We reaffirm our long-term Neutral recommendation on
Grupo Televisa S.A.
). The company's third-quarter 2012 financial results easily
outpaced the Zacks Consensus Estimates. In the reported quarter,
except the Other business segment, all the remaining four
business segments of Televisa witnessed considerable sales
growth. Moreover, Televisa continues to generate higher royalties
from its Univision venture.
At present, a considerable share of Televisa's income comes
from its U.S. operations, including the sale of content, website
and cable television. We believe the deal will be beneficial to
both Televisa and Univision. Televisa allows Univision to access
its content and then rebroadcast it on television and the
Internet for a royalty. The U.S. Hispanic TV market is highly
lucrative and growing at a remarkable pace. In the previous
quarter, royalty from Univision was $62 million, up 6.5% year
over year. Management estimated that Univision will generate $245
million of royalty revenue in 2012.
We are quite optimistic regarding the newly formed
Televisa-Iusacell venture in the Mexican wireless market. Mexican
wireless market is highly monopolistic. Telcel, a unit of
America Movil SAB
), controls over 70% of the market,
) controls more than 22%, and Iusacell controls hardly 5% of
Televisa controls 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 services.
Undoubtedly, a foothold in the lucrative mobile market will make
the company a highly integrated broadcasting and telecom operator
in Mexico. Nevertheless, We believe Televisa is currently fairly
valued as the stock price has soared over 47% in the last
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