The future streaming service of the new Televisa-Univision company, to be launched in early 2022, will be offered first in Mexico and the United States, said Univision CEO, Wade Davis. The company will feature content from both companies, including series, movies, sports, telenovelas, and archival content, to compete with industry giants such as Netflix.

The deal between the Mexican media giant and its U.S. partner will bring significant investments and generate up to $5.5 billion in debt-free cash flow over the next few years, executives said Wednesday. Televisa, whose shares soared to levels not seen in nearly two and a half years, announced the day before that it will merge most of its content business with the largest Spanish-language media conglomerate in the United States.

In a call with analysts, Alfonso de Angoitia, Televisa's co-CEO, said the new joint venture will also generate US$2 billion in equity value on day one, as it pushes its webcasting strategy to reach consumers around the world. The new Spanish-language content giant will not need to seek additional sources of cash because the merger improved its financial profile, said Wade Davis.

Televisa operates several TV channels, a cable and internet system, and entertainment businesses, but has been under pressure for years as viewers migrate from traditional broadcast services to streaming options such as Netflix. Its finances have also taken a hit from deep cuts in advertiser spending.

S&P maintains a negative rating on Televisa

Standard & Poor's Financial Services (S&P) maintained a negative rating on Televisa following the announcement of the creation of the new content company Televisa-Univision. This unfavorable outlook goes hand in hand with Mexico's sovereign rating. This contrasts with the optimism that boosted Televisa's shares on the Mexican Stock Exchange (BMV), which soared more than 20 percent after the announcement of the merger, reaching their highest level in almost two and a half years at 49.95 pesos.

In a statement sent to the BMV, S&P said that the negative outlook on Televisa's global scale rating reflects that of Mexico (global scale, foreign currency, BBB/Negative/A-2), given that the company's rating has a notch above that of the sovereign. However, if we revise Mexico's foreign currency sovereign rating outlook to stable, we could maintain Televisa's negative outlook if its leverage indicators worsen in a way that triggers a negative scenario over the next 12 to 18 months."

In its analysis, S&P said that if the transaction is finalized, Televisa is expected to reduce its size and diversity because the content segment represents about 31.2 percent of revenues, but the company will receive 3 billion in proceeds that will be used to reduce the net leverage ratio to below 2 times.

Therefore, the issuer and issue ratings granted today by S&P Global Ratings are on a global scale of 'BBB+' and a national scale -CaVal- of 'mxAAA'. The rating agency also said that this negative outlook reflects the potential reassessment of Televisa's business and financial risk profiles once the merger of its content segment with Univision is completed.

The rating could worsen if in the next 12 to 18 months if Mexico's foreign currency sovereign rating is downgraded or if its business risk profile weakens as a result of the transaction, the lower leverage or expected cash flow of the newly created entity does not offset the weakening. And, conversely, the scenario could turn positive if Mexico's rating improves. "We would also need to assess the business and financial risk profiles, as well as the cash flow dynamics of the newly created entity," S&P reported.