Televisa Grapples With Pena Nieto’s Push for Competition

When Enrique Pena Nieto ran for president in 2012, opponents nicknamed him the Televisa candidate for what they described as favorable coverage from Mexico’s largest broadcaster. Now as president he’s pushing for more competition that will hurt Grupo Televisa SAB’s revenue growth.

In a move that surprised the industry for its speed and resolve, Pena Nieto last week persuaded the Supreme Court to revoke a lower court’s injunction suspending regulatory measures against Televisa.

Pena Nieto’s action may signal that a Mexican business tactic of delaying regulatory decisions with court injunctions is losing its effectiveness. At stake for Televisa is the revenue it has said it will forgo if it’s unable to license its programming to pay-TV companies for a fee. The company said the current situation aids Dish Mexico, which competes with Televisa’s own Sky satellite unit.

“This was a wake-up call for Televisa, for the regulator to say, ‘We count with the backing of the presidential office,’” Gabriel Sosa Plata, a media and telecommunications professor at Mexico City’s Universidad Autonoma Metropolitana, said in a phone interview. “In Mexico, litigation has the objective to lengthen decisions. The longer it goes, the fewer decisions are made -- and they wanted to delay this decision.”

‘Absurd’ Claim

Televisa said it never intended to delay a ruling by the regulator, the Federal Telecommunications Institute. Its lawsuit over retransmission of broadcast signals was filed against Dish in 2011, well before last year’s telecommunications law, and the judge in the case issued an injunction claiming the IFT didn’t have the authority to rule on the matter.

“It’s absurd to suppose that we want to delay the regulator’s pronouncements,” said Hector Villareal, a Televisa press official, in an interview. “To the contrary, the status quo hurts Televisa and benefits Dish, which doesn’t only show our channels but advertises the retransmission of our channels to consumers.”

The broadcaster, controlled by billionaire Emilio Azcarraga, will still get its day in court. While the Supreme Court’s ruling paused the lower court’s injunction, letting the IFT move forward, the high court still must make a final decision on whether the agency has jurisdiction over retransmission.

Once Pena Nieto and the Supreme Court intervened, the Federal Telecommunications Institute went into action, ordering Televisa to offer its channel 2 and channel 5 broadcast networks to cable and satellite providers at no charge. The must-offer rule will cause Televisa to miss out on as much as 1.4 billion pesos ($106 million) in sales this year, the company said.

Expeditious Answer

Pena Nieto was able to get an uncharacteristically expeditious answer from the court, according to Federico Hernandez, a lawyer who specializes in telecommunications at the Barrera, Siqueiros y Torres Landa law office in Mexico City.

“In less than a week, the regulator managed to untie itself from a lawsuit that could have taken a big toll on its image,” Hernandez said in a phone interview. “The power behind a broadcaster, such as Televisa, goes way beyond judicial matters. They have a tactical influence that’s difficult to measure.”

Televisa said it’s waiting to see a formal copy of the ruling before it decides what to do next. The IFT published the rules on its website today and said they will appear in the national gazette in the coming days. The president’s press office didn’t respond to requests for comment.

Concentrated Markets

Mexico has highly concentrated phone and broadcast markets, in which billionaire Carlos Slim’s America Movil SAB controls about 70 percent of Mexico’s mobile-phone customers and 80 percent of its landlines, and where 96 percent of all viewers are split among Azcarraga’s Televisa and Ricardo Salinas’s TV Azteca SAB. The IFT ruling also affected Azteca’s channels 7 and 13.

The IFT dealt Televisa another blow this week, announcing that it would fine the company’s Cablevision unit $659,000 under a law that prohibits price-fixing. Another cable operator, Megacable Holdings SAB, was fined $2.5 million under the ruling.

Megacable plans to challenge the regulator’s fine in court in the coming weeks, General Counsel Ramon Olivares said in a telephone interview. The IFT penalized the company in areas where it doesn’t even have licenses to operate, he said. A Televisa press official didn’t reply to a request for comment on the price-fixing case.

Pena Nieto’s backing of IFT contradicts the idea that he has a close relationship with Televisa, a charge he has denied. He told media company Grupo Expansion in a 2012 interview that he wasn’t the Televisa candidate, calling the accusation a myth.

Televisa Candidate?

Javier Corral, a lawmaker for the opposition National Action Party, was one of the critics of Pena Nieto’s press coverage, calling him the Televisa candidate in a 2012 column in online political magazine La Silla Rota.

“He gets the best image and focus,” Corral said. “The candidate is under Televisa’s protection.” Corral’s stance hasn’t changed, a press official for the senator said yesterday.

The IFT’s ruling is a victory for Dish Mexico, which has a marketing partnership with America Movil.

Now that it has the nation’s most-watched stations, Dish’s channel lineup is on more equal footing against Sky and against cable companies that had paid Televisa in the past to use the signal.

Televisa had protested Dish’s decision in September to move ahead with carrying the broadcaster’s channels without waiting for a regulatory decision. A Dish press official had no immediate comment.

Cutting Growth

Retransmission fees represent a small part of the sales in Televisa’s TV unit, which gets more than 70 percent of its revenue from advertising. Still, the must-offer rules cut into one of its sources of growth. Revenue from fees charged to pay-TV operators climbed 2.3 percent last quarter, down from growth of 10 percent or more in the previous three quarters.

Last week, Televisa reported a 4.3 percent gain in fourth-quarter adjusted profit to 8.49 billion pesos. Sales climbed 8.3 percent from a year earlier to 21.4 billion pesos. Its shares fell 2.2 percent to 75.91 pesos at the close today in Mexico City.

For years, operators in the Mexican telecommunications industry have relied on legal tactics that allowed them to indefinitely suspend potentially unfavorable rulings from regulators, said Irene Levy, the president of Observatel, a Mexico-City based group that analyzes the telecommunications industry.

Indefinite Suspensions

In 2012, Televisa got a temporary injunction stopping the government from proceeding with plans to switch from analog to digital broadcasts. After passing the telecommunications law last year, the government is now moving forward with the transition with a pilot program.

America Movil used injunctions in 2011 to stave off antitrust fines and to keep regulators from enforcing fee cuts. An America Movil press official declined to comment.

“These antiquated litigation practices, which even motivated this reform, have to stop,” IFT President Gabriel Contreras said in a press conference in Mexico City last week. “We live in a state of law.”

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