iv.Explanation as to any change in the issuer’s exposure to the principal risks identified thereby and in their management, and any contingency or event known to or
anticipated by the issuer’s management, which could affect any future report. Description of any circumstance or event, such as any change in the value of the underlying assets or reference variables, resulting in a financial derivative being
used other than as originally intended, or substantially altering its structure, or resulting in the partial or total loss of the hedge, thereby forcing the Issuer to assume new obligations, commitments or changes in its cash flows in a manner
that affects its liquidity (e.g., margin calls). Description of the impact of such financial derivative transactions on the issuer’s results or cash flows. Description and number of financial derivatives maturing during the quarter, any closed
positions and, if applicable, number and amount of margin calls experienced during the quarter. Disclosure as to any default under the relevant contracts.
Since a significant portion of the Company’s debt and costs are denominated in U.S. dollars, while its revenues are primarily denominated in Mexican pesos,
depreciation in the value of the Mexican peso against the U.S. dollar and any future depreciation could have a negative effect on the Company’s results due to exchange rate losses. However, the significant amount of U.S. dollars in the Company’s
treasury, and the hedging strategies adopted by the Company in recent years, have enabled it to avoid significant foreign exchange losses.
Circumstances or events, such as changes in the value of the underlying assets or reference variables, resulting in a financial
derivative being used other than as originally intended, or substantially altering its structure, or resulting in the partial or total loss of the hedge, thereby forcing the Company to assume new obligations, commitments or changes in its cash
flows in a manner that affects its liquidity (e.g., margin calls). Description of the impact of such financial derivative transactions on the Company’s results or cash flows.
As of the date hereof, no circumstance or event of a financial derivative transaction, resulted in a partial or total loss of the relevant hedge requiring
that the Company assume new obligations, commitments or variations in its cash flow such that its liquidity is affected.
Description and number of financial derivatives maturing during the quarter, any closed positions and, if applicable, number and amount of margin calls
experienced during the quarter. Disclosure as to any default under the relevant contracts.
The preparation of consolidated financial statements in conformity with IFRS Standards, requires the use of certain critical accounting estimates. It also requires management to exercise its
judgment in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the consolidated financial statements in the period the assumptions changed. Management believes that the underlying
assumptions are appropriate. The areas involving a higher degree of judgment or complexity, or areas where estimates and assumptions are significant to the Group’s financial statements are disclosed in Note 5 to these consolidated financial
statements.
These consolidated financial statements were authorized for issuance on April 13, 2020, by the Group’s Principal Financial Officer.
The financial statements of the Group are prepared on a consolidated basis and include the assets, liabilities and results of operations of all companies in which the Company has a
controlling interest (subsidiaries). All intercompany balances and transactions have been eliminated from the consolidated financial statements.
Subsidiaries
Subsidiaries are all entities over which the Company has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether or not the Company
controls another entity. The subsidiaries are consolidated from the date on which control is obtained by the Company and cease to consolidate from the date on which said control is lost.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred,
the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree
on an acquisition-by-acquisition basis at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and
liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in income or loss.
Changes in Ownership Interests in Subsidiaries without Change of Control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as
owners. The difference between fair value of any consideration paid and the interest acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non-controlling interests are also
recorded in equity.
Loss of Control of a Subsidiary
When the Company ceases to have control of a subsidiary, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying
amount recognized in income or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that amounts previously recognized in other comprehensive income are
reclassified to income or loss except for certain equity financial instruments designated irrevocably with changes in other comprehensive income or loss.
At December 31, 2019 and 2018, the main direct and indirect subsidiaries of the Company were as follows:
|
Subsidiaries
|
|
Company’s
Ownership
Interest (1)
|
|
Business
Segment (2)
|
|
Empresas Cablevisión, S.A.B. de C.V. and subsidiaries (collectively, “Empresas Cablevisión”) (3)
|
|
51.2
|
%
|
|
Cable
|
|
Subsidiaries engaged in the Cablemás business (collectively, “Cablemás”) (4)
|
|
100
|
%
|
|
Cable
|
|
Televisión Internacional, S.A. de C.V. and subsidiaries (collectively, “TVI”) (5)
|
|
100
|
%
|
|
Cable
|
|
Cablestar, S.A. de C.V. and subsidiaries (collectively, “Bestel”) (6)
|
|
66.2
|
%
|
|
Cable
|
|
Arretis, S.A.P.I. de C.V. and subsidiaries (collectively, “Cablecom”) (7)
|
|
100
|
%
|
|
Cable
|
|
Subsidiaries engaged in the Telecable business (collectively, “Telecable”) (8)
|
|
100
|
%
|
|
Cable
|
|
FTTH de México, S.A. de C.V. (9)
|
|
100
|
%
|
|
Cable
|
|
Corporativo Vasco de Quiroga, S.A. de C.V. (“CVQ”) and subsidiaries (10)
|
|
100
|
%
|
|
Cable and Sky
|
|
Innova, S. de R.L. de C.V. (“Innova”) and subsidiaries (collectively, “Sky”) (11)
|
|
58.7
|
%
|
|
Sky
|
|
Grupo Telesistema, S.A. de C.V. (“Grupo Telesistema”) and subsidiaries
|
|
100
|
%
|
|
Content and Other Businesses
|
|
Televisa, S.A. de C.V. (“Televisa”) (12)
|
|
100
|
%
|
|
Content
|
|
Televisión Independiente de México, S.A. de C.V. (“TIM”) (12)
|
|
100
|
%
|
|
Content
|
|
G.Televisa-D, S.A. de C.V. (12)
|
|
100
|
%
|
|
Content
|
|
Multimedia Telecom, S.A. de C.V. (“Multimedia Telecom”) and subsidiary (13)
|
|
100
|
%
|
|
Content
|
|
Ulvik, S.A. de C.V. (14)
|
|
100
|
%
|
|
Content and Other Businesses
|
|
Controladora de Juegos y Sorteos de México, S.A. de C.V. and subsidiaries
|
|
100
|
%
|
|
Other Businesses
|
|
Editorial Televisa, S.A. de C.V. and subsidiaries
|
|
100
|
%
|
|
Other Businesses
|
|
Grupo Distribuidoras Intermex, S.A. de C.V. and subsidiaries
|
|
100
|
%
|
|
Other Businesses
|
|
Villacezán, S.A. de C.V. (“Villacezán”) and subsidiaries (15)
|
|
100
|
%
|
|
Other Businesses
|
|
Sistema Radiópolis, S.A. de C.V. (“Radiópolis”) and subsidiaries (16)
|
|
50
|
%
|
|
Held-for-sale operations
|
|
(1)
|
Percentage of equity interest directly or indirectly held by the Company.
|
|
(2)
|
See Note 26 for a description of each of the Group’s business segments.
|
|
(3)
|
Empresas Cablevisión, S.A.B. de C.V., is a direct majority-owned subsidiary of CVQ.
|
|
(4)
|
Some Cablemás subsidiaries are directly owned by CVQ and some other Cablemás subsidiaries are indirectly owned by CVQ.
|
|
(5)
|
Televisión Internacional, S.A. de C.V., is a direct subsidiary of CVQ.
|
|
(6)
|
Cablestar, S.A. de C.V., is an indirect majority-owned subsidiary of CVQ and Empresas Cablevisión, S.A.B. de C.V.
|
|
(7)
|
Arretis, S.A.P.I. de C.V.; is a direct subsidiary of CVQ.
|
|
(8)
|
The Telecable subsidiaries are directly owned by CVQ.
|
|
(9)
|
FTTH de México, S. A. de C.V., is an indirect subsidiary of CVQ.
|
|
(10)
|
CVQ is a direct subsidiary of the Company and the parent company of Empresas Cablevisión, Cablemás, TVI, Bestel, Cablecom, Telecable and Innova.
|
|
(11)
|
Innova is an indirect majority-owned subsidiary of the Company, CVQ and Sky DTH, S.A. de C.V. (“Sky DTH”), and a direct majority-owned subsidiary of Innova Holdings, S. de R.L. de C.V. (“Innova Holdings”). Sky is a satellite
television provider in Mexico, Central America and the Dominican Republic. Although the Company holds a majority of Innova’s equity and designates a majority of the members of Innova’s Board of Directors, the non-controlling
interest has certain governance and veto rights in Innova, including the right to block certain transactions between the companies in the Group and Sky. These veto rights are protective in nature and do not affect decisions about
relevant business activities of Innova.
|
|
(12)
|
Televisa, TIM and G.Televisa-D, S.A. de C.V., are direct subsidiaries of Grupo Telesistema.
|
|
(13)
|
Multimedia Telecom and its direct subsidiary, Comunicaciones Tieren, S.A. de C.V. (“Tieren”), are indirect wholly-owned subsidiaries of Grupo Telesistema, through which the Company owns shares of the
capital stock of UHI and maintains an investment in warrants that are exercisable for shares of common stock of UHI. As of December 31, 2019 and 2018, Multimedia Telecom and Tieren have investments representing 95.3% and 4.7%,
respectively, of the Group’s aggregate investment in shares of common stock and share warrants issued by UHI (see Notes 9, 10 and 20).
|
|
(14)
|
Direct subsidiary through which we conduct certain operations of our Content segment and certain operations of our Other Businesses segments.
|
|
(15)
|
Villacezán is an indirect subsidiary of Grupo Telesistema.
|
|
(16)
|
Radiópolis is a direct subsidiary of the Company through which the Group conducts the operations of its Radio business. The Company controls Radiópolis as it has the right to appoint the majority of
the members of the Board of Directors of Radiópolis. The Group has classified the assets and related liabilities of its Radio business as held-for-sale in its consolidated statement of financial position as of December 31, 2019,
and its Radio operations as held-for-sale operations in the Group’s segment information for the years ended December 31, 2019, 2018 and 2017. Through the third quarter of 2019, the Radio business was included as part of the
Group’s Other Businesses segment (see Notes 3 and 26).
|
The Group’s Cable, Sky and Content segments, as well as the Group’s Radio business, which is a held-for-sale operations (see Note 3 and 26), require governmental
concessions and special authorizations for the provision of broadcasting and telecommunications services in Mexico. Such concessions are granted by the Mexican Institute of Telecommunications (“Instituto Federal de Telecomunicaciones” or
“IFT”) for a fixed term, subject to renewal in accordance with the Mexican Telecommunications and Broadcasting Law (“Ley Federal de Telecomunicaciones y Radiodifusión” or “LFTR”).
Renewal of concessions for the Content segment (Broadcasting) and the Radio business require, among others: (i) to request such renewal to IFT prior to the last fifth
period of the fixed term of the related concession; (ii) to be in compliance with the concession holder’s obligations under the LFTR, other applicable regulations, and the concession title; (iii) a declaration by IFT that there is no public
interest in recovering the spectrum granted under the related concession; and (iv) the acceptance by the concession holder of any new conditions for renewing the concession as set forth by IFT, including the payment of a related fee. IFT
shall resolve within the year following the presentation of the request, if there is public interest in recovering the spectrum granted under the related concession, in which case it will notify its determination and proceed with the
termination of the concession at the end of its fixed term. If IFT determines that there is no public interest in recovering the spectrum, it will grant the requested extension within 180 business days, provided that the concessionaire
accepts, in advance, the new conditions set by IFT, which will include the payment of the fee referred to above. Such fee will be determined by IFT for the relevant concessions, considering the following elements: (i) the frequency band;
(ii) the amount of spectrum; (iii) coverage of the frequency band; (iv) domestic and international benchmark regarding the market value of frequency bands; and (v) upon request of IFT, an opinion issued by the Ministry of Finance and Public
Credit of IFT´s proposal for calculation of the fee.
Renewal of concessions for the Sky and Cable segments require, among others: (i) to request its renewal to IFT prior to the last fifth period of the fixed term of the
related concession; (ii) to be in compliance with the concession holder’s obligations under the LFTR, other applicable regulations, and the concession title; and (iii) the acceptance by the concession holder of any new conditions for
renewing the concession as set forth by IFT. IFT shall resolve any request for renewal of the telecommunications concessions within 180 business days of its request. Failure to respond within such period of time shall be interpreted as if
the request for renewal has been granted.
The regulations of the broadcasting and the telecommunications concessions (including satellite pay TV) establish that at the end of the concession, the frequency
bands or spectrum attached to the services provided in the concessions shall return to the Mexican government. In addition, at the end of the concession, the Mexican government will have the preferential right to acquire infrastructure,
equipment and other goods directly used in the provision of the concession. If the Mexican government were to exercise its right to acquire infrastructure, equipment and other goods, it would be required to pay a price that is equivalent to
a formula that is similar to fair value. To the knowledge of the Company’s management, no spectrum granted for broadcasting services in Mexico has been recovered by the Mexican government in at least the past three decades for public
interest reasons. However, the Company’s management is unable to predict the outcome of any action by IFT in this regard. In addition, these assets, by themselves, would not be enough to immediately begin broadcasting or offering satellite
pay TV services or telecommunications services, as no content producing assets or other equipment necessary to operate the business would be included.
Also, the Group’s Gaming business, which is reported in the Other Businesses segment, requires a permit granted by the Mexican Federal Government for a fixed term,
subject to renewal in accordance with Mexican law. Additionally, the Group’s Sky businesses in Central America and the Dominican Republic require concessions or permits granted by local regulatory authorities for a fixed term, subject to
renewal in accordance with local laws.
The accounting guidelines provided by IFRIC 12 Service Concession Arrangements, are not applicable to the Group due
primarily to the following factors: (i) the Mexican government does not substantially control the Group’s infrastructure, what services are provided with the infrastructure and the price at which such services are offered; (ii) the Group’s
broadcasting service does not constitute a public service as per the definition in IFRIC 12; and (iii) the Group is unable to divide its infrastructure among the public (telephony and possibly Internet services) and non-public (pay TV)
service components.
At December 31, 2019, the expiration dates of the Group’s concessions and permits were as follows:
|
Segments
|
|
Expiration Dates
|
|
Cable
|
|
Various from 2022 to 2048
|
|
Sky
|
|
Various from 2020 to 2028
|
|
Content (broadcasting concessions) (1)
|
|
In 2021 and the relevant renewals start in 2022 ending in 2042
|
|
Other Businesses:
|
|
|
|
Gaming
|
|
In 2030
|
|
Held-for-sale operations:
|
|
|
|
Radio (2)
|
|
Various from 2020 to 2039
|
|
(1)
|
In November 2018, the IFT approved the renewal of the Group’s broadcasting concessions for all of its television stations in Mexico, for a term of 20 years after the existing expiration date in 2021.
In November 2018, the Group paid in cash for such renewal an aggregate amount of Ps.5,754,543, which includes a payment of Ps.1,194 for administrative expenses and recognized this payment as an intangible asset in its consolidated
statement of financial position. This amount will be amortized in a period of 20 years beginning on January 1, 2022, by using the straight-line method (see Note 13).
|
|
(2)
|
The amounts paid by the Group for renewal of certain Radio concessions in 2017 amounted to an aggregate of Ps.37,848. In addition, IFT granted in 2017 two new concessions to the Group in Ensenada and
Puerto Vallarta. The amount paid by the Group for obtaining these concessions amounted to an aggregate of Ps.85,486. The Group recognized the amounts for renewal and obtaining these concessions as intangible assets in its
consolidated statement of financial position, and are amortized in a period of 20 years by using the straight-line method (see Note 13).
|
The concessions or permits held by the Group are not subject to any significant pricing regulations in the ordinary course of business.
|
(c)
|
Investments in Associates and Joint Ventures
|
Associates are those entities over which the Group has significant influence but not control, generally those entities with a shareholding of between 20% and 50% of the
voting rights. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Joint ventures are those joint arrangements where the Group
exercises joint control with other stockholder or more stockholders without exercising control individually, and have rights to the net assets of the joint arrangements. Investments in associates and joint ventures are accounted for using the
equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the net assets of the investee after the date of
acquisition.
The Group’s investments in associates include an equity interest in UHI represented by approximately 10% of the outstanding total shares of UHI as of December 31, 2019
and 2018 (see Notes 9 and 10).
If the Group’s share of losses of an associate or a joint venture equals or exceeds its interest in the investee, the Group discontinues recognizing its share of further
losses. The interest in an associate or a joint venture is the carrying amount of the investment in the investee under the equity method together with any other long-term investment that, in substance, form part of the Group’s net investment
in the investee. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of
the associate or joint venture.
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s chief executive officers (“chief operating decision makers”)
who are responsible for allocating resources and assessing performance for each of the Group’s operating segments.
|
(e)
|
Foreign Currency Translation
|
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity
operates (“functional currency”). The presentation and reporting currency of the Group’s consolidated financial statements is the Mexican peso, which is used for compliance with its legal and tax obligations.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or measurement where items are remeasured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income as part of finance income or expense, except
when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary securities denominated in foreign currency classified as investments in financial instruments are analyzed between exchange
differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized cost are recognized in income or loss, and other
changes in carrying amount are recognized in other comprehensive income or loss.
Translation of Foreign Operations
The financial statements of the Group’s foreign entities that have a functional currency different from the presentation currency are translated into the presentation
currency as follows: (a) assets and liabilities are translated at the closing rate at the date of the statement of financial position; (b) income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (c) all resulting translation differences are
recognized in other comprehensive income or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the
closing rate. Translation differences arising are recognized in other comprehensive income or loss.
Assets and liabilities of non-Mexican subsidiaries that use the Mexican Peso as a functional currency are initially converted to Mexican Pesos by utilizing the exchange
rate of the statement of financial position date for monetary assets and liabilities, and historical exchange rates for non-monetary items, with the related adjustment included in the consolidated statement of income as finance income or
expense.
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line “Long-term debt, net of
current portion” of the consolidated statement of financial position) has been designated as a hedge of a net investment in a foreign operation in connection with the Group’s investment in shares of common stock of UHI (hedged item), which
amounted to U.S.$433.7 million (Ps.8,189,662) and U.S.$421.2 million (Ps.8,285,286) as of December 31, 2019 and 2018, respectively. Consequently, any foreign exchange gain or loss attributable to this designated hedging long-term debt is
credited or charged directly to other comprehensive income or loss as a cumulative result from foreign currency translation (see Note 10).
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line “Long-term debt, net of
current portion” of the consolidated statement of financial position) has been designated as a fair value hedge of foreign exchange exposure related to: (i) its investment in warrants exercisable for common stock of UHI and (ii) its initial
investment in Open Ended Fund until March 31, 2018, and its entire investment in Open Ended Fund beginning in the second quarter of 2018 (hedged items), which amounted to Ps.33,775,451 (U.S.$1,788.6 million) and Ps.4,688,202 (U.S.$248.3
million), respectively, as of December 31, 2019, and Ps.34,921,530 (U.S.$1,775.1 million) and Ps.7,662,726 (U.S.$389.5 million), respectively, as of December 31, 2018. Consequently, any foreign exchange gain or loss attributable to this
designated hedging long-term debt is credited or charged directly to other comprehensive income or loss, along with the recognition in the same line item of any foreign currency gain or loss of these investments in warrants and Open Ended
Fund designated as hedged items (see Notes 9, 14 and 18).
Beginning on January 1, 2018, the Group adopted the hedge accounting requirements of IFRS 9 Financial Instruments, (“IFRS 9”)
for all of its hedging relationships. This IFRS Standard became effective on that date.
|
(f)
|
Cash and Cash Equivalents and Temporary Investments
|
Cash and cash equivalents consist of cash on hand and all highly liquid investments with an original maturity of three months or less at the date of acquisition. Cash is
stated at nominal value and cash equivalents are measured at fair value, and the changes in the fair value are recognized in the statement of income.
Temporary investments consist of short-term investments in securities, including without limitation debt with a maturity
of over three months and up to one year at the date of acquisition, stock and other financial instruments, or a combination thereof, as well as current maturities of non-current investments in financial instruments. Temporary investments
are measured at fair value with changes in fair value recognized in finance income in the consolidated statement of income, except securities which are measured at amortized cost.
As of December 31, 2019 and 2018, cash equivalents and temporary investments primarily consisted of fixed short-term deposits and corporate fixed income securities
denominated in U.S. dollars and Mexican pesos, with an average yield of approximately 2.20% for U.S. dollar deposits and 8.09% for Mexican peso deposits in 2019, and approximately 1.77% for U.S. dollar deposits and 7.69% for Mexican peso
deposits in 2018.
|
(g)
|
Transmission Rights and Programming
|
Programming is comprised of programs, literary works, production talent advances and films.
Transmission rights and literary works are valued at the lesser of acquisition cost and net realizable value. Programs and films are valued at the lesser of production
cost, which consists of direct production costs and production overhead, and net realizable value. Payments for production talent advances are initially capitalized and subsequently included as direct or indirect costs of program production.
Transmission rights are recognized from the point of which the legally enforceable license period begins. Until the license term commences and the programming rights are available, payments made are recognized as prepayments.
The Group’s policy is to capitalize the production costs of programs which benefit more than one annual period and amortize them over the expected period of future
program revenues based on the Company’s historical revenue patterns and usage for similar productions.
Transmission rights, programs, literary works, production talent advances and films are recorded at acquisition or production cost. Cost of sales is calculated and
recorded for the month in which such transmission rights, programs, literary works, production talent advances and films are matched with related revenues.
Transmission rights are recognized in income over the lives of the contracts. Transmission rights in perpetuity are amortized on a straight-line basis over the period of
the expected benefit as determined by past experience, but not exceeding 25 years.
Inventories of paper, magazines, materials and supplies for maintenance of technical equipment are recorded at the lower of cost or its net realization value. The net
realization value is the estimated selling price in the normal course of business, less estimated costs to conduct the sale. Cost is determined using the average cost method.
Through December 31, 2017, the Group classified its financial assets in the following categories: loans and receivables, held-to-maturity investments, financial assets
at fair value through income or loss (“FVIL”) and available-for-sale financial assets. The classification depended on the purpose for which the financial assets were acquired. Management determined the classification of its financial assets
at initial recognition.
Beginning on January 1, 2018, the Group classifies its financial assets in accordance with IFRS 9 which became effective on that date. Under the guidelines of IFRS 9,
the Group classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or loss (“FVOCIL”), or FVIL, based on the Company’s business model for managing the financial assets and the
contractual cash flows characteristics of the financial asset.
Financial Assets Measured at Amortized Cost
Financial assets are measured at amortized cost when the objective of holding such financial assets is to collect contractual cash flows, and the contractual terms of
the financial asset give rise on specified dates to cash flows that are only payments of principal and interest on the principal amount outstanding. These financial assets are initially recognized at fair value plus transaction costs and
subsequently carried at amortized cost using the effective interest rate method, with changes in carrying value recognized in the consolidated statement of income in the line which most appropriately reflects the nature of the item or
transaction. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period that are included in non-current assets. The Group’s financial assets measured at amortized costs are
primarily presented as “trade notes and accounts receivable”, “other accounts and notes receivable”, and “due from related parties” in the consolidated statement of financial position (see Note 7).
Financial Assets Measured at FVOCIL
Financial assets are measured at FVOCIL when the objective of holding such financial assets is both collecting contractual cash flows and selling financial assets, and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Group’s investments in certain equity instruments have been designated to be measured at FVOCIL, as permitted by IFRS 9 (see Note 28). In connection with this
designation, any amounts presented in consolidated other comprehensive income are not subsequently transferred to consolidated income. Dividends from these equity instruments are recognized in consolidated income when the right to receive
payment of the dividend is established, and such dividend is probable to be paid to the Group.
