Earnings Call Transcript - TV Q2 2022

Operator, Operator

Good morning, everyone, and welcome to Grupo Televisa's Second Quarter 2022 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. As a reminder, this call is being recorded. And I would now like to turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Alfonso de Angoitia, Co-CEO

Thank you, Paul. Good morning, everyone, and thank you for joining us. With me today are Pepe Antonio Gonzalez, CEO of Cable; Luis Malvido, CEO of Sky; and Carlos Phillips, CFO of Grupo Televisa. During the second quarter, Grupo Televisa's consolidated revenue reached MXN 18.5 billion, representing year-on-year growth of 0.3%, while operating segment income reached MXN 7 billion, equivalent to a year-on-year decline of almost 5%. Revenue growth at our residential operations in Cable and our other businesses segment was partially offset by declining revenue at our enterprise operations in Cable and Sky. Pepe Antonio and Luis will elaborate on the operating and financial performance of each of our core consolidated segments in their remarks. But before, let me say that since the last time we spoke, the global economy has gone through significant changes. GDP growth in the U.S. and Mexico is expected to slow down. The global economic outlook should remain challenged in the near future, while the thoughts of a global economic recession have increased. We will continue to monitor the evolution of macro variables and will not hesitate to act decisively, taking necessary measures to preserve free cash flow in the event of a further deterioration of the economy as has been the case in previous macroeconomic downturns. It is important to highlight that we have already identified and presented to our Board in yesterday's meeting, the levers we will pull in every single business where we operate in the event of a recession. As you may recall, during the COVID recession in 2020, excluding the other businesses segment, as most of them were fully closed for a significant portion of the year, Grupo Televisa's segment revenue and operating segment income for our three core operations grew by 2% and 2.1% year-on-year, respectively. We achieved this resilient operating and financial performance by implementing an aggressive cost reduction plan, which translated into MXN 2.2 billion in savings or the equivalent of 3.6% of our OpEx structure. Despite a more challenging global economic landscape, we firmly believe that we have a stronger footing than ever following our merger of our media content and production assets with Univision as our streaming portfolio is fully complete and very well positioned to capture the massive global streaming opportunity. And because both Grupo Televisa and TelevisaUnivision have much stronger balance sheets than in the previous global economic downturns with leverage ratios of 2.2x and 5.5x, respectively. Moreover, we are confident that we will continue to deliver strong revenue growth at TelevisaUnivision and resilient operating performance at Grupo Televisa during the second half of the year. Despite a higher probability of a recession, we still expect growth in 2022 to be back-end loaded both at TelevisaUnivision and Grupo Televisa driven by several factors such as the monetization of the World Cup rights, increased advertising spending in Mexico due to the Qatar World Cup during the fourth quarter, mid-term elections in the U.S., solid RGU net adds in the remainder of the year at Cable and closing pending contracts for new projects at our enterprise operations. Now let me walk you through TelevisaUnivision's solid second quarter results released yesterday morning. The company delivered another outstanding quarter with revenue of $1.1 billion, growing 11% year-on-year on a pro forma basis, while EBITDA of $373 million, declined by 8% as streaming investments ramp up, following the launch of the ViX AVOD service on March 31 and ahead of the ViX Plus SVOD service launched on July 21. Moreover, during the first half of the year, TelevisaUnivision's revenue has increased by 11%, while EBITDA has just declined by around 1%, a remarkable achievement considering the launch of ViX and ViX Plus, which illustrates the power and uniqueness of our combined assets as well as the focus and discipline of our execution. During the quarter, revenue growth at TelevisaUnivision was driven by strong increases in consolidated advertising and subscription, and licensing revenue of 11% and 10%, respectively. In the U.S., advertising revenue increased by 11% as we continue