We reaffirm our long-term Neutral recommendation on
Grupo Televisa S.A.
). The company's fourth quarter of 2012 financial results easily
outpaced the Zacks Consensus Estimates.
Why Kept at Neutral?
The stock price of Televisa has moved up nearly 42% in the
last year, significantly outpacing the S&P 500 return of just
22.9% over the same period. Televisa is currently trading at the
high end of its 52-week price range. With respect to several
valuation metrics, the stock is also trading at significantly
higher multiples compared to the S&P 500. We believe the
company is currently fairly valued and the stock price will not
provide above market gains any time soon. Televisa currently has
a Zacks Rank #3 (Hold).
Balanced View on Televisa
Recent telecommunications industry reforms bill of the Mexican
government may pave the way for Televisa to capture a large chunk
of the market share. According to the bill, the newly formed
regulator, the Federal Telecommunications Institute, will have
the power to force any company to divest some of its assets if it
controls more than 50% market share in any segment.
America Movil SAB
) and Telmex control nearly 70% and 80% of the Mexican wireless
and wireline telephone markets, respectively. Moreover, both
these companies are closely controlled by the world's largest
telecom tycoon, Carlos Slim. Further,
) commands around 20% of the Mexican wireless market share. Any
shake up of the existing telephone market structure in Mexico may
turn beneficial for Televisa. Earlier, in 2010, Televisa
abandoned its wireless venture with Nextel de Mexico, a
NII Holdings Inc.
), due to prolonged legal battles.
In the same coin, the telecommunications industry reforms bill
of the Mexican government may go against Televisa, as the company
currently controls nearly 70% of the country's broadcast TV
market. Furthermore, TV Azteca, a sister concern of Grupo
Iusacell, commands nearly 25% of the Mexican TV market. TV Azteca
and Grupo Iusacell are the holding companies of Grupo
Thus, Televisa and Azteca form a perfect duopolistic market
structure in Mexico. The regulator may well ask Televisa to
disinvest some of its broadcasting assets, which in turn will
reduce Televisa's market power and create an opportunity for
Carlos Slim to enter the Mexican TV market.
AMER MOVIL-ADR (AMX): Free Stock Analysis
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GRUPO TELEVISA (TV): Free Stock Analysis
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