05
2012
annual report
CABLEVISION / FIBERTEL
INDEX
01 02
2012 MACROECONOMIC
ENVIRONMENT
HISTORY AND DEVELOPMENT
P. 09
P. 17
Annual Report 2012
07
03 04
BUSINESS OVERVIEW
FINANCIAL INFORMATION
P. 45
P. 77
Cablevisión S.A.
01
2012
Macroeconomic
Environment
Annual Report 2012
2012 Macroeconomic Environment
11
One of the few positive economic highlights
of 2012 was the dynamism that emerging
economies were able to sustain despite
the overall slowdown of developed
countries economies. The serious social
and economic crisis that continues to
affect several Euro Zone countries has led
to considerable deterioration in the block
of developed countries. This has not been
offset by the modest upturn of the US or
Japan’s return to growth.
Most industrial emerging countries – led by
China and, to a lesser extent, India – proved
resilient to such deterioration and were
able to continue to grow during the year
under review at an above-average rate, thus
funneling growth in other emerging countries
that provide these industrial economies with
agricultural and non-agricultural commodities.
In short, all emerging countries recorded lower
growth rates compared to 2011.
The world has continued to register growth at
two different structural paces, reflecting a new
global accumulation mechanism focused on
emerging economies.
The poor performance of Argentine
economy in 2012 is the exception to the
rule prevailing in emerging countries for two
reasons. First of all because, unlike its peers,
the world did not represent a burden for
Argentina.
In fact, even though the slowdown of Brazilian
economy did have a negative impact on
Argentina’s industrial exports, in 2012 the price
of its agricultural products in general and the
price of soybean in particular, were higher on
average than those of the previous year and
remained high compared to historical levels
(largely offsetting the lower volume of the crop
harvest).
Secondly, because unlike in other
emerging countries and the region as a
whole, local economic policies worsened,
instead of relieving, the effects of the
global financial crisis.
The year 2012 stands out as an actual turning
point in the performance of Argentine
economy. The change in the ground rules
fuelled in the aftermath of last year’s
presidential elections broadly and significantly
damaged economic activity developing a
disturbing scenario of stagflation (stagnation
plus high inflation).
Despite the strong acceleration in the rate
of increase of money supply, the halt in
economic activity was not reverted.
The money supply ended the year with an
annual increase of 40% due to increased
financing from the Central Bank to the
Treasury.
Thus, the balance of Argentine economy at
the end of 2012 is at best modest, as a direct
result of the policies applied in response to
the imbalances created in and carried over
from the previous years.
The most significant negative side effects
of the policies implemented in 2012 were
decrease in the generation of genuine
employment, stagnation of the purchasing
power of workers’ salaries, capital depletion
of the Central Bank, decrease in exports, and
loss of international reserves. The scenario of
ch 01
stagflation is paired with certain additional
disturbing conditions under which the
economy is operating, such as an accelerated
loss of competitiveness, increased
primarization and shortage of local and foreign
reproductive investments -noticeable mainly
in the capital depletion of key strategic sectors.
In terms of key macroeconomic equilibrium,
a slight improvement is perceived in the real
generation of foreign currency on the external
front, which is mainly due to the sudden
closing of the economy, an unusual situation
that has negatively affected several aspects
of the real economy. This performance is the
result of the strong contraction of imports, in
general, and intermediate goods and capital, in
particular. Consequently, the external surplus
for the year was slightly higher than that of the
previous year and remained above USD 10
billion for the eleventh consecutive year.
However, this apparent strategic achievement
is tainted by two specific facts. One of them is
the widening of the trade deficit in the energy
sector, estimated in around USD 3.5 billion this
year. This phenomenon worsens a historical
problem of Argentine economy, because in
order to avoid affecting the country’s foreign
reserve position, the surplus of the agricultural
sector in the coming years must not only cover
the structural deficit of the industrial sector,
but also that of the energy sector as well.
The second specific fact is the evolution of
the Central Bank’s international reserves. The
monetary authority has again registered a drop
in its foreign currency position of more than
USD 3 billion. The achievement of a higher
foreign trade surplus and the substantial
decrease in capital flight and profit / dividend
remittances were not enough to prevent both
the use of federal reserves to service sovereign
debt, and the collapse in foreign currency
inflows to the financial system. As opposed to
most emerging countries in the region, which
were able to accumulate reserves throughout
the year, Argentina’s decrease in foreign
reserves brought this variable to USD 43.1
billion at year-end, their lowest record since
2007.
The continued deterioration on the fiscal
front deepened still further in 2012. Primary
Annual Report 2012
2012 Macroeconomic Environment
13
spending has again outgrown revenues. The
national primary deficit (without counting
profit remittances from BCRA and ANSES)
exceeded Ps. 35 billion, which is more than
double the figure for 2011. The financial deficit
(i.e. after payment of interest on public debt)
grew in 2012 to over Ps. 80 billion. Both figures
are the highest since 2003, in absolute and
relative terms.
This fiscal deterioration occurred in spite
of record-high tax pressure and is mostly
financed with printing of money, which fuels
the already high inflationary expectations.
Perspectives for the Upcoming Year
Under the new scheme in which the Argentine
economy is advancing, its short-term and
medium-term performance mostly depends on
its ability to generate sufficient foreign currency
inflows to cover the external structural deficit of
industrial and energy sectors and honor interest
payments on sovereign debt. With no access
to voluntary financing from capital markets,
the debt service is directly contingent upon an
increase in prices and/or volume of exports and/
or the use of federal reserves.
The baseline scenario for Argentine economy
in the coming year is supported by three
important assumptions. On the external front,
the US-dollar supply is expected to increase,
mostly as a result of the harvest volume and
the resulting agricultural exports (both are
expected to reach historical records in 2013).
This will be paired with shorter maturities
of foreign currency sovereign debt, mainly
attributable to the potential default on the
2012 coupon of the GDP-linked bonds.
Meanwhile, at a regional level, the most relevant
highlight is the expected improvement in
Brazil´s performance -estimated to surpass
that of previous years- and its related positive
impact on Argentine exports to that market,
which are mostly industrial.
At the strictly local level, the mid-term
congressional elections could cause a more
aggressive drive in economic policy, albeit at the
risk of worsening carryover imbalances. In fact,
and by way of example, inflationary pressures
are expected to build up again in line with the
recovery of economic activity, which would
continue to hinder the scope of significant
improvements in social indicators and the
distribution of income of the Argentine people.
In the absence of measures that address
the distortions accumulated in the last few
years, and without an additional supply
of US dollars from the agricultural sector,
the external restriction would inevitably
appear again beyond 2013, compromising
economic performance and endangering the
accomplishments achieved so far, as well as the
ability to move forward with pending issues.
Changes in the Regulatory Framework
The Company’s activities used to be governed
by Broadcasting Law No. 22,285. On October
10, 2009, Audiovisual Communication
Services Law No. 26,522 was enacted and
promulgated, introducing changes to the
regulatory framework that are detailed on
the Individual Financial Statements of the
company. The telecommunication services
provided by the Company and its merged and
related companies are governed by the National
Telecommunications Law No. 19,798 and
by Decree No. 764/00, as amended and
supplemented accordingly.
01
Annual Report 2012
2012 Macroeconomic Environment
15
The Company is assessing the possible
consequences on its business of the highly
controversial Audiovisual Communication
Services Law, its regulations and other issues.
Depending on a number of factors, the
Company could be forced to divest certain
services, which shall depend on the choices
the Company and/or its parent Company
will make. This could entail a reduction in the
services currently provided, the ownership
and rights of which were acquired in due time
in compliance with the provisions of Law No.
22,285. Therefore, this situation has led to a
general current condition of uncertainty on
the business of the Company, which could
materially affect the recoverability of its
significant assets.
However, the recoverability of such assets
could be unaffected in a scenario where
the most important claims brought by the
Company and third parties were addressed
within a framework of greater rationality, be it
by the amendment, repeal or declaration of
unconstitutionality of the law in question and /
or its regulations.
The Company and its legal advisors believe
that this Audiovisual Communication Services
Law and its regulations violate material
constitutional rights, such as the right to
property and freedom of press, among
other issues. For this reason it shall pursue
all relevant legal actions in all court instances
in order to protect its rights and those of its
shareholders, and to protect the fundamental
principles infringed thereby.
In addition, during the year 2009 and until the
date of this Annual Report, several agencies
under the jurisdiction of the Executive Branch
issued resolutions and carried out actions
aimed at undermining the legitimate rights
and interests of Cablevisión S.A. and its
subsidiaries. Faced with this systemic context,
the Company relied on all available legal
resources and the effective legal framework
applicable to each relevant matter in order
to protect its rights and the integrity of its
assets. The main situations that illustrate
this are detailed on the Individual Financial
Statements of the company.
