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Televisa Must Modify Iusacell Deal for Approval, Mexico Says

Feb. 7 (Bloomberg) -- Grupo Televisa SAB, the world’s largest Spanish-language broadcaster, must modify its proposal to enter the mobile-phone business to win approval for the $1.6 billion deal, Mexico’s antitrust agency said.

The plan to acquire a 50 percent stake in wireless carrier Grupo Iusacell SA would have created “grave risks” for competition, the agency said today in a statement explaining its Jan. 24 decision to reject the deal. Iusacell is owned by billionaire Ricardo Salinas, who controls TV Azteca SAB, Televisa’s main rival in the broadcast television market.

“Benefits in one market can’t be used to justify harming competition in other markets,” the agency said.

Televisa and Iusacell are planning legal filings to ask the agency to reconsider its decision. The companies can propose remedies to address the agency’s concerns in the filings. Neither company proposed such remedies in their original request for approval of the transaction, the agency said.

“Televisa would like to reiterate that the intent of its proposal is to promote competition in the phone industry so users have better prices and services,” Televisa said in an e-mailed statement. “Televisa is in favor of competition in all markets, and for that reason the viable options are being analyzed.”

Dan McCosh, a spokesman for Salinas, declined to comment.

Televisa fell 0.5 percent to 50.6 pesos at the close in Mexico City, its lowest level since Sept. 23. The shares have dropped 6.5 percent since the antitrust ruling was reported by El Universal newspaper on Jan. 25, compared with a 2.3 percent gain for the benchmark IPC index.

Deal Rejected

While the agency made its decision last month, it had to legally notify the parties before it could officially announce the ruling. Televisa and Iusacell disclosed last week they had been informed of the deal’s rejection.

Allowing Televisa to buy half of Iusacell would have created an incentive for the controlling shareholders to collaborate in broadcast television, the agency said. The companies attract almost all of Mexico’s broadcast viewers. Advertisers spend 57 percent of their budgets in Mexico on broadcast television, so prices in that market affect the prices of products for consumers, the agency concluded.

Broadcast television channels represent more than 40 percent of the pay-TV audience, so the “probable coordination” between Televisa and TV Azteca would allow the companies to use their programming, such as Mexican league soccer games, as an advantage over competitors in the pay-TV business, the agency said. Televisa controls three of Mexico’s largest cable operators and its biggest satellite-TV company. Iusacell started a pay-TV service, Totalplay, last year.

Eduardo Perez Motta, the agency’s chief, voted against the transaction, along with fellow commissioners Rodrigo Morales Elcoro and Miguel Flores Bernes. Commissioners Luis Alberto Ibarra Pardo and Cristina Massa Sanchez voted in favor of the transaction, arguing that it would benefit mobile-phone competition and that the agency could have imposed conditions to protect other markets.

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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