GRUPO TELEVISA, S.A.B.
Fitch Ratings has affirmed
The Rating Outlook is Stable. Fitch has also affirmed the company's foreign and local currency senior unsecured debt ratings at 'BBB+'/'
Televisa's ratings incorporate the company's strong competitive position as an important player in the Mexican telecommunications industry. The company has a diversified service portfolio of pay-TV, Voice and Broadband services, which generates a defensible, stable and predictable cashflow. The ratings reflect Fitch's expectation that Televisa will maintain a strong liquidity position, a net debt-to-EBITDA ratio near 2.0x, and that the company will primarily use proceeds from the TelevisaUnivision merger transaction to pay down debt. The negative ongoing secular threats and challenges for pay-TV, more competition in the industry and its high gross leverage levels for the rating category temper the ratings.
Key Rating Drivers
Strengthening Financial Structure: Fitch forecasts an improvement in the company's gross and net leverage to 3.6x and 2.1x at YE 2023. This compares to 4.4x and 2.3x, respectively at YE 2022. Televisa's gross leverage level should continue declining as the company uses proceeds from the TelevisaUnivision merger transaction to pay down debt. During 2022, Televisa prepaid around MXN 16.7 billion of debt. For 2023, Fitch expects around MXN9.5 billion of debt reduction; the gross leverage level should trend to around 3.4x as of YE 2024.
Competitive Environment: Fitch believes Televisa is well positioned to address the increasing industry competitive pressures due to the company's scale, network penetration level and its continuous investment strategy in network deployment. Televisa had around 19 million of homes passed as of YE 2022, and its strategy is to increase by nearly 1 million the homes passed during 2023 while maintaining a capital intensity ratio near 18%.
Fitch expects that broadband demand should continue to drive Televisa's revenue and EBITDA growth. Fitch anticipates Televisa will be able to maintain a lead position in pay-TV and a second position in fixed broadband. However, high competition, lower disposable income and high inflation pressures could limit EBITDA growth in the near term.
Growth Opportunities to Continue: Low broadband penetration in
Stable Cash Flow generation: Cashflow generation is defensible, stable and predictable. Telecom segments are more resilient to downturns than other sectors, given the integration nature of the cable packages for video, voice and broadband services. Telecom operators benefit from relative stable spending and the increased demand for digital connectivity. Going forward, Fitch expects Televisa will generate around MXN18 billion of cash flow from operations (CFO).
Strong Market Position: Televisa is the leading provider of Pay TV with a 62.4% subscriber market share and the second-largest fix broadband operator with 25.9% subscriber market share, behind America Movil with 40.8% subscriber market share, according to
Free Cash-flow Turnaround: Fitch forecasts Televisa's FCF to turn neutral in 2023 as the company's capital to revenue ratio falls to 18% in 2023 and 2024 from 25% in 2022. This level of capex is manageable for Televisa's expected CFO. Fitch incorporates an annual dividend payment of around MXN1 billion during 2023-2025. The company is expected to maintain its commitment to a conservative financial structure.
Portfolio Realignment: Televisa continues to realign its portfolio. The company is in the process of spinning-off its Other Business segment, which includes the soccer team America, the Azteca stadium, the gaming operations and magazine publishing and distribution. The company plans to create a new controlling entity that will be listed on the
In 2022, Televisa completed the merger of its Content segment to the
Manageable FX Exposure: The company has an important amount of its cash and equivalents in
Derivation Summary
Televisa's credit profile is supported by its business position as the largest pay-TV provider and the second largest in fix broadband in
Fitch expects Total Play to continue gaining market share from much larger incumbents over the next few years as the company increases its subscriber penetration. Regarding Axtel, the company is an undiversified fixed-line provider, has a smaller scale and lower margins. Axtel reorganized itself into a service unit and infrastructure unit.
Televisa is rated one notch below America Movil (A-/Positive) and Comcast (A-/Stable). America Movil has a stronger financial structure, lower net leverage, higher degree of geographic diversification with leading positions in mobile and fixed throughout
Key Assumptions
Total revenue to decrease around 1% due to the spin-off of other business segment;
EBITDA margins near 35%;
Around
Cable and SKY segment RGU to grow around 2% during 2023;
Capex of around MXN13.3 billion in 2023 and 2024;
Dividends of around MXN1,000 million during 2023-2025;
Approximately
The company spin off its other business segment.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The possibility of any positive rating action in the short to medium term remains limited given the company's elevated leverage profile and reduction in geographic revenue diversification.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Loss in market share and pressured operating margins due to competition in its Cable and Sky segment operations;
Sizable acquisitions without any clear indication of EBITDA improvement to mitigate the negative financial impact;
Expectation of net leverage above 2.5x and gross leverage above 3.5x over the medium to long term;
Dividends above historical levels;
Higher MXN depreciation could pressure the rating;
A downgrade in
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Strong Liquidity Profile: Televisa's liquidity position and financial flexibility are expected to remain strong over the rating horizon. Televisa has a cash balance of MXN51.1 billion that comfortably covers MXN1.6 billion of the current portions of long-term debt as of YE 2022. The debt maturity profile is well spread, without any sizable bullet maturity concentration. Total debt, excluding lease liabilities under IFRS16 amounted to MXN108.6 billion as of YE 2022 and consists of MXN105.2 billion of bank debt and capital market debt and MXN3.4 billion related to lease liabilities.
Fitch expects that Televisa will continue to use the proceeds from the TelevisaUnivision transaction to pay down debt, and that the company will be able to maintain a net leverage level (pre-IFRS16) below 2.0x. Televisa has an undrawn committed credit facility with a syndicate of banks for
Issuer Profile
Televisa is the leading provider of pay TV with a 62.4% subscriber market share and the second-largest fixed broadband operator with 25.9% subscriber market share in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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