Mediaset Espana Comunicacion SA

MAD:TL5

Earnings Call Transcript 2018-Q2

[Mario Sacedo Arriola, Head of Investor Relations]

I am Mario Sacedo, Head of Investor Relations. Let me introduce you to today's speakers. The presentation will be hosted by Massimo Musolino, General Operations Manager. The presentation will be followed by a Q&A session where Massimo Musolino; Quico Alum, Publiespaña General Manager; and Javier Uría, the group CFO, will answer all your questions. Massimo, you have the floor.

[Massimo Musolino]

Good evening, everyone. Welcome to our First Half 2018 Results Presentation, where we cover the main aspects of the figures released to the market a few minutes ago. I would like to go over the key points now and then move on the Q&A section. On Slide 2, you have a brief summary of the main aspects from the second quarter of the year. Our leadership in audience was reinforced against our main competitor achieving a 3.8 percentage point gap in total individual from April to June. Gross advertising revenues climbed in the second quarter by 4.5 percentage points, well above the total market growth of the period, which amounted to, as Infoadex released, 1.6% growth rate. This increase allows Mediaset España to gain 90 basis points of TV advertising market share, to 44.2% in the second quarter of the year. On the profitability and earnings side, adjusted EBITDA in the quarter increased by 5.8% to almost EUR 92 million; while earnings per share in the period went up by 13% to EUR 0.22. On Slide 3 (sic) [ Slide 5 ], you can find some set of figures but accumulated for the period January to June. As we mentioned before, the audience share leadership position was confirmed, Infoadex figures, on the evolution of the Spanish advertising market gave Mediaset España a TV advertising market share of 43.6%, which implies 40 basis points up against last year, and extending the gap with the second market player to 2 percentage points. Revenues for the period were almost flat, and margin remained over 30%, some of the highest in the industry. Finally, net profit to June, which amounted to EUR 125.2 million and EPS to EUR 0.38, reached the same figures as last year. Let's now move on the business performance section. On Slide 4 (sic) [ Slide 7 ], you have the TV consumption figure for the breakdown for 2018. This period does confirm our views about the general trend of TV viewers. If the content is right, there is no reason for TV viewers to abandon the TV experience. Many times there is somebody talking about the decline in TV consumption. This is not the case in the Spanish market, where consumption is over 4 hours per daytime viewer. With or without guest consumption, the general trend shows no major changes in consumer behavior.On Slide 5 (sic) [ Slide 8 ], you can see, according to the data reported by Kantar Media, how Pay-TV consumption is slowly growing in the year due to the contribution of the free-to-air channels broadcasted in the platform. In the second quarter, it represented 23.2% of the total TV consumption. Approximately 7.2 points come from Pay-TV channels and 16 points correspond to free-to-air channels such as Telecinco, which can also be seen on the Pay-TV platform. The growth in the Pay-TV audience is driven by linear free-to-air channels rather than the Pay-TV channel which are decreasing. Linear free-to-air channels in the second quarter accounts for close to 70% of the audience of the Pay-TV platform. Moving on to Slide 6 (sic) [ Slide 9 ], talking about audience share in the first half of this year. We reinforced our leadership position. On a group level, Mediaset España reached a share of 29.1% with an advantage of 2.4 percentage points over its main competitor. Also, in term of share for main channel, Mediaset España consolidated its leadership with Telecinco reaching 15.8%, which is 4.7 percentage points above the second channel. The figures achieved in June were remarkable, where Mediaset España reached a new record in commercial target, 36.1%, having the top 20 viewed programs of the month. Also in June, Telecinco leads every single day in audience share. On Slide 7 (sic) [ Slide 10 ], you can find a brief summary of the World Cup event. A total number of 64 games were broadcasted by Mediaset España in June and July. The 4 top performances in terms of audience share had been the French national fixed games against Portugal, Morocco, Iran and Russia. In the Spain/Russia game in particular, Mediaset España reached a record audience share of 72.4%. 26 games have been broadcasted on the Telecinco Channel, achieving an average of 5.8 million viewers and an average share of 45.6%. 