Mediaset Espana Comunicacion SA

MAD:TL5

Earnings Call Transcript 2020-Q1

[Operator]

Thank you for standing by, and welcome to the Mediaset España's Q1 2020 Results Presentation. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Mario Sacedo. Please go ahead.

[Mario Sacedo Arriola, Head of Investor Relations]

Hello. Good morning, everybody. Welcome to 2020 first quarter results presentation of Mediaset España Comunicación. Let me introduce you to today's speakers. The presentation will be hosted by Massimo Musolino, General Operation Manager. After his presentation, we will open a Q&A session hosted by Massimo Musolino; Quico Alum, Publiespaña General Manager; and Javier Uría, the Group CFO. They will answer all your questions. Massimo, you have the floor.

[Massimo Musolino]

Good morning, everybody. Welcome to Mediaset España's first quarter results webcast and presentation. We will now take a look at the main aspects of the operational and financial figures that we released to the market this morning. You can ask any questions you may have in the Q&A section at the end of my presentation. On Slide 2, we have Mediaset's main figures for the period on the right-hand side of the slide. You can see how our audience leadership, as a group, was confirmed, once again, with remarkable 28.1% in total individuals, a gap of almost 2% compared to our main competitors. According to Infoadex, the audiovisual market declined by 9.8%, and Mediaset España's market share was 43.1%, which implies an improvement of 40 basis points against the same period of last year. The TV advertising market declined by 11.7% to EUR 439 million, with Mediaset España reaching EUR 192 million, which is equivalent to a market share of 43.7%, which implies a 92 basis points improvement on last year. This figure allowed us to widen the gap with our main competitor to more than 220 basis points, which is a remarkable difference. We have seen 2 different trends in the first few months of the year. First of all, February and the beginning of March was slight positive. Then there was a strong deterioration in the market evolution during the latter part of March as a result of the coronavirus. Looking at the financials, on the left-hand side of the page, you can see that our total net revenues reached EUR 229.8 million, mainly driven by the strong performance of other revenues, which more than offset the decline in the advertising revenues. EBITDA for the period stood at EUR 67.3 million, while net profit for the period was EUR 48.9 million or EUR 0.16 per share, which is roughly the same figure as last year despite the challenging conditions. Finally, cash flow generation remained strong at EUR 73.9 million. On Slide 3, you have the TV consumption figure for the first quarter of the year, which posted a real improvement of 10 million per viewers to 250 million in the first quarter of this year. Please let me remind you that the above figures do not include television viewed on devices such as tablets, phones, computers, any other devices. If we take a closer look at the numbers, you can see how the trend was reinforced once the lockdown period for the coronavirus crisis officially began on March 16 in Spain, proving that TV is still a reference for news and entertainment. More specifically, March reached a total consumption of 286 minutes, which is 53 minutes more than March last year. This figure is the highest number recorded ever, and it shows how the TV sets are still central to families in their homes. Regarding April, the trend is continuing to be even more remarkable, with the provisional figure pending the daily consumption data for the last 3 days of the month of 295 minutes, which is 70 minutes more than April last year. Linear consumption in the quarter amounted to 242 minutes compared to the 233 minutes from the first quarter 2019. The linear TV consumption represents 96.8% of total TV consumption. Nonlinear in the same period amounts to 8 minutes per person day, representing 3.2% of the total TV consumption. The different group's evolution is remarkable. While Mediaset TV consumption increased by 4.5%, our main competitor's consumption declined by 2%. This performance speaks volumes about how the quality of the content matters and how demanding TV viewers are. Moving on to the Slide 4. You can see how our TV advertising revenues evolved during the quarter. We posted a 6.9% GRP's volume decline, while in terms of prices, we saw a reduction of 3.1%. We will elaborate later about our pricing policy in the current market conditions. Let me share our main goal during this challenging period. Based on our past experiences where we'll learn how a declining price is quite inflexible, and it does not generate additional revenues nor can it be reversed in the medium term. This policy explains our different performance in the quarter in comparison with our main competitor. And it is also, in our opinion, a good tool to protect the whole market evolution. As Infoadex reported, Mediaset España TV advertising revenues amounted to EUR 192 million, EUR 10 million more than Atresmedia, equivalent to 5.5%. The variation versus last year is the most remarkable. Mediaset post a decline of 9.9%, almost 2 percentage points better than total TV market, while our main competitor declined by [ 30.7% ]. The chart on Slide 5 is a visual explanation of how the company has been adjusting its operations to the new reality of the audiovisual market. Total net revenue in the period went up by 1.7%, thanks to the increasing traction of net advertising revenue sources with remarkable growth, achieving EUR 35.4 million, which is 15 points -- 15.4% of the total revenues recorded in the period. This excellent performance is a result of Mediterráneo Audiovisual content sales; the agreement signed with Amazon Prime in mid-February, which includes fiction and documentaries; MiTele Plus subscriptions, which today has more than 130,000 subscribers, 50% of which are dormant due to the interruption of the football content services provide for third parties; as well as the sublicensing of the company rights to international sport OTT platform. On Slide #6, you can see our traditional bullet points on Mediaset España digital activity. Following ComScore figures, the Internet video consumption in January and February reached 36 minutes per person per day for total individuals. We are still pending the figure for