Financial Assets at FVIL
Financial assets at FVIL are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in
the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as
non-current.
Impairment of Financial Assets
From January 1, 2018, the Group assesses on a forward looking basis the expected credit losses associated with its financial assets carried at fair value through other
comprehensive income or loss. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition
of the receivables, see Note 7 for further details.
Offsetting of Financial Instruments
Financial assets are offset against financial liabilities and the net amount reported in the consolidated statement of financial position if, and only when the Group:
(i) currently has a legally enforceable right to set off the recognized amounts; and (ii) intends either to settle on a net basis, or to realize the assets and settle the liability simultaneously.
|
(j)
|
Property, Plant and Equipment
|
Property, plant and equipment are recorded at acquisition cost.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to income or loss during the financial
period in which they are incurred.
Land is not depreciated. Depreciation of property, plant and equipment is based upon the carrying value of the assets in use and is computed using the straight-line
method over the estimated useful lives of the asset, as follows:
|
|
|
Estimated Useful Lives
|
|
Buildings
|
|
|
|
Buildings improvements
|
|
5-20 years
|
|
Technical equipment
|
|
3-30 years
|
|
Satellite transponders
|
|
15 years
|
|
Furniture and fixtures
|
|
3-10 years
|
|
Transportation equipment
|
|
4-8 years
|
|
Computer equipment
|
|
3-6 years
|
|
Leasehold improvements
|
|
5-30 years
|
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within other income or expense in the consolidated
statement of income.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of
property, plant and equipment.
Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct
costs and restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight – line basis. If the Group is reasonably
certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and mostly leases of low-value assets are recognized on a straight-line basis as an expense in
profit or loss. Short-term leases are leases with a lease term of 12 months or less.
|
(l)
|
Intangible Assets and Goodwill
|
Intangible assets and goodwill are recognized at acquisition cost. Intangible assets and goodwill acquired through business combinations are recorded at fair value at
the date of acquisition. Intangible assets with indefinite useful lives, which include, trademarks, concessions, and goodwill, are not amortized, and subsequently recognized at cost less accumulated impairment losses. Intangible assets with
finite useful lives are amortized on a straight-line basis over their estimated useful lives, as follows:
|
|
|
Estimated
Useful Lives
|
|
Trademarks with finite useful lives
|
|
4 years
|
|
Licenses
|
|
3-14 years
|
|
Subscriber lists
|
|
4-10 years
|
|
Payments for renewal of concessions
|
|
20 years
|
|
Other intangible assets
|
|
3-20 years
|
Trademarks
The Group determines its trademarks to have an indefinite life when they are expected to generate net cash inflows for the Group indefinitely. Additionally, the Group
considers that there are no legal, regulatory or contractual provisions that limit the useful lives of trademarks. The Group has not capitalized any amounts associated with internally developed trademarks.
In 2015, the Company’s management evaluated trademarks in its Cable segment to determine whether events and circumstances continue to support an indefinite useful life
for these intangible assets. As a result of such evaluation, the Company identified certain businesses and locations that began migrating from an acquired trademark to an internally developed trademark between 2015 and 2016, in connection
with enhanced service packages offered to current and new subscribers, and estimated that this migration process will take approximately four years. Accordingly, in 2015, the Group changed the useful life assessment from indefinite to finite
for acquired trademarks in certain businesses and locations in its Cable segment, and began to amortize on a straight line basis the related carrying value of these trademarks when the migration to the new trademark started using an estimated
useful life of four years.
Concessions
The Group defined concessions to have an indefinite life due to the fact that the Group has a history of renewing its concessions upon expiration, has maintained the
concessions granted by the Mexican government, and has no foreseeable limit to the period over which the assets are expected to generate net cash inflows. In addition, the Group is committed to continue to invest for the long term to extend
the period over which the broadcasting and telecommunications concessions are expected to continue to provide economic benefits.
Any fees paid by the Group to regulatory authorities for concessions renewed are determined to have finite useful lives and are amortized on a straight-live basis over
the fixed term of the related concession
Goodwill
Goodwill arises on the acquisition of a business and represents the excess of the consideration transferred over the Group’s interest in net fair value of the
identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash
generating units (“CGUs”), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of
goodwill is compared to the recoverable amount, which is the higher between the value in use and the fair value less costs to sell. Any impairment of goodwill is recognized as an expense in the consolidated statement of income and is not
subject to be reversed in subsequent periods.
|
(m)
|
Impairment of Long-lived Assets
|
The Group reviews for impairment the carrying amounts of its long-lived assets, tangible and intangible, including goodwill (see Note 13), at least once a year, or
whenever events or changes in business circumstances indicate that these carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. To determine whether an impairment exists, the carrying value of the reporting unit is compared with its recoverable amount. Fair value estimates
are based on quoted market values in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including discounted value of estimated future cash flows,
market multiples or third-party appraisal valuations. Any impairment of long-lived assets other than goodwill may be subsequently reversed under certain circumstances.
|
(n)
|
Trade Accounts Payable and Accrued Expenses
|
Trade accounts payable and accrued expenses are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade
accounts payable and accrued expenses are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade accounts payable and accrued expenses are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
Trade accounts payable and accrued expenses are presented as a single item of consolidated current liabilities in the consolidated statements of financial position as of
December 31, 2019 and 2018.
Debt is recognized initially at fair value, net of transaction costs incurred. Debt is subsequently carried at amortized cost; any difference between the proceeds (net
of transaction costs) and the redemption value is recognized in the consolidated statement of income over the period on which the debt is outstanding using the effective interest method.
Fees paid on the establishment of debt facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will
be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity
services and amortized over the period of the facility to which it relates.
Current portion of long-term debt and interest payable are presented as a single line item of consolidated current liabilities in the consolidated statements of
financial position as of December 31, 2019 and 2018.
Debt early redemption costs are recognized as finance expense in the consolidated statement of income.
|
(p)
|
Customer Deposits and Advances
|
Customer deposits and advance agreements for advertising services provide that customers receive prices that are fixed for the contract period for advertising time in
the Group’s platforms based on rates established by the Group. Such rates vary depending on when the advertisement is made, including the season, hour, day and type of programming.
The Group recognizes customer deposits and advance agreements for advertising services in the consolidated statement of financial position when these agreements are
executed either with a consideration in cash paid by customers or with short-term non-interest bearing notes received from customers in connection with annual (“upfront basis”) and from time to time (“scatter basis”) prepayments (see Note 7).
In connection with the initial adoption of IFRS 15 Revenues from Contracts with Customers (“IFRS 15”) in the first quarter of 2018 (see Note 2 (s)), customer deposits and advances agreements are
presented by the Group as a contract liability in the consolidated statement of financial position when a customer pays consideration, or the Group has a right to an amount of consideration that is unconditional, before the Group transfers
services to the customer. Under the guidelines of this standard, a contract liability is a Group’s obligation to transfer services or goods to a customer for which the Group has received consideration, or an amount of consideration is due,
from the customer. In addition, the Group recognizes contract asset upon the approval of non-cancellable contracts that generate an unconditional right to receive cash consideration prior to services being rendered. The Company’s management
has consistently recognized that an amount of consideration is due, for legal, finance and accounting purposes, when a short-term non- interest bearing note is received from a customer in connection with a deposit or advance agreement entered
into with the customer for advertising services to be rendered by the Group in the short term.
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be
required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The increase in the provisions due to passage of time is recognized as interest expense.
The capital stock and other equity accounts include the effect of restatement through December 31, 1997, determined by applying the change in the Mexican National
Consumer Price Index between the dates capital was contributed or net results were generated and December 31, 1997, the date through which the Mexican economy was considered hyperinflationary under the guidelines of IFRS Standards. The
restatement represented the amount required to maintain the contributions and accumulated results in Mexican Pesos in purchasing power as of December 31, 1997.
Where any company in the Group purchases shares of the Company’s capital stock (shares repurchased), the consideration paid, including any directly attributable
incremental costs is deducted from equity attributable to stockholders of the Company until the shares are cancelled, reissued, or sold. Where such shares repurchased are subsequently reissued or sold, any consideration received, net of any
directly attributable incremental transaction costs, is included in equity attributable to stockholders of the Company.
In connection with the initial adoption of IFRS 15, in the first quarter of 2018, the Company’s management: (i) reviewed significant revenue streams and identified
certain effects on revenue recognition in the Group’s Cable and Sky segments, as discussed below; (ii) used the retrospective cumulative effect, which consists in recognizing any cumulative adjustment resulting from the new standard at the
date of initial adoption in consolidated equity; and (iii) did not restate the comparative information for the years ended December 31, 2017 and 2016, which was reported under the revenue recognition IFRS Standard in effect in those periods
(see Note 28).
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for services provided. The Group recognizes revenue
when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases
its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
The Group derives the majority of its revenues from media and entertainment-related business activities both in Mexico and internationally. Revenues are recognized when
the service is provided and collection is probable. A summary of revenue recognition policies by significant activity is as follows:
|
•
|
Cable television, internet and telephone subscription, and pay-per-view and installation fees are recognized in the period in which the services are rendered. Through December 31, 2017, commissions for obtaining contracts with
customers in the Group’s Cable segment were accounted for as they were incurred. Beginning on January 1, 2018, in accordance with IFRS 15, incremental costs for obtaining contracts with customers, primarily commissions, are recognized
as assets in the Group’s consolidated statement of financial position and amortized in the expected life of contracts with customers.
|
|
•
|
Revenues from other telecommunications and data services are recognized in the period in which these services are provided. Other telecommunications services include long distance and local telephony, as well as leasing and
maintenance of telecommunications facilities.
|
|
•
|
Sky program service revenues, including advances from customers for future direct-to-home (“DTH”) program services, are recognized at the time the service is provided. Through December 31, 2017, commissions for obtaining contracts
with customers in the Group’s Sky segment were accounted for as they were incurred. Beginning on January 1, 2018, in accordance with IFRS 15, certain incremental costs for obtaining contracts with customers, primarily commissions, are
recognized as assets in the Group’s consolidated statement of financial position and amortized in the expected life of contracts with customers.
|
|
•
|
Advertising revenues, including deposits and advances from customers for future advertising, are recognized at the time the advertising services are rendered.
|
|
•
|
Revenues from program services for network subscription and licensed and syndicated television programs are recognized when the programs are sold and become available for broadcast.
|
|
•
|
Revenues from magazine subscriptions are initially deferred and recognized proportionately as products are delivered to subscribers. Revenues from the sales of magazines are recognized on the date of circulation of delivered
merchandise, net of a provision for estimated returns.
|
|
•
|
Revenues from publishing distribution are recognized upon distribution of the products.
|
|
•
|
Revenues from attendance to soccer games, including revenues from advance ticket sales for soccer games and other promotional events, are recognized on the date of the relevant event.
|
|
•
|
Motion picture production and distribution revenues are recognized as the films are exhibited.
|
|
•
|
Gaming revenues consist of the net win from gaming activities, which is the difference between amounts wagered and amounts paid to winning patrons and are recognized at the time of such net win.
|
In respect to sales of multiple products or services, the Group evaluates whether it has fair value evidence for each deliverable in the transaction.
For example, the Group sells cable television, internet and telephone subscription to subscribers in a bundled package at a rate lower than if the subscriber purchases each product on an individual basis. Subscription revenues received from
such subscribers are allocated to each product in a pro-rata manner based on the fair value of each of the respective services.
Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its
recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is
recognized using the original effective interest rate.
Pension and Seniority Premium Obligations
Plans exist for pensions and seniority premiums (post-employment benefits), for most of the Group’s employees funded through irrevocable trusts.
Increases or decreases in the consolidated liability or asset for post-employment benefits are based upon actuarial calculations. Contributions to the trusts are determined in accordance with actuarial estimates of funding requirements.
Payments of post-employment benefits are made by the trust administrators. The defined benefit obligation is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension
obligation.
Remeasurement of post-employment benefit obligations related to experience adjustments and changes in actuarial assumptions of post- employment benefits
are recognized in the period in which they are incurred as part of other comprehensive income or loss in consolidated equity.
Profit Sharing
The employees’ profit sharing required to be paid under certain circumstances in Mexico, is recognized as a direct benefit to employees in the
consolidated statements of income in the period in which it is incurred.
Termination Benefits
Termination benefits, which mainly represent severance payments by law, are recorded in the consolidated statement of income. The Group recognizes
termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that involves the payment of termination benefits.
The income tax expense for the period comprises current and deferred income tax. Income tax is recognized in the consolidated statement of income, except to the extent
that it relates to items recognized in other comprehensive income or directly in equity. In this case, the income tax is recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries
where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction (other than in a business combination) that at the time of the transaction affects neither accounting nor taxable income or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences and
tax loss carryforwards can be utilized. For this purpose, the Group takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, projected taxable income, carryforward
periods, current tax structure, potential changes or adjustments in tax structure, and future reversals of existing temporary differences.
Deferred income tax liabilities are provided on taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except for
deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets
are provided on deductible temporary differences associated with investments in subsidiaries, joint ventures and associates, to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefit
of the temporary difference and it is expected to reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the
deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
|
(w)
|
Derivative Financial Instruments
|
The Group recognizes derivative financial instruments as either assets or liabilities in the consolidated statements of financial position and measures such instruments
at fair value. The accounting for changes in the fair value of a derivative financial instrument depends on the intended use of the derivative financial instrument and the resulting designation. For a derivative financial instrument
designated as a cash flow hedge, the effective portion of such derivative’s gain or loss is initially reported as a component of other comprehensive income or loss and subsequently reclassified into income when the hedged exposure affects
income. The ineffective portion of the gain or loss is reported in income immediately. For a derivative financial instrument designated as a fair value hedge, the gain or loss is recognized in income in the period of change together with the
offsetting loss or gain on the hedged item attributed to the risk being hedged. When a hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument that has been recognized in other
comprehensive income remains in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to income or loss.
For derivative financial instruments that are not designated as accounting hedges, changes in fair value are recognized in income in the period of change. During the years ended December 31, 2019, 2018 and 2017, certain derivative financial
instruments qualified for hedge accounting (see Note 15).
Comprehensive income for the period includes the net income for the period presented in the consolidated statement of income plus other comprehensive income for the
period reflected in the consolidated statement of comprehensive income.
|
(y)
|
Share-based Payment Agreements
|
Key officers and employees of certain subsidiaries of the Company have entered into agreements for the conditional sale of Company’s shares under the Company’s Long-Term
Retention Plan. The share-based compensation expense is measured at fair value at the date the equity benefits are conditionally sold to these officers and employees, and is recognized as a charge to consolidated income (administrative
expense) over the vesting period. The Group recognized a share-based compensation expense of Ps.1,129,644, Ps.1,327,549 and Ps.1,489,884 for the years ended December 31, 2019, 2018 and 2017, respectively, of which Ps.1,108,094, Ps.1,305,999
and Ps.1,468,337 was credited in consolidated stockholders’ equity for those years, respectively (see Note 17).
Through December 31, 2018:
|
•
|
The determination of whether an arrangement was, or contained, a lease was based on the substance of the arrangement and required an assessment of whether the fulfillment of the arrangement was dependent on the use of a specific
asset or assets and whether the arrangement conveyed the right to use the asset.
|
|
•
|
Leases of property, plant and equipment and other assets where the Group held substantially all the risks and rewards of ownership were classified as finance leases. Finance lease assets were capitalized at the commencement of the
lease term at the lower of the present value of the minimum lease payments or the fair value of the lease asset. The obligations relating to finance leases, net of finance charges in respect of future periods, were recognized as
liabilities. The interest element of the finance cost was charged to the consolidated statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance leases was depreciated over the shorter of the useful life of the asset and the lease term.
|
|
•
|
Leases where a significant portion of the risks and rewards were held by the lessor were classified as operating leases. Rentals were charged to the consolidated statement of income on a straight line basis over the period of the
lease.
|
|
•
|
Leasehold improvements were depreciated at the lesser of its useful life or contract term.
|
In the first quarter of 2019, the Group adopted IFRS 16 Leases (“IFRS 16”), which became effective for annual periods
beginning on January 1, 2019 (see Note 28). The Group does not apply this new IFRS Standard to short-term leases and leases for which the underlying asset is of low value, as permitted by the guidelines of IFRS 16.
On adoption of IFRS 16, the Group recognized lease liabilities in relation to leases which had previously been classified as operating leases under the principles of IAS
17 Leases (“IAS 17”). These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee´s incremental
borrowing rate as of January 1, 2019. The average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 4.7% and 10.6% for U.S. dollars leases and Mexican pesos leases, respectively.
|
(aa)
|
New and Amended IFRS Standards
|
The Group adopted IFRS 16 in 2019, which became effective on January 1, 2019 (see Notes 2 (k), 2 (z) and 28). The Group adopted IFRS 15 and IFRS 9 in 2018, which became effective on January 1, 2018 (see Notes 2 (i), 2 (t) and 28). Some
other amendments and improvements to certain IFRS Standards became effective on January 1, 2019 and 2018, and they did not have any significant impact on the Group’s consolidated financial statements.
Below is a list of the new and amended IFRS Standards that have been issued by the IASB and are effective for annual periods starting on or after January 1, 2020.
|
New or Amended IFRS Standard
|
|
Title of the IFRS Standard
|
|
Effective for Annual
Periods Beginning
On or After
|
|
Amendments to IFRS 10 and IAS 28 (1)
|
|
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
|
|
Postponed
|
|
IFRS 17 (2)
|
|
Insurance Contracts
|
|
January 1, 2021
|
|
IFRS Conceptual Framework
|
|
Conceptual Framework for Financial Reporting
|
|
January 1, 2020
|
|
Amendments to IFRS 3 (1)
|
|
Definition of a Business
|
|
January 1, 2020
|
|
Amendments to IAS 1 and IAS 8 (1)
|
|
Definition of Material
|
|
January 1, 2020
|
|
Amendments to IFRS 9, IAS 39 and IFRS 7 (2)
|
|
Interest Rate Benchmark Reform
|
|
January 1, 2020
|
|
Amendments to IAS 1 (1)
|
|
Classification of Liabilities as Current or Non-current
|
|
January 1, 2022
|
(1) This new or amended IFRS Standard is not expected to have a significant impact on the Group’s consolidated financial statements.
(2) This new or amended IFRS Standard is not expected to be applicable to the Group’s consolidated financial statements.
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture, were issued in September 2014 and address and acknowledge inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an
investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involved a business (whether it is housed in a subsidiary or not). A partial gain or loss is
recognized when a transaction involved assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015, the IASB postponed the effective date of these amendments indefinitely pending the outcome of
its research project on the equity method of accounting.
IFRS 17 Insurance Contracts (“IFRS 17”) was issued in May 2017 and supersedes IFRS 4 Insurance
Contracts (“IFRS 4”), which has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. IFRS 17 establishes principles for the
recognition, measurement, presentation and disclosures of insurance contracts issued. It also requires similar principles to be applied to reinsurance contracts with discretionary participation features issued. IFRS 17 solves the comparison
problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner. Under the provisions of IFRS 17, insurance obligations will be accounted for using current values instead of historical cost. IFRS 17
is effective on January 1, 2021, and earlier application is permitted.
Conceptual Framework for Financial Reporting (“Conceptual
Framework”) was issued in March 2018, replacing the previous version of the Conceptual Framework issued in 2010. The Conceptual Framework describes the objective of, and the concepts for, general purpose financial reporting. The purpose of
the Conceptual Framework is to: (a) assist the IASB to develop IFRS Standards that are based on consistent concepts; (b) assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or
other event, or when a Standard allows a choice of accounting policy; and (c) assist all parties to understand and interpret the IFRS Standards. The Conceptual Framework is not an IFRS Standard. Nothing in the Conceptual Framework overrides
any IFRS Standard or any requirement in an IFRS Standard. The revised Conceptual Framework is effective immediately for the IASB and the IFRIC, and has an effective date of January 1, 2020, with earlier application permitted, for companies
that use the Conceptual Framework to develop accounting policies when no IFRS Standard applies to a particular transaction.
Amendments to IFRS 3 Definition of a Business was issued in October 2018. The amended definition emphasizes that the output of
a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others. Distinguishing between a business and a
group of assets is important because an acquirer recognizes goodwill only when acquiring a business. Amendments to IFRS 3 is effective on January 1, 2020, and earlier application is permitted.
Amendments to IAS 1 and IAS 8 Definition of Material was issued in October 2018. The definition of material helps a company
determine whether information about an item, transaction or other event should be provided to users of financial statements. However, companies sometimes experienced difficulties using the previous definition of material when making
materiality judgements in the preparation of financial statements. Consequently, the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8) in October 2018. Amendments to IAS 1 and IAS 8
is effective on January 1, 2020, and earlier application is permitted.
Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform were issued in September 2019. These amendments modify
some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by interest rate benchmarks such as interbank offered rates. In addition, the amendments require companies to provide additional
information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments are effective for annual reporting periods beginning on or after January 1, 2020. Earlier application is permitted.
Amendments to IAS 1 Classification of Liabilities as Current or Non-current was issued in January 2020, the amendments clarify one of the criteria
in IAS 1 for classifying a liability as non-current that is, the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendments are effective for annual
reporting periods beginning on or after January 1, 2022. Earlier application is permitted.
Accounting Policies
The principal accounting policies followed by the Group and used in the preparation of its annual consolidated financial statements as of December 31, 2019, and where
applicable, of its interim condensed consolidated financial statements, are summarized below. These accounting policies should be read in conjunction with the audited consolidated financial statements of the Group for the years ended December
31, 2019 and 2018, once they have been submitted to the Mexican Banking and Securities Commission (“Comisión Nacional Bancaria y de Valores” and the U.S. Securities and Exchange Commission, respectively
|
(a)
|
Basis of Presentation
|
The consolidated financial statements of the Group as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, are presented in accordance with
International Financial Reporting Standards (“IFRS Standards”), as issued by the International Accounting Standards Board (“IASB”). IFRS Standards comprise: (i) IFRS Standards; (ii) International Accounting Standards (“IAS Standards”);
(iii) IFRS Interpretations Committee (“IFRIC”) Interpretations; and (iv) Standing Interpretations Committee (“SIC”) Interpretations.
The consolidated financial statements have been prepared on a historical cost basis, except for the measurement at fair value of temporary investments, derivative financial
instruments, financial assets, equity financial instruments, plan assets of post-employment benefits and share-based payments, as described below.
The preparation of consolidated financial statements in conformity with IFRS Standards, requires the use of certain critical accounting estimates. It also requires management
to exercise its judgment in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the consolidated financial statements in the period the assumptions changed. Management believes that
the underlying assumptions are appropriate. The areas involving a higher degree of judgment or complexity, or areas where estimates and assumptions are significant to the Group’s financial statements are disclosed in Note 5 to these
consolidated financial statements.
These consolidated financial statements were authorized for issuance on April 13, 2020, by the Group’s Principal Financial Officer.
The financial statements of the Group are prepared on a consolidated basis and include the assets, liabilities and results of operations of all companies in which the Company
has a controlling interest (subsidiaries). All intercompany balances and transactions have been eliminated from the consolidated financial statements.
