UPDATE: Mexico's Televisa 2Q Profit Flat On Year At MXN1.8 Billion

Mexican broadcast and telecommunications concern Grupo Televisa SAB (TV, TLEVISA.MX) said Monday its net profit in the second quarter was unchanged from a year earlier at 1.8 billion pesos ($154 million) as higher royalties from U.S. network Univision Communications Inc. (UVN) and stronger sales from pay TV businesses offset a drop in broadcast-advertising revenue.

Sales in the quarter rose 4.7% to MXN15.13 billion. Royalties from Univision were 63% higher at $60.2 million following an agreement last year in which Televisa acquired a stake in the U.S. broadcaster and extended its program licensing agreement.

Televisa Executive Vice President Alfonso de Angoitia said during a conference call with analysts that the company expects royalties from Univision to reach $220 million this year.

Sales at satellite-TV business Sky Mexico rose 10% to MXN3.12 billion, as the unit added 274,000 subscribers for a total of just under 3.6 million.

Cable TV and telecommunications sales rose 15% to MXN3.33 billion.

The company also benefited from a decrease in financing costs as the Mexican peso appreciated 1.5% against the U.S. dollar during the quarter compared with a 4.1% depreciation in the like-2010 quarter.

The quarterly sales increases were offset by a 5.9% drop in broadcast advertising revenue, to MXN5.48 billion, as companies controlled by billionaire Carlos Slim pulled advertising with Televisa in a dispute over rates.

Televisa said that, excluding the effect of the Slim companies, broadcast revenue was 1% lower than a year ago.

Slim controls Mexico's two largest phone companies, fixed-line operator Telefonos de Mexico SAB (TMX, TFONY) and wireless carrier Telcel, a unit of America Movil SAB (AMX.MX, AMX, AMOV), among other firms.

Jose Baston, president of television and content at Televisa, said the company has begun to compensate for the loss of revenue from Slim's companies via advertising from other clients and cost controls.

Baston added that Televisa is open to negotiate with Slim's companies to bring them back on board "whenever they are ready."

Televisa also received revenue from the soccer World Cup in the second quarter of 2010 which didn't reoccur in the most recent quarter. Baston said that Televisa will encounter another difficult comparison base in the third quarter because World Cup revenue spilled into that period of 2010 as well.

Operating profit in the quarter slipped 0.6% to MXN4.21 billion.

Televisa plans to invest $1.6 billion for half of Mexican wireless carrier Grupo Iusacell, which is owned by the controlling shareholder of rival broadcaster TV Azteca SAB (AZTECA.MX).

De Angoitia dismissed concerns that Mexico's communications regulator Cofetel may not approve the transaction, saying that the deal should go through because Televisa doesn't have a presence in the wireless market.

He welcomed recent regulatory efforts to increase competition in telephony, saying that the reduction in termination rates for calls to mobile phones will likely benefit the end-consumer and act as an incentive for Televisa's fixed-line customers to complete more calls.

"We have not seen this type of change in Mexico in a long time--we are very happy," De Angoitia said.

-By Anthony Harrup and Amy Guthrie, Dow Jones Newswires; 5255-5890-5176; mexico@dowjones.com

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