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Grupo Radio Centro, S.A.B. de C.V. Message Board

  • zebraspit zebraspit Mar 3, 2004 11:22 AM Flag

    Positives on the arb. ruling?

    Last July RC was written up and recommended by someone at the Value Investors Club site(http://www.valueinvestorsclub.com/guests/view-thread.asp?id=1118&view-idea=t). (It was one of the highest rated ideas there ever, as rated by fellow members; the stock at the time of recommendation was just under $6)
    The member gave the following answer to a question posed there about this Monitor arbitration situation; I thought it might be helpful to post it here:


    >>I cannot predict the outcome of the
    arbitration, nor do I think the company can. However, while Monitor represents ~20% of
    revenues, it represents a much smaller % of cash flow, as it is much costlier to
    produce vs. other programming alternatives. Management at RC has taken a very active
    approach to creating a contingency plan, which includes much lower cost programming
    and, ironically, may actually result in improved margins (it's a bit complicated
    because one doesn't simply revamp such an entire program and becasue the company is party
    to other agreements with Infored and Vivo). Management insists that an adverse
    result in the arbitration would have no material impact on the company's financials.

    I would also note that were Vivo able to win his arbitration, he would
    likely have to compensate RC for all future lost programming that the company had
    previously paid for. Ultimately, this doesn't make any sense because Vivo has a
    responsibility to produce the show until 2015 (even if he cuts out) and is bound by a
    non-compete in any event. Thus, I suspect that this is mostly a posturing/renegotian
    tactic which ultimately gets forgotten or which the company is able to address
    through a contingency plan that they have developed for a year.

    The company has
    lost market share primarily due to competition. I suspect it will stablize somewhere
    in the 30-35% range, which is obviously a significant share of the alrgest city in
    N. America, regardless of the decline. In fact, RC is more heavily regulated by
    Mexican authorities than other radio companies because it's cumulative share is so
    high (I believe, for example, they are subject to a muchy more stringent approval
    process for ANY acquisition that they are considering). While losing share can never be
    a good thing, I suspect that the financial impact has been negligible given that RC
    has over twice the share of any other company and if you want to advertise in Mexico
    City, you clearly need to do it with this company. <<

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