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Televisa Outperforms in 4Q

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Driven by strong growth in its pay-TV services, Grupo Televisa S.A.B. (TV - Free Report) handily beat the Zacks Consensus Estimates in the fourth quarter of 2012. Net income was approximately $241 million, up 20.1% year over year. The annualized upsurge primarily resulted from an increase in the top line and favorable movement of the foreign exchange rate. Earnings per Global Depository Shares were 42 cents, well above the Zacks Consensus Estimate of 39 cents.

Quarterly consolidated net revenue of around $1,536 million imroved 8.2% over the prior-year quarter easily beat the Zacks Consensus Estimate of $1518 million. All 5 business segments of Grupo Televisa witnessed considerable sales growth. Televisa currently has a Zacks Rank #3 (Hold).

Gross margin was 55.4% compared with 55.8% in the year-ago quarter. Consolidated operating income was $413.1 million, up 3.5% from the prior-year quarter. Operating margin was 26.9% compared with 28.1% in the year-ago quarter.

Capital expenditure during 2012 was $881.1 million. At year-end 2012, Televisa had approximately $1,892 million in cash and marketable securities and $4,112.1 million in debt outstanding compared with $1,549.9 million of cash and marketable securities and $4,059.1 million outstanding debt at the end of 2011. At the end of 2012, debt-to-capitalization ratio was around 0.43 compared with 0.49 at the end of 2011.

Content Segment

Quarterly total revenue was $793 million, up 4.9% year over year. Operating profit was $373.1 million, up 0.3% year over year, and operating margin was 47% compared with 49.2% in the year-ago quarter. Full-year 2012 royalty from Univision was $247.6 million, up 10.1% year over year.  

Within this segment, Advertising revenue was $598.8 million, up 3.6% year over year. Network Subscription revenue was $63.6 million, up 17.3% year over year. Licensing and Syndication revenue was $130.6 million, up 5.5% year over year.  

Publishing Segment

Quarterly revenue was $77.6 million, up 2.6% year over year. Operating profit was $10.5 million, down 15.3% year over year, and operating margin was 13.6% compared with 16.4% in the year-ago quarter.

Sky Segment

Quarterly revenue came in at $295.7 million, up 19.2% year over year. Operating profit was $124.5 million, up 13.8% year over year. Quarterly operating margin was 42.1% compared with 44.1% in the year-ago quarter.

Cable and Telecom Segment

Quarterly revenue was $313.3 million, up 9.8% year over year. Operating profit was $122.5 million, up 12.7% year over year. Operating margin came in at 39.1% compared with 38.1% in the year-ago quarter.

Other Businesses Segment

Quarterly revenue was $82.3 million, up 3.1% year over year. Operating income was $1.2 million compared with an operating loss of $68.2 million in the year-ago quarter. Operating margin was 1.4% compared with (8.5%) in the year-ago quarter.

Subscriber Statistics

As of Dec 31, 2012, Televisa had 2,308,794 Video subscribers; 1,306,104 Internet Broadband subscribers; and 754,302 Telephony subscribers, which together constitutes 4,369,200 revenue generating units (RGU) in the Cable and Telecom segment. The company also had 5,153,445 net active Satellite TV subscribers including 164,669 commercial subscribers. These figures were up 28.6% and 4.5% year over year, respectively. In the reported quarter, Sky segment added 270,000 net active subscribers.

Our Take

Televisa is on the verge of entering into the lucrative Mexican wireless market through its partnership with Grupo Iusacell. Earlier, in 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. due to prolonged legal battles.

The Mexican wireless market is highly monopolistic. Telcel, a unit of America Movil SAB (AMX - Free Report) , controls over 70% of the market, Telefonica SA (TEF - Free Report) controls more than 22%, and Iusacell controls hardly 5%. Undoubtedly, a foothold in the lucrative wireless market will make Televisa a highly integrated broadcasting and telecom operator in Mexico.

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