Bloomberg News

Univision Says Televisa Claims `Breach' in Contract

February 01, 2006

Univision Communications Inc., the largest U.S. Spanish-language television broadcaster, said it was accused of causing a ``material breach'' in its programming contract with Grupo Televisa SA.

Televisa's claim, made in U.S. District Court in Los Angeles, reiterated earlier allegations that Univision failed to pay royalties and edited some Televisa shows without permission, Los Angeles-based Univision said today in a regulatory filing. Univision said it ``emphatically disagrees'' that a material breach has occurred.

A finding that there was a material breach could ultimately let Mexico City-based Televisa end the contract that provides about 30 percent of Univision's programming, Bank of America analyst Jonathan Jacoby wrote in a report. That is unlikely because the contract, which runs through 2017, gives the companies time to resolve such problems after a judge rules, Jacoby said. The companies have been sparring for the past year.

``Even if there were a material breach -- which we are absolutely convinced there has not been -- we would have 180 days to cure it,'' Douglas Kranwinkle, Univision's general counsel, wrote in an e-mailed statement. He said Televisa's allegations were ``part of its defense against the counterclaims that we filed.''

Televisa spokesman Mario San Martin didn't immediately return a call seeking comment.

Univision shares rose 1 cent to $31.85 at 4:19 p.m. in New York Stock Exchange composite trading. They have risen 19 percent in the past 12 months. Televisa shares rose 61 centavos to 44.24 pesos in Mexico City trading today. They have gained 30 percent in the past year.

Legal Feud

The lawsuit may be part of an effort by Televisa to get more money from Univision, Miller Tabak analyst David Joyce said in a report. Univision pays Televisa about $100 million a year for exclusive rights to shows that aired first in Mexico, he wrote.

Televisa, the world's largest Spanish-language broadcaster, owns a 12.7 percent stake in Univision, according to the most recent Bloomberg data. The two companies sparred last February when Univision's chairman and controlling shareholder, Jerrold Perenchio, named Ray Rodriguez as president over the objection of Televisa executives on Univision's board.

Televisa Chief Executive Officer Emilio Azcarraga Jean resigned from Univision's board last May, when his company first sued Univision in U.S. District Court in Los Angeles. In previous filings in the lawsuit, Televisa hadn't claimed the alleged breaches were material, Univision said.

Amended Complaint

The amended complaint doesn't ask the court to rule that the breach was material, Kranwinkle said. No other claims were changed or added, Univision said in today's filing with the U.S. Securities and Exchange Commission.

Televisa's lawsuit seeks $1.5 million in unpaid royalties for one program and seeks an injunction preventing unauthorized editing of its shows. Televisa also seeks an injunction preventing Univision from recovering $5 million it has paid in royalties.

The contract gives parties 90 days to resolve material breaches related to pay royalties and 180 days for those involving other matters, Jacoby wrote.

To contact the reporters on this story: Michael White in Los Angeles at Mwhite8@bloomberg.net.

To contact the editor responsible for this story: Emma Moody at emoody@bloomberg.net.


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