July 8 (Bloomberg) -- Grupo Televisa SAB got a boost from soccer’s World Cup in the second quarter, with sports fans drawing higher advertising spending and clamoring for satellite subscriptions.
Operating profit rose 2.1 percent from a year earlier to 7.62 billion pesos ($585 million), leaving out depreciation, amortization and other expenses, according to a statement yesterday from the world’s biggest Spanish-language broadcaster. That surpassed the 7.5 billion-peso average of analysts’ estimates compiled by Bloomberg.
Televisa, which had rights to all 64 World Cup matches through its Sky satellite unit, is relying on exclusive content to draw viewers and advertisers. The growth helps compensate for the revenue Televisa was forced to give up last year, when new regulations required the company to offer up its two most popular broadcast channels to other cable and satellite companies for free.
While the World Cup effect aided Televisa, the tournament is only temporary. Sky’s subscriber growth is likely to be milder in the future, executives said today on a conference call. Televisa shares dropped 2.9 percent to 89.69 pesos at the close in Mexico City.
Satellite users grew by 203,262 in the second quarter, compared with the 140,000 average estimate of three analysts compiled by Bloomberg. The company ended the quarter with 6.4 million satellite customers, up 13 percent from a year earlier, compared with a growth rate of 14 percent in the first quarter.
Cable connections -- Internet, video and phone -- totaled 5.4 million, an increase of 190,000 from the prior quarter, compared with the 150,000 average estimate. Video customers were up 6.9 percent from a year earlier, up from 6.5 percent in the first quarter.
Last weekend, Mexico’s Senate approved measures that also force the broadcaster to publish its advertising rates and stand by them regardless of who the customer is. The bill has been sent to the lower house of Congress for approval.
“While there are factors that benefit Televisa’s operations in 2014, such as the dynamism of Sky and Cablevision, the implementation of must carry, must offer and stronger regulation could limit the company’s growth,” Valeria Romo, an analyst with Banco Monex SA, said in an e-mailed report today.
Net income jumped to 2.21 billion pesos, or 77 centavos a share, from 1.83 billion pesos, or 63 centavos, lifted by improved results from investments in Univision Communications Inc. and Grupo Iusacell SA. Total sales climbed 7.1 percent to 19.3 billion pesos, in line with analysts’ estimates.
Iusacell, Mexico’s third-largest mobile-phone company, has struggled to compete with billionaire Carlos Slim’s America Movil SAB, which controls 70 percent of the market. Televisa is interested in mergers in the mobile industry to better compete, though it’s awaiting the outcome of the telecommunications bill to make investment plans, executives said on the conference call today. Iusacell is co-owned by Televisa and billionaire Ricardo Salinas.
Sales from the content business, which includes broadcast and cable networks as well as syndication, rose 4.4 percent in the quarter to 8.61 billion pesos. In May, Televisa’s president of content, Jose Baston, said the company was in negotiations to develop shows for video-streaming provider Netflix Inc. That month, the broadcaster also announced a five-year programming deal with Sony Pictures.
Advertising sales climbed 6 percent to 6.26 billion pesos as companies spent more for World Cup spots. The tournament also increased Televisa’s costs, with the content unit’s profit margin falling 3.3 percentage points to 46 percent. The World Cup normally stretches from the end of the second quarter to the beginning of the third. Mexico’s national team bowed out at the very end of the second quarter, with a June 29 loss to the Netherlands.
Televisa shares have climbed 14 percent this year on optimism that the new telecommunications laws will help it compete with America Movil for Internet and phone users.
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