March, but up to February, Mediaset España recorded a monthly average of 18.9 million unique users, which is 41.9% more than last year. Finally, the number of video stream registered a monthly average of 486 million, which is an increase of 61.1% compared to the same period last year. All of these details are excellent results which support the current digital strategy of our company. Moving now to the financial review on Slide 7. You can see total cost for the period amounted to EUR 162.5 million, which is a 4.4% increase versus last year. We have to highlight the impact of the cost of sales on other operating costs, which is linked with the beforementioned evolution -- positive evolution of other revenues in the period. In absence of this figure, total costs in the quarter would have been lower than last year. Today, and we will elaborate later on, Mediaset España's implementing some cost measure that will allow us to offset some of the advertising market decline in the coming months. In terms of results, the adjusted EBITDA for the period was EUR 67.3 million with a 29.3% margin. This number confirms that Mediaset España is one of the most profitable European broadcaster despite the adverse TV advertising market condition in the year. On Slide #8, you can see a summary of our corporate events in the first 3 months of the year. First, as you know, the MFE project is at a standstill as a result of the interim measure adopted in Madrid court. But we are continuing to work hard on the project internally. As you can see on the time line, Mediaset España held an extraordinary general meeting on February 5 in order to adapt MFE article of association. Also, in January and February, Milan and Amsterdam courts rejected even this case, which intended to block the new company being launched. In the last 2 weeks of March, we announced a 4.25% increase in our ProSieben stake. Also some week later after another acquisition of 4.1% carryout by Mediaset S.p.A., the whole group reached a 24.9% share of the voting rights. This proves a clear commitment to the sector consolidation across Europe. On Slide 9, I would like to share with you some of the steps we have taken in our action plan due to the COVID-19 crisis. The first steps -- the first step concerns staff and facilities with the objective of preserving business activities and safeguarding our employees. Obviously, the most important thing is the health, security of our employees and the people who work within the Mediaset environment. We have adopted strong health care policies, which combined with some changes to our facilities to maintain social distancing, and reducing the number of people on set should decrease the infection risk. Secondly, today, we have 65 of our total employees working from home. This unknown situation has led us to reinforce our IT. We had a massive laptop delivery and extremely fast implementation of system for video conferences and meetings, online teaching for cybersecurity awareness, summarizing plenty of measures, which allow us to work in a friendly and safe environment in a record time. Some measures focus on specific areas of duty such as adjustments and changes to staff timetables, canceling employees' business trip, a reduction in the number of people with access to confidential information in key areas. Finally, we are also currently reviewing our KPIs in order to evaluate the efficiency and the productivity of working from home as a previous step to returning to the facilities after COVID-19. And now let's have a look at Slide 10, where we go into more detail on the cost measure that Mediaset España is implementing to allow the company to offset some of the advertising market decline expecting over the coming months. Let's start with the decision taken regarding content. The most evident action is linked to the programming grid where we move, as usual, quickly in order to adapt our programs to the new advertising market reality. As an example, all production in progress were stopped. And in parallel, we decide to monitor the status of the investing companies -- production company in order to secure their financial and operational capabilities. We also decide to change some of the program schedule for others, which were recorded prior to the crisis. These measures focus on the programming grid in combination with other overheads and operational costs, which will allow us to make savings of around EUR 50 million to EUR 55 million in the remainder of the season, April to July, as a result of the EuroCup being postponed, which was the main cost during the season. Moving into our commercial policy. We're managing specific actions such as branding campaigns, combined with the price agreement, which is going to support the business in the difficult environment, but it will also support prices in the post-COVID phase. Lastly, in order then to secure the company's financial requirements, we have increased the group's credit line up to EUR 300 million, all of them available when we consider appropriate. All of this allows Mediaset España to be prepared to face all future challenges in a strong position, both operationally and financially. Concluding this presentation, I would like make a few final remarks to give you the outlook for 2020 on Slide 11. 2020 is probably the most difficult year in our recent history. And for this reason, we are reevaluating and adapting our operations to the new reality. But we have a clear road map for achieving our financial targets. The main one is to protect cash flow generation. Most of the measures previously explained are based on CapEx and the operating cost delays or cancellation without losing our leadership position in terms of audience and advertising market share. Our other aim is to protect the advertising prices. Television remains a key element of communication. And something we learn from previous crisis about prices is how difficult it is to recover from a decline in them. We are now in a position of helping our clients with a specific agreement during the COVID period, but maintaining prices once the situation has normalized. Finally, we remain positive about the launching of MFE once it is given to go-ahead by the Spanish courts. As we said before, we were working hard on this internally with all the required corporate actions in order to facilitate the creation of our pan-European platform. And now let's move into the Q&A section.

