An Eye on Univision

CBS: Takeover's tempting but tricky

By ELIZABETH GUIDER NEW YORK So is CBS really interested in buying Univision?

Well, except for the valuation and the regulation, it’s “a wonderful company.”

That’s how CBS Corp. chief financial officer Fred Reynolds deftly skirted the issue when asked point blank at an investor conference Wednesday about the state of play for the hot Hispanic network.

“We’ll have to see how the process unfolds,” Reynolds went on to tell some 200 investor types gathered for Bank of America’s Media, Telecommunications and Entertainment Conference in Gotham.

Admittedly, he added, the Hispanic market is growing faster than traditional broadcasting, but the regulatory issue is “monumental” — and the company is “very highly valued.” (CBS already owns stations in most of the Univision markets and would obviously have to divest most of the outlets it purchased.)

The CBS Corp. exec went on to talk up his own company’s prospects for this year and beyond, putting the emphasis on several areas that he believes the Street overlooks in its ho-hum analysis of the recently demerged conglom. The stock has dropped 6% since the split in early January, closing Wednesday at $24.44.

On the CBS network score, Reynolds said, “We have a schedule that works,” with very few holes to fill for the coming season. In fact, five out of six new dramas are working, he added, and the most recent midseasoners, sitcom “The New Adventures of Old Christine” and drama “The Unit,” look to be gaining traction.

CBS should do very well in the advertising upfront, he reassured the analysts.

More importantly, and to his point about overlooked prospects for long-term cash, the exec indicated that the Eye now owns 20 out of its 22 hours in primetime. That means there can be “more consistency in the backend” as these properties go into syndication in the next few years. He also pointed to growth areas in the news division and other dayparts, where the conglom currently lags.

As for the CBS station group, Reynolds admitted it was a long haul to move from third or fourth place up to first place in top markets. (At this point the Eye stations are No. 2 or 3 in the top five markets.)

“Being No. 1 is a franchise. We know that’s the prize,” he said, suggesting the conglom had set that as a top priority. Being No. 1 in the top five markets would, he said, result in several hundred million dollars of revenue, most of which would be profit.

On the radio front, Reynolds did not pussyfoot about the loss of Howard Stern to the 27 stations that carried his show — “they are down, and ’06 will be very tough for them” — but the beauty of radio, as compared to television stations, is that “we can change it on a dime.”

“Radio is nimble,” he opined, and new talent and formats can be yanked or introduced in a matter of days.

He also pointed out that Stern did not impact the 152 CBS stations that didn’t carry the shock jock, and that the company’s costs had gone down now that the flow of moolah to Stern had been stemmed. Reynolds would not comment on a recently filed lawsuit in which the conglom claims Stern defrauded CBS in the lead-up to his departure for XM Satellite Radio.

As for new opportunities in the digital domain, Reynolds said the company is already drawing incremental revenues from repurposing its content on these various platforms. He hazarded that, like sister conglom Viacom, CBS is arguably pocketing in the realm of $150 million annually from these experiments, with nothing but upside ahead.

Just consider “I Love Lucy,” he told his two B of A questioners, Jon Jacoby and Doug Shapiro. The last episode of that show came out in 1957 in black and white. “We’ve made $25 million in revenues off of that show,” he said.

On the numbers front, Reynolds said the company intends to pay “an ever increasing dividend, it having already been raised from 14¢ to 16¢ last quarter and that that increment would be revisited after the company disposes of its parks division and pockets some cash.

Finally, Reynolds estimated that revenues would grow by low- to mid-single digits, and EBITDA by mid-single digits this year, adding that digital repurposing of content is a revenue stream consisting almost entirely of profit.

The B of A confab continues today with presentations by Viacom, News Corp. and Time Warner Cable, among others.