A Televisa-Megacable Merger Would Likely Shift the Mexican Telecom Market

Groupo Televisa confirmed that it has held talks to merge its cable assets with Megacable recently and that it submitted a nonbinding proposal last month. While Megacable’s board has rejected that proposal, Televisa asserted that it will continue pursuing a combination. The shares of both firms were up sharply on the news, a logical response in our view given the potential strategic benefits that a merger could produce. A transaction could have modest negative implications for America Movil. We are leaving our fair value estimates unchanged for now at $14 per share for Televisa and $21 for America Movil; Televisa shares look attractive.