Cablevisión S.A.
02
HISTORY
AND DEVELOPMENT
THE COMPANY
Cablevisión
is one of the
leading regional
cable television
and broadband
systems.
Annual Report 2012
History and Development
19
ORGANIZATIONAL
STRUCTURE
The following table sets forth the Company’s consolidated subsidiaries, as of December 31, 2012, including the country of incorporation
and the ownership interest:
SUBSIDIARY
COUNTRY OF INCORPORATION
OWNERSHIP INTEREST
Pem S.A.
Argentina
100,00
CV Berazategui S.A.
Argentina
70,00
Cable Imagen S.R.L. (1)
Argentina
100,00
Televisión Dirigida S.A.E.C.A.
Paraguay
100,00
Cablevisión Comunicaciones S.A.E.C.A.
Paraguay
100,00
Consorcio Multipunto Multicanal (CMM) S.A.
Paraguay
100,00
Wolves Televisión S.A.
Argentina
100,00
Adesol S.A.
Uruguay
100,00
Airevisión Internacional S.A.
Argentina
60,00
Primera Red Interactiva de Medios Argentinos (Prima) S.A.
Argentina
100,00
Fintelco S.A.
Argentina
100,00
(1) Currently being transformed into a “sociedad anónima” (corporation).
ch 02
Cablevision is one of the leading regional
cable television and broadband systems.
This segment derives its revenues mainly from
monthly fees for basic cable and high speed
internet access services.
To a lesser extent, revenues are also
generated by connection charges and
advertising, premium programming and
pay-per-view service charges, DVR, HD
package and the distribution of our magazine.
In 2012, Cablevision featured revenues for
US$ 1,670 millions, with an EBITDA of US$ 498
millions. By the end of the fiscal year the pay
television system served 3.4 million subscribers
in Argentina and Uruguay and 1.5 million internet
access subscribers in Argentina.
In terms of the geographical availability, by the
end of 2012 Cablevision’s network reached
approximately 7.3 million homes passed in
Argentina. Services are provided in the City of
Buenos Aires and its surrounding areas, and
in the provinces of Buenos Aires, Santa Fe,
Río Negro, Entre Ríos, Córdoba, Corrientes,
Formosa, Misiones, Salta, Chaco and
Neuquén. As part of its regional strategy the
company also operates in Uruguay.
The backbone of Cablevision’s network
structure is entirely built with fiber optic. The
architecture of bidirectional service networks as
well as new networks is based on a design called
fiber to services area (FSA), which combines
fiber optic trunks with coaxial cable extensions
and allows bidirectional transmission.
Cablevision offers a basic service that
features the main programming channels,
depending on the capacity of local networks.
It purchases basic and premium programming
from more than 25 suppliers and also
broadcasts Buenos Aires over the air TV
channels. Most programming contracts
are peso denominated, its price generally
linked to the number of subscribers and the
increase of basic fee.
By paying an additional charge and renting a
digital decoder, Cablevision subscribers may
receive premium packages and pay-per-view
programming, including additional movie and
adult channels, among other products. As of
December 31, 2012 there were 1.08 million
digital decoders with premium services in all
operating regions of Cablevision (including
Uruguay), which represents a penetration of
33% of the digital network basic cable service
subscribers. Also, Cablevision offers an
optional social service of digital pay television
with a reduced rate called Cablevision Flex
to approximately 500,000 residents of low
income areas.
As per Internet access services,
Cablevision offers connectivity products
especially designed for residential or
corporate users, which comprise high speed
cable modem Internet access products
through its 750 Megahertz (MHz) network
under the Fibertel Brand.
Annual Report 2012
History and Development
21
ch 02
Company’s Ownership
As of December 31, 2012, stockholder’s equity was Ps. 197,604,267
and was fully subscribed and paid in. The issuance of 276,767 Class
B book-entry common shares is pending. Such shares correspond to
the capital increase from the merger made effective as of October 1,
2008. Registration of such capital increase at the Inspección General
de Justicia is still pending.
On January 29, 2009 the Company acquired 17,585 Class C book-entry
shares of Multicanal, representing 1,471 Class B book-entry shares of
Cablevisión with a nominal value of Ps. 1 per share. The cost of this
acquisition was Ps. 73,646, which were charged to the “Accumulated
results” account. The nominal amount of the acquired shares was
charged to the “Capital stock” account and credited in the account
“Treasury shares”.
In connection with such shares the Company shall proceed as provided
under Section 221 of the Argentine Commercial Companies’ Law.
The following table sets forth the Company’s ownership structure.
The Company’s main shareholders do not have preferred or different
voting rights.
SHAREHOLDERS
NUMBER OF SHARES
STAKE (%)
Southel Holdings S.A. (1)
56.609.313
28,7
VLG Argentina, LLC (2)
101.252.687
51,2
Fintech Media LLC (3)
28.304.317
14,3
Vistone S.A. (4)
3.277.197
1,7
CV B Holding S.A. (5)
7.883.139
4,0
Others (3) (6)
277.614
0,1
TOTAL
197.604.267
100,00
(1) Class A shares, controlled by Grupo Clarín S.A. (2) Class A shares, controlled by Grupo Clarín S.A. and Fintech Media LLC.
(3) Class B shares (4) Class B shares, controlled by Grupo Clarín S.A. (5) Class B shares, controlled by Grupo Clarín S.A.
(6) Includes treasury shares.
Annual Report 2012
History and Development
23
CABLEVISION S.A.
OWNERSHIP
40%
CABLE TV
& INTERNET ACCES
LEADING CABLE TV NETWORK IN TERMS OF SUSCRIBERS
PRINTING
& PUBLISHING
#1 NEWSPAPPER IN LATAM IN TERMS OF CIRCULATION
AND #1 IN AD REVS IN ARGENTINA
BROADCASTING
& PROGRAMMING
LEADING BROADCAST TV STATION IN ARGENTINA IN
TERMS OF ADVERTISING AND AUDIENCE
DIGITAL CONTENT & OTHERS
#1 NETWORK OF LOCAL INTERNET PORTALS IN TERMS
OF TRAFFIC GENERATION IN ARGENTINA
LEADING HIGH SPEED INTERNET ACCESS
PROVIDER IN ARGENTINA
GRUPO CLARIN
60%
GRUPO CLARIN
U.S. BASED EMERGING MARKET INVESTMENT FUND,
WITH AUM OF U$S 4 BILLON
FINTECH ADVISORY INC.
FINTECH
ADVISORY INC.
ch 02
BOARD OF DIRECTORS
AND SENIOR MANAGEMENt
Cablevisión is managed by a Board of Directors currently formed by ten
directors, out of which nine are elected by the holders of outstanding
Class A shares, and one is elected by the holders of outstanding Class B
shares (the “Company’s Shares”).
All directors must have their residential address in the Republic of
Argentina. All of them must be Argentine citizens and comply with the
requirements of Sections 45 and 46 of the Broadcasting Law.
Directors hold office for the term of one fiscal year, and may be
re-elected indefinitely. At the first Board meeting, Directors must
appoint a chairman and a vice chairman to act in the event of absence
or impairment of the chairman. The chairman, or the vice chairman
in the event of absence or impairment of the chairman, shall be the
Company’s legal representative.
The Board of Directors has set up an Executive Committee formed
by one member of the Board of Directors appointed by Fintech, one
member of the Board of Directors appointed by Grupo Clarín and the
Company’s highest executive authority. The Board of Directors shall
have decision power with the majority of its present members in a
meeting. Certain matters require the unanimous vote of the Executive
Committee or, if deemed appropriate by the Board of Directors, the
affirmative vote of one or more directors elected by Fintech and one or
more directors elected by Grupo Clarín.
Annual Report 2012
History and Development
25
Cablevisión’s by-laws provide that the Board of Directors shall have full
power to manage and dispose of the Company’s property, including
those powers set forth in Section 1,881 of the Civil Code and Section
9 of Decree No. 5,965/63, which must be granted by means of a
special power of attorney. The Board of Directors may, on behalf of the
Company, carry out any action in furtherance of its corporate purpose,
including banking transactions.
Under Argentine law, directors have the obligation to perform their
duties with the loyalty and the diligence of a prudent business person,
and the directors of a company listed in Argentina are subject to a
loyalty and diligence duty under Decree No. 677/01, promulgated in
connection with Public Offering Law No. 17,811. Directors are jointly and
severally liable to the Company, the shareholders and third parties
for the improper performance of their duties, for violating the law,
Cablevisión’s bylaws or regulations, if any, and for any damage caused
by fraud, abuse of authority or gross negligence. Under Argentine
law, specific duties may be assigned to a director pursuant to the
Company’s bylaws or to a resolution made at a shareholders’ or board
meeting. In such cases, a director’s liability will be determined with
reference to the performance of such duties, subject to compliance
with certain registration requirements.
