Televisa and Its Peers Need to Work Together Against Mexican Giant America Movil

Director

Michael Hodel

Historically a powerhouse in Spanish-language media, Televisa is now focused primarily on Mexican telecom, a highly competitive market that would benefit greatly from consolidation. The firm also holds a majority interest in satellite television provider Sky Mexico and a minority interest in TelevisaUnivision, the largest Spanish-language media company globally, in addition to several smaller holdings it plans to spin off. We expect Televisa will continue to refine its portfolio as it finds opportunities to improve its competitive position or realize value for shareholders. 

Televisa used cash flow from its TV broadcasting enterprise to become a major player in Mexico's telecom market, providing broadband, television, and phone services via a handful of subsidiaries under a single brand, Izzi. We believe that broadband is the largest growth opportunity for Televisa, as Mexico’s broadband penetration remains around 60%. The firm’s networks can reach 19 million homes, or about half of the Mexican population, and it continues to invest to expand its reach. 

However, the firm is seeing stiff competition from cable rival Megacable, which is also expanding its footprint and now reaches 12 million homes, Total Play, which has expanded its fiber network to reach more than 17 million homes, and America Movil’s Telmex, which is upgrading its ubiquitous phone network to fiber. Televisa holds about 25% Mexican broadband market share, making it a vital player in the industry. But, we would like to see the four major players scale back their expansion efforts to limit the number of areas where three or four are present. 

We believe Sky, which provides television service to about 6 million Mexican households, is in a state of decline. The expansion of broadband availability and high-quality wireless service will likely increase the ways in which consumers can access content. Still, we expect the business will retain a core loyal customer base and continue to generate consistent cash flow thanks to its highly variable cost structure.

Business Strategy & Outlook

We assign Grupo Televisa a narrow moat. 

Via its satellite (Sky Television) and cable platforms (Izzi), Televisa is the largest pay-TV distributor in Mexico, with a market share of roughly 60%. Despite rapid subscriber growth in pay TV over the past decade in Mexico and cord-cutting in the U.S., Mexico remains just behind the U.S., with around 60% penetration. While we don't expect pay-TV penetration to increase, we do expect it to decline slower than the cord-cutting pace seen in the U.S. 

Izzi also offers wireline broadband service and has a 24% market share, behind the dominant player, America Movil's Telmex, with 43% share. This service accounts for an increasingly important piece of Televisa's business overall: the cable and telecom segment accounted for 46% of revenue in 2021, up from about 33% five years earlier and will account for around two thirds of revenue in 2022 now that the content business was spun off and merged with Univision. The Mexico broadband market has consolidated over the past decade and now features only four operators with over 1% share. While Telmex remains the dominant provider, many of Telmex's customers subscribe to its older DSL service, which has allowed Izzi and the other two distributors (Megacable and Totalplay) to capture most of the industry’s growth over the past several years, decreasing Telmex's dominance considerably (its share was 69% in 2013).

While Telmex has been adding fiber to its nationwide copper network, the firm likely passes fewer than 10 million homes with fiber to the home. Telmex has also pushed fiber deeper into other areas, shortening copper loop lengths to offer faster DSL speeds, but we suspect speeds in these neighborhoods typically top out at 25-50 Mbps. In contrast, Izzi passes almost 18 million homes with hybrid-fiber networks that use DOCSIS technology, capable of reliably delivering data speeds of up to 1 Gbps, which should provide service that competes well against fiber alternatives for the foreseeable future. 

We think the historically benign regulatory environment in Mexico had been a notable factor in Grupo Televisa accumulating its large collection of assets and market power. Televisa was allowed to build a content empire thanks to its dominant share of broadcast TV viewing and now has added ownership stakes in distribution as well. However, the Mexican government did change regulations in the telecom industry in attempt to curtail the market dominance of America Movil and Grupo Televisa. Given this backdrop, we continue to monitor the regulatory changes to gauge any potential impact on the long-term earning potential of Televisa.