to benefit from the '21/'22 upfront, which delivered the highest growth in volume and pricing in history. In addition, TelevisaUnivision experienced strong demand for advanced marketing solutions in the U.S. and the highest scattered pricing for our company in history. In Mexico, advertising revenue increased by 14% year-on-year as the record-setting 2022 upfront produced strong client demand with seven of the top ten advertising categories growing their spend during the quarter. Moreover, our number of clients in the second quarter was the highest on record. Subscription and licensing revenue increased by 10% in both the U.S. and Mexico. This growth was primarily driven by the new contract with YouTube TV signed in mid-September 2021 and pay-television subscriber growth and higher prices in Mexico. Moving on to the performance of our content. In the U.S., our total market share in primetime audiences went up to 7% in the second quarter from 6.8% during the same period of last year. Moreover, our share of Spanish language primetime viewing rose 40 basis points to 62.2%. In Mexico, our free-to-air television share of primetime audiences from Monday to Friday increased to 58.4% from 55.9% during the second quarter. In the second quarter, 19 of the top 20 programs on Mexico's broadcast television were produced and transmitted by us. Also, we broadcasted eight of the top ten most-watched soccer matches in the quarter. Moreover, the audiences of our free-to-air networks are higher than those of our peers on free-to-air and pay-television networks combined. While our linear business continues to deliver great success and outperformed the market, we could not be more excited about our streaming business and the enormous promise we have made over the last 15 months. Our AVOD service ViX has been live for its first full quarter seeing substantial success with our streaming ad sales efforts, onboarding new streamline-only advertisers, while selling ViX into our linear ad buyers. We are very excited about the early results we have seen at ViX. We set some aggressive goals in terms of users and engagement and both have been performing better than expected. We have great momentum, but it is too early to draw conclusions on trends from these results. We are just one quarter into this journey, and we are very excited about what we are achieving so far. Looking ahead, we just closed another incredibly successful '22/'23 U.S. upfront. On the heels of a strong comp from last year, volume grew double digits to the highest level we have produced in seven years. For the second consecutive year, pricing held in line with the market in the high single-digit range. This follows years of price discounting in Univision and starts to take the value of our content back to the pricing levels where it belongs, made possible by the work we have done to reinvent our ad sales function and the strong momentum of our content. Importantly, we grew in both linear and streaming. Unlike other media companies, we were able to leverage growth in ways that are complementary to linear. Demand from ViX came from our existing linear advertisers, where the bundle rates approached an outstanding 70% as well as from new digital-first advertisers. Capturing digital budgets where there is secular growth in ad dollars is a huge opportunity for us, and we're executing on it. Our early success is also solid proof of the quality algorithm we have made with these new products and new brands. July 21st marked another milestone for our streaming service with the launch of our completely new SVOD service ViX Plus, featuring more than 10,000 hours of ad-free premium entertainment programming in its first year and up to 7,000 hours of live sports with a monthly price of $6.99 in the U.S. and MXN 119 in Mexico. We just announced our first two original series, Maria Felix: La Dona, and La Mujer del Diablo, and both are already receiving great reviews in the press. We're also taking the best theatrical slate of 2022 from our own studio, Videocine, and putting them exclusively on ViX Plus. ViX Plus completes our comprehensive offering of three distinct platforms, including linear, digital, and audio. We are unique in the industry in that our streaming service is truly complementary to linear. Our linear business is healthy, and we're not looking to cannibalize that. Rather, we have the content library, corporate production capabilities, and sports rights to fuel content on three distinct platforms. Now let me turn the call over to Pepe Antonio, CEO of Cable.