The Company’s senior executive officers are currently the following:
ch 02
Carlos Alberto
Moltini
has been a member of the Board of Directors
since September 2006 and was appointed
Chief Executive Officer (CEO) in October
2006. Prior to that he served for five years
as General Manager of Multicanal after
having worked for seven years as CFO of Arte
Radiotelevisivo Argentino S.A. (“ARTEAR”), a
leading broadcasting channel of the City of
Buenos Aires owned by Grupo Clarín S.A., and
other companies in the broadcasting sector.
Mr. Moltini graduated from the University of
Buenos Aires as a Certified Public Accountant.
Annual Report 2012
History and Development
29
Roberto Daniel
Nobile
is our Chief Operating Officer. He joined
Cablevisión in October 2006. Before this, he
was Financial and Administrative Manager of
AGEA since December 1999. Prior to that date,
he was Administration Manager at AGEA. He
holds a CPA and a Master’s Degree in Financial
Management. He worked for six years at Pistrelli,
Diaz y Asociados, an Arthur Andersen affiliate,
where he was appointed Manager of the
Audit and Commercial Advisory Division. He
then worked as Financial and Administration
Manager of Honeywell of Argentina S.A.I.C. and
later as Controller for the Southern Region
thereof (Brazil, Argentina and Chile).
ch 02
Juan Martín
Vico
joined the Company as Chief Financial
Officer in August 2007. Prior to this, he
worked for more than seven years for Grupo
Clarín, where his last position was Manager of
the New Business Development Department.
Before this, he worked as senior corporate
analyst at Duff & Phelps Credit Rating Agency
in the City of Buenos Aires (now merged into
Fitch Ratings). He graduated in Economics
and as a Public Accountant at the University
of Buenos Aires and later obtained a Master’s
Degree in Finance from Universidad del CEMA.
Mr. Vico is a Chartered Financial Analyst.
ch 02
HISTORY AND
DEVELOPMENT
The beginning
Cablevisión was founded in 1981 in La Lucila – in the city’s surrounding
areas, in the Province of Buenos Aires, offering the signal of Channel
5 and open-air channels to 500 subscribers. By 1983, the company
started to expand towards Vicente Lopez, San Isidro and the northern
Area of the City of Buenos Aires.
The following year, Cablevisión added three channels of its own: CV3
(a programming guide), CV5 (information) and CV6 (classified ads),
and reached 6,000 customers. In 1986, by means of an Executive
decree, the broadcasting and reception from satellite channels
was legalized, allowing cable operators to broaden the scope and
variety of their programming offer. By the early 90’s, Cablevision had
70,000 customers who were offered 18 channels with 23 different
programming options. The company had thus become a leader in the
cable television segment.
As its network coverage grew, Cablevisión reached neighborhoods that
were already receiving service from another cable company, Video Cable
Communications (VCC), which resulted in a more competitive offer.
Years later, VCC was merged into Cablevisión and Multicanal, which also
competed for subscribers in the Buenos Aires Metropolitan Area (AMBA).
The company kept growing and focused on its operating and territorial
expansion though two strategic initiatives. On the one hand, by adding
new contents, such as newly released movies, first class sports events,
children’s programs and live concerts. On the other, an expansion plan
was devised within the AMBA, absorbing Televisora Belgrano, as well
as incorporating the districts of Quilmes, Berazategui and Avellaneda,
thus taking the company’s first steps in southern Buenos Aires, which
entailed significant growth.
In 1994, Cablevision consolidated its Multi System Operators (MSO)
networks in Argentina, introducing new technologies to the country’s
cable television market. The following year there was a change in
the Company’s shareholding structure: Tele Communications
International, Inc. (TCI) acquired 51% of the company, which gave
momentum to the business.
A period of expansion
Between 1996 and 1997 Cablevisión acquired:
- Oeste Cable Color, an operator in the municipalities of Morón,
Moreno, San Martín, Tres de Febrero, Almirante Brown and La Matanza;
- Cable Río de los Deltas, an operator in Tigre and San Fernando ;
- Mandeville Argentina S.A., an operator in the Province of Buenos Aires
and Northern Argentina;
- 50% of UIH in Bahía Blanca and Santa Fe;
- 50% of VCC S.A., incorporating new areas in the City of Buenos Aires, Greater
Buenos Aires area and the provinces of Córdoba, Santa Fe and Entre Ríos.
Hence, Cablevisión consolidated its position in the country from a
cable operator in the City of Buenos Aires and Greater Buenos Aires
Area with 700,000 subscribers to a national level service provider,
available in 8 provinces.
Annual Report 2012
The Internet Business
In September 1997 Cablevisión created Fibertel, a subsidiary
through which it began to provide limited Internet access to its cable
subscribers, becoming the first company in the country to massively
offer cable modem technology to connect to Internet at high speed
without the dial-up system.
Since the onset of this service, we offered dial up services, one-way
cable modem - with telephone return - and bidirectional high-speed
cable modem services. A year later, the dial-up service had 1,947
subscribers, the one-way cable modem service had 495 subscribers
and the bidirectional high-speed service had 2,162 subscribers.
In 2002 Cablevisión absorbed Fibertel, the transaction was approved
by the Inspección General de Justicia, the competent authority for this
kind of operations.
The Consolidation
In September 2006, the two leading cable companies in Argentina,
Cablevisión and Multicanal, were merged to form the first video and
broadband alternative private national network, so as to compete in a
global market with mighty players, such as Telcos.
Through this operation, Grupo Clarín and Fintech Advisory took
ownership of a majority stake in Cablevisión and Multicanal, the two
leading cable systems in Argentina, and formed the first regional cable
television system and the first alternative private national network of
value added services, such as Internet and broadband. The transaction
involved the exchange of assets and interests, as well as direct
investment by both partners.
ch 02
Annual Report 2012
History and Development
35
3.4 million
pay television
customers and
1.5 million
broadband
Internet subs.
ch 02
The agreement was executed in two stages.
- In the first stage, Grupo Clarín and Fintech increased their existing
holdings in Cablevisión, with the acquisition of the shares held
by American fund Hicks, Muse, Tate & Furst (40%) and minority
shareholders. Therefore, Grupo Clarín and Fintech came to hold
approximately 60% and 40%, respectively, of Cablevisión’s capital stock.
- The second stage consisted in the incorporation of Multicanal to the
system, with the resulting incorporation of Fintech as shareholder of
such company, and a reduction of Grupo Clarín’s stake.
The transaction also included other undertakings relating to both
companies such as Teledigital, a cable operator from within the
country, and Prima (Primera Red Interactiva de Medios Argentinos), an
Internet access company owning Flash (broadband), Ciudad Internet
(dial-up) and Fullzero (free service).
This was a landmark event for Cablevisión, as it was the first time that
domestic capitals, such as Grupo Clarín’s, had impact on and long
term commitment with the company’s capital stock. On the other
hand, Fintech Advisory’s bet was to continue to support the company
and was based on the company’s development prospects in the
medium term, as well as the opportunity to invest in Argentina.
In this regard, the pay television industry had begun to deploy
its technological developments that called for the digitization of
Annual Report 2012
History and Development
37
processes. Also, broadband had started to take off, bringing in its
wake the need for a large infrastructure allowing to compete with the
telephone market.
It is in this context that the consolidation process of both companies was
furthered so as to acquire the scale needed to face investments and to
cope with the technological challenges of a constantly evolving market.
As for the rest of the world, similar mergers were carried out in other
Latin American countries, such as VTR and Metropolis in Chile, AT&T
and Comcast in the United States, Movistar and Global Star in Peru
and Net and Vivax in Brazil. There was therefore a consolidation of
the cable industry in the hands of few operators, some of them with
shares exceeding those of Cablevisión in their own markets, such as
Italy (65.8%), Peru (64.7%), United Kingdom (71.7%), Panama (56.5%),
Mexico (51.4%) and Colombia (48.3%), amongst others.
The integration of both companies enabled Cablevisión to reach an
efficient distribution point of pay TV and Internet with cutting edge
technology. After the merger, customers gained access to more and
better services: digital television, HD contents, the expansion of broadband
within the country, navigation speed and infrastructure for fixed telephony.
The merger was invigorating for the telecommunications industry in
Argentina. In the field of video, digital development and HD, it allowed us to
reach such a critical mass of customers as to encourage programmers to
invest in bringing more and better HD programs not only for Cablevisión,
but for the whole market. In the Internet industry, the merger of both
companies forced telephone companies to invest more than ever so as
to offer a broader bandwidth, and in places where they had not provided
services before, in order to keep up with Cablevisión’s trend.