30 games have been broadcasted on the Cuatro Channel, with an average over 2.8 million viewers and an average share of 23.7%. The 2014 World Cup played in Brazil produced a 0.5 increase in audience, while we estimate that this year tournament will contribute about 0.9 percent points total audience share on annual basis. The broadcasting [ will be strenuously ] led to a perfect time then between the programming strategy, with a successful production of a large number of lighted towers that have been added to our multiplatform content offer and commercial strategy. On top of that, we can confirm that from an economic point of view, the World Cup positively contributed to our P&L. On Slide 8 (sic) [ Slide 11], and taking the opportunity brought by the World Cup, we launched our HbbTV project together with a series of sports apps on June 14 under the LOVEStv framework. We are currently operating in test environment, with the aim of fine-tuning our proposal to our cost to customers in the coming months in preparation for the final launch on a large scale. Our estimate of TV sets with the HbbTV capability in Spain is currently in the range of 1.5 million and 2 million units, which brings a clear business opportunity in the future. Moving now on to the Slide 9 (sic) [ Slide 12 ], let me elaborate some of our achievements in the digital arena during the first half of this year. Monthly unique users amounted, on average, 11.9 million, with the 900 million videos viewed to May, which makes Mediaset España the sixth player in the market after web giants such as Google, Amazon and Twitter. The 4.2 million minutes consumed in the first 5 months of the year make our company the undisputed leader among the audiovisual players in term of online consumption. New initiatives, such as our YouTube channel reached an outstanding 67.6 million views since it was launched in April. As a result, Internet advertising revenues grew by 28.3% to June compared to the same period last year. I would also like to remind you that according to Infoadex figures, the first half Internet advertising market grew by 11.7%, which is less than half of the growth by Mediaset España. Let's start now to the financial section on Slide 10 (sic) [ Slide 14 ] with a quick review of the advertising revenues performance. On the right-hand side of the chart, you can see that Mediaset España growth advertising revenues grew by 0.3% in the first half of the year; while the second quarter growth increase of 4.5% to EUR 277.6 million. These figures outperformed the total market growth in the second quarter, which, according to Infoadex' publications, increased by 1.6%. As a result, from January to June, the total advertising market growth in 2018 was down by 1%. In this context, Mediaset España gained market share achieving a total of 43.6%. This share makes Mediaset España the undisputed leader of the market in terms of advertising revenue with a 2 percentage point gap against the second market player. Moving now to Slide 11 (sic) [ Slide 15 ], we have the evolution of the volume and prices during the first half of the year. After first quarter of the year that was impacted by the Easter period, we caused a great recovery in the second quarter, both in terms of volumes, which are up by 3%, and prices, which are up by 1.2%. It's better than the market performance with Mediaset España TV advertising revenue with similar figures to last year in June; without volumes, up 0.3% and prices, slightly down by 0.8%. On Slide 12 (sic) [ Slide 16 ], we provide an OpEx breakdown, the previously mentioned increasing weight of World Cup sport content explains the 25.5% decline in the consumption on third-party rights Spanish fiction, 19 million viewers less than last year. In accumulated terms, operating cost to June increased by 1.8% versus last year, reaching EUR 351.5 million. The slight increase in costs is more considering the relevance of the World Cup in terms of financial resource consumption and the successful audience share growth reached in the period demonstrates great cost management without penalizing the quality of the programming grid. On Slide 13 (sic) [ Slide 17 ], you can see the Mediaset España margin evolution in June -- accumulated in June. The second quarter of the year was positively affected by the calendar respect, and the World Cup revenues show an improvement in margins of 60 basis points to 33%. The adjusted EBITDA for the period grew by 5.8% to EUR 91.9 million. On accumulated basis until June, adjusted EBITDA amounted to EUR 159.2 million, down 5.3% against the same period last year, while our EBITDA margin reached 31.3%, which remains among the highest of the industry, thanks to business management discipline. On Slide 14 (sic) [ Slide 18 ], you have the net income for the period, which remains stable against the first half 2017. The cash conversion remains one of the highest in the industry, reaching 88.2%, 1 point -- decimal point above the same period last year, despite of the negative effects of the World Cup [indiscernible] conditions. And let me finish with a few final remarks on an outlook update on Slide 15 (sic) [ Slide 20 ]. The first half of 2018 was a positive, successful profitable period, despite the challenging market conditions. Our business performance reflected the cost discipline applied in an environment of growing audience share and reinforced our leadership position both in advertising revenues, market share and profitability. Moving into the second half of the year, we can update our 2018 cost guidance. In terms of operating cost, the previous target was EUR 770 million. Today, we can improve it to EUR 760 million. This is the result of the cost discipline and the substitution cost achieved during the first half of this year. Talking about the new business area, we are today in a position to confirm our expectation about digital revenues with an effective growth rate very important for the whole year. And finally, our main aim is to maintain our leading position, both in term audience share and advertising market share for the second part of this year achieving -- maintaining our full position in terms of profitability. And now let's move into Q&A. Mario?

