innovation - Esmas

2000 2001
2002
nnovation
2004
elecommunications
orefront
largest media company in
Spanish-speaking world
www.televisa.com
e coming years”
TELEVISA SIGNS LANDMARK
AGREEMENT WITH UNIVISION
2004
FOREFRONT
year
2003
In 2000, Televisa
nanced its debt, r
ing costs, exten
and replacing a
dollar-denominat
with inflation-ad
ness. As a resul
Televisa signific
its capital structu
its currency risk.
Moody’s gave Te
investment-grade
2008
decade 2007 Televisa
2009
www.televisair.com
ANNUAL
GRUPO TELEVISA 2010 ANNUAL REPORT
008 2007
2005
2001
As of today, Televisa has
one of the largest telecom infrastructures in the country.
Through its cable and telecom
assets, it reaches several of the
most important cities in Mexico with more than 6 million
homes passed and has close
to 50 thousand miles of fiber
and coaxial cable around the
country.
2009
2010
growing
2005
•
Televisa launched Televisa
Deportes Network (TDN)
2003
2002
television conte
innovation
FOREFRONT
01
In 2007 Televisa celebrated 50 years of
producing its popular Telenovelas, captivating audiences throughout the Spanishspeaking world and beyond.
2000
a decade
at the
GRUPO TELEVISA 2010 ANNUAL REPORT
a decade at the
2005
2006
year
Today, Fundación Televisa (“Fundación”)
reaches millions through Televisa’s media
platforms and builds alliances with companies, non-governmental organizations,
and Mexico’s government and people. Alliances play a key role in multiplying the
social impact of Fundación’s work and
base funding.
Televisa will build
on these milestones
annual report
decade
2006 a great year
In 2006 Cablevisión completed the conversion
of its network from analog to digital format.
This milestone enabled the company to provide a host of new services and pay-TV offer-
2005
INVESTOR INFORMATION
In the past decade, Televisa has achieved several
milestones that have enabled the Company
to create value through the production and
distribution of its content and to strengthen its
position as a leader in its industry.
Today Televisa is well positioned to identify and
quickly respond to opportunities and events in the
rapidly growing and ever-changing global media
and telecommunications market.
In the coming years, Televisa will build on these
milestones to continue benefiting its clients,
shareholders, employees, and the communities in
which it operates.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 30 / BOARD OF DIRECTORS 40 /
FINANCIAL STATEMENTS 41
We ask that investors and
analysts direct all inquiries to:
SEC filings
Design: signi.com.mx
A DECADE AT THE FOREFRONT 08 / MANAGEMENT´S DISCUSSION AND ANALYSIS OF
CPOs (Certificados de Participación
Ordinarios) of Grupo Televisa, S.A.B.,
comprise 117 shares each (25 Series
A Shares, 22 Series B Shares, 35 Series
D Shares and 35 Series L Shares), and
are listed and admitted for trading on
the Mexican Stock Exchange (Bolsa
Mexicana de Valores, S.A.B. de C.V.),
under the ticker symbol TLEVISA CPO.
The GDRs (Global Depositary Receipts),
each representing five CPOs, are listed
on the New York Stock Exchange and
trade under the ticker symbol TV.
Decisions regarding the payment
and amount of dividends are
subject to approval by a majority
of the Series A Shares and Series B
Shares voting together, generally,
by recommendation of the board of
directors, as well as to the approval
of a majority of the Series A Shares
voting separately. On March 25, 2004,
the Company’s board of directors
approved a dividend payment policy
pursuant to which the Company shall
pay an annual ordinary dividend of
Ps.0.35 per CPO.
Grupo Televisa, S.A.B., is the largest media company in the
Spanish-speaking world based on its market capitalization and
a major participant in the international entertainment business.
It has interests in television production and broadcasting,
production of pay-television networks, international distribution
of television programming, direct-to-home satellite services,
cable television and telecommunication services, magazine
publishing and distribution, radio production and broadcasting,
professional sports and live entertainment, feature-film
production and distribution, the operation of a horizontal
internet portal, and gaming.
TELEVISA AT A GLANCE 02 / LETTER TO SHAREHOLDERS 04 / FINANCIAL HIGHLIGHTS 06
Investor relations
Dividend policy
COMPANY PROFILE
CONTENTS
Common stock data
Televisa files and submits annual reports
to the US Securities and Exchange
Commission. This annual report
contains both historical information
and forward-looking statements. These
forward-looking statements, as well as
other forward-looking statements made
by the company, or its representatives
from time to time, whether orally or in
writing, involve risks and uncertainties
relating to the company’s businesses,
operations, and financial condition. A
summary of these risks is included in the
company’s filings with the US Securities
and Exchange Commission, and this
summary as well as the other filings with
and submissions to the US Securities
and Exchange Commission, are and
will be available through the office of
investor relations upon written request.
Grupo Televisa, S.A.B.
Av. Vasco de Quiroga 2000
C.P. 01210 México, D.F.
(5255) 5261-2445
[email protected]
www.televisa.com
www.televisair.com
Corporate headquarters
Grupo Televisa, S.A.B.
Av. Vasco de Quiroga 2000
C.P. 01210 México, D.F.
(5255) 5261-2000
Legal counsel
Mijares, Angoitia, Cortés y
Fuentes, S.C.
Montes Urales 505, 3er piso
C.P. 11000 México, D.F.
(5255) 5201-7400
Fried, Frank, Harris, Shriver &
Jacobson LLP
One New York Plaza
New York, New York 10004
U.S.A.
(212) 859-8000
Independent auditors
PricewaterhouseCoopers, S.C.
Mariano Escobedo 573
C.P. 11580 México, D.F.
(5255) 5263-6000
Depositary
The Bank of New York
BNY Mellon Shareowner
Services
PO Box 358516
Pittsburgh, PA 15252-8516
(201) 680-6825
This annual report is available in both English and Spanish. April 2011.
Este informe anual está disponible tanto en español como en inglés. Abril 2011.
II
1
TELEVISA AT A GLANCE
TELEVISION
BROADCASTING
PAY-TELEVISION
NETWORKS
PROGRAMMING
EXPORTS
SKY
The world’s leading
producer of Spanishlanguage television
content, Televisa
operates four broadcast
channels—2, 4, 5, and
9—in Mexico through
258 affiliated stations
throughout the country.
Produces and
distributes 18 pay-TV
brands—15 owned
and 3 represented.
In the U.S., distributes
its pay-TV channels
through Univision.
Mexico’s leading
direct-to-home satellite
television system; also
operates in Central
America and the
Dominican Republic.
Contribution
to Sales: 5%
Exports its programs
and formats to television
networks around
the world. In the U.S.,
distributes its content
through Univision
under a recently
renewed and extended
Programming License
Agreement (PLA).
Contribution
to Sales:
Contribution
to OSI:1 7%
Contribution
to Sales: 5%
Produced
approximately 16
thousand hours of
content in 2010 for
pay-TV channels
Contribution
to OSI:1 7%
39%
Contribution
to OSI:1 46%
Produced
approximately 59
thousand hours of
content in 2010 for
free-to-air television
Average weekday
primetime
audience
share 70.5%
+26
million
pay-TV
subscribers
The PLA, which was
extended to at least
2025, increases
the royalties
Televisa receives.
In addition,
the PLA now
includes Televisa
programming for
all of Univision’s
audiovisual media
platforms.
Contribution to Sales: 19%
Contribution
to OSI:1 22%
Demographic
expansion through
new packages:
MiSky and VeTV.
More than one
million subscribers
added in 2010.
Subscriber base:
3 million
58
countries
worldwide
(approximate reach)
1
Operating segment income (OSI) is defined as operating income before corporate expenses, depreciation and amortization. For a
reconciliation of operating segment income with operating income, see Note 22 to our year-end consolidated financial statements.
22
CABLE AND
TELECOM
PUBLISHING
OTHER BUSINESSES
UNCONSOLIDATED
BUSINESSES
Cablevisión, Cablemás,
and TVI offer pay-TV,
voice, and data services
in Mexico City, Monterrey,
and several cities in Mexico.
Telecom company Bestel
provides data and longdistance services in Mexico
and the United States.
The leading Spanishlanguage magazine
publisher; produces 165
titles under 109 brands.
TIM
Complete digital
entertainment through
several web portals.
Contribution to Sales: 5%
Gaming
Bingo parlors and online
lottery business.
La Sexta (40.8%)
Free-to-air channel in Spain,
which continues reporting
sustained audience
share of 6.6% and strong
operating performance.
Contribution
to OSI:1 2%
Soccer teams
Three of Mexico’s
professional soccer teams.
Consolidated
restructuring process
and returned to doubledigit Operating Segment
Income margin. Also,
continued to expand
the reach of its titles
through digital platforms:
Azteca stadium
Mexico’s largest stadium.