The merger of the companies is in effect and was authorized in December
2007 by the Comisión Nacional de Defensa de la Competencia (Argentina
Antitrust Commission, or “CNDC”), the competent authority therefor.
The merger was unanimously approved by its three members. Prior to its
approval, the CNDC consulted the matter with the COMFER, according
to the statutory procedure, which stated that the consolidation of both
companies did not affect the regulatory framework in force or competition
in that sector.
Cablevisión currently provides pay television and Internet services in
12 provinces (Neuquén, Río Negro, Buenos Aires, La Pampa, Santa Fe,
Córdoba, Entre Ríos, Corrientes, Misiones, Chaco, Formosa, Salta) and
in the City of Buenos Aires. In addition, it also operates in Uruguay. By
the end of 2012, the company had 3.4 million pay television customers
and 1.5 million broadband Internet subscribers.
Providing
pay television and
Internet services
in 12 Argentine
provinces, the City
of Buenos Aires
and Uruguay
CABLEVISION’S MILESTONES
2007
In 2007, Cablevisión started its venture into the digital era. In the
following year, this allowed the company to launch its wireless Internet
access service, Fibertel Wi Fi. During that year, it also increased its
content offer by launching Cablevisión Digital HD. Furthermore, 5 HD
signals were incorporated to the programming grid: Fox HD, HBO HD,
National Geographic HD, Moviecity HD and ESPN HD.
2009
In 2009, the company launched Cablevisión Max HD, with DVR
functions (digital video recorder) to record, forward, pause and rewind
live programming and watch high definition contents. High speed
Internet access services Fibertel 10 MB and Fibertel 15 MB were also
launched. Additionally, the Virtual Branch service was inaugurated,
which is an online Cablevision and Fibertel platform for the purchase,
management and change of products and services. During 2009, the
company launched the Cablevisión Pay-Per-View product, allowing
users the one-time hiring of films, documentaries and adult content.
Moreover, the company launched Fibertel Security, a security suite with
antivirus protection and incorporated the Fox Sports HD signal to its grid.
2010
In 2010, FiberCorp, the brand of Cablevisión’s Corporate Business,
was created in order to provide comprehensive telecommunications
solutions to large, medium and small sized companies. Today
FiberCorp provides dedicated Internet access solutions, broadband
Internet access, data transmission multipoint dedicated networks and
virtual private networks (VPN), among other services. In addition, the
company launched Fibertel Nitro, a service that maximizes download
and upload speed. In the same year, the company launched three
digital portals allowing to simultaneously watch up to 6 channels, and
ESPN Play, a web portal to access the signal’s programming from any
device connected to the Internet. During 2010, the company also
achieved the incorporation of new high definition signals: Space HD,
Cinecanal HD, HD Theater Discovery Network, MGM HD, Nat Geo Wild
HD, MTV HD, History Channel HD and the live transmission of events in HD.
2011
In 2011, Cablevisión launched Fibertel Evolution 30 MB, a wideband
Internet service access of maximum speed. In addition, Cablevisión
launched Moviecity Play, a web portal to access Moviecity programming
from any device connected to the Internet, and incorporated new HD
signals: TN, Canal 13, TNT, ESPN 3, Sony, Universal, TLC, A & E and TV
Pública. By the end of 2011, Fibercorp had reached 25,000 customers.
2012
In 2012, Cablevisión launched Video on Demand (VOD) for digital HD
and Max HD clients, who can now access more than 3,000 titles. In
addition, the Company added 3 new HD signals, growing from 25 HD
signals to 30. In the Internet segment, “Fibertel Zone” was launched
during 2012. “Fibertel Zone” is the first WI-FI internet circuit in Argentina
allowing to navigate in a safe and fast way in bars, restaurants, cinemas,
gyms, parks and many other locations.
Annual Report 2012
History and Development
41
2013
In 2013, Cablevisión plans to maintain its investment
approach to strengthen its fiber optic network,
incorporate new HD signals and expand the VOD
service outside of Buenos Aires. Cablevisión also plans
to include the OTT (Over the Top) services in the
residential and professional segment, a Wideband which
offers up to 30 Megas connectivity. In the corporate
segment, the Company plans to launch new products
under the FiberCorp brand, expanding the fiber optic
solutions for its business clients.
Annual Report 2012
43
Millions of hours
entertaining
people in 32
years of history.
Cablevisión S.A.
03
BUSINESS OVERVIEW
ch 03
Business overview
By December 31st, 2012, the cable system served approximately
3,288,800 subscribers in Argentina, 115,900 subscribers in Uruguay and
1,504,500 Internet subscribers in Argentina. The following table shows
subscriber and related data by December 31st, 2012 for Argentina, and
is based on information published by third parties and our internally
generated market information:
Homes passed (1) (2)
7.349.600
Cable Subscribers (1)
3.288.800
Cable Penetration (3)
44,7%
Internet Subscribers (1)
1.504.500
Internet Penetration (4)
45,7%
(1) Numbers rounded to the nearest hundred (2) Homes passed by cable networks (3) Subscribers as a percentage
of total homes passed (4) Subscribers as a percentage of total cable subscribers.
Cablevisión’s main activity is the operation of cable networks in the
Buenos Aires Metropolitan Area (AMBA) which includes the City of
Buenos Aires and surrounding areas and which, together with the city
of La Plata form the “AMBA Region”. Cablevisión also operates in other
cities in the provinces of Buenos Aires, Santa Fe, Entre Ríos, Córdoba,
Corrientes, Formosa, Misiones, Salta, Chaco, Neuquén and Río Negro.
By December 31st, 2012, Cablevisión was organized in four regional
clusters: the AMBA Region, the Province of Buenos Aires Region, the
Central Region and the Litoral Region.
By December 31st, 2012, Cablevisión’s cable network reached
approximately 7.3 million homes in Argentina. Most of the homes
in Cablevisión’s network were passed by its 750 Mhz bi-directional
broadband. Cablevisión’s 750 MHz networks enable it to offer services
and products that generate additional revenues, such as access to
Internet, digital services and premium channels.
Annual Report 2012
Business Overview
47
Business strategy
The consolidated long-term business strategy focuses on continued
investment in upgrading networks in order to increase revenues and
operating cash flow on a general level. Thus, the Company seeks
to enhance the value equation for each customer by introducing
innovative and competitive services and products, while keeping the
focus on customer satisfaction. The core elements of the long-term
strategy include:
Expansion of the broadband Internet subscriber base.
It is the Company’s intention to focus its marketing efforts on the sale
of broadband connectivity to its existing cable television subscribers
and to new customers. To improve market penetration, Cablevisión
maintains its strategy of offering the highest speed available in the
market at the best price. By December 31st, 2012, Cablevisión had
1,483,000 clients to cable modem Internet access in Argentina through
its own networks; 6,600 clients to the dial-up system; 8,400 clients to
the ADSL system and 6,500 to other broadband technologies. Even
though Cablevisión has these three technologies, its main focus and
differentiating feature is cable modem. It has a leading position in that
market under the brand Fibertel.
Greatest speed in the market. Fibertel is undoubtedly the
broadband service that offers the highest speed in the market and it
does so at competitive prices. It continues to offer Fibertel Evolution,
a product with 30-mega downstream speed and 3-mega upstream
speed. It is the first internet provider in the country to sell a product of
the new Wideband generation - a new technology that allows clients
to surf the web at substantially higher speeds. Wideband is based
on Docsis 3.0 technology. Its main functionalities are the following:
browsing with multiple “windows” opened at the same time, real-time
streaming, viewing instant high-definition videos uninterruptedly and
ability to connect several devices browsing simultaneously to a single
modem but not at the expense of speed. This service is currently
available in the AMBA region, Córdoba, Rosario, La Plata, Santa Fe,
Paraná and other cities in the country’s provinces.
Expansion of the cable subscriber base. By December 31st,
2012, the Company provided cable television services to 3,404,700
subscribers in Argentina and Uruguay. It is also the intention of the
Company to continue to grow in terms of cable television subscribers,
increasing penetration in the areas where it currently operates, as
well as in new areas. At present Cablevisión also offers digital services
to its subscribers, which include a basic digital package, as well as
optional access to Premium and High Definition (HD) services. These
services are offered in the City of Buenos Aires and its surrounding
areas (the AMBA Region), in the Greater Buenos Aires Area, Córdoba,
Rosario, Mar del Plata, Santa Fe and other cities. The network’s
digitalization is aimed at keeping abreast with the world’s digitalization
49
Connecting people with the highest technology
30 HD signals
Major sport events
broadcast
1000 movie titles
on-demand
Annual Report 2012
Business Overview
51
process, offering more and better services
and improving revenues. Cablevisión also
offers Cablevisión Flex, an optional social
service of digital paid television with a
reduced subscription, to approximately
500,000 neighbors of low income areas.
