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Bear of the Day

We reaffirm our Underperform recommendation on Grupo Televisa S.A. (TV) global depositary shares (GDS) ahead of its third quarter-2011 financial results. Televisa lost a significant amount of advertising revenue from businesses of Mexican telecom tycoon Carlos Slim. Intensifying competition in the Mexican pay-TV market has forced Televisa to spend more in order to retain and solidify its customer base.

As a result, depreciation and amortization expenses increased by leaps and bounds which significantly hurt the company's bottom line. Televisa is trying its best to enter into the lucrative wireless market of Mexico. Despite this, we remain concerned that the company may not get the necessary regulatory approvals.

We believe prolonged legal battles with Carlos Slim controlled entities will continue to affect the overall financials of Televisa in the rest of 2011. We do not find any near-term catalyst for the company to drive the stock price.

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