Subsidiaries
Subsidiaries are all entities over which the Company has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether or not the
Company controls another entity. The subsidiaries are consolidated from the date on which control is obtained by the Company and cease to consolidate from the date on which said control is lost.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the
assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling
interest in the acquiree on an acquisition-by-acquisition basis at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in income or loss.
Changes in Ownership Interests in Subsidiaries without Change of Control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their
capacity as owners. The difference between fair value of any consideration paid and the interest acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non-controlling interests are
also recorded in equity.
Loss of Control of a Subsidiary
When the Company ceases to have control of a subsidiary, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change
in carrying amount recognized in income or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts
previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that amounts previously recognized in other comprehensive
income are reclassified to income or loss except for certain equity financial instruments designated irrevocably with changes in other comprehensive income or loss.
At December 31, 2019 and 2018, the main direct and indirect subsidiaries of the Company were as follows:
|
Subsidiaries
|
|
Company’s
Ownership
Interest (1)
|
|
Business
Segment (2)
|
|
Empresas Cablevisión, S.A.B. de C.V. and subsidiaries (collectively, “Empresas Cablevisión”) (3)
|
|
51.2
|
%
|
|
Cable
|
|
Subsidiaries engaged in the Cablemás business (collectively, “Cablemás”) (4)
|
|
100
|
%
|
|
Cable
|
|
Televisión Internacional, S.A. de C.V. and subsidiaries (collectively, “TVI”) (5)
|
|
100
|
%
|
|
Cable
|
|
Cablestar, S.A. de C.V. and subsidiaries (collectively, “Bestel”) (6)
|
|
66.2
|
%
|
|
Cable
|
|
Arretis, S.A.P.I. de C.V. and subsidiaries (collectively, “Cablecom”) (7)
|
|
100
|
%
|
|
Cable
|
|
Subsidiaries engaged in the Telecable business (collectively, “Telecable”) (8)
|
|
100
|
%
|
|
Cable
|
|
FTTH de México, S.A. de C.V. (9)
|
|
100
|
%
|
|
Cable
|
|
Corporativo Vasco de Quiroga, S.A. de C.V. (“CVQ”) and subsidiaries (10)
|
|
100
|
%
|
|
Cable and Sky
|
|
Innova, S. de R.L. de C.V. (“Innova”) and subsidiaries (collectively, “Sky”) (11)
|
|
58.7
|
%
|
|
Sky
|
|
Grupo Telesistema, S.A. de C.V. (“Grupo Telesistema”) and subsidiaries
|
|
100
|
%
|
|
Content and Other Businesses
|
|
Televisa, S.A. de C.V. (“Televisa”) (12)
|
|
100
|
%
|
|
Content
|
|
Televisión Independiente de México, S.A. de C.V. (“TIM”) (12)
|
|
100
|
%
|
|
Content
|
|
G.Televisa-D, S.A. de C.V. (12)
|
|
100
|
%
|
|
Content
|
|
Multimedia Telecom, S.A. de C.V. (“Multimedia Telecom”) and subsidiary (13)
|
|
100
|
%
|
|
Content
|
|
Ulvik, S.A. de C.V. (14)
|
|
100
|
%
|
|
Content and Other Businesses
|
|
Controladora de Juegos y Sorteos de México, S.A. de C.V. and subsidiaries
|
|
100
|
%
|
|
Other Businesses
|
|
Editorial Televisa, S.A. de C.V. and subsidiaries
|
|
100
|
%
|
|
Other Businesses
|
|
Grupo Distribuidoras Intermex, S.A. de C.V. and subsidiaries
|
|
100
|
%
|
|
Other Businesses
|
|
Villacezán, S.A. de C.V. (“Villacezán”) and subsidiaries (15)
|
|
100
|
%
|
|
Other Businesses
|
|
Sistema Radiópolis, S.A. de C.V. (“Radiópolis”) and subsidiaries (16)
|
|
50
|
%
|
|
Held-for-sale operations
|
|
(1)
|
Percentage of equity interest directly or indirectly held by the Company.
|
|
(2)
|
See Note 26 for a description of each of the Group’s business segments.
|
|
(3)
|
Empresas Cablevisión, S.A.B. de C.V., is a direct majority-owned subsidiary of CVQ.
|
|
(4)
|
Some Cablemás subsidiaries are directly owned by CVQ and some other Cablemás subsidiaries are indirectly owned by CVQ.
|
|
(5)
|
Televisión Internacional, S.A. de C.V., is a direct subsidiary of CVQ.
|
|
(6)
|
Cablestar, S.A. de C.V., is an indirect majority-owned subsidiary of CVQ and Empresas Cablevisión, S.A.B. de C.V.
|
|
(7)
|
Arretis, S.A.P.I. de C.V.; is a direct subsidiary of CVQ.
|
|
(8)
|
The Telecable subsidiaries are directly owned by CVQ.
|
|
(9)
|
FTTH de México, S. A. de C.V., is an indirect subsidiary of CVQ.
|
|
(10)
|
CVQ is a direct subsidiary of the Company and the parent company of Empresas Cablevisión, Cablemás, TVI, Bestel, Cablecom, Telecable and Innova.
|
|
(11)
|
Innova is an indirect majority-owned subsidiary of the Company, CVQ and Sky DTH, S.A. de C.V. (“Sky DTH”), and a direct majority-owned subsidiary of Innova Holdings, S. de R.L. de C.V.
(“Innova Holdings”). Sky is a satellite television provider in Mexico, Central America and the Dominican Republic. Although the Company holds a majority of Innova’s equity and designates a majority of the members of Innova’s Board of
Directors, the non-controlling interest has certain governance and veto rights in Innova, including the right to block certain transactions between the companies in the Group and Sky. These veto rights are protective in nature and do
not affect decisions about relevant business activities of Innova.
|
|
(12)
|
Televisa, TIM and G.Televisa-D, S.A. de C.V., are direct subsidiaries of Grupo Telesistema.
|
|
(13)
|
Multimedia Telecom and its direct subsidiary, Comunicaciones Tieren, S.A. de C.V. (“Tieren”), are indirect wholly-owned subsidiaries of Grupo Telesistema, through which the Company
owns shares of the capital stock of UHI and maintains an investment in warrants that are exercisable for shares of common stock of UHI. As of December 31, 2019 and 2018, Multimedia Telecom and Tieren have investments representing
95.3% and 4.7%, respectively, of the Group’s aggregate investment in shares of common stock and share warrants issued by UHI (see Notes 9, 10 and 20).
|
|
(14)
|
Direct subsidiary through which we conduct certain operations of our Content segment and certain operations of our Other Businesses segments.
|
|
(15)
|
Villacezán is an indirect subsidiary of Grupo Telesistema.
|
|
(16)
|
Radiópolis is a direct subsidiary of the Company through which the Group conducts the operations of its Radio business. The Company controls Radiópolis as it has the right to appoint
the majority of the members of the Board of Directors of Radiópolis. The Group has classified the assets and related liabilities of its Radio business as held-for-sale in its consolidated statement of financial position as of December
31, 2019, and its Radio operations as held-for-sale operations in the Group’s segment information for the years ended December 31, 2019, 2018 and 2017. Through the third quarter of 2019, the Radio business was included as part of the
Group’s Other Businesses segment (see Notes 3 and 26).
|
The Group’s Cable, Sky and Content segments, as well as the Group’s Radio business, which is a held-for-sale operations (see Note 3 and 26), require governmental concessions
and special authorizations for the provision of broadcasting and telecommunications services in Mexico. Such concessions are granted by the Mexican Institute of Telecommunications (“Instituto Federal de Telecomunicaciones” or “IFT”) for a fixed
term, subject to renewal in accordance with the Mexican Telecommunications and Broadcasting Law (“Ley Federal de Telecomunicaciones y Radiodifusión” or “LFTR”).
Renewal of concessions for the Content segment (Broadcasting) and the Radio business require, among others: (i) to request such renewal to IFT prior to the last fifth period
of the fixed term of the related concession; (ii) to be in compliance with the concession holder’s obligations under the LFTR, other applicable regulations, and the concession title; (iii) a declaration by IFT that there is no public interest
in recovering the spectrum granted under the related concession; and (iv) the acceptance by the concession holder of any new conditions for renewing the concession as set forth by IFT, including the payment of a related fee. IFT shall resolve
within the year following the presentation of the request, if there is public interest in recovering the spectrum granted under the related concession, in which case it will notify its determination and proceed with the termination of the
concession at the end of its fixed term. If IFT determines that there is no public interest in recovering the spectrum, it will grant the requested extension within 180 business days, provided that the concessionaire accepts, in advance, the
new conditions set by IFT, which will include the payment of the fee referred to above. Such fee will be determined by IFT for the relevant concessions, considering the following elements: (i) the frequency band; (ii) the amount of spectrum;
(iii) coverage of the frequency band; (iv) domestic and international benchmark regarding the market value of frequency bands; and (v) upon request of IFT, an opinion issued by the Ministry of Finance and Public Credit of IFT´s proposal for
calculation of the fee.
Renewal of concessions for the Sky and Cable segments require, among others: (i) to request its renewal to IFT prior to the last fifth period of the fixed term of the related
concession; (ii) to be in compliance with the concession holder’s obligations under the LFTR, other applicable regulations, and the concession title; and (iii) the acceptance by the concession holder of any new conditions for renewing the
concession as set forth by IFT. IFT shall resolve any request for renewal of the telecommunications concessions within 180 business days of its request. Failure to respond within such period of time shall be interpreted as if the request for
renewal has been granted.
The regulations of the broadcasting and the telecommunications concessions (including satellite pay TV) establish that at the end of the concession, the frequency bands or
spectrum attached to the services provided in the concessions shall return to the Mexican government. In addition, at the end of the concession, the Mexican government will have the preferential right to acquire infrastructure, equipment and
other goods directly used in the provision of the concession. If the Mexican government were to exercise its right to acquire infrastructure, equipment and other goods, it would be required to pay a price that is equivalent to a formula that is
similar to fair value. To the knowledge of the Company’s management, no spectrum granted for broadcasting services in Mexico has been recovered by the Mexican government in at least the past three decades for public interest reasons. However,
the Company’s management is unable to predict the outcome of any action by IFT in this regard. In addition, these assets, by themselves, would not be enough to immediately begin broadcasting or offering satellite pay TV services or
telecommunications services, as no content producing assets or other equipment necessary to operate the business would be included.
Also, the Group’s Gaming business, which is reported in the Other Businesses segment, requires a permit granted by the Mexican Federal Government for a fixed term, subject to
renewal in accordance with Mexican law. Additionally, the Group’s Sky businesses in Central America and the Dominican Republic require concessions or permits granted by local regulatory authorities for a fixed term, subject to renewal in
accordance with local laws.
The accounting guidelines provided by IFRIC 12 Service Concession Arrangements, are not applicable to the Group due primarily to the
following factors: (i) the Mexican government does not substantially control the Group’s infrastructure, what services are provided with the infrastructure and the price at which such services are offered; (ii) the Group’s broadcasting service
does not constitute a public service as per the definition in IFRIC 12; and (iii) the Group is unable to divide its infrastructure among the public (telephony and possibly Internet services) and non-public (pay TV) service components.
At December 31, 2019, the expiration dates of the Group’s concessions and permits were as follows:
|
Segments
|
|
Expiration Dates
|
|
Cable
|
|
Various from 2022 to 2048
|
|
Sky
|
|
Various from 2020 to 2028
|
|
Content (broadcasting concessions) (1)
|
|
In 2021 and the relevant renewals start in 2022 ending in 2042
|
|
Other Businesses:
|
|
|
|
Gaming
|
|
In 2030
|
|
Held-for-sale operations:
|
|
|
|
Radio (2)
|
|
Various from 2020 to 2039
|
|
(1)
|
In November 2018, the IFT approved the renewal of the Group’s broadcasting concessions for all of its television stations in Mexico, for a term of 20 years after the existing
expiration date in 2021. In November 2018, the Group paid in cash for such renewal an aggregate amount of Ps.5,754,543, which includes a payment of Ps.1,194 for administrative expenses and recognized this payment as an intangible
asset in its consolidated statement of financial position. This amount will be amortized in a period of 20 years beginning on January 1, 2022, by using the straight-line method (see Note 13).
|
|
(2)
|
The amounts paid by the Group for renewal of certain Radio concessions in 2017 amounted to an aggregate of Ps.37,848. In addition, IFT granted in 2017 two new concessions to the Group
in Ensenada and Puerto Vallarta. The amount paid by the Group for obtaining these concessions amounted to an aggregate of Ps.85,486. The Group recognized the amounts for renewal and obtaining these concessions as intangible assets in
its consolidated statement of financial position, and are amortized in a period of 20 years by using the straight-line method (see Note 13).
|
The concessions or permits held by the Group are not subject to any significant pricing regulations in the ordinary course of business.
|
(c)
|
Investments in Associates and Joint Ventures
|
Associates are those entities over which the Group has significant influence but not control, generally those entities with a shareholding of between 20% and 50% of the voting
rights. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Joint ventures are those joint arrangements where the Group exercises
joint control with other stockholder or more stockholders without exercising control individually, and have rights to the net assets of the joint arrangements. Investments in associates and joint ventures are accounted for using the equity
method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the net assets of the investee after the date of acquisition.
The Group’s investments in associates include an equity interest in UHI represented by approximately 10% of the outstanding total shares of UHI as of December 31, 2019 and
2018 (see Notes 9 and 10).
If the Group’s share of losses of an associate or a joint venture equals or exceeds its interest in the investee, the Group discontinues recognizing its share of further
losses. The interest in an associate or a joint venture is the carrying amount of the investment in the investee under the equity method together with any other long-term investment that, in substance, form part of the Group’s net investment in
the investee. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the
associate or joint venture.
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s chief executive officers (“chief operating decision makers”) who are
responsible for allocating resources and assessing performance for each of the Group’s operating segments.
|
(e)
|
Foreign Currency Translation
|
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates
(“functional currency”). The presentation and reporting currency of the Group’s consolidated financial statements is the Mexican peso, which is used for compliance with its legal and tax obligations.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or measurement where items are
remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the
statement of income as part of finance income or expense, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary securities denominated in foreign currency classified as investments in financial instruments are analyzed between exchange differences
resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized cost are recognized in income or loss, and other changes in carrying
amount are recognized in other comprehensive income or loss.
Translation of Foreign Operations
The financial statements of the Group’s foreign entities that have a functional currency different from the presentation currency are translated into the presentation currency
as follows: (a) assets and liabilities are translated at the closing rate at the date of the statement of financial position; (b) income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (c) all resulting translation differences are
recognized in other comprehensive income or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing
rate. Translation differences arising are recognized in other comprehensive income or loss.
Assets and liabilities of non-Mexican subsidiaries that use the Mexican Peso as a functional currency are initially converted to Mexican Pesos by utilizing the exchange rate
of the statement of financial position date for monetary assets and liabilities, and historical exchange rates for non-monetary items, with the related adjustment included in the consolidated statement of income as finance income or expense.
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line “Long-term debt, net of current
portion” of the consolidated statement of financial position) has been designated as a hedge of a net investment in a foreign operation in connection with the Group’s investment in shares of common stock of UHI (hedged item), which amounted to
U.S.$433.7 million (Ps.8,189,662) and U.S.$421.2 million (Ps.8,285,286) as of December 31, 2019 and 2018, respectively. Consequently, any foreign exchange gain or loss attributable to this designated hedging long-term debt is credited or
charged directly to other comprehensive income or loss as a cumulative result from foreign currency translation (see Note 10).
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line “Long-term debt, net of current
portion” of the consolidated statement of financial position) has been designated as a fair value hedge of foreign exchange exposure related to: (i) its investment in warrants exercisable for common stock of UHI and (ii) its initial investment
in Open Ended Fund until March 31, 2018, and its entire investment in Open Ended Fund beginning in the second quarter of 2018 (hedged items), which amounted to Ps.33,775,451 (U.S.$1,788.6 million) and Ps.4,688,202 (U.S.$248.3 million),
respectively, as of December 31, 2019, and Ps.34,921,530 (U.S.$1,775.1 million) and Ps.7,662,726 (U.S.$389.5 million), respectively, as of December 31, 2018. Consequently, any foreign exchange gain or loss attributable to this designated
hedging long-term debt is credited or charged directly to other comprehensive income or loss, along with the recognition in the same line item of any foreign currency gain or loss of these investments in warrants and Open Ended Fund designated
as hedged items (see Notes 9, 14 and 18).
Beginning on January 1, 2018, the Group adopted the hedge accounting requirements of IFRS 9 Financial Instruments, (“IFRS 9”) for all
of its hedging relationships. This IFRS Standard became effective on that date.
|
(f)
|
Cash and Cash Equivalents and Temporary Investments
|
Cash and cash equivalents consist of cash on hand and all highly liquid investments with an original maturity of three months or less at the date of acquisition. Cash is
stated at nominal value and cash equivalents are measured at fair value, and the changes in the fair value are recognized in the statement of income.
Temporary investments consist of short-term investments in securities, including without limitation debt with a maturity of over three months and up to one year at the date of
acquisition, stock and other financial instruments, or a combination thereof, as well as current maturities of non-current investments in financial instruments. Temporary investments are measured at fair value with changes in fair value
recognized in finance income in the consolidated statement of income, except securities which are measured at amortized cost.
As of December 31, 2019 and 2018, cash equivalents and temporary investments primarily consisted of fixed short-term deposits and corporate fixed income securities denominated
in U.S. dollars and Mexican pesos, with an average yield of approximately 2.20% for U.S. dollar deposits and 8.09% for Mexican peso deposits in 2019, and approximately 1.77% for U.S. dollar deposits and 7.69% for Mexican peso deposits in 2018.
|
(g)
|
Transmission Rights and Programming
|
Programming is comprised of programs, literary works, production talent advances and films.
Transmission rights and literary works are valued at the lesser of acquisition cost and net realizable value. Programs and films are valued at the lesser of production cost,
which consists of direct production costs and production overhead, and net realizable value. Payments for production talent advances are initially capitalized and subsequently included as direct or indirect costs of program production.
Transmission rights are recognized from the point of which the legally enforceable license period begins. Until the license term commences and the programming rights are available, payments made are recognized as prepayments.
The Group’s policy is to capitalize the production costs of programs which benefit more than one annual period and amortize them over the expected period of future program
revenues based on the Company’s historical revenue patterns and usage for similar productions.
Transmission rights, programs, literary works, production talent advances and films are recorded at acquisition or production cost. Cost of sales is calculated and recorded
for the month in which such transmission rights, programs, literary works, production talent advances and films are matched with related revenues.
Transmission rights are recognized in income over the lives of the contracts. Transmission rights in perpetuity are amortized on a straight-line basis over the period of the
expected benefit as determined by past experience, but not exceeding 25 years.
Inventories of paper, magazines, materials and supplies for maintenance of technical equipment are recorded at the lower of cost or its net realization value. The net
realization value is the estimated selling price in the normal course of business, less estimated costs to conduct the sale. Cost is determined using the average cost method.
Through December 31, 2017, the Group classified its financial assets in the following categories: loans and receivables, held-to-maturity investments, financial assets at fair
value through income or loss (“FVIL”) and available-for-sale financial assets. The classification depended on the purpose for which the financial assets were acquired. Management determined the classification of its financial assets at initial
recognition.
Beginning on January 1, 2018, the Group classifies its financial assets in accordance with IFRS 9 which became effective on that date. Under the guidelines of IFRS 9, the
Group classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or loss (“FVOCIL”), or FVIL, based on the Company’s business model for managing the financial assets and the contractual
cash flows characteristics of the financial asset.
Financial Assets Measured at Amortized Cost
Financial assets are measured at amortized cost when the objective of holding such financial assets is to collect contractual cash flows, and the contractual terms of the
financial asset give rise on specified dates to cash flows that are only payments of principal and interest on the principal amount outstanding. These financial assets are initially recognized at fair value plus transaction costs and
subsequently carried at amortized cost using the effective interest rate method, with changes in carrying value recognized in the consolidated statement of income in the line which most appropriately reflects the nature of the item or
transaction. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period that are included in non-current assets. The Group’s financial assets measured at amortized costs are primarily
presented as “trade notes and accounts receivable”, “other accounts and notes receivable”, and “due from related parties” in the consolidated statement of financial position (see Note 7).
Financial Assets Measured at FVOCIL
Financial assets are measured at FVOCIL when the objective of holding such financial assets is both collecting contractual cash flows and selling financial assets, and the
contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Group’s investments in certain equity instruments have been designated to be measured at FVOCIL, as permitted by IFRS 9 (see Note 28). In connection with this designation,
any amounts presented in consolidated other comprehensive income are not subsequently transferred to consolidated income. Dividends from these equity instruments are recognized in consolidated income when the right to receive payment of the
dividend is established, and such dividend is probable to be paid to the Group.
Financial Assets at FVIL
Financial assets at FVIL are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the
short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as
non-current.
Impairment of Financial Assets
From January 1, 2018, the Group assesses on a forward looking basis the expected credit losses associated with its financial assets carried at fair value through other
comprehensive income or loss. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the
receivables, see Note 7 for further details.
Offsetting of Financial Instruments
Financial assets are offset against financial liabilities and the net amount reported in the consolidated statement of financial position if, and only when the Group:
(i) currently has a legally enforceable right to set off the recognized amounts; and (ii) intends either to settle on a net basis, or to realize the assets and settle the liability simultaneously.
|
(j)
|
Property, Plant and Equipment
|
Property, plant and equipment are recorded at acquisition cost.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to income or loss during the financial
period in which they are incurred.
Land is not depreciated. Depreciation of property, plant and equipment is based upon the carrying value of the assets in use and is computed using the straight-line method
over the estimated useful lives of the asset, as follows:
|
|
|
Estimated Useful Lives
|
|
Buildings
|
|
|
|
Buildings improvements
|
|
5-20 years
|
|
Technical equipment
|
|
3-30 years
|
|
Satellite transponders
|
|
15 years
|
|
Furniture and fixtures
|
|
3-10 years
|
|
Transportation equipment
|
|
4-8 years
|
|
Computer equipment
|
|
3-6 years
|
|
Leasehold improvements
|
|
5-30 years
|
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within other income or expense in the consolidated statement
of income.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property,
plant and equipment.
Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability, any lease payments made at or before the
commencement date less any lease incentives received, any initial direct costs and restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight – line basis. If the Group is reasonably certain to
exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and mostly leases of low-value assets are recognized on a straight-line basis as an expense in profit or
loss. Short-term leases are leases with a lease term of 12 months or less.
|
(l)
|
Intangible Assets and Goodwill
|
Intangible assets and goodwill are recognized at acquisition cost. Intangible assets and goodwill acquired through business combinations are recorded at fair value at the date
of acquisition. Intangible assets with indefinite useful lives, which include, trademarks, concessions, and goodwill, are not amortized, and subsequently recognized at cost less accumulated impairment losses. Intangible assets with finite
useful lives are amortized on a straight-line basis over their estimated useful lives, as follows:
|
|
|
Estimated
Useful Lives
|
|
Trademarks with finite useful lives
|
|
4 years
|
|
Licenses
|
|
3-14 years
|
|
Subscriber lists
|
|
4-10 years
|
|
Payments for renewal of concessions
|
|
20 years
|
|
Other intangible assets
|
|
3-20 years
|
Trademarks
The Group determines its trademarks to have an indefinite life when they are expected to generate net cash inflows for the Group indefinitely. Additionally, the Group
considers that there are no legal, regulatory or contractual provisions that limit the useful lives of trademarks. The Group has not capitalized any amounts associated with internally developed trademarks.