Pepe Antonio Gonzalez, CEO of Cable

Thank you, Alfonso. During the second quarter of 2022, our Cable segment's residential operations continued to show a solid improvement in operating metrics for the third consecutive quarter, leading to accelerated growth in residential revenue. In terms of net additions, we added 304,000 fixed revenue-generating units in the second quarter, marking the second quarter in a row over 300,000, along with 21,000 mobile RGUs. We concluded the quarter with a total of 15.2 million RGUs, composed of 15 million fixed and 200,000 mobile. These increases are the highest since 2018, excluding impacts from the pandemic. Monthly sales are at record levels, propelled by the reorganization of our flagship products, the home pass expansion plan initiated last year, and improved sales processes. Our robust customer retention program, which includes enhanced broadband speeds for certain products and notable network quality improvements, has helped maintain stable churn rates. Video services continue to perform well, with net video additions at record levels for the third consecutive quarter, adding 79,000 video RGUs this quarter, where triple-play packages represented nearly two-thirds of our sales while enhancing retention efforts. In the broadband sector, we accelerated growth from Q1, adding 78,000 RGUs for a total of 5.8 million. Broadband remains our highest margin service, and we are enhancing its offerings, also seeing a rise in double-play sales. The positive operating metrics in the residential segment are now beginning to lead to incremental revenue growth. Revenue growth in our residential segment rose from 3.4% in Q1 to 3.8% in Q2. This improvement coincided with cost efficiency initiatives, allowing EBITDA to grow more rapidly than revenue, increasing from 4.3% in Q1 to 5.0% in Q2. For our enterprise operations, which represent about 12% of our Cable revenue, results were affected by a challenging year-on-year comparison due to the Red Jalisco project. Excluding this impact, revenue would have grown by 1.7%, compared to the reported decline of 18.8%. Red Jalisco was a state-sponsored initiative in Jalisco to develop a fiber network. Despite the difficulties in growing enterprise revenue in the first half of the year, we are optimistic about a strong recovery in the second half, aiming for year-on-year growth in the low to mid-single digits as new projects are finalized. We anticipate that residential RGU net additions will remain robust, mirroring levels seen in recent quarters, while revenue growth in the residential segment continues to progress steadily. The cycle of ongoing projects and the introduction of new ones is expected to lead to stronger revenue for the enterprise segment. Before I hand the call back to Alfonso, I want to emphasize our confidence that the expansion into selected locations initiated last year has contributed to our strong operational outcomes, which we expect to sustain throughout the remainder of the year.

Alfonso de Angoitia, Co-CEO

Thank you, Pepe Antonio. Now let me turn the call over to Luis Malvido, CEO of Sky. Before that, let me say that Luis took over as CEO of Sky this year, and he has done a wonderful job in putting together a turnaround plan. He is going to share with us the details of that plan, which was approved by the Board of Directors of Sky two days ago, and he has put together a new team of executives that are just great. So Luis, please take us through your plan.