Contribution to
Sales: 20%
Contribution
to OSI:1 17%
Through its 20-year lease
of dark fiber cable from
the Mexican Federal Electricity Commission (CFE),
the consortium formed
by Telefónica, Televisa,
and Megacable will offer
alternative access to data
transmission services.
Radio
Network of 117 owned and
affiliated radio stations.
Contribution
to Sales: 7%
•vanidades.com
•muyinteresante.com.mx
•tuenlinea.com.mx
•esquirelat.com
Cablevisión
Video subscribers: 668,985
299,157
Voice subscribers: 190,441
Broadband subscribers:
•Tvynovelas.com
20
Cablemás
Video subscribers: 997,239
Broadband subscribers: 360,049
Voice subscribers:
•caras.com.mx
Ocesa Entretenimiento (40%)
Live-entertainment
company in Mexico.
2010 most popular event:
Paul McCartney concert.
205,180
countries
reached
TVI
Video subscribers: 301,698
Broadband subscribers: 147,268
Voice subscribers: 106,129
33
3
TO OUR SHAREHOLDERS:
When I became CEO of Televisa in 1997, I found an incredibly
successful broadcasting operation with decades of experience
producing highly rated content. But at that time, Televisa was
facing a very challenging financial situation. The company was
highly leveraged and held some non-strategic assets.
F
rom 1997 to 2000, we worked hard to strengthen the
competitive position of Televisa and, importantly, its
financial position. We shed non-strategic assets, improved our share of the television audience, made our operations more efficient, and significantly reduced our debt.
We continued along this path over the decade that followed.
We further strengthened our financial position, diversified our
business beyond broadcast television, and solidified our position as the leading producer of Spanish-language content in
the world with a number of key strategic partnerships. Along
the way, we made successful inroads into the growing telecommunications segment, in particular cable and satellite
television. Some of the results of the past decade were:
Strengthening our financial position
• Revenue rose from Ps.19.7 billion1 in 2001 to Ps.57.9 billion in 2010, reflecting a ten-year compounded annual
growth rate (CAGR) of 13 percent.
• Consolidated operating income grew at a CAGR of 16
percent, from Ps.4.1 billion1 in 2001 to Ps.15.6 billion in
2010.
• Our balance sheet strengthened. At the end of 2010, our
net debt was only Ps.12.7 billion, and our net-debt-to-operating-income ratio was 0.8 times. In 2001, that number
was 1.8 times.
• Our market capitalization increased 2.3 times from US$5.5
billion in 20012 to US$14.4 billion in 20102. Over that same
period we returned to our shareholders nearly US$2.2 billion in dividends.
Diversification beyond broadcast television
Over the past decade we have undertaken significant efforts to diversify the company beyond our legacy broadcast
television business while building on and staying connected
to the true cornerstone of our success: our content.
The results are already apparent. In 2001, advertising revenue was 71 percent of our total revenue, while in 2010 it was
42 percent of revenue. Mexico’s advertising industry has yet
to expand as a result of an improving economy and of people’s increasing purchasing power. But in the meantime, we
1
2
3
Mexican pesos in real terms as of December 31, 2001, as reported.
As of December 31.
Source: Pyramid Research 2010E.
44
have diversified beyond advertising and positioned Televisa
as a relevant and growing participant in telecommunications, an industry that currently totals US$243 billion—five times
the size of Mexico’s media industry.
In the process of finding new and faster-growing sources of
revenue, we have made many successful investments but
also a few challenging ones. One is our gaming business,
which has been confronted by legislative changes that
have significantly increased taxes on gaming revenues.
Nonetheless, we see value in our license and will continue
to explore ways to profitably exploit it. And while La Sexta
has succeeded operationally and delivers ratings above our
initial expectations, it currently faces an economic crisis in
Spain that has dampened its financial results.
There is no doubt, however, that—throughout the entire
process—we have taken important steps that have expanded the reach of our brand and our content, multiplying
the value of both. In the pages that follow we mention ten
key milestones, but these are only some of many milestones
that have positioned Televisa to continue succeeding in the
coming years.
Building strong alliances
While diversifying our businesses we worked hard to improve
our operations. Our strategic alliances—in particular our partnerships with two of the most important media companies in
the US Hispanic market—are a key component of our ability
to grow our audience with exciting and enduring programming, and to maximize the value that we derive from it. In
2008, for example, we partnered with Telemundo for the exclusive rights to distribute its content in Mexico for ten years,
and we have an option to extend this agreement for an additional five years.
In 2010 we strengthened our relationship with Univision
through an agreement that brings significant upside potential for both companies. We extended our program license
agreement with Univision to at least 2025. The agreement
increases the royalties from Univision and includes the purchase of a five percent equity interest and the issuance of
debentures convertible into an additional 30 percent equity
stake of Univision in the future, subject to existing laws and
regulations. We also have the option to acquire an additional five percent equity stake in Univision. This agreement
positions Televisa to participate in the most underutilized and
fastest-growing media market in the United States. We will
work with Univision in order for them to optimize the exploitation of our content in the United States.
Cable and telecom: positioning for the long-term
We continued to advance our cable and telecom strategy,
which began in earnest with our acquisitions of Bestel and
stakes in TVI and Cablemás over the past four years. In addition, as part of a consortium, in 2010 we won the auction to
exploit dark fiber owned by the Mexican Federal Electricity
Commission (CFE). This is a significant step in our effort to become a relevant participant in Mexico’s fast-growing telecom market. We are confident that our investments in these
businesses are laying the groundwork for Televisa to benefit
from a rapidly changing and growing industry.
Together, our activities have laid a solid foundation for years
of operational and financial success. Today, our operations,
brands, and balance sheet are very strong. We are the primary producer of audiovisual content in the Spanish language and a very relevant producer of linear channels for
pay-television platforms. Through our multiple investments,
Televisa is an important pay-television provider in Mexico
and has one of the largest telecom infrastructures in the
country. We are a company known for using our reach to
contribute to the health, education, and cultural development of the communities that we serve. And we consistently
maintain relatively low levels of debt and long maturities on
our indebtedness.
Even as we look back on a very successful decade, our eyes
are fixed firmly on the future. Ever mindful of both challenges
and opportunities, our vision is to:
• remain the world’s foremost producer of Spanish-language content;
• increase the reach of our linear pay-television channels
around the world;
• continue to play a role in the consolidation of Mexico’s
cable industry;
• participate in the opportunities presented by the growing
wireless data industry; and
• continue to capitalize on the emergence of new platforms
that, through audience segmentation, present a highly fragmented yet largely untapped advertising client base.
We live in a multiplatform world, in which television content is
viewed not only over televisions, but also on many other devices. Increasingly, people are viewing television content on
the go. We are investing to ensure that our content reaches
our audiences wherever they may be and on whatever device they prefer. We have made significant progress. For ex-
We further strengthened our financial position,
diversified our business beyond broadcast
television, and solidified our position as the
leading producer of Spanish-language
content in the world with a number of key
strategic partnerships.
ample, since 2007, all of our content is produced with an eye
toward the multiplatform opportunities for distribution. This,
together with the digitalization of a large portion of our library
of content, means that we now have more than 50 thousand
hours of content available for digital audiovisual distribution.
The media and telecom environment is rapidly changing.
We are confident that the steps we have taken during the
last decade leave us well positioned to capitalize on the
changes that are sure to come. We never tire of highlighting that our biggest competitive edge is the fact that we
produce the majority of the content that we transmit, the
same content that has delivered close to 70 percent of the
audience for many years now. We produce it and therefore
have the ability to make it available in the platforms chosen
by our audiences.
I want to thank our dedicated employees, management
team, and board of directors for their hard work and our
audiences and customers for their continuing loyalty. To our
shareholders I want to extend my appreciation for your continued confidence in our vision and our long-term prospects.
We look forward to rewarding you well into the future.
Emilio Azcárraga Jean
Chairman of the Board and Chief Executive Officer
55
5
FINANCIAL HIGHLIGHTS
In millions of Mexican pesos, except per-CPO amounts and shares outstanding.
2010
Var.%
Ps.
57,857
10.5
Operating segment income 1
20,745
23,063 11.2
Segment margin 38.8% 39.0%
Operating income 15,157 15,583 Margin 29.0%
26.9%
Controlling interest net income 6,007
7,683
Earnings per CPO 2.14
2.75
Shares outstanding at year-end (in millions) 327,231
325,023
2009
Consolidated net sales
Ps. 52,353
2.8
27.9
Ps.
20,943 (30.1)
Temporary investments at year-end 8,902
10,447 17.4
Long-term investments at year-end 3,996
3,858 (3.5)
Total debt at year-end 43,416
47,965 10.5
Net debt position at year-end 576
12,717 2,107.8
Cash and cash equivalents at year-end 1
Ps.
