Televisa Back in Wireless Domain - Analyst Blog
June 19 2012 - 4:30AM
Zacks
Grupo Televisa
S.A. (TV), the largest media company in the Spanish
speaking world, is finally on the verge of entering into the
lucrative Mexican wireless market. Recently, the company won
conditional approval from the Mexican regulator CoFeCo (CFC) to
acquire 50% stake of Grupo Iusacell, a small wireless operator of
Mexico.
Yesterday, in a filing with the
Mexican stock exchange, Televisa declared that the company accepted
all the conditions imposed by CFC and thereby converted its $1.6
billion investment in the low-interest bearing notes of GSF Telecom
Holdings, the holding company of Grupo Iusacell, into 50% shares of
it.
CFC was initially reluctant about
this merger. The main concern of CFC was that although
Televisa-Iusacell venture will create a formidable player in the
highly concentrated Mexican wireless market, the merger will indeed
create a virtual monopoly in the Mexican TV market. WhileTelevisa
controls 70% share of the Mexican pay-TV and satellite TV market,
Grupo Iusacell is a part of Grupo Salinas, which also controls TV
Azteca, the second largest pay-TV operator in Mexico. In fact,
these two entities control approximately 100% of the Mexican TV
broadcasting market together.
To solve the monopolistic
concentration, CFC imposed several restrictive conditions on the
Televisa-Iusacell merger including (1) the deal will depend on the
success of the proposed government auction of the TV frequency. The
Mexican government wants at least a new TV broadcaster in addition
to incumbent Televisa and TV Azteca (2) both Televisa and TV Azteca
should refrain from forcing any TV advertiser to become a Iusacell
client (3) Televisa must offer new pay TV package that includes all
four of its free public channels for which the company currently
charges a fee to cable operators and (4) Televisa must offer the
sale of advertising time to all incumbent telecom operators.
The situation is just the opposite
in the wireless market. Here, Telcel, a unit of America
Movil S.A.B. (AMX), controls over 70% of the market,
Telefonica S.A. (TEF) controls more than 22%, and
Iusacell controls hardly 5% of market share. Interestingly,
Iusacell has an existing agreement with Telefonica for network
sharing in order to improve both the entities coverage and service
quality.
Televisa currently holds four
free-to-air broadcast channels, the largest of the two satellite TV
channels, and three cable units offering triple-play TV, phone and
Internet services. Undoubtedly, a foothold in the lucrative
wireless market will make it a complete and powerful telecom
operator in Mexico.
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis Report
GRUPO TELEVISA (TV): Free Stock Analysis Report
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