Feb 21, 2018
Executives
Alfonso de Angoitia - Co-Chief Executive Officer of Grupo Televisa Salvi Folch - Interim Chief Executive Officer of Cable Carlos Ferreiro - Corporate Vice Presidents of Finance Isaac Lee - Chief Content Officer Alex Penna - Chief Executive Officer of Sky
Analysts
David Joyce - Evercore Gregorio Tomassi - Itau BBA Rodrigo Villanueva - Merrill Lynch Daniel Federle - Credit Suisse Richard Dineen - UBS Soomit Datta - New Street Research Andre Baggio - JP Morgan Alejandro Gallostra - BBVA
Operator
Good morning, everyone, and welcome to Grupo Televisa's Fourth Quarter and Full Year 2017 Conference Call. Before we begin, I would like to draw your attention to the press release, which explains the use of forward-looking statements and applies to everything we discuss in today's call and in the earnings release.
I will now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa.
Please go ahead, sir.
Alfonso de Angoitia
Thank you, Jarred. Good morning, everyone, and thanks for joining us today.
With me are the heads of our three core business segments Isaac Lee, our Chief Content Officer; Alex Penna, CEO of Sky; Salvi Folch, Interim CEO of Cable. And also, Carlos Ferreiro, Antonio Lara, Corporate Vice Presidents of Finance and Administration respectively.
I will walk you through the highlights of our 2017 results and our expectations for 2018. Following my opening remarks, they will join me in answering all your questions.
Now starting with our financial results for 2017, consolidated revenues were down by 4.4% in the fourth quarter and by 2% for the year, and consolidated operating segment income was down by 7% in the fourth quarter and by 3.8% for the year. Without a doubt, 2017 was a disappointing year.
The main drivers of this result were, first in content, we experienced a decline in advertising revenue even though ratings improved. We were able to eliminate the disconnect between revenues and ratings and fixing this will remain one of Televisa’s highest priorities in 2018.
Our other business segment also contributed to the decline in consolidated results, mostly as a result of our publishing operation. Sky remain very resilient while maintaining strong margins.
And our residential cable business showed a marked improvement operationally. Now let me address each of our three core operations.
Starting with cable, this operation contributed last year with 34% of segment net sales and was the largest contributor of operating segment income reaching 37%. During 2017, and in spite of a number of challenges earlier in the year, our cable business posted top line growth of 3.6%.
Growth in operating segment income was 6%, and the margin reached 42.5%, the highest on record for a full-year. Operations wise our cable division showed ongoing improvement throughout 2017 quarter-after-quarter and in November we surpassed the 10 million milestones in terms of revenue generating units or RGUs.
Our cable operation is now firing on all cylinders. Net ads in terms of RGUs during the fourth quarter at 241,000 were the highest of the last six quarters with both data and video customers growing at a very healthy pace.
With all the steps taken during 2017, we have, out of the 2016 slowdown stronger. Our five cable companies are now mostly operated as a single fully integrated cable company.
Our credit filters and improved service have resulted in a significant reduction in churn and a large portion of our infrastructure has been upgraded. Our opportunity and competitive position in the market is enviable.
For example, we now have a technological advantage versus our main competitor in many of our markets. Low data penetration of about 52%, our growing demand for high-speed data among many households that still have a DSL service and a very competitive price.
In the process of integrating and upgrading our cable operations, we have been able to find efficiencies that have resulted in the expansion of our operating segment income margins to more than 42% from 38% just three years ago. As a result, the prospects of our residential [indiscernible] looks very promising while strong top line growth for the coming years [indiscernible] very healthy margin.
We believe these margins are sustainable over the medium term. That being said, the results of our enterprise business, which provides telecommunication services to large institutions, government entities, and other telecom participants fell short of our objectives.
We're relaunching this operation in 2018. So, it can contribute to grow.