In 2015, the Company’s management evaluated trademarks in its Cable segment to determine whether events and circumstances continue to support an indefinite useful life for
these intangible assets. As a result of such evaluation, the Company identified certain businesses and locations that began migrating from an acquired trademark to an internally developed trademark between 2015 and 2016, in connection with
enhanced service packages offered to current and new subscribers, and estimated that this migration process will take approximately four years. Accordingly, in 2015, the Group changed the useful life assessment from indefinite to finite for
acquired trademarks in certain businesses and locations in its Cable segment, and began to amortize on a straight line basis the related carrying value of these trademarks when the migration to the new trademark started using an estimated
useful life of four years.
Concessions
The Group defined concessions to have an indefinite life due to the fact that the Group has a history of renewing its concessions upon expiration, has maintained the
concessions granted by the Mexican government, and has no foreseeable limit to the period over which the assets are expected to generate net cash inflows. In addition, the Group is committed to continue to invest for the long term to extend the
period over which the broadcasting and telecommunications concessions are expected to continue to provide economic benefits.
Any fees paid by the Group to regulatory authorities for concessions renewed are determined to have finite useful lives and are amortized on a straight-live basis over the
fixed term of the related concession
Goodwill
Goodwill arises on the acquisition of a business and represents the excess of the consideration transferred over the Group’s interest in net fair value of the identifiable
assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”), or groups of CGUs, that are
expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is
compared to the recoverable amount, which is the higher between the value in use and the fair value less costs to sell. Any impairment of goodwill is recognized as an expense in the consolidated statement of income and is not subject to be
reversed in subsequent periods.
|
(m)
|
Impairment of Long-lived Assets
|
The Group reviews for impairment the carrying amounts of its long-lived assets, tangible and intangible, including goodwill (see Note 13), at least once a year, or whenever
events or changes in business circumstances indicate that these carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. To determine whether an impairment exists, the carrying value of the reporting unit is compared with its recoverable amount. Fair value estimates are based on quoted
market values in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including discounted value of estimated future cash flows, market multiples or
third-party appraisal valuations. Any impairment of long-lived assets other than goodwill may be subsequently reversed under certain circumstances.
|
(n)
|
Trade Accounts Payable and Accrued Expenses
|
Trade accounts payable and accrued expenses are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade
accounts payable and accrued expenses are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade accounts payable and accrued expenses are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
Trade accounts payable and accrued expenses are presented as a single item of consolidated current liabilities in the consolidated statements of financial position as of
December 31, 2019 and 2018.
Debt is recognized initially at fair value, net of transaction costs incurred. Debt is subsequently carried at amortized cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in the consolidated statement of income over the period on which the debt is outstanding using the effective interest method.
Fees paid on the establishment of debt facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services
and amortized over the period of the facility to which it relates.
Current portion of long-term debt and interest payable are presented as a single line item of consolidated current liabilities in the consolidated statements of financial
position as of December 31, 2019 and 2018.
Debt early redemption costs are recognized as finance expense in the consolidated statement of income.
|
(p)
|
Customer Deposits and Advances
|
Customer deposits and advance agreements for advertising services provide that customers receive prices that are fixed for the contract period for advertising time in the
Group’s platforms based on rates established by the Group. Such rates vary depending on when the advertisement is made, including the season, hour, day and type of programming.
The Group recognizes customer deposits and advance agreements for advertising services in the consolidated statement of financial position when these agreements are executed
either with a consideration in cash paid by customers or with short-term non-interest bearing notes received from customers in connection with annual (“upfront basis”) and from time to time (“scatter basis”) prepayments (see Note 7). In
connection with the initial adoption of IFRS 15 Revenues from Contracts with Customers (“IFRS 15”) in the first quarter of 2018 (see Note 2 (s)), customer deposits and advances agreements are presented
by the Group as a contract liability in the consolidated statement of financial position when a customer pays consideration, or the Group has a right to an amount of consideration that is unconditional, before the Group transfers services to
the customer. Under the guidelines of this standard, a contract liability is a Group’s obligation to transfer services or goods to a customer for which the Group has received consideration, or an amount of consideration is due, from the
customer. In addition, the Group recognizes contract asset upon the approval of non-cancellable contracts that generate an unconditional right to receive cash consideration prior to services being rendered. The Company’s management has
consistently recognized that an amount of consideration is due, for legal, finance and accounting purposes, when a short-term non- interest bearing note is received from a customer in connection with a deposit or advance agreement entered into
with the customer for advertising services to be rendered by the Group in the short term.
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be
required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments
of the time value of money and the risks specific to the obligation. The increase in the provisions due to passage of time is recognized as interest expense.
The capital stock and other equity accounts include the effect of restatement through December 31, 1997, determined by applying the change in the Mexican National Consumer
Price Index between the dates capital was contributed or net results were generated and December 31, 1997, the date through which the Mexican economy was considered hyperinflationary under the guidelines of IFRS Standards. The restatement
represented the amount required to maintain the contributions and accumulated results in Mexican Pesos in purchasing power as of December 31, 1997.
Where any company in the Group purchases shares of the Company’s capital stock (shares repurchased), the consideration paid, including any directly attributable incremental
costs is deducted from equity attributable to stockholders of the Company until the shares are cancelled, reissued, or sold. Where such shares repurchased are subsequently reissued or sold, any consideration received, net of any directly
attributable incremental transaction costs, is included in equity attributable to stockholders of the Company.
In connection with the initial adoption of IFRS 15, in the first quarter of 2018, the Company’s management: (i) reviewed significant revenue streams and identified certain
effects on revenue recognition in the Group’s Cable and Sky segments, as discussed below; (ii) used the retrospective cumulative effect, which consists in recognizing any cumulative adjustment resulting from the new standard at the date of
initial adoption in consolidated equity; and (iii) did not restate the comparative information for the years ended December 31, 2017 and 2016, which was reported under the revenue recognition IFRS Standard in effect in those periods (see Note
28).
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for services provided. The Group recognizes revenue when
the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its
estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
The Group derives the majority of its revenues from media and entertainment-related business activities both in Mexico and internationally. Revenues are recognized when the
service is provided and collection is probable. A summary of revenue recognition policies by significant activity is as follows:
|
•
|
Cable television, internet and telephone subscription, and pay-per-view and installation fees are recognized in the period in which the services are rendered. Through December 31, 2017, commissions for obtaining contracts with
customers in the Group’s Cable segment were accounted for as they were incurred. Beginning on January 1, 2018, in accordance with IFRS 15, incremental costs for obtaining contracts with customers, primarily commissions, are recognized
as assets in the Group’s consolidated statement of financial position and amortized in the expected life of contracts with customers.
|
|
•
|
Revenues from other telecommunications and data services are recognized in the period in which these services are provided. Other telecommunications services include long distance and local telephony, as well as leasing and
maintenance of telecommunications facilities.
|
|
•
|
Sky program service revenues, including advances from customers for future direct-to-home (“DTH”) program services, are recognized at the time the service is provided. Through December 31, 2017, commissions for obtaining contracts
with customers in the Group’s Sky segment were accounted for as they were incurred. Beginning on January 1, 2018, in accordance with IFRS 15, certain incremental costs for obtaining contracts with customers, primarily commissions, are
recognized as assets in the Group’s consolidated statement of financial position and amortized in the expected life of contracts with customers.
|
|
•
|
Advertising revenues, including deposits and advances from customers for future advertising, are recognized at the time the advertising services are rendered.
|
|
•
|
Revenues from program services for network subscription and licensed and syndicated television programs are recognized when the programs are sold and become available for broadcast.
|
|
•
|
Revenues from magazine subscriptions are initially deferred and recognized proportionately as products are delivered to subscribers. Revenues from the sales of magazines are recognized on the date of circulation of delivered
merchandise, net of a provision for estimated returns.
|
|
•
|
Revenues from publishing distribution are recognized upon distribution of the products.
|
|
•
|
Revenues from attendance to soccer games, including revenues from advance ticket sales for soccer games and other promotional events, are recognized on the date of the relevant event.
|
|
•
|
Motion picture production and distribution revenues are recognized as the films are exhibited.
|
|
•
|
Gaming revenues consist of the net win from gaming activities, which is the difference between amounts wagered and amounts paid to winning patrons and are recognized at the time of such net win.
|
In respect to sales of multiple products or services, the Group evaluates whether it has fair value evidence for each deliverable in the transaction. For example, the Group
sells cable television, internet and telephone subscription to subscribers in a bundled package at a rate lower than if the subscriber purchases each product on an individual basis. Subscription revenues received from such subscribers are
allocated to each product in a pro-rata manner based on the fair value of each of the respective services.
Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount,
being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognized using the
original effective interest rate.
Pension and Seniority Premium Obligations
Plans exist for pensions and seniority premiums (post-employment benefits), for most of the Group’s employees funded through irrevocable trusts. Increases or decreases in the
consolidated liability or asset for post-employment benefits are based upon actuarial calculations. Contributions to the trusts are determined in accordance with actuarial estimates of funding requirements. Payments of post-employment benefits
are made by the trust administrators. The defined benefit obligation is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash
outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Remeasurement of post-employment benefit obligations related to experience adjustments and changes in actuarial assumptions of post- employment benefits are recognized in the
period in which they are incurred as part of other comprehensive income or loss in consolidated equity.
Profit Sharing
The employees’ profit sharing required to be paid under certain circumstances in Mexico, is recognized as a direct benefit to employees in the consolidated statements of
income in the period in which it is incurred.
Termination Benefits
Termination benefits, which mainly represent severance payments by law, are recorded in the consolidated statement of income. The Group recognizes termination benefits at the
earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that involves the payment of termination benefits.
The income tax expense for the period comprises current and deferred income tax. Income tax is recognized in the consolidated statement of income, except to the extent that it
relates to items recognized in other comprehensive income or directly in equity. In this case, the income tax is recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where
the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction (other than in a business combination) that at the time of the transaction affects neither accounting nor taxable income or loss. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences and tax
loss carryforwards can be utilized. For this purpose, the Group takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, projected taxable income, carryforward
periods, current tax structure, potential changes or adjustments in tax structure, and future reversals of existing temporary differences.
Deferred income tax liabilities are provided on taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except for deferred
income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are provided
on deductible temporary differences associated with investments in subsidiaries, joint ventures and associates, to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefit of the temporary
difference and it is expected to reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the
deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
|
(w)
|
Derivative Financial Instruments
|
The Group recognizes derivative financial instruments as either assets or liabilities in the consolidated statements of financial position and measures such instruments at
fair value. The accounting for changes in the fair value of a derivative financial instrument depends on the intended use of the derivative financial instrument and the resulting designation. For a derivative financial instrument designated as
a cash flow hedge, the effective portion of such derivative’s gain or loss is initially reported as a component of other comprehensive income or loss and subsequently reclassified into income when the hedged exposure affects income. The
ineffective portion of the gain or loss is reported in income immediately. For a derivative financial instrument designated as a fair value hedge, the gain or loss is recognized in income in the period of change together with the offsetting
loss or gain on the hedged item attributed to the risk being hedged. When a hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive
income remains in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to income or loss. For derivative
financial instruments that are not designated as accounting hedges, changes in fair value are recognized in income in the period of change. During the years ended December 31, 2019, 2018 and 2017, certain derivative financial instruments
qualified for hedge accounting (see Note 15).
Comprehensive income for the period includes the net income for the period presented in the consolidated statement of income plus other comprehensive income for the period
reflected in the consolidated statement of comprehensive income.
|
(y)
|
Share-based Payment Agreements
|
Key officers and employees of certain subsidiaries of the Company have entered into agreements for the conditional sale of Company’s shares under the Company’s Long-Term
Retention Plan. The share-based compensation expense is measured at fair value at the date the equity benefits are conditionally sold to these officers and employees, and is recognized as a charge to consolidated income (administrative expense)
over the vesting period. The Group recognized a share-based compensation expense of Ps.1,129,644, Ps.1,327,549 and Ps.1,489,884 for the years ended December 31, 2019, 2018 and 2017, respectively, of which Ps.1,108,094, Ps.1,305,999 and
Ps.1,468,337 was credited in consolidated stockholders’ equity for those years, respectively (see Note 17).
Through December 31, 2018:
|
•
|
The determination of whether an arrangement was, or contained, a lease was based on the substance of the arrangement and required an assessment of whether the fulfillment of the arrangement was dependent on the use of a specific
asset or assets and whether the arrangement conveyed the right to use the asset.
|
|
•
|
Leases of property, plant and equipment and other assets where the Group held substantially all the risks and rewards of ownership were classified as finance leases. Finance lease assets were capitalized at the commencement of the
lease term at the lower of the present value of the minimum lease payments or the fair value of the lease asset. The obligations relating to finance leases, net of finance charges in respect of future periods, were recognized as
liabilities. The interest element of the finance cost was charged to the consolidated statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance leases was depreciated over the shorter of the useful life of the asset and the lease term.
|
|
•
|
Leases where a significant portion of the risks and rewards were held by the lessor were classified as operating leases. Rentals were charged to the consolidated statement of income on a straight line basis over the period of the
lease.
|
|
•
|
Leasehold improvements were depreciated at the lesser of its useful life or contract term.
|
In the first quarter of 2019, the Group adopted IFRS 16 Leases (“IFRS 16”), which became effective for annual periods beginning on
January 1, 2019 (see Note 28). The Group does not apply this new IFRS Standard to short-term leases and leases for which the underlying asset is of low value, as permitted by the guidelines of IFRS 16.
On adoption of IFRS 16, the Group recognized lease liabilities in relation to leases which had previously been classified as operating leases under the principles of IAS 17 Leases (“IAS 17”). These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee´s incremental borrowing rate as
of January 1, 2019. The average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 4.7% and 10.6% for U.S. dollars leases and Mexican pesos leases, respectively.
|
(aa)
|
New and Amended IFRS Standards
|
The Group adopted IFRS 16 in 2019, which became effective on January 1, 2019 (see Notes 2 (k), 2 (z) and 28). The Group adopted IFRS 15 and IFRS 9 in 2018, which became
effective on January 1, 2018 (see Notes 2 (i), 2 (t) and 28). Some other amendments and improvements to certain IFRS Standards became effective on January 1, 2019 and 2018, and they did not have any significant impact on the Group’s
consolidated financial statements.
Below is a list of the new and amended IFRS Standards that have been issued by the IASB and are effective for annual periods starting on or after January 1, 2020.
|
New or Amended IFRS Standard
|
|
Title of the IFRS Standard
|
|
Effective for Annual
Periods Beginning
On or After
|
|
Amendments to IFRS 10 and IAS 28 (1)
|
|
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
|
|
Postponed
|
|
IFRS 17 (2)
|
|
Insurance Contracts
|
|
January 1, 2021
|
|
IFRS Conceptual Framework
|
|
Conceptual Framework for Financial Reporting
|
|
January 1, 2020
|
|
Amendments to IFRS 3 (1)
|
|
Definition of a Business
|
|
January 1, 2020
|
|
Amendments to IAS 1 and IAS 8 (1)
|
|
Definition of Material
|
|
January 1, 2020
|
|
Amendments to IFRS 9, IAS 39 and IFRS 7 (2)
|
|
Interest Rate Benchmark Reform
|
|
January 1, 2020
|
|
Amendments to IAS 1 (1)
|
|
Classification of Liabilities as Current or Non-current
|
|
January 1, 2022
|
(1) This new or amended IFRS Standard is not expected to have a significant impact on the Group’s consolidated financial statements.
(2) This new or amended IFRS Standard is not expected to be applicable to the Group’s consolidated financial statements.
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture, were issued in September 2014 and address and acknowledge inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor
and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involved a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when
a transaction involved assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015, the IASB postponed the effective date of these amendments indefinitely pending the outcome of its research
project on the equity method of accounting.
IFRS 17 Insurance Contracts (“IFRS 17”) was issued in May 2017 and supersedes IFRS 4 Insurance
Contracts (“IFRS 4”), which has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. IFRS 17 establishes principles for the
recognition, measurement, presentation and disclosures of insurance contracts issued. It also requires similar principles to be applied to reinsurance contracts with discretionary participation features issued. IFRS 17 solves the comparison
problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner. Under the provisions of IFRS 17, insurance obligations will be accounted for using current values instead of historical cost. IFRS 17 is
effective on January 1, 2021, and earlier application is permitted.
Conceptual Framework for Financial Reporting (“Conceptual Framework”) was issued in
March 2018, replacing the previous version of the Conceptual Framework issued in 2010. The Conceptual Framework describes the objective of, and the concepts for, general purpose financial reporting. The purpose of the Conceptual Framework is
to: (a) assist the IASB to develop IFRS Standards that are based on consistent concepts; (b) assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or other event, or when a Standard
allows a choice of accounting policy; and (c) assist all parties to understand and interpret the IFRS Standards. The Conceptual Framework is not an IFRS Standard. Nothing in the Conceptual Framework overrides any IFRS Standard or any
requirement in an IFRS Standard. The revised Conceptual Framework is effective immediately for the IASB and the IFRIC, and has an effective date of January 1, 2020, with earlier application permitted, for companies that use the Conceptual
Framework to develop accounting policies when no IFRS Standard applies to a particular transaction.
Amendments to IFRS 3 Definition of a Business was issued in October 2018. The amended definition emphasizes that the output of a
business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others. Distinguishing between a business and a group
of assets is important because an acquirer recognizes goodwill only when acquiring a business. Amendments to IFRS 3 is effective on January 1, 2020, and earlier application is permitted.
Amendments to IAS 1 and IAS 8 Definition of Material was issued in October 2018. The definition of material helps a company determine
whether information about an item, transaction or other event should be provided to users of financial statements. However, companies sometimes experienced difficulties using the previous definition of material when making materiality
judgements in the preparation of financial statements. Consequently, the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8) in October 2018. Amendments to IAS 1 and IAS 8 is effective on
January 1, 2020, and earlier application is permitted.
Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform were issued in September 2019. These amendments modify some
specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by interest rate benchmarks such as interbank offered rates. In addition, the amendments require companies to provide additional
information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments are effective for annual reporting periods beginning on or after January 1, 2020. Earlier application is permitted.
Amendments to IAS 1 Classification of Liabilities as Current or Non-current was issued in January 2020, the amendments clarify one of
the criteria in IAS 1 for classifying a liability as non-current that is, the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendments are effective for
annual reporting periods beginning on or after January 1, 2022. Earlier application is permitted.
GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES
Notes to Interim Unaudited Condensed Consolidated Financial Statements
As of December 31, 2020 and 2019 and for the years ended December 31, 2020 and 2019
(In thousands of Mexican Pesos, except per CPO, per share and exchange rate amounts, unless otherwise indicated)
Grupo Televisa, S.A.B. (the “Company”) is a limited liability public stock corporation (“Sociedad Anónima Bursátil” or “S.A.B.”), incorporated under the laws of Mexico.
Pursuant to the terms of the Company’s bylaws (“Estatutos Sociales”) its corporate existence continues through 2106. The shares of the Company are listed and traded in the form of “Certificados de Participación Ordinarios” or “CPOs” on the
Mexican Stock Exchange (“Bolsa Mexicana de Valores” or “BMV”) under the ticker symbol TLEVISA CPO, and in the form of Global Depositary Shares or “GDSs”, on the New York Stock Exchange, or “NYSE”, under the ticker symbol TV. The Company’s
principal executive offices are located at Av. Vasco de Quiroga No. 2000, Colonia Santa Fe, 01210 Mexico City, Mexico.
Grupo Televisa, S.A.B. together with its subsidiaries (collectively, the “Group”) is a leading media company in the Spanish-speaking world, an important cable operator in
Mexico, and an operator of a leading direct-to-home satellite pay television system in Mexico. The Group distributes the content it produces through several broadcast channels in Mexico and in over 70 countries through 25 pay-tv brands,
television networks, cable operators and over-the-top or “OTT” services. In the United States, the Group’s audiovisual content is distributed through Univision Communications Inc. (“Univision”), the leading media company serving the Hispanic
market. Univision broadcasts the Group’s audiovisual content through multiple platforms in exchange for a royalty payment. In addition, the Group has equity representing approximately 36% on a fully-diluted basis of the equity capital in
Univision Holdings, Inc. or “UHI”, the controlling company of Univision. The Group’s cable business offers integrated services, including video, high-speed data and voice services to residential and commercial customers as well as managed
services to domestic and international carriers. The Group owns a majority interest in Sky, a leading direct-to-home satellite pay television system and broadband provider in Mexico, operating also in the Dominican Republic and Central
America. The Group also has interests in magazine publishing and distribution, professional sports and live entertainment, feature-film production and distribution, and gaming.
|
2.
|
Basis of Preparation and Accounting Policies
|
These interim condensed consolidated financial statements of the Group, as of December 31, 2020 and 2019, are unaudited, and have been prepared in accordance with the
guidelines provided by the International Accounting Standard 34, Interim Financial Reporting. In the opinion of management, all adjustments necessary for a fair presentation of the condensed
consolidated financial statements have been included herein.
These interim unaudited condensed consolidated financial statements should be read in conjunction with the Group’s audited consolidated financial statements and notes
thereto for the years ended December 31, 2019, 2018 and 2017, which have been prepared in accordance with International Financial Reporting Standards (“IFRS Standards”) as issued by the International Accounting Standards Board (“IASB”), and
include, among other disclosures, the Group’s most significant accounting policies, which were applied on a consistent basis as of December 31, 2020.
These interim unaudited condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual
financial statements; they should be read in conjunction with the Group’s audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017. There have been no significant changes in the Corporate Finance
Department of the Company or in any risk management policies since the year end.
These interim unaudited condensed consolidated financial statements were authorized for issuance on February 16, 2021, by the Group’s Corporate Vice President of Finance.
The preparation of interim unaudited condensed consolidated financial statements requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these interim unaudited condensed consolidated financial statements, the significant judgments made by management in applying the Group’s accounting policies
and the key sources of estimation uncertainty were the same as those that applied to the audited consolidated financial statements for the year ended December 31, 2019.
IFRS Standard that became effective on January 1, 2019
IFRS 16
IFRS 16 Leases (“IFRS 16”) was issued in January 2016 replaced IAS 17 Leases (“IAS 17”),
and became effective on January 1, 2019. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee
recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items.
Lessor accounting remains similar to the former IFRS Standard: lessors continue to classify leases as finance or operating leases.
Beginning in the first quarter of 2019, the Group adopted the guidelines of IFRS 16 by using the retrospective cumulative effect, which consists of recognizing any
cumulative adjustment due to the new IFRS Standard at the date of initial adoption in consolidated assets and liabilities. Accordingly, as a lessee, the Group recognized lease liabilities as of January 1, 2019, for leases classified as
operating leases through December 31, 2018, and measured these lease liabilities at the present value of the remaining lease payments, discounted using the incremental borrowing rate as of January 1, 2019. The carrying amounts of leases
classified as a finance leases through December 31, 2018, became the initial carrying amounts of right-of-use assets and lease liabilities under the guidelines of IFRS 16 beginning on January 1, 2019.
