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Univision's( UVN) $3.5 billion deal to buy Hispanic Broadcasting (HSP) was music to the Spanish-language broadcasting stocks Wednesday morning. But not for long.

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Entravision Communications

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leaped at the opening on news of the deal before drifting lower as investors considered the broader picture.

At issue is whether the particulars of each company's business live up to the generalized scenario driving the Univision-Hispanic deal: That the Spanish language media market is poised for a boom, and ripe for further consolidation.

There was no shortage of investors looking to play the trend: The thinly traded microcap

Radio Unica Communications


rose more than 11% Wednesday. But at midafternoon all the sector's big players had given away most or all of their earlier gains, while buyer Univision dropped 17% to $31.15 as investors suffered buyer's remorse vicariously.

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That's not to say the sentiment on the deal was entirely negative. One buy-sider who was long Hispanic Broadcasting going into Wednesday's announcement said yes to the general trend, while refraining from commenting on any of the other companies' investment value. "It's one of the best investment stories out there as a sector," said the buy-sider, speaking on condition of anonymity. "There was and is inevitable consolidation."

Univision and Telemundo -- Univision's rival, acquired earlier this year by


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-owned NBC -- have been trumpeting the value of the multiethnic Spanish language market to Wall Street since at least the late 1980s. And operating conditions are particularly good right now, says the buy-sider.

According to U.S. Census statistics cited by Hispanic Broadcasting, the Hispanic market in the U.S. grew by 56% from 1990 to 2000 -- census data that, says the buysider, are working their way through ad sales presentations made by Spanish language broadcasters.

Getting Ahead

Indeed, Spanish language broadcasters have done well despite a weak overall advertising market. In the first quarter of 2002, Entravision recorded $49.1 million in revenue, up 12%, reporting same-station revenue increases of 16%; Spanish Broadcasting reported $29.7 million in first quarter revenue, up 18.3%, and added that same-station sales had improved.

Yet neither company's picture is a simple one. Entravision's outdoor advertising unit reported lower revenues, and the company took a $46.2 million charge in the first quarter, to write down goodwill associated with its outdoor business. Complicating matters is that Univision is already Entravision's largest shareholder; on a conference call with analysts Wednesday, a Univision executive avoided saying whether the company might increase or decrease its stake in Entravision.

Meanwhile, hours after the Univision-Hispanic deal was announced, Spanish Broadcasting sued Hispanic Broadcasting and

Clear Channel Communications

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, the radio station giant that is Hispanic's largest shareholder. Spanish Broadcasting says that the two other companies "have adversely affected SBS's ability to raise capital, depressed SBS's share price, impugned the reputation of SBS

and made station acquisitions more difficult," among other allegations.

Deal-driven optimism aside, it's hardly a simple story for investors to sort out.