[Mario Sacedo Arriola, Head of Investor Relations]

Thank you, Massimo. This is the end of our presentation. Now we are ready to take your questions.

[Operator]

[Operator Instructions] We will take our first question from Annick Maas from Liberum.

[Annick Tonie Maas, Analyst]

My first question is on the TV advertising market in Q2. I think you said somewhat it grew 1.6%. Could you tell us the market growth ex the World Cup? And then the second one is on pricing. Can you maybe comment also here how pricing has developed excluding the World Cup effect? And maybe comment also on -- I remember in Q1, you said that the reason for the negative pricing was that you had less premium advertisers advertising with you. How has the mix of these advertisers changed over the last quarter?

[Massimo Musolino]

About the TV marketing in the second half with the World Cup and without the World Cup, I mean it's really difficult to know what would have happened in the market without the World Cup. We don't have this kind of information because let me to explain one thing. If we analyze when the World Cup is over and analyzing the behavior of different sector, we see that most of the prices related to the football have raised their investments in the market perspective. But over [indiscernible], our clients are fairly [indiscernible] who have maintained, no increment, their investment. Then I don't know what it could have happened if we didn't have the World Cup. Then I don't have that questions. I think the most important conclusion for that period is that in this market, it is very important to have had the World Cup. I mean, I cannot answer the question about the market without the World Cup; I don't have this kind of answer because some clients have moved their investment from the second part -- for the second quarter to the last part of the year. About prices, we have incremented our prices by 1.2% in the second Q. In H2 that now, in this moment, we have more -- you can say more adult clients than they ready or willing to pay more for being in the World Cup. And this has helped us to increase our prices. But [ analysis of ] our prices is that the prices, [ they're related and very ] connected with the market. Then regarding the World Cup, prices should increase at the same pace as the [ TV ] market or a bit above. Force them more has not sense in the current market because then you're going to have some problems with some clients. And of course, you have to watch your competitors' price strategy in order to fix or to set your prices. It's okay that?

[Annick Tonie Maas, Analyst]

Yes, that is fine.

[Operator]

We will now take our next question from Julien Roch from Barclays.

[Julien Roch, MD & European Media Analyst]

It's Julien Roch with Barclays. My first question for Quico. If you could give us some indication of what happened to the advertising market in July and particularly August? That's my first question. My second question, still -- well, either for Quico or Massimo. But [ I2P ], which is one of the 2 advertising data collector in Spain, has put a forecast of minus 0.6% for the full year. I mean what do you feel about that? Do you think the market could be negative for the full year? And then my last question is on your Internet revenue. You're saying it's going to be up more than 20%, but I don't think you've ever disclosed what those revenues were. So could we get the Internet revenues in million euros for full year '17 and the first half of '18, please?

[Quico Alum, General Manager of Publiespaña]

Okay, about the July and the last part of the year, talking about the market. As we have said before, we have seen in this period with the World Cup, that some clients have reduced or just maintain their investments and they have moved their investment to the last part of the year. Of course, I cannot confirm that in this moment because we are still reeling from that, but we know that these clients of this -- these clients, they have not reduced their budgets for the year. Then we hope -- or we expect that at the end of the year, they are going to invest what was expected. Then for us, July, of course, because the first part, the first 15 days of July, we have had the European Cup, then for that duration, that is positive. I cannot answer about what is going to happen with the market because I don't know the figures of our main competitor and the other commercial channels. But for us, as well, fortunately, it's only positive because we had had a very strong 15 first days of July. About September, this -- because August is a very small amount, our September, October and December, we think that is going to be a positive quarter. We still remain positive, optimistic of [ programs ] about the last part of the year. And we hope that at the end, 2018 is going to be a positive year. We don't usually give the exact figure because really, we don't know. We don't know what is going to happen. But with information we have from some clients, we hope that at the end, the year 2018 is going to be positive. Your question was about Internet. As Massimo said, we are growing at a good pace, 20%, something like that, but if you tell me the figures of our main competitor, I would tell my figure.

