Izzi and Sky prepare to cut 20% of the workforce

Alfonso de Angoitia, co-CEO of Grupo Televisa, revealed in a conference with analysts that before the end of 2024, the verticals of Izzi and Sky will be merged so that in 2025 the full benefit of the synergies of both assets will finally be reflected.

The manager said that so far they have reorganized the structure of the combined company, “which allows us to retain the best talent and optimize duplicate roles,” in addition to implementing synergies and efficiencies in several areas that include the commercial part, sales commissions. , programming, IT, technology, finance and marketing, among others. This process has allowed the Group to reduce operating expenses by 8.5% year-on-year during the first nine months of the year, as detailed by De Angoitia in a call with analysts.

The full integration of Izzi and Sky will allow Grupo Televisa to improve its operating margin by saving 400 million pesos, as well as draw up strategies more focused on a single player to face the growing competition from Megacable, Telmex and Totalplay, as well as from the platforms video streaming platforms like Netflix, which increasingly emulate the business model of cable companies.

But the moves made by Izzi and Sky, under the command of Francisco Valim, CEO of both companies, have involved the elimination of various areas of the company to avoid duplication of positions and make the work team more efficient. Two internal Televisa sources with knowledge of the matter who asked not to be identified assured Expansión that Televisa is preparing to cut 20% of the Izzi and Sky workforce, involving all levels of the companies and will take effect from the 15th. of December.

One of the sources assured this medium that the restructuring that is taking place within both companies has generated enormous uncertainty among employees. “No one knows clearly what will happen to the company because the general director’s plan (Francisco Valim) is not entirely clear,” the source commented.

The layoffs of Izzi and Sky add to those reported in recent days within TelevisaUnivision, whose company also seeks to improve its financial perspective within the streaming industry. Expansión requested a position from Grupo Televisa, but did not comment until the publication of the text.

Carlos Hermosillo, independent analyst, commented that the merger of Izzi and Sky cannot ensure the success and financial balance of Grupo Televisa because the new player that results from both assets will compete in a complex environment in terms of fixed services and in especially with streaming platforms, who have reduced the relevance of pay television.

“The company has focused its attention on the internet business but the price and quality of service will be critical, and it is precisely in this issue where they have shown that they do not have a good advantage over their competitors,” said Hermosillo.

Francisco Valim, CEO of Izzi and Sky, has focused his efforts on optimizing capital spending and increasing cash flow, a characteristic feature of the manager after his time in various telecommunications companies. But this decision has implied the withdrawal of the sports channel Afizzionados, which represented an incentive for users when contracting a subscription with Izzi, while for the company it represented only 1% of its total income, but above all, a financial burden for its profitability as a business.

This decision was reflected in its financial statements. In the third quarter of this year, Izzi’s sales fell 4.3% and it lost 25,000 customers, according to the company’s financial data. The company’s CEO himself acknowledged that the withdrawal of the channel was one of the reasons for this result. Something similar happened with Sky where Valim also applies structural adjustments. Sky sales fell 6.3% and it reported a disconnection of 270,000 users.

Brian Rodríguez, an analyst at Monex, explained that although the companies’ income decreases due to the departure of subscribers, the reduction in costs and operating expenses makes the company more attractive to investors, so they can subsequently focus on generating more subscribers. .

“It seems to me that the company ends up accepting that subscribers are going to continue leaving and for now they want to focus on continuing to grow their flow,” said the analyst.

The company has placed all its hopes in the union of the Izzi and Sky assets with which it seeks to improve profitability, optimize capital expenditure and increase the company’s free cash flow generation in the coming years, although this implies , paradoxically, in higher expenses such as settlements for layoffs.

According to Televisa’s 2023 annual report, Izzi incurred additional operating expenses of 51.2 million pesos only due to personnel reductions. With the merger, the cost could increase significantly. But it is a price that Televisa is willing to pay, according to De Angoitia in a conference with analysts.