The initial impact of recording lease liabilities, and the corresponding right-of-use assets in accordance with the guidelines of IFRS 16, increased the Group’s
consolidated total assets and liabilities as of January 1, 2019, as described below. Also, as a result of the adoption of IFRS 16, the Group recognizes a depreciation of rights-of-use assets for long-term lease agreements, and a finance
expense for interest from related lease liabilities, instead of affecting consolidated operating costs and expenses for lease payments made, as they were recognized through December 31, 2018, under the guidelines of the former IFRS Standard.
The Company’s management has concluded the analysis and assessment of any changes to be made in the Group’s accounting policies for long-term lease agreements as a lessee,
including the implementation ofcontrols over financial reporting in the different business segments of the Group, in connection with the measurement and disclosures required by IFRS 16.
As a result of the adoption of IFRS 16, the Group recognized as right-of-use assets and lease liabilities in its consolidated statements of financial position as of
December 31, 2020 and 2019, and January 1, 2019, long-term lease agreements that were recognized as operating leases through December 31, 2018, as follows:
|
Long-term Lease Agreements
|
|
December 31, 2020
Assets (Liabilities
|
)
|
|
December 31, 2019
Assets (Liabilities
|
)
|
|
January 1, 2019
Assets (Liabilities
|
)
|
|
Right-of-use assets, net
|
Ps.
|
4,392,420
|
|
Ps.
|
4,502,590
|
|
Ps.
|
4,797,312
|
|
|
Lease liabilities 1
|
|
(4,745,292
|
)
|
|
(4,641,705
|
)
|
|
(4,797,312
|
)
|
|
|
Ps.
|
(352,872
|
)
|
Ps.
|
(139,115
|
)
|
Ps.
|
—
|
|
|
1
|
Current portion of lease liabilities as of December 31 2020 and 2019, and January 1, 2019, amounted to Ps.524,458, Ps.533,260 and Ps.462,513, respectively.
|
The Group has also classified as right-of-use assets and lease liabilities in its consolidated statements of financial position as of December 31, 2020 and 2019, and January
1, 2019, property and equipment and obligations under long-term lease agreements that were recognized as finance leases through December 31, 2018, as follows:
|
Long-term Lease Agreements
|
|
December 31, 2020
Assets (Liabilities
|
)
|
|
December 31, 2019
Assets (Liabilities
|
)
|
|
January 1, 2019
Assets (Liabilities
|
)
|
|
Right-of-use assets, net
|
Ps.
|
2,819,745
|
|
Ps.
|
3,050,462
|
|
Ps.
|
3,402,869
|
|
|
Lease liabilities 1
|
|
(4,547,059
|
)
|
|
(4,721,815
|
)
|
|
(5,317,944
|
)
|
|
|
Ps.
|
(1,727,314
|
)
|
Ps.
|
(1,671,353
|
)
|
Ps.
|
(1,915,075
|
)
|
|
1
|
Current portion of lease liabilities as of December 31, 2020 and 2019, and January 1, 2019, amounted to Ps.753,296, Ps.724,506 and Ps.651,800, respectively.
|
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
|
•
|
Applying a single discount rate to a portfolio of leases with reasonably similar characteristics
|
|
•
|
Relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at January 1, 2019
|
|
•
|
Accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-term leases
|
|
•
|
Excluding initial direct cost for the measurement of the right-of-use asset at the date of initial application, and
|
|
•
|
Using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
|
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the
transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
3. Disposition of Radiópolis and Assets Held for Sale
In July 2019, the Company announced a stock purchase agreement with Corporativo Coral, S.A. de C.V. (“Coral”) and Miguel Alemán Magnani as Obligor to dispose of its 50%
equity interest in Sistema Radiópolis, S.A. de C.V. (“Radiópolis”), a direct subsidiary of the Company at that date engaged in the Radio business, for an aggregate amount of Ps.1,248,000, as well as the payment of a dividend by Radiópolis to
the Company by the closing date of this transaction. While the sale of the Company’s equity interest in the Radio business was consummated for legal and tax purposes as of December 31, 2019, the total assets and related total liabilities of
Radiópolis in the amount of Ps.1,675,426 and Ps.432,812, respectively, as of December 31, 2019, were classified as current assets and current liabilities held for sale in the Group’s consolidated statement of financial position as of that
date, as the voting interest of the Company in Radiópolis continued to be in place until the full payment of the purchase price was made by the acquirer. In March and June 2020, the Company entered into additional agreements with Coral an its
Obligor to complete this transaction by which, among other things, the acquirer made two cash payments in March and June of 2020, for the amount of Ps.603,395 and Ps.110,000, respectively, and a final cash payment in July 2020 for the amount
of Ps.534,605. In July 2020, the Company concluded this transaction and received the payment of a dividend from Radiópolis in the amount of Ps.285,669. Following this transaction, the Group classified its former Radio operations as disposed
operations in the segment information of its consolidated statements of income for the years ended December 31, 2020 and 2019. The Group did not classify its former Radio operations as discontinued operations in these consolidated statements
of income, as these operations did not represent a separate major line of business in any of those years, based on a materiality assessment performed by management (see Notes 15 and 19)
In July 2019, the Company announced an agreement with Live Nation Entertainment, Inc. (“Live Nation”), to dispose of its 40% equity interest in Ocesa
Entretenimiento, S.A. de C.V. (“OCEN”), a live entertainment company with operations in Mexico, Central America and Colombia. OCEN is (i) a direct associate of OISE Entretenimiento, S.A. de C.V. (“OISE Entretenimiento”), a wholly-owned
subsidiary of the Company; and (ii) a subsidiary of Corporación Interamericana de Entretenimiento, S.A.B. de C.V.(“CIE”). The proposed disposal of OCEN was expected to be completed by the parties in the first half of 2020, through the sale of
all of the outstanding shares of OISE Entretenimiento, which net assets are comprised primarily of the 40% equity stake in OCEN. This transaction was subject to customary closing conditions, including regulatory approvals and certain
notifications and to the closing of the sale by CIE to Live Nation of a portion of its stake in OCEN. In consideration for the sale of the shares of OISE Entretenimiento, the Company expected to receive cash proceeds in the aggregate amount
of Ps.5,206,000. As a result of this proposed transaction, beginning on July 31, 2019, the Group classified the assets of OISE Entretenimiento, including the carrying value of its investment in OCEN as current assets held for sale in its
consolidated statement of financial position. As of December 31, 2019, the carrying value of current assets held for sale in connection with this proposed transaction amounted to Ps.694,239, of which Ps.693,970, were related to the carrying
value of the investment in OCEN. On April 16, 2020, the Mexican competence regulator (“Comisión Federal de Competencia”) approved this transaction. On May 5, 2020, Live Nation informed the Company that based on a series of allegations, they
were not obligated to close the acquisition of the Company’s equity participation in OCEN. The Company disagreed with these allegations. The parties entered into a standstill agreement to allow discussions to take place, which expired on May
2020, without reaching an agreement among the parties. Live Nation notified the Company a unilateral termination of the stock purchase agreement (the “Termination Letter”). The Company disagreed with such Termination Letter and reserves all
of its rights in connection with Live Nation’s prior allegations and any related actions, including in connection with the Termination Letter, and will evaluate all remedies and actions available to it under the existing contracts and at law.
As a result, beginning on May 31, 2020, the Company ceased to classify the assets of OISE Entretenimiento, including the investment in OCEN, as current assets held for sale, and began to classify its investment in OCEN as an investment in
associates and joint ventures in its consolidated statement of financial position (see Notes 5 and 14).
|
4.
|
Investments in Financial Instruments
|
At December 31, 2020 and 2019, the Group had the following investments in financial instruments:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Equity instruments measured at fair value through other comprehensive income:
|
|
|
|
|
|
|
|
Warrants issued by UHI (1)
|
Ps.
|
—
|
|
Ps.
|
33,775,451
|
|
|
Open-Ended Fund (2)
|
|
1,135,803
|
|
|
4,688,202
|
|
|
Other equity instruments (3)
|
|
5,397,504
|
|
|
5,751,001
|
|
|
|
|
6,533,307
|
|
|
44,214,654
|
|
|
|
|
469,405
|
|
|
51,245
|
|
|
|
Ps.
|
7,002,712
|
|
Ps.
|
44,265,899
|
|
|
(1)
|
Investment in warrants issued by UHI that were exercisable for UHI’s common stock. The Group exercised these warrants for common stock of UHI on December 29, 2020, at an exercise price
of U.S.$0.01 per warrant share. The warrants did not entitle the holder to any voting rights or other rights as a stockholder of UHI. The warrants did not bear interest. As of December 29, 2020 and December 31, 2019, the number of
warrants owned by the Group amounted to 4,590,953 warrant shares, which upon their exercise and together with its investment in shares of UHI, represented approximately 36% on a fully-diluted, as-converted basis of the equity
capital in UHI. In conjunction with the acquisition of the majority stock of Univision Holdings, Inc. (“UHI”) by a group of investors, which was announced on February 25, 2020, the Company’s management assessed and concluded that
this information did not constitute evidence of a condition that existed as of December 31, 2019, and reviewed the assumptions and inputs related to its discounted cash flow model used to determine the fair value of its investment
in warrants and shares of UHI as of March 31, 2020. Based on this assessment and review, the Company’s management recognized (i) a decline in the estimated fair value of the Group’s investment in warrants of UHI as of March 31,
2020, in the amount of Ps.21,899,164, which was accounted for in other comprehensive income or loss, net of income tax of Ps.6,639,400, for the year ended December 31, 2020; and (ii) an impairment loss that decreased the carrying
value of the Group’s investment in shares of UHI as of March 31, 2020, in the amount of Ps.5,455,356, which was accounted for in share of income or loss of associates and joint ventures in the consolidated statement of income for
the year ended December 31, 2020 (see Notes 5 and 10).
|
|
(2)
|
The Group has an investment in an Open-Ended Fund that has as a primary objective to achieve capital appreciation by using a broad range of strategies through investments in
securities, including without limitation stock, debt and other financial instruments, a principal portion of which are considered as Level 1 financial instruments in telecom, media and other sectors across global markets, including
Latin America and other emerging markets. Shares may be redeemed on a quarterly basis at the Net Asset Value (“NAV”) per share as of such redemption date. The fair value of this fund is determined by using the NAV per share. The NAV
per share is calculated by determining the value of the fund assets, all of which are measured at fair value,and subtracting all of the fund liabilities and dividing the result by the total number of issued shares. In July and
November 2019, the Company redeemed a portion of its investment in Open-Ended Fund at the aggregate fair value amount of U.S.$121.6 million (Ps.2,301,682) and recognized cash proceeds from this redemption for such aggregate amount.
In September and December 2020, the Company redeemed a portion of its investment in Open-Ended Fund at the aggregate fair value amount of U.S.$153.7 million (Ps.3,155,644) and recognized cash proceeds from this redemption for such
aggregate amount.
|
|
(3)
|
Other equity instruments include publicly traded instruments, and their fair value is determined by using quoted market prices at the valuation date.
|
A roll-forward of financial assets at fair value through other comprehensive income for the years ended December 31, 2020 and 2019, is presented as follows:
|
|
|
Warrants Issued by UHI (1)
|
|
|
Open-Ended
Fund (1)
|
|
|
Other Equity Instruments
|
|
|
Total
|
|
|
At January 1, 2020
|
Ps.
|
33,775,451
|
|
Ps.
|
4,688,202
|
|
Ps.
|
5,751,001
|
|
Ps.
|
44,214,654
|
|
Disposition of investments
|
|
—
|
|
|
(3,159,970
|
)
|
|
—
|
|
|
(3,159,970
|
)
|
Change in fair value in other comprehensive income
|
|
(16,387,752
|
)
|
|
(392,429
|
)
|
|
(353,497
|
)
|
|
(17,133,678
|
)
|
|
|
|
(17,387,699
|
)
|
|
—
|
|
|
—
|
|
|
(17,387,699
|
)
|
|
At December 31, 2020
|
Ps.
|
—
|
|
Ps.
|
1,135,803
|
|
Ps.
|
5,397,504
|
|
Ps.
|
6,533,307
|
|
|
|
|
Warrants Issued by UHI (1)
|
|
|
Open-Ended
Fund (1)
|
|
|
Other Equity Instruments
|
|
|
Other Financial Assets
|
|
|
Total
|
|
|
At January 1, 2019
|
Ps.
|
34,921,530
|
|
Ps.
|
7,662,726
|
|
Ps.
|
6,545,625
|
|
Ps.
|
72,612
|
|
Ps.
|
49,202,493
|
|
Disposition of investments
|
|
—
|
|
|
(2,331,785
|
)
|
|
—
|
|
|
(72,723
|
)
|
|
(2,404,508
|
)
|
Change in fair value in other comprehensive income
|
|
(1,146,079
|
)
|
|
(642,739
|
)
|
|
(794,624
|
)
|
|
111
|
|
|
(2,583,331
|
)
|
|
At December 31, 2019
|
Ps.
|
33,775,451
|
|
Ps.
|
4,688,202
|
|
Ps.
|
5,751,001
|
|
Ps.
|
—
|
|
Ps.
|
44,214,654
|
|
|
(1)
|
The foreign exchange gain for the year ended December 31, 2020, derived from the hedged warrants issued by UHI and the investment in an Open-Ended Fund, was hedged by foreign exchange
loss from the consolidated statement of income, in the amount of Ps.5,511,412 and Ps.471,097, respectively.The foreign exchange loss for the year ended December 31, 2019, derived from the hedged warrants issued by UHI and the
investment in an Open-Ended Fund, was hedged by foreign exchange gain in the consolidated statement of income, in the amount of Ps.1,403,384 and Ps.289,298, respectively (see Notes 9 and 16).
|
|
5.
|
Investments in Associates and Joint Ventures
|
At December 31, 2020 and 2019, the Group had the following investments in associates and joint ventures accounted for by the equity method:
|
|
|
Ownership as of December 31, 2020
|
|
|
|
December 31,
2020
|
|
|
December 31, 2019
|
|
|
Associates:
|
|
|
|
|
|
|
|
|
|
|
|
UHI (1)
|
|
36.0
|
%
|
|
Ps.
|
21,395,487
|
|
Ps.
|
8,189,662
|
|
|
|
|
40.0
|
%
|
|
|
556,251
|
|
|
693,970
|
|
|
|
|
|
|
|
|
113,905
|
|
|
115,161
|
|
|
Joint ventures:
|
|
|
|
|
|
|
|
|
|
|
Grupo de Telecomunicaciones de Alta Capacidad, S.A.P.I. de C.V. and subsidiary (“GTAC”) (3)
|
|
33.3
|
%
|
|
|
514,731
|
|
|
567,165
|
|
Periódico Digital Sendero, S.A.P.I. de C.V.(“PDS”) (4)
|
|
50.0
|
%
|
|
|
204,464
|
|
|
196,474
|
|
|
|
|
|
|
|
Ps.
|
22,784,838
|
|
Ps.
|
9,762,432
|
|
|
(1)
|
The Group accounts for its investment in common stock of UHI, the parent company of Univision, under the equity method due to the Group’s ability to exercise significant influence, as
defined under IFRS Standards, over UHI’s operations. Beginning on December 29, 2020, the Group has the ability to exercise significant influence over the operating and financial policies of UHI because (i) it owns 5,701,335 Class
“A” shares of common stock of UHI, representing approximately 36% of the outstanding shares of UHI on a fully-diluted basis, and approximately 41% of the voting shares of UHI, as a result of exercising all of its outstanding
warrants for common stock of UHI on that date; and (ii) it has three officers of the Company designated as members of the Board of Directors of UHI, which is composed of nine directors. Before December 29, 2020, the Group had the
ability to exercise significant influence over the operating and financial policies of UHI because (i) it owned 1,110,382 Class “C” shares of common stock of UHI, representing approximately 10% of the outstanding total shares of UHI
and 14% of the voting shares of UHI, and 4,590,953 warrants issued by UHI, which upon their exercise, and together with the former investment in shares of UHI, represented approximately 36% on a fully-diluted, as-converted basis of
the equity capital in UHI, subject to certain conditions, laws and regulations; and (ii) it had three officers and one director of the Company designated as members of the Board of Directors of UHI, which was composed of 19
directors, of 22 available board seats.
|
|
The Group is also a party to a Program License Agreement (“PLA”), as amended, with Univision, an indirect wholly-owned subsidiary of UHI, pursuant to which Univision has the right to
broadcast certain Televisa content in the United States, and to another program license agreement pursuant to which the Group has the right to broadcast certain Univision’s content in Mexico (“Mexican License Agreement”), in each
case through 7.5 years after the Group has voluntarily sold two-thirds of its initial investment made in UHI in December 2010. On February 25, 2020, UHI, Searchlight Capital Partners, LP (“Searchlight”), a global private investment
firm, and ForgeLight LLC (“ForgeLight”), an operating and investment company focused on the media and consumer technology sectors, announced a definitive agreement in which Searchlight and ForgeLight would acquire a majority
ownership interest from all stockholders of UHI other than the Group. Terms of the transaction were not disclosed. The Group elected to retain its approximately 36% stake in UHI’s equity capital upon exercise of its warrants on a
fully-diluted, as-converted basis. Under the terms of the acquisition, Searchlight and ForgeLight would purchase the remaining 64% ownership interest from the other stockholders of UHI. The transaction, which was subject to
customary closing conditions including receipt of regulatory approvals, was closed on December 29, 2020. In conjunction with this transaction and a related decline in the fair value of the Group’s investment in warrants issued by
UHI, the Company’s management recognized an impairment loss in the amount of Ps.5,455,356 that decreased the carrying value of its investment in shares of UHI as of March 31, 2020.This impairment adjustment was accounted for in
share of income or loss of associates and joint ventures in the Group’s consolidated statement of income for the year ended December 31, 2020 (see Notes 1, 4, 9, 14 and 16).
|
|
(2)
|
In July 2019, the Group classified its 40% equity interest in OCEN as current assets held for sale. In 2019, the stockholders of OCEN approved the payment of dividends in the
aggregate amount of Ps.1,931,000, of which Ps.772,400 were paid to the Group, as well as a capital reduction in the amount of Ps.200,466, of which Ps.80,186 were paid to the Group. Beginning on May 31, 2020, the Company (i) ceased
to classify the assets of OISE Entretenimiento, including the investment in OCEN, as current assets held for sale; (ii) began to classify its equity interest in OCEN as an investment in associates and joint ventures in its
consolidated statement of financial position; (iii) recognized its share of income of OCEN, which was discontinued from August 1, through December 31, 2019, in retained earnings in the amount of Ps.147,975, and began to recognize
its share of income or loss of OCEN for the year ended December 31, 2020; and (iv) restated for comparison purposes its previously reported statement of financial position as of December 31, 2019, which included its investment in
OCEN as current assets held for sale, to conform with the current classification of this asset as investments in associates and joint ventures. As of December 31, 2020 and 2019, the investment in OCEN included goodwill of Ps.359,613
(see Notes 3 and 14).
|
|
(3)
|
GTAC was granted a 20-year contract for the lease of a pair of dark fiber wires held by the Mexican Federal Electricity Commission and a concession to operate a public
telecommunications network in Mexico with an expiration date in 2030. GTAC is a joint venture in which a subsidiary of the Company, a subsidiary of Grupo de Telecomunicaciones Mexicanas, S.A. de C.V., and a subsidiary of Megacable,
S.A. de C.V., have an equal equity participation of 33.3%. In June 2010, a subsidiary of the Company entered into a long-term credit facility agreement to provide financing to GTAC for up to Ps.688,217, with an annual interest rate
of the Mexican Interbank Interest Rate (“Tasa de Interés Interbancaria de Equilibrio” or “TIIE”) plus 200 basis points. Under the terms of this agreement, principal and interest are payable at dates agreed by the parties, between
2013 and 2021. As of December 31, 2020 and 2019, GTAC had used a principal amount of Ps.688,183 under this credit facility. During the year ended December 31, 2020, GTAC paid principal and interest to the Group in connection with
this credit facility in the aggregate principal amount of Ps.123,390. During the year ended December 31, 2019, GTAC paid principal and interest to the Group in connection with this credit facility in the aggregate principal amount
of Ps.114,574. Also, a subsidiary of the Company entered into supplementary long-term loans to provide additional financing to GTAC for an aggregate principal amount of Ps.946,128, with an annual interest of TIIE plus 200 basis
points computed on a monthly basis and payable on an annual basis or at dates agreed by the parties. Under the terms of these supplementary loans, principal amounts can be prepaid at dates agreed by the parties before their
maturities between 2023 and 2029. During the years ended December 31, 2020 and 2019, GTAC paid principal and interest to the Group in connection with this credit facility in the aggregate principal amount of Ps.122,656 and
Ps.86,321, respectively. The net investment in GTAC as of December 31, 2020 and 2019, included amounts receivable in connection with this long-term credit facility and supplementary loans to GTAC in the aggregate amount of
Ps.821,253 and Ps.872,317, respectively. These amounts receivable are in substance a part of the Group’s net investment in this investee (see Note 9).
|
|
(4)
|
The Group accounts for its investment in PDS under the equity method, due to its 50% interest in this joint venture. As of December 31, 2020 and 2019, the Group’s investment in PDS
included intangible assets and goodwill in the aggregate amount of Ps.113,837.
|
|
6.
|
Property, Plant and Equipment, Net
|
Property, plant and equipment as of December 31, 2020 and 2019, consisted of:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Buildings
|
Ps.
|
9,812,051
|
|
Ps.
|
9,435,452
|
|
|
Building improvements
|
|
183,368
|
|
|
182,660
|
|
|
Technical equipment
|
|
157,059,914
|
|
|
141,966,642
|
|
|
Satellite transponders
|
|
6,026,094
|
|
|
6,026,094
|
|
|
Furniture and fixtures
|
|
1,263,800
|
|
|
1,158,745
|
|
|
Transportation equipment
|
|
3,122,232
|
|
|
3,000,322
|
|
|
Computer equipment
|
|
9,198,382
|
|
|
8,548,265
|
|
|
Leasehold improvements
|
|
3,605,636
|
|
|
3,434,374
|
|
|
|
|
190,271,477
|
|
|
173,752,554
|
|
|
Accumulated depreciation
|
|
(124,957,287
|
)
|
|
(109,028,784
|
)
|
|
|
|
65,314,190
|
|
|
64,723,770
|
|
|
Land
|
|
4,886,600
|
|
|
4,891,094
|
|
|
Construction and projects in progress
|
|
13,083,562
|
|
|
13,714,368
|
|
|
|
Ps.
|
83,284,352
|
|
Ps.
|
83,329,232
|
|
As of December 31, 2020, technical equipment includes Ps.868,418 and related accumulated depreciation of Ps.299,495 in connection with costs of dismantling certain
equipment of the cable networks in the Group’s Cable segment.
Depreciation charged to income for the years ended December 31, 2020 and 2019, was Ps.17,689,503 and Ps.17,437,800, respectively. As of January 1, 2019, in connection with
the adoption of IFRS 16, the Group classified as right-of-use assets those obligations recognized as finance leases as of December 31, 2018 (see Note 2).