[Julien Roch, MD & European Media Analyst]

Well, Atresmedia actually now have broken down digital. They have changed the way they're reporting. So if you want to know their figure, give me 1 second and I will give it to you. So digital advertising in 2017 was EUR 27.1 million.

[Quico Alum, General Manager of Publiespaña]

20 sorry?

[Julien Roch, MD & European Media Analyst]

EUR 27.1 million for digital advertising for Atresmedia.

[Quico Alum, General Manager of Publiespaña]

Yes, but in this can have the [indiscernible] include all the Smart-Clip and the other properties of [indiscernible], I'm talking just about the [indiscernible].

[Julien Roch, MD & European Media Analyst]

Yes, it does include Smartclip but Smartclip is consolidated considered only in 2018. So there is actually -- I don't think there was Smartclip in 2017. Anyway, so you're not going to give us advertising for you then?

[Quico Alum, General Manager of Publiespaña]

No.

[Operator]

[Operator Instructions] We will take our next question from Richard Eary.

[Richard Eary]

Just a couple of questions from my side. Just going back to the price increases in the second quarter, which obviously, look pretty lackluster and obviously in the first half, they've been pretty lackluster. Can you just talk us through that why you're not being able to actually drive price increases relative to where you were last year? I mean I'm just looking at occupancy rates in terms of just the year and for also Antena 3 and occupancy rates are still similar to where they were. So I'm just trying to understand why you're failing to get that leverage on price. So could you just explain that a little bit more? The second thing is if you look at the other revenues, they were obviously slightly weaker this quarter as well. I'm just wondering if you can give us an update on retrans and global content sales and an update into how you see that growing?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes, if we look at the other revenues, the number in the first half is very much in-line actually with the numbers in the first half of 2017. It's only minus 2%. We have slightly more cinema or movie revenues because in the first half, we have some revenues that come from the films that we released in the very last part of the last year. The small negativity that we have comes mainly for the discontinuance of the online gambling activity that we have for some months in 2017. We do not have anything this year because we sold the business towards the end of the first half of last year. So I think that those are the 2 main elements under this caption here. But like I said, the numbers are very close to those of last year and especially because of the cinema activities, these numbers tend to be more volatile. So we haven't seen anything that we were not expecting on this caption here really this year.

[Quico Alum, General Manager of Publiespaña]

Okay the question about our prices was why we didn't push more the prices, push up more the prices?

[Richard Eary]

Correct. I mean occupancy rates are similar to where they were last year. Obviously, the market's a bit softer but, I mean, given a duopoly structure, why can't you leverage more price increases, given the fact that audience levels haven't changed?

[Quico Alum, General Manager of Publiespaña]

Yes, that's right. I mean the price increase is very connected or connected with the market increase. Then, if you push the price farther than the market, then you're going to have a lot of unsold inventory. And in this moment, we don't think it's a good idea because we have some clients that to link with them is not easy at this moment. I think we have increased our prices by 1.5 points, something like that. Our goal for the last quarter is even to go farther in prices increase. We expect to -- can achieve that goal, but it's also very important, but in the end of the year. I can tell you, I mean, this is a negotiation, it's not one of the question about prices. The problem with the prices is when the market increase a lot and the price is not, then you going to run out of [ programming ] in the inventory, whenever you are going to find we have overbooking problem. But in this case, we didn't have an overbooking problem, we have some unsold, no more than 5%, 6% in prime time; then, for that situation, it's okay.

[Operator]

We will take our next question from Laurie Davison.

[Laurence Davison, Research Analyst]

It's Laurie here from Deutsche. Just first, just a follow-up on Richard's question. Why do you think you can get through price increases in the second half if you have failed in the first half and you have the World Cup, which has benefited that? Second question is you previously described EUR 760 million as the floor in terms of cost which you can't go below. I think you emphasized you've been through 7 years of cost-cutting. So is there no further room for cost-cutting now below this revised level of OpEx? And last question, consensus on FactSet and on Bloomberg is for 2% revenue growth this year. Given the first half is flat in terms of advertising and you've got tougher comps in the second half, do you think that plus 2% for the full year is realistic?

