Televisa Adjusted Profit Rises on Cable, Advertising Sales

Grupo Televisa SAB, the largest Spanish-language TV producer, reported a gain in fourth-quarter adjusted profit as cable and satellite subscriptions rose and advertising spending climbed.

Operating-segment profit, which leaves out items such as depreciation and amortization, rose 4.3 percent to 8.49 billion pesos ($639 million), Mexico City-based Televisa said in a statement. Sales rose 8.3 percent to 21.4 billion pesos, compared with the 20.8 billion-peso average of 10 analysts’ estimates compiled by Bloomberg.

New cable and satellite customers are propelling sales for Televisa, reducing the broadcaster’s reliance on over-the-air TV advertising. The Sky satellite business added 136,550 users, less than 245,000 average estimate of four analysts polled by Bloomberg. Cable connections, including TV, Internet and phone subscriptions, rose by more than 175,000 to 5.08 million.

The new customers are helping Televisa as it forgoes another source of revenue. The company will miss out on about 1.4 billion pesos in sales this year because of a new law that lets cable and satellite companies include its channels in their lineups for free instead of paying, Executive Vice President Alfonso de Angoitia said on a conference call with analysts today.

Dish Mexico and Axtel SAB have been retransmitting Televisa’s signals for free since September. Televisa is in a legal battle challenging the authority of Mexico’s Federal Telecommunications Institute to police the retransmissions of its broadcasts.

Iusacell Writedown

The impact of the law cut retransmission revenue by 22 percent from a year earlier to 639 million pesos in the fourth quarter, Televisa said. The company reported 8.32 billion pesos in revenue from TV advertising, 7.8 percent higher than a year earlier.

Televisa shares rose 2.3 percent to 76.31 pesos at the close of trading in Mexico City.

While growth slows for its Mexican television business, Televisa’s investment in U.S. Spanish-language TV is paying off. The company reported finance income of 5.36 billion pesos in the fourth quarter to reflect the increased value of its debt holdings in Univision Communications Inc., the largest U.S. Spanish-language broadcaster.

Conservative Valuation

Televisa calculated the value of the asset conservatively, and it may be worth more, Angoitia said. A financial investor acquired a 1.5 percent equity stake in Univision last month for $125 million, which would value Televisa’s investment at $3 billion instead of the $2 billion the Mexican company calculated itself, Angoitia said.

“It’s a valuable price discovery exercise,” Richard Dineen, a New York-based analyst at HSBC Holdings Plc, said in a phone interview. “The tension here is that private-equity investors are not lifetime holders. An exit is in the cards.”

The 1.5 percent stake could later be sold to a strategic buyer, which may include Televisa, Dineen said.

The company’s investment in Mexican mobile-phone operator Grupo Iusacell SA hasn’t gone as well. Televisa recorded a fourth-quarter loss from joint ventures of 4.74 billion pesos in the quarter, mostly to write down the value of Iusacell. After acquiring its 50 percent stake in the company for $1.6 billion in 2012, Televisa invested 1.59 billion pesos in the mobile-phone carrier in 2013.

The wireless company is in talks to combine its operations with Telefonica SA in Mexico, a person with knowledge of the matter said earlier this month.

“Consolidation may be good for the market down the road,” Angoitia said on the call today. Iusacell, which ended 2013 with 8 million subscribers, or 8 percent of the market, is focusing on growth and waiting for more clarity on regulatory matters, he said.

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