Luis Malvido, CEO of Sky

Thank you very much, Alfonso. Today, I will share the key highlights of the strategic program along with examples of initiatives currently in progress. After that, I will provide an overview of our second quarter operating and financial results. Our strategic program envisions three elements for Sky: First, strengthening our core business through a digitalization and simplification program; second, evolving our core to become an OTT aggregator; and third, expanding beyond our core. To achieve this vision, we've structured a strategic plan around four pillars: revenue growth, customer lifecycle management, high-quality content and products, and digital transformation, simplification, and efficiency. Starting with revenue growth, our main priority is to expand our top line by revamping our commercial strategies in key markets, reinforcing sales channels, and leveraging strategic alliances to boost telecom revenue. We assessed the pay-TV market in Central America, a region with over 60 million people and a large rural population, which is ideal for DTH given the low penetration of pay-TV and broadband. Currently, Sky has fewer than 150,000 customers in these markets, representing less than 3% market share. This is a growing market where we have a significant opportunity to gain market share. Our strategy focuses on enhancing commercial operations in selected countries that offer attractive market size, growth potential, and macroeconomic stability. We chose five out of the seven countries where we operate. By implementing a solid operational revamp and refocusing commercial efforts, we expect to increase the consolidated top line by about 5% over the next three years. A significant opportunity lies in strengthening sales channels in Mexico. During the second half, we took control of all digital channels previously led by our master dealers. We also introduced AI tools to optimize our investment and enhance sales while improving customer experience. Additionally, we implemented Oracle Field Service to manage installations and improve the installations-to-sale ratio. In the initial six weeks after launch, we saw improvements from 63% to our target of 90%. This initiative is part of our plan to transition from a situation where 90% of sales come from personalized door-to-door channels, to a new mix where digital channels, telemarketing, and retail points of sale represent 40% of total sales. Along with a new commission model, we aim to shift the product base from the current 90-10 prepaid to postpaid ratio to a balanced mix of 70-30 between prepaid and postpaid, which should lead to a significant improvement in gross ARPU. As for strategic alliances to increase Sky's telecom revenue, in the second half of this quarter, we will launch a new mobile service utilizing the AT&T network, known for its robust and competitive 5G coverage. Our initial target market will be Sky postpaid customers, and we will offer competitive individual and family plans with attractive cross-promotions leveraging our video assets. Regarding our partnership with Altan for fixed wireless, Altan has completed its financial restructuring and has a new management team, which we expect will improve service and network quality. We are also looking into partnership options to provide competitive high-speed broadband to our pay-TV customers. I anticipate sharing more details in upcoming quarters. Moving to customer lifecycle management, our aim is to become a customer-centric organization that anticipates customer needs to maximize lifetime value. We've established a dedicated team and built the technology to prioritize customer interests and act on data across each stage of the customer journey. As part of this initiative, we are redesigning the user interface of our mobile app and webpages to better align with customer needs, maximizing conversion rates. A first step has been implementing a new digital customer care channel via WhatsApp, where in less than a month, 14% of contacts with postpaid customers were handled through this channel, with a target of 50% by year-end. To enhance customer satisfaction, we're improving retail service for prepaid customers and have restructured our service operations. We discovered that our service provision for prepaid and postpaid customers is similar, despite having five times more prepaid customers. This imbalance, along with complexities in our inbound call process, leads to customer attrition and unnecessary sales redundancies. We launched a trial last month to enhance prepaid service, anticipating annual savings of approximately MXN 300 million. In managing churn, we have created a framework using data analytics and customer segmentation to address this issue effectively. I look forward to reporting positive trends in churn management in the upcoming quarters. Now, turning to our focus on high-quality content and products. Sky must retain its influential role in the pay-TV sector as a leading content provider. To that end, we've secured exclusive rights for several prominent sports properties, including Spanish La Liga and Copa del Rey, as well as all UEFA national teams and Bundesliga matches. Sky will also be the sole platform offering complete coverage of the FIFA World Cup Qatar 2022 at the end of this year. We will leverage this opportunity to reposition our brand, becoming the first pay-TV operator to provide 4K content in Mexico. We'll make our thematic work available for free to our entire customer base across both DTH and Blue To Go platforms, requiring only registration. Our objective is to enhance customer loyalty, reduce churn, spur recharges, and promote our OTT platform. Moving on to our digital transformation, simplification, and efficiency, we are conducting a comprehensive review of our processes this year to identify areas for cost reduction and resource reallocation. We identified sales processes as a key area for automation. Currently, our sales process involves manual steps that can hurt customer experience and create inefficiencies. We are implementing Salesforce and another digital platform to enhance operational performance, lower costs, and reduce errors by early Q4. A major opportunity for efficiency lies in adapting our sales commission model, which currently emphasizes volume over quality. The existing commission structure pays full commissions upfront and rewards high volume rather than high quality, resulting in quality issues, especially in prepaid sales. The new model will incentivize sales quality based on a revenue share structure, encouraging dealers to enhance product mixes and improve customer loyalty. During the second quarter, we implemented various initiatives to enhance sales quality, impacting gross addition levels. We discontinued the cross-selling of the Sky postpaid package due to high early churn rates and launched promotional packages like HD Gold and Sky Silver HD to address customer needs. Additionally, we developed a new variable sales commission plan linked to customer payments. We also discontinued certain bundles due to churn concerns. In broadband, Altan's financial challenges delayed investments, affecting churn and sales. However, with Altan's recent financial restructuring, we anticipate gradual improvements in service quality, which should support our business expansion. In terms of customer cancellations, we saw an increase due to a pandemic-related spike and low-quality additions during last year. As a result, we lost 256,000 RGUs in the second quarter and will discontinue our prepaid reactivation promotion, expecting around 450,000 cancellations in the coming quarters without impacting revenue or EBITDA. Financially, revenue declined 7.7% compared to last year's second quarter, primarily due to diminished prepaid recharges and a reduced postpaid customer base in Mexico and Central America. Operating segment income fell by 23.9% because of lower revenues and rising costs, notably from World Cup rights amortization. Excluding these rights, operating segment income declined by 18.6%. In conclusion, this year is a transformative one for Sky. Our strategic program implementation, along with non-recurring costs related to the World Cup, will make this year appear weak. However, we are confident in a strong recovery next year, particularly in terms of EBITDA and free cash flow.