Narrow

Economic Moat

Grupo Televisa, S.A.B.

Grupo Televisa SAB engages in the provision of media products and services. It operates through the following segments: Content, Sky, Cable, and Other Businesses. The Content segment includes advertising, network subscription revenue and licensing and syndication. The Sky segment includes direct-to-home satellite television system. The Cable segment offers video, high-speed data and voice services to residential and commercial customers, including small- and medium-sized businesses and hotels; and provides telecommunications services, including voice, data, and managed services, to domestic and international carriers and to enterprise, corporate, and government customers. The Other Businesses segment comprises of publishing, gaming, soccer, radio, feature-film distribution, and publishing distribution activities. The company was founded in 1930 and is headquartered in Mexico City, Mexico.

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Grupo Televisa, S.A.B. (NYSE:TV ) Q2 2023 Earnings Conference Call July 26, 2023 11:00 AM ET Company Participants Alfonso de Angoitia - Co-CEO Francisco Valim - CEO of Cable Luis Malvido - CEO, Sky Carlos Phillips - CFO Conference Call Participants Carlos Legarreta - Itau Vitor Tomita - Goldman Sachs Marcelo Santos - JPMorgan Fred Mendes - Bank of America Operator Good morning, everyone, and welcome to Grupo Televisa's Second Quarter 2023 Conference Call.

Grupo Televisa, S.A.B. (TV) Q2 2023 Earnings Call Transcript

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Is Grupo Televisa (TV) a Great Value Stock Right Now?

The mean of analysts' price targets for Grupo Televisa (TV) points to a 61.4% upside in the stock. While this highly sought-after metric has not proven reasonably effective, strong agreement among analysts in raising earnings estimates does indicate an upside in the stock.

Wall Street Analysts Predict a 61.4% Upside in Grupo Televisa (TV): Here's What You Should Know

Grupo Televisa (TV) has been upgraded to a Zacks Rank #2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.

Grupo Televisa (TV) Upgraded to Buy: Here's What You Should Know

Grupo Televisa, S.A.B. (TV) Q1 2023 Earnings Call Transcript.

Grupo Televisa, S.A.B. (TV) Q1 2023 Earnings Call Transcript

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Grupo Televisa, S.A.B. (NYSE:TV ) Q4 2022 Results Conference Call February 24, 2023 10:00 AM ET Company Participants Alfonso de Angoitia - Co-Chief Executive Officer Pepe Antonio Gonzalez - Chief Executive Officer of Cable Luis Malvido - Chief Executive Officer of Sky Carlos Phillips - CFO of Grupo Televisa Conference Call Participants Fred Mendes - Bank of America Leonardo Ramos - UBS Marcelo Santos - JP Morgan Carlos Legarreta - Itau Soomit Datta - New Street Research Operator Good morning, everyone, and welcome to the Grupo Televisa's Fourth Quarter and Full Year 2022 Conference Call.

Grupo Televisa, S.A.B. (TV) Q4 2022 Earnings Call Transcript

Grupo Televisa, S.A.B. shares are already up almost 40% since the turn of the year. Valuation remains depressed, especially on the assets side.

Grupo Televisa: 2023 Rally Could Indeed Continue For Some Time To Come

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Grupo Televisa, S.A.B. (NYSE:TV ) Q3 2022 Earnings Conference Call October 28, 2022 9:00 AM ET Company Participants Alfonso de Angoitia – Co-Chief Executive Officer Pepe Antonio Gonzalez – Chief Executive Officer of Cable Luis Malvido – Chief Executive Officer of Sky Conference Call Participants David Joyce – Barclays Carlos Legarreta – Itau Alejandro Chavez – Credit Suisse Soomit Datta – New Street Research Marcelo Santos – JPMorgan Alejandro Gallostra – BBVA Operator Good morning, everyone, and welcome to the Grupo Televisa's Third Quarter 2022 Conference Call.

