Black Clouds Loom Over Brazils Auction Process

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Sao Paulo, Brazil -- Bidders in Brazil's pay TV
auction are on tenterhooks waiting to see if they will be called to submit their proposals
this month, after a flood of injunctions in November threatened to derail the whole
process.

While some of those injunctions have already been
overruled, there are still others pending, leaving the industry uncertain as to how they
will affect the auction's future.

One of the unknowns is whether the dates for the submission
of bid proposals -- scheduled for Jan. 5, 12, 19 and 26 -- will go ahead as planned. That
is the intention of the Agencia Nacional de Telecomunicaoes (Anatel), the new government
agency overseeing the auction.

The main instigator in the legal battlefield is TV Cidade,
a consortium formed by some executives at newspaper Jornal do Brasil and TV
networks SBT and Bandeirantes. Together, they intend to bid on franchises in 194 cities.
While some of TV Cidade's suits have been thrown out of court, two are currently
before Brazil's Federal High Court.

They challenge the legality of the auction and the
jurisdiction of Anatel and the Communications Ministry. Since Brazil's cable law was
passed before Anatel existed, the question is which body -- Anatel or the ministry -- has
the right to rule on issues related to the auction.

'We think that there's a contradiction between
what the regulations say and what the tender invitations say,' said TV Cidade's
head, Marcos Amazonas.

Because of a backlog of cases in the High Court, it may not
hear TV Cidade's case until March. If the court decides in its favor, there is a
chance that bidders that will have won concessions by then will not be granted those
concessions. That might force the auctioning process to start all over again.

What is at stake is the business itself, said Alexandre
Annenberg, general director of one of Brazil's largest MSOs, TVA Network.

'We also challenged [some issues] ... But the rules
have been established, and our interest now is that new licenses are granted,'
Annenberg said.

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