2018 shall be another year of improving free cash flow as a result of growing customer base together with lower CapEx after completion of substantially all of our network upgrades. In sum, we remain very excited about the outlook for our cable division and focused on creating value for Televisa's shareholders as we move ahead with our plans.
Moving to Sky, during 2017 it contributed with 23% of segment net sales and 27% [ph] of operating segment income. For the full-year it posted modest revenue growth of 1.2% and operating segment income growth of 2.1% with a margin of 45.5%.
We closed 2017 with approximately 8 million subscribers. The growth in subscribers during the year was just about flat, but it followed a very solid growth of 742,000 subscribers in 2016 as a consequence of the analog shutdown.
In addition, the number of high-definition subscribers increased by 20% last year, reaching close to 600,000 subscribers, and the average to revenue per customer grew by 6%. With a difficult comparison behind us, we now expect the revenue growth will resume in 2018 helped in part by further increases to the pricing of our packages.
The price of Sky's prepaid packages remains very low when compared to other markets in the region even when adjusting for purchasing power. In addition, Sky will be the only paid television platform in Mexico to offer all 64 games of the Soccer World Cup, which will drive further growth.
Sky's investment in exclusive sports content during 2018, such as the World Cup will result in a temporary step down in its operating segment income margins. Nevertheless, we see such investments as crucial to the company's competitive position and anticipate that Sky’s margins will likely remain healthy during 2018 at around low-to-mid 40s.
Lastly, Sky continues to explore offering voice and data services. It has just recently launched Blue Telecomm using local loop unbundling and in the second quarter it will start offering Internet services through fixed wireless.
We have big plans for Sky in this respect, but we will remain careful with our rollout as we continue running tests. Moving on to Content.
During 2017, it contributed with approximately 35% of segment net sales. Advertising now represents about 21% of consolidated sales and in sharp contrast to about 36% just six years ago.
We are much less dependent on advertising sales as we did in the past. For the full-year, Content revenue dropped by 9.3% during the quarter, and by 7.3% for the year.
Operating segment income reached 12.8 billion pesos with a margin of 37.7%. As I mentioned before, advertising revenue declined sharply in 2017 and the fourth quarter was no exception.
Similar to the first three quarters of the year clients were generally absent from the scatter market during the fourth quarter. Overall, our clients 2017 upfront investments were more than sufficient for them to meet their target eyeballs, so they saw little need to tap the scatter market last year.
As a result, for the full-year, total advertising revenues declined by 10.8%. On the other hand, audiences were strong overall in 2017, even though competition intensified quite a bit towards year-end.
Prime-time audiences on our flagship network were up 15% for the full-year and 22% in the fourth quarter versus the prior year. As we explained throughout last year, higher ratings coupled with fixed prices on a per spot basis limited our ability and flexibility and worked against us.
This is precisely why we are changing how we sell our advertising. Starting 2018, under the new management structure for our Content business, Bernardo and I have made it our priority to monetize the strong viewership of our content property properly.
This process has started with a very difficult negotiation of our upfront. In large part, it was difficult because those discussions included both the change in the pricing mechanism and the actual amount committed.
In that respect, I am very happy to report that first a 100% of our clients are now buying advertising based on ratings. And second, the total amount in upfront commitment was very strong.
In total, more than 16.4 billion pesos have been committed in non-cancellable television advertising for 2018. On an apples-to-apples basis, advertising customers - customer deposits rose by 1.8% and this includes several contracts that were concluded soon after year end.
Also, we are extremely happy to report that we have a few new clients such as Amazon, Uber, Mercado Libre, and Trivago. This proves that television advertising continues to be an important outlet even for big Internet companies.
As you have seen from the most recent years, the upfront is not a predictor of the likely performance for the full year, but the results of the latest round of negotiations represent a strong word of confidence in Televisa's ability to deliver solid audience consistently. While at this moment we cannot provide advertising revenue guidance, we know that our scale is unmatched by our competition and we reach very desirable and diverse audiences with four free-to-air networks and 14 paid television networks.