Alfonso de Angoitia, Co-CEO

Thank you, Luis. We face significant challenges, but importantly, we also see substantial opportunities ahead at Sky. In conclusion, Bernardo and I are optimistic about our growth prospects for 2022. At TelevisaUnivision, we have seen solid operating and financial performance in the first half of 2022, strong upfront announcements in both the U.S. and Mexico, new licensing agreements with virtual MVPDs in the U.S., the Qatar World Cup, and the successful debut of our global streaming platform, which together should enable us to achieve double-digit revenue growth for the second year in a row. For Grupo Televisa, the ongoing strong momentum in net subscriber additions is expected to gradually boost residential revenue growth at Cable in the upcoming quarters. Although both Cable and Sky have experienced hurdles, we firmly believe that the strategies and tactics we plan to implement in the coming quarters will help us reach our medium-term objectives. Finally, as we discussed with our Board yesterday, we are prepared to take the necessary steps to maintain free cash flow when the economy faces challenges, as has been the case in previous economic downturns. Now we’re ready for your questions. Paul, could you please provide instructions for the Q&A?

Operator, Operator

And our first question today will come from Alejandro Gallostra with BBVA.

Alejandro Gallostra, Analyst

I have a couple of questions. The first one is regarding the MSO operations in Cable. We're seeing good growth rates, along with good net additions. So I'm wondering if this is a turning point in this business segment, and if this growth is sustainable going forward? And my second question is about Sky. The revenue and EBITDA decline has been accelerating this year. So is it reasonable to assume that this trend will continue in the second half and potentially in the first half of next year? Or do you have a marketing strategy in place to reactivate subscribers as we approach the FIFA World Cup in Q4? Or how long should it take for the new business to turn into revenue and EBITDA growth?

Alfonso de Angoitia, Co-CEO

Thank you, Alejandro for your question. I'll ask Pepe Antonio to answer your first question regarding MSO growth rates. Indeed, we're very happy with the net additions we have experienced in this quarter and last quarter. And I'll ask Luis to answer your second question about Sky trends and the immediate future for our operations at Sky.

Pepe Antonio Gonzalez, CEO of Cable

Thank you, Alfonso. Thank you for your questions. We believe that these growth rates are sustainable. The significant turnaround that we have seen in the operating metrics has been driven by a few factors. First, the realignment of our flagship products as well as the home pass expansion we implemented last year. We analyze our product offerings across regions, against our competitors and made our products more attractive. So we believe our different products are finding their sweet spot in the market, and we think it's a sustainable level somewhere in between the last three quarters. Let me give you a bit of color on this. On the sales part, over two-thirds of our sales are triple play. This means our product needs are approaching the correct one, with record levels of triple play sales. Our sales force is running very strong with monthly sales only surpassed by a few months during the pandemic. We have simplified our micro, small, and medium enterprise product offerings to make it very simple, and we have seen very encouraging results only in the last month. On the retention side, we went to the root process of our churn. We increased our network quality. For example, our saturated interfaces are back to early 2020 levels. We’ve had a series of initiatives to improve the client experience, resulting in a reduction of client calls to our call centers by about 20%, or 200,000 calls. We continue to progress on our digitalization process. We now have a client help center web-based that started only this year and had 100,000 interactions. In the last month, it was over 450 visits. We simplified our monthly billing. Our sales gap has resulted in fewer customer losses due to our complete electronic transition, which has minimized mistakes and reduced documentation. Finally, we have increased broadband speeds for five products that have added up to 2.2 million clients, which is 35% of our day. So going forward, we hope that this momentum will continue, and we believe the expansion of our footprint will allow us to maintain solid net adds.

Alfonso de Angoitia, Co-CEO

And Luis, as for the second question, it pertains to Sky trends and the second half of this year.