29,942
Operating segment income (OSI) is defined as operating income before corporate expenses, depreciationand amortization. For a
reconciliation of operating segment income with operating income, see Note 22 to our year-end consolidated financial statements.
6
Cable and Telecom
Sky
Other Businesses
Publishing Programming Exports
Pay-Television Networks
39%
20%
19%
7%
5%
5%
5%
Operating
Segment Income
Breakdown
TV Broadcasting Sky
Cable and Telecom
Programming Exports
Pay-Television Networks
Publishing
46%
22%
17%
7%
7%
2%
09
57,857
10
(millions of pesos)
09
23,063
TV Broadcasting 52,353
Breakdown
20,745
Segment
Net Sales
10
(millions of pesos)
Other Businesses reported a negative contribution
to OSI of Ps.184mm during the year 2010.
7
THE LAUNCH OF
FUNDACIÓN TELEVISA
The first Televisa foundation was established in 1975 as Fundación
Cultural Televisa and focused primarily on cultural initiatives. It closed
in the late 1990s while Televisa underwent financial restructuring. Toward the end of 2000, Emilio Azcarraga Jean, Televisa’s chairman
and CEO, led an effort to reopen the foundation and to focus on
social efforts, in particular education, nutrition, health, and housing,
while continuing to promote Mexican culture.
Today, Fundación Televisa (“Fundación”) reaches millions through
Televisa’s media platforms and builds alliances with companies, nongovernmental organizations, and Mexico’s government and people.
Alliances play a key role in multiplying the social impact of Fundación’s
work and base funding. Through these alliances the effective dollarfor-dollar match for Fundación’s programs over the past ten years
has been 8.39 to 1. In 2010 alone, the match was 17.7 to 1 —that’s
US$17.70 for every dollar that the foundation contributes itself.
Over the years Fundación has worked hard to reach its goals and
can now share with pride many of its success stories. For example, in
2006 Fundación launched Bécalos, a scholarship program, in partnership with the Mexican Bank Association. By leveraging these alliances and Fundación’s access to media, Bécalos has raised more
than US$110 million and provided more than 113,000 scholarships
since 2005. These include 65,813 awards for teachers and school principals; 26,808 for high school students; and 21,011 bachelor awards,
primarily for studies in engineering, science, and technology.
Over the last decade, Fundación has improved the nutrition and
health of more than 44,000 children in the poorest regions of Mexico.
Access to housing has also been at the top of Fundación’s agenda.
As of year-end 2010, Fundación had built 22,000 homes through an
alliance structure similar to that of Bécalos. If compared with commercial homebuilders, Fundación and its allies would be the fifthlargest housing developer in Mexico.
But its mission goes beyond education, health, and housing. Fundación’s relationship with Televisa enables it to raise awareness of social issues and expand the impact of its campaigns. Televisa contributes with advertising space for Fundación to promote and increase
public action on health, such as breast cancer, and on environmental issues, such as energy and water conservation.
8
Growing number of beneficiaries
The launch of Fundación in 2001 was only the beginning.
The number of people directly benefiting from Fundación’s
programs has risen each year, from 100,339 in 2001 to
633,403 in 2010. Fundación will continue to invest resources
in education and health while maintaining its commitment
to the promotion of Mexican culture at home and abroad.
9
Solid financial position
Even after our recent US$1.2 billion investment in Univision,
our balance sheet remains strong. As of December 31, 2010,
our consolidated net-debt position was approximately Ps.12.7
billion, and the average maturity of our debt was 14.3 years.
In the years to come, we will continue to focus on maintaining
the health of our balance sheet.
10
TELEVISA ISSUES US$300 MILLION, 30-YEAR,
INVESTMENT-GRADE BOND
In the late 1990s Televisa initiated the arduous but necessary process
of repairing its finances and strengthening its balance sheet. Later,
in 2000, Televisa successfully refinanced its debt, reducing borrowing
costs, extending maturities, and replacing a portion of its US-dollardenominated indebtedness with inflation-adjusted indebtedness.
As a result of these steps, Televisa significantly improved its capital
structure and reduced its currency risk. That same year, Moody’s
gave Televisa’s debt an investment-grade rating.
Because of the earlier work it had undertaken to refinance its debt
and improve its financial structure, on March 11, 2002, Televisa was
able to become the first Mexican company to issue a 30-year bond.
The offering consisted of US$300 million in Senior Notes at a coupon of 8.50 percent. The proceeds were used to refinance a US$276
million bridge loan. Televisa was able to complete this transaction
thanks to a strong credit profile and the market’s confidence in its
long-term prospects.
The bond received three awards, including one from Latin Finance.
Shortly after the bond was issued, Fitch and Standard & Poor’s gave
Televisa’s debt an investment-grade rating. These ratings made
Televisa one of the first Mexican companies to receive investmentgrade ratings from all three agencies, even before Mexican sovereign debt was given an investment-grade rating. The bond offering
was also significant because, up to its issuance, Mexican companies
had no access to financing with maturities of this length.
Since then, Televisa has continued to focus on improving the strength
of its balance sheet. In November 2009, Televisa issued a US$600 million bond at a spread over U.S. Treasuries of only 245 basis points,
the second-smallest spread of any Mexican issuer at the time. A
year later, in October 2010, Televisa issued a Ps.10 billion bond with
a coupon of 7.38 percent due in 2020 and a spread of only 135
basis points over Mexican Government Bonds. It was, at that time,
the largest corporate fixed-rate debt issuance in the history of the
Mexican market.
11
Solid and profitable growth
As of December 31, 2010, Televisa reached a market
capitalization of US$14.4 billion. As it looks forward to the next
decade, Televisa will continue to focus on delivering solid,
profitable growth and on maintaining a consistent and open
channel of communication with the market in order to remain
a relevant holding for the investor community.
12
TELEVISA CELEBRATES
10 YEARS ON THE NYSE
Televisa was first traded on the Mexican stock exchange (BMV) in
1991. In June of 1993 the company’s GDS (Global Depositary Shares)
began trading on the New York Stock Exchange (NYSE), and in 2003
the company celebrated the tenth anniversary of its listing.
During the fourth quarter of 2003, Televisa was the fifth-largest Latin
American GDS holding for institutional investors and the third most
liquid among Mexican companies. Televisa’s average daily volume
on the NYSE was more than 450,000 shares, and the average daily
value traded was more than US$18 million.
Since its listing, Televisa has focused on maintaining an ongoing dialogue with the investor community—one that distinguishes itself for
being an honest, open, and straightforward channel of communication. Televisa has always taken very seriously its fiduciary duty to
all company shareholders and recognizes the importance of understanding the expectations of the investor community.
In 2010, Televisa was the third most-liquid GDS holding among Mexican companies listed on the NYSE and the sixth most-liquid on the
Mexican stock exchange. During 2010, the average daily volume
on the NYSE was more than 2 million shares, or approximately US$50
million, representing more than 70 percent of the Company’s total
trading volume.
Listing on the NYSE allowed Televisa to access capital in order to
fuel growth while improving efficiency and management standards. Among other measures, Televisa took the necessary steps
to strengthen corporate governance and meet the expectations
of its shareholder base.
13
Quality and innovation
Sky will continue to seek profitable growth by maintaining
superior service and innovative offerings. Low pay-TV
penetration in Mexico and Sky’s scale and nationwide
distribution will continue to contribute to solid profit margins.
Along the way, Sky will remain focused on upgrading systems
and facilities, increasing satellite capacity, and expanding its
high-definition (HD) offerings to subscribers.
14
SKY CONSOLIDATES ITS
POSITION AS THE LEADING
DTH PROVIDER IN MEXICO
Sky began operations in 1997 and quickly became a very successful
pay-TV provider in Mexico. From an early stage, it positioned itself as
the pay-TV provider of choice for the same reasons that Sky is successful today: superior customer service, international sports content,
and attractive pay-TV packages.
In 2004, Sky’s competitor decided to exit the Mexican market and
reached an agreement with Televisa to migrate its subscribers to Sky.
That same year, Televisa began the consolidation of Sky into its financial statements.
Since then, Sky’s subscriber base has grown at a compounded annual rate of 20 percent, from close to 600 thousand in 2000 to more
than 3 million at year-end 2010. Much of the initial growth in Sky originated from a strategy that targeted the high-end and middle-market
segments. Sky continues to serve this customer base with attractive
premium packages and value-added services.
Most recently, in the second quarter of 2010, Sky launched its successful HD package, further enhancing its premium pay-TV offerings.
The profile of its customer base allows Sky to deliver one of the strongest ARPU, or average revenue per user, in Mexico.
In 2009 Sky entered the lower-income market segment with packages such as MiSky and VeTV. This strategic move allowed Sky to
deliver growth of one million subscribers in 2010 alone. Furthermore,
Sky was able to expand into this new segment of the market while
maintaining strong margins. During 2010, at 45 percent, its Operating
Segment Income margin was among the highest in the industry.