We are cautiously optimistic and we believe that with the proper pricing mechanism and once we stabilize it, this is a business that could go back to growing together with economy. As you have seen, we have made significant progress in boosting ratings evidenced by the double-digit growth on our flagship in 2017.
This was accomplished even as we reduced costs and expenses during the year by approximately 800 million pesos. There is no denying that the industry is becoming more competitive and we need to invest in our Content to deliver what audiences are demanding.
In 2018, and starting from a lower base of 2017, we have [indiscernible] percentage growth in Content costs and expenses will be in the low teens. The increase will be driven primarily by three specific factors, two of which are one-time event driven investments.
These three factors are: First, we are investing in a number of transformational initiatives to strengthen our Content and consolidate the recent improvement in ratings. For example, we launched recently the first ever television pilot season initiative to expand our Content pipeline by developing new original series by national and international independent producers.
The first phase of the pilot program resulted in more than 100 television projects being submitted by 55 third-party independent production companies. Second, we are also investing in transmitting the soccer World Cup in the second and third quarters of the year.
Of the 64 matches about half of them will be transmitted on our free-to-air networks. And third, our coverage of the election this year will require an additional one-time investment.
They will be the most important elections in Mexico's modern history. This election has comprised a Presidential election, the renewal of both chambers of Congress, nine governorships among others.
We want to be the most balanced trustworthy and reliable source of information for the Mexican public throughout this process. This anticipated increase in cost and expenses comes precisely as the Univision royalty rate goes up by 36% to approximately 16.5% [ph] of Univision's audiovisual revenue.
Therefore, the royalty increase will support much of the 2018 investment in our content division. Moving on to CapEx, they will be $885 million during 2017.
This is $600 million less than the prior year and $115 million less than our guidance for the year. For 2018, we expect that the amount in CapEx will be similar to that of 2017.
The breakdown of our forecast for 2018 is approximately $550 million for our Cables business, 250 million for Sky, and 150 million for our Content and other businesses. In particular, in the case of the Cable business, CapEx as a percentage of revenue shall be in the high 20s during 2018, down from 55% in 2016.
We continue to follow the path of U.S. cable when back in the early 2000s, their investments in rebuilding the networks was practically completed in cable companies starting reaping the benefits of growing free cash flows.
Over the past few years, Televisa [ph] has taken specific steps to better extract value from its unique set of assets. Our industry continues to change at a fast pace and we have to be one step ahead.
So far developing a leadership position in both Content and distribution has been one of our primary competitive advantages. It has given us the scale to compete with global participants and the resources needed to fund our expansion in Cable and develop our telecom infrastructure.
Currently, Bernardo and I are actively analyzing the advantages and disadvantages of holding our various assets under the same corporate structure. Throughout this exercise, we are watching carefully what other industry participants are doing globally and also considering the specific circumstances in Mexico.
Rest assured, the main goal here is to maximize shareholder value. Along those lines, we will also continue to actively explore the sale of our non-core operations.
As a first step and as we reported last week, we have agreed to sell our 19% stake in Imagina in Spain for a total amount of approximately $355 million. This is a transaction that is subject to regulatory approval, but we expect it to close in the next few months.
We have also shut down our publishing business in Argentina, which was recurrently losing money and we will do the same with other nonperforming businesses. In closing, 2018 will be a very important year for Televisa as we continue to focus on increasing further our share of high-speed data in the country resuming growth in sky, stabilizing advertising revenue, and consolidating our improvement in ratings.
As in the past, we will continue to maintain a very strict control over costs and expenses and take all necessary steps both operationally and structurally to position Televisa for continued success over the long-term. Thank you for your attention.
We are now ready to take your questions.
Operator
[Operator Instructions] And your first question comes from the line of David Joyce your line is open.
David Joyce
Thank you. If you could please provide some more color on the advertising front, last, how much of your inventory was sold in the scatter market and was there any [indiscernible] was left unsold?
