Mexican Sat Dance

Losses from DTH may cut Televisa profits for years

MEXICO CITY — Televisa has posted strong profits for 1997, but satcaster operations pushed its results into the red for the fourth quarter and are expected to remain a drain for several years.

Televisa reported Friday a net loss of $42.6 million in the fourth quarter versus a net profit of $24 million a year earlier. Quarterly revenue inched up to $526 million from $518 million.

For the full-year, it recorded a net profit of $732 million, including a net gain from the sale of its interest in PanAmSat and some other one-time items, vs. a net loss of $84.9 million for 1996. Revenue for the year rose 6.3% to $1.74 billion in 1997 from $1.63 billion in 1996.

Operating results were essentially in line with expectations, with revenue higher than predicted and margins not quite as strong, analysts said. Even so, “Televisa is still a company making a lot of promises that it still has not delivered,” analyst Tim Baker of SBC Warburg told Daily Variety. “Fourth-quarter revenue rose just 1.8% in peso terms — that’s a poor performance given that Mexico was by then in a recovery.”

Rival broadcaster TV Azteca, though “clearly in a different phase of growth,” Baker said, reported a 36% leap in fourth-quarter revenue in real-dollar terms to $137 million. For the year, net revenue rose 68% to $451 million, while net income increased 26% to $143 million.

Televisa’s losses from its DTH operations were high, at more than $36 million, said one analyst who had projected around $7 million in losses. Televisa expects satcasting to generate substantial net losses and negative cash flow over at least the next several years. Its service, Sky, just launched in Spain in September and in Colombia in December.

Televisa is not moving as quickly as analysts would like on cutting costs. For the year, Televisa took almost $110 million in charges for cutting costs — most of which went to severance packages. As announced in May 1997, it has cut expenses, staff, donations, overtime and amenities and frozen some salaries.

It expects to take another aggregate charge of about $10 million in the first two quarters of this year for cost-cutting moves. The cuts — to be completed by mid-1998 — are expected to create annual cost savings of about $100 million, Televisa said.

But production costs have continued to climb, offsetting many savings, said one analyst.

Azteca, analysts say, is far leaner, and just announced on March 4 it was cutting 12% of its staff.

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