Grupo Televisa S.A. (TV), the largest media company in the Spanish speaking world, has decided to acquire the remaining 41.7% stake in local cable TV company Cablemas for approximately $397 million.

Cablemas offers triple-play bundled voice, video and data services in Mexico. Acquisition of 100% stake in Cablemas will further consolidate Televisa’s market share in Mexico. Cablemas has nearly 1 million cable TV subscribers, 360,000 Internet subscribers and 205,000 telephony subscribers.

Televisa is a dominant force in the Mexican media business. The company is almost a monopoly with around 70% of the Mexican open television market. In the last quarter, four of the top-five rated soap operas in Mexico were produced and transmitted by Televisa. As a result, the pay-TV revenue and profit accelerated.

Even though it has a comfortable position in the Mexican market, Televisa has been expanding to more stable and developed markets in the U.S. Televisa’s goal is to create a North American Spanish language media empire, comprising broadcast, Internet, publishing and live events. The potential for growth in the U.S. Spanish market is remarkable and Televisa is in a great position to take advantage of this trend.

Televisa has effectively purchased a 35% stake in its U.S. rival Univision Communications for $1.2 billion. As per the agreement, the company paid $130 million in cash for a 5% stake and raised convertible debt for the remaining 30% stake. Televisa also enjoys the right to buy an additional 5% stake over the next five years, bringing its potential ownership up to 40%.

Televisa now wants to concentrate on its core entertainment content creation and distribution businesses rather than bearing huge legal expenses for a new venture such as providing wireless services with NII Holdings Inc. (NIHD). The deal with Univision becomes very handy for Televisa to pursue this goal. The U.S. Hispanic TV market is highly lucrative and growing at a remarkable pace.

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

 
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