And in this upfront rather negotiations where you have got 100% of your ad clients under the new sales mechanism, how much of the inventory was told in this round of upfronts? Thank you.
Alfonso de Angoitia
Hi David. As you saw, the fourth quarter was a very difficult quarter.
It had to do with the manner in which we sold the advertising for that year, and especially had to do with the increase in terms of ratings especially on prime-time ratings. I don't have the numbers here in terms of inventory usage, and especially that and what has to do with the scatter market.
However, what I can [indiscernible] inventory was pretty low both in the third quarter and the fourth quarter. Now, we're very excited about the new advertising spend and as I mentioned the negotiations were pretty difficult because we were migrating and we were able to migrate a 100% of our clients to the new system.
We believe that it’s a system that although where the clients will have less flexibility it will allow us to have that flexibility and to be able to use our inventory and deliver the ratings. Of course, now we are guaranteeing ratings as it happens in the U.S.
and most countries in the Europe, and so we’re very excited because of our situation, our current situation [indiscernible] and we believe that 2018 we will see a better year for us.
David Joyce
Thank you. And if I could another question, on the Cable side, how much of the broadband data subscriber growth is coming from increased market share versus just increased penetration or growth of the market?
Thank you.
Alfonso de Angoitia
I’ll ask Salvi to answer the question.
Salvi Folch
Hi. Well it has come from both fronts.
The penetration of broadband has increased over time. However, we continue to be out of the 35 countries in the OECD.
We continue to be the country with the lowest penetration reaching about 52% at year-end growing from somewhere about 49%. So, there was a slight growth there.
Now, taking market share away from the incumbent was also a relevant factor. If you see what they added in the year it was less than 50,000 subscribers, while we added North of 350,000.
So, it was both penetration and taking market share. We now have about 22.5% market share of the overall industry.
However, our homes [indiscernible] are only 40 million out of 33 million in the country. So, only covering about 42% of the country, I think that that demonstrates that our product is very competitive.
David Joyce
Great, thank you very much.
Operator
Your next question is from the line of Gregorio Tomassi. Your line is open.
Gregorio Tomassi
Yes, good morning thanks for the call to you all. Going back a little bit to advertising revenues outlook for 2018, and having heard you mentioning that the goal here is stabilizing advertising revenues, isn't there a possibility that you are understating the chances of actually seeing some growth in advertising revenues next year?
How do you interpret the 1.8% increase in upfront sales from a year, which is 2017 in which most of actual sales actually came from upfront sales, and in a year in which you sound pretty confident that you will get ratings stronger than they were in 2017, meaning isn't it fair to assume that at least 1%, 1.8% is a floor for advertising revenue growth in 2018?
Alfonso de Angoitia
Hi Gregorio, we’re encouraged to see the upfront growing 1.8%, and we’re also encouraged by the - what I mentioned before in the sense of now having the system in place and 100% of our clients using that system for buying advertising. However, we’re being cautious.
We would rather overdeliver then promised now. It all had to do with ratings.
We’re doing the necessary investments in our production of Content. We will continue to do that.
It’s a year where we will have the World Cup. So, having the 64 games of the World Cup and basically having 32 and all the channels gives us an advantage, but we are being cautious about it.
We believe that it will be a year where we will be able to stabilize the sales on that front.
Gregorio Tomassi
And if I may, considering that let’s say 2016 was a year of increasing prices, 2017 has been the year of actually linking or living without the linkage between prices and ratings? And is there anything missing in the way you approach the advertising business in terms of contracting client interaction, pricing structure that could affect 2018 or can we consider 2018 as a year that is a first one or what should be the normal advertising revenue practice for the foreseeable future?
Alfonso de Angoitia
I think that 2018 should be the new normal. It should be the starting point.
As I mentioned before, I think we have many advantages. We have an unduplicated reach.
If you compare what we deliver on our flagship Channel 2 Las Estrellas, every night on prime-time nobody can get there, nobody can get to those numbers. So, I believe that it’s a starting point that 2018 will be a starting point and it will be the new base using the new system of sales.
