Updated Research Report on Grupo Televisa - Analyst Blog

On Jun 18, 2014, we issued an updated research report on Grupo Televisa S.A.B. TV. Televisa's strong footprint in the Mexican broadcast market, the regulatory permission to enter into the Mexican wireless market and its strong ownership in the U.S.-based Spanish-language broadcaster, Univision, will drive growth.

The government of Mexico has decided to reform its telecommunications sector which is highly monopolistic with one or two companies dominating the market. The government intends to increase competition by encouraging the entry of other operators. In this regard, regulator Federal Telecommunications Institute identified broadcasting giant Televisa and telecom behemoth America Movil S.A.B. AMX as the dominant players in the respective markets.

The recent Mexican law reforms may pave the way for Televisa to capture a large chunk of the wireless market share. The new regulations will also allow America Movil to enter the broadcasting market of Mexico, which has been controlled by Televisa for a long time.

However, the latest industry report stated that the proposed regulation will defer American Movil's TV segment expansion plans for at least two years. During these two years, Televisa can reformulate its broadcasting and media strategy and take strategic decisions to capitalize on the lucrative Mexican wireless industry.

Televisa is also likely to gain significantly from its ownership stake in the U.S. broadcaster Univision Communications Inc. At present, Televisa effectively holds 38% (after converting debt into equity) of Univision.

Currently, the owners of Univision are exploring strategic options to sell the company and may also consider an initial public offering in the next year. According to industry rumors management is expecting more than $20 billion from the Univision sale. Consequently, Televisa is positioned to gain significantly from the sale.

On the flip side, the new telecommunications industry reform bill of the Mexican government will allow America Movil to enter the broadcasting market of Mexico, which has been controlled by Televisa for a long time. This may substantially reduce Televisa's advertisement revenues. In fact, America Movil has been eager to foray into this market with its existing telecom network.

Although the new regulations will allow Televisa to enter the lucrative wireless market, we remain skeptical about its success. In 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. NIHD owing to prolonged legal disputes.

Televsa currently carries a Zacks Rank #2 (Buy). Another well-performing stock in the broadcast TV sector is LIN Media LLC. LIN with the same rank as Televisa.

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GRUPO TELEVISA TV: Free Stock Analysis Report
 
AMER MOVIL-ADR AMX: Free Stock Analysis Report
 
NII HLDGS-CL B NIHD: Free Stock Analysis Report
 
LIN MEDIA LLC LIN: Free Stock Analysis Report
 
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