This service, which seeks to enhance “digital
inclusion”, comprises the installation of
digital set-top units and allows clients to buy
a service with fewer signals for half the price
and gradually buy additional signal packages
until completing a full basic product. The
Company believes that the installation of
digital boxes will increase revenues and
customer loyalty. The Company will continue
to strive to bring its best products to the
entire country in order to further reduce the
“digital gap” between regions.
Additional products and services.
The Company intends to deploy suitable
equipment to offer other services, such
as telephone and digital content and high
definition services to an increasingly greater
number of its subscribers. In order to inform
current and prospective customers about
the products offered by Cablevision and
their features, Cablevisión has created a new
way of naming products, Mundo Cablevisión,
which clearly presents all products and
their corresponding services, which include
Cablevisión Clásico, Cablevisión Digital,
Cablevisión Digital HD and Cablevisión Max HD.
High Definition Products (HD) and 3D:
In line with technological progress and the
selling trends of LCD and LED television sets,
Cablevisión continues with the process of
incorporating not only signals and events in
high definition (HD) but also the transmission
of 3D content for the first time.
By the end of year 2012, the HD grid included
30 signals of different fields, including
sports, movies and series, music, lifestyle
and documentaries. This year many signals
have been incorporated, amongst which we
can mention: Warner HD, AXN HD, Concert
Channel HD and Disney Channel HD. For
the year 2013 we will continue to focus on
increasing such offer and on the transmission
of higher impact sports events.
During year 2012, in event signals 600 and 601,
we broadcasted the London Olympic Games,
the “Clausura” Soccer Tournament, the
“Nacional B” Soccer Tournament, the Brazil
World Cup qualifiers, the “Libertadores” Cup,
the Eurocup, the Spanish Soccer League, the
final match of the Copa del Rey, TC 2000 and
the Davis Cup. In October 2012, Cablevisión
(together with Moviecity) presented a 3D
movie cycle for all its Cablevisión HD and
Cablevisión Max HD customers. Seven titles
were presented week by week, including: Puss
in Boots, Transformers 3, The Dark Side of
the Moon, and Kung Fu Panda 3D. During 2013
we will continue to work on agreements that
will allow us to broadcast more 3D content,
focusing on sports and family programs.
Video-on-Demand Service: In October
2012, we launched the Video-On-Demand
(VoD) service, whereby Cablevisión Digital HD
and Cablevisión MAX HD customers, initially
in the AMBA Region, will be able to select and
purchase digital video content on demand
(using their remote controls). These contents
are delivered on an exclusive basis through
ch 03
the distribution network. Customers have
the option to “rent” movies listed as offered
content (including the latest movies only a
few months after their theater premieres).
They will now be able to subscribe to a library
of contents (more than 1000 titles – Pack
1000) available to watch whenever they want
and as many times as they want, featuring the
greatest variety of genres. They can now also
consume contents from “Linear TV” (we can
currently highlight the contents of Channel
13) whenever they want at no cost, among
other offers. The project that has led to this
service began in 2011 and it has brought
together the effort of all levels of the company.
Some of the initiatives that have made this
project posible are the selection, acquisition
and implementation of the VoD platform,
the capacity adjustment of distribution
networks, the configuration of the return
system under the DoCSIS system in decoders
(DSG technology), the normalization of
some residential devices, the definition and
configuration of the customer relationship
management system (CrM) of the new
products and the acquisition of contents for
the platform. In addition, we are working on
the development of a platform that will also
allow subscribers to receive these contents
through the Internet. This new product is
expected to be launched in the second
semester of 2013.
Improving technology. The Company
has continuously invested in the renewal
and reconstruction of their networks to
increase the number of homes reached by
our bidirectional transmission services and
digital video. It has also worked hard to create
the largest telecommunications network
Annual Report 2012
Business Overview
53
other than those of the telecoms. Not only
does this state-of-the-art network allow the
incorporation of new and better services, but
it can also scale as the digital video, HD and
broadband businesses evolve.
Reconstruction of new bidirectional
networks and extension of the
interurban backbone. Investment in the
reconstruction of networks has allowed us to add
109,000 homes (around 3,800 reconstructed
blocks) with the potential to acquire bidirectional
services (e.g. Internet). In addition, by
reconstructing networks with a higher bandwidth, we will be in a position to distribute digital
video services. We have also completed works
for approximately 140 km. of the fiber optic
interurban network, allowing us to bring into our
own network the cities of Saladillo and Carlos Paz,
within the existing network architecture.
Capacity increase in the access network
(cablemodem) – Network nodes
division. During the year 2012, Cablevisión
continued to deploy equipment to increase
the capacity of its broadband services,
in order to provide higher speed to more
customers. Fifty three new CMTS and around
500 plaques (276 DS and 224 US) were
installed, all with DOCSIS 3.0 technology.
This technology allows much higher Internet
access speeds (e.g. our 30-Mega product).
Simultaneously, the capacity of distribution
networks was increased by dividing and/or
segmenting nodes, which has allowed us to
bring customers the aforementioned new
CMTS capabilities.
ch 03
Development of and migration to the new CRM.
In November 2012, Cablevisión successfully completed “Open Project”,
an initiative that had been launched in March 2009, making a drastic
organizational change through the implementation of a new customer
management system. The main purpose was to implement a world-class
telecommunications system that allowed Cablevisión to improve its
capacity to launch new products and services, such as, VoIP, tripleplay, VOD (Video on demand), more cable signals and broadband
improvements.
Mobility. During 2012, Cablevisión launched Fibertel Zone, the first
Argentine WI-FI circuit. This service allows people to surf the web for
free at the highest speed at bars, restaurants, movie theaters, gyms
and parks, among many other locations. The requirements to surf the
web at a Fibertel Zone point are a Wi-Fi enabled mobile device and
selecting the applicable network. The service is available for Fibertel
customers and non-customers. Upon establishing the connection,
customers obtain the following benefits: higher speed, priority in
navigation and connection without time restrictions.
The company considers that the development of this new product
positions Fibertel as a pioneer in the telecommunications market.
Fibertel Zone is a unique product in the local market, providing a free
service not only to customers but also to potential customers. The goal
for 2013 is to continue to extend the number of Fibertel Zone “points”.
Emphasizing customer service and the brand. The Company
believes that customer service is a key element to foster subscriber
loyalty and differentiate its services from those of its competitors.
The Company constantly strives to offer the best combination
of products and services to its subscribers and to increase its
business efforts by means of the promotion of its brands, minimizing
churn and maintaining its market share. In addition, we always
encourage employees to seek customer satisfaction. By applying
ten guiding principles in our customer relations, internally known
as the Decalogue, we continue to work towards focusing all of the
Company’s attention on customer satisfaction. This has come
hand in hand with technical training programs and development
programs for mid-level management, heads and managers, internal
communication campaigns, prizes for the best working teams in
customer service and problem solving, among other initiatives. During
2012, because of the merge of Cablevisión and Fibertel’s websites, a
new site was developed: “Mundo Clientes”, a space created to make
things easier and more enjoyable for customers. Among the functions
of this new site there are: on-line access to invoices and payments,
easy administration of services, program searching and on-line
channel guide, discounts for a large variety of proposals such as
theater performances, open air events, restaurants and much more.
Furthermore, customers get the chance to participate in raffles for
concert tickets and other prizes.
Play Platforms. In line with the strategy to continue to offer the largest
number of contents in the widest range of devices, during 2012 we
added within “Mundo Clientes” the possibility to access on line to the
contents of: FOX Play with a proposal of movies and series, ESPN Play
with the highlights of live world sports, Moviecity Play with the best movies
and Premium entertainment and Hot Go with top quality adult contents.
ch 03
Regional coverage
Networks and Operating Regions
The AMBA Region includes the cable
systems deployed in the City of Buenos
Aires and its surrounding metropolitan
area and smaller towns in the provinces
of Neuquén and Río Negro. The AMBA
Region is divided into three sub-regions:
the Northwestern region, including the
Northwestern Greater Buenos Aires Area
and the towns of Zárate, Campana, Luján
and Mercedes; the Federal Capital Region;
the Southern region, including the Southern
Greater Buenos Aires Area, La Plata and
the towns of General Las Heras, Lobos,
Chascomús and Dolores in the province
of Buenos Aires and 27 towns and villages
in the provinces of Neuquén and Río
Negro. AMBA is the region with the highest
purchasing power in Argentina and also
with the highest population density. There
are approximately 12 million inhabitants
in the region, representing approximately
33% of the total Argentine population.