During the years ended December 31, 2020 and 2019, the Group invested Ps.20,131,738 and Ps.19,108,284, respectively, in property, plant and equipment as capital
expenditures.
|
7.
|
Right-of-use Assets, Net
|
Right-of-use assets, net as of December 31, 2020 and 2019, consisted of:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Buildings
|
Ps.
|
5,464,584
|
|
Ps.
|
5,085,242
|
|
|
Satellite transponders
|
|
4,275,619
|
|
|
4,275,619
|
|
|
Technical Equipment
|
|
1,883,982
|
|
|
1,688,829
|
|
|
Others
|
|
231,137
|
|
|
58,021
|
|
|
|
|
11,855,322
|
|
|
11,107,711
|
|
|
Accumulated depreciation
|
|
(4,643,157
|
)
|
|
(3,554,659
|
)
|
|
|
Ps.
|
7,212,165
|
|
Ps.
|
7,553,052
|
|
Depreciation charged to income for the years ended December 31, 2020 and 2019, was Ps.1,096,774 and Ps.1,376,181, respectively.
|
8.
|
Intangible Assets and Goodwill, Net
|
The balances of intangible assets and goodwill, net as of December 31, 2020 and 2019, were as follows:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Cost
|
|
|
Accumulated Amortization
|
|
|
Carrying Value
|
|
|
Cost
|
|
|
Accumulated Amortization
|
|
|
Carrying Value
|
|
Intangible assets and goodwill with indefinite useful lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
35,242
|
|
Ps.
|
—
|
|
Ps.
|
35,242
|
|
Ps.
|
175,444
|
|
Ps.
|
—
|
|
Ps.
|
175,444
|
|
|
|
|
15,166,067
|
|
|
—
|
|
|
15,166,067
|
|
|
15,166,067
|
|
|
—
|
|
|
15,166,067
|
|
|
|
|
14,113,626
|
|
|
—
|
|
|
14,113,626
|
|
|
14,113,626
|
|
|
—
|
|
|
14,113,626
|
|
Intangible assets with finite useful lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,227,096
|
|
|
(1,971,314
|
)
|
|
255,782
|
|
|
2,127,697
|
|
|
(1,899,187
|
)
|
|
228,510
|
|
|
|
|
553,505
|
|
|
(442,848
|
)
|
|
110,657
|
|
|
553,505
|
|
|
(332,103
|
)
|
|
221,402
|
|
|
|
|
13,122,893
|
|
|
(8,446,906
|
)
|
|
4,675,987
|
|
|
10,858,388
|
|
|
(6,843,169
|
)
|
|
4,015,219
|
|
|
|
|
8,804,334
|
|
|
(7,258,070
|
)
|
|
1,546,264
|
|
|
8,782,852
|
|
|
(6,632,419
|
)
|
|
2,150,433
|
|
Payment for renewal of concessions
|
|
5,825,559
|
|
|
—
|
|
|
5,825,559
|
|
|
5,821,828
|
|
|
—
|
|
|
5,821,828
|
|
|
|
|
5,183,656
|
|
|
(4,191,348
|
)
|
|
992,308
|
|
|
5,198,960
|
|
|
(3,762,535
|
)
|
|
1,436,425
|
|
|
|
Ps.
|
65,031,978
|
|
Ps.
|
(22,310,486
|
)
|
Ps.
|
42,721,492
|
|
Ps.
|
62,798,367
|
|
Ps.
|
(19,469,413
|
)
|
Ps.
|
43,328,954
|
|
Amortization charged to income for the years ended December 31, 2020 and 2019, was Ps.2,474,510 and Ps.2,500,646, respectively. Additional amortization charged to income
for the years ended December 31, 2020 and 2019, was Ps.380,863 and Ps.531,426, respectively, primarily in connection with amortization of soccer player rights.
In November 2018, the Mexican Institute of Telecommunications (Instituto Federal de Telecomunicaciones or “IFT”) approved the renewal of the Group’s broadcasting
concessions for all of its television stations in Mexico, for a term of 20 years after the existing expiration date in 2021. In November 2018, the Group paid in cash for such renewal an aggregate amount of Ps.5,754,543, which includes a
payment of Ps.1,194 for administrative expenses and recognized this cost as an intangible asset in its consolidated statement of financial position. This amount will be amortized in a period of 20 years beginning on January 1, 2022, by using
the straight-line method.
In the fourth quarter of 2017, the Company’s management reviewed the useful life of certain Group’s television concessions accounted for as intangible assets in conjunction
with the payment made in 2018 for renewal of concessions expiring in 2021, which amount will be determined by the IFT before the renewal date. Based on such review, the Group classified these concessions as intangible assets with a finite
useful life and began to amortize the related net carrying amount of Ps.553,505 in a period ending in 2021.
During 2020 and the second half of 2019, the Group monitored the market associated with its Publishing business, which is classified into the Other Businesses segment,
which has experienced a general slow-down in Latin America. Accordingly, the Group has reduced its cash flow expectations for some of its operations. As a result of such evaluation, the Group recognized an impairment loss for trademarks with
indefinite useful lives related to its Publishing business, for an aggregate amount of Ps.40,803 and Ps.67,574 in other expense, net, in the consolidated statement of income for the years ended December 31, 2020 and 2019.
As of December 31, 2020 and 2019, there was no evidence of significant impairment indicators in connection with the Group’s intangible assets in the Cable, Sky and Content
segments.
|
9.
|
Debt, Lease Liabilities and Other Notes Payable
|
As of December 31, 2020 and 2019, debt, lease liabilities and other notes payable outstanding were as follows:
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31, 2019
|
|
|
|
|
Principal
|
|
|
Finance Costs
|
|
|
Total
|
|
|
Total
|
|
|
U.S. dollar debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.625% Senior Notes due 2025 (1)
|
Ps.
|
11,969,580
|
|
Ps.
|
(162,815)
|
|
Ps.
|
11,806,765
|
|
Ps.
|
11,129,156
|
|
|
4.625% Senior Notes due 2026 (1)
|
|
5,984,790
|
|
|
(24,424)
|
|
|
5,960,366
|
|
|
5,635,748
|
|
|
8.5% Senior Notes due 2032 (1)
|
|
5,984,790
|
|
|
(19,870)
|
|
|
5,964,920
|
|
|
5,643,504
|
|
|
6.625% Senior Notes due 2040 (1)
|
|
11,969,580
|
|
|
(120,485)
|
|
|
11,849,095
|
|
|
11,203,427
|
|
|
5% Senior Notes due 2045 (1)
|
|
19,949,300
|
|
|
(412,967)
|
|
|
19,536,333
|
|
|
18,453,920
|
|
|
6.125% Senior Notes due 2046 (1)
|
|
17,954,370
|
|
|
(119,284)
|
|
|
17,835,086
|
|
|
16,871,348
|
|
|
5.250% Senior Notes due 2049 (1)
|
|
14,961,975
|
|
|
(294,210)
|
|
|
14,667,765
|
|
|
13,858,286
|
|
|
Total U.S. dollar debt
|
Ps.
|
88,774,385
|
|
Ps.
|
(1,154,055)
|
|
Ps.
|
87,620,330
|
|
Ps.
|
82,795,389
|
|
|
Mexican peso debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.79% Notes due 2027 (2)
|
|
4,500,000
|
|
|
(16,122)
|
|
|
4,483,878
|
|
|
4,481,519
|
|
|
8.49% Senior Notes due 2037 (1)
|
|
4,500,000
|
|
|
(11,903)
|
|
|
4,488,097
|
|
|
4,487,372
|
|
|
7.25% Senior Notes due 2043 (1)
|
|
6,500,000
|
|
|
(53,091)
|
|
|
6,446,909
|
|
|
6,444,540
|
|
|
Bank loans (3)
|
|
16,000,000
|
|
|
(88,350)
|
|
|
15,911,650
|
|
|
15,883,817
|
|
|
Bank loans (Sky) (4)
|
|
2,750,000
|
|
|
-
|
|
|
2,750,000
|
|
|
5,500,000
|
|
|
Bank loans (TVI) (5)
|
|
852,893
|
|
|
(786)
|
|
|
852,107
|
|
|
1,344,058
|
|
|
Total Mexican peso debt
|
Ps.
|
35,102,893
|
|
Ps.
|
(170,252)
|
|
Ps.
|
34,932,641
|
|
Ps.
|
38,141,306
|
|
|
Total debt (6)
|
|
123,877,278
|
|
|
(1,324,307)
|
|
|
122,552,971
|
|
|
120,936,695
|
|
|
Less: Current portion of long-term debt
|
|
617,489
|
|
|
(498)
|
|
|
616,991
|
|
|
491,951
|
|
|
Long-term debt, net of current portion
|
Ps.
|
123,259,789
|
|
Ps.
|
(1,323,809)
|
|
Ps.
|
121,935,980
|
|
Ps.
|
120,444,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite transponder lease obligation (7)
|
Ps.
|
3,818,559
|
|
Ps.
|
—
|
|
Ps.
|
3,818,559
|
|
Ps.
|
4,014,567
|
|
|
Leases (8)
|
|
5,473,792
|
|
|
—
|
|
|
5,473,792
|
|
|
5,348,953
|
|
|
Total lease liabilities
|
|
9,292,351
|
|
|
—
|
|
|
9,292,351
|
|
|
9,363,520
|
|
|
Less: Current portion
|
|
1,277,754
|
|
|
—
|
|
|
1,277,754
|
|
|
1,257,766
|
|
|
Lease liabilities, net of current portion
|
Ps.
|
8,014,597
|
|
Ps.
|
—
|
|
Ps.
|
8,014,597
|
|
Ps.
|
8,105,754
|
|
|
Other notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other notes payable (9)
|
Ps.
|
—
|
|
Ps.
|
—
|
|
Ps.
|
—
|
|
Ps.
|
1,324,063
|
|
|
Less: Current portion
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,324,063
|
|
|
Other notes payable, net of current portion
|
Ps.
|
—
|
|
Ps.
|
—
|
|
Ps.
|
—
|
|
Ps.
|
—
|
|
|
(1)
|
The Senior Notes due between 2025 and 2049, in the aggregate outstanding principal amount of U.S.$4,450 million and Ps.11,000,000, are unsecured obligations of the Company, rank
equally in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company, and are junior in right of payment to all of the existing and future liabilities of the Company’s subsidiaries.
Interest rate on the Senior Notes due 2025, 2026, 2032, 2037, 2040, 2043, 2045, 2046, and 2049 including additional amounts payable in respect of certain Mexican withholding taxes, is 6.97%, 4.86%, 8.94%, 8.93%, 6.97%, 7.62%, 5.26%,
6.44% and 5.52% per annum, respectively, and is payable semi-annually. These Senior Notes may not be redeemed prior to maturity, except: (i) in the event of certain changes in law affecting the Mexican withholding tax treatment of
certain payments on the securities, in which case the securities will be redeemable, in whole or in part, at the option of the Company; and (ii) in the event of a change of control, in which case the Company may be required to
redeem the securities at 101% of their principal amount. Also, the Company may, at its own option, redeem the Senior Notes due 2025, 2026, 2037, 2040, 2043, 2046 and 2049, in whole or in part, at any time at a redemption price equal
to the greater of the principal amount of these Senior Notes or the present value of future cash flows, at the redemption date, of principal and interest amounts of the Senior Notes discounted at a fixed rate of comparable U.S. or
Mexican sovereign bonds. The Senior Notes due 2026, 2032, 2040, 2043, 2045, 2046 and 2049 were priced at 99.385%, 99.431%, 98.319%, 99.733%, 96.534%, 99.677% and 98.588%, respectively, for a yield to maturity of 4.70%, 8.553%,
6.755%, 7.27%, 5.227%, 6.147% and 5.345%, respectively. The Senior Notes due 2025 were issued in two aggregate principal amounts of U.S.$400 million and U.S.$200 million, and were priced at 98.081% and 98.632%, respectively, for a
yield to maturity of 6.802% and 6.787%, respectively. The agreement of these Senior Notes contains covenants that limit the ability of the Company and certain restricted subsidiaries engaged in the Group’s Content segment, to incur
or assume liens, perform sale and leaseback transactions, and consummate certain mergers, consolidations and similar transactions. The Senior Notes due 2025, 2026, 2032, 2037, 2040, 2045, 2046 and 2049 are registered with the U.S.
Securities and Exchange Commission (“SEC”). The Senior Notes due 2043 are registered with both the SEC and the Mexican Banking and Securities Commission (“Comisión Nacional Bancaria y de Valores” or “CNBV”).
|
|
(2)
|
In 2017, the Company issued Notes (“Certificados Bursátiles”) due 2027, respectively, through the BMV in the aggregate principal amount of Ps.4,500,000. In July 2019, the Company
prepaid all of the outstanding Notes due 2021 and 2022 in the aggregate principal amount of Ps.11,000,000. In October 2019, the Company prepaid all of the outstanding Notes due 2020 in the aggregate principal amount of
Ps.10,000,000. Interest rate on the Notes due 2027 is 8.79% per annum and is payable semi-annually. The Company may, at its own option, redeem the Notes due 2027, in whole or in part, at any semi-annual interest payment date at a
redemption price equal to the greater of the principal amount of the outstanding Notes and the present value of future cash flows, at the redemption date, of principal and interest amounts of the Notes discounted at a fixed rate of
comparable Mexican sovereign bonds. The agreement of the Notes due 2027 contains covenants that limit the ability of the Company and certain restricted subsidiaries appointed by the Company’s Board of Directors, and engaged in the
Group’s Content segment, to incur or assume liens, perform sale and leaseback transactions, and consummate certain mergers, consolidations and similar transactions.
|
|
(3)
|
In 2017, the Company entered into long-term credit agreements with three Mexican banks, in the aggregate principal amount of Ps.6,000,000, with an annual interest rate payable on a
monthly basis of 28-day TIIE plus a range between 125 and 130 basis points, and principal maturities between 2022 and 2023. The proceeds of these loans were used primarily for the prepayment in full of the Senior Notes due 2018.
Under the terms of these loan agreements, the Company is required to: (a) maintain certain financial coverage ratios related to indebtedness and interest expense; and (b) comply with the restrictive covenant on spin-offs, mergers
and similar transactions. In July 2019, the Company entered into a credit agreement for a five-year term loan with a syndicate of banks in the aggregate principal amount of Ps.10,000,000. The funds from this loan were used for
general corporate purposes, including the refinancing of the Company’s indebtedness. This loan bears interest at a floating rate based on a spread of 105 or 130 basis points over the 28-day TIIE rate depending on the Group’s net
leverage ratio. The credit agreement of this loan requires the maintenance of financial ratios related to indebtedness and interest expense. During 2018, the Company executed a revolving credit facility with a syndicate of banks,
for up to an amount equivalent to U.S.$618 million payable in Mexican pesos, which funds may be used for the repayment of existing indebtedness and other general corporate purposes. This revolving credit facility remained unused as
of December 31, 2019. In March 2020, the Company drew down Ps.14,770,694 under this revolving credit facility, with a maturity in the first quarter of 2022, and interest payable on a monthly basis at a floating rate based on a
spread of 87.5 or 112.5 basis points over the 28-day TIIE rate depending on the Group’s net leverage ratio. This facility was used by the Company as a prudent and precautionary measure to increase the Group’s cash position and
preserve financial flexibility in light of uncertainty in the global and local markets resulting from the COVID-19 outbreak. On October 6, 2020, the Company prepaid in full without penalty the principal amount of Ps.14,770,694 under
this revolving credit facility. Accordingly, the Company classified this long-term debt as a current liability as of September 30, 2020, net of related finace costs, in the amount of Ps.14,736,512. The Company retained the right to
reborrow the facility in an amount of up to the Mexican peso equivalent of U.S.618 million, and the facility remains available through March 2022.
|
|
(4)
|
In March 2016, Sky entered into long-term credit agreements with two Mexican banks in the aggregate principal amount of Ps.5,500,000, with maturities between 2021 and 2023, and
interest payable on a monthly basis with an annual rate in the range of 7.0% and 7.13%. In July 2020, Sky prepaid a portion of these loans in the aggregate cash amount of Ps.2,818,091, which included principal amounts of
Ps.2,750,000, and related accrued interest and transaction costs in the amount of Ps.68,091. Under the terms of these credit agreements, the Company is required to: (a) maintain certain financial coverage ratios related to
indebtedness and interest expense; and (b) comply with the restrictive covenant on spin-offs, mergers and similar transactions.
|
|
(5)
|
As of December 31, 2020 and 2019, included outstanding balances in the aggregate principal amount of Ps.852,893 and Ps.1,345,382, respectively, in connection with credit agreements
entered into by TVI with Mexican banks, with maturities between 2020 and 2022, bearing interest at an annual rate of TIIE plus a range between 100 and 125 basis points, which is payable on a monthly basis. This TVI long- term
indebtedness is guaranteed by the Company. Under the terms of these credit agreements, TVI is required to comply with certain restrictive covenants and financial coverage ratios.
|
|
(6)
|
Total debt is presented net of unamortized finance costs as of December 31, 2020 and 2019, in the aggregate amount of Ps.1,324,307 and Ps.1,441,597, respectively, and does not include
related interest payable in the aggregate amount of Ps.1,934,656 and Ps.1,943,863, respectively.
|
|
(7)
|
Under a capital lease agreement entered into with Intelsat Global Sales & Marketing Ltd. (“Intelsat”) in March 2010, Sky is obligated to pay at an annual interest rate of 7.30% a
monthly fee through 2027 of U.S.$3.0 million for satellite signal reception and retransmission service from 24 KU-band transponders on satellite IS-21, which became operational in October 2012. The service term for IS-21 will end at
the earlier of: (a) the end of 15 years or; (b) the date IS-21 is taken out of service (see Note 7).
|
|
(8)
|
In 2020, includes lease liabilities recognized beginning on January 1, 2019 under IFRS 16 for an aggregate amount of Ps.4,745,292. Also, includes minimum lease payments of property and
equipment under leases that qualify as lease liabilities. As of December 31, 2020 and 2019, includes Ps.728,500 and Ps.699,066, respectively, in connection with a lease agreement entered into by a subsidiary of the Company and GTAC,
for the right to use certain capacity of a telecommunications network through 2029. This lease agreement provides for annual payments through 2029. Other finance liabilities have terms, which expire at various dates in 2020.
|
|
(9)
|
Notes payable issued by the Company in connection with the acquisition in 2016 of a non-controlling interest in TVI. As of December 31, 2019, cash payments to be made in 2020 related
to these notes payable amounted to an aggregate of Ps.1,330,000, including implicit interest of Ps.142,500. Accumulated accrued interest for this transaction amounted to Ps.136,563 as of December 31, 2019. In February 2020, the
Group repaid all of its outstanding other notes payable as of December 31, 2019.
|
As of December 31, 2020 and 2019, the outstanding principal amounts of Senior Notes of the Company that have been designated as hedging instruments of the Group’s
investments in UHI and the investment in Open-Ended Fund (hedged items) were as follows:
|
|
.
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Hedged items
|
|
Millions of U.S. dollars
|
|
|
Thousands of Mexican Pesos
|
|
|
Millions of U.S. dollars
|
|
|
Thousandsof Mexican Pesos
|
Investment in shares of UHI (net investment hedge)
|
U.S.$
|
1,072.5
|
|
Ps.
|
21,395,487
|
|
U.S.$
|
433.7
|
|
Ps.
|
8,189,662
|
Warrants issued by UHI (foreign currency fair value hedge)
|
|
—
|
|
|
—
|
|
|
1,788.6
|
|
|
33,775,451
|
Open-Ended Fund (foreign currency fair value hedge)
|
|
56.9
|
|
|
1,135,803
|
|
|
248.3
|
|
|
4,688,202
|
|
|
U.S.$
|
1,129.4
|
|
Ps.
|
22,531,290
|
|
U.S.$
|
2,470.6
|
|
Ps.
|
46,653,315
|
The foreign exchange gain or loss derived from the Company’s U.S. dollar denominated long-term debt designated as a hedge, for the years ended December 31, 2020 and 2019,
is analyzed as follows (see Notes 4 and 16):
|
Foreign Exchange Gain or Loss Derived from Senior Notes Designated as Hedging Instruments
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Recognized in:
|
|
|
|
|
|
|
Comprehensive (loss) gain
|
Ps.
|
(7,344,088
|
)
|
Ps.
|
2,030,424
|
|
Total foreign exchange (loss) gain derived from hedging Senior Notes
|
Ps.
|
(7,344,088
|
)
|
Ps.
|
2,030,424
|
|
|
Offset against by:
|
|
|
|
|
|
|
Foreign currency translation gain (loss) derived from the hedged net investment in shares of UHI
|
Ps.
|
1,361,579
|
|
Ps.
|
(337,742
|
)
|
Foreign exchange gain (loss) derived from hedged warrants issued by UHI
|
|
5,511,412
|
|
|
(1,403,384
|
)
|
Foreign exchange gain (loss) derived from the hedged Open-Ended Fund
|
|
471,097
|
|
|
(289,298
|
)
|
Total foreign currency translation and foreign exchange gain (loss) derived from hedged assets
|
Ps.
|
7,344,088
|
|
Ps.
|
(2,030,424
|
)
|
The table below analyzes the Group’s debt and lease liabilities into relevant maturity groupings based on the remaining period at December 31, 2020, to the contracted
maturity date:
|
|
|
Less than 12 Months
January 1, 2021
to December 31, 2021
|
|
|
12-36
Months
January 1, 2022 to December
31, 2023
|
|
|
36-60
Months
January 1, 2024
to December 31, 2025
|
|
|
Maturities Subsequent to December 31, 2025
|
|
|
Total
|
|
|
Debt (1)
|
Ps.
|
617,489
|
|
Ps.
|
8,985,404
|
|
Ps.
|
21,969,580
|
|
Ps.
|
92,304,805
|
|
Ps.
|
123,877,278
|
|
|
|
|
1,277,754
|
|
|
2,184,098
|
|
|
2,240,777
|
|
|
3,589,722
|
|
|
9,292,351
|
|
Total debt and lease liabilities
|
Ps.
|
1,895,243
|
|
Ps.
|
11,169,502
|
|
Ps.
|
24,210,357
|
|
Ps.
|
95,894,527
|
|
Ps.
|
133,169,629
|
|
(1)The amounts of debt are disclosed on a principal amount basis.
|
10.
|
Financial Instruments
|
The Group’s financial instruments presented in the consolidated statements of financial position included cash and cash equivalents, temporary investments, accounts and
notes receivable, a long-term loan receivable from GTAC, warrants that are exercisable for UHI’s common stock, non-current investments in debt and equity securities, securities in the form of an open-ended fund, accounts payable, outstanding
long-term debt, lease liabilities, other notes payable, and derivative financial instruments. For cash and cash equivalents, temporary investments, accounts receivable, accounts payable, and current maturities of long-term debt and lease
liabilities, the carrying amounts approximate fair value due to the short maturity of these instruments. The fair value of the Group’s long-term debt securities is based on quoted market prices.
The fair value of long-term loans that the Group borrowed from leading Mexican banks (see Note 9) has been estimated using the borrowing rates currently available to the
Group for bank loans with similar terms and average maturities. The fair value of non-current investments in financial instruments, and currency option and interest rate swap agreements were determined by using valuation techniques that
maximize the use of observable market data.