[Mario Sacedo Arriola, Head of Investor Relations]

Thank you, Massimo. This is the end of our presentation. We are now ready to take all your questions. Operator, please, let's proceed to open the Q&A session.

[Operator]

[Operator Instructions] Your first question comes from the line of Andrea Randone from Intermonte.

[Andrea Randone, Research Analyst]

My questions are about the MFE project. And in particular, I would kindly ask you if you have any update about any possible date for the hearing and if you are -- if you know if the Spanish court is working right now or when they will restart working after the lockdown? And the second question is, if you can provide us some clarification on the rationale behind your decision to reopen the possibility for withdrawal shares to change their mind.

[Massimo Musolino]

About the merger process, you know that the Italian-Dutch court gave the green light to the project. Now we are waiting the decision of the Spanish court today. Up to today, the courts are closed due to the emerging situation of the country due to the coronavirus pandemic. We must wait for the open of the court, and then we expect to have a physical meeting with the judge. What I can say that, immediately, after the green light, that we hope it will be, we -- in a few weeks, we are ready to merge the company. As I stated in my presentation, we have continued working hard on the project internally. We have done all our homework to facilitate the process after the green light from the court.

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

Yes. On the second point, this is really the second opportunity that we give to those investors who want to revoke their original decision in terms of exercising the withdrawal rates. The first one, which was at the end of February, it was based on the fact that there was a delay in the whole MFE major projects -- process, which was out of our control. It had to do with all the legal cases and everything else. We gave this opportunity because, obviously, we had anticipated that everything was going to be completed by the end of the year, but that was not the case. So that was the first opportunity that we gave. The second one is based on an absolutely unforeseen situation, which is that some investors came to us and say that due to the circumstance of the COVID-19, they have to monetize the shares that were blocked, and we started to get this feeling that some investors would appreciate to have the second opportunity. And that's why we decided to open up a second window, which started on the 20th of April and is going to run until next Monday, until the fourth of May. And I should say that this is -- we hope that this is the last chance. We have 2 unforeseen circumstances, and I think that nothing else is going to happen. So really, this is the last chance for those who want to revoke their original decision in terms of the exercise of the withdrawal rates.

[Operator]

Your next question comes from the line of Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

Thanks for taking my 3 questions. The first one is related with the first quarter, and I would like to understand, excluding the good performance of the content sales that we have already seen, what has been the underlying trend in the OpEx, particularly the OpEx related with the broadcasting business? My second question is related with the ad market trends, and which is then if you can share with us some color on how the lockdown is affecting the TV ad market. And how the -- what is your views on the month of April, which is almost already over? And what are your expectations on how do you believe that other places may behave with the progressive lockdown stop or lockdown reduction? And the third question is related with dividends. And it is true that you have already defined the dividend policy after or once the Media For Europe deal is completed, but for this year, 2020, you haven't defined any kind of dividend policy for Mediaset España. So in that sense, I would like to know if we continue to see delays on the execution of the Media For Europe deal, we should expect any kind of remuneration for the Mediaset España shareholders meanwhile?

