Grupo Televisa SAB - ADR - Level III

AT&T Mexico acquisition: major strategic upside, but execution + disclosure limitations are key - Televisa announced an agreement to acquire AT&T’s wireless telco business in Mexico for $2.0B, planned to close in 1Q 2027 after regulatory approvals. - Deal structure: 50/50 partnership with Fintech Holdings; each partner contributes $400M equity at closing, with the remaining $1.2B funded via a 5-year nonrecourse loan. - Expected scale post-close: ~24M wireless subs, 5.7M broadband, 6.3M video; revenue target ~$8B/year (about ~23% of Mexico’s total telecom market). - Balance-sheet impact: net debt/EBITDA expected to rise to 1.9x vs 1.6x at 3Q end (management portrays this as still strong). - Outlook on accounting/synergies: investment in a joint venture using equity method; synergies planned from “get-go” after close via services agreements (cross-bundling and cost efficiencies). However, management said it’s not planning to disclose AT&T Mexico stand-alone financials initially (AT&T reports under U.S. GAAP vs Televisa IFRS, implying a likely lag in transparent pro forma detail).

Telco ops (izzi + Sky): strong profitability rebound despite softer top-line; fiber momentum continues - Cable footprint & fiber: network >20M homes passed; ~8,000 new homes passed in the quarter; 4.3M homes upgraded YTD to FTTH; ending 3Q with ~67% of footprint passed with fiber-to-the-home. - Broadband growth: broadband net adds ~9,000 in 3Q; gross adds “similar to 2Q” (suggesting maturity/penetration effects). - Churn: monthly churn stayed below historical average (~<2%) for six consecutive quarters, aided by retention/value-customer focus. - Video weakness: ~48k video subscribers lost in 3Q; management linked acceleration vs the recent ~34k average to World Cup end in July (timing/seasonality impact). - Mobile slowdown (surprising/negative): mobile net adds 68k (solid but slower than ~83k average last four quarters), attributed to the new SIM registration law requiring photo ID—causing temporary market slowdown; management says their base is postpaid so registration is largely “automatic.”

Segment profitability: best-in-3-years quarter; driven by OpEx efficiency + Sky/izzi integration - Segment revenue: MXN 14.1B, -3.8% YoY. - Operating segment income: MXN 6.0B, +5.6% YoY. - Operating segment income margin: 42.6%, +380 bps YoY and best quarter in ~3 years; +80 bps sequentially. - Key driver: OpEx decline of 9.7% YoY, plus synergies from Sky + izzi integration. - CapEx: MXN 3.0B in 3Q (21.3% of sales), “mostly in line” with first-half intensity despite the FTTH upgrades already delivered. - Cash generation: Operating cash flow for K1 Sky (EBITDA – CapEx) MXN 3.0B, 29.3% of sales.