Cablevisión has constructed a fiber optic
ring around the City of Buenos Aires that
provides redundancy and improves network
reliability. It has consolidated the City of
Buenos Aires with its surrounding areas
using fiber optic loops.
The Province of Buenos Aires Region of
Cablevisión consists of three sub-regions:
Lincoln, Bahía Blanca and Mar del Plata,
including approximately 100 municipalities.
AMBA
Buenos Aires
Homes Passed
4.207.700
933.900
Cable Subscibers
1.804.300
457.300
Cable Penetration
42,9%
49,0%
Internet Subscribers
983.300
150.700
Internet Penetration
54,5%
33,0%
Annual Report 2012
Business Overview
57
Cablevisión’s Central Region includes the
cable systems located mainly in the provinces
of Córdoba, La Pampa and Salta, including,
among others, the cities of Río Cuarto and
Villa María, Santa Rosa and San Francisco
and Salta.
Cablevisión’s Litoral Region comprises the
cable systems located in the northeastern
area of Argentina, including, among others, the
cities of Rosario and Santa Fe in the province
of Santa Fe; Paraná, in the province of Entre
Ríos; Posadas in the province of Misiones;
Resistencia and two other cities in the province
of Chaco; San Pedro and Baradero and their
surrounding areas in the province of Buenos
Aires; the city of Corrientes, other smaller
towns in the province of Corrientes and
Formosa city, in the province of Formosa.
operating regions of Cablevisión in Argentina
by December 31st, 2012 and is based on
information published by third parties and our
internally generated market information:
The following table shows Cablevisión’s
subscribers and related data for the four
Central Region
Litoral
Total
957.700
1.250.300
7.349.600
469.100
558.100
3.288.800
49,0%
44,6%
44,7%
194.400
176.100
1.504.400
41,4%
31,5%
45,7%
Annual Report 2012
Business Overview
59
INTERNATIONAL OPERATIONS
Uruguay
Through its subsidiary Telemás S.A., the
Company provides programming and
management services to ultra high frequency
(“UHF”) systems and to another seven cable
operators in Uruguay for a programming and
management fee. By December 31st, 2012, it
served approximately 115,900 subscribers.
In the cities of Montevideo and Canelones,
Telemás S.A. offers more than 60 channels
with a digital service and competes with other
systems offering similar products.
Paraguay
On July 15th, 2012, subject to certain conditions
precedent, each of the Paraguayan subsidiaries
of Cablevisión (Cable Visión Comunicaciones
S.A., Televisión Dirigida S.A., Consorcio
Multipunto Multicanal S.A. and Producciones
Unicanal S.A.) embraced an agreement with
the Paraguayan company Telefónica Celular
del Paraguay S.A. (“Telecel”), a subsidiary of
Millicom International Cellular S.A., whereby
they agreed to assign the majority of their
assets and operations to Telecel. The conditions
precedent were complied with on October
1st, 2012, whereupon the agreed assignment
was made for a total purchase price of US$
142.4 million, of which US$ 6.7 million were
held in escrow. As a result of this transaction,
the Company obtained a consolidated profit
net of taxes of approximately Ps. 444 million,
of which Ps. 141 million correspond to non
controlling interests. In addition, upon effecting
the transaction, the Company started to
provide different services to the purchaser in
connection with the businesses sold.
The Company offered, upon effecting the sale,
pay television and Internet services in Asunción
and Gran Asunción. It had 122,900 pay television
customers and 13,700 Fibertel customers.
Cablevisión S.A. held a 70% interest in such
subsidiaries. The remaining 30% was held by
minority shareholders. On October 1st, 2012,
the minority shareholders transferred their
equity interest to the controlling group for a
total purchase price of US$ 31.5 million.
On October 1st, 2012, the Company sold its
equity interest in Teledeportes Paraguay S.A. for
approximately US$ 6.8 million, out of which US$
0.2 million were held in escrow. As a result of this
transaction, the Company obtained an Earning
After Taxes of approximately Ps. 1 million.
Annual Report 2012
Business Overview
61
PROGRAMMING
AND OTHER CABLE
TELEVISION SERVICES
ch 03
The Company uses significant resources to obtain a wide range of
programming options in order to attract potential subscribers and retain
existing ones. Revenues are mainly obtained from monthly charges for
basic cable service and high speed Internet access, and, to a lesser extent
from connection charges, advertising, premium programming, pay-perview services, digital packages, DVR, HD packages and distribution of the
magazine.
Cablevisión purchases basic and premium programming from more than
25 content providers, including ESPN SUR S.A (ESPN), Imagen Satelital S.A.
(Turner/Claxson), HBO Latin America Group (HBO), Fox Latin America
Channel S.R.L., LAPTV, Telered Imagen Sociedad Anónima (“TRISA”),
Pramer and Discovery Latin America, as well as from all the broadcast
television channels of Buenos Aires. Grupo Clarín S.A. (“Grupo Clarín”) holds
a controlling interest in Arte Radiotelevisivo Argentino S.A. (“ARTEAR”), and
a 50% share in TRISA, which are important content providers in Argentina.
We have some programming arrangements with affiliates of our parent
company, Grupo Clarín.
Furthermore, Cablevision has complied with current regulations which
provide for a restructuring of the grid by genre and the incorporation of
mandatory signals INCAA TV, Paka Paka and Telesur.
Premium Services
By paying an additional charge, Cablevisión subscribers may receive
premium packages in addition to the basic service. Such packages
or services include other signals in addition to those offered in the
basic package, with exclusive and differentiated content in film, adult
and sports genres, or a combination of the three. Monthly fees for
premium services depend on the selected package, the operating and
geographical region where the subscriber is located, and the Company’s
technological platform -digital or analog- in each region. To receive
this service on digital platforms, premium subscribers receive from
Cablevisión -under a loan for use- a digital decoder that allows them to
receive such service and also acquire pay-per-view programming. As of
December 31st, 2012 there were approximately 1,099,500 digital set-top
units for the Premium service in all of Cablevisión’s operational regions
(including Uruguay). Hence, 32.3% of its basic cable services were
provided through its digital network.
Additionally, Cablevisión offers its customers high definition (“HD”)
programming services through a digital decoder.
Annual Report 2012
Business Overview
63
Basic Digital Service
Cablevisión offers digital service in the AMBA Region, the City of La
Plata and the most important cities in the country (Córdoba, Rosario,
Santa Fe, etc.). This service allows the Company to increase the offer of
signals and has an on-screen guide.
Cablevisión offers a product called “Basic Digital Package”, which
features the following digital channels: ESPN Extra, Discovery
Civilization, Discovery Science, Discovery Turbo, Bloomberg, Baby
TV, WOBI TV, Biography Channel, MTV Hits, MTV Jams, VH1 Soul,
Argentinísima, TV5, CNN International, Fox Sports 3, TLC, NBA TV,
The Golf Channel, Sy Fi, Fox Life, Eurochannel, Much Music, Fox News,
Antena 3, Arirang, Al Jazeera, Solo Tango, Concert Channel, Mix Play TV,
Tooncast, Casa Club TV, Poker Sports,and more than 50 extra audio
channels.
HD Signal Services
In order to keep providing the best programming to its customers,
Cablevisión offers Cablevisión Digital HD and Cablevisión MAX HD in
high definition in those locations that have the technology required for
High Definition broadcasting. These products include 30 channels in
a wide variety of genres such as sports, movies, series, documentaries
and music, thereby offering television services with maximum resolution
and image quality. The pack includes signals such as ESPN, Fox Sports,
Cinecanal, MTV, HBO, Movie City, Discovery, Fox, among others.
Additionally, and as part of the product Cablevisión Max HD, subscribers
may access more than 115 standard quality channels, optional premium
content and the greatest variety of high definition channels.
During 2012, through the HD platform, Cablevision broadcasted events
using 3D technology to its customers of the Premium HD service that
have the suitable equipment for such technology. Additionally, in the
last quarter of 2012, Cablevision launched the Video-on-Demand
platform, which allows customers to acquire programs or event
packages from a programming library located in frequency 1 of the HD
package signal grid. Customers acquiring the HD package may access
the free services available in such frequency.
ch 03
INTERACTIVE SERVICES
INTERNET ACCESS
AND TELEPHONY
Since September 1997, Cablevisión has
offered high speed cable modem Internet
access through its 750 MHz networks under
the Fibertel brand. Cablevisión’s Internet
connectivity products are especially designed
for the needs of residential or corporate
users, providing specific solutions such
as virtual private network (VPN) services,
traditional protocol Internet connections (IP)
and corporate products including additional
services.
