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Televisa to Gain from Mexican Law Reform

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The government of Mexico has decided to reform its telecommunications sector, predominantly the wireline and wireless phone segments and the cable and satellite TV segments. The telecommunications sector in Mexico is highly monopolistic with one or two companies dominating the market.

In this regard, regulator Federal Telecommunications Institute, which is popularly known as IFT, identified telecom behemoth America Movil S.A.B. (AMX - Free Report) and broadcasting giant Grupo Televisa S.A.B. (TV - Free Report) as the dominant players in the respective markets.

The new telecommunications industry reform bill of the Mexican government may pave the way for Televisa to capture a large chunk of the wireless market share. The new regulations will also allow America Movil to enter the broadcasting market of Mexico, which has been controlled by Televisa for a long time.

However, a recent industry report stated that the proposed regulation will defer America Movil’s television expansion plans for at least two years.

During these two years, Televisa can reformulate its broadcasting and media strategy and can also take strategic decisions regarding the lucrative Mexican wireless industry.

As stringent IFT measures, Televisa has to share its broadcast towers with competitors for a stipulated amount of fees. Moreover, the company will not be allowed to acquire exclusive broadcasting rights of popular sports and entertainment events such as world cup football.

Recently, Televisa stated that the new government telecommunications bill would impose disproportionate obligations on the company such as, limitations on its advertising sales, use of infrastructure and content distribution. Currently, Televisa has a Zacks Rank #4 (Sell). 

In 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. owing to prolonged legal disputes. Currently, the company holds a 50% stake in Grupo Iusacell, a small wireless operator of Mexico.

However, Bloomberg reported that Telefonica S.A. (TEF - Free Report) is negotiating with Televisa and Grupo Salinasto, the remaining 50% stake holder of Iusacell, to acquire the company.

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