Luis Malvido, CEO of Sky

Yes, sure. The second half will bring the World Cup for Sky, which is really material. Currently, we have our prepaid customer base topping up about 65% of them every month, and we are very confident that this percentage will go significantly up because of the demand for these matches. We will also make the World Cup available on our Blue To Go platform, and the condition will be, as I stated in the speech, to identify customers, which is a challenge we face these days. We will have better customer information, understand their behavior, and especially, we will have the tools to show them promotions. For this reason, the World Cup will significantly improve our top line during the second half, and we are prepared to take advantage of that. At the same time, we have another opportunity coming in the second half that will have some impact on this year, but mostly next year, which will be the new commission scheme and the digitalization of sales processes. This change will allow us to shift our focus to postpaid, which would bring not only lower churn but also a higher ARPU. This will start to be visible in Q1 of next year. Altogether, the channel mix and the new commission will allow us to create more predictable revenues, bringing in more postpaid and more value. In the upcoming year, we will also launch a new mobile operator this September. This service will be based on the AT&T network, and we are very confident that it will be well-received by our customers. As I mentioned, our top-line opportunities will primarily stem from these beyond-the-core opportunities. Specifically, we expect this new service to contribute around 3% to 5% revenue growth over the next three years, which is considerable. Moreover, the turnaround in Central America, where we are currently experiencing dropping gross adds, RGUs, and a significant decline in revenues, will likely also start showing improvements this year with our new strategy having a significant impact next year's top line.

Alfonso de Angoitia, Co-CEO

Thank you, Luis. Adding on what Luis has mentioned, I would say this is a year for the turnaround of Sky; it will be a weak year, but we will see the results of all the initiatives that Luis described in the next year.

Operator, Operator

And our next question will come from Lucas Base with UBS.

Unidentified Analyst, Analyst

So we noticed a large contribution from income from JVs and associates. Can you provide insight into what the normalized level is going forward? Can we assume TelevisaUnivision will be the largest contributor to that line? And one follow-up question: How about corporate expenses? What is the normalized level we should expect?

Alfonso de Angoitia, Co-CEO

Thank you, Lucas, for your question. I'll ask Carlos Phillips to answer it.

Carlos Phillips, CFO

Lucas, you're correct. In terms of the share of income from associates and joint ventures, the largest share comes from TelevisaUnivision; that's the majority of that line. The increase, as you know, after the transaction, there were two large effects. The first one is that the share grew from approximately 36% to 45%. We also did it in a larger company because after the transaction, we moved from 35% to 45% of Univision, which is a larger company with larger earnings, so that's part of the effect. The other aspect is that we have preferred shares in the company that pay a dividend, which is also part of that line item. The normalized size of that line will depend on what the earnings are at TelevisaUnivision since we share in those earnings. The only recurring and somewhat predictable item would be the dividend from the preferred equity, which is approximately $41.25 million per year. Regarding corporate expenses, as you may have seen, we had a reduction from last year's quarter of approximately MXN 95.8 million. The largest components of these corporate expenses are our corporate overhead alongside PTU, which is the employee profit sharing in Mexico and employee share-based compensation. We do not expect any significant movements in this line item. Just to note, the share-based compensation is a non-cash item.

Operator, Operator

And our next question will come from David Joyce with Barclays.

David Joyce, Analyst

Glad to hear about the near-term detailed plan for Sky. Where do you expect there to be a larger opportunity from here with these changes—more so in Mexico or more so in Central America, where you've had that stagnant level of subscribers over the long term? I was also wondering how the global operation, the MVNO on the Cable side, will develop given these changes with Altan as well.

Alfonso de Angoitia, Co-CEO

Thank you, David. In terms of Sky's opportunity, I would say it's both in Mexico and Central America, and Luis can add to that.

Luis Malvido, CEO of Sky

As I mentioned, Central America is a huge opportunity. While it is currently small compared to the size of our business in Mexico, we believe that we can double revenue there in 3 to 4 years, which is very relevant for the entire company. However, since Central America is still small, even doubling it will have an impact of up to 5% on the top line in the business. That said, Mexico is our core business. Everything we do here will have a tremendous impact on long-term value. Opportunities in Mexico come from growth in both top line and EBITDA and cash flow. In terms of EBITDA, savings will stem from the simplification program we are starting, with opportunities being massive. Sky has been a highly successful company for decades, and we previously didn't focus much on processes because speed and growth were the priority. Now is the moment to review our processes, the way we do things to digitalize processes and from that, we will bring significant savings. We plan to push down CapEx from $257 million spent last year to below $220 million this year, and we are very confident that next year we can further reduce that figure in order to protect and even grow cash flow.