Grupo Televisa, S.A.B. (TV) Q3 2022 Earnings Call Transcript

Mexican broadcaster Grupo Televisa's satellite television unit SKY has launched new mobile phone services using AT&T's network, the company said Tuesday, in a bid to expand product offerings to its clients.

Televisa's Sky unit launches mobile services with AT&T network

Grupo Televisa S.A.B. (NYSE:TV ) Q2 2022 Earnings Conference Call July 27, 2022 9:00 AM ET Company Participants Alfonso de Angoitia - Co-Chief Executive Officer Pepe Antonio Gonzalez - Chief Executive Officer, Cable Luis Malvido - Chief Executive Officer, Sky Carlos Phillips - Chief Financial Officer Conference Call Participants Alejandro Gallostra - BBVA David Joyce - Barclays Marcelo Santos - JPMorgan Alejandro Chavelas - Credit Suisse Carlos Legarreta - GBM Operator Good morning, everyone, and welcome to the Grupo Televisa's Second Quarter 2022 Conference Call.

Grupo Televisa, S.A.B. (TV) CEO Alfonso de Angoitia on Q2 2022 Results - Earnings Call Transcript

Grupo Televisa, Mexico's largest broadcaster, reported on Tuesday a 44% jump in net profit in the second quarter compared with the year earlier period.

Mexico's Televisa posts 44% jump in Q2 net profit

Televisa's recent carve-out has resulted in a cleaner capital structure for the remainco while retaining exposure to the high-growth TelevisaUnivision entity. With advertising momentum buoying results and Vix/Vix+ showing promise for the long term, there is a lot to like here.

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Grupo Televisa, S.A.B. (NYSE:TV ) Q1 2022 Earnings Conference Call April 27, 2022 9:00 AM ET Company Participants Alfonso de Angoitia – Co-Chief Executive Officer Antonio Gonzalez – Chief Executive Officer of Cable Luis Malvido – Chief Executive Officer of Sky Carlos Phillips – Chief Financial Officer Conference Call Participants David Joyce – Barclays Marcelo Santos – J.P.

Grupo Televisa, S.A.B. (TV) Management on Q1 2022 Results - Earnings Call Transcript

Grupo Televisa, Mexico's largest broadcaster, on Tuesday posted a big jump in first quarter net profit versus a loss in the same period a year earlier, boosted by discontinued operations related to its content merger with Univision.

Mexico's Televisa reports first-quarter boost in net profit on Univision fusion

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Grupo Televisa, Mexico's largest broadcaster, reported on Thursday an 8.6% dip in net profit in the fourth quarter compared with the same period a year earlier.

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The stock price of Grupo Televisa SAB (NYSE: TV) increased by 1.86% in the most recent trading session. This is why it happened.

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NEW YORK and MEXICO CITY, Feb. 1, 2022 /PRNewswire/ -- Grupo Televisa, S.A.B ("Televisa"; NYSE:TV; BMV:TLEVISA CPO) and Univision Holdings II, Inc. (together with its wholly owned subsidiary, Univision Communications Inc., "Univision") today announced the completion of the transaction between Televisa's media content and production assets and Univision. The new company, which is named TelevisaUnivision, Inc. (the "Company" or "TelevisaUnivision"), creates the world's leading Spanish-language media and content company.

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NEW YORK & MEXICO CITY--(BUSINESS WIRE)--Grupo Televisa, S.A.B (“Televisa”; NYSE:TV; BMV:TLEVISA CPO) and Univision Holdings II, Inc. (together with its wholly owned subsidiary, Univision Communications Inc., “Univision”) today announced the completion of the transaction between Televisa's media content and production assets and Univision. The new company, which is named TelevisaUnivision, Inc. (the “Company” or “TelevisaUnivision”), creates the world's leading Spanish-language media and conten

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