MEXICO CITY Shares in Mexican broadcaster and pay TV provider Grupo Televisa, the world's biggest producer of Spanish-language content, rose sharply on Friday, a day after it raised the value of its investment in U.S. broadcaster Univision.
The company raised the value of its option to convert loans to Univision UVN.UL into an equity position after it said an anonymous investor took a $125 million stake in the company, valuing it at $8 billion or 15 times core profit.
Televisa (TLVACPO.MX) shares rose 4.21 percent to 77.75 pesos shortly before midday, after climbing more than 6 percent immediately following the company's conference call with analysts.
The company has equity and debentures that, with U.S. regulatory approval, could be converted into a 37 percent stake in Univision.
Executives from Televisa, which reported a drop in fourth-quarter profit on Thursday, said they increased the fair-value of their option in Univision by $385 million.
That was a conservative increase, Televisa Chairman Alfonso de Angoitia said on the call with analysts. "At that valuation that was paid by that financial investor we could value it at $3 billion, but we are being conservative."
The Mexican firm also expects royalties from Univision to increase this year on rising demand for Televisa's content.
Regulatory changes in Mexico could introduce more competition into the country's television, Internet and phone markets this year.
Televisa is likely to be deemed a dominant broadcaster by Mexico's regulator in a decision expected in March. That means the company will have to offer its public broadcast channels to pay-television producers for free as part of a process known as 'must carry, must offer.'
"In spite of the negative impact of 'must offer' in our content business, we are giving guidance for the content revenue growth in 2013 of mid-single digits," said Angoitia.
"For 2014, we expect Univision to continue delivering solid top line results, potentially resulting in royalties to Televisa of $350 million," he added.
Royalties from Univision were $273.2 million in 2013.
(Reporting by Michael O'Boyle; Editing by Richard Chang)