Bloomberg News

Televisa May Be ‘Stuck’ With $1.6 Billion Iusacell Debt Deal

January 27, 2012

(Updates with closing share prices in 12th paragraph.)

Jan. 26 (Bloomberg) -- Grupo Televisa SAB, the world’s largest Spanish-language broadcaster, may be left with nothing but an IOU after spending $1.6 billion on an attempt to buy its way into Mexico’s mobile-phone business.

Televisa had committed to that amount by October 2011 for acquiring debt in wireless carrier Grupo Iusacell SA that would be convertible into a 50 percent equity stake in the company. El Universal newspaper and Dow Jones Newswires reported yesterday that Mexico antitrust regulators voted 3-2 to reject the deal.

“They may be stuck” if the news reports are accurate, said Alejandro Gallostra, an analyst at BBVA Bancomer SA. “I don’t know if they have a way to exit the contract.”

Televisa, controlled by billionaire Emilio Azcarraga, has been waiting since April for the antitrust agency to decide whether to approve the deal. The company hasn’t disclosed any clause in the agreement with Iusacell that would have let it pull money out if the government blocked the transaction.

Televisa also hasn’t said how much interest it would get on Iusacell’s debt if it was unable to convert to equity. Iusacell sought a restructuring plan with creditors in 2010 for the second time in four years.

“It’s complicated to value the investment,” said Luis Rodriguez, director of research at Casa de Bolsa Finamex SAB in Guadalajara, Mexico. “As long as the transaction isn’t official, you can’t consider it as equity.”

Conversion Costs

A Televisa official who can’t be named under the company’s policy declined to disclose the interest rate on its Iusacell debt and whether the agreement lets the broadcaster withdraw its investment. Televisa won’t comment on the antitrust agency’s decision until it has been legally notified and has had a chance to review it, the official said.

A delay in the antitrust agency’s approval of the deal could lead to “increased conversion costs” for the Iusacell debt and “a prolonged conversion time frame, which could materially affect the value of the debentures,” Televisa said in an April filing providing details of its agreement with the wireless carrier. The Iusacell debt would be difficult to sell because there is no liquid market for it, the company said.

The filing didn’t show what would happen if the antitrust agency rejected the deal.

The Federal Competition Commission said in a statement yesterday it won’t disclose the result of the vote until it has legally notified the parties. A Iusacell official declined to comment.

Potential Appeal

Rodriguez said Televisa would probably appeal an adverse antitrust decision and fight in court to win its stake in Iusacell. An uncertain outcome won’t hurt the shares much more because it will be overshadowed by Televisa’s cable-TV and broadcast results this year, when elections and the Olympic games should boost ratings and sales, he said.

Televisa fell 3.2 percent to 52.39 pesos at the close in Mexico City, its lowest level since Oct. 17. The stock has declined for six straight days, its longest losing streak in a year.

Alfonso de Angoitia, Televisa’s executive vice president, said on an April 15 conference call the company expected approval for the Iusacell deal within six months. In a July 11 conference call, he said he didn’t expect the antitrust agency to challenge the transaction. If it didn’t get approval, Televisa would maintain the Iusacell debt, he said.

America Movil SAB and NII Holdings Inc. asked the antitrust agency last year to look into whether Televisa and Iusacell had already cemented the deal without waiting for antitrust approval, which would be punishable by a fine of as much as 8 percent of each company’s Mexican sales.

Targeting NII

The antitrust agency still has an open investigation, started last month, into agreements between companies in the mobile-phone and broadcasting businesses. While the agency hasn’t said which companies it’s probing, Televisa and Iusacell believe they are being targeted, Francisco Borrego, a lawyer for Iusacell, said earlier this month.

If the antitrust agency has rejected the Televisa investment in Iusacell, it could also conclude that even allowing the broadcaster to hold Iusacell’s debt would be unacceptable, BBVA Bancomer’s Gallostra said.

Investors are speculating that Televisa could turn its sights back toward NII, the smallest of Mexico’s four carriers, said Jennifer Fritzsche, an analyst in Chicago for Wells Fargo & Co., yesterday in a research note. Televisa had planned to invest $1.44 billion for a stake in NII’s Mexican unit in 2010. The broadcaster abandoned the plan after Iusacell went to court to challenge NII’s victory in a government auction of mobile- phone airwaves.

NII, based in Reston, Virginia, slipped 0.3 percent to $19.92 at the close in New York after jumping 5.6 percent yesterday.

--Editors: Romaine Bostick, Niamh Ring

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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