Latin Finance - January/February 2011 - 56

grupo televisa

Televisa Builds a Moat
by Jef Cozza rupo Televisa’s announcement last year that it would take a 30% stake in Nextel Mexico for $1.44 billion in cash seemed perfectly in line with its stated intention to provide Mexican consumers with television, internet, landline and mobile service, the so-called quadruple play. “With this venture we will be able to offer to our customer base the first quadruple play in Mexico, which paves the way for a successful integrated media and telecom strategy,” Emilio Azcarraga Jean, chairman and CEO of Televisa, said at the time. Already a dominant player in Mexico in the first three services, buying a piece of Nextel would give Televisa the final leg of its platform. The deal had been contingent on acquiring 30 megahertz in mobile phone spectrum via an auction held by the Mexican government. Despite a series of lawsuits by Grupo Iusacell, Mexico’s third largest wireless provider, seeking to block an auction from which it was excluded, Televisa and Nextel were awarded the license in October. Which is why Televisa’s announcement that it would walk away surprised some people. “To just do nothing with respect to adding a wireless capability would be surprising,” says James Allen, head of LatAm M&A at Morgan Stanley, who is not involved with either company. “It wouldn’t be surprising to see Televisa and Nextel arrive at a recut deal, or for Televisa to find some alternate arrangement for wireless,” Allen adds. Lack of other partners for Televisa in Mexican telecoms could force it to deal with Nextel if it wants to go mobile. This could be done through a smaller equity stake in NII Holdings, or by paying a lower price, says Allen.

Televisa’s partnership with Nextel may be off the table. But the Mexican media conglomerate is still expected to pursue mobile to unlock value in its content.

The Televisa control room: Nextel is still in play and Megacable is an option Neither Nextel nor Televisa gave any indication as to why the deal had fallen through in a terse joint press release issued in October 18. However, it is almost certain that Televisa was the marriage wrecker. Nextel says it will continue its 3G network buildout with or without Televisa’s investment. Televisa, meanwhile, now has the option of negotiating a commercial agreement with Nextel or Iusacell without a major equity investment. After announcing the breakup, Televisa’s ADRs rose 1.5 % while Nextel dropped 2.68%. That will likely give Televisa negotiating leverage if and when it decides to return to the table, says a banker. Televisa began as a radio broadcast station in 1930 founded by Emilio Azcárraga Vidaurreta. Azcárraga expanded this into a multimedia conglomerate with operations in broadcast television, satellite, cable, print media and internet. The $12.9 billion market cap company had 52.3 billion pesos in revenues as of November 30, and was taken over by Azcárraga’s son Emilio Azcárraga Jean in 1997. Television broadcasting remains its major source of revenue, 38% according to its most recent quarterly filing, compared with 20% each for its cable & telecom and pay-per-view.

56 LatinFinance

January/February 2011

Latin Finance - January/February 2011

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