

cable when back in the early 2000s, their investments in rebuilding the networks was practically completed in cable companies starting reaping the benefits of growing free cash flows. Over the past few years, Televisa [ph] has taken specific steps to better extract value from its unique set of assets.

Our industry continues to change at a fast pace and we have to be one step ahead. So far developing a leadership position in both Content and distribution has been one of our primary competitive advantages.

It has given us the scale to compete with global participants and the resources needed to fund our expansion in Cable and develop our telecom infrastructure. Currently, Bernardo and I are actively analyzing the advantages and disadvantages of holding our various assets under the same corporate structure.

Throughout this exercise, we are watching carefully what other industry participants are doing globally and also considering the specific circumstances in Mexico. Rest assured, the main goal here is to maximize shareholder value. Along those lines, we will also continue to actively explore the sale of our non-core operations.

As a first step and as we reported last week, we have agreed to sell our 19% stake in Imagina in Spain for a total amount of approximately $355 million. This is a transaction that is subject to regulatory approval, but we expect it to close in the next few months.

We have also shut down our publishing business in Argentina, which was recurrently losing money and we will do the same with other nonperforming businesses.

In closing, 2018 will be a very important year for Televisa as we continue to focus on increasing further our share of high-speed data in the country resuming growth in sky, stabilizing advertising revenue, and consolidating our improvement in ratings.

As in the past, we will continue to maintain a very strict control over costs and expenses and take all necessary steps both operationally and structurally to position Televisa for continued success over the long-term. Thank you for your attention. We are now ready to take your questions..

[Operator Instructions] And your first question comes from the line of David Joyce your line is open..

Thank you.

If you could please provide some more color on the advertising front, last, how much of your inventory was sold in the scatter market and was there any [indiscernible] was left unsold? And in this upfront rather negotiations where you have got 100% of your ad clients under the new sales mechanism, how much of the inventory was told in this round of upfronts? Thank you..

Hi David. As you saw, the fourth quarter was a very difficult quarter. It had to do with the manner in which we sold the advertising for that year, and especially had to do with the increase in terms of ratings especially on prime-time ratings.

I don't have the numbers here in terms of inventory usage, and especially that and what has to do with the scatter market. However, what I can [indiscernible] inventory was pretty low both in the third quarter and the fourth quarter.

Now, we're very excited about the new advertising spend and as I mentioned the negotiations were pretty difficult because we were migrating and we were able to migrate a 100% of our clients to the new system.

We believe that it’s a system that although where the clients will have less flexibility it will allow us to have that flexibility and to be able to use our inventory and deliver the ratings. Of course, now we are guaranteeing ratings as it happens in the U.S.

and most countries in the Europe, and so we’re very excited because of our situation, our current situation [indiscernible] and we believe that 2018 we will see a better year for us..

Thank you. And if I could another question, on the Cable side, how much of the broadband data subscriber growth is coming from increased market share versus just increased penetration or growth of the market? Thank you..

I’ll ask Salvi to answer the question..

Hi. Well it has come from both fronts. The penetration of broadband has increased over time. However, we continue to be out of the 35 countries in the OECD. We continue to be the country with the lowest penetration reaching about 52% at year-end growing from somewhere about 49%. So, there was a slight growth there.

Now, taking market share away from the incumbent was also a relevant factor. If you see what they added in the year it was less than 50,000 subscribers, while we added North of 350,000. So, it was both penetration and taking market share. We now have about 22.5% market share of the overall industry.

However, our homes [indiscernible] are only 40 million out of 33 million in the country. So, only covering about 42% of the country, I think that that demonstrates that our product is very competitive..

Great, thank you very much..

Your next question is from the line of Gregorio Tomassi. Your line is open..

Yes, good morning thanks for the call to you all.

