Grupo Televisa, S.A. (TV - Free Report) , the undisputed leader in the Mexican pay-TV market, has further solidified its foothold by acquiring a 100% stake in rival pay-TV operator Grupo Cable TV, popularly known as Cablecom S.A.
Last year, Televisa had acquired a 51% stake in Cablecom after convertible debt exchange of a 95% stake in Tenedora Ares SAPI, which originally owned 51% of Cablecom. The deal included an option to acquire the remaining 49%, subject to regulatory approvals.
Recently, Televisa declared its receipt of the required regulatory approval to acquire the remaining 49% stake in Cablecom for a total consideration of 8.55 billion Mexican Pesos (approximately $654 million).
Televisa, which serves 8.9 million customers through its cable or satellite TV services, currently dominates approximately 70% of the Mexican broadcasting and pay-TV market.Acquisition of Cablecom will add another 1.2 million customers (video, data or voice) to its kitty with at least 840,000 TV (video) subscribers.
Televisa currently serves approximately 3 million Internet (data) and telephony (voice) customers. Acquisition of Cablecom will render economies of scale to compete with America Movil SAB (AMX - Free Report) which serves 22 million high-speed Internet and telephony customers.
Meanwhile, 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 merely one or two companies dominating the market. The Mexican government, however, intends to increase competition by encouraging the entry of other operators.
In this regard, regulator Federal Telecommunications Institute, popularly known as IFT, identified broadcasting giant Televisa and telecom behemoth America Movil as the dominant players in their respective markets.
However, there is a provision in the new telecom regulation which enables any company to acquire its competitor so long their combined market share doesn’t exceed 20% of the Mexican telecommunications industry. In line with this provision, Televisa has duly acquired full control of Cablecom.
Other Stocks to Consider
Televisa currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the Broadcast TV/Radio industry include Media General Inc. and Saga Communications Inc. . Both the stocks currently carry a Zacks Rank #2 (Buy).