Gregorio Tomassi
Thank you very much.
Operator
Your next question comes from the line of Rodrigo Villanueva. Your line is open.
Rodrigo Villanueva
Thank you, good morning. Alfonso I was wondering if you could help us quantify the extra cost related to the World Cup to the coverage of the elections in Mexico?
That would be my first question and the second is, if it is reasonable to assume severance expenses in 2010 and if so could you quantify them? Thank you.
Alfonso de Angoitia
Sorry Rodrigo, I couldn't hear the last part of your question.
Rodrigo Villanueva
Okay, so the first question is related to extra cost related to the World Cup definition, the coverage of the elections in Mexico, I was wondering if you could help us quantify them. And the second one would be related to severance expenses.
This has been very high in 2016 and 2017, I was wondering if we should expect additional severance expense in 2018, and if so if you could help us quantify them as well. Thank you.
Alfonso de Angoitia
As to your first question, we’re going to invest a total of around $150 million in Content this year. So that includes all the initiatives that have to do with the production of Content channels both over their channels and paid television channels.
It also includes the World Cup and the coverage of election. So, I can give you the total amount, which is 150 million.
I would not like to or I don't have the detail here. If you want we can go over the detail in the call afterwards.
And Carlos can you go over the severance payment during 2017 please.
Carlos Ferreiro
Hi Rodrigo, regarding the other expense line, in the fourth quarter approximately 800 million pesos were non-recurring. This amount includes the closing of our publishing business in Argentina, severance payments for a number of employees and executives and also the write-off of some Content assets.
What we believe it will happen in 2018 severance payments will most likely continue some form to continue our restructuring of our main businesses. So, there will be severance payments in 2018 as well.
Too soon to tell what the amount or too soon to say and quantify those amounts, but that will continue going in 2018.
Rodrigo Villanueva
Understood. Thank you.
Operator
And your next question comes from the line of Daniel Federle. Your line is open.
Daniel Federle
Thank you very much. Good morning everyone.
We have been seeing some articles mentioning the plans of Televisa to increase the partnership with some international Content providers like Netflix or Amazon, could you please tell us what the company is planning in this front? That is my first question.
And we saw the Supreme Court's decision from yesterday really in favor of the Televisa, could you please tell us how you see the next steps in this discussion about the dominance of Televisa in the Pay-TV front? Thank you very much.
Alfonso de Angoitia
Thank you for your question Daniel. I will ask Isaac to answer your first question, but before that I will answer your last question as to the dominance of the termination of Televisa.
This is a long story, as you may recall, on September 2016 [indiscernible] decided that we did not have substantial power in the paid television market and that will consider in the information that they have back then in September 2015. Then on January 2017 this was last year, of course [indiscernible] to a period that encompasses basically August of 2014.
So, as a result of that Court order, on March 2017, if a [indiscernible] its original decision and they cleared us as an economic agent with substantial power in the pay television markets as of August 2014. So, it was a freshly operated decision because they were saying that we have substantial power as of August 2014 and the division was made in 2017.
Of course, we have filed several emotions, one that got all the way up to the Supreme Court and now, the First Chamber of the [indiscernible] decided on February 7 that in [indiscernible] of its original ruling did not comply with the initial court order. We believe that one of the probable outcomes will be that [indiscernible] will now determine that we do not have substantial market power in paid television.
We have not been officially notified of the Supreme Court decision, so we’re waiting to see exactly what that says. And now to your first question, Isaac?
Isaac Lee
Daniel, good morning. Our priority remains to focus on our broadcast networks and our 14 cable networks, more than anything else, and we are also doing everything that is necessary to be fully aligned with Univision on Content production.
However, with the different window opportunities that we have and considering that the IP is very important to us you can expect Televisa to partner with international players to produce premium content. As you can imagine, our capacity for marketing in Mexico is second to none and wants to partner with us.
