The last two weeks have been intense for Grupo Televisa. While its shares fell dramatically, a risk agency cut its credit rating due to rising costs and a drop in subscribers. Surprisingly, a few days later, the market began to respond to reports from Wall Street that the stock was trading below its value, which strongly boosted the shares. The episode is a symptom of the structural changes taking place in the company.
Few companies in Mexico have left their mark on culture like Televisa has, creator of decades of products that have influenced the country’s popular culture. But the emblematic television station is migrating to become less of a television station and more of a telecommunications company. Its future looks more like that of América Móvil, owned by businessman Carlos Slim, although it maintains, as until now, a significant investment in the television content business.
Grupo Televisa’s share price has been declining for years, losing almost 80% of its value since 2018. On November 21, the share began to fall and the next day the credit risk company S&P Global reduced its rating. debt from BBB+ to BBB, one step lower and closer to the “junk” rating. This led to the stock falling even further. However, this week the shares recovered, driven in part by investment bank reports that recommended their purchase.
“The performance of Televisa shares has been among the poorest of the stations belonging to the Mexican Stock Exchange, driven by a combination of bad news and higher interest rates,” wrote Citibanamex analysts Andrés Cardona, Matheus Tostes, and Gabriel Gusan in a report to clients. Despite “some apathy on the part of foreign investors” to the company’s decision to separate businesses that do not have to do with telecommunications, Citibanamex concluded that “the stock is too cheap to be ignored and 2024 offers better prospects.”
The decision they refer to began in 2019, when Grupo Televisa acquired telecommunications assets with the purchase of Axtel, betting on a business focused on fixed telephony, internet and pay television through fiber optics. Its high penetration in the pay television market, through Sky, gives Televisa a competitive advantage. But it has lost two million subscriptions in two years.
“Sky was a company that was dedicated to pay television services through fixed antennas,” explains Humberto Patiño, S&P Global analyst and one of those responsible for the cut in Grupo Televisa’s credit rating. “When the antennas stopped having relevance because now they were transmitted through modems that are placed below television, this transition weighed a little on Televisa in terms of subscribers because it did not make the transition automatically or in line with the industry. This is an industry that requires constant technological advances in operation and also very good price planning to be able to maintain market share.” Added to the drop in subscribers is inflation, which has increased costs for the company.
Between 2019 and 2023, the company also began the spin-off of certain businesses outside of telecommunications, such as the PlayCity casinos, the live entertainment company Ocesa and even magazines. The plan is to create a holding that has its own financing, business model and risks. But the most radical change in its strategy came in 2020, when Televisa and Univisión merged their content assets to create the largest catalog in Spanish.
The content was in charge of a subsidiary in the United States, TelevisaUnivisión, of which Televisa owns 45%. The rest is in the hands of Univision, so Televisa has decision-making power, but Univision has control. In recent weeks, this subsidiary came under fire for an interview with former President Donald Trump. The network had turned its back on Trump in 2015 due to his insults and offenses to Latin Americans.
The content business has changed rapidly and TelevisaUnivisión is plagued by the same ills that plague its competitors: the rise of TikTok and Instagram reels. Data from the financial reports of companies and the Wall Street Journal show that every year, people spend more time watching short videos on these social networks than watching television. Unlike television stations, social networks do not need a large budget for production, since the users themselves generate the content. Furthermore, platforms streaming like Netflix represent fierce competition.
“What happens with the increase in users in streaming applications is that companies or governments begin to separate the budget that they previously allocated to television to also include other platforms. They begin to hire influencers to make advertisements, clearly the budget is divided in two,” says Patiño.
Televisa has a total debt equivalent to 90,000 million pesos, although 70% is denominated in dollars, S&P said. Patiño and his colleague Fabiola Ortiz assure that Grupo Televisa, on its path to becoming a telecommunications company, could sell its position in TelevisaUnivisión if it needed to reduce its leverage.
“Our rating considers that in a stress scenario, Televisa’s participation can be re-sold or it can be materialized in cash terms to be able to pay the national debt,” says Patiño.
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