Univision, Secure in Its Domination, Reaps Spanish-Language Rewards

By DARRELL SATZMAN
Staff Reporter

In one sweeps period this year, television stations owned by Univision Communications Inc. had the No. 1 evening newscasts in Los Angeles, New York, Chicago and Miami among adults 18-34. In Los Angeles, Univision also had the most popular primetime lineup for that age group.

Clearly, advertisers are taking note.

As late-year media predictions begin to emerge for 2004, growth in the Spanish-language sector is expected to outpace advertising gains overall. If so, it would be the third consecutive year that Spanish media has grown at a more rapid clip than English-language media.

Los Angeles-based Univision is poised to take full advantage reflected by a healthy rise in third-quarter net income and an 8 percent gain in the stock price over the last three months. Now comes an additional opportunity: completion of the $3.5 billion merger with Hispanic Broadcasting Corp.

"We believe next year we will see growth in existing advertisers increasing their budgets and growth in companies coming into Spanish media for the first time," said Roberto Orci, president of M3 Alliance Consulting, a Los Angeles Hispanic marketing company. "Univision has become a vehicle for U.S. Hispanic marketers that offers the same quality as the general market."



Media giant

With its acquisition of Hispanic Broadcasting, Univision became the largest Spanish-language radio operator in the United States, in addition to being the top Hispanic television broadcaster.

Cross-platform promotional opportunities between broadcasting outlets and the ability to offer integrated advertising options are not the only benefits expected from the merger.

Univision's assets now include 55 television stations and more than 50 radio stations in the nation's largest Hispanic markets. It operates the Univision and TeleFutura TV networks and the Galavision cable channel. It has 43 affiliate stations nationwide and its Univision Music Group owns Fonovisa and 50 percent of Disa, two of the largest Spanish-language record labels.

With its radio stations, Univision now has the ability to promote its artists on the air an advantage no other Spanish-language label can match.

The company also owns a 27 percent stake in Santa Monica-based Hispanic broadcaster Entravision Communications Corp. and 15 percent of Grupo Televisa, Mexico's largest producer of television programming and the source of much of Univision's most popular fare. (To win regulatory approval of the Hispanic Broadcasting deal, Univision agreed to reduce its stake in Entravision to 10 percent by 2009. The company has not yet sold any shares.)

"Over the long run, Univision has been the monster in the industry and this gives them even more of a presence," Maite D'Amico, president of local advertising agency Cruz/Kravetz Ideas.

Indeed, all Spanish-language broadcasting is growing faster than the industry average.

Besides NBC-owned Telemundo, which is launching several new shows this season that were produced in the United States, there is TV Azteca and the newer Hispanic Television Network along with a host of new cable offerings. Spanish media giant Grupo Prisa is also considering launching a Spanish-language cable channel in this country.

Despite that competition, it's generally believed that Univision, with its wide reach, is best positioned to benefit from the growth in Hispanic media.

"Univision is unique among media companies in that it already dominates its market," said Leland Westerfield, an analyst with Jeffries & Co. "Consumption by English consumers is flat. Univision's market is still growing."



Eye on integration

Although there has been little immediate cost cutting, the integration of Hispanic Broadcasting's radio stations into the Univision fold has apparently gone smoothly.

"The two businesses in practice operate independently, but the integration of television and radio should be seamless," said Westerfield. "It doesn't require massive reorganization and combined the two management teams overlap quite well."

Most of the top Hispanic Broadcasting management has been retained by Univision in what is now called Univision Radio. In Los Angeles, Thomas McSweeney was recently named vice president and general manager of the company's five local stations. He had been with Hispanic Broadcasting in a similar capacity.

Univision's local radio stations include KSCA-FM (101.9) and KLVE-FM (107.5), the top-two grossing Spanish-language stations in the market, as well as KRCD-FM (98.3), KRCV-FM (103.9) and KTNQ-AM (1020). Those combine with two local television stations, KMEX (Channel 34) and KFTR (Channel 46).

There has been speculation that Univision would consolidate its local radio operations currently housed in Glendale at its corporate headquarters in West Los Angeles. "As they look at what write-downs that have for the merger expenses they might look at the Glendale lease, which is probably very expensive," said Jason Helfstein, an analysts with CIBC World Markets. "It would make sense if they consolidated those operations."

Univision officials declined comment.



Expanding clout

In a Nov. 13 conference call, Mac Tichenor, president and chief executive of Univision Radio, said the company was seeing positive signs, especially among advertisers in the automotive, financial services and consumer product categories.

"Although we're just beginning the process of integration, we've already begun to see the first benefits of the combination of radio with the other Univision platforms in the sales arena," Tichenor said. "We can now compete on more equal footing with the media companies that have combined these two broadcast media."

Tichenor last month accepted an invitation to serve on the Arbitron Advisory Board, which helps establish standards for monitoring radio listening a sign of Univision's new clout in the radio industry.

The positive noise coming from the company belies the nervousness some analysts felt when Univision's shares first reached the $37 mark in early September,

At the time, SG Cowen Securities Corp., Merrill Lynch Global Securities and Lehman Bros. Inc. downgraded the company from the equivalent of a "buy" rating to "market perform."

A month later, however, the company reported third-quarter net income of $42.2 million, compared with $20.3 million for the like period a year earlier. Third quarter revenues were $321 million, compared to $269.8 million, primarily on the strength of an 18 percent jump in television revenue.

Clear Channel Communications Inc., which owned 26 percent of Hispanic Broadcasting, took advantage of the relatively strong share price last month, selling 8.3 million Univision shares, about one-third of its stake in the company.

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