In addition to Sky’s recent successful inroads into other demographics
in Mexico, Sky has developed a solid presence in other Latin American markets. In the aggregate for the Dominican Republic and Central America, Sky closed 2010 with 145 thousand subscribers.
15
INTERNATIONAL SUCCESS
OF TELEVISA’S CONTENT
In 2005 Rebelde (Rebel), a Telenovela that portrayed the life of teenagers at a private boarding school in Mexico, became an international sensation. The success of Rebelde demonstrated Televisa’s
ability to produce content that has universal appeal and can deliver
value to all of Televisa’s business segments.
Televisa first aired Rebelde in October of 2004. The characters were
also members of the band RBD, which, together with Rebelde, quickly
captured the imagination of youth throughout Mexico, Latin America,
the United States, and many other countries around the world.
Rebelde aired on Channel 2 in Mexico for three seasons through July
2006 for a total of 750 half-hour episodes. The Telenovela’s tremendous
success spurred the production of additional content that crossed all
of Televisa’s platforms. These other platforms included DVDs, pay-TV
content, music production, nearly 240 live concerts, RBD magazine,
SMS, ring tones, and licensing agreements for merchandising. Rebelde,
the Mexican adaptation of Cris Morena’s original script, was not only
a multiplatform success; it was also a global phenomena. Eventually,
Rebelde was successfully transmitted in 65 countries.
The popularity of Rebelde has endured: the program was aired in
2009 and 2010 via pay-TV platforms and on Televisa’s all-Telenovela
channel, TLnovela. Today, Rebelde continues to draw an important
audience.
During 2005, Rebelde was just one success of many for Televisa’s
Programming Exports business. That same year, other international
hits included the reality series Bailando por un Sueño, of which we
sold the format in Italy, France, and Peru, among others. Also, the
Telenovela Rubí was televised in the United States, 16 countries in
Latin America, the Philippines, Malaysia, Israel, and Eastern Europe,
among other countries.
Beyond selling its content worldwide, in 2008 Televisa began exporting some of its most successful program formats through collaborative arrangements with producers in China, Brazil, and afterwards
with France. These arrangements enabled Televisa to participate in
high-potential advertising markets around the world. Televisa is successfully adapting its content to the languages and nuances particular to each culture and in formats new to those markets.
16
Maximizing the value of our content
In the years to come, Televisa will continue to focus on
finding creative ways to maximize the value of its content
and expertise and will seek new markets, new formats,
and new business models.
17
At the forefront of technology
Today Cablevisión is one of several cable assets that,
together, have transformed Televisa into a relevant player in
Mexico’s cable and telecom industry. In 2010, Cablevisión
served a total of 1.2 million revenue-generating units (RGUs)
in Mexico City. Of that number 669 thousand were video, 299
thousand broadband, and 190 thousand voice subscribers.
With this and other efforts Cablevisión is working to remain at
the forefront of technology and to strengthen its competitive
position in this fast-growing industry.
18
CABLEVISIÓN DIGITALIZES
ITS NETWORK
In 2006 Cablevisión completed the conversion of its network from
analog to digital format. This milestone enabled the company to
provide a host of new services and pay-TV offerings, tapping its full
potential in Mexico City and laying the groundwork to become one
of the most technologically advanced players in Mexico’s cable
and telecom market.
Two years earlier, Cablevisión had begun the process of converting its analog-format cable infrastructure to a fully digitalized network. The conversion positioned Cablevisión to combat what was
then an intractable problem in Mexico: piracy. The conversion
brought an immediate jump in the number of video subscribers,
which grew on average 10 percent annually during the three-year
digitalization period.
More significant was the fact that the conversion, built with an investment of US$133 million, allowed the company to offer high-valueadded services such as HD TV and video-on-demand.
During recent years, Cablevisión’s triple-play services have fueled
the Company’s growth in Mexico’s cable and telecom market. In
2007, Cablevisión launched its first triple-play package, effectively
transforming the company from a pay-TV provider into a telecommunications company.
In 2009 Cablevisión began a US$240-million project to deploy “fiber
to the curb,” and in doing so to bring more and better services to
the home. These include higher capacity and download speeds for
high-speed internet, video-programming such as digital video recording, and HD TV.
19
TELEVISA CELEBRATES 50
YEARS OF THE TELENOVELA
In 2007 Televisa celebrated 50 years of producing its popular Telenovelas, captivating audiences throughout the Spanish-speaking
world and beyond.
The novela as a media format was first transmitted by radio in 1932.
The first Telenovela produced in Mexico, Senda Prohibida, was
broadcast in 1958. Since then, Televisa has produced more than 800
Telenovelas, and today the Telenovela remains one of our most successful formats.
Unlike soap operas, which can run for decades, Telenovelas begin
with a defined story line, are broadcast on a daily basis, and have
an average run of 120 episodes. Televisa is able to produce approximately ten to 15 Telenovelas every year, aided by an extensive library
of scripts and a tremendous pool of talent, most of which is developed in-house.
The appeal of the Telenovela continues to grow in Mexico and
abroad. As a matter of fact, three of the five most successful Telenovelas ever were launched in the past five years. During 2007, for
example, Destilando Amor achieved an average audience share of
46.8 percent and, during its final episode, garnered an impressive 61.1
percent audience share. Televisa repeatedly replicates successes
such as these in the United States. That same year, Destilando Amor
reached an audience of 12.7 million viewers and powered Univision
to the nation’s number-one ranking among all adults in the coveted
18–34 and 18–49 demographics. Additionally, the final episode of
Destilando Amor, transmitted by Univision, was the most-watched finale of any Telenovela in Univision’s history1.
Key to the success of Televisa is the consistency in the quality and
appeal of the content that it produces. In 2006, the final episode of
La Fea Más Bella garnered 43 rating points and an audience share
of more than 62 percent. And last year, the final episode of Soy tu
Dueña was the highest-rated show in Mexico, with 30.4 rating points.
In all, during 2010, Televisa produced and transmitted all of the topten Telenovelas in Mexico, including the final episode of Hasta que el
Dinero nos Separe, which garnered 28.4 rating points.
The company’s skill in the production of Telenovelas has complemented Televisa’s success in the production of other popular formats,
such as news and sports programs, reality shows, and series.
1
Among key demographics including all viewers 2 plus and adults 18 to 49. Source:
Univision fourth-quarter 2007 earnings conference call transcript.
20
21
INVESTMENT IN
CABLEMÁS ADVANCES
TELEVISA’S CABLE AND
TELECOM STRATEGY
In 2006, Televisa invested US$258 million in long-term notes convertible into a 49 percent interest in Cablemás, the second-largest
cable company in Mexico.1 In 2008 Televisa made an additional
investment in Cablemás, and COFECO, Mexico’s competition
commission, approved the conversion of those notes into equity.
Televisa’s resulting 58.3 percent investment in Cablemás was a key
step forward in the company’s strategy to become a relevant participant in Mexico’s cable and telecommunications industry.
Televisa’s initial investment in Cablemás was one of the first in a
series of steps to expand its presence in the rapidly growing cable
and telecom industry. For example, in 2006, Televisa acquired a
50 percent interest in Televisión Internacional (TVI), which operates in Monterrey and other parts of northern Mexico. And in 2007
Televisa took a majority stake in Bestel, a fiber-optic network that
provides voice, data, and managed services to domestic and international carriers both in Mexico and the United States. In 2009,
Televisa’s cable assets Cablevisión, TVI, and Cablemás collaborated with Megacable to offer YOO, a nationally branded, lowcost triple-play offering. And in June 2010, the Mexican Communications and Transportation Ministry awarded to the consortium
formed by Televisa, Telefónica, and Megacable a 20-year contract for the lease of a pair of dark-fiber wires held by the Mexican
Federal Electricity Commission.
As of today, Televisa has one of the largest telecom infrastructures
in the country. Through its cable and telecom assets, it reaches several of the most important cities in Mexico with more than 6 million
homes passed and has close to 50 thousand miles of fiber and coaxial cable around the country. In the aggregate, as of December
31, 2010, its three cable investments had more than 1.9 million video
subscribers, 502 thousand voice subscribers, and 806 thousand data
subscribers. Since the Cablemás investment in 2006, the total number of RGUs has been growing at an average rate of 22 percent per
year. For the coming years, Televisa expects this business to remain
an important source of growth.
1
Based on number of subscribers and homes passed.
22
Attractive growth potential
As Televisa continues to explore opportunities to expand its
presence in cable and telecom, it will seek to play a role in the
consolidation of cable in Mexico. The Company expects to
benefit from economies of scale and the growth potential of
this industry, and it will continue to work to improve its offerings,
the quality of its service, and the profitability of its business.