[Massimo Musolino]

Yes, I answer to the cost question. EUR 760 million is a result of our original guidance of EUR 770 million, less the savings actually during the first half of the year. What we are doing now is to consolidate this EUR 10 million. And we confirm the budget we have for the second half of the year because we think that nothing has happened which indicates the need to modify our programming grid, which represent the majority of our cost. Of course, as we are used to do, we look at the advertising market evolution. At this stage, we still remain positive for the second half of this year. This is why we are not modifying our cost budget for the second half. If we see in advance, of course, that the market is not so [ fresh ] as we think now, I think that we can do something to reduce this base. But they're all solid because you should consider that we are in the middle of July. Honestly, I would say it's not material, neither in terms of revenues, neither in terms of cost. But yes, when we go back from holiday at the beginning of September, we will start with the new season programming grid, which is really strong. And for next week -- for next season, we -- for the last quarter this year, we have prepared a strong programming grid with the 3 -- for example, in prime time, we broadcast the Spanish fiction, 2 entertainment show, important to total show. So we have a good and expansive programming grid for the last quarter. If we understand it, that the TV advertising market is not in line with our expectation, we will try to say something. In any case, I think that in my opinion EUR 760 million, EUR 770 million, I always say the same, is the real -- the right cost basis for a company like Mediaset España.

[Quico Alum, General Manager of Publiespaña]

Okay, about the other 2 questions, the first question and the third question. Yes, I am going to explain in our way of thinking. We have said first we think that the second part of the year is going to be a positive -- we are going to have a positive market, and when we think that, the first thing you have to do is to prepare a really strong programming grid for the second part of the year. And where we have that, we are going to give that to our clients because we are really confident with that. In [indiscernible] with that, we think that the market is going to grow in the second part of the year -- or from September, no, July is the workup, August is a really small month, then from September. Then within that, we are going to achieve the 2% of the market, we are going to go above or below that number? I cannot answer the question, because I don't have enough information to answer, so I can give you my opinion but I mean it's not -- it's not based on, really, realistic numbers, because we don't have these kind of numbers. When we think that the market is going to grow, of course, we have to do some work to increase our prices because we have to give space to all this kind of -- to all our clients. Then we have to grow our price. Our goal in pricing this moment, because we are dealing with the first clients for September, is, as we said in the conference calls before -- the last conference call, is around 3%, 4% to increase our prices. And is that our goal. I hope that in this -- somehow we didn't achieve that goal and because of the market. In the last part of the year, I think we can achieve that goal. But it's going to depend on the amount of money that we're going to have -- we're going to see or we're going to find on the table. And for that, we have to wait and we just start to negotiate that. For that, my answer, short answer, on previous slide, 2%, yes, it's a possibility. We can grow out that number it could be. We don't say that. The prices has to be a little up from the market. Market is 2% or maybe 3%, 3.5% and that's it, and for that, we have to prepare our own strong programming grid for the last part of the year, because we are really confident with the market. Of course, we'll have to see as in the middle of September or the first 15 days of September, we are going to have a better idea about the market. We are going to have the budget from the, 10, 20, main clients here in Spain. And this is going to shape the market that we're going to have in the last part of the year. But in this market, if I'm to go step by step, and we don't have to be -- we are optimistic, we are always optimistic with the Free-TV, of course, we are optimistic with that but we have to wait to answer that question to give you exactly number for that.

[Laurence Davison, Research Analyst]

Okay. So just on the costs -- on your cost comments, just to understand it fully, you're saying that EUR 760 million is the floor but you can make some tactical savings if advertising is weak, is that right?

[Quico Alum, General Manager of Publiespaña]

Yes, advertising will be weak. We will try to reduce our cost base, of course. We have 4 weeks then something this [indiscernible]. It is a little bit limited. We get [indiscernible].

[Laurence Davison, Research Analyst]

Yes, that's what I'm trying to get to is what is the limit if you include tactical cost savings?

[Quico Alum, General Manager of Publiespaña]

It is difficult to say, depends in the moment when we say that the TV advertising market is weak. But it's also important to see what the other player will do. Don't forget that we have to perfect our TV business. We have to do different things, developing our digital business, and not only the TV -- additional TV business. So sometimes, we cannot kill the kid, it's only for super saving money. We have a medium long-term view of our business, so.

