Buenos Aires, Argentina -- Consolidation in Argentina's
cable and broadcast-television industries is tying up the growth of premium-channel tiers,
while at the same time weaving a web of political connections worthy of movie-of-the-week
That's because the rapid growth of CEI Citicorp Holdings
S.A.'s assets, led by CEO Ricardo Handley and including MSO Cablevision/TCI2,
is now seemingly regarded as a problem by its former partner, Grupo Clarín. CEI used to
hold a minority stake in Clarín's MSO, Multicanal.
CEI's fast growth has slowed the divestiture negotiations
and an agreement about the way that Video Cable Comunicación -- an MSO bought jointly by
CEI and Clarín -- will be divided among the companies. This agreement is key to any
future development of premium structuring.
According to the major MSOs' original plans, tiering should
have been extended by now to the Greater Buenos Aires area, which accounts for some 40
percent of the country's total subscriber base of 5.4 million. To date, tiering only
exists in several small cities in Argentina's interior.
Implementing premium tiering and pricing is important for
both the MSOs and for premium channels like HBO Olé and Cinecanal. The MSOs -- which have
never been able to agree on how to implement tiering amid fierce competition -- need
another revenue stream as programming costs escalate. The premium channels, meanwhile,
have long insisted that premium tiering is a key means for them to introduce new products,
such as multiplexed networks.
When Clarín and CEI purchased VCC last year, it was
understood that the slicing of this MSO -- then the country's No. 2 MSO, accounting for
some 680,000 subscribers -- would settle the account between CEI, Spain's Telefónica
Internacioal de España (TISA, another former Multicanal shareholder and current CEI ally)
and Clarín, thus paving the way for wider implementation of tiering.
All of this seems to have turned Grupo Clarin's attention
toward issues more urgent than how VCC's subscribers will be divided. At this point, the
apparently unstoppable expansion of CEI is becoming a matter of discussion for all of the
people involved in show business and communications. It is no less remarkable that
opposition party Alianza, which aspires to win the 1999 election, has not voiced
disapproval of this growth.
But at the same time, CEI and Telefónica started a buying
spree that included Editorial Atlántida S.A., which controls broadcaster Telefé (Channel
11); Telearte (Channel 9), which is also owned by Australian group Prime Television; and
several broadcast TV stations in the interior of the country. This multiple ownership is
against existing law.
Current legislation forbids any person or company from
owning more than one radio or TV station. Technically, the law is on hold, pending new
legislation, although the ownership restrictions have not been resolved.
So far, nobody has complained, and the government has not
pressed antitrust charges.
This laissez faire attitude has been attributed by the
local press to a close relationship between Raul Moneta, CEI's second-biggest shareholder,
and Argentine President Carlos Saul Menem, who may run for an unprecedented third term.
Elections are scheduled to be held next year, but Argentina's Constitution prohibits a
According to speculation that has not been denied, Menem
has asked Moneta to drum up business support for his re-election project. This would have
to include a revision to the Constitution by the Supreme Court, most members of which have
been appointed by Menem himself.
Still, there are people worried about CEI's involvement in
According to an article that appeared in well-respected
local newspaper La Nación, executives of Citicorp, which owns 40 percent of CEI,
are disturbed about seeing the bank linked to business deals that are seemingly becoming
more and more political. Handley is a former Citicorp employee and a close friend of John
Reed, the company's CEO. Citicorp's relationship with CEI is subject to U.S. regulations.
According to frequent press reports, Menem intends to
permit the buildup of a massive media network in friendly hands. This would help him in
the future if the need arises. In early March, it was announced that Torneos y
Competencias S.A. -- the leading local sports-programming company, headed by Carlos Avila,
who is also tightly linked to CEI -- was buying equity in Buenos Aires broadcaster
América 2. There's also news that CEI is expected to became a local partner of
panregional direct-to-home platform Sky Latin America. At the same time, CEI,
Tele-Communications International Inc. (TINTA) and TISA are partners in TyC.