23
Continuous growth
The ongoing growth in pay-TV penetration in Mexico and
abroad, the appeal of Televisa’s pay-TV channels, and its
extensive advertising inventory in this platform will continue
to position Televisa Networks as one of the fastest-growing
segments in Televisa.
24
TDN LAUNCH ENHANCES
TELEVISA’S PAY-TV OFFERING
Televisa launched Televisa Deportes Network (TDN), its all-sports payTV channel, in 2009. The addition of TDN rounded out Televisa’s portfolio of pay-TV channels with one of the most important genres in terms
of ratings and commercial opportunities.
Immediately upon its launch, TDN became one of the highest-rated
sports channels in Mexico.1 TDN enabled Televisa to build an audience
different from viewers of its general entertainment content, and one
that is particularly attractive to advertising clients.
The dedication put into making TDN a success is evidence of the importance that Televisa gives to this media platform. Through Televisa
Networks, we distribute a total of 18 pay-TV brands (15 owned and 3
represented) in more than 50 countries. Pay television provides Televisa with an opportunity to monetize much of the content that has
already been produced and amortized while accessing a revenue
stream different from advertising, namely subscription revenue. In
addition, through this platform Televisa is able to monetize more effectively its content abroad. Of the more than 26 million subscribers
around the world, two thirds of them are outside Mexico.
Today, Televisa’s pay-TV channels are top-ranked in many categories. In 2010, the channels Televisa transmitted over pay-TV platforms in
Mexico included five of the top-ten general entertainment channels;
three of the top-five music/lifestyle channels; and three of the top-five
movie channels.
Advertising in this platform is becoming an important source of revenue. Pay-TV channels attract demographics different from those
of broadcast television. As such, Televisa is able to gain access to
a special set of clients that otherwise would have not advertised in
over-the-air television, such as those that seek certain demographics
or that target specific geographies. In addition to benefiting from a
recurring stream of affiliate revenue, the growth of this platform has effectively allowed Televisa to benefit from the fragmentation of advertisers, expanding its total client base. For Televisa Networks, advertising
has grown at a CAGR of 43 percent2 since 2005. Today, it represents
nearly 20 percent of the total revenues of this business segment.
1
As measured on platforms carrying both TDN and other sports channels.
2
Calculated with information as reported in each time period.
25
Increasing presence in the Hispanic market
In 2010, Univision royalties accounted for US$156 million and
constituted the majority of Televisa’s Programming Exports
segment revenue. Under the new agreement, Televisa now
benefits from the creation of value in Univision. Televisa
invested US$1.2 billion in Univision for a five percent equity
stake and debentures convertible into a 30 percent equity stake of Univision, subject to existing laws and
regulations. The agreement also gives Televisa an option to
acquire an additional five percent equity stake in Univision.
In addition, the two companies signed a program license
agreement for Mexico, under which Televisa received the right to broadcast Univision’s content in the country.
The agreement expands and deepens the most important
alliance in Spanish-language media today. It aligns the
interests of both companies and empowers them to work
together to enhance their presence and prospects in the
growing U.S. Hispanic market.
26
TELEVISA SIGNS
LANDMARK AGREEMENT
WITH UNIVISION
In December 2010 Televisa made a substantial investment in
Univision and expanded and extended its long-term Program
License Agreement.
Since 1961, Televisa has successfully exported its content to the United
States, initially through Spanish International Network, which in the
1980s changed its name to Univision. Televisa has also participated
in the U.S. pay-TV market through TuTV, its joint venture with Univision,
since 2002.
This new agreement increases the exposure of Televisa’s content to
the U.S. Hispanic market, giving Univision the right to carry it across
all of its audiovisual platforms.
The U.S. Hispanic market represents an important growth opportunity
for Televisa, since a significant number of U.S. companies still do not
advertise in this market—even though population is growing at four
times the rate of the total U.S. population.
In addition, nearly two-thirds of the country’s 50 million Hispanics
are of Mexican heritage, and household consumption is 27 percent
higher than consumption in Mexico. As a cultural demographic,
U.S. Hispanics tend to retain cultural traditions and value systems,
which partly explains why Televisa’s content travels naturally and
successfully to the United States.
This new agreement provides a mutually beneficial platform. For
example, the agreement will enable them to capture the growth
opportunity presented by offering new advertising alternatives to
current and potential clients. The agreement will also extend the
portfolio of pay-TV channels distributed in the United States and
allow for the digital transmission of Televisa’s content.
The agreement expands the royalty base and immediately increases
the royalty payment to Televisa from 9.36 percent of television-only
revenues to 11.91 percent of all audiovisual revenue. The agreement
provides for a further increase, to 16.22 percent, beginning in 2018.
27
a decade
at the
FOREFRONT
2005
• International success of
Televisa’s content
• The DirecTV subscriber
migration process is
completed, increasing Sky’s
base to more than 1.25
million.
2001
• The launch of
Fundación Televisa
• Pricing of US$300 million
10-year Senior Notes offering
with an 8% coupon.
• Salomé breaks rating
records, delivering 25 rating
points.
2003
• Televisa celebrates 10
years on the NYSE
• Niña Amada Mía breaks
rating records, delivering 26
rating points.
2004
2006
• Televisa issues US$300
million, 30-year,
investment-grade bond
• Sky consolidates its
position as the leading DTH
provider in Mexico
• Cablevisión digitalizes its
network
• Agreement to launch five
Pay-TV channels in the U.S.1
• The corporate restructuring
concludes, and a dividend
policy3 is approved.
• Amor Real ranks as the mostwatched Telenovela of all
time among US Hispanics.
• Pay-TV Networks subscribers
reach more than 10 million.
1
2
3
4
5
6
7
8
28
28
• A US$600 million dollar 20-year Senior Notes
offering is priced.4
2002
• Cablevisión launches public
offering on the Mexican
stock exchange2.
• Cablevisión begins to offer
DVR and HD services.
in partnership with Univision.
49% of its capital.
Ps.0.35 per CPO annually.
with a coupon rate of 6.625%.
at 8.49% and due 2037.
which represented an approximate 11.3% equity stake.
US$500 million aggregate principal amount of Senior Notes due 2018.
in Mexico and Latin America.
9
10
• La Fea Más Bella breaks
rating records, delivering 29
rating points.
• Pay-TV Network subscribers
reach more than 15 million.
• Televisa acquires a 50%
equity stake in TVI.
US$600 million aggregate principal amount due 2040.
together with Megacable.
11
at 7.38% and due 2020.
12
formed by Telefónica, Televisa, and Megacable.
13
among Total Viewers 2+.
2007
2009
• Televisa celebrates 50
years of the Telenovela
• TDN launch enhances
Televisa’s Pay-TV offering
• Pricing of Ps.4,500 million
aggregate principal amount
of Senior Notes,5 one of the
few 30-year euro-peso deals.
• Pricing of Senior Notes9 at
6.625%, a 245 bp spread
over Mexican treasuries, the
second smallest spread of
any Mexican issuer.
• Cablevisión launches
telephony services and
acquires Bestel.
• Sky reaches 1.5 million
subscribers and initiates
operations in Central
America and the Dominican
Republic.
• Televisa acquires Editorial
Atlántida.
• Televisa sells its shares and
warrants 6 in Univision for
US$1,094.37 million.
• Our three cable
investments10 launch YOO,
a successful triple-play
offering.
• Cablevisión initiates “Grand
Slam” project, taking fiberto-the-curb and increasing
homes passed, among other
objectives.
2010
• Investment in Cablemás
advances Televisa’s cable
and telecom strategy
• Televisa signs landmark
agreement with Univision
• Televisa becomes exclusive
distributor of Telemundo
content in all audiovisual
platforms.8
• Pay-TV Networks subscribers
reach more than 20 million.
• Telehit beats MTV in Mexico
national ratings and
maintains leadership in the
years to follow.
• Televisa expresses interest in
participating in the mobile
telecommunications
market.
• Sky launches VeTV and pays
Ps.2.7 billion in dividends.
2008
• Pricing of Senior Notes7 at
6%, the lowest coupon ever
paid for any bond issued by
Televisa.
• Television Broadcasting
delivers revenue growth of
0.5%, while Mexican GDP
decreases 6%.
• Pricing of Ps.10,000 million
aggregate principal
amount of notes,11 the
largest corporate issuance
at a fixed rate in the local
market, at a historically low
interest rate.
• Sky reaches 3 mm
subscribers, of which 1 mm
are added in 2010; launches
IS-16 satellite; and starts to
offer HD services.
• Televisa launches ForoTV, a
24-hour news channel.
• The consortium12 receives a
contract for the lease of a
pair of dark-fiber wires held
by the Mexican Federal
Electricity Commission.
