Bloomberg News

Televisa Extends Losses After Phone Deal Veto: Mexico City Mover

February 03, 2012

Feb. 2 (Bloomberg) -- Grupo Televisa SAB, the world’s largest Spanish-language broadcaster, fell for the 10th time in 11 days after Mexico’s antitrust agency rejected its $1.6 billion plan to enter the nation’s mobile-phone market.

Televisa dropped 3.9 percent to 50.86 pesos at the close in Mexico City for the biggest daily slide since Sept. 5. The stock has declined 6.1 percent since Jan. 25, the day El Universal newspaper reported the antitrust decision, citing unnamed sources. That compares to a 1.3 percent gain for Mexico’s benchmark IPC index.

The decision by the antitrust agency, known as Cofeco, prevents Televisa from converting the debt it holds from mobile- phone carrier Grupo Iusacell SA into shares representing a 50 percent stake. Televisa hasn’t disclosed whether its agreement with Iusacell includes a way it could get its money back if the deal is rejected.

“This is negative news for Televisa, in our view, assuming that Cofeco’s decision is upheld following the appeal process,” said Gregorio Tomassi, an analyst at Banco Santander SA, today in a research note. “Televisa’s collection rights to the already disbursed loan are not clear.”

The 3-2 vote by Cofeco to block the merger will hurt efforts to bring down prices in the mobile-phone business, Televisa said yesterday in an e-mailed statement. The first step to overturn the decision may be to ask Cofeco to review its ruling, Mexico City-based Televisa said.

“This decision taken by Cofeco damages the potential for competition in a key sector for Mexico’s development,” Televisa said in the statement. “The lack of competition has deeply affected the degree of adoption of these services and the development of Mexico’s telecommunications infrastructure.”

Ruling Review

A government-commissioned study published by the Organization for Economic Cooperation and Development concluded Mexico’s phone industry overcharged consumers $13.4 billion a year between 2005 and 2009. The study called for greater competition in mobile-phone and high-speed Internet services.

Under Mexican law, companies have 30 business days to ask the antitrust agency to review a ruling. The agency then has 60 business days to answer the request. An antitrust official who can’t be named under the agency’s policy declined to comment.

Closely held Iusacell’s debt owned by Televisa has an interest rate of 2 percent, Televisa said yesterday. The mobile- phone carrier, which is third in the market behind America Movil SAB and Telefonica SA, sought a restructuring plan with creditors in 2010 for the second time in four years.

Two antitrust commissioners who voted to allow the deal affirmed that with a stake in Iusacell, Televisa could improve competition in the mobile-phone market, Televisa said, citing the ruling, which Cofeco hasn’t yet made public.

Alliance of Rivals

The commissioners also said the antitrust agency could prevent any negative effects from the transaction by imposing specific conditions, Televisa said.

The decision was based on “suspicions and hypothetical assumptions,” Mexico City-based Iusacell said in a separate statement, without providing details.

Iusacell is owned by billionaire Ricardo Salinas, who also controls TV Azteca SAB, Televisa’s chief competitor in Mexico’s broadcast television business.

An alliance would bring the nation’s two biggest over-the- air TV networks closer together and could harm competition, said critics including the Mexican Association for the Right to Information. Televisa and Salinas’s group had said they would continue to compete aggressively in broadcast TV.

Overturning the Decision

Televisa will eventually succeed in overturning the decision, Tomas Lajous, an analyst at UBS AG in Mexico City, said today in a research note. Cofeco commissioners might reconsider their decision if Televisa and Azteca agree to conditions to ensure they don’t collaborate, such as offering their video programming to other wireless carriers, 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. The complaints cited Televisa’s appointment of at least one board member for Iusacell and the investment.

Televisa already has the right to name one of Iusacell’s four board members and can add a second when it converts the wireless carrier’s debt into shares, the company confirmed last month. The acquisition of debt isn’t a transaction that requires the antitrust agency’s review, Televisa said.

Investigation Open

The antitrust agency still has an open investigation, started in December, 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 last month.

Antitrust representatives delivered documents related to the decision yesterday to Iusacell after a physical confrontation. Guards punched and shoved antitrust lawyers trying to enter Iusacell’s building in Mexico City, according to a government official who asked not to be named because of the antitrust agency’s policy.

Iusacell plans to file a complaint with Mexico’s attorney general because of the incident because unidentified people accompanying the antitrust officials were “aggressive,” the company said in an e-mail yesterday. The company is reviewing security footage of the incident, it said.

--Editors: Niamh Ring, Cecile Daurat

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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