Television Univision, a newly formed Spanish media venture, will launch its planned streaming platform in the United States and Mexico next year before expanding elsewhere in Latin America and in Europe, its chief executive told Reuters on Wednesday.
The service, which will take on established rivals including Netflix Inc (NFLX.O) and Disney Plus (DIS.N), will be a product of a move to combine the content of Mexican broadcaster Grupo Televisa (TLEVISACPO.MX) and U.S. peer Univision, announced on Tuesday.
Televisa shares surged by as much as a third before closing with a gain of 22.8% on the day, as investors bet on the growth potential of the venture. Less than 10% of the global population of 600 million Spanish speakers uses digital video platforms, versus nearly 70% of the English language market, according to data shared by Televisa, Mexico’s largest broadcaster.
“You can almost think of Mexico as a soft launch for the rest of Latin American countries. … We will then think about the European Spanish market,” Univision Chief Executive Wade Davis, who will also lead the new venture, said in a phone interview.
Content that is already popular with the companies’ audience may be featured on the streaming platform, including soap operas known as “telenovelas,” and sports and reality programs, Davis said.
It will scale up content production, focusing on higher quality and more hours, according to Emilio Azcarraga, Televisa’s chairman of the board.
“The combination of Televisa (and) Univision will allow a
substantial increase in investment in content,” Azcarraga told Reuters. “And of course, the resources and technological insights of Google and SoftBank will be invaluable in the future.”
The transaction was partially financed by a $1 billion Series C preferred investment led by the SoftBank (9984.T) Latin American Fund, with participation from ForgeLight, Google (GOOGL.O) and The Raine Group.
Davis said the combined power of Televisa and Univision’s ad sales businesses will give the new company an edge to compete globally in the streaming video space.
“The fact that we have by far the largest ad sales force on the planet selling Spanish language media, the largest relationships with global advertisers and their agencies, will provide us huge advantages relative to global media companies,” Davis said.
The new combined company will provide $2 billion of equity value on day one, Televisa Co-Chief Executive Alfonso de Angoitia said on an earlier conference call. It is expected to generate between $5 billion and $5.5 billion of leverage-free cash flow over the coming years, Davis added.
Analysts from Itau BBA said in a research note that the deal implies better long-term prospects for Televisa’s telecoms business in Mexico.
“We like the new partners coming into Univision, especially Google, which likely speaks to the digital-transformation opportunity the industry faces, particularly in the Hispanic content market,” the bank said.
The Televisa Univision plan was hailed by Mexican President Andres Manuel Lopez Obrador, who praised the deal as an “important function for the Hispanic community,” but called on the company to prevent discrimination and xenophobia, particularly against migrants, and to respect the “dignity” of Mexicans. He did not elaborate.
The president, who has pressed companies to ensure they fulfill their fiscal obligations, also said the operation would yield several billion pesos in taxes.
“All taxes will be paid,” he said.