[Massimo Musolino]

And something that is really important, because it's converted in our other market, it's not the same that the market is going to be strong in a housewife is food or healthy market and you've got to be strong in telecoms automotive. Then the programming grid will have to drive according to the market movements inside the market, but it's not the same. And for that, you have to wait, I mean, because [ if you have ] housewives, we have really strong programming grid in housewives and it's an [indiscernible] of telecoms who have to think more about, with kind of themes, whatever kind of brand that we have, we are going to put on the table. But for that, I mean, it's not like it's going to be stronger, no, it's who is going to be strong inside of the market, the TV markets.

[Operator]

We will now take our next question from Sarah Simon from Berenberg.

[Sarah Simon, Analyst]

Yes, 2 rather boring questions, I'm afraid. The one is can you just remind us what is in other advertising revenue in terms of your own media? And secondly, on the new cost budget, one of the sort of noticeable things is that depreciation is a lot lower year-on-year, it's kind of half of the level of last year? To what extent does lower depreciation kind of driving at least some of that reduced cost budget?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes, Sarah, I'll start with your second point. Yes, there is a decrease in depreciation in the first half of this year. But you will see that there is an increase in other costs. Basically, this is a reflection of the management of the lineup in the first half. You could say that, of course, we have to make room for the World Cup. And you know that there is a replacement element here as well. So what you have is a decrease in amortization, which comprises fiction and third-party rights, with something close to EUR 20 million, you will have an increase in other operating costs. Basically, this is just -- like I said, this is just a reflection of the management of the World Cup in the sense of replacing some features there and some third-party rights with the football matches of the World Cup. For the...

[Sarah Simon, Analyst]

And what about the other bits of depreciation because they're also down quite a lot? Is that just timing?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

The other technical [indiscernible]…

[Sarah Simon, Analyst]

Yes, but I mean -- yes, technical.

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Well, if you're just talking about technical depreciation, that has to do with the fact that some of the investments in big data that we started to do just a couple of years ago. The time for amortizing those expired last year. And that's it basically. Most are f the technical investment in big data. I'm talking about technical amortization…

[Unknown Executive]

Digital.

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes digital, most part of those investments were made a couple of years, 3 years ago and the previous amortization is rather small, right? So that's why we don't have this number anymore. And your first point had to do with what's on the line of third-party media, right, or third-party advertisers?

[Sarah Simon, Analyst]

No, not -- no, third [indiscernible] before, but I'm just wondering if you can remind us what's in the other advertising?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

On the other revenue side? What did you mean?

[Sarah Simon, Analyst]

Yes. No, other advertising, so the difference between gross media revenue and TV revenue.

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes, because that implies -- within the media, so España media, what you have there is there's the TV advertising plus the Internet advertising. This is just -- you have everything that you -- in the EUR 481 million, you have the TV -- traditional TV advertising plus the Internet advertising; whilst, in the third-party media, of course, what we have is the advertising on which we act as agents for other parties.

[Operator]

[Operator Instructions] We'll take our next question from Lisa Yang from Goldman Sachs.

[Lisa Yang, Equity Analyst]

Just wanted to come back to your point around the advertising market. I mean you're saying the clients haven't used their budget for the year. I mean, what's the reason behind that? I mean especially with the World Cup, why are they being so cautious? Is it because of the timing you'll put on launches? I mean any color you can give on that would be great. And what are the sectors, in particular, you think there could be upside for the rest of the year? The second question is a follow-up to a question earlier on. July, you think's very strong. Could you quantify that, could be up double-digit? Then if you look at the third-party revenue, it was quite strong, about 27%, what happened there? What's the outlook for the year? And the last question is around the cost of the World Cup, if you can give us the exact cost in the second quarter and what you expect in Q3?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes, I will start with the last point on costs of the World Cup. As you know, this is an event which is played between 2 months, June and July. You have an allocation between the 2 months or between the 2 quarters or the 2 months which have to do basically with the revenue that the matches are going to generate, this is the main point. You need to have an equilibrium between the 2, the allocation is based on which are the other attaching revenues that you're going to get. And of course, the main difference here in terms of average revenues, lies with whether or not we're talking about a match in which Spain is there, right? So this is very important. This is the main consideration. On top of that, as we've said, that we have already a lot of experience in this event. We have World Cups and Eurocups for the last 6 to 8 years. And of course, we have a lot of experience of how to allocate those costs. And on the other hand, this cost are also being ratified and audited by our auditors. And the allocation has been found to be correct. Just to give you an example of how things can change from one month to the other, is that Spain, the first match after the group stage, they'll have to play -- that was played on 1st of July, depending on whether or not Spain had been first or second in that group. The match will have been played 30th of June or 1st of July. So that makes a difference in terms of advertising revenues. Of course, that's the kind of consideration that we look at when allocating costs from one month to the other. And as explained, that we have between June and what you will see in the month of July when we have the results for the third quarter.