So, on a case-by-case basis and looking very carefully at what is best for our programming structure you can see that happening.
Daniel Federle
Okay, thank you very much.
Alfonso de Angoitia
This would be an exciting part of our business going forward. As Isaac was mentioning, we are the largest producer of Content in Spanish in the world.
We have been very successful for many; many decades and I believe in producing Content for others. We will also be very successful.
Daniel Federle
Perfect. Thank you.
Operator
Your next question comes from the line of Richard Dineen. Your line is open.
Richard Dineen
Thank you very much. And good morning, everyone.
Just maybe, firstly a clarification on the earlier answer that I think Carlos gave on the other expense line, so if 800 million is the sale of Argentina and the impairments plus the severance, assuming that severance will continue, is it possible to say what part of the 800 is Argentina in the asset write-downs. What’s truly non-recurring in that sense because it looks like that could be quite important on a sort of adjusted EBITDA basis?
And then just secondly, if it’s possible just with regards to the comment on potentially raising surprises to Sky. In the past, you know that’s being quite difficult.
We have seen higher churn low recharges when you’ve increased prices in the past. Just wondering if there is any reason why that might be different?
Is it the World Cup is a stronger economy, so any color on that would be helpful? Thank you, guys.
Alfonso de Angoitia
We will ask Carlos to answer your first question and give you the detail and the breakdown and then Alex can take the second question.
Carlos Ferreiro
Hi Richard. About 70% of other expense line and is coming from non-recurring events; that’s Argentina and the write-off of Content assets and the remaining 30% would be severance.
Richard Dineen
Fantastic. Thank you.
Alex Penna
Hi, this is Alex. Basically, price increases by its own nature, increase churn.
Obviously, throughout 2017, we experienced the high churn on our prepaid product as a result of the price increases we carried out in December of the previous year in January of 2017. This year 2018, we also carried out another price increase in all our programming packages, but are basically the weighted average was about 4%.
We expect that will help us with the growth of the top line throughout this year, but - and we also considered that the effect of the World Cup will help us throughout this year in terms of containing the increase in churn. So, the World Cup definitely will help us in that aspect.
Carlos Ferreiro
Richard, what I can say is that of course we will be a rational with any changes in our prices. It all has to do with the economy and how the economy in general is doing.
So, of course we would always try to at least grow prices with inflation, but we will have to be very careful as to the appropriate time in doing that. It’s important also to mention that we believe that paid television and especially the Sky prices are very affordable in Mexico, and our packages - our paid television packages are very robust.
It’s also important to mention that our prepaid packages through Sky are one of the lowest priced in Latin America.
Richard Dineen
That's great. Alfonso, Carlos, Alex thanks so much for these comments.
Appreciate it.
Operator
And your next question comes from the line of Soomit Datta. Your line is open.
Soomit Datta
Hi there. Two or three questions please.
First of all, just to go back to the comment you made about evaluating assets looking at whether assets should all be under the same corporate structure? And I mean maybe you could elaborate a little bit more here, I guess the principal is you think some of these assets are being undervalued by the market or potentially you think there are synergies to be gained from shuffling things around a bit, could you kind of sort of go into a little bit more detail about what is being considered here, potentially spinning of Cable or sale of DTH, anything more here would be very helpful.
And then secondly, on Blue Telecomm please, looks to be a kind of sort of acceleration of the initiative here. How should we think about this business going forward being part of CI when might you look to extend the business into a triple play service?
And if I could just finally add on, I was interested to hear you talking about a fixed wireless service as well, in addition to the unbundling model, could you - what exactly are you sort of thinking about here? That would be great.
Thank you.
Alfonso de Angoitia
Hi Soomit. As to your first question, we are considering all types of scenarios.