Alfonso de Angoitia, Co-CEO

Sky generally is a fantastic asset. It generates free cash flow, has great brand recognition in Mexico, and boasts a huge offering of content. It's the platform that has the most relevant sports content in Mexico, far surpassing others. As Luis mentioned, it has exclusive rights to the Spanish La Liga and Copa del Rey, which is significant in Mexico, as well as all UEFA national team tournaments and the Bundesliga. In terms of sports offerings, it's number one. It has a national footprint, of course, and a national installation team. It's an incredible asset, and we have to stabilize it while sharing all the turnaround plans. We believe that next year, as we progress through the World Cup amortization, EBITDA will begin to stabilize, and we will start generating additional revenue and EBITDA.

Carlos Phillips, CFO

Alfonso, let me add something that is very relevant, especially for next year. We will launch a new platform, an OTT aggregator. Not only does this provide new revenue streams, but it is also essential to protect our customer base. We know we are day-to-day challenged by cable operators offering broadband and TV in their bundles, and as we haven't had this service, we've struggled to protect customers. For this reason, this Android box will help us initially protect our existing customers. This kit will allow us to save sizable OpEx and CapEx with installations by eliminating many of the installation costs related to DTH services. We will still quantify the opportunity size but we are confident we can save significant CapEx and OpEx through this new project.

Alfonso de Angoitia, Co-CEO

As for your second question regarding the MVNO offerings, I would like to ask Pepe Antonio to answer that.

Pepe Antonio Gonzalez, CEO of Cable

Thank you very much. As you may know, we invested in an MD&A platform in infrastructure. This is currently in the final stages of testing, literally the last weeks of tests. We believe this will provide us with a tremendous amount of flexibility. Right now, the MVNO service we have with Altan restricts us in many ways, especially regarding the choice of cell phones. In the next couple of months, we will relaunch our mobile services through this MVNE platform, which I think will be promising and will provide more details in the next call.

David Joyce, Analyst

Great. If I could just ask one more quickly about the FX impact on your balance sheet, revenues, and expenses, since there's been some movement. How should we think about that going forward?

Alfonso de Angoitia, Co-CEO

Thank you, David. I'll ask Carlos to address that.

Carlos Phillips, CFO

David, during the quarter, we had a MXN 552 million foreign exchange gain. This is due to the net dollar asset position that we have on our balance sheet. This used to be a little different, but as a result of the transaction, we have a large cash balance that’s dollar-denominated, as well as an investment in Univision, which is dollar-denominated as well and quite substantial. So this quarter, we saw a depreciation of the Mexican peso against this net dollar asset position. In terms of inflows and outflows, after the transaction, most of our inflows from operations are peso-denominated. We have certain dollar-denominated flows from contracts with TelevisaUnivision and from the dividend we receive from our preferred shares, but it's mostly peso-denominated. On the expense and outflow side, a significant percentage of CapEx is dollar-denominated. We employ hedging to manage our exposure to that risk, and again, our large dollar-denominated balance also gives us some flexibility on that side.

Operator, Operator

And our next question will come from Marcelo Santos with JPMorgan.

Marcelo Santos, Analyst

I wanted to ask about the pricing environment in Cable. How are you dealing with price increases, especially in this tough economic environment? Additionally, could you comment on your performance in the new areas that you ventured into with Cable in the new cities? How is the business plan developing there?

Alfonso de Angoitia, Co-CEO

Thank you, Marcelo. I'll ask Pepe Antonio to answer both questions. As I mentioned, we grew our homes pass by 2 million last year, with an investment of $200 million. This year, we will continue with 600,000 additional homes, and we have seen growth in penetration. We are satisfied with the results, although in some locations it took longer than we expected. However, I believe we are seeing the right trends and outcomes moving in the right direction. Now I'll let Pepe Antonio expand on the first question and provide more details on the second one.

