Televisa Goes Mobile - Finally - Analyst Blog

After a series of controversies, Grupo Televisa S.A. (TV), the undisputed leader of the Mexican broadcast market, fulfilled its aim to enter the lucrative wireless market of Mexico. Recently, the Mexican government issued a license to Televisa and its partner Nextel Mexico, a subsidiary of NII Holdings Inc. (NIHD).

On August 17, 2010, the Mexican Wireless regulator CoFeTel approved the auction bid submitted by the Televisa-Nextel venture for a 30 MHz nationwide block in the 1.7 GHz band of wireless frequency. Last July, Televisa and Nextel together also won one block of frequency ranging from 1850 MHz – 1990 MHz.

The bid raises several eyebrows as the Televisa-Nextel bid size for 30 MHz spectrum block is just $14 million. This is miles behind the $400 million bid size quoted by the two largest Mexican wireless operators, America Movil SAB (AMX) and Telefonica S.A. (TEF), for another block of wireless spectrum.

Despite this low bid, the Televisa-Nextel venture remains the only bidder due to the CoFeTel rules that restrict the amount of wireless spectrum that an individual operator can secure. Both America Movil and Telefonica have already reached that level. The recent move by the Mexican government to conduct auctions for both fiber optic strands and wireless spectrums are aimed to boost competition in the country’s telecom market.

On September 23, 2010, a court ruling prevented the Telecommunications Ministry of that country from allotting the slot of wireless spectrum to the Televisa-Nextel venture. Finally, all the hurdles are now clear and the joint venture is now free to install its wireless network.

Last February, Televisa signed an agreement with NII Holdings to acquire a 30% stake in the latter’s wireless arm in Mexico, Nextel for approximately $1.44 billion. Nextel is currently working on building its nationwide 3G wireless network.

Televisa is hoping to create an innovative converged communication platform by adding Nextel’s wireless and broadband services to its existing portfolio of pay TV services that provides market leading content and multiple distribution channels. This new venture will offer converged quadruple play services consisting of Wireless, TV, Broadband Data and Fixed line voice.

In a development from last June, the Communications and Transportation Ministry of Mexico awarded a 20-year lease for two strands of 19,457 Kilometers optical fiber lines to a consortium led by Televisa. The consortium formed by Televisa, Telefonica and Megacable Holdings SAB submitted $69.3 million for this bid. Televisa declared that the consortium will further invest more than $100 million to establish the telecom network.

We maintain our long-term Neutral recommendation for Televisa. Currently, it is a short-term Zacks #3 Rank (Hold) stock.