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Televisia Unveils 2013 Capex Plan

Zacks Equity Research

Grupo Televisia S.A. (TV), a dominant force in the Mexican media business has increased its 2013 capital expenditure plan to $1 billion from $881 million in 2012 representing an annual increase of 13.51%. Televisia has allocated majority of its revenue in the cable and telecommunication business.

The double-digit increase does not come as a surprise as the company increased its capital expenditure by 11.38% in 2012. Televisia has earmarked $565 million for cable and telecom segment, $300 million for satellite television service and $135 million for content and other business.

Televisia’s Cable and telecom segment offers bundled triple-play video, data, and telephony services and has surpassed two million phone and internet subscribers for the first time in fourth quarter of 2012.

Televisia enjoys a monopoly in the Mexican media space and controls about 70% of the country’s broadcasting market with rival TV Azteca controlling the remaining 30%. The potential for growth of Spanish language channels and content is enormous and Televisia intends to capitalize on it.

Additionally, the Pay-TV market in Mexico is vastly untapped with a penetration of around 43-44% in 2012, thereby reflecting a massive opportunity for future growth. In the recently concluded quarter the company’s added 270,000 satellite TV subscribers and at the end of 2012 the company had a total of 5.2 million subscribers.

However, the company continues to struggle in the wireless segment as 70% of the Mexican wireless segment is controlled by America Movil S.A.B. (AMX) and 20% by Telefonica S.A. (TEF). In an attempt to augment its market share Televisia acquired a 50% stake in wireless carrier lusacell in Jun 2012, which presently controls a 6% of the Mexican telecom market.

The acquisition comes after a failed attempt in 2010 to enter a into a wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. (NIHD) due to prolonged legal battles.

According to Televisia, lusacell will invest $800 million in infrastructure deployment over the next three years. We believe, a portion of the Televisia's proposed $565 million investment for cable and telecom segment, might be directed towards wireless network enhancement of lusacell.

Moreover, at the end of 2012 the company had $1,892 million in cash and marketable securities, which will allow Televisia to fund its future investments without depending on the debt market. Currently, Televisia carries a Zacks Rank #3 (Hold).

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