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

Yes, I'll start with your first point. The first point, you cannot separate the increase in OpEx from the increase that you have seen in other income, with significant increase versus last year. We're talking about EUR 23 million more. When we look at the OpEx, you see that, that increase is just EUR 7 million. So the increase in cost of sales for that increase in the -- increase in income is higher than those EUR 7 million. So that gives you the indication that if you take off that impact, you will have seen a small decline or a significant one, but you have seen that broadcasting costs have been down versus first quarter of last year, in line with what we have expected would be the normal evolution of things until the 15th of March. So I think that the end result of all this is that very good results on the order income. That cost of sales related to that is not that significant. It makes the OpEx go up. But if you look in terms of the margin, it tells you that we have a very good margin in these new operations. And it tells you, too, like I said at the beginning, that without that impact, we will have that still small decline in the broadcasting costs versus last year.

[Massimo Musolino]

If I can add something to the Javier's speech, at the end of the day, in the first quarter, the impact of the coronavirus has been small in terms of days for the television, for the broadcast activity because the emergency state was declared at the mid of March. So we can say that -- we can say something in terms of programming grid and overhead only in -- for a couple of week of the quarter. The real impact will be in the second quarter of this year. So April and May, probably, they are up. The end of June, we will have -- we will live in an emergency state. So in this time, we expect to have a cost saving of between EUR 50 million to EUR 55 million -- including July, sorry, because we have had our calculation considering all the EuroCup impact. The EuroCup has been postponed to next year, so we will save this cost. Of course, we have to replace 50 -- more than 50 metrics in our programming grid. Then there will be replacement cost in our programming grid. But in any case, we have suspended the production of all our recording -- recorded programs during this period. In our programming grid, you -- Fernando, you live in Spain, I think you can appreciate that all our live program are on air in the morning, in the afternoon, in our prime time. So there is no saving in that programs. We only sale cost of the recorded programs that we are now broadcasting second runs at 0 cost. At the same time, in prime time, we have moved some fiction to the last quarter of the year. We hope that in that moment, the advertising market will be better than now. So summarizing, you can -- we can appreciate the cost saving only in the second quarter more than in the first one. In answer to your question about dividend, as I said before, talking about the merger process, we are waiting a decision for the Spanish courts to proceed. Then in the meantime, we'll not be announcing any further dividends against 2019 profits. In the previous calls, I said that if the merger is not completed for any reasons, then the Board of Directors will reevaluate the possibility of distributing a dividend. But at this moment, we remain positive, the MFE merger will be.

[Quico Alum, General Manager of Publiespaña]

Okay. About the market, according to our estimates, we consider the beginning of the state of lockdown on March 10, on March 11, something like that and we consider that this lockdown is going to be relaxed in 10 of May, something like that, that we are talking about 2 full months. We consider the market will have declined by half in this period of 2 complete months. And we expect that the situation is going to start improving in the second half of May because we'll have some news for some clients. But it's very difficult how it's going to -- how these new clients are going to come to the TV again? How much are going to invest? But we think that the market is going to improve, of course. It's going to be better, but it's going to be -- better say less bad than we have the first day -- the last or the worst fortnight was the first days of April -- the first 10 days of April were the worst period for us in the advertising market, and then we are improving little by little. But we are -- but we don't know -- we don't have this kind of information in this moment. And we are -- we don't have information for saying you what is going to happen in the second half of May. And in these 2 months, the markets have reduced by half, more or less.

[Fernando Cordero Barreira, Equity Analyst]

Okay. Many thanks to all and particularly on the clarity on OpEx, including the EuroCup savings on the target of EUR 50 million.

[Operator]

Your next question comes from the line of Richard Eary from UBS.

[Richard Eary]

Just a couple of questions for me. Just to maybe get a bit more clarity in terms of what you just said in the statement in terms of trading. So did I read that correctly that you're saying May is down 50% or at least 50%? April, May is down 50%, but you are starting to see some signs of improvement already in terms of bookings. Maybe that's the first question. Is that correct? Or did I misread something?

