Univision gains don't help stock.

As Univision Communications Inc. moves to tighten its grip on the nation's Hispanic television audience, its stock has sputtered over concerns about the Spanish-language advertising market and delays in its purchase of Hispanic Broadcasting Corp.

Although Univision officials said the company is making gains with its fall slate in the current "upfront" advertising period, the gap between general market advertising rates and Hispanic market rates continues to concern investors.

In addition, a coalition of lawmakers, including Sen. Edward Kennedy, D-Mass., and Rep. Maxine Waters, D-Los Angeles, last week joined a handful of Hispanic organizations voicing opposition to the pending Hispanic Broadcasting deal, which was valued at $3.5 billion in stock when it was announced last year.

The impact of the heightened opposition on the Federal Communication Commission's review of the merger is unclear, but there is concern it could drag out the process -- already nearly a year old and previously expected to close this quarter -- into the summer or beyond.

Despite such concerns, Univision continues to roll in its core TV business. The company last year successfully launched a new network, TeleFutura, and revamped its cable station, Galavision. The most recent national ratings show Univision building on an already substantial lead over chief competitor Telemundo.

NBC's $2.6 billion acquisition of Telemundo in 2002 has thus far failed to staunch a decade-long exodus of viewers from that network to Los Angeles-based Univision, which carries 41 of the top 50 Spanish-language programs nationally, according to the Nielsen Hispanic Station Index.

Univision claims to have the No.1 rated Spanish-language program in every market in which it airs. Univision also commands about 85 percent of the U.S. Hispanic audience.

Stock pressures

Even with that momentum, Univision stock, which closed at $28.40 on May 20, is down 30 percent from $40.45 a year ago and had dropped more than 10 percent since the beginning of the month.

David Joyce, an equity analyst at Miami-based investment bank Guzman & Co., said he believes Univision is undervalued based on its long-term outlook. Guzman has no investment banking business with Univision.

"It's not a question of Univision's dominance over Telemundo," Joyce said. "TV ad rates have been strong in the English-language upfront and there have been increases for Spanish-language programs, but they are not closing the gap that investors continue to hope for."

Between its Univision and TeleFutura properties, Univision owns 48 television stations nationwide, including two in Los Angeles, KMEX-TV (Channel 34) and KFTR-TV (Channel 46). It also owns the Univision Music Group with a handful of labels such as Fonovisa Records and Mexico-based Disa Records.

The Hispanic Broadcasting deal would give Univision more than 55 radio stations.

The source of Univision's troubles with the FCC stem from its 31 percent stake in Santa Monica-based Entravision Communications Corp., which also owns Spanish-language radio and television stations. Opponents have argued that Univision and Clear Channel Communications Inc., which owns more than radio 1,200 stations nationwide and a 26 percent stake in Hispanic Broadcasting, would unfairly dominate U.S. Hispanic media if the deal were approved.

Univision has pledged to convert its stake of Entravision into a non-voting position, but that has failed to mollify opponents.

With the all-stock Hispanic Broadcasting deal up in the air, Univision shares have yet to recover from an initial dip it took following the announcement last June, Joyce said.

Three-pronged attack

Although much of Univision's growth predated the launch of TeleFutura, the new network is the third piece in a programming puzzle that has helped the company solidify its dominance in the past year with a lineup heavy with telenovelas, news, sports and game shows.

"We counter-program each other. At any time period during the day, you'll never see any of the same genre running across the three networks," said Tom McGarrity, co-president of Univision network sales. "The theory is not to carve up our Univision viewers, but to bring new viewers into the marketplace."

The ability to sell advertising across three networks has translated into more interest from advertisers during the current upfront period.

Last year, Univision made deals with about 120 advertisers in the upfront period, a number McGarrity said would likely increase this year. Still, he acknowledged Univision has much selling ahead before it can attract the 250 or so advertisers that sign up for the major English-language networks during the upfront.

"They are the top dog and they know how to stay there," said Dede Jeffrey, a media buyer at Los Angeles-based Round2 Communications. "This is going to be a big year for Telemundo. They have to reshape themselves to compete."

Manuel Abud, vice president and general manager of Telemundo's two Los Angeles stations, KVEA-TV (Channel 52) and KWHY-TV (Channel 22), said the NBC merger is already helping the network both in tenns of programming expertise and ad sales.

"We have the resources and support of the No. 1 broadcaster in the country," Abud said, adding that Telemundo is producing shows in the United States to improve production values and to better connect with a U.S. born audience.

While Telemundo plans to experiment with new concepts this fall, Univision will mostly stick with the tried and true, especially novelas, or soap operas. The company has a long-term deal with Mexico's Grupo Televisa, whose novelas, which are produced for a fraction of the cost of U.S. shows, consistently garner the highest ratings both here and in Mexico.

"When you can build your network around these solid rocks (from Televisa), it makes it easy" said Luca Bentivogio, executive director of Los Angeles-based Latino Public Broadcasting, and a former producer with both Univision and Telemundo.

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Univision Communication Inc.

Stock prises

May 21, 2002  $39.42
May 21, 2003  $27.53

Note: Table made from line graph