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We reaffirm our long-term Neutral recommendation on Grupo Televisa S.A. (TV - Analyst Report). The company’s third-quarter 2012 financial results easily outpaced the Zacks Consensus Estimates. In the reported quarter, except the Other business segment, all the remaining four business segments of Televisa witnessed considerable sales growth. Moreover, Televisa continues to generate higher royalties from its Univision venture.

At present, a considerable share of Televisa’s income comes from its U.S. operations, including the sale of content, website and cable television. We believe the deal will be beneficial to both Televisa and Univision. Televisa allows Univision to access its content and then rebroadcast it on television and the Internet for a royalty. The U.S. Hispanic TV market is highly lucrative and growing at a remarkable pace. In the previous quarter, royalty from Univision was $62 million, up 6.5% year over year. Management estimated that Univision will generate $245 million of royalty revenue in 2012.

We are quite optimistic regarding the newly formed Televisa-Iusacell venture in the Mexican wireless market. 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%, and Iusacell controls hardly 5% of market share.

Televisa 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. Nevertheless, We believe Televisa is currently fairly valued as the stock price has soared over 47% in the last year.   

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