[Quico Alum, General Manager of Publiespaña]

Okay. No. We -- I mean, we think that the worst period is going to end in the middle of May. But this is for us because it's when the lockdown is going to be relaxed by the government. And from the second half of May, we think -- we hope, we expect that some clients are going to come back to the TV. That is true. For example, some automotive clients, they are going to come back, and beverage clients. But the problem in this moment to make any forecast is that we don't have with -- amount are going to come back. I don't know if they're going to come back really, really strong or step by step. But we don't know that. We have to wait. But it's true that we have open negotiation with clients for the second half of May. That is true. And the clients, they have disappeared from the TV during this 2-month period. But I can say you -- I would like to have more information, but really, I don't have this information at this moment.

[Richard Eary]

No, no, I appreciate that. So just the second question in terms of pricing. You made some comments earlier that you've realized that if you cut prices, it's hard to recover them as we saw coming out of basically the financial crisis in '08, '09. Can you give us some insight in terms of what pricing has been in sort of April, May and whether it's just literally a physical volume drop-off that's driven that or whether that you've been susceptible to pricing declines as well or whether you've been able to hold prices through the sort of April, May period?

[Quico Alum, General Manager of Publiespaña]

Okay. In this situation, I mean, it's evident than in the current situation, keep our pricing policy, we've not changed it at all. It's not profitable. In fact, it could actually be detrimental, be harmful for the TV market. And we have brought up during this 2 months period our pricing policy to the new situation -- to the new market situation to try to help some clients to keep their investment in TV. But in the other hand, we must keep an eye in the cost cutting phase because for us, the price is really important. And we think as soon as the situation has normalized, our pricing policy will be the same as before. We try to maintain not to increase our prices in TV because it's true that we -- in this period, it's clear that TV is stronger than ever in terms of consumption, in terms of coverage. And we think that for the second half of May, we expect that -- June, our pricing policy that's going to increase prices by 2%. This is going to come back, and I think we are going to be able to apply it. But during this 2-month period, we have helped some clients in order to keep their investment in TV.

[Richard Eary]

No, no, that's helpful. Just one last question just in terms of other revenues, which I think was pleasing and I'm surprised basically on the upside. Can you give a bit more granularity behind the EUR 35 million makeup and how we should think about those numbers going into Q3 and FY '20, considering whether you renew, basically, the support throughout the MiTele Plus? What happens in terms of the cinema slate in terms of postponements, just so we can get a sort of a range in terms of outcomes for the other revenue numbers?

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

Okay. This is a business line which is going to be made up of very different activities. We do have movies here. Movies has always been one of the most important components. Movies in the first quarter, the numbers are very much in line with last year. So everything is business as usual. But of course, movies are going to be affected in the rest of the year. And as Massimo was saying before, the shootings and production in general is going to be halted. Or if not, it's going to be -- we're going to see a significant amount of reduction here. So movies, we don't expect to see a lot of activity in the rest of the year. What we have seen in this quarter is probably, if not all of it, but very little is going to be left, if any, for the rest of the year. But there are some other lines of business here which have been very important in the first quarter. One of them is the sales of rights to streaming companies and to other players in the market. This is an activity which is going to continue. But of course, it's not linear. It's not anything that we have contracts running every single quarter. But we may see and we -- certainly, we will see some activity here. The other line of business is the pay OTT platform. But of course, that would be subject. The final number on this line of business will finally -- when we talk about the full year, will finally be dependent on what happens to the contracts in place post the end of the current season. That is something that, of course, we have no lines on that yet. What I can tell you, though, that all in all, with all the movies, with the situation that I have just explained and with the sale of rights and everything else that we expect, that we -- our main case scenario right now is that the number is going to be higher at the end of the year despite the movie situation. But the number at the end of the year is going to be higher than the one we had in 2019.

[Richard Eary]

No, that's helpful. Maybe just one last question, apologies. Just in terms of the credit lines that you talked to be extending, I presume this is just to support working capital and the cash flow in the business. This is not to basically increase or take an additional stake in ProSieben.

