AMX America Movil SAB de CV

Grupo Televisa S.A.B. (TV) reported its second-quarter fiscal 2012 financial results, missing the Zacks Consensus Estimate by a penny. Quarterly consolidated net income was approximately $131.9 million, down 11.3% year over year. The year-over-year decline primarily resulted from an increase in foreign exchange loss along with a non-cash change in fair value of the company’s investment in GSF Telecom Holdings, the parent company of Grupo Iusacell. First-quarter earnings per Global Depository Shares were 23 cents, a penny short of the Zacks Consensus Estimate of 24 cents.

Quarterly consolidated net revenue of around $1,255.1 million was an improvement of 12.3% over the prior-year quarter. All the five revenue generating segments of Grupo Televisa witnessed considerable sales growth.

Quarterly gross margin was 56.5% compared with 55.9% in the year-ago quarter. Second-quarter consolidated operating income was $345 million, up 13.9% over the prior-year quarter. Quarterly operating margin was 27.5% compared with 27.1% in the year-ago quarter.

At the end of the first half of 2012, Televisa had a little over $1,557.7 million cash and marketable securities compared with $1,549.9 million at the end of 2011. Capital expenditure, during the reported quarter, was $12.4 million. At the end of the first half of 2012, Televisa had $3,980.9 million of outstanding debt on its balance sheet compared with $4,059.1 million at the end of 2011. At the end of the previous quarter, debt-to-capitalization ratio was around 0.47 compared with 0.49 at the end of 2011.

Content Segment

Quarterly total revenue was $579.8 million, up 8.2% year over year. Operating profit was $279.2 million, up 7.3% year over year. Quarterly operating margin was 48.2% compared with 48.6% in the year-ago quarter. Royalty from Univision was $64.2 million, up 6.7% year over year.  

Within this segment, Advertising revenue was $411.4 million, down 0.1% year over year. Network Subscription revenue was $59.5 million, up 31.3% year over year. Licensing and Syndication revenue was $108.9 million, up 37.8% year over year.  

Publishing Segment

Quarterly revenue was $68.6 million, up 16.7% year over year. Operating profit was $11.5 million, up 2% year over year. Quarterly operating margin was 16.7% compared with 19.1% in the year-ago quarter.

Sky Segment

Quarterly revenue came in at $262 million, up 13.6% year over year. Operating profit was $123.3 million, up 11.5% year over year. Quarterly operating margin was 47.1% compared with 47.9% in the year-ago quarter.

Cable and Telecom Segment

Quarterly revenue was $286.1 million, up 16.2% year over year. Operating profit was $108.9 million, up 32.9% year over year. Quarterly operating margin came in at 38% compared with 33.3% in the year-ago quarter.

Other Businesses Segment

Quarterly revenue was $82.3 million, up 20.1% year over year. Operating income was $3.8 million, up 366.1% year over year. Quarterly operating margin was 4.6% compared with 1.2% in the year-ago quarter.

Subscriber Statistics

As of June 30, 2012, Televisa had 2,232,831 Video subscribers; 1,176,250 Broadband subscribers; and 699,303 Telephony subscribers, which together constitutes 4,108,384 revenue generating units (RGU) in the Cable and Telecom segment. As of June 30, 2012, Televisa had 4,550,695 gross active Satellite TV subscribers including 161,191 commercial subscribers. These figures were up 26.9% and 4.7% year over year, respectively.

Our Recommendation

Televisa is on the verge of entering into the lucrative Mexican wireless market through its partnership with Grupo Iusacell. Mexican wireless market is highly monopolistic. Telcel, a unit of America Movil SAB (AMX), controls over 70% of the market, Telefonica SA (TEF) controls more than 22%, and Iusacell controls hardly 5% of market share. Undoubtedly, a foothold in the lucrative wireless market will make Televisa a highly integrated broadcasting and telecom operator in Mexico.

We maintain our long-term Neutral recommendation on Televisa. Currently, it holds a short-term Zacks #2 Rank (Buy) on the stock.

 
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