Going back a little bit to advertising revenues outlook for 2018, and having heard you mentioning that the goal here is stabilizing advertising revenues, isn't there a possibility that you are understating the chances of actually seeing some growth in advertising revenues next year? How do you interpret the 1.8% increase in upfront sales from a year, which is 2017 in which most of actual sales actually came from upfront sales, and in a year in which you sound pretty confident that you will get ratings stronger than they were in 2017, meaning isn't it fair to assume that at least 1%, 1.8% is a floor for advertising revenue growth in 2018?.

Hi Gregorio, we’re encouraged to see the upfront growing 1.8%, and we’re also encouraged by the - what I mentioned before in the sense of now having the system in place and 100% of our clients using that system for buying advertising. However, we’re being cautious. We would rather overdeliver then promised now. It all had to do with ratings.

We’re doing the necessary investments in our production of Content. We will continue to do that. It’s a year where we will have the World Cup. So, having the 64 games of the World Cup and basically having 32 and all the channels gives us an advantage, but we are being cautious about it.

We believe that it will be a year where we will be able to stabilize the sales on that front..

And if I may, considering that let’s say 2016 was a year of increasing prices, 2017 has been the year of actually linking or living without the linkage between prices and ratings? And is there anything missing in the way you approach the advertising business in terms of contracting client interaction, pricing structure that could affect 2018 or can we consider 2018 as a year that is a first one or what should be the normal advertising revenue practice for the foreseeable future?.

I think that 2018 should be the new normal. It should be the starting point. As I mentioned before, I think we have many advantages. We have an unduplicated reach. If you compare what we deliver on our flagship Channel 2 Las Estrellas, every night on prime-time nobody can get there, nobody can get to those numbers.

So, I believe that it’s a starting point that 2018 will be a starting point and it will be the new base using the new system of sales..

Thank you very much..

Your next question comes from the line of Rodrigo Villanueva. Your line is open..

Thank you, good morning. Alfonso I was wondering if you could help us quantify the extra cost related to the World Cup to the coverage of the elections in Mexico? That would be my first question and the second is, if it is reasonable to assume severance expenses in 2010 and if so could you quantify them? Thank you..

Sorry Rodrigo, I couldn't hear the last part of your question..

Okay, so the first question is related to extra cost related to the World Cup definition, the coverage of the elections in Mexico, I was wondering if you could help us quantify them. And the second one would be related to severance expenses.

This has been very high in 2016 and 2017, I was wondering if we should expect additional severance expense in 2018, and if so if you could help us quantify them as well. Thank you..

As to your first question, we’re going to invest a total of around $150 million in Content this year. So that includes all the initiatives that have to do with the production of Content channels both over their channels and paid television channels. It also includes the World Cup and the coverage of election.

So, I can give you the total amount, which is 150 million. I would not like to or I don't have the detail here. If you want we can go over the detail in the call afterwards. And Carlos can you go over the severance payment during 2017 please..

Hi Rodrigo, regarding the other expense line, in the fourth quarter approximately 800 million pesos were non-recurring. This amount includes the closing of our publishing business in Argentina, severance payments for a number of employees and executives and also the write-off of some Content assets.

What we believe it will happen in 2018 severance payments will most likely continue some form to continue our restructuring of our main businesses. So, there will be severance payments in 2018 as well. Too soon to tell what the amount or too soon to say and quantify those amounts, but that will continue going in 2018..

Understood. Thank you..

And your next question comes from the line of Daniel Federle. Your line is open..

Thank you very much. Good morning everyone. We have been seeing some articles mentioning the plans of Televisa to increase the partnership with some international Content providers like Netflix or Amazon, could you please tell us what the company is planning in this front? That is my first question.

And we saw the Supreme Court's decision from yesterday really in favor of the Televisa, could you please tell us how you see the next steps in this discussion about the dominance of Televisa in the Pay-TV front? Thank you very much..

Thank you for your question Daniel. I will ask Isaac to answer your first question, but before that I will answer your last question as to the dominance of the termination of Televisa.

This is a long story, as you may recall, on September 2016 [indiscernible] decided that we did not have substantial power in the paid television market and that will consider in the information that they have back then in September 2015.