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

No, no, absolutely. This is for the normal business of the company. It's an extension of EUR 50 million versus the numbers that you have seen at the end of December. It's 255. And we have renewed all of those lines. These are short-term lines. And we have increased that number by somewhat EUR 45 million. And absolutely, this is for the running of the company, working capital and everything else. Nothing to do with ProSieben or any other specific reasons.

[Operator]

Your next question comes from the line of Ivón Leal from BBVA.

[Ivón Leal, Research Analyst]

Just to clarify, there are a couple of things which I didn't understand pretty well, okay? So just 2 follow-ups on the cost side, okay? So you're telling me EUR 50 million, EUR 55 million less of OpEx starting second quarter. So that means that given that you have, like, EUR 6 million OpEx more in the first quarter, you're guiding to EUR 45 million, EUR 50 million less OpEx for full year 2020. Is that right? And on that particular question, that assumes that the cost for the football rights in the fourth quarter are going to be the same that last year. Okay. That's on the upside. And then just following up with what my colleague was just asking. On the sales of rights to streaming companies, to OTTs, that is basically new content that you produced in the fourth quarter or last year, okay? Or it's basically old content that you had on your BiblioTech. And if it's new content, you should have very high visibility on what you're going to sell to the end of the year. Is it right or not?

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

Okay, a host of things there. First of all, the costs. If I -- maybe on the EuroCup that Massimo was talking about, this is just not for the second quarter, it's for the season starting on the first of April and running until the 22nd of July. Let's say, 15th of July, which would have been the end of the EuroCup, right? So it's not net of anything that would have happened in the first quarter. This is the pure savings on the second quarter plus the X numbers of days of July for the EuroCup, right? So just to be clear on that. Your second point was on the sale of -- sale of programs or...

[Ivón Leal, Research Analyst]

Of content. Yes, yes.

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

To the streaming companies. Here, you have a host of different varieties here. You can sell something that you have not broadcasted yet. You can sell something that you broadcast at the same time. You can sell something. And if they're going to come after, you have broadcasted in your normal daily chain, right? So there's a whole -- what we have -- we do have a -- we do have kind of an idea in mind, but it's not contracts that we have already signed. We have a perception, our salespeople talk to these companies, and they know more or less what kind of a demand they could encounter, but it's not anything that is signed and on paper. We have a good estimate, and that's why I was saying that we expect that at the end of the day, our number is going to be higher than last year. But it's not that we have the contract signed. It is just our best estimate based on our contracts with these people.

[Ivón Leal, Research Analyst]

Okay. Okay. And maybe following up on MiTele Plus, is it on breakeven in the first quarter?

[Francisco Javier Uría Iglesias, CFO & Director of Economic]

No. [ No. ]

[Massimo Musolino]

Sorry. So just to elaborate this point because -- MiTele Plus is like, it's a start for us at this moment. Well, this is first year, we started with MiTele Plus at the end of July. So the cost -- the main cost, of course, is the cost of football. And we use football rights as a driver to accelerate the brand of MiTele Plus in the market. So no one gained money in the first quarter or in the first year of a new project. So we have to wait probably a couple of years to really understand if it is profitable or not project.

[Ivón Leal, Research Analyst]

So I was just trying to figure out if you guys are thinking about renewing football rights for next year. But probably that's a decision you have not taken yet.

[Massimo Musolino]

No, no. Honestly, the main question about football right is what happened for this reason, because we have an agreement with Telefónica. The Telefónica gets us the 2 football channels. And I think that no one knows if the football metrics will be back for this season or not. So we are waiting. So this is now today the problem, not an exit. Let's see what happens. And then we will decide what to do for the next season.

[Operator]

[Operator Instructions] Your next question comes from the line of Jon Ogden from the Pacific Rim Investments.

