MEXICO CITY Oct 22 Broadcaster Televisa is betting on the U.S. Hispanic market for growth after reaching a new royalty deal with partner Univision and is sending plans to enter Mexican mobile phone market to the backburner for now.
Grupo Televisa (TV.N) (TLVACPO.MX) said earlier this month it was investing $1.2 billion in debt-laden broadcaster Univision, a long-time partner that uses the Mexican company's programs to fill in most of its prime time slots.
Under the agreement, Univision [UVN.UL] will have unrestricted use of Televisa content for television, Internet, video on demand and mobile phones.
"The U.S. Hispanic market is of paramount interest ... it is a market with tremendous potential," said Televisa's Executive Vice President Alfonso de Angoitia during a conference call Friday morning.
In exchange for the expanded rights and content, Televisa will receive larger royalties from Univision through December 2017. Currently, royalties amount to 9.36 percent of Univision's television revenue, excluding certain soccer events, but this will rise to 11.91 percent through 2017.
"This market has a purchasing power of $1 trillion. Advertisers are finally realizing the potential of this market and this should reflect in Univision's strong revenue growth in the coming years," he added.
Televisa's talks with Univision happened while the company negotiated another deal with NII Holdings' Nextel (NIHD.O) to enter the mobile phone market in Mexico.
But after facing dozens of legal challenges from a rival that questioned the auction process where Televisa and Nextel purchased a portion of spectrum, the two decided to part ways this week.
Given the large number of injunctions "against the spectrum auction it was in the best interest of Televisa and our shareholders not to proceed with this transaction," De Angoitia said.
The executive said Televisa will continue to evaluate opportunities for the mobile market but did not say when this could happen or which option it would look at.
Televisa on Thursday posted a 9 percent rise in third-quarter net earnings on higher sales driven by World Cup advertising and paid cable and satellite television services.
Given its solid performance, De Angoitia said broadcast television revenues could now grow between 5.5 percent and 6 percent this year, up slightly from a previous view of 5 percent.
Televisa shares slipped 0.05 percent to 55 pesos on the Mexican stock exchange, while its New York-traded shares fell 0.18 percent to $22.25. (Reporting by Cyntia Barrera Diaz; Editing by Steve Orlofsky)