We’re not ready to share any specifics at this moment, but we’re analyzing all these carefully and thoroughly, they are big decisions, and this is basically whether it’s good for Televisa, but most importantly good to generate value for our shareholders to keep all the assets under the same umbrella or to create separate public vehicles. As I mentioned, we’re looking in detail what our global peers are doing, and even though we now live in a world where media and telecommunications continue to converge from the point of view of customers there does not seem to be a consensus among our peers, among international telecommunications and media companies in terms of the right business mix.
For example, we have seen what our partner AT&T is doing and buying Content [indiscernible]. Comcast is maintaining itself as an integrated company with Cable and the production of Content and over their television signals et cetera.
Comcast is very similar to Televisa in the sense that, I mean we’re the largest cable supplier and we’re also one of the largest - or in our case we’re the largest producer of Content. So, we’re an integrated company, but on the other side for example Fox is selling a material part of its assets.
So, we’re looking into this and as I mentioned, basically there is no consensus, but for us exploring carefully means that we have to evaluate all the merits of different structures. And also, we’re considering the particular circumstances in Mexico.
We’re also considering the regulatory and competitive environments in our country. So, in general, all these analysis that we’re making involves and has the main purpose of creating shareholder value.
Soomit Datta
Maybe just to jump in quickly, I know it’s early days, is there anything so far, you’ve concluded about Mexico, which is materially different than the U.S., which I guess is the main comparison here, is there anything which you would sort of flag as being quite different, which would help shape you thinking?
Alfonso de Angoitia
We have not identified anything that particular about Mexico when compared to other markets.
Soomit Datta
Okay thanks. And then sorry on Blue Telecomm, any thought there would be great.
Alfonso de Angoitia
Yes, Alex would take that question.
Alex Penna
With regards to the Blue Telecomm that we have just launched. We launched as you know following the friends and family phase that we carried out in the second half of last year.
We recently last launched our voice and data services under the brand name of Blue Telecomm and we are starting with focusing on the resale of Telmex products. Still we have readied our unbundling of the local loop and able to sell directly our own products.
We continue facing a number of obstacles from Telmex both in sales, installation, and the full operation of this line of business, but we continue filing our claims, compliance with the authority, the [indiscernible]. With regards to the launching of Internet services using the fixed wireless technology, we - our plan is to launch this product in sometime in April, and we do believe that this fixed wireless Internet product will be highly successful because of its flexibility in terms of areas coverage, and no requirement for installation.
It’s a plug-in product. So, we are very hopeful that this product will be very successful for us.
Soomit Datta
What frequency or what Spectrum brand are you using please?
Alex Penna
We are going to be using the existing network of cellular company and we are also having conversations with this new shared network. It’s going to be available in Mexico.
Soomit Datta
Okay that’s really helpful. Thank you.
Operator
Your next question comes from the line of Andre Baggio. Your line is open.
Andre Baggio
Hi thanks for the remarks so far, can you clarify on the - specifically on the network revenues, was there a price increase in the fourth quarter with the money that Televisa Content Division charged to Sky, Cable and other operators on a per user basis?
Alfonso de Angoitia
Yes - you mean subscriber revenue - I mean basically the paid television networks?
Andre Baggio
Yes.
Alfonso de Angoitia
Yes, it had to do mostly with the fact that basically we repackaged our paid television networks, and now they include different Content rights and that resulted in higher overall price.
Andre Baggio
Perfect. And second is that, I’m just quickly doing some math, but it seems to me that if you add $150 million in cost to the Content division, it is more than offset the gain that you could have with [indiscernible] so are you prepared to have lower margins in the Content Division in the year versus what you had in 2017?
Alfonso de Angoitia
Yes, of course this year we will have the royalty stream coming Univision as you were mentioning. And we will have these events that are non-recurring.
So, it will all depend on the performance of our advertising and sales business. As I mentioned, we had a pretty solid upfront where the basic accomplishment was to bring all our customers, a 100% of our customers to the new system, to a system where we are selling GRPs, guaranteed GRPs and the new pricing mechanism.
