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Grupo Televisa S.A. - GDS (TV)

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We downgrade our recommendation on Grupo Televisa S.A. (TV) to Underperform following its second-quarter 2011 financial results, which fell below the Zacks Consensus Estimates. 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 spent more in order to retain and solidify its customer base. Therefore, depreciation and amortization charges increased by leaps and bounds while significantly hurting the company's bottom line.

Televisa is trying hard to enter into the lucrative wireless market of Mexico. However, we remain concerned that the company may not get the regulatory approval. We believe a prolonged legal battle 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.

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