The carrying and estimated fair values of the Group’s non-derivative financial instruments as of December 31, 2020 and 2019, were as follows:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Assets:
Cash and cash equivalents
|
Ps.
|
29,168,996
|
|
Ps.
|
29,168,996
|
|
Ps.
|
27,451,997
|
|
Ps.
|
27,451,997
|
|
Trade notes and accounts receivable, net
|
|
12,651,469
|
|
|
12,651,469
|
|
|
14,486,184
|
|
|
14,486,184
|
|
Warrants issued by UHI (see Note 4)
|
|
—
|
|
|
—
|
|
|
33,775,451
|
|
|
33,775,451
|
|
Long-term loans and interest receivable from GTAC (see Note 5)
|
|
824,092
|
|
|
821,253
|
|
|
872,317
|
|
|
875,585
|
|
Open-Ended Fund (see Note 4)
|
|
1,135,803
|
|
|
1,135,803
|
|
|
4,688,202
|
|
|
4,688,202
|
|
Other equity instruments (see Note 4)
|
|
5,397,504
|
|
|
5,397,504
|
|
|
5,751,001
|
|
|
5,751,001
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes due 2025, 2032 and 2040
|
Ps.
|
29,923,950
|
|
Ps.
|
40,584,237
|
|
Ps.
|
28,325,700
|
|
Ps.
|
34,954,254
|
|
|
|
|
19,949,300
|
|
|
24,282,886
|
|
|
18,883,800
|
|
|
19,739,047
|
|
Senior Notes due 2037 and 2043
|
|
11,000,000
|
|
|
9,238,435
|
|
|
11,000,000
|
|
|
8,986,870
|
|
Senior Notes due 2026 and 2046
|
|
23,939,160
|
|
|
31,811,792
|
|
|
22,660,560
|
|
|
26,645,193
|
|
|
|
|
14,961,975
|
|
|
18,978,667
|
|
|
14,162,850
|
|
|
15,364,426
|
|
|
|
|
4,500,000
|
|
|
5,035,860
|
|
|
4,500,000
|
|
|
4,656,375
|
|
|
|
|
19,602,893
|
|
|
19,801,142
|
|
|
22,845,382
|
|
|
23,012,707
|
|
|
|
|
9,292,351
|
|
|
9,343,100
|
|
|
9,363,520
|
|
|
9,120,903
|
|
|
|
|
—
|
|
|
—
|
|
|
1,324,063
|
|
|
1,295,780
|
|
(1) In 2020, includes lease agreements recognized beginning on January 1, 2019 under IFRS 16 for an aggregate amount of Ps.4,745,292.
The carrying values (based on estimated fair values), notional amounts, and maturity dates of the Group’s derivative financial instruments as of December 31, 2020 and 2019,
were as follows:
|
December 31, 2020:
Derivative Financial Instruments
|
|
Carrying Value
|
|
|
Notional Amount (U.S. Dollars in Thousands
|
)
|
|
Maturity Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Derivatives recorded as accounting hedges:
(cash flow hedges)
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
1,759
|
|
Ps.
|
122,400
|
|
|
May 2022
|
|
|
|
|
23,784
|
|
Ps.
|
730,493
|
|
|
April 2022
|
|
|
|
|
109,146
|
|
Ps.
|
2,000,000
|
|
|
October 2022
|
|
|
|
|
86,171
|
|
Ps.
|
1,500,000
|
|
|
October 2022
|
|
|
|
|
180,941
|
|
Ps.
|
2,500,000
|
|
|
February 2023
|
|
|
|
|
762,827
|
|
Ps.
|
10,000,000
|
|
|
June 2024
|
|
|
|
|
714,763
|
|
U.S.$
|
330,500
|
|
|
January 2021 through March 2022
|
|
Derivatives not recorded as accounting hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
204,250
|
|
Ps.
|
9,385,347
|
|
|
March 2022
|
|
|
|
|
176,868
|
|
U.S.$
|
88,353
|
|
|
January 2021 through February 2022
|
|
Empresas Cablevisión´s forward
|
|
190,726
|
|
U.S.$
|
96,789
|
|
|
January 2021 through February 2022
|
|
|
|
|
318,701
|
|
U.S.$
|
135,000
|
|
|
Febraury 2021 through February 2022
|
|
|
|
|
706,287
|
|
U.S.$
|
344,898
|
|
|
January 2021 through February 2022
|
|
|
|
Ps.
|
3,476,223
|
|
|
|
|
|
|
|
|
December 31, 2019:
Derivative Financial Instruments
|
|
Carrying Value
|
|
|
Notional Amount (U.S. Dollars in Thousands
|
)
|
|
Maturity Date
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Derivatives recorded as accounting hedges:
(cash flow hedges)
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
4,592
|
|
Ps.
|
407,200
|
|
|
May 2020 through May 2022
|
|
|
|
Ps.
|
4,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Derivatives recorded as accounting hedges:
(cash flow hedges)
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
8,943
|
|
Ps.
|
938,182
|
|
|
April 2022
|
|
|
|
|
38,543
|
|
Ps.
|
2,000,000
|
|
|
October 2022
|
|
|
|
|
30,702
|
|
Ps.
|
1,500,000
|
|
|
October 2022
|
|
|
|
|
83,122
|
|
Ps.
|
2,500,000
|
|
|
February 2023
|
|
|
|
|
185,205
|
|
Ps.
|
6,000,000
|
|
|
June 2024
|
|
|
|
|
144,466
|
|
U.S.$
|
218,688
|
|
|
January 2020 through September 2020
|
|
|
Derivatives not recorded as accounting hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
45,968
|
|
U.S.$
|
66,000
|
|
|
January 2020 through October 2020
|
|
Empresas Cablevisión´s forward
|
|
48,474
|
|
U.S.$
|
73,000
|
|
|
January 2020 through October 2020
|
|
|
|
|
87,090
|
|
U.S.$
|
127,850
|
|
|
January 2020 through September 2020
|
|
|
|
|
242,777
|
|
U.S.$
|
361,550
|
|
|
January 2020 through October 2020
|
|
|
|
Ps.
|
915,290
|
|
|
|
|
|
|
|
UHI Warrants
In July 2015, the Group exchanged its investment in U.S.$1,125 million principal amount of Convertible Debentures due 2025 issued by UHI for 4,858,485 warrants that were
exercisable for UHI’s common stock, and exercised 267,532 of these warrants to increase its equity stake in UHI from 7.8% to 10%. On December 29, 2020, the Group exercised all of its remaining warrants for common shares of UHI to increase its
equity stake in UHI from 10% to 36% on a fully diluted basis (see Notes 4 and 5).
The Group determined the fair value of its investment in warrants by using the income approach based on post-tax discounted cash flows. The income approach requires
management to make judgments and involves the use of significant estimates and assumptions. These estimates and assumptions include long-term growth rates and operating margins used to calculate projected future cash flows, risk-adjusted
discount rates based on weighted average cost of capital within a range of 8% to 9%, among others.
The Group´s estimates for market growth were based on historical data, various internal estimates and observable external sources when available, and are based on
assumptions that are consistent with the strategic plans and estimates used to manage the underlying business. Since the described methodology is an internal model with significant unobservable inputs, the UHI warrants are classified as Level
3. Additionally, the Group determined the fair value of its investment in warrants by using the Black-Scholes model (“BSPM”). The BSPM involves the use of significant estimates and assumptions. The assumptions used as of December 29, 2020 and
December 31, 2019, included the UHI stock´s spot price of U.S.$190 and U.S.$390 per share on a fully-diluted, as–converted basis, respectively, and the UHI stock’s expected volatility of 64% and 40%, respectively (see Notes 5 and 14).
The Company’s management applied significant judgment to determine the classification of the warrants issued by UHI that were exercisable for UHI’s common stock. These
warrants did not comply with the definition of a derivative financial instrument because the initial investment that the Group paid to acquire the original instrument (Convertible Debentures) was significant and a derivative requires no
initial investment or one that is smaller than would be required for a contract with similar response to changes in market factors; therefore, the Group classified the warrants issued by UHI as equity instruments with changes in fair value
recognized in other comprehensive income or loss in consolidated equity. Significant judgment was applied by the Company’s management in assessing that the characteristics of the warrants issued by UHI are closer to an equity instrument in
accordance with IAS 32 Financial Instruments: Presentation (see Note 4).
|
11.
|
Capital Stock and Long-Term Retention Plan
|
At December 31, 2020, shares of capital stock and CPOs consisted of (in millions):
|
|
|
Authorized and
Issued(1)
|
|
|
Repurchased by the Company (2)
|
|
|
Held by a Company´s
Trust (3)
|
|
|
Outstanding
|
|
|
Series “A” Shares
|
|
122,179.4
|
|
|
(1,105.4
|
)
|
|
(8,054.8
|
)
|
|
113,019.2
|
|
|
Series “B” Shares
|
|
58,019.7
|
|
|
(972.8
|
)
|
|
(6,118.4
|
)
|
|
50,928.5
|
|
|
Series “D” Shares
|
|
88,554.1
|
|
|
(1,547.5
|
)
|
|
(5,984.2
|
)
|
|
81,022.4
|
|
|
Series “L” Shares
|
|
88,554.1
|
|
|
(1,547.5
|
)
|
|
(5,984.2
|
)
|
|
81,022.4
|
|
|
|
|
357,307.3
|
|
|
(5,173.2
|
)
|
|
(26,141.6
|
)
|
|
325,992.5
|
|
Shares in the form of CPOs
|
|
296,023.0
|
|
|
(5,173.2
|
)
|
|
(20,004.2
|
)
|
|
270,845.6
|
|
Shares not in the form of CPOs
|
|
61,284.3
|
|
|
—
|
|
|
(6,137.4
|
)
|
|
55,146.9
|
|
|
|
|
357,307.3
|
|
|
(5,173.2
|
)
|
|
(26,141.6
|
)
|
|
325,992.5
|
|
|
CPOs
|
|
2,530.1
|
|
|
(44.2
|
)
|
|
(171.0
|
)
|
|
2,314.9
|
|
|
(1)
|
As of December 31, 2020, the authorized and issued capital stock amounted to Ps.4,907,765 (nominal Ps.2,459,154)
|
|
(2)
|
During the year ended December 31, 2020, the Company repurchased 616.0 million shares, in the form of 5.3 million CPOs, in the amount of Ps.195,597, in connection with a share
repurchase program that was approved by the Company’s stockholders.
|
|
(3)
|
In connection with the Company’s Long-Term Retention Plan (“LTRP”) described below.
|
A reconciliation of the number of shares and CPOs outstanding for the years ended December 31, 2020 and 2019, is presented as follows (in millions):
|
|
|
Series “A” Shares
|
|
|
Series “B” Shares
|
|
|
Series “D” Shares
|
|
|
Series “L” Shares
|
|
|
Shares Outstanding
|
|
|
CPOs Outstanding
|
|
|
As of January 1, 2020
|
|
116,223.9
|
|
|
52,852.8
|
|
|
84,083.8
|
|
|
84,083.8
|
|
|
337,244.3
|
|
|
2,402.4
|
|
|
Repurchased (1)
|
|
(131.6
|
)
|
|
(115.8
|
)
|
|
(184.3
|
)
|
|
(184.3
|
)
|
|
(616.0
|
)
|
|
(5.3
|
)
|
|
Cancelled and forfeited (2)
|
|
(3,097.4
|
)
|
|
(1,830.0
|
)
|
|
(2,911.3
|
)
|
|
(2,911.3
|
)
|
|
(10,750.0
|
)
|
|
(83.2
|
)
|
|
Acquired
|
|
(86.0
|
)
|
|
(75.6
|
)
|
|
(120.3
|
)
|
|
(120.3
|
)
|
|
(402.2
|
)
|
|
(3.4
|
)
|
|
Released
|
|
110.3
|
|
|
97.1
|
|
|
154.5
|
|
|
154.5
|
|
|
516.4
|
|
|
4.4
|
|
|
As of December 31, 2020
|
|
113,019.2
|
|
|
50,928.5
|
|
|
81,022.4
|
|
|
81,022.4
|
|
|
325,992.5
|
|
|
2,314.9
|
|
|
|
|
Series “A” Shares
|
|
|
Series “B” Shares
|
|
|
Series “D” Shares
|
|
|
Series “L” Shares
|
|
|
Shares Outstanding
|
|
|
CPOs Outstanding
|
|
|
As of January 1, 2019
|
|
116,207.2
|
|
|
53,116.1
|
|
|
84,502.9
|
|
|
84,502.9
|
|
|
338,329.1
|
|
|
2,414.4
|
|
|
Repurchased (1)
|
|
(973.7
|
)
|
|
(856.9
|
)
|
|
(1,363.3
|
)
|
|
(1,363.3
|
)
|
|
(4,557.2
|
)
|
|
(38.9
|
)
|
|
Acquired (3)
|
|
(65.6
|
)
|
|
(57.7
|
)
|
|
(91.9
|
)
|
|
(91.9
|
)
|
|
(307.1
|
)
|
|
(2.7
|
)
|
|
Released
|
|
1,056.0
|
|
|
651.3
|
|
|
1,036.1
|
|
|
1,036.1
|
|
|
3,779.5
|
|
|
29.6
|
|
|
As of December 31, 2019
|
|
116,223.9
|
|
|
52,852.8
|
|
|
84,083.8
|
|
|
84,083.8
|
|
|
337,244.3
|
|
|
2,402.4
|
|
(1)Repurchased by the Company in connection with a share repurchase program.
(2)Cancelled and forfeited in connection with the Company’s LTRP.
(3)Acquired by a Company’s trust in connection with the Company’s LTRP.
Long-Term Retention Plan
During the first half of 2020, the trust for the LTRP increased the number of shares and CPOs held for the purposes of this Plan in the amount of: (i) 5,526.3 million shares
of the Company in the form of 47.2 million CPOs, and 666.9 million Series “A” Shares, not in the form of CPO units, in connection with the cancellation of these shares in the fourth quarter of 2019, which were conditionally sold to certain
Company’s officers and employees in 2015 and 2016, as described in the paragraph below; and (ii) 1,009.7 million shares in the form of 8.6 million CPOs, in connection with forfeited rights under this Plan. Additionally, in the second quarter
of 2020, this trust released 516.4 million shares in the form of 4.4 million CPOs.
In the fourth quarter of 2019, the Company agreed to (i) cancel 9,490.5 million shares that were conditionally sold to certain officers and employees in 2015, 2016 and
2017, which conditions had not been complied with in full yet; and (ii) sell conditionally 4,745.3 million shares to the these officers and employees at a lower price and additional vesting periods of two and three years. In connection with
these events, the Company recognized an additional expense that was included as administrative expense for the year ended December 31, 2019.
In the fourth quarter of 2020, the trust for the LTRP increased the number of shares and CPOs held for the purposes of this Plan in the amount of: (i) 3,196.1 million shares
in the form of 27.4 million CPOs, and 351.0 million Series “A” Shares, not in the form of CPO units, in connection with forfeited rights under this Plan; and (ii) acquired 402.2 million shares of the Company in the form of 3.4 million CPOs,
in the amount of Ps.111,979.
In the third quarter of 2020, the Company recognized as a decrease to the balance of shares repurchased a refund in the amount of Ps.100,000, which was made to the Company
in 2019 by the trust for the LTRP. In the fourth quarter of 2020, the Company made a funding to the trust for the LTRP for acquisition of shares in the aggregate amount of Ps.197,000.
In connection with the Company’s LTRP, the Group accrued in equity attributable to stockholders of the Company a share-based compensation expense of Ps.962,806 and
Ps.1,108,094 for the years ended December 31, 2020 and 2019, respectively, which amount was reflected in consolidated operating income as administrative expense.
As of December 31, 2020 and 2019, the Company’s legal reserve amounted to Ps.2,139,007, and was classified into retained earnings in equity attributable to stockholders of
the Company.
In April 2019, the Company’s stockholders approved the payment of a dividend of Ps.0.35 per CPO and Ps.0.002991452991 per share of Series “A”, “B”, “D” and “L” Shares,
not in the form of a CPO unit, which was paid in cash in May 2019, in the aggregate amount of Ps.1,066,187.
In April 2020, to further maximize liquidity and as a precautionary measure, the Company’s Board of Directors did not propose the payment of a 2020 dividend for approval of
the Company’s general stockholders’ meeting held on April 28, 2020.
|
13.
|
Non-controlling Interests
|
In 2020 and 2019, the holding companies of the Sky segment paid a dividend to its equity owners in the aggregate amount of Ps.2,750,000 and Ps.3,800,000, respectively, of
which Ps.1,134,808 and Ps.1,570,659, respectively, were paid to its non-controlling interests.
In 2020, Pantelion, LLC. paid a dividend to its equity owners in the aggregate amount of Ps.394,269, of which Ps.193,192, were paid to its non-controlling interests.
|
14.
|
Transactions with Related Parties
|
The balances of receivables and payables between the Group and related parties as of December 31, 2020 and 2019, were as follows:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Current receivables:
|
|
|
|
|
|
|
|
UHI, including Univision (1)
|
Ps.
|
692,282
|
|
Ps.
|
748,844
|
|
|
|
|
34,137
|
|
|
3,968
|
|
|
Telemercado Alameda, S. de R.L. de C.V.
|
|
11,517
|
|
|
10,917
|
|
|
Editorial Clío, Libros y Videos, S.A. de C.V.
|
|
2,308
|
|
|
2,933
|
|
|
Other
|
|
46,708
|
|
|
47,765
|
|
|
|
Ps.
|
786,952
|
|
Ps.
|
814,427
|
|
|
|
|
|
|
|
|
|
|
Current payable:
|
|
|
|
|
|
|
|
UHI, including Univision (1)
|
Ps.
|
—
|
|
Ps.
|
594,254
|
|
|
AT&T/ DirecTV
|
|
(32,310
|
)
|
|
25,447
|
|
|
Other
|
|
(50,697
|
)
|
|
24,550
|
|
|
|
Ps.
|
(83,007
|
)
|
Ps.
|
644,251
|
|
|
(1)
|
As of December 31, 2020 and 2019, receivables from UHI related primarily to the PLA amounted to Ps.692,282 and Ps.748,844, respectively. Through December 29, 2020, the Group recognized
a provision associated with a consulting arrangement entered into by the Group, UHI and an entity controlled by the former chairman of the Board of Directors of UHI, by which upon consummation of a qualified initial public offering
of the shares of UHI or an alternative exit plan for the main current investors in UHI, the Group would pay the entity a portion of a defined appreciation in excess of certain preferred returns and performance thresholds of UHI. In
connection with the sale of shares by the former control stockholders of UHI, which was concluded on December 29, 2020, and the dissolution of the special-purpose entity for this arrangement, the Company cancelled this provision on
that date, and recognized a non-cash other income in the amount of Ps.691,221 in the statement of income for the year ended December 31, 2020 (see Note 15).
|
In the years ended December 31, 2020 and 2019, royalty revenue from Univision amounted to Ps.8,155,338 and Ps.7,527,364 respectively.
15. Other Income or Expense, Net
Other income (expense) for the years ended December 31, 2020 and 2019, is analyzed as follows:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Net gain on disposition of Radiópolis (see Note 3)
|
Ps.
|
932,449
|
|
Ps.
|
—
|
|
|
Net (loss) gain on disposition of investments
|
|
(142,576
|
)
|
|
627
|
|
|
Donations
|
|
(62,155
|
)
|
|
(27,786
|
)
|
Legal and financial advisory professional services (1)
|
|
(504,448
|
)
|
|
(353,937
|
)
|
|
Gain (loss) on disposition of property and equipment
|
|
57,949
|
|
|
(158,658
|
)
|
|
Deferred compensation
|
|
(225,804
|
)
|
|
(199,195
|
)
|
|
Dismissal severance expense (2)
|
|
(273,281
|
)
|
|
(533,233
|
)
|
|
Impairment adjustments (3)
|
|
(40,803
|
)
|
|
(67,574
|
)
|
|
Cancellation of a related-party provision (see Note 14)
|
|
691,221
|
|
|
—
|
|
|
Income for cash reimbursement received from Imagina (4)
|
|
167,619
|
|
|
—
|
|
|
Interest income for recovered Asset Tax from prior years
|
|
—
|
|
|
139,995
|
|
|
Other, net
|
|
(342,726
|
)
|
|
(116,826
|
)
|
|
|
Ps.
|
257,445
|
|
Ps.
|
(1,316,587
|
)
|
|
(1)
|
Includes primarily legal, financial advisory and professional services in connection with certain litigation and other matters.
|
|
(2)
|
Includes severance expense in connection with dismissals of personnel, as a part of a continued cost reduction plan. In 2019, included Ps.150,000 related to an accrual for
restructuring certain administrative areas in the first quarter of 2020.
|
|
(3)
|
In 2020 and 2019, includes impairment adjustments in connection with trademarks in the Group’s Publishing business.
|
|
(4)
|
In the second quarter of 2020, the Company received a cash reimbursement from Imagina Media Audiovisual, S.L. (“Imagina”), in connection with a legal outcome that was favorable to
Imagina, a former associated company.
|
Finance (expense) income for the years ended December 31, 2020 and 2019, included:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Interest expense (1)
|
Ps.
|
(10,482,168
|
)
|
Ps.
|
(10,402,021
|
)
|
|
Other finance expense, net (2)
|
|
—
|
|
|
(873,177
|
)
|
|
Finance expense
|
|
(10,482,168
|
)
|
|
(11,275,198
|
)
|
|
Interest income (3)
|
|
1,131,742
|
|
|
1,529,112
|
|
|
Other finance income, net (2)
|
|
89,323
|
|
|
—
|
|
|
Foreign Exchange gain, net (4)
|
|
3,159,912
|
|
|
935,291
|
|
|
Finance income
|
|
4,380,977
|
|
|
2,464,403
|
|
|
|
Ps.
|
(6,101,191
|
)
|
Ps.
|
(8,810,795
|
)
|
|
(1)
|
In the years ended December 31, 2020 and 2019, included interest expense related to lease liabilities that were recognized in connection with the initial adoption of IFRS 16 (see Note
2) in the aggregate amount of Ps.426,672 and Ps.426,541, respectively.
|
|
(2)
|
Other finance income or expense, net, included gain or loss fair value from derivative financial instruments.
|
|
(3)
|
This line item included primarily interest income from cash equivalents.
|
|
(4)
|
Foreign exchange gain or loss, net, included (i) foreign exchange gain or loss resulted primarily from the appreciation or depreciation of the Mexican peso against the U.S. dollar on
the Group’s U.S. dollar-denominated monetary liability position, excluding long-term debt designated as a hedging instrument of the Group’s investments in UHI and Open-Ended Fund, during the years ended December 31, 2020 and 2019;
and (ii) foreign exchange gain or loss resulted primarily from the appreciation or depreciation of the Mexican peso against the U.S. dollar on the Group’s U.S. dollar-denominated monetary asset position during the years ended
December 31, 2020 and 2019 (see Note 9). The exchange rate of the Mexican peso against the U.S dollar was of Ps.19.9493 and Ps.18.8838 as of December 31, 2020 and 2019, respectively.
|
Income taxes in the interim periods are accrued using the income tax rate that would be applicable to expected total annual earnings. For the years ended December 31, 2020
and 2019, the effective income tax rate was 88% and 30%, respectively. The effective income tax rate for the year ending December 31, 2020, was affected primarily by the non-deductible tax effect of the impairment adjustment to the carrying
value of the investment in shares of UHI, which was recognized by the Group in the first quarter of 2020 (see Note 5). As of December 31, 2020 and 2019, the effective income tax rate, before the share of income or loss of associates and joint
ventures, was 44% and 33%, respectively.
|
18.
|
Earnings per CPO/Share
|
At December 31, 2020 and 2019 the weighted average of outstanding total shares, CPOs and Series “A”, Series “B”, Series “D” and Series “L” Shares (not in the form of CPO
units), was as follows (in thousands):
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Total Shares
|
Ps.
|
330,685,559
|
|
Ps.
|
338,375,192
|
|
|
CPOs
|
|
2,351,464
|
|
|
2,412,794
|
|
|
Shares not in the form of CPO units:
|
|
|
|
|
|
|
|
Series “A” Shares
|
|
55,563,596
|
|
|
56,077,584
|
|
|
Series “B” Shares
|
|
187
|
|
|
187
|
|
|
Series “D” Shares
|
|
239
|
|
|
239
|
|
|
Series “L” Shares
|
|
239
|
|
|
239
|
|
Basic earnings per CPO and per each Series “A”, Series “B”, Series “D” and Series “L” Share (not in the form of a CPO unit) for the years ended December 31, 2020 and 2019,
are presented as follows:
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Per CPO
|
|
|
Per Share (*
|
)
|
|
Per CPO
|
|
|
Per Share (*
|
)
|
Net income attributable to stockholders of the Company
|
Ps.
|
(0.31)
|
|
Ps.
|
0.0
|
|
Ps.
|
1.60
|
|
Ps.
|
0.01
|
|
(*) Series “A”, “B”, “D” and “L” Shares, not in the form of CPO units.