[Quico Alum, General Manager of Publiespaña]

Okay, about July, as well, I said it's going to be a strong month for us. And I don't know about the market, but we are not to grow at a double digit, no, not like that. It's going to be a strong but no double-digit. About the [indiscernible] growth in the second half -- in the second quarter of the year you're asking about that, or the second half of this year. I mean the most important sectors in the last part of the year are always the same. The main sector is beauty, is a really strong sector and have some good news for them. And also about knowing the -- in all the months but in October and November automotive is a really strong sector. But this, I think, is not going to change. Maybe the big question mark is in telecoms is going to change their way that has done in this first half of this year and is going to invest more money in the second half of the year. The telecoms. And also we hope a lot in September and November from [indiscernible]. In this case, to be more specific from dealers, we have some good news for them and then we have to wait. I mean we are still negotiating.

[Francisco Javier Uría Iglesias, Chief Financial Officer]

And the first question was the main clients.

[Lisa Yang, Equity Analyst]

No just wondering like why have your clients been holding back their spend so far, especially with the World Cup?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Okay. Yes, that's how we -- let me say like in this question is -- we didn't expect that. That one thing is clear during the event. It's the first time that one fully TV channel broadcasted 64 matches in live. And that creates a really great event around the World Cup. And we think, but we don't really know, that maybe some clients, they didn't want us to be with this kind of amount of matches that we have -- we broadcast in Telecinco and in Cuatro. And they decided to move their investment to another part, another period of the year. We think that, but we -- really, we don't know -- is among -- I mean they shift to these sectors but they are not connected with the football or with the kind of public audience. And it's housewife is a sector. Then we hope and wish that the sector, they are going to move. And they have their arsenal, that they are going to invest in the last part of the year. But we don't have the confirm, we don't have -- we didn't close yet the agreements. But I cannot tell you the exact situation of that.

[Lisa Yang, Equity Analyst]

And the third-party revenue?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

About the Internet revenues, I think we are going to [indiscernible]...

[Lisa Yang, Equity Analyst]

No, third-party revenue. The third-party revenue.

[Francisco Javier Uría Iglesias, Chief Financial Officer]

The third-party revenue includes these channels like in this case it's one paid channel is [ Tele-2 ]. We are working with them. And another free TV channel, that is GOL TV and some is more with Internet websites. This is it. But main...

[Lisa Yang, Equity Analyst]

No I'm just wondering why was it so strong in Q2 and what do you expect for the year?

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Oh because, basically -- because one of the main -- because one of the main clients here with GOL TV, we just signed this contract in September. So that's why we have a comparison, a positive comparison with the first half of last year, that's the main difference with last year.

[Operator]

We now take our next question from Chris Johnen from HSBC.

[Christopher Johnen, Analyst]

First, could you maybe talk about what sort of partnerships or collaborations are currently ongoing with some of the other European broadcasters either on a technical side, Ad-tech or maybe an outbid on the media lines because it seems that there's a little bit of -- yes, a little bit of news flow in the press, but it doesn't seem as if a lot is actually happening. So I'd be curious what are your views on that? And then 2 kind of boring questions. First, if you could maybe tell us what the EUR 6 million at equity result was in the second quarter? And I also only got a very bad line when you were commenting on July and August advertising. So it'd be great if you could repeat what you said there.

