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We reaffirm our long-term Neutral recommendation on Grupo Televisa S.A. (TV - Analyst Report) ahead of its third-quarter 2012 financial results. In the second quarter of 2012, all the five business segments of Televisa generated considerable revenue growth. Moreover, Teleisa is continuously generating higher royalties from its Univision venture in the U.S. We are quite optimistic regarding the newly formed Televisa-Iusacell venture in the Mexican wireless market.

The company at present controls four free-to-air broadcast channels, the largest of the two satellite TV channels, and three cable TV units offering triple-play TV, voice and Internet services. Undoubtedly, a foothold in the lucrative mobile market will make the company a highly integrated broadcasting and telecom operator in Mexico. Meanwhile the stock price has soared nearly 28% in the last year. We believe Televisa is currently fairly valued and will not provide above market gain anytime soon.

Televisa is finally on the verge of entering into the lucrative Mexican wireless market. In last June, the company won conditional approval from the Mexican regulator CoFeCo (CFC) to acquire 50% stake of Grupo Iusacell, a small wireless operator of Mexico controlling around 5% market share. Mexican wireless market is highly monopolistic. Telcel, a unit of America Movil SAB (AMX - Analyst Report), controls over 70% of the market, Telefonica SA (TEF - Analyst Report) controls more than 22%.

In a filing with the Mexican stock exchange, Televisa declared that the company accepted all the conditions imposed by CFC, and thereby converted its $1.6 billion investment in the low-interest bearing notes of GSF Telecom Holdings, the holding company of Grupo Iusacell, into 50% shares of it. Televisa-Iusacell venture will create a formidable player in the highly concentrated Mexican wireless market.

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