Diluted earnings per CPO and per Share attributable to stockholders of the Company:
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
Total Shares
|
Ps.
|
352,237,926
|
|
Ps.
|
354,827,433
|
|
|
CPOs
|
|
2,486,783
|
|
|
2,508,916
|
|
|
Shares not in the form of CPO units:
|
|
|
|
|
|
|
|
Series “A” Shares
|
|
58,926,613
|
|
|
58,926,613
|
|
|
Series “B” Shares
|
|
2,357,208
|
|
|
2,357,208
|
|
|
Series “D” Shares
|
|
239
|
|
|
239
|
|
|
Series “L” Shares
|
|
239
|
|
|
239
|
|
Diluted earnings per CPO and per each Series “A”, Series “B”, Series “D” and Series “L” Share (not in the form of a CPO unit) for the years ended December 31, 2020 and
2019, are presented as follows:
|
|
|
|
|
|
2020
|
|
|
|
|
|
2019
|
|
|
|
|
Per CPO
|
|
|
Per Share (*
|
)
|
|
Per CPO
|
|
|
Per Share (*
|
)
|
Net income attributable to stockholders of the Company
|
Ps.
|
(0.29)
|
|
Ps.
|
0.0
|
|
Ps.
|
1.53
|
|
Ps.
|
0.01
|
|
(*) Series “A”, “B”, “D” and “L” Shares not in the form of CPO units.
The table below presents information by segment and a reconciliation to consolidated total for the years ended December 31, 2020 and 2019:
|
|
|
Total Revenues
|
|
|
Intersegment Revenues
|
|
|
Consolidated Revenues
|
|
|
Segment Income
|
|
|
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable
|
Ps.
|
45,367,108
|
|
Ps.
|
710,357
|
|
Ps.
|
44,656,751
|
|
Ps.
|
18,898,301
|
|
|
Sky
|
|
22,134,701
|
|
|
581,270
|
|
|
21,553,431
|
|
|
9,135,346
|
|
|
Content
|
|
32,613,007
|
|
|
4,679,805
|
|
|
27,933,202
|
|
|
12,360,797
|
|
|
Other Businesses
|
|
4,276,074
|
|
|
1,281,096
|
|
|
2,994,978
|
|
|
116,480
|
|
|
Segment total
|
|
104,390,890
|
|
|
7,252,528
|
|
|
97,138,362
|
|
|
40,510,924
|
|
Reconciliation to consolidated amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposed operations (see Note 3)
|
|
223,272
|
|
|
—
|
|
|
223,272
|
|
|
(3,991
|
)
|
Eliminations and corporate expenses
|
|
(7,252,528
|
)
|
|
(7,252,528
|
)
|
|
—
|
|
|
(1,954,406
|
)
|
Depreciation and amortization
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,260,787
|
)
|
Consolidated total before other income
|
|
97,361,634
|
|
|
—
|
|
|
97,361,634
|
|
|
17,291,740
|
(1)
|
|
Other income, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
257,445
|
|
|
|
Ps.
|
97,361,634
|
|
Ps.
|
—
|
|
Ps.
|
97,361,634
|
|
Ps.
|
17,549,185
|
(2)
|
|
|
|
Total
Revenues
|
|
|
Intersegment Revenues
|
|
|
Consolidated Revenues
|
|
|
Segment Income
|
|
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable
|
Ps.
|
41,701,982
|
|
Ps.
|
591,618
|
|
Ps.
|
41,110,364
|
|
Ps.
|
17,797,571
|
|
|
Sky
|
|
21,347,078
|
|
|
437,275
|
|
|
20,909,803
|
|
|
9,121,221
|
|
|
Content
|
|
35,060,534
|
|
|
3,589,407
|
|
|
31,471,127
|
|
|
12,649,135
|
|
|
Other Businesses
|
|
8,200,212
|
|
|
772,793
|
|
|
7,427,419
|
|
|
1,464,249
|
|
|
Segment total
|
|
106,309,806
|
|
|
5,391,093
|
|
|
100,918,713
|
|
|
41,032,176
|
|
Reconciliation to consolidated amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposed operations (see Note 3)
|
|
841,437
|
|
|
2,969
|
|
|
838,468
|
|
|
258,885
|
|
Eliminations and corporate expenses
|
|
(5,394,062
|
)
|
|
(5,394,062
|
)
|
|
—
|
|
|
(1,960,648
|
)
|
Depreciation and amortization
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,008,796
|
)
|
Consolidated total before other expense
|
|
101,757,181
|
|
|
—
|
|
|
101,757,181
|
|
|
18,321,617
|
(1)
|
|
Other expense, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,316,587
|
)
|
|
|
Ps.
|
101,757,181
|
|
Ps.
|
—
|
|
Ps.
|
101,757,181
|
|
Ps.
|
17,005,030
|
(2)
|
(1)This amount represents operating income before other income or expense, net.
(2)This amount represents consolidated operating income.
Disaggregation of Total Revenues
The table below present total revenues for each reportable segment disaggregated by major service/product lines and primary geographical market for the years ended December
31, 2020 and 2019:
|
|
|
Domestic
|
|
|
Export
|
|
|
Abroad
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital TV Service
|
Ps.
|
16,549,458
|
|
Ps.
|
—
|
|
Ps.
|
—
|
|
Ps.
|
16,549,458
|
|
|
|
|
1,633,201
|
|
|
—
|
|
|
—
|
|
|
1,633,201
|
|
|
Broadband Services
|
|
16,540,687
|
|
|
—
|
|
|
—
|
|
|
16,540,687
|
|
|
Telephony
|
|
4,382,964
|
|
|
—
|
|
|
—
|
|
|
4,382,964
|
|
|
Other Services
|
|
702,023
|
|
|
—
|
|
|
—
|
|
|
702,023
|
|
|
Enterprise Operations
|
|
5,245,443
|
|
|
—
|
|
|
313,332
|
|
|
5,558,775
|
|
|
Sky:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DTH Broadcast Satellite TV
|
|
19,398,285
|
|
|
—
|
|
|
1,569,999
|
|
|
20,968,284
|
|
|
Advertising
|
|
1,112,662
|
|
|
—
|
|
|
—
|
|
|
1,112,662
|
|
|
Pay-Per-View
|
|
42,291
|
|
|
—
|
|
|
11,464
|
|
|
53,755
|
|
|
Content:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
16,180,397
|
|
|
169,362
|
|
|
—
|
|
|
16,349,759
|
|
|
Network Subscription Revenue
|
|
4,322,535
|
|
|
1,143,657
|
|
|
—
|
|
|
5,466,192
|
|
|
Licensing and Syndication
|
|
1,572,659
|
|
|
9,224,397
|
|
|
—
|
|
|
10,797,056
|
|
|
Other Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
959,985
|
|
|
—
|
|
|
—
|
|
|
959,985
|
|
|
Soccer, Sports and Show Business Promotion
|
|
1,382,708
|
|
|
146,324
|
|
|
—
|
|
|
1,529,032
|
|
|
Publishing - Magazines
|
|
269,768
|
|
|
—
|
|
|
942
|
|
|
270,710
|
|
|
Publishing - Advertising
|
|
173,645
|
|
|
—
|
|
|
—
|
|
|
173,645
|
|
|
Publishing Distribution
|
|
309,673
|
|
|
—
|
|
|
—
|
|
|
309,673
|
|
|
Feature Film Production and Distribution
|
|
915,165
|
|
|
—
|
|
|
117,864
|
|
|
1,033,029
|
|
|
|
|
91,693,549
|
|
|
10,683,740
|
|
|
2,013,601
|
|
|
104,390,890
|
|
|
Disposed operations (see Note 3)
|
|
223,272
|
|
|
—
|
|
|
—
|
|
|
223,272
|
|
Intersegment eliminations
|
|
(7,252,528
|
)
|
|
—
|
|
|
—
|
|
|
(7,252,528
|
)
|
Consolidated total revenues
|
Ps.
|
84,664,293
|
|
Ps.
|
10,683,740
|
|
Ps.
|
2,013,601
|
|
Ps.
|
97,361,634
|
|
|
|
|
Domestic
|
|
|
Export
|
|
|
Abroad
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital TV Service
|
Ps.
|
16,298,079
|
|
Ps.
|
—
|
|
Ps.
|
—
|
|
Ps.
|
16,298,079
|
|
|
Advertising
|
|
1,507,831
|
|
|
—
|
|
|
—
|
|
|
1,507,831
|
|
|
|
|
14,544,473
|
|
|
—
|
|
|
—
|
|
|
14,544,473
|
|
|
|
|
3,658,121
|
|
|
—
|
|
|
—
|
|
|
3,658,121
|
|
|
|
|
801,937
|
|
|
—
|
|
|
—
|
|
|
801,937
|
|
|
|
|
4,626,396
|
|
|
—
|
|
|
265,145
|
|
|
4,891,541
|
|
|
Sky:
|
|
|
|
|
|
|
|
|
|
|
|
|
DTH Broadcast Satellite TV
|
|
18,918,077
|
|
|
—
|
|
|
1,359,079
|
|
|
20,277,156
|
|
|
Advertising
|
|
953,634
|
|
|
—
|
|
|
—
|
|
|
953,634
|
|
|
Pay-Per-View
|
|
98,539
|
|
|
—
|
|
|
17,749
|
|
|
116,288
|
|
|
Content:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
19,236,014
|
|
|
223,434
|
|
|
—
|
|
|
19,459,448
|
|
|
Network Subscription Revenue
|
|
3,832,716
|
|
|
1,160,459
|
|
|
—
|
|
|
4,993,175
|
|
|
Licensing and Syndication
|
|
1,794,636
|
|
|
8,813,275
|
|
|
—
|
|
|
10,607,911
|
|
|
Other Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming
|
|
2,974,284
|
|
|
—
|
|
|
—
|
|
|
2,974,284
|
|
|
Soccer, Sports and Show Business Promotion
|
|
1,821,605
|
|
|
1,182,972
|
|
|
—
|
|
|
3,004,577
|
|
|
Publishing - Magazines
|
|
393,763
|
|
|
—
|
|
|
18,076
|
|
|
411,839
|
|
|
Publishing - Advertising
|
|
246,309
|
|
|
—
|
|
|
23,461
|
|
|
269,770
|
|
|
Publishing Distribution
|
|
337,685
|
|
|
—
|
|
|
—
|
|
|
337,685
|
|
|
Feature Film Production and Distribution
|
|
890,927
|
|
|
787
|
|
|
310,343
|
|
|
1,202,057
|
|
|
Segment Total
|
|
92,935,026
|
|
|
11,380,927
|
|
|
1,993,853
|
|
|
106,309,806
|
|
|
Disposed operations (see Note 3)
|
|
841,437
|
|
|
—
|
|
|
—
|
|
|
841,437
|
|
Intersegment eliminations
|
|
(5,387,894
|
)
|
|
—
|
|
|
(6,168
|
)
|
|
(5,394,062
|
)
|
Consolidated total revenues
|
Ps.
|
88,388,569
|
|
Ps.
|
11,380,927
|
|
Ps.
|
1,987,685
|
|
Ps.
|
101,757,181
|
|
Seasonality of Operations
The Group’s results of operations are not highly seasonal. The Group typically recognizes a large percentage of its consolidated net sales (principally advertising) in the
fourth quarter in connection with the holiday shopping season. In 2019 and 2018, the Group recognized 27.8% and 26.4%, respectively, of its annual consolidated net sales in the fourth quarter of the year. The Group’s costs, in contrast to its
revenues, are more evenly incurred throughout the year and generally do not correlate to the amount of advertising sales.
On March 11, 2020, the World Health Organization declared the outbreak of Coronavirus (“COVID-19”) as pandemic. Most governments in the world are implementing different
restrictive measures to contain the spread of this pandemic. This situation is significantly affecting the global economy, including Mexico, due to the disruption or slowdown of supply chains and the increase in economic uncertainty, as
evidenced by the increase in volatility of asset prices, exchange rates and decreases in long-term interest rates. During the fourth quarter of 2020, the Company’s management made an assessment of potential adverse impacts of COVID-19 in its
business segments, primarily in connection with impairment indicators and testing of significant long-lived assets, expected credit losses for accounts receivable, recovery of deferred income tax assets and workforce considerations. The
Company’s management will continue to assess the potential adverse impacts of COVID-19, including the monitoring of impairment indicators and testing, forecasts and budgets, fair values and/or estimated future cash flows related to the
recoverability of significant financial and non-financial assets of its business segments. The consequences derived from COVID-19 in the first quarter of 2021, are events after the reporting period not requiring an adjustment to the Group’s
consolidated financial statements for the year ended December 31, 2020, and these consequences will be recognized as required in the Group’s consolidated financial statements for the year ending December 31, 2021. As of the authorization date
of these consolidated financial statements, the Company’s management cannot predict the adverse impact of COVID-19 in the Group’s consolidated financial statements for the year ending December 31, 2021.
The Company´s management cannot guarantee that conditions in the bank lending, capital and other financial markets will not continue to deteriorate as a result of the
pandemic, or that its access to capital and other sources of funding will not become become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. In addition, the deterioration of
global economic conditions as a result of the pandemic may ultimately reduce the demand of the Group´s products across its segments, as its clients and customers reduce or defer their spending.
The Mexican Government is still implementing the plan to reactivate economic activities in accordance with color-based phases determined on a weekly basis in every state of
the country. Most of non-essential economic activities are open with some limitations, mainly on capacity and hours of operation. However, a significant part of the population is still implementing social distancing and shelter-in-place
policies. As a result, during the quarter ended December 31, 2020, this has affected, and is still affecting the ability of the Group´s employees, suppliers and customers to conduct their functions and businesses in their typical manner.
As of this date given that they are considered essential economic activities, the Group has continued operating its media and telecommunications businesses uninterrupted to
continue benefiting the country with connectivity, entertainment and information, and during the four quarter ended December 31, 2020, the Group continued with the production of new content following the requirements and health guidelines
imposed by the Mexican Government. During the quarter ended December 31, 2020, the Group´s Content segment recovered from the previous quarters during the pandemic as a result of the easing in lockdown restrictions in some jurisdictions in
which its customers are located. Notwithstanding the foregoing, we are partially dependent on the demand for advertising from consumer-focused companies, and the COVID-19 pandemic has caused, and could further cause, advertisers to reduce or
postpone their advertisement spending on its platforms.
In the Group´s Other Businesses segment, sporting and other entertainment events for which it has broadcast rights, or which it organizes, promotes and/or is located in
venues it owns, has started to operate again with some limitations and taking the corresponding sanitary measures, and to date some of itscasinos have resumed operations with reduce capacity and hours of operation. When local authorities
approve the re-opening of these venues that are still not operating, rules may be enacted including capacity and operating hours restrictions; these may affect the results of its Other Businesses segment in the following months.
Notwithstanding the foregoing, the authorities may impose restrictions on non-essential activities, including but not limited to temporary shutdowns or additional
guidelines which could be expensive or burdensome to implement, which may affect our operations.
The magnitude of the impact on the Group’s businesses will depend on the duration and extent of the COVID-19 pandemic and the impact of federal, state, local and foreign
governmental actions, including continued or future social distancing, and consumer behavior in response to the COVID-19 pandemic and such governmental actions. Due to the evolving and uncertain nature of this situation, the Company´s
management is not able to estimate the full extent of the impact of the COVID-19 pandemic, but it may continue affecting the Group´s businesses, financial position and results of operations over the near, medium or long-term.
On March 5, 2018, a purported stockholder class action lawsuit was filed in the United States District Court for the Southern District of New York
alleging securities law violations in connection with allegedly misleading statements and/or omissions in the Company’s public disclosures. The lawsuit alleges that the Company and two of its executives failed to disclose alleged involvement
in bribery activities relating to certain executives of Fédération Internationale de Football Association (“FIFA”), and wrongfully failed to disclose weaknesses in the Company’s internal control over its financial reporting as of December 31,
2016. On May 17, 2018, the Court appointed a lead plaintiff for the putative stockholder class. On August 6, 2018, the lead plaintiff filed an amended complaint. The Company thereupon filed a motion to dismiss the amended complaint. On March
25, 2019, the court issued a decision denying the Company’s motion to dismiss, holding that plaintiff’s allegations, if true, were sufficient to support a claim. The parties began to exchange discovery materials, and the discovery process has
continued into 2021. On June 8, 2020, the court issued a decision denying class certification based on the inadequacy of the proposed class representative. On June 29, 2020, the court issued a decision granting class certification to a new
class representative. The Company sought permission for leave to appeal the District Court's order. On October 6, 2020, the United States Court of Appeals for the Second Circuit denied Televisa’s request for leave to appeal the District
Court’s class certification order. The Company continues to believe that the lawsuit, and the material allegations and claims therein, are without merit and intends to continue vigorously defending against the lawsuit.
With regard to plaintiff’s allegations regarding FIFA, outside counsel long previously investigated the circumstances surrounding the Company’s
acquisition of the Latin American media rights for the Canada, Mexico and USA 2026 FIFA World Cup and 2030 FIFA World Cup and uncovered no credible evidence that would form the basis for liability for the Company or for any executive,
employee, agent or subsidiary thereof. In particular, the Company itself made no payment to any FIFA person and in no way knew of, or condoned, any payment by any third party to any FIFA person. The Company also notes that no proceedings have
been initiated against it by any governmental agency.
On April 27, 2017 the tax authorities, initiated a tax audit to the Company, with the purpose of verifying compliance with tax provisions for the
period from January 1st to December 31st, 2011 regarding federal taxes as direct subject of Income Tax (Impuesto Sobre la Renta or ISR), Flat Tax (Impuesto Empresarial
a Tasa Única) and Value Added Tax (Impuesto al Valor Agregado). On April 25, 2018 the authorities informed the observations determined as a result of such audit, that could entail a default on
the payment of the abovementioned taxes. On May 25, 2018, by a document submitted before the authority, the Company asserted arguments and offered evidence to undermine the authority’s observations. On June 27, 2019, the Company was notified
of the outcome of the audit, in which a tax liability was determined for an amount of Ps.682 million for ISR, penalties, surcharges and inflation adjustments. On August 22, 2019 the Company filed an administrative proceeding (recurso de revocación) against such tax liability, before the Legal area of the Tax Authorities, which is in the process of being resolved. As of the date of this report, there are no elements to
determine if the outcome would be adverse or favorable to the Company’s interests.
On June 1st, 2016 the tax authority initiated a tax audit to a Company’s indirect subsidiary that carries out operations in the Gaming business, which
is presented in the Other Businesses segment, with the purpose of verifying compliance with tax provisions for the period from January 1st to December 31st, 2014 regarding federal taxes as direct subject, as well as a withholder. On April 24,
2017 the authorities informed the facts and omissions detected during the development of the verification process, that could entail a default on the payment of the abovementioned taxes. On May 30, 2017, by a document submitted before the
authorities, the Company’s subsidiary asserted arguments and offered evidence to undermine the facts and omissions included in the authority’s last partial record. On June 21, 2019 such entity was notified of the outcome of the audit, in
which a tax liability was determined for an amount of Ps.1,334 million, essentially related to IEPS (Impuesto Especial Sobre Producción y Servicios or Excise Tax); on August 16, 2019 an administrative
proceeding (recurso de revocación) was filed before the Legal area of the Tax Authorities. On January 7, 2021, the resolution to the administrative proceeding was notified, in which the appealed
resolution was confirmed. The deadline for filing a claim (juicio de nulidad) before the Federal Court of Administrative Justice is currently running. As of the date of this report, there are no
elements to determine if the outcome would be adverse or favorable to the Company’s interests.
On August 12, 2019 the tax authority initiated a Foreign Trade Audit to a Company’s indirect subsidiary (Cablebox. S.A. de C.V.), with the purpose of
verifying the correct payment of the contributions and levies on the import of the merchandise, as well as compliance with non-customs regulations and restrictions applicable to 26 foreign trade operations carried out during fiscal year 2016.
On April 30, 2020, the authority released the observations determined as a result of the aforementioned review, which could lead to non-compliance with the payment of the referred contributions. On April 30, 2020 the authorities informed the
facts and omissions detected during the development of the verification process, that could entail a default on several provisions of the Customs Act (Ley Aduanera). On June 2 and 29, 2020, by several documents submitted before the
authorities, the Company’s subsidiary asserted arguments and offered evidence to undermine the facts and omissions included in the authority’s last partial record. On July 16 such entity was notified of the outcome of the audit, in which a
tax liability was determined for an amount of Ps.289,821 for a fine consisting on 70% of the commercial value of the merchandise subject to review, due to the alleged failure to comply with the Norma Oficial
Mexicana, or Official Mexican Standards (NOM-019-SCFI-1998), as well as on the amount of the commercial value of the merchandise due to the material impossibility of become property of the Federal Treasury. On August 27, 2020 an
administrative proceeding (recurso de revocación) was filed before the Legal area of the Tax Authorities, which is in the process of being resolved. As of the date of this report, there are no
elements to determine if the outcome would be adverse or favorable to the Company’s interests.
The matters described in the previous paragraphs did not require the recognition of a provision as of December 31, 2020.
There are several legal actions and claims pending against the Group, which are filed in the ordinary course of business. In the opinion of the
Company’s management, none of these actions and claims is now expected to have a material adverse effect on the Group’s financial statements as a whole; however, the Company’s management is unable to predict the outcome of any of these legal
actions and claims.
Description of significant events and transactions
See Note 3 of the Disclosure of interim financial reporting.
|
Dividends paid, ordinary shares:
|
0
|
|
Dividends paid, other shares:
|
0
|
|
Dividends paid, ordinary shares per share:
|
0
|
|
Dividends paid, other shares per share:
|
0
|