• Publishing concludes the
restructuring of the business
and extends the presence
of six brands to digital
platforms.
• Televisa produces its 800th
Telenovela.
• Soy tu Dueña becomes the
most-watched Spanishlanguage Telenovela in US
television history13.
• Pay-TV Networks subscribers
reach more than 25 million.
29
29
MANAGEMENT´S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
Set forth below are our consolidated results for the years ended December 31, 2009 and 2010. Results
included have been prepared in accordance with Mexican Financial Reporting Standards (“Mexican
FRS”), and are presented in Mexican Pesos. The financial information set forth below should be read in
conjunction with our audited consolidated financial statements as of and for the years ended December 31, 2009 and 2010 included in this Annual Report.
The images shown along the MD&A section of this report are extracts of a campaign named “Estrellas del
Bicentenario” (Bicentennial Stars), which was produced and transmitted by Televisa to celebrate the Bicentennial of Mexico’s independence by highlighting some of the country’s most beautiful locations.
Year ended December 31,
(In millions of Mexican Pesos)(1)
Net sales
Ps.
Cost of sales(2)
2009
2010
52,352.5
Ps. 57,856.8
23,768.4 26,294.8
Selling expenses(2)
4,672.1
4,797.7
Administrative expenses(2)
3,825.5
4,602.4
Depreciation and amortization
4,929.6
6,579.3
Operating income
15,156.9 15,582.6
Other expense, net
1,764.9
567.2
Integral cost of financing, net
2,973.3
3,028.6
Equity in losses of affiliates, net
715.3
211.9
Income taxes
3,120.7
3,259.0
Non-controlling interest net income
575.6
832.5
Ps.
7,683.4
Controlling interest net income
(1)
Ps.
6,007.1
Certain data set forth in the table above may differ from data set forth in the consolidated statements of
income for the years ended December 31, 2009 and 2010 included in this Annual Report due to differences in
rounding.
(2)
Excluding depreciation and amortization.
30
Overview of Consolidated Results
Net Sales
Our net sales increased by Ps.5,504.3 million, or 10.5%, to
Ps.57,856.8 million for the year ended December 31, 2010
from Ps.52,352.5 million for the year ended December 31,
2009. This increase was attributable to revenue growth across
all our business segments with the exception of Publishing
which underwent a restructuring process. Growth was especially strong in our Cable and Telecom and Sky segments.
Cost of Sales
Cost of sales increased by Ps.2,526.4 million, or 10.6%, to
Ps.26,294.8 million for the year ended December 31, 2010
from Ps.23,768.4 million for the year ended December 31,
2009. This increase was due to higher costs in our Cable and
Telecom, Television Broadcasting, Sky, Pay Television Networks and Programming Exports segments. These increases
were partially offset by a decrease in the costs of our Publishing and Other Businesses segments.
Selling Expenses
Selling expenses increased by Ps.125.6 million, or 2.7%, to
Ps.4,797.7 million for the year ended December 31, 2010 from
Ps.4,672.1 million for the year ended December 31, 2009. This
increase was attributable to higher selling expenses in our
Cable and Telecom, Pay Television Networks, Programming
Exports and Television Broadcasting segments. These increases were partially offset by a decrease in selling expenses in
our Publishing, Sky and Other Businesses segments.
Administrative Expenses
Administrative expenses increased by Ps.776.9 million, or
20.3%, to Ps.4,602.4 million for the year ended December 31,
2010 from Ps.3,825.5 million for the year ended December 31,
2009. This increase reflects increased administrative expenses in all our segments, especially in our Cable and Telecom
and Sky segments, as well as an increase in corporate expenses due to higher share-based compensation expense,
which amounted to approximately Ps.560.6 million in 2010,
compared with Ps.375.7 million in 2009.
Palenque, Chiapas. Archaeological zone.
31
Overview of Operating Segment Results
The following tables set forth the net sales and operating segment income (loss), for each of the
Company’s business segments for the years ended December 31, 2009 and 2010.
% Contribution to 2010
Total Segment
Net Sales
Year ended December 31,
(In millions of Mexican Pesos)
2010
2009
Net Sales
Ps.
22,750.1
Pay Television Networks
2,736.6
3,146.2
5.3
Programming Exports
2,845.9
3,074.8
5.2
Publishing
3,356.1
3,229.6
5.5
Sky
10,005.2
11,248.2
19.0
Television Broadcasting
Ps.
21,561.6
38.5 %
Cable and Telecom
9,241.8
11,814.2
20.0
Other Businesses
3,771.4
3,812.3
6.5
59,075.4
100.0
Intersegment Revenues (1) (1,166.1)
(1,218.6) (2.1)
Ps.
57,856.8
97.9 %
Total Segment Net Sales Consolidated Net Sales
(1)
Ps.
53,518.6
52,352.5
For segment reporting purposes, intersegment revenues are included in each of the segment revenues.
Year ended December 31,
(In millions of Mexican Pesos)
2010
2009
Operating Segment Income (Loss)
(1)
Ps.
10,323.9
Ps.
10,714.3
Pay Television Networks 1,660.4
1,622.0
Programming Exports
1,437.2
1,503.6
Publishing
190.7
425.3
Sky
4,478.8
5,074.5
Cable and Telecom
2,971.9
3,907.2
Other Businesses
(318.2)
(184.0)
Total Operating Segment Income
20,744.7
23,062.9
Corporate Expenses
(658.2)
(901.0)
Depreciation and Amortization
(4,929.6)
(6,579.3)
Consolidated Operating Income
15,156.9
Ps.
15,582.6
Television Broadcasting
(1)
Ps.
The operating segment income (loss) set forth in this Annual Report does not reflect corporate expenses or
depreciation and amortization in any period presented and is presented herein to facilitate the discussion of
segment results.
32
Television Broadcasting
Television Broadcasting net sales, representing 40.3% and
38.5% of our total segment net sales for the years ended
December 31, 2009 and 2010, respectively, increased by
Ps.1,188.5 million, or 5.5%, to Ps.22,750.1 million for the year
ended December 31, 2010 from Ps.21,561.6 million for the
year ended December 31, 2009. Our content continued to
perform well. For example the final episode of the novela
“Soy tu Dueña” was the highest rated program transmitted
in Mexico through broadcast television during the year, and
nine of the top-ten rated shows on over-the-air television in
Mexico were transmitted by us. The sales of the broadcast
and transmission of the 2010 Soccer World Cup in South Africa also contributed to the increase in net sales.
Television Broadcasting operating segment income increased
by Ps.390.4 million, or 3.8%, to Ps.10,714.3 million for the year
ended December 31, 2010 from Ps.10,323.9 million for the
year ended December 31, 2009. This increase was due to the
increase in net sales and was partially offset by an increase
in cost of sales related to the transmission during the year
of programs produced in connection with the 2010 Soccer
World Cup, including the soccer matches, and an increase in
operating expenses, primarily in personnel expenses.
Pay-Television Networks
Pay Television Networks net sales, representing 5.1% and 5.3%
of our total segment net sales for the years ended December
31, 2009 and 2010, respectively, increased by Ps.409.6 million,
or 15.0%, to Ps.3,146.2 million for the year ended December
31, 2010 from Ps.2,736.6 million for the year ended December
31, 2009. This increase was achieved in spite of a negative
translation effect of foreign-currency-denominated sales,
and was driven by higher revenues from channels sold in
Mexico as well as higher advertising sales, which represented 22.7% of segment revenue in 2010. Some of the most successful channels during the year included “Clásico TV” and
the 2-hour delayed version of “Channel 2”. Additionally, during the year, we successfully added to our portfolio of highdefinition channels “Golden” and “American Network”, and
launched the “TL Novela” channel in Brazil.
Pay Television Networks operating segment income decreased by Ps.38.4 million, or 2.3%, to Ps.1,622.0 million for the
year ended December 31, 2010, from Ps.1,660.4 million for
the year ended December 31, 2009. This decrease reflects
an increase in cost of sales and operating expenses, driven
mainly by investments made in the production and launch
of two new channels. In August 2009 we launched our
sports pay-TV channel, “Televisa Deportes Network (TDN)”,
which carried on an exclusive basis ten of the 64 games of
the 2010 Soccer World Cup. Additionally, in February 2010
we launched “Foro TV”, our 24-hour news pay-TV channel,
which from September 2010 is broadcast on our free-to-air
Channel 4.
Montebello lagoons, Chiapas. Pojoj lake.
33
Programming Exports
Programming Exports net sales, representing 5.3% and 5.2%
of our total segment net sales for the years ended December
31, 2009 and 2010, respectively, increased by Ps.228.9 million,
or 8.0%, to Ps.3,074.8 million for the year ended December 31,
2010 from Ps.2,845.9 million for the year ended December 31,
2009. This increase was primarily due to an increase in royalties from Univision, from U.S.$143.0 million in 2009 to U.S.$156.1
million in 2010, as well as higher programming sales mainly
in Europe and higher revenue from co-productions abroad.