Then on January 2017 this was last year, of course [indiscernible] to a period that encompasses basically August of 2014. So, as a result of that Court order, on March 2017, if a [indiscernible] its original decision and they cleared us as an economic agent with substantial power in the pay television markets as of August 2014.

So, it was a freshly operated decision because they were saying that we have substantial power as of August 2014 and the division was made in 2017.

Of course, we have filed several emotions, one that got all the way up to the Supreme Court and now, the First Chamber of the [indiscernible] decided on February 7 that in [indiscernible] of its original ruling did not comply with the initial court order.

We believe that one of the probable outcomes will be that [indiscernible] will now determine that we do not have substantial market power in paid television. We have not been officially notified of the Supreme Court decision, so we’re waiting to see exactly what that says.

And now to your first question, Isaac?.

Daniel, good morning. Our priority remains to focus on our broadcast networks and our 14 cable networks, more than anything else, and we are also doing everything that is necessary to be fully aligned with Univision on Content production.

However, with the different window opportunities that we have and considering that the IP is very important to us you can expect Televisa to partner with international players to produce premium content. As you can imagine, our capacity for marketing in Mexico is second to none and wants to partner with us.

So, on a case-by-case basis and looking very carefully at what is best for our programming structure you can see that happening..

Okay, thank you very much..

This would be an exciting part of our business going forward. As Isaac was mentioning, we are the largest producer of Content in Spanish in the world. We have been very successful for many; many decades and I believe in producing Content for others. We will also be very successful..

Perfect. Thank you..

Your next question comes from the line of Richard Dineen. Your line is open..

Thank you very much. And good morning, everyone.

Just maybe, firstly a clarification on the earlier answer that I think Carlos gave on the other expense line, so if 800 million is the sale of Argentina and the impairments plus the severance, assuming that severance will continue, is it possible to say what part of the 800 is Argentina in the asset write-downs.

What’s truly non-recurring in that sense because it looks like that could be quite important on a sort of adjusted EBITDA basis? And then just secondly, if it’s possible just with regards to the comment on potentially raising surprises to Sky. In the past, you know that’s being quite difficult.

We have seen higher churn low recharges when you’ve increased prices in the past. Just wondering if there is any reason why that might be different? Is it the World Cup is a stronger economy, so any color on that would be helpful? Thank you, guys..

We will ask Carlos to answer your first question and give you the detail and the breakdown and then Alex can take the second question..

Hi Richard. About 70% of other expense line and is coming from non-recurring events; that’s Argentina and the write-off of Content assets and the remaining 30% would be severance..

Fantastic. Thank you..

Hi, this is Alex. Basically, price increases by its own nature, increase churn. Obviously, throughout 2017, we experienced the high churn on our prepaid product as a result of the price increases we carried out in December of the previous year in January of 2017.

This year 2018, we also carried out another price increase in all our programming packages, but are basically the weighted average was about 4%.

We expect that will help us with the growth of the top line throughout this year, but - and we also considered that the effect of the World Cup will help us throughout this year in terms of containing the increase in churn. So, the World Cup definitely will help us in that aspect..

Richard, what I can say is that of course we will be a rational with any changes in our prices. It all has to do with the economy and how the economy in general is doing. So, of course we would always try to at least grow prices with inflation, but we will have to be very careful as to the appropriate time in doing that.

It’s important also to mention that we believe that paid television and especially the Sky prices are very affordable in Mexico, and our packages - our paid television packages are very robust. It’s also important to mention that our prepaid packages through Sky are one of the lowest priced in Latin America..

That's great. Alfonso, Carlos, Alex thanks so much for these comments. Appreciate it..

And your next question comes from the line of Soomit Datta. Your line is open..

Hi there. Two or three questions please.

First of all, just to go back to the comment you made about evaluating assets looking at whether assets should all be under the same corporate structure? And I mean maybe you could elaborate a little bit more here, I guess the principal is you think some of these assets are being undervalued by the market or potentially you think there are synergies to be gained from shuffling things around a bit, could you kind of sort of go into a little bit more detail about what is being considered here, potentially spinning of Cable or sale of DTH, anything more here would be very helpful.

