Televisa's 'BBB+' ratings reflect the company's strong business position as the leading Mexican TV Broadcaster and one of the largest media companies in the Spanish-speaking world, diversified media and telecommunications portfolio, solid financial position underpinned by its robust free cash flow generation and liquidity, as well as the extended debt maturity profile. Televisa's ratings factor in the company's exposure to economic cycles, strong competition across business segments, and increasing regulatory pressure in
The ratings also reflect Televisa's strategy to expand its business through organic growth and cash investments for acquisitions. The recent investments made by Televisa include its purchase of MXN7 billion convertible notes and MXN2.5 billion debt instrument of Tenedora Ares,
KEY RATING DRIVERS
Robust Cash Generation from Contents
Televisa's high quality in-house content production has enabled it to maintain its large broadcasting market position in
Regulatory Pressure to Increase
Fitch expects the on-going constitutional reform on the Mexican media sector to result in an increased level of competition in the long-term; the impact should be manageable for Televisa, however, as Televisa's content production ability remains intact, which remains key to advertisement revenue. Fitch does not foresee any significant dilution of the company's market share over the medium term, and thus its cash flow and financial profile will remain relatively stable. Fitch believes that it will require significant time and resources for new entrants to become competitive in their contents quality against Televisa.
Televisa was declared as the 'preponderant' operator in the broadcasting sector during
Operational Diversification Continues
Solid growth in the company's pay-TV and telecom businesses has continued to support its diversification from broadcast advertising revenues. Integration of the content production and solid distribution channels has been the company's key business strategy enabling a more stable operating performance and stronger business profile compared to its regional peers. In the first quarter of 2014, Televisa generated more than half of its total operating segment income from non-contents segment, with Sky, its direct-to-home (DTH) satellite operation, and Telecommunications segment accounting for 32% and 27% of the total operating segment income, respectively. The company has maintained a double-digits revenue growth for these businesses which has helped mitigate slowing industry growth from the advertising business.
Strong Cash Generation
Fitch forecasts Televisa to maintain its positive FCF generation over the medium term. Fitch expects the company's cash flow from operations to continue to be robust, well over MXN20 billion in 2014, which will comfortably cover its capex, which is likely to remain high in line with the 2013 level of over MXN14 billion. During the past three years (2011 - 2013), Televisa spent approximately MXN12 billion on average for capex annually, primarily to improve its business position in the DTH and telecom segments, as well as to invest in the mandatory digitalization. In the same period, due to the high capex, dividend payments have remained at the minimum authorized level at approximately MXN1 billion on average annually.
Solid Financial Profile
Fitch expects the company's total adjusted-debt-to-EBITDA ratio to remain near 2.0x and its net-debt-to-EBITDA ratio to remain below 1.5x in the long term, on a pro-forma basis reflecting the recent
The company also has a robust liquidity as of
Fitch's expectation of sustained increases in the leverage ratios could result in a negative rating action. On the other hand, further geographical and business diversification coupled with consistent free cash flow generations and a lower leverage could be seen as positive for the ratings.
Additional information is available on www.fitchratings.com
--'Corporate Rating Methodology' (
Corporate Rating Methodology - Effective
Source: Fitch Ratings
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