Brazils Cable Land Rush Slows


Sao Paulo, Brazil -- Major bidders in one of the largest
pay TV-license auctions in the world have dramatically changed their strategies in light
of new market realities.

The auction, taking place in Brazil, has drawn attention
from investors across the Americas, including many in the United States. But those in the
running said they've slashed their total license applications by between 40 percent
and 80 percent.

Reasons for the pullback varied, but most cited the
yearlong wait for the first batch of some 200 licenses to be awarded. They are part of the
first block of 1,000 licenses to be awarded nationwide.

"Each business plan has certain assumptions ... A year
or so later, everything has changed. It's a different business now," said Walter
Longo, president of marketing consultancy Unimark/Longo, based here.

The delays in the license awards, Longo added, prompted
some companies to instead concentrate their financial firepower on bidding for Brazilian
fixed-line and cellular-telephony licenses.

"Some companies were prepared to go into cable, and
they then went into telephony," Longo said. The slowdown in the Brazilian economy and
the overall crisis of confidence in emerging markets has also put a dent in business
plans. Many in the industry are talking about a credit squeeze.

Others chasing cable licenses said that instead of shooting
scattershot for many concessions in a variety of locations, they are now pinpointing more
lucrative markets that would enable them to cluster their franchises.

The two dominant pay TV companies in Brazil, TVA and Globo
Cabo, are aiming for new licenses in markets that are near their existing operations, in
hopes of achieving some efficiencies.

"We are concentrating in the northeast and in the
interior in the state of Sao Paulo, and we have abandoned areas like Belem and Manaus
[along the Amazon River in northern Brazil], where there were no potential
synergies," said Alexandre Annenberg, general director of TVA Network, the TVA unit
handling its license applications.

Annenberg, who is also president of the Brazilian
Subscription TV Association (ABTA), said that in the first cable-license batch, it has
withdrawn some two-dozen, or 39 percent, of its applications for hardwire-cable licenses.

TVA's rival, Globo Cabo, gave similar reasons for
slashing its number of bids by 83 percent, to 10 from 60.

"We are more selective about what we buy into. We
either want to enter the bigger cities or those areas where we are already," said
Moyses Pluciennik, Globo Cabo's CEO.

Hitting the larger markets is also a priority for ABTA
director Hermano Lins de Albuquerque, president of wireless cable operator TV Filme Inc.,
which has filed 14 applications. But the company is reconsidering some of them in smaller
markets because they no longer make economic sense, he said.

Potential overbuilding in Brazil played a large part in the
decision by Opportunity, a Brazilian private-investment company, to reduce its
applications to 35 from 48. As many as five different competitors could eventually emerge
in some Brazilian markets, spread out between wireless, hardwire-cable and direct-to-home

A director of Opportunity, Ricardo Machado Ferreira
Velloso, noted that established systems have had an extra year to build out their systems
and upgrade, making the prospect of competition much tougher.

Opportunity is backed by U.S.-based Citibank, and it is
partnered with several small, independent cable operators in the Brazilian cable auction.

The downsized plans and worsening financial picture for
Brazil as a whole were two reasons why attendees at the recent TV Link show here
characterized the mood at the convention as somewhat subdued compared with the year

However, one bright moment was provided by the government
body overseeing Brazil's auction, the National Telecommunications Agency (Anatel).
Its officials announced that the body will award 40 to 50 cable licenses by the end of
this month. After that, Annenberg is hopeful that the painfully slow process will speed up

With Anatel due to introduce new rules and regulations
governing the process, by next year, it should be ready to announce a batch of 200 license
winners every 60 to 90 days, Annenberg said. That could put some 1,000 licenses on the
block next year, he added.