Viacom and Spanish telecom giant Telefonica said Tuesday that Viacom has acquired Television Federal, known as Telefe, one of the main free-to-air channels in Argentina for $345 million in cash.
"The transaction adds one of Argentina's most popular television networks and biggest content producers to Viacom's fast-growing portfolio of international TV networks and digital properties," the companies said.
Viacom said the transaction is expected to be accretive to its fiscal year 2017 earnings.
Telefe reaches 95 percent of all households in Argentina, which has a population of 43 million, and has attracted approximately a 33 percent share of viewership year-to-date, Viacom said. The network produces more than 3,000 hours of Spanish-language video content each year, including seven of the top 10 programs currently airing locally. Its library consists of 33,000 hours of local content.
Viacom is buying the Telefe network in capital Buenos Aires; eight wholly owned channels in the interior of the country; Telefe Internacional, a pay TV channel seen throughout the Americas and distributed globally to 10 million subscribers in 17 countries; digital apps such as Mi Telefe (My Telefe) and Telefe Noticias (Telefe News); multi-channel network UPlay; and 12 production studios.
"By combining Telefe with Viacom's popular pay TV networks, which include MTV, Nickelodeon, Comedy Central and Paramount Channel, this deal further strengthens Viacom International Media Networks' position in Argentina and Latin America," Viacom said.
"Telefe is an outstanding broadcast and production business, and this acquisition will accelerate our growth strategy in Argentina, one of the most advanced and valuable media markets in Latin America," said Bob Bakish on his first day as acting president and CEO of Viacom.
Wall Street has mostly focused on another deal, namely a possible recombination of Viacom and CBS Corp., which the companies have been exploring. But the Argentina deal fits in with Bakish's experience as head of Viacom International Media Networks, which he has made a key growth business in recent years.
"Viacom has an unrivaled track record of combining free and pay TV networks to deliver strong growth in high-value or high-growth markets, including in the U.K. and India," said Bakish. "Working together with Telefe's highly successful team, we can strengthen Telefe's market-leading status in Argentina and expand its presence around the world using Viacom's extensive global network, potentially reaching hundreds of millions of Spanish speakers across Latin and North America, as well as in other markets."
Telefe will be part of the portfolio of Pierluigi Gazzolo, president of VIMN Americas. "The acquisition builds on Viacom's long and successful track record of investment in Argentina, beginning with the launch of MTV in 1993," the company said. Viacom's portfolio in the market also includes 12 branded pay TV networks, including Nickelodeon, Nick Jr., Comedy Central, Paramount Channel and VH1; authenticated TV Everywhere mobile apps, events and experiences; and consumer products. VIMN has maintained a local office in Buenos Aires since 1995.
Analysts, who have been looking for Bakish's first moves, commented on the deal in mostly positive terms.
"We estimate that Telefe generates approximately $200 million in annual revenue at a mid-teens operating margin, with the majority of that revenue coming from local-market advertising," wrote Guggenheim Partners analyst Michael Morris. "We see the acquisition strengthening Viacom's current linear offering in Argentina, the third-largest consumer market in Latin America, from a low-single digit market share to more than 30 percent. In addition, we expect the stronger market share to provide additional leverage in future pay TV carriage negotiations. Argentina currently has about 11 million multi-channel TV subscribers, according to SNL Kagan, growing at a 4 percent annual rate." He concluded: "We see today's action as a positive, albeit still modest, step forward for the business."
Jefferies analyst John Janedis said in a report: "While the deal gives Viacom incremental scale internationally, it also suggests the board is allowing Bakish to invest in the business as the recombination with CBS is evaluated." He added: "We view the deal positively and expect the asset to contribute more once Viacom can better leverage the content library/production to sell into other regions."
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