Grupo Televisa Earnings: Spinning Off Ollamani Should Turn Attention to the Cable Business

Grupo Televisa sharply improved profitability during the fourth quarter, but the more important task of reviving revenue growth remains a work in progress. Management indicated that customer metrics have steadily improved since the firm shifted its strategy last fall to reduce promotional discounting, and that the level of competition in the broadband market is easing somewhat. Commentary from rival Megacable on its earnings call lines up with this view. Still, the Mexico broadband market needs to consolidate to cement pricing discipline and reduce duplicative investment. We have trimmed our fair value estimate to $6.50 from $8, which primarily reflects the debt-free spinoff of Ollamani, which closed on Feb. 20. Ollamani holds the majority of Grupo Televisa’s former “other” segment, including Stadium Azteca, the Club America soccer team, and gambling operations. We expect Grupo Televisa will continue to look for ways to utilize its assets more efficiently and deliver value for shareholders.