Grupo Televisa S.A.
) is currently fairly valued, and thus, reaffirm our long-term
Neutral recommendation. The stock price has soared 33.4% in the
last year. The company reported mixed financial results for the
second quarter of 2012. All the five business segments of Televisa
generated considerable sales growth in the previous quarter.
We are quite optimistic regarding the regulatory approval of
Televisa-Iusacell venture to enter into the Mexican wireless
market. Televisa currently holds four free-to-air broadcast
channels, the largest of the two satellite TV channels, and three
cable TV units offering triple-play TV, voice and Internet
Mexican wireless market is highly monopolistic. Telcel, a unit
America Movil SAB
), controls over 70% of the market,
) controls more than 22%, and Iusacell controls hardly 5% of market
share. Undoubtedly, a foothold in the lucrative mobile market will
make the company a highly integrated broadcasting and telecom
operator in Mexico.
Pay-TV market in Mexico is vastly untapped. Several industry
researchers estimated that the pay-TV penetration rate may reach
43%-44% by the end of 2012, reflecting a massive opportunity for
future growth. Televisa's cable & telecom service, which offers
bundled triple-play video, data, and telephony services, may become
a significant revenue generator.
At present, a considerable share of Televisa's income comes from
its U.S. operations, including the sale of content, website and
cable television. Televisa is continuously generating higher
royalties from its Univision venture in the U.S. The U.S. Hispanic
TV market is highly lucrative and growing at a remarkable pace. In
the previous quarter, royalty from Univision was $64.2 million, up
6.7% year over year. Management estimated that Univision will
generate $245 million of royalty revenue in 2012.
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