And then secondly, on Blue Telecomm please, looks to be a kind of sort of acceleration of the initiative here.

How should we think about this business going forward being part of CI when might you look to extend the business into a triple play service? And if I could just finally add on, I was interested to hear you talking about a fixed wireless service as well, in addition to the unbundling model, could you - what exactly are you sort of thinking about here? That would be great.

Thank you..

Hi Soomit. As to your first question, we are considering all types of scenarios.

We’re not ready to share any specifics at this moment, but we’re analyzing all these carefully and thoroughly, they are big decisions, and this is basically whether it’s good for Televisa, but most importantly good to generate value for our shareholders to keep all the assets under the same umbrella or to create separate public vehicles.

As I mentioned, we’re looking in detail what our global peers are doing, and even though we now live in a world where media and telecommunications continue to converge from the point of view of customers there does not seem to be a consensus among our peers, among international telecommunications and media companies in terms of the right business mix.

For example, we have seen what our partner AT&T is doing and buying Content [indiscernible]. Comcast is maintaining itself as an integrated company with Cable and the production of Content and over their television signals et cetera.

Comcast is very similar to Televisa in the sense that, I mean we’re the largest cable supplier and we’re also one of the largest - or in our case we’re the largest producer of Content. So, we’re an integrated company, but on the other side for example Fox is selling a material part of its assets.

So, we’re looking into this and as I mentioned, basically there is no consensus, but for us exploring carefully means that we have to evaluate all the merits of different structures. And also, we’re considering the particular circumstances in Mexico. We’re also considering the regulatory and competitive environments in our country.

So, in general, all these analysis that we’re making involves and has the main purpose of creating shareholder value..

Maybe just to jump in quickly, I know it’s early days, is there anything so far, you’ve concluded about Mexico, which is materially different than the U.S., which I guess is the main comparison here, is there anything which you would sort of flag as being quite different, which would help shape you thinking?.

We have not identified anything that particular about Mexico when compared to other markets..

Okay thanks. And then sorry on Blue Telecomm, any thought there would be great..

Yes, Alex would take that question..

With regards to the Blue Telecomm that we have just launched. We launched as you know following the friends and family phase that we carried out in the second half of last year. We recently last launched our voice and data services under the brand name of Blue Telecomm and we are starting with focusing on the resale of Telmex products.

Still we have readied our unbundling of the local loop and able to sell directly our own products. We continue facing a number of obstacles from Telmex both in sales, installation, and the full operation of this line of business, but we continue filing our claims, compliance with the authority, the [indiscernible].

With regards to the launching of Internet services using the fixed wireless technology, we - our plan is to launch this product in sometime in April, and we do believe that this fixed wireless Internet product will be highly successful because of its flexibility in terms of areas coverage, and no requirement for installation. It’s a plug-in product.

So, we are very hopeful that this product will be very successful for us..

What frequency or what Spectrum brand are you using please?.

We are going to be using the existing network of cellular company and we are also having conversations with this new shared network. It’s going to be available in Mexico..

Okay that’s really helpful. Thank you..

Your next question comes from the line of Andre Baggio. Your line is open..

Hi thanks for the remarks so far, can you clarify on the - specifically on the network revenues, was there a price increase in the fourth quarter with the money that Televisa Content Division charged to Sky, Cable and other operators on a per user basis?.

Yes - you mean subscriber revenue - I mean basically the paid television networks?.

Yes..

Yes, it had to do mostly with the fact that basically we repackaged our paid television networks, and now they include different Content rights and that resulted in higher overall price..

Perfect.

And second is that, I’m just quickly doing some math, but it seems to me that if you add $150 million in cost to the Content division, it is more than offset the gain that you could have with [indiscernible] so are you prepared to have lower margins in the Content Division in the year versus what you had in 2017?.

