Nets Respond to Argentine Rate Squeeze

8/09/1998 8:00 PM Eastern

BUENOS AIRES -- Latin American pay TV programmers are using
a variety of strategies in response to the sharp decline in carriage fees in Argentina.

"Our contracts here have tended to become longer.
Instead of two- to three-year contracts, we are looking at three- to five-year ones,"
said James Samples, senior vice president of Turner Broadcasting System Latin America Inc.
He added that Turner is also focusing on "the kind of things that give our networks
added value," such as promotions that would help operators.

Over the last two years, three MSOs -- Multicanal,
CableVisión/TCI5 , and Supercanal -- have come to control more than half of
Argentina's cable subscribers. This gives them significant bargaining power with
programmers, who report that carriage rates have been pushed down by about 25 percent over
the last 18 months.

The rate pressure is affecting even Argentina's strong
local programmers, such as Imagen Satelital. On July 1 the Supercanal MSO, which boasts
about 500,000 subscribers, dropped Imagen Satelital channel bouquet from its lineup.

Imagen president Alberto Gonzalez said that the MSO wanted
to slash programming rates to an unacceptable level. At press time, Imagen lawyers had
notified Supercanal that they may sue the MSO for breach of contract. Gonzalez said that
taking a strong stance will not only vindicate Imagen, but will also send a message to
other MSOs that "they cannot do the same thing."

Supercanal executives couldn't be reached for comment.

To be sure, Argentina's top MSOs are under more
pressure than ever to control costs following their acquisition binge over recent years.

Argentina's CEI Citicorp Holdings S.A. -- which
together with Tele-Communications International Inc. and Telefónica de España
International owns CableVisión -- has reportedly spent about $2 billion over the last 18
months to build its media portfolio.

Programming is an obvious cost-cutting area, said Paul
Salvoldelli, managing director and principal of BGS Group, a Buenos Aires-based management
affiliate of the private investment company Hicks, Muse, Tate & Furst Inc., a CEI

"It is hard to get margins up when a third of your
costs are going to programming every

month," he said. "They should be between 20
percent and 25 percent of gross revenues."

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