On Mar 18, 2014, we issued an updated research report on Grupo Televisa, S.A.B. (TV). We anticipate that the recent regulatory reform in the Mexican telecommunications industry will affect the company’s operations. The new regulation will encourage other cable/satellite TV operators to enter the Mexican pay-TV market.
Grupo Televisa has delivered negative earnings surprise in the last three quarters out of four, with an average negative surprise of 8.9%. In the fourth quarter of fiscal 2013, the company reported mixed financial results. Earnings per GDS came in below the Zacks Consensus Estimate whereas net revenue outpaced the same.
Televisa currently dominates approximately 70% of the Mexican broadcasting and pay-TV market. The Federal Telecommunications Institute wants to restrict the maximum hold of a company in a market to 50%. Televisa also has to share its broadcast towers with competitors for a stipulated amount of fees.
The new telecommunications industry reform bill of the Mexican government will allow America Movil S.A.B. de C.V. (AMX) 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.
On the other hand, the new regulations may allow Televisa to capture a large chunk of the wireless market. In 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. (NIHD), owing to prolonged legal disputes.
Currently, the company holds a 50% stake in Grupo Iusacell, a small wireless operator of Mexico. However, Bloomberg reported that Telefonica S.A. (TEF) is negotiating with Televisa and Grupo Salinasto, the remaining 50% stake holder of Iusacell, to acquire the company.
Grupo Televisa currently carries a Zacks Rank #5 (Strong Sell).