Cablevisión provides high speed Internet
services in the AMBA Region, the cities of La
Plata, Córdoba, Rosario, Campana, Río Cuarto,
Posadas, Salta, Olavarría, Pergamino, Mar del
Plata, Bahía Blanca, Santa Fe and other cities
in the country.
Annual Report 2012
Business Overview
67
MARKETING
AND CUSTOMER SERVICE
Advertising and Marketing
Cablevisión uses several market positioning
mechanisms, including promotions,
customer service center locations, company
newsletters, institutional information and
programming through its websites.
It advertises in the printed media and over its
own broadcasting signals. Cablevisión also
publishes a free monthly guide distributed
to most of its cable television service
subscribers and a monthly magazine called
“Miradas”, which is sold to a portion of its
subscriber base.
Marketing activities include:
• advertising on television, radio, newspapers,
billboards and local channels offered to
subscribers;
• personal visits to current and potential
subscribers by the Company’s staff;
• telemarketing addressed to potential
and former subscribers, as well as current
subscribers who have not hired premium
services;
• sending mailings and promotional material
to current and potential subscribers; and
• special events for subscribers, some
of which are promoted together with
programming suppliers.
Competitors have installed networks in some
of the areas covered by Cablevisión and
their subsidiaries offer promotions, including
rebates of installation charges and discounts
in basic or premium fees. As a response, we
launch special promotions based on market
circumstances.
Customer Service
The Company has a unified customer
service center (“Contact Center”) which
operates as a telephone complaint center and
offers subscribers the possibility to contact
Cablevisión’s representatives 24/7. Even though
most interactions take place over the phone,
subscribers may also contact the customer
service by e-mail, fax, chat and the web site.
During 2012, Cablevisión led improvement
actions to consolidate the customer service
model in order to address client queries
with a satisfaction level above the market
average. Every month we reached the 85%
Top Two Box target and in several months we
exceeded 90%.Also in terms of technological
innovation, Cablevisión introduced a new
tool which allowed it to render customized
customer service to subscribers who made
contact through social networks, particularly
Facebook and Twitter.
During the whole year the structured
improvement process was consolidated,
allowing us to be certified under COPCR
rules during the first quarter of 2013. This
ch 03
international model was created in the
United States and has been reached by very
prestigious companies worldwide. The rules
were designed to improve client satisfaction
by optimizing the level of service and quality.
At present, customer service is a distinctive
feature that allows the Company to provide
its customers with the products and services
that are best suited to their expectations.
Churn Rate
The churn rate is determined by calculating
the number of disconnected customers
registered over a given period, as a percentage
of the initial number of cable television
customers for the same period.
The churn rate for year 2012 was 15.0%,
compared to 15.1% recorded in the previous
year. During year 2012, Cablevisión gained
46,700 subscribers (including net new
subscriptions from Paraguay during
January-September), compared to 132,400
subscribers during the previous year.
To reduce the churn rate, Cablevisión and
its subsidiaries pursue a vigorous customer
attraction and retention policy.
Competition
Cablevisión competes in the cable television
segment against other cable television
operators and providers of other television
services, including direct, satellite and
broadcast services. Given the fact that
licenses are granted on a non-exclusive basis,
Cablevisión’s systems have frequently been
subject to overlapping with one or multiple
competing cable networks; in addition to
satellite service which is available throughout
the company’s entire coverage area. Free
broadcasting services are currently available to
Annual Report 2012
Business Overview
69
Argentine population; in the AMBA region, these
services primarily include four private television
signals (one of them is controlled by Grupo
Clarín) and its local subsidiaries and a national
state-owned television signal. Additionally,
under a project aimed at implementing the
Argentine Terrestrial Digital TV System, the
National Government has handed out digital
set-top units among certain social sectors that
allow free access to certain signals.
The Argentine cable television industry has
more than 700 operators. The most significant
competitors are Telecentro S.A located in the
AMBA region and DIRECTV (DTH technology),
and Internet video streaming systems (Netflix,
Arnet play, Speedy) that compete against
Cablevisión nationwide.
Among the cable systems, competition is
based primarily on:
• price;
• programming services offered;
• customer satisfaction; and
• quality of the system.
The Company can effectively compete
against other cable television providers on the
basis of a competitive price, a higher number
of quality programs and customer service
rendered through its call-center. It also seeks
to attract and retain customers through client
service policies.
Two major competitors (Arnet and Speedy)
are identified in the high-speed Internet access
segment; each of them related to one of the
country’s two fixed-telephony providers. These
companies also render 3G services through their
brands Personal and Movistar, respectively. Claro
- which had already been selling 3G technology,
started to offer high-speed Internet services
through fiber optics. Therefore, the Internet
access segment faces fierce competition from
several providers in an ever-growing market.
Annual Report 2012
Business Overview
71
CABLEVISION’S
REPRESENTATIVES
24
7
every day of the year
ch 03
Human Resources
During year 2012, Cablevisión worked on
the following aspects relating to its Human
Resources.
Occupational safety and health:
Cablevision maintains a work safety
management and occupational health
policy, according to OHSAS 18001, recently
recertified at the company level.
Training: In terms of training, a new learning
model was implemented, where not only
the collaborator is involved, but also the
boss. Training activity venues were moved to
universities (Di Tella, Palermo and AustralIAE Universities). These new programs are
designed for different ranks of the company,
including, mid-level management, analysts,
heads and managers and include more than
300 participants.
Work Environment. During 2012, we
conducted our biannual Internal Opinion Survey
through the consulting firm MERCER, with a
participation rate of 96% and a global satisfaction
rate of 82%. Based on this survey we created
and launched various action plans that will be
implemented during 2013. This process is driven
by Grupo Clarín throughout its business units.
Also during 2012, we held integration activities,
such as management meetings, middle
management reunions and sports tournaments,
as well as other actions which involved granting
employee benefits, such as discount cards.
During year 2012 we designed and launched a
Human Resources self management tool that
allows each boss and collaborator to handle
certain actions and queries independently,
such as requests for vacation time or leaves
of absence, salary receipt printouts, training
administration, etc.
Corporate Social Responsibility and
Community Relations
Cablevisión understands social responsibility
as a management model that promotes
respect amongst people, communities
and towards the environment, seeking to
contribute towards the construction of a
fairer, more inclusive and sustainable society.
During year 2012, Cablevisión worked to
broaden the scope of social responsibility
actions to reach different management areas
of the company. It has thus included social
responsibility, sustainable development and
inclusion approach contents in different
areas of development and institutional
communication with its collaborators. The
commitment to the community through
the Private Social Investment Programs
continued to focus on two main strategies:
responsible communication and digital
inclusion. The following programs, among
others, were implemented: Segundos
para Todos, Audiovisuales en la Escuela,
Cablevisión Abre sus Puertas a la Comunidad,
Capacitaciones a la Comunidad, Puente
Digital, Compás, Voluntariado Corporativo
and Gestión Ambiental.
Annual Report 2012
Business Overview
75
Cablevisión understands
social responsibility as a management
model that promotes respect amongst
people, communities and towards the
environment, seeking to collaborate
in the construction of a fairer, more
inclusive and sustainable society.
Cablevisión S.A.