So, it will all depend on the performance of the sales business, but of course the additional costs two of which are non-recurrent. Those are the World Cup and the coverage of the elections.
It will be offset by the increase in terms of the royalty stream we are receiving from Univision.
Andre Baggio
Perfect. Thanks a lot.
Operator
Your next question comes from the line of Alejandro Gallostra. Your line is open.
Alejandro Gallostra
Hi, good morning. Thank you very much for the call.
I would like to go back to the Blue Telecomm discussion, and my first question is again for Alex, if instituted well the launch of fixed wireless broadband in April. Perhaps you would be using your own infrastructure as well as potentially [indiscernible] so you will not be using governments infrastructure at all, is that correct?
Alex Penna
Well, as I said, we are going to use the existing cellular network of one of the existing players in Mexico to provide this fixed wireless service, and there is also the possibility of using a different network in order to expand the production of this fixed wireless service.
Alejandro Gallostra
Okay, thank you. Still on Blue Telecomm, without the type of synergies that you expect to obtain between Sky and Blue Telecomm if any, and what are your general expectations for [indiscernible] and the type of margin that you expect to obtain in the long run, and if you will be reporting these service as part of a Sky and you will also be reporting the number of [indiscernible] used?
Alfonso de Angoitia
Alejandro to the first part of your question, Sky has a tremendous advantage because it has 8 million subscribers, it has national coverage in terms of installation forces in terms of sales forces. So, there are a lot of synergies in offering new products such as, these two that Alex was describing.
One is, a fixed wireless type of service, which I mean where you plug in a devise and you get broadband. And the second is using basically the infrastructure that Telmex has through the local loop unbundling.
So, those are the two products that Sky is launching. And as to your second part of the question Alex?
Alex Penna
Well in terms of, as Alfonso just said, in terms of synergies they are pretty clear. And in terms of economics for these lines of business, we are still fine-tuning the business plan, but if anything, it is clear to us that this product more than allowing Sky to get into the triple playfield just going to result in a very important retention to our existing line of business and subscribers of video.
Alfonso de Angoitia
Basically, we are trying to do what Sky did in the United Kingdom where it has a very large and substantial presence on the broadband type market, and I mean using as a base the 8 million subscribers that we already have and the National infrastructure that is in place. So, I think the synergies are tremendous.
If the local loop unbundling works then I think - and if the new product that is, as I mentioned a plug-in product, which is very easy to - I mean you buy it, and basically you plug it in and use it. Those are going to be very good products for Sky.
Alejandro Gallostra
Thank you. Thank you, very much.
So, if [indiscernible] once you are sure that this product works, would you plan to offer triple play services to final customers and he says that few customers which obtain not only the Blue Telecomm service, but also [indiscernible] would get an additional advantage putting that, because this is something that you could only denote bundles because customers do not benefit from this pure play [ph] offer, is that something that you would consider in the future if that action works is that correct?
Alfonso de Angoitia
Yes, definitely. And right now, what we are doing is offering the packages of voice and data not including video.
But down the road we may package the three services together and [indiscernible] benefits to our subscribers.
Alejandro Gallostra
Thank you. And then would you plan to report these figures and this performance as part of Sky or separately, did you plan to also report the number of RGUs?
And finally, any color on the margin that you expect for [indiscernible] would be helpful.
Alfonso de Angoitia
Yes, the numbers of this new line of businesses are going to be consolidated and reported within Sky numbers. And with regards to our margins, despite the fact that I cannot provide forward guidance, but we expect the margins as stated by Alphonso earlier throughout this year to be between low 40s and mid-40s, and we will continue being in very healthy - these margins of Sky going forward.
Alejandro Gallostra
Excellent. Thank you very much for your answers.
Operator
I will turn the call back over to the presenters.
Alfonso de Angoitia
Thank you, Jarred. Thanks everyone for joining us today.
If you have any questions, please reach out to us. We look forward to speaking with you in the next quarter.
Operator
This does conclude today's conference call. You may now disconnect.