This increase was partially offset by a negative translation effect on foreign-currency-denominated sales.
Programming Exports operating segment income increased
by Ps.66.4 million, or 4.6%, to Ps.1,503.6 million for the year
ended December 31, 2010 from Ps.1,437.2 million for the year
ended December 31, 2009. This increase was primarily due
to the increase in net sales, which was partially offset by an
increase in cost of sales due to higher programming and coproduction costs and operating expenses, primarily due to
an increase in personnel expenses and an increase in the
provision for doubtful trade accounts.
Publishing
Publishing net sales, representing 6.3% and 5.5% of our total
segment net sales for the years ended December 31, 2009
and 2010, respectively, decreased by Ps.126.5 million, or
3.8%, to Ps.3,229.6 million for the year ended December 31,
2010 from Ps.3,356.1 million for the year ended December
31, 2009. The annual decrease was driven by the negative
impact of the translation effect on foreign-currency-denom-
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inated sales; and from a restructuring of the business, which
included taking some magazines off the market resulting in
a decrease in magazine circulation in Mexico and consequently a decrease in advertising revenue. This decrease was
partially offset by an increase in advertising sales abroad.
Publishing operating segment income increased by
Ps.234.6 million, or 123.0%, to Ps.425.3 million for the year
ended December 31, 2010 from Ps.190.7 million for the year
ended December 31, 2009. This increase reflects lower paper and printing costs in connection with the restructuring
process and lower operating expenses due to non-recurrent charges such as a decrease in allowances and the
provision for doubtful trade accounts. This increase in the
operating segment income was partially offset by the decrease in net sales.
Sky
Sky net sales, representing 18.7% and 19.0% of our total segment net sales for the years ended December 31, 2009 and
2010, respectively, increased by Ps.1,243.0 million, or 12.4%,
to Ps.11,248.2 million for the year ended December 31, 2010
from Ps.10,005.2 million for the year ended December 31,
2009. The annual increase was driven by solid growth in the
subscriber base in Mexico, mainly attributable to the success
of Sky’s new low-cost offerings. Additionally, Sky transmitted
24 matches of the 2010 Soccer World Cup on an exclusive
basis and in some packages sold it as a pay-per-view event.
The number of gross active subscribers increased to 3,044,000
(including 149,900 commercial subscribers) as of December
31, 2010 from 1,959,700 (including 144,300 commercial subscribers) as of December 31, 2009.
Sky operating segment income increased by Ps.595.7 million
or 13.3% to Ps.5,074.5 million for the year ended December
31, 2010 from Ps.4,478.8 million for the year ended December
31, 2009. This increase was due to the increase in net sales as
well as a reduction in the amount of costs amortized related
to the exclusive transmission of certain 2010 Soccer World Cup
matches. This increase was partially offset by an increase in programming costs associated with the increase in our subscriber
base, and operating expenses due to commissions paid and
increase in the provision for doubtful trade accounts.
Cable and Telecom
Cable and Telecom net sales, representing 17.3% and 20.0%
of our total segment net sales for the years ended December
31, 2009 and 2010, respectively, increased by Ps.2,572.4 million,
or 27.8%, to Ps.11,814.2 million for the year ended December
31, 2010 from Ps.9,241.8 million for the year ended December 31, 2009. This increase was primarily due to the consolidation of Cablevisión Monterrey (“TVI”) effective October
1, 2009, which represented incremental sales of Ps.1,463.5
million as well as the addition of more than 356,000 revenue
generating units (RGUs) in Cablevisión and Cablemás.
Cable and Telecom operating segment income increased
by Ps.935.3 million, or 31.5%, to Ps.3,907.2 million for the year
ended December 31, 2010 from Ps.2,971.9 million for the
year ended December 31, 2009. This increase was due to
the continued growth in the cable platforms as well as a
positive translation effect on foreign-currency-denominated
costs, and was partially offset by the increase in costs resulting from the growth in the subscriber base and higher costs
and expenses resulting from the consolidation of TVI.
The following table sets forth the breakdown of RGUs as of
December 31, 2010:
CABLEVISIÓN
CABLEMÁS
TVI
Video
668,985
997,239
301,698
Broadband
299,157
360,049
147,268
Voice
190,441
205,180
106,129
1,158,583
1,562,468
555,095
RGUs
Other Businesses
Other Businesses net sales, representing 7.0% and 6.5% of our
total segment net sales for the years ended December 31,
2009 and 2010, respectively, increased by Ps.40.9 million, or
1.1%, to Ps.3,812.3 million for the year ended December 31,
2010 from Ps.3,771.4 million for the year ended December 31,
2009. This increase was primarily due to higher sales related to
our gaming, sporting events production, radio and publishing
distribution businesses. This increase was partially offset by lower sales in our feature-film distribution and internet businesses.
Other Businesses operating segment loss decreased by
Ps.134.2 million, or 42.2%, to Ps.184.0 million for the year ended
December 31, 2010 from Ps.318.2 million for the year ended
December 31, 2009. This decrease reflects a decrease in the
losses attributable to our sporting events production, gaming
and publishing distribution businesses as well as an increase
in the operating segment income of our radio business. These
favorable effects were partially offset by an increase in the
losses attributable to our internet business and the losses attributable to our feature-film distribution business in 2010, as
compared to 2009 when this business produced income.
Depreciation and Amortization
Depreciation and amortization expense increased by
Ps.1,649.7 million, or 33.5%, to Ps.6,579.3 million for the year
ended December 31, 2010 from Ps.4,929.6 million for the year
ended December 31, 2009. This change primarily reflects an
increase in such expense in our Cable and Telecom (due
to the consolidation of TVI), Sky and Television Broadcasting
segments. This increase was partially offset by a decrease in
such expense in our Publishing segment.
Ría Lagartos, Yucatán.
Biosphere reserve.
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Operating Income
Operating income increased by Ps.425.7 million, or 2.8%, to
Ps.15,582.6 million for the year ended December 31, 2010
from Ps.15,156.9 million for the year ended December 31,
2009. This increase reflects the increase in our total net sales,
partially offset by the increases in cost of sales, operating
expenses and depreciation and amortization expense.
Non-operating Results
Other Expense, Net
Other expense, net, for the year ended December 31, 2010,
included expenses related to financial advisory and professional services mainly associated with our investment
in Univision transaction, loss on disposition of property and
equipment, non-recurring expenses in connection with the
refinancing of debt in our Cable and Telecom segment, and
an impairment adjustment to the carrying value of goodwill
of a business within our Publishing segment. These expenses
were partially offset by a net gain on disposition of investments.
Other expense, net, decreased by Ps.1,197.7 million, or 67.9%,
to Ps.567.2 million for the year ended December 31, 2010,
compared with Ps.1,764.9 million for the year ended December 31, 2009. This decrease reflected primarily i) a reduction
in non-cash impairment adjustments to the carrying value of
goodwill in our Cable and Telecom, Television Broadcasting
and Publishing segments and ii) the gain on disposition of investments in shares. These favorable variances were partially
offset by i) non-recurring expenses related to the refinancing
of debt of Cablemás, and ii) increases in other expenses related to financial advisory and professional services and the
disposition of equipment.
Integral Cost of Financing, Net
Integral cost of financing, net, significantly impacts our financial statements in periods of high inflation or currency
fluctuations. Under Mexican FRS, integral cost of financing
reflects:
• interest expense, including gain or losses from derivative
instruments;
• interest income; and
• foreign exchange gain or loss attributable to monetary
assets and liabilities denominated in foreign currencies,
including gains or losses from derivative instruments.
Our foreign exchange position is affected by our assets or
liabilities denominated in foreign currencies, primarily U.S.
dollars. We record a foreign exchange gain or loss if the exchange rate of the Peso to the other currencies in which our
monetary assets or liabilities are denominated varies.
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The net expense attributable to integral cost of financing increased by Ps.55.3 million, or 1.9%, to
Ps.3,028.6 million for the year ended December 31, 2010 from
Ps.2,973.3 million for the year ended December 31, 2009. This
increase primarily reflected i) a Ps.478.9 million increase in
interest expense, due mainly to a higher average principal
amount of long-term debt in 2010, and ii) a Ps.5.9 million decrease in interest income explained primarily by a reduction
of interest rates applicable to cash equivalents and temporary investments in 2010. These unfavorable variances were
partially offset by a Ps.429.5 million decrease in foreign exchange loss resulting primarily from the favorable effect of a
5.5% appreciation of the Mexican peso against the U.S. dollar in 2010 our average net U.S. dollar liability position in 2010,
which changed from a net U.S. dollar asset position in 2009.
