Mexico City -- A Dallas-based investment company is
deepening its holdings in Latin America, where it has a $1 billion investment fund
earmarked for pay TV and other businesses.
Hicks, Muse, Tate & Furst has already dipped into the
fund with last week's announcement of an investment in Venezuela-based cable company
Intercable. Hicks, Muse and BGS Group S.A. have bought an undisclosed minority stake in
Intercable from Corporacion Telemic, the company that still has control of the MSO. That
move follows the recent announcement of a separate media fund with Venezuelan media
powerhouse Cisneros Group of Cos. (CTG), as well as an investment about a year ago in one
of Mexico's most significant pay TV operations, MVS Multivisión.
Hicks, Muse plans to build out Intercable's cable
plant, concentrated in the western part of the country. The MSO currently has some 80,000
subscribers. The investment firm plans to attack Venezuela's larger cities, where
cable penetration is low or nonexistent, according to Paul Savoldelli, a partner in BGS
Group, a Buenos Aires-based company that has become Hicks, Muse's "management
consultant." As such, BGS will operate some of the firms' cable-related
investments and serve as an investment "talent scout," mainly in the Mercosur
region in the southern area of Latin America. The affiliation between Hicks, Muse and BGS,
which was also announced last week, is similar to the kinds of affiliations that Hicks,
Muse has cultivated for its U.S. investments.
In explaining their working relationship, Savoldelli said,
"It's a unique combination of BGS' local management and expertise with
Hicks, Muse's financial sophistication."
BGS has no equity ties to Hicks, Muse; it's owned by
Savoldelli and his two partners, Julio Baqueriza and Julio Cesar Gutierrez. And the two
companies are by no means strangers. All three BGS partners were senior executives in
Mandeville Partners Argentina, the Argentine-based MSO in which Hicks, Muse once held an
investment. It sold off its indirect stake in Mandeville last year to Citicorp Holdings
In many ways, that partnership was the impetus behind BGS,
said Alan Menkes, a Hicks, Muse managing director and principal partner. "We
partnered them [Mandeville] in a specific deal, which was very successful," Menkes
said. "We like to work with a management team before we start a formal relationship
...We want them to walk before they can run." With regard to the benefits of a
management-affiliate approach, Menkes said, "It enables us to improve due diligence
and to do the kinds of transactions that a straight financial transaction can't
deliver," he said. In the case of Intercable, for example, BGS is handling issues
such as the cable build-out and equipment purchases.
Hicks, Muse has also formed a management affiliate in
Mexico, although that company is likely to pursue investments in two other industry
sectors in which Hicks, Muse is interested: financial and food.
Menkes estimated that 30 percent to 40 percent of the
firm's $1 billion investment fund -- which will be spent over an 18-month to
three-year time frame -- will be sunk into media and telecommunications. To date, $650
million has been committed to the fund, with a further $350 million to be committed over
the next few months. Which sectors the company focuses on will depend on local market
Further investment in Mexico's pay TV industry is
unlikely, Menkes said, because "the average monthly revenue per subscriber of about
$20" does not compare favorably with other markets in the region. Even in Argentina,
where that figure is about $30 to $35 per subscriber, the fierce consolidation of that
country's cable business makes it tough to gain market share, Savoldelli said. For
that reason, "the opportunities in Argentina are mainly outside of cable," like
in radio and finance, he added.
In pay TV, Hicks, Muse views Brazil -- where thousands of
cable licenses are scheduled to be auctioned over the next few years -- as the
region's best potential market.
In April 1997, the company invested $120 million in
Mexico's largest wireless cable operator, MVS Multivisión. More recently, it joined
forces with CTG to create a $500 million fund for media investments in Latin America and
the Iberian Peninsula. That fund's focus is primarily in radio and broadcast TV.