EUR 850.00 For Business Accounts Only

Morningstar | Grupo Televisa is a video content and distribution powerhouse, and pay TV has been performing well.

We are still bullish on Televisa's long-term prospects despite ongoing and potential regulatory changes. The firm is a powerhouse in Spanish-language media due to its programming prowess and ownership of the leading broadcast networks in Mexico, which garner about 70% audience share. Televisa is a dominant producer of Spanish-language programming, especially telenovelas, which draw huge audiences. Telenovelas are also popular with Spanish-speaking viewing audiences in the United States via distribution partner Univision, which pays royalties to Televisa based on an agreement that runs through 2025. We believe Televisa can retain a dominant position because of its huge market share and programming prowess, even though the government has granted a license for a new entrant into the broadcast market. In 2010, Televisa made an opportunistic $1.2 billion investment in Univision that gave it an initial 5% equity stake, 15-year debentures that can be converted into another 30%, and the option to acquire an additional 5% stake in Univision. It currently holds a 10% equity stake in Univision and has received approval from the Federal Communications Commission to increase its stake to 49%. Univision’s initial public offering is rumored to occur this year but may be delayed by recent performance issues. Combining the ownership stake with the higher 16% royalty rate that begins in 2018, Televisa holds a large economic interest in the U.S. Spanish-language media market. Televisa has used the cash flow from its TV broadcasting enterprise to become a dominant player in Mexico's pay-TV market by holding stakes in four pay-TV companies that control more than half of Mexico's total subscribers. Ifetel recently reversed its initial pay-TV review due to a court-ordered review. As a result, Televisa was declared an economic agent with substantial power in the pay-TV sector. Management has filed an injunction and is challenging the constitutionality of the court ruling. While we agree with the firm that the scope of the review was overly limited, the outcome of the challenge remains cloudy as the Mexican government appears to be in favor of breaking up large telecom and media firms.