Equity in Losses of Affiliates, Net
This line item reflects our equity participation in the operating
results and net assets of unconsolidated businesses in which
we maintain an interest, but over which we have no control.
We recognized equity in losses of affiliates up to the amount
of our initial investment and subsequent capital contributions, or beyond that amount when guaranteed commitments have been made by us in respect of obligations incurred by affiliates.
Equity in losses of affiliates, net, decreased by Ps.503.4
million, or 70.4%, to Ps.211.9 million in 2010 compared with
Ps.715.3 million in 2009. This decrease mainly reflected a reduction in equity in loss of La Sexta, our 40.5% interest in
a free-to-air television channel in Spain. This decrease was
partially offset by the absence of equity in earnings of i)
Volaris, as we disposed of this investment in the third quarter of 2010, and ii) TVI, as we began consolidating its assets, liabilities and results of operations in our consolidated
financial statements effective in the fourth quarter of 2009.
Equity in losses of affiliates, net, for the year ended December 31, 2010, mainly is comprised of the equity in loss of La
Sexta, which was partially offset by the equity in earnings
of other associates.
Income Taxes
Income taxes increased by Ps.138.3 million, or 4.4%, to
Ps.3,259.0 million in 2010 from Ps.3,120.7 million in 2009. This
increase primarily reflected a higher income tax base, which
was partially offset by a lower effective income tax rate.
We are authorized by the Mexican tax authorities to compute our income tax on a consolidated basis. Mexican controlling companies are allowed to consolidate, for income
tax purposes, income or losses of their Mexican subsidiaries
up to 100% of their share ownership in such subsidiaries.
The Mexican corporate income tax rate in 2008, 2009 and
2010 was 28%, 28% and 30%, respectively.
The Flat Rate Business Tax (“Impuesto Empresarial a Tasa Única” or “IETU”) became effective in Mexico as of January 1,
2008. This flat tax replaced Mexico´s asset tax and is applied
along with Mexico´s regular income tax. In general, Mexican
companies are subject to paying the greater of the flat tax
or the income tax. The IETU is calculated by applying a tax
rate of 16.5% in 2008, 17% in 2009, and 17.5% in 2010 and the
thereafter. Although the IETU is defined as a minimum tax it
has a wider taxable base as some of the tax deductions allowed for income tax purposes are not allowed for the flat
tax. As of December 31, 2008, 2009 and 2010, this tax did not
have an effect on the Group´s deferred tax position, and
the Group does not expect to have to pay the IETU in the
near future.
In December 2009, the Mexican government enacted certain amendments and changes to the Mexican Income Tax
Law that became effective as of January 1, 2010. The main
provisions of these amendments and changes are as follows:
i) the corporate income tax rate is increased from 28% to
30% for the years 2010 through 2012, and will be reduced
to 29% and 28% in 2013 and 2014, respectively; ii) the deferred income tax benefit derived from tax consolidation of
a parent company and its subsidiaries is limited to a period
of five years; therefore, the resulting deferred income tax has
to be paid starting in the sixth year following the fiscal year in
which the deferred income tax benefit was received; iii) the
payment of this income tax has to be made in installments:
25% in the first and second year, 20% in the third year, and
15% in the fourth and fifth year; and iv) this procedure applies for the deferred income tax resulting from the tax consolidation regime prior to and from 2010, so taxpayers paid
in 2010 the first installment of the cumulative amount of the
deferred tax benefits determined as of December 31, 2004.
Uxmal, Yucatán. Archaeological zone.
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Non-controlling Interest Net Income
Non-controlling interest net income reflects that portion of
operating results attributable to the interests held by third
parties in the businesses which are not wholly-owned by
us, including our Cable and Telecom and Sky segments, as
well as our Radio business.
Non-controlling interest net income increased by Ps.256.9
million, or 44.6%, to Ps.832.5 million in 2010, from Ps.575.6 million in 2009. This increase primarily reflected a higher portion
of consolidated net income attributable to interests held by
non-controlling stockholders in our Cable and Telecom and
Sky segments.
Controlling Interest Net Income
We generated controlling interest net income in the amount
of Ps.7,683.4 million in 2010, as compared to Ps.6,007.1 million
in 2009. The net increase of Ps.1,676.3 million reflected:
• a Ps.425.7 million increase in operating income;
These changes were partially offset by:
• a Ps.55.3 million increase in integral cost of financing, net;
• a Ps.138.3 million increase in income taxes; and
• a Ps.256.9 million increase in non-controlling interest net income.
Capital Expenditures, Acquisitions and Investments
During 2011, we expect to:
• make aggregate capital expenditures for property,
plant and equipment totaling U.S.$850 million, of which
U.S.$435 million and U.S.$270 million are for the expansion and improvements of our Cable and Telecom and
Sky segments, respectively, and the remaining U.S.$145
million are for our Television Broadcasting segment and
other segments;
• make investments related to our 33.3% interest in GTAC
for an aggregate amount of Ps.159 million.
• a Ps.1,197.7 million decrease in other expense, net; and
During 2010, we:
• a Ps.503.4 million decrease in equity in losses of affiliates, net.
• made aggregate capital expenditures totaling U.S.$1,011
million, of which U.S.$438.5 million, U.S.$436.6 million and
U.S.$12.5 million correspond to our Cable and Telecom,
Sky and Gaming businesses, respectively, and U.S.$123.4
million to our Television Broadcasting and other businesses;
Monte Albán, Oaxaca. Archaeological zone.
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• made loans related to our 40.5% interest in La Sexta for an
aggregate amount of €21.5 million;
• made investments of U.S.$1,255 million in cash in Broadcasting Media Partners, Inc. (“BMP”), the controlling
company of Univision, in exchange for a 5% equity stake
of the outstanding common stock of BMP and U.S.$1,125
million principal amount debentures due 2025 bearing
interest at an annual rate of 1.5%, that are initially convertible into a 30% equity stake in the common stock of
BMP; and
• made investments and long-term loans related to our
33.3% interest in Grupo de Telecomunicaciones de Alta
Capacidad, S.A.P.I. de C.V. (“GTAC”) for an aggregate
amount of Ps.426.7 million.
During 2009, we:
• made aggregate capital expenditures totaling
U.S.$499.3 million, of which U.S.$239 million, U.S.$128.8
million and U.S.$17.5 million correspond to our Cable
and Telecom, Sky and Gaming businesses, respectively,
and U.S.$114 million to our Television Broadcasting and
other businesses;
• made investments related to our 40.5% interest in La Sexta for an aggregate amount of €35.7 million; and
• made investments in Volaris, for U.S.$5 million, and in
other associates for approximately U.S.$5.5 million.
Indebtedness
As of December 31, 2010, our consolidated long-term portion
of debt amounted to Ps.46,495.7 million, and our consolidated current portion of debt was Ps.1,469.1 million. As of December 31, 2010, our total consolidated debt was denominated in U.S. dollars (59.18%) and Mexican pesos (40.82%).
Additionally, as of December 31, 2010, our consolidated
long-term portion of capital lease obligations amounted
to Ps.280.1 million, and our consolidated current portion of
capital lease obligations was Ps.349.7 million.
The major components of our total consolidated indebtedness as of December 31, 2010 were as follows:
• 8% Senior Notes due 2011 for an outstanding amount of
U.S.$72 million;
• 6% Senior Notes due 2018 for an amount of U.S.$500
million;
• 6.625% Senior Notes due 2025 for an amount of U.S.$600
million;
• 8.5% Senior Notes due 2032 for an amount of U.S.$300
million;
• 8.49% Senior Notes due 2037 for an amount of Ps.4,500
million ;
• 6.625% Senior Notes due 2040 for an amount of U.S.$600
million;
• Long-term loan facility due 2012 for an amount of U.S.$225
million with an average annual interest of LIBOR + 0.525%
(Empresas Cablevisión);
• Long-term loan facility due 2012 for an amount of Ps.1,000
million with an average annual interest rate of 10.35%;
• Long-term loan facility due 2016 for an amount of Ps.1,400
million with an average annual interest of TIIE + 24 basis
points (Sky);
• Long-term loan facility due 2016 for an amount of Ps.2,100
million with an average annual interest rate of 8.74%
(Sky);
• 7.38% Notes due 2020 for an amount of Ps.10,000 million;
• Short-term loan facilities for an aggregate amount of
Ps.510 million with annual interest rates in the range of TIIE
plus 1.50% and TIIE plus 3.50% (TVI);
• Short-Term loan facilities for an aggregate amount of
Ps.70 million with annual interest rates in the range of
7.10% and 7.84% (TVI);
• Satellite transponder lease obligation for an amount
equivalent to U.S.$33.6 million; and
• Other capital lease obligations for an amount equivalent
to U.S.$17.4 million.
For a further description of this indebtedness, see Note 8 to
the Consolidated Financial Statements.
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