Yes, of course this year we will have the royalty stream coming Univision as you were mentioning. And we will have these events that are non-recurring. So, it will all depend on the performance of our advertising and sales business.

As I mentioned, we had a pretty solid upfront where the basic accomplishment was to bring all our customers, a 100% of our customers to the new system, to a system where we are selling GRPs, guaranteed GRPs and the new pricing mechanism.

So, it will all depend on the performance of the sales business, but of course the additional costs two of which are non-recurrent. Those are the World Cup and the coverage of the elections. It will be offset by the increase in terms of the royalty stream we are receiving from Univision..

Perfect. Thanks a lot..

Your next question comes from the line of Alejandro Gallostra. Your line is open..

Hi, good morning. Thank you very much for the call. I would like to go back to the Blue Telecomm discussion, and my first question is again for Alex, if instituted well the launch of fixed wireless broadband in April.

Perhaps you would be using your own infrastructure as well as potentially [indiscernible] so you will not be using governments infrastructure at all, is that correct?.

Well, as I said, we are going to use the existing cellular network of one of the existing players in Mexico to provide this fixed wireless service, and there is also the possibility of using a different network in order to expand the production of this fixed wireless service..

Okay, thank you.

Still on Blue Telecomm, without the type of synergies that you expect to obtain between Sky and Blue Telecomm if any, and what are your general expectations for [indiscernible] and the type of margin that you expect to obtain in the long run, and if you will be reporting these service as part of a Sky and you will also be reporting the number of [indiscernible] used?.

Alejandro to the first part of your question, Sky has a tremendous advantage because it has 8 million subscribers, it has national coverage in terms of installation forces in terms of sales forces. So, there are a lot of synergies in offering new products such as, these two that Alex was describing.

One is, a fixed wireless type of service, which I mean where you plug in a devise and you get broadband. And the second is using basically the infrastructure that Telmex has through the local loop unbundling. So, those are the two products that Sky is launching.

And as to your second part of the question Alex?.

Well in terms of, as Alfonso just said, in terms of synergies they are pretty clear.

And in terms of economics for these lines of business, we are still fine-tuning the business plan, but if anything, it is clear to us that this product more than allowing Sky to get into the triple playfield just going to result in a very important retention to our existing line of business and subscribers of video..

Basically, we are trying to do what Sky did in the United Kingdom where it has a very large and substantial presence on the broadband type market, and I mean using as a base the 8 million subscribers that we already have and the National infrastructure that is in place. So, I think the synergies are tremendous.

If the local loop unbundling works then I think - and if the new product that is, as I mentioned a plug-in product, which is very easy to - I mean you buy it, and basically you plug it in and use it. Those are going to be very good products for Sky..

Thank you. Thank you, very much.

So, if [indiscernible] once you are sure that this product works, would you plan to offer triple play services to final customers and he says that few customers which obtain not only the Blue Telecomm service, but also [indiscernible] would get an additional advantage putting that, because this is something that you could only denote bundles because customers do not benefit from this pure play [ph] offer, is that something that you would consider in the future if that action works is that correct?.

Yes, definitely. And right now, what we are doing is offering the packages of voice and data not including video. But down the road we may package the three services together and [indiscernible] benefits to our subscribers..

Thank you. And then would you plan to report these figures and this performance as part of Sky or separately, did you plan to also report the number of RGUs? And finally, any color on the margin that you expect for [indiscernible] would be helpful..

Yes, the numbers of this new line of businesses are going to be consolidated and reported within Sky numbers.

And with regards to our margins, despite the fact that I cannot provide forward guidance, but we expect the margins as stated by Alphonso earlier throughout this year to be between low 40s and mid-40s, and we will continue being in very healthy - these margins of Sky going forward..

Excellent. Thank you very much for your answers..

I will turn the call back over to the presenters..

Thank you, Jarred. Thanks everyone for joining us today. If you have any questions, please reach out to us. We look forward to speaking with you in the next quarter..

This does conclude today's conference call. You may now disconnect..