Mexico’s Televisa will avoid tighter regulation in Pay TV

Monday, Oct 05, 2015

Media giant Grupo Televisa will avoid stringent regulation in Mexico’s lucrative pay-TV market after the country’s telecommunications regulator found the company isn’t a dominant player in that sector.

The ruling is a relief for Televisa, which has already been declared dominant in broadcast TV, after months of speculation that an additional regulatory blow in pay TV could dent further the company’s revenue.

The decision is important because Televisa, the largest media group in the Spanish-speaking world by market value, avoids specific regulations on rates and content in its pay-TV business. The firm could have been forced to sell some cable assets if it had been found dominant.

Satellite and cable accounted for half of the company’s $5.9 billion in sales in the 12 months through June, and are the company’s fastest-growing businesses.

Although Televisa controls 52% of Mexico’s cable market and 71% of the satellite-TV business, the regulator argued the company hasn’t enough market power to fix prices or restrict services. Competitors such as Axtel or Dish Mexico have been able to constantly increase their competitiveness and market share in recent years, the regulator said Friday.

The ruling throws cold water on observers who considered that Televisa had too much power in the pay-TV market and should face tougher regulation. Those observers say prices of pay-TV services have been rising in recent months, while phones services decreased.

For more than two decades, Mexico’s broadcast TV market has mostly been in hands of a de facto duopoly of Televisa and No. 2 broadcaster TV Azteca, owned by mogul Ricardo Salinas. Together, they control about 95% of the TV advertising pie. Televisa has 65% of the broadcast TV market and around 62% of the pay TV subscribers.

The Mexican Congress passed tougher antitrust laws in 2013 and 2014 with the support of President Enrique Peña Nieto and the main opposition parties. The laws were intended to increase competition in a historically concentrated media sector.

The new rules have turned Mexico in an increasingly competitive market.

Cadena Tres of businessman Olegario Vázquez was awarded in March a new national broadcast network to compete with Televisa and Azteca. In pay TV, independent operators such as Axtel are expanding operations and offering new products.

The regulator has already forced Televisa to share broadcast infrastructure with new competitors and is also barred from acquiring some broadcast exclusive content, such as some soccer games. Tycoon Carlos Slim, who has dominated the phone market for decades, also faces stiff new regulations in telecommunications and is considering selling some assets.

The regulations on broadcast TV have already benefited pay-TV operators, the regulator said, suggesting additional measures are unnecessary. Televisa must offer its broadcast channels for free to pay-TV competitors, helping make its rivals more competitive, the regulator added.

With more than 9 million subscribers in satellite and cable TV, Televisa is Mexico’s largest pay-TV provider. The company has focused on expanding the business, having bought in the last year independent pay-TV firms Telecable and Cablecom.

Shares of the company have held up well in the past year, in part because Televisa’s pay-TV business has avoided regulations and its exclusive content, particularly its homemade soap operas and popular sports events, remain highly competitive.

Televisa has been the leading media company since it was created in the 1970s from a merger of several smaller TV channels, among them one of former Mexican President Miguel Alemán. The company has had historically close links with President Peña Nieto’s ruling Institutional Revolutionary Party, what has led some analysts to doubt the seriousness of the recent legal reforms to tame Televisa’s power.

The company is controlled by the Azcárraga family. Emilio Azcárraga Jean, the grandson of the firm’s founder, has 43% of the voting rights and names 11 of the 20 board members.