Pepe Antonio Gonzalez, CEO of Cable

Thank you very much, Alfonso. I find the pricing environment interesting because there are two opposing forces at play. On one hand, we are facing a more competitive environment, which pushes prices down. Conversely, we are also seeing inflation increases in Mexico and globally. This year, our competitors raised their prices, but we have resisted making increases to maintain the realignment of our products. As I mentioned in my initial remarks, we believe our products are finding their sweet spot regarding quality, speed, and price. Moving ahead, it will depend on how lengthy this inflationary period lasts, and we may have to make adjustments. On the competitive side, we have reacted swiftly. We have aligned our prices effectively and are now monitoring competition package by package and region while successfully reacting. In the new areas where we have expanded, we have made historic investments and have managed to act quickly in increased competition. More than 60% of our network is fiber deep, enabling us to adjust quickly across regions. We’ve maintained stable churn rates, and we are pleased to report that sales continue to be strong and at historic highs.

Alfonso de Angoitia, Co-CEO

And our next question will come from Alejandro Chavelas with Credit Suisse.

Alejandro Chavelas, Analyst

Most of my questions have been answered. Just one question regarding Cable. Can you provide more details on the terms of your exclusive distribution agreements with ViX? Specifically, what the wholesale lease can be and when the users will be recognized for the cost base? Anything on that front would be very helpful.

Alfonso de Angoitia, Co-CEO

Thank you, Alejandro. I'll ask Pepe Antonio to expand on what I've said. It's exciting that we'll bundle ViX Plus with our other offerings, as we've done with other aggregators, but with an emphasis here. ViX Plus is a fantastic distribution platform featuring tremendous content from our library. It has a 24/7 news program, sports, and exclusive games from the Mexican Soccer League, among many others. Together with premium content specifically produced for the platform, it will be the number one platform in terms of Spanish-language content globally and, of course, in Mexico. Therefore, it's great for our distribution efforts, and I’ll turn it over to Pepe Antonio for additional insights.

Pepe Antonio Gonzalez, CEO of Cable

Thank you very much, Alfonso. We are very, very excited about the opportunity of partnering with TelevisaUnivision as a distributor of ViX. In fact, our advertising campaign has a slogan that states that ViX is the house of ViX in Mexico. I can't provide numerical details about our deal with them, but I can affirm that it will benefit us and them. We have a vast base that will aid us in distributing ViX to six million potential customers. At the same time, this will serve as a differentiator for our offering and appeal to customers choosing us over our competitors since ViX is a significant platform that will expand our business. We've established an exclusive deal for the launch of ViX in Mexico, and we are capitalizing on this to promote our brand as well.

Alfonso de Angoitia, Co-CEO

Additionally, I think it’s important to mention that all the Blim subscribers—about 700,000—will transition to ViX as well, which adds significantly to the ViX Plus base.

Operator, Operator

And our next question will come from Carlos Legarreta with GBM.

Carlos Legarreta, Analyst

I have two questions regarding the Cable segment. First of all, what have been the dynamics in the mass market, particularly in areas where your cable competitor is entering? Secondly, was the growth in Cable enterprise, excluding the Red Jalisco project, in line with the 5% growth mentioned last quarter?

Alfonso de Angoitia, Co-CEO

Thank you, Carlos. I'll ask Pepe Antonio to respond to both questions.

Pepe Antonio Gonzalez, CEO of Cable

Thank you, Carlos for the question. The investments EC has made in recent years, including the historical enhancements to its network, were crucial in allowing us to act quickly in areas facing increased competition. A significant part of our network—over 60%—is fiber deep, enabling us to maintain our HFC network while allowing us to swiftly implement price adjustments in response to competition, particularly in Mexico City where the network is fully fiber deep. Our customer base has remained stable, and our churn rates have not only remained stable but have also shown signs of decrease. Therefore, we maintain confidence in our customer retention as we continue our growth in sales. As for the second part of your question regarding enterprise revenue growth for the Cable segment, which would have been about 1.7% had we excluded the impact of the Red Jalisco project—which saw an impact of 18.8%. The growth reflected in the headline is affected by the tough year-on-year comparison due to Red Jalisco, but we do expect to see that growth in the low to mid-single digits during the upcoming quarters as we close new projects. However, it's worth mentioning that Red Jalisco provided substantial EBITDA contributions, so it still poses challenges in terms of meeting our EBITDA expectations going forward.

Operator, Operator

This will conclude our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Alfonso de Angoitia, Co-CEO

I would like to thank everyone for joining us today. As always, feel free to contact us with any additional questions that you may have. And I wish you a very happy end of summer.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.