[Jon Ogden;Pacific Rim Investments LLC;Analyst]

And I hope my sympathies are with you for a bad outbreak there. Sorry, if you could indulge me slightly, I'm absolutely brand-new to the company. And I'm involved in value-vesting U.S. family office. And we are kind of very interested in the company. But -- so -- but we're very new to the company. The first question was just the -- I couldn't quite catch the 50% to 60% down number, which obviously sounds rather worrying, but everything is at the moment. Is that -- I mean, do you have your subscribers on sort of 1-year contracts? And then what you're talking about is the ones that are rolling off in this month and next month only, say, 50% are signing again and 50% aren't. I just couldn't quite understand what that was. And the second question is just on your competitive situation in the coming years with regard to new competition for people like Netflix, Disney. They're all rolling out sort of competing products. And that sort of comes back to the fact that you are very much a value investment at the moment. And I just -- we like that. But of course, the deal means that you'll be folded into something that's much more -- higher valuation. So this is not a value-accretive deal for our Spanish shareholders, quite the opposite. So I just wonder why -- what's the rationale why this deal should be a good thing for a Spanish shareholder? I just do not see that. And so it just suggests to me that the deal should not go ahead if you're actually acting in the interest of your own shareholders. Unless, by the way, that you do not see a good future for España at all as a stand-alone entity, which should be interesting to know why you would think that was the case.

[Quico Alum, General Manager of Publiespaña]

Sorry. One question. The first question was about the ad market, no?

[Jon Ogden;Pacific Rim Investments LLC;Analyst]

No. Well, the first question was just to understand the 50% to 60% down. Now with my understanding, I don't know. But the cable companies I know will sign people up, they'll sign a contract for 1 year, and then you pay whatever it is per month. And at the end of that, you can decide whether you want to continue or not. And I was wondering if the 50% or 60% down was the people are going to renew 50% or 60% or not renewing. So you're losing a lot of customers in this period. Is that what it is? Or is it something else? That number, I couldn't quite understand that. That was my first question.

[Quico Alum, General Manager of Publiespaña]

Yes. No, no. The MiTele Plus subscription is month -- it's a monthly basis. You can decide to subscribe 1 year or you can subscribe for 1 month, and then you renew it every month. More or less, it is a standard market price practice in Spain at the moment, because in every OTT platform, you can subscribe only 1 month if you want. About the Netflix and the U.S.A. giants competition in Spain and Europe, it's clear that something has changed in our market because we have moved from, let's say, a TV market to a new market that we call audiovisual market, where we -- I don't see that to compete is the right word. The audiovisual market is a market in which we live together with other players, more of them different than us and bigger than us. I say this because we don't consider Netflix or Google, only competitors, but also clients. They are clients of our -- of the advertising of our channel. They are clients because we sell them our production, fiction and programs. About the European -- the pan-European project, we consider that this audiovisual market is not local. So there will be a local market -- a local TV market. But in term of digital, in term of platform, in terms of the digital market, it is higher than -- larger than the Spanish one or Italian one. This is why we think that to merger different broadcaster in different countries can create the right scale, the right size to compete in the market with them. Of course, this kind of merger has 2 different aspects. First of all, the local business more or less remain the same. Spanish TV will continue to produce and broadcast Spanish program, and Italian will do the same. The alliance -- the advantage of the alliance comes from synergy in the digital area. For example, OTT platform, software development, advertising -- European advertising agreement with headquarters of the most important multinationals. These are the reason why we consider that a European -- pan-European company can unlock value from the media market.

[Jon Ogden;Pacific Rim Investments LLC;Analyst]

Just going back to the first point, just to further clarify, so if the majority of your subscribers on 1-month contracts, so you've actually seen a drop-off of 50% overall in your subscribers. And -- but they could come back very quickly as well as they kind of reassess. And I just wondered why that was so catastrophic given that a lot of people are staying in the houses. You would expect them to be kind of watching more TV. That's what we keep hearing about. So why was it so badly down in recent days?

[Quico Alum, General Manager of Publiespaña]

The majority of subscriber do this for 1 month. There is a small economic advantage to this for 1 year. Honestly, we see that this kind of consumer is not willing to assume a mid- or long-term commitment. Then you should consider that this -- MiTele Plus is a start-up. So we need to create a number of subscriber quickly. So we think that to offer only 1-month subscription is a way to increase more quickly the number of subscribers.

[Mario Sacedo Arriola, Head of Investor Relations]

Okay. Well, I guess there is no more question pending to be taken. Then now it's time to close this conference call. We hope all of you will stay well and safe. And obviously, if you have any further questions, please don't hesitate to contact the Investor Relations department. Thank you.

[Massimo Musolino]

Thank you very much. Bye-bye.

[Operator]

That does conclude our conference for today. Thank you all for participating, and you may now all disconnect.