04
FINANCIAL INFORMATION
BACKBONE
During 2012 we were able to
transport more than
90% of our internal
traffic through our
own dark fiber rings
Annual Report 2012
Financial Information
79
CAPEX
CV invested USD 1,4 Bn in Capex from 2007 through 2012 mainly to generate growth and to increase margins
BACKBONE
NETWORK CAPACITY
Source: Company Information
*Digital Technology for Lower
Income Neighborhoods
63,9
63,9% 2W
4,8
31,3 % 750MHz
4,8%
31,3
CAPEX
DVB*
Source: Company Information
*Without Paraguay Sale effect
CV Consolidated
USD MM and % of Net Revenues
340
237
153
2008
2009
294
224
164
2007
2010
2011
2012
Annual Report 2012
Financial Information
81
LITORAL
CATV 558,1 INTERNET 176,1
URUGUAY
CATV 115,8
CENTER
CATV 469,1 INTERNET 194,1
BSAS
CATV 457,2 INTERNET 150,7
GEOGRAPHIC
FOOTPRINT &
SUBS
AMBA
CATV 1.804,2 INTERNET 983,2
NETWORK
7.5MM homes-passed (63,9% 2-way)
49.400 KM
SUBS
3.404.700 CATV*
1.504.400 INTERNET*
98.9% CMV
0,6% ADSL
0.5% DIAL-UP
17.500 TELEPHONY
PENETRATION
44.7% CATV o/HHPP*
31.6% INTERNET o/HHPP 2W*
PRODUCTS
ANALOG & DIGITAL TV, PAY PER VIEW,
HD CHANNELS, DIGITAL VIDEO RECORDER
BROADBAND (UP TO 15 MB)
FIXED TELEPHONY
CONSISTENT SUBS GROWTH
CATV SUBS
Source: Company Information
(1) As of October 7, 2010 CV sold a minor participation in 3
subsidiaries with the effect of loosing control of those companies
and deconsolidating aprox 100M Subs.. (2) As of July’12 Cablevision
deconsolidated its Paraguay Operation (119,700 subs)
Thousands subscribers
CAGR +2%
3,022
2007
3,191
3,193
2008
2009
BROADBAND SUBS
3,490
3,358
2010
2011
2012
Source: Company Information
Thousands subscribers
6
Bandwidth (Mb) offered
CAGR +2%
1.343
923
3,404
976
1.483
1.119
726
6
1
2007
3
2008
6
6
3
2009
2010
2011
2012
Annual Report 2012
Financial Information
CABLE TV &
INTERNET ACCESS
REVENUES
USD MM
Source: Company Information
83
EBITDA
USD MM
EBITDA MARGIN
Source: Company Information
CAGR +
CAGR +
13%
15%
34%
35%
36%
37%
32%
839
1.081
1.131
2007
2008
2009
1.248
1.534
1.670
2010
2011
2012
SUMMARY
FINANCIALS
286
2007
378
407
468
498
529
2008
2009
2010
2011
2012
12,0 x
1,0x
1,2x
11,1 x
9,5 x
7,0 x
0,8x
0,8x
FINANCIAL RATIOS
EBITDA/Int. Expense
Net Debt/EBITDA
2009
32%
2010
2011
2012
ch 04
Cablevisión S.A.
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN PESOS)
REVENUE
7,601,613,628
6,096,620,546
Cost of sales (1)
(3,983,085,638)
(3,286,024,046)
Gross income
3,618,527,990
2,810,596,500
Selling expenses (1)
(948,876,294)
(711,705,592)
Administrative expenses (1)
(982,419,628)
(734,755,222)
Financial income
133,734,198
78,939,507
Financial costs
(854,323,707)
(514,757,340)
Other income and expenses, net
9,720,382
7,010,627
Equity in earnings from associated companies
10,426,069
9,004,599
Net income before income tax
986,789,010
944,333,079
Income tax
(474,319,527)
(338,489,826)
Net income for the year from continuing operations
512,469,483
605,843,253
498,717,214
47,426,493
Discontinued operations
Net income for the year from discontinued operations net of income tax
Impuesto a las ganancias
Annual Report 2012
Financial Information
85
Net income for the year
1,011,186,697
653,269,746
Variation in translation differences of foreign operations from
continuing operations
181,370,451
79,258,710
Variation in translation differences of foreign operations from
discontinued operations
(1,899,698)
1,848,770
Net income for the year
1,190,657,450
734,377,226
Equity holders of the Company
835,617,440
624,641,262
Non-controlling interests
175,569,257
28,628,484
Equity holders of the Company
976,404,288
688,079,222
Non-controlling interests
214,253,162
46,298,004
Other comprehensive income
Earnings from continuing and discontinued operations attributable to:
Total comprehensive income attributable to:
(1) Includes amortization of intangible assets and depreciation of property, plant and equipment of Ps.
719,683,718 and Ps. 598,994,403 at December 31, 2012 and 2011, respectively.
ch 04
Cablevisión S.A.
CONSOLIDATED FINANCIAL
STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN PESOS)
12.31.2012
12.31.2011
Property, plant and equipment
3,716,354,983
3,255,631,207
Intangible assets
180,478,688
206,817,320
Goodwill
3,046,578,117
2,996,516,762
Investments in associated companies
50,111,810
54,186,812
Investments
247,221,094
-
Deferred tax asset
19,005,673
20,475,022
Other receivables
83,571,494
148,782,095
Trade receivables
122,742,973
122,089,759
Total non-current assets
7,466,064,832
6,804,498,977
ASSETS
NON-CURRENT ASSETS
Annual Report 2012
Financial Information
87
CURRENT ASSETS
12.31.2012
12.31.2011
Inventories
7,287,871
21,531,761
Other assets
168,454
1,546,446
Other receivables
237,068,819
202,431,534
Trade receivables
518,005,474
287,161,748
Investments
455,297,728
70,154,167
Cash and cash equivalents
468,085,935
472,256,019
Total current assets
1,685,914,281
1,055,081,675
Total assets
9,151,979,113
7,859,580,652
ch 04
SHAREHOLDERS’ EQUITY (as per related statement)
12.31.2012
12.31.2011
Attributable to the Company’s equity holders
4,287,442,369
3,488,663,340
Attributable to non-controlling interests
131,958,509
113,375,725
Total shareholders’equity
4,419,400,878
3,602,039,065
Bank and financial debt
2,513,694,725
2,499,526,016
Deferred tax liability
152,830,705
40,686,542
Allowances and other charges
151,364,948
120,375,002
Taxes payable
5,735,001
7,526,903
Other payables
80,570,750
80,095,829
Accounts payable and others
385,239
1,059,408
Total non-current liabilities
2,904,581,368
2,749,269,700
Bank and financial debt
352,751,880
307,856,742
Taxes payable
322,161,981
215,781,974
Other payables
74,119,799
47,020,512
Accounts payable and others
1,078,963,207
937,612,659
Total current liabilities
1,827,996,867
1,508,271,887
Total liabilities
4,732,578,235
4,257,541,587
Total liabilities and shareholders’ equity
9,151,979,113
7,859,580,652
LIABILITIES
NON-CURRENT LIABILITIES
CURRENT LIABILITIES
Cablevisión S.A.
89
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (IN PESOS)
2012
2011
Net income for the year
1,011,186,697
653,269,746
Accrued income tax
474,319,527
338,489,826
Equity in earnings from associated companies
(10,426,069)
(9,004,599)
Depreciation of property, plant and equipment
647,804,855
535,093,677
Amortization of intangible assets
71,878,863
63,900,726
Allowances
77,511,713
73,607,000
Result for the sale of property, plant and equipment
(3,208,789)
(5,671,964)
Accrued interest, net
216,383,619
216,316,363
Financial results - sundry
398,351,886
139,015,828
Results from discontinued operations
(399,258,357)
34,644,754
CASH PROVIDED BY OPERATIONS
Adjustments to reconcile the net income for the period to net cash
flows provided by operations:
Changes in assets and liabilities
2012
2011
Trade receivables
(279,130,720)
(239,267,697)
Other receivables
41,067,051
(181,678,570)
Inventories
11,834,952
(21,525,099)
Accounts payable and others
141,525,095
304,668,833
Taxes payable
(99,782,264)
18,673,403
Other payables and allowances
1,194,884
-206,020
Temporary exchange rate differences from foreign subsidiaries
118,554,300
24,092,836
Collection of interest
57,759,859
14,414,366
Income tax paid
(296,712,164)
(475,175,007)
Net cash provided by operations
2,180,854,938
1,483,658,402
Net increase of intangible assets and goodwill
(46,857,020)
(43,627,708)
Collection of dividends
18,067
-
Net increase of other placements
(251,265,023)
-
Collection for the sale of permanent establishment of foreign companies
738,299,692
-
Collection for the sale of property, plant and equipment
3,064,400
6,877,374
Net increase of property, plant and equipment
(1,292,701,983)
(1,366,879,238)
Net cash used in investment activities
(849,441,867)
(1,403,629,572)
CASH USED IN INVESTMENT ACTIVITIES
Annual Report 2012
Financial Information
91
CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES
2012
2011
Settlement of dividends
(216,697,932)
(404,433,638)
Settlement of financial instruments
(6,177,500)
-
Increase of loans
134,980,974
720,712,844
Acquisition of investment for the purchase of notes of subsidiaries
(195,525,800)
-
Settlement of loans - interests
(262,116,411)
(175,333,192)
(Transfer) / Contribution to reserve account and others
(13,409,252)
5,652,798
Dividends to non-controlling interests
(1,663,910)
(16,980,822)
Acquisition of non-controlling interests
(135,190,836)
-
Settlement of loans - principal and issuing expenses
(261,219,926)
(83,089,133)
Net cash (used in) / provided by financing activities
(957,020,593)
46,528,857
Net increase in cash
374,392,478
126,557,687
Cash at the beginning of year
542,410,186
396,137,648
Financial results provided by cash
2,288,759
19,714,851
Cash at the end of the year (1)
919,091,423
542,410,186
(1) Includes:
Cash and cash equivalents
Investments with a maturity not exceeding three months
468.085.935
451.005.488
472.256.019
70.154.167