Univision's Fourth-Quarter, Full-Year Losses Expand in 2008

Spanish-Language Media Company Copes With Falling Ad Revenue, Massive Debt Load

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NEW YORK (AdAge.com) -- Mired in debt and falling ad sales, Univision Communications posted a 7.8% drop in net revenue, to $502.1 million, for the fourth quarter of 2008 and a net loss of $1.99 billion, compared with a net loss of $201.5 million for the same period in 2007.

For the full year, the Spanish-language media company reported a 2.5% decline in 2008 net revenue to $2 million. Univision's full-year net loss for 2008 was $5.1 billion, compared with $314.9 million in 2007.

For Univision, the recession is not only slashing ad revenue but also making it harder for the company to pay back the enormous debt load it took on when a consortium of investors bought Univision for $12.3 billion in 2007 at the height of the highly leveraged private-equity boom.

On a conference call to discuss the company's results with analysts, Andrew Hobson, Univision's chief financial officer, said several times that the company had made a $385 million debt repayment today. At the end of 2008, Univision's long-term debt stood at just more than $10 billion.

Accounting for the loss
The 2008 net loss came largely from impairments the company took on assets and $610.8 million from settling a lawsuit in January 2009 with Univision's main program provider, Mexican media giant Grupo Televisa. Most of the charge for the settlement relates to the free airtime Univision will provide Televisa for the next nine years, until the long-term programming agreement between the two companies ends in 2017. Other charges included investment losses of $162.9 million and restructuring charges of $45 million, including the most recent round of layoffs, in early 2009, when the post of chief marketing officer was eliminated.

Asked about the first quarter, which ends today, Mr. Hobson said, "The first quarter has been tough, and we expect the year to be tough, with weakness to be driven by auto and retail."

Auto advertising was Univision's biggest-spending category last year but had fallen to fourth by the last quarter of 2008, trailing retail, telecommunications and consumer package goods, he said. In the fourth quarter, Univision's car advertising fell 41%, he said.

"In some of our markets, as many as 40% of local dealers have closed down," he said.

In retail, among the best-performing categories in the fourth quarter, advertisers spent 3% more, and telecommunications and fast-food restaurants, the fifth-biggest-spending category, were both up 8%, Mr. Hobson said.

Getting ready for round two
Round two of the battle between Univision and Televisa will begin later this month. The two companies are still squabbling over who should get the U.S. digital-media rights to the Televisa programming Univision airs in the U.S. Since digital media didn't really exist when the long-term programming agreement was signed in the 1990s, both companies claim the rights should belong to them. Unless they can resolve the issue out of court in the next three weeks, a trial will start April 21 in a Los Angeles court in front of the same judge, Philip Gutierrez, who presided over the January court case that was settled in mid-trial.

During the call with analysts, Univision's chief operating officer, Ray Rodriguez, emphasized that Univision continues to add viewers, unlike the English-language TV networks.

"Univision was the only network to grow among adults 18 to 49 during the fourth quarter," he said. For the first time, Univision became the fourth network among the 18-to-34 segment in 2007, ahead of CBS, he said.

"We've been told by advertisers that the Hispanic population is one of the few bright spots, and we continue to see growth in viewership," he said.

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