The largest global Spanish-language broadcaster, Grupo Televisa SA (TV), has announced plans to sell approximately 10 billion pesos ($802 million) of fixed-rate bonds due in 2020 to fund acquisitions. The money is likely to be utilized to acquire a 35% stake of Univision for a consideration of around $1.2 billion. Almost a year ago, Televisa raised $600 million by issuing fixed-rate bonds.
Televisa is also in talks with NII Holdings Inc. (NIHD) over its $1.44 billion investment in the mobile-phone company’s Mexican unit, Nextel. Legal problems have been cropping up since Televisa’s agreement with Nextel. The primary condition of the deal will be a wireless license to enter the extremely competitive cell phone market, which the companies obtained a few days back to deploy a wireless network across the country.
Televisa continues to face threats from its competitors such as TV Azteca and mobile phone operator Iusacell who have left no stone unturned to stop the merger by dragging the Televisa-Nextel deal to local courts for several weeks. Last week, a judge ruled in favor of Iusacell, prohibiting Televisa and Nextel from using the spectrum they already bought for an undisclosed guarantee amount.
Televisa expects to create an innovative converged communication platform by adding Nextel’s wireless and broadband services to its existing portfolio of pay TV services. This new venture will offer converged quadruple play services, comprising Wireless, TV, Broadband Data and Fixed-Line voice.
A considerable share of Televisa’s income comes from its U.S. operations, including the sale of content, website and cable television. However, recently, it has been hit hard by the prevailing adverse economic conditions. Although Televisa is in a better position to face the economic crisis compared with other companies, it will be hard to completely avoid the impact of the adverse economic scenario.
Televisa is a dominant force in the Mexican media business. The company enjoys a monopoly with around 70% of the Mexican open television market. Televisa has a stable customer base in different sectors, including Television broadcasting, pay television network, publishing and radio.
We believe entry into the wireless services business will open up a significant new source of revenue growth in the long run. Furthermore, Televisa has been expanding into more stable and developed markets in the U.S. and Europe.
We maintain our long-term Neutral recommendation for Televisa. Currently, it is a short-term Zacks #3 Rank (Hold) stock.
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