-- Grupo Televisa S.A.B.'s cable and telecom and
direct-to-home (DTH) satellite TV segments' strong performance have contributed
to the company's solid financial performance.
-- We are affirming our 'BBB+' global scale and 'mxAAA' national scale
ratings on Televisa.
-- The stable outlook reflects our view that Televisa's key financial
metrics will remain stable over the next two years, fueled by its revenue
On Nov. 7, 2012, Standard & Poor's Ratings Services affirmed its 'BBB+' global
scale and 'mxAAA' national scale ratings on Grupo Televisa S.A.B. The outlook
The 'BBB+' global scale rating on Televisa reflects the company's
"satisfactory" business risk profile and its "modest" financial risk profile.
The rating also reflects Televisa's positive free cash flow generation, high
operating margins, strong liquidity, manageable maturity debt profile, its
leadership in Mexico's (foreign currency rating BBB/Stable/A-2, local currency
rating A-/Stable/A-2) television industry, and its increasing participation in
the telecommunications industry. However, these factors are partly offset by
the company's somewhat dependence on advertisement revenue, its high capital
expenditures requirements, and the increased competition in Mexico's telecom
Our view of country risk in Mexico influences our ratings on Televisa because
the company's operations are concentrated in this market. We stress tested the
company under a Mexican sovereign default scenario, including a sharp currency
devaluation and a significant decline in the company's revenue and EBITDA.
Under this scenario, we concluded that Televisa would still be able to
generate sufficient cash flow to service its debt obligations.
Televisa is the largest media company in Mexico, with holdings in a wide
variety of businesses, including content, cable and telecom, Sky (the
company's the direct-to-home satellite television unit), and publishing among
others. While the company is still somewhat dependent on advertising revenue,
the growth in the cable and telecom and Sky segments have allowed Televisa to
diversify its revenues. For third-quarter 2012, the cable and telecom and Sky
segments accounted for 22% and 21% of consolidated revenues, respectively,
compared with 15.5% and 18% for the same period in 2008. In addition,
Televisa's investment in Grupo Iusacell S.A. de C.V. (Iusacell; not rated), a
Mexican wireless provider, is in line with the company's continued pursuit of
growth opportunities and diversification in the telecom sector. Although the
company's equity participation in Iusacell is still negative, we believe it
could turn positive in the next few years as the company increases its
Televisa's financial results remain positive, in our view. The company's
revenues increased by 8.7% during third-quarter 2012, compared with the same
period in 2011. This reflected revenue growth, particularly in the content,
cable and telecom, and Sky segments. The EBITDA margins remained stable at
Under our base case scenario, we expect a high single-digit increase in
revenues during the next few years, driven by the company's content, Sky, and
cable and telecom segments. We expect that the content segment's ad revenues
will increase with or slightly below Mexico's GDP growth. We also expect that
royalties from Univision will continue to grow as a result of an increase in
Sky and cable and telecom segments will likely derive growth from an increased
subscriber base and, to a lesser extent, from the sale of premium services. We
expect that the EBITDA margin will remain very stable at about 40% going
We consider Televisa's liquidity as strong under our criteria. We anticipate
that the sources of liquidity will exceed uses by a ratio of more than 1.5x
over the next 12 months to 18 months. In our forecast, we expect the sources
of liquidity to include cash of Mexican peso (MXP) $21.58 billion as of Sept.
30, 2012, and funds from operations (FFO) of more than MXP$28 billion for the
next 12 months. We expect that cash uses for the next 12 months will include
capital expenditures of about MXP$11.0 billion and will remain focused on the
cable and telecom and Sky segments, debt maturities of about MXP$520 million,
and dividend payments of about MXP$1.5 billion.
Televisa's stable cash flow generation supports strong liquidity. During the
first nine months of 2012, the company reported FFO of MXN19.3 billion, which,
when paired with its solid cash position, is enough to cover its capital
expenditures and its investments. We expect that the company will keep
generating positive free operating cash flow through the next few years.
Our liquidity analysis also incorporates qualitative factors, including our
view that the company has the capacity to withstand high-impact
low-probability events, its sound banking relationships with banks and access
to capital markets, and an overall prudent financial risk management.
Televisa's covenant headroom was ample as of Sept. 30, 2012, in our view.
The stable outlook reflects our view that Televisa's stable revenues and
operating margin trends will continue over the next two years. The outlook
also takes into account our assumption that Televisa's moderate financial
policy will maintain the company's financial ratios commensurate with a solid
We could lower the ratings over the next two years if Televisa's adjusted debt
to EBITDA were to persistently exceed 2.5x, or if the company's adjusted
FFO-to-debt ratio were to fall to less than 30%. Factors that could contribute
to such a development include a reverse in the currently favorable operating
trends, aggressive debt-financed acquisitions, or additional unexpected cash
outflows for the Iusacell investment. We consider the possibility of an
upgrade to be remote because of the risks associated with operating in Mexico,
the strong competition, and the sovereign credit ratings on Mexico.
Related Criteria And Research
-- Key Credit Factors: Criteria For Rating The Television And Radio
Broadcasting Industry, Dec. 11, 2009
-- Key Credit Factors: Business And Financial Risks In The Global
Telecommunication, Cable, And Satellite Broadcast Industry, Jan. 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Grupo Televisa S.A.B.
Issuer Credit Rating
Global Rating Scale BBB+/Stable/--
Caval - Mexican Rating Scale mxAAA/Stable/--
Global Rating Scale BBB+
Caval - Mexican Rating Scale mxAAA
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left