Televisa Earnings: Price Increases Should Lift Cable Growth in the Coming Quarters

Televisa’s TV first-quarter results didn’t deviate much from recent trends, and we’re leaving our fair value estimate at $10. We believe the stock is very attractive despite concerns around the Mexican broadband business, as we expect Televisa will make gradual progress in improving operations with the potential to buy or sell assets or merge with another entity to unlock value.

Cable segment revenue increased 2.7% year over year, with 4% growth in the core residential business and 4% in the enterprise segment. Televisa added 85,000 net new broadband customers during the quarter, giving it 6% more customers than a year ago, roughly in line with the pace of its network footprint expansion. The presence of four competitors that are each rapidly expanding or upgrading their networks has produced a challenging competitive environment, which has pressured pricing. Televisa instituted a price increase earlier this month and indicated that it has seen only a modest increase in customer defections, giving management confidence that revenue growth will accelerate in the coming quarters. Inflationary pressures hit the segment EBITDA margin, which dropped to 41% from 42% a year ago, leaving EBITDA roughly flat.

Revenue in the Sky satellite business dropped 12% from a year ago, a sharp acceleration as the impact from customer losses accumulates. The firm’s customer base is 16% smaller than a year ago, but efforts to purge unprofitable customers and attract stronger accounts lifted revenue per customer 5% year over year. The segment has benefited from a large variable cost base and efforts to trim expenses, leaving the EBITDA margin flat at 35% year over year despite the drop in revenue.