[Massimo Musolino]

About the partnerships, we know the European broadcaster. We have done something with the partner especially, of course, with our Italian shareholder. And we will build a company, an advertising company in London together with ProSiebenSat.1, TF1, Mediaset Italia and Mediaset España, concerning programmatic and digital advertising. We discuss with them about the new technological development. So we consider this kind of a partnership really positive. It is something that adds value to us because it's a way to face -- it's a way to see how other broadcasters which have the same problem, the same issues, that asks them how they face these problems. So we hope in the future to continue to have this kind of a partnership with them. We cannot rule out any kind of collaboration. We are really positive on this kind of relationship.

[Francisco Javier Uría Iglesias, Chief Financial Officer]

Yes, especially some boring issues as I am, I'm going to willingly answer your questions about the equity. No, sorry, jokes aside. The EUR 5.93 million that we have in the second quarter mainly stems from the agreement that we have with Telefónica, where we sold our stake in digital close to them back in 2014. There was an earnout provision in the contract, in which we have to -- with a limit both in terms of money and in terms of number of years. Now, we were entitled to get a compensation every -- at the end of each year after the -- after they actually took control of the platform, that was in 2015. We had an agreement, whereby, depending on the evolution and the increase in the number of subscribers at the end of each year, we were entitled to have a compensation. And most part of this number, of this EUR 5.9 million that we have here, comes from the compensation which has been paid to us on the basis of the increase in the number of subscribers between April 2017 and April 2018.

[Massimo Musolino]

Okay. About the market around July and August result, July for us, is going to be, I think, a good -- a positive month. For us, I don't know about the market, I have to wait until the end of July to try to analyze there how our dealer company grows. Then -- but for us, we're going to be about the mid-market August. It's a really small market and it's very difficult to forecast. And the most important part of the quarter is always the last 15 days of September. And for that, we'll have to wait until the last week of August to know what's going to happen in the last part of September. Because obviously then, with 15 days -- with the first 15 days of July, the last 15 days of September are the most important and are going to decide the shine of us is positive, how much it's positive of the quarter.

[Christopher Johnen, Analyst]

That's very clear. Maybe one follow-up on your -- on the partnership with your biggest shareholder. I mean is there -- are they, would you say, any tangible synergies in the collaboration with Mediaset? Any sort of comment, that will be interesting, whether you believe that -- or there is actually good example that you could give where you see that having them as a biggest shareholder has actually been beneficial for minority shareholders in Mediaset España?

[Massimo Musolino]

We are starting something. We are producing fiction together. And we share different experience about the new technologies, about the TV platform, digital developments. So at this stage, we are talking about different projects. Up to now, let's say that the traditional business hasn't created big synergies. But I think, and this is my personal opinion about the digital and the new developments, the possibility to share investment and strategy together with other broadcaster could be a clear advantage for us and for all the broadcasters, especially thinking about the side over other competitors, new competitors that they are entering in the audiovisual market.

[Operator]

We will now take our next question from Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

There's going to be only one; a follow-up on the OpEx discussion. Particularly, just you have said that the new OpEx guidance is basically reflecting the savings already materialized in the first half. If we take a look on the OpEx performance in the first 2 quarters, it's clear that the -- that probably these savings have been materialized in the second quarter. And I would like to know if those savings have been obtained on the whole lineup or particularly from -- or at which extent the success of one of your formats, in particular, Survival, have helped to generate those cost savings during the quarter?

[Massimo Musolino]

One of the main difference with this World Cup is that we had bought it in advance. If you remind when we bought Brazil World Cup, we did it a few weeks before the beginning of the [indiscernible]. This time, we had bought at the end of last year, so we have had a strategy all the time to prepare a different programming grid considering the incremental cost of the World Cup. And then we have had all the time to find the right way to balance this cost increase with the different saving. So -- sorry, I can say that these have been a general new structure of the -- for the programming grid with respect to the normal one. It wasn't only one program, but it is, let's say, the mix of all the programs and all the channels.

[Operator]

It appears there are no further questions at this time. I'd like to turn the conference back to you for any additional or closing remarks.

[Mario Sacedo Arriola, Head of Investor Relations]

Now it's time to close this conference call. Thank you very much for attending our presentation. If you have any further questions, please don't hesitate to contact the Investor Relations department. In the meantime, have a great summertime to all of you. Goodbye.

[Massimo Musolino]

Bye-bye. Thank you.