Cofeco approves Televisa/Iusacell tie-up subject to conditions

15 Jun 2012

With Mexico’s competition regulator, Comision Federal de Competencia (Cofeco), having last week announced that it had reached a decision regarding local media giant Televisa’s bid for a 50% stake in Iusacell, details of the ruling have now been made public. According to Reuters, the antitrust watchdog has given the go-ahead for the acquisition, despite having rejected the proposed tie-up back in January 2012 over concerns that it could threaten competition in the television advertising market. However, the deal is understood to hinge on a number of conditions, most notable of which is the success of a government auction of new TV frequencies enabling the launch of a new television network within two years. A Cofeco statement on this element of its decision was reported by Reuters as saying: ‘If after 24 months the auction of a third television network has not been made successfully, it will automatically trigger a mechanism to dissolve the partnership between Televisa and Grupo Salinas in Iusacell.’ Other conditions that have been reported include the requirement for both Televisa and TV Azteca to refrain from forcing would-be TV advertisers to become Iusacell customers, while Televisa and Iusacell must also offer all cable and satellite TV customers a new pay TV package that includes all four of Televisa’s free public channels. Should any of the conditions fail to be met, Cofeco has said that, as well as the dissolution of the sale, fines of up to 10% of each firm’s annual turnover will be imposed on the duo.

In the wake of the ruling it has yet to be confirmed whether any appeals will be filed against the proposed conditions for the merger, but Luis Nino de Rivera, spokesman for Iusacell’s parent company Grupo Salinas, was cited as saying: ‘From a first glance at the conditions I can say they are extremely harsh, costly and difficult to meet.’ The executive also noted that his company will call for some clarity on a number of the points raised by the regulator, adding: ‘The Cofeco document consists of 600 pages, has an extraordinary level of detail and while we do not fully understand what they imply we won’t be able to evaluate the real impact these conditions have.’

As previously reported by CommsUpdate, Cofeco’s five board members voted three-to-two in favour of rejecting the tie-up in January 2012, after the April 2011 announcement by Televisa that it had agreed to acquire a 50% stake in Iusacell. The media giant said it had agreed to pay around USD1.6 billion for the stake, subject to receiving regulatory approval for the deal, with USD1.57 billion paid for debt convertible into Iusacell equity in addition to a direct cash payment of USD37.5 million. Further ahead, Televisa also agreed to pay an additional USD400 million to Iusacell shareholders if the cellco’s earnings before interest, tax, depreciation and amortisation (EBTIDA) reach a cumulative USD3.47 billion between January 2011 and December 2015. Despite the initial rejection, reports in February 2012 then claimed that the sale could yet go ahead if the two companies addressed issues raised by the competition watchdog.

Mexico, Grupo Televisa, Iusacell (inc. Unefon)