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Grupo Televisa Up to Buy on Strong Pay-TV Market Presence

Zacks Investment Research upgraded Mexican pay-TV and broadcasting behemoth, Grupo Televisa, S.A. (TV), by a notch to a Zacks Rank #2 (Buy) on Sep 23, 2014.

Why the Upgrade?

Grupo Televisa’s 100% stake buy in rival pay-TV operator Grupo Cable TV, popularly known as Cablecom S.A., further strengthens its position in the Mexican pay-TV market. Televisa, which serves 8.9 million customers through its cable or satellite TV services, currently dominates approximately 70% of the Mexican broadcasting and pay-TV market. Acquisition of Cablecom will add another 1.2 million customers (video, data or voice) to its kitty with at least 840,000 TV (video) subscribers.

In addition, Grupo Televisa may gain significantly from its 38% ownership stake in privately held, Univision Communications Inc., the largest Spanish-language broadcaster in the U.S.

Earlier, Univision, together with ESPN of The Walt Disney Co. (DIS), received a shot in the arm with its impressive broadcasting performance in the 2014 FIFA World Cup Football Tournament. Univision reported an impressive 60% increase in viewership during the soccer tournament. Notably, Televisa allows Univision to access its content and then rebroadcast it on TV and the Internet for a royalty. In the second quarter of 2014, Televisa’s royalty from Univision was a record-high of $84 million, up 19.1% year over year.

Further, the recent Mexican telecommunications industry reform bill may pave the way for greater wireless market share gain for Televisa. The new regulations will also allow America Movil (AMX) to enter the broadcasting market of Mexico, which has been controlled by Televisa for long.

However, the latest industry reports suggest that the proposed regulation will defer American Movil’s television expansion plans by around two years. During this period, Televisa may reformulate its broadcasting and media strategies and take appropriate decisions which will help it to capitalize on the lucrative Mexican wireless industry.

In another positive development, Grupo Televisa’s top line grew 7.1% over the prior-year quarter and also surpassed the Zacks Consensus Estimate in the recently-concluded second quarter of 2014. Except for the Other Business segment, the company witnessed year-over-year growth across all businesses.

Another stock worth considering in this sector is Saga Communications Inc. (SGA) with a Zacks Rank #1 (Strong Buy).

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