Televisa on the rise

Mexican net sees profits grow 8.1%

MEXICO CITY — Televisa, Mexico’s No. 1 net and the world’s largest producer of Spanish-lingo content, on Monday said net profit rose 8.1% during the third quarter compared with the same period last year on satellite sub growth and windfall political ad spending.

Net said it earned $155 million during the period ending September. Total sales grew 8.8%, on a pro forma basis, to $754 million. Web made accounting adjustments during fourth quarter of 2004 to magazine distribution unit that are reflected in pro forma figures.

Results beat the call of analysts, who expected flatter growth due to an unfavorable comparison with high Olympic Games’ ad revenue in the third quarter of 2004.

Terrestrial broadcasting unit reported 3% growth in revenue to more than $426 million. Bedrock free TV unit has 70% of Mexican viewers in a deathgrip.

During the third quarter, Televisa enjoyed the gravy of heavy political advertising ahead of national elections in July 2006. Candidates from Mexico’s two major parties battled it out in primaries during the quarter, spending lavishly on campaigns.

Televisa isn’t specifying how much it’s raking in during the preliminary campaign season, when party spending isn’t regulated. But web has promised to make all political ad contracts public during the official season that runs from January to July, when analysts expect the company to make well over $60 million. 

Sales at satellite TV unit Sky grew 32% to nearly $148 million. Service added 274,100 new subs during the quarter bringing total subs to 1.22 million.  Web punched ads boasting Sky will be the only system in Mexico to offer all World Cup games in 2006.

Sales at Cable TV unit Cablevision grew 30.7% to $33.2 million. Unit reported 19.3% subscriber growth, including more than 130,000 new digital subscribers for a total of more than 406,000 subs. 

Recent months have been marked by several major deals, including Televisa’s return to the music biz and a bid to enter Spain.

In July, net announced deal with EMI Music to form joint music ventures in Mexico and U.S. In August, it put up $25 million for a 25% stake in low-fare air carrier “Vuelo.” Most recently, in October, it formed a consortium with Spanish media companies to bid for a license to operate one analog and two digital terrestrial channels in Spain.

“Televisa has definitely decided to be more aggressive in its expansion strategy,” said analyst Patrick Grenham at Citigroup Smith Barney, who said he expects further ventures abroad around the corner. “We hope that strategy is based on its content business.” Other analysts also showed reservations over the airline venture, but they have been heartened by the Spanish bid.

Web expects to spend $200 million to $400 million on the Spanish channel over the next four to five years.

Grenham noted Televisa could easily fund start-up costs for the Spanish channel just with its expected growth in cash flow during 2006, when he expects web to have $640 million of loose coin.

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