Hicks, Muse Sets Its Own Argentine Course

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Buenos Aires, Argentina -- Last week's move by
Dallas-based private-investment firm Hicks, Muse, Tate & Furst Inc. to acquire an
independent cable operator in Argentina fueled speculation that it is aggressively
pursuing a go-it-alone cable strategy in that market.

Hicks, Muse -- which has self-proclaimed aspirations to
build a Latino-wide cable empire -- announced that it purchased an independent
cable-systems company in the province of Buenos Aires. It did not identify the company
other than to say it serves some 8,000 subscribers. Local media reports said the deal was
worth $7 million.

While this may be a small-fry deal, it provides another
clue to the important power plays that are shaping one of Latin America's most mature
cable markets.

The big industry buzz in Argentina is that Hicks,
Muse's chief investment vehicle in Argentina, CEI-Citicorp Holdings S.A., is on the
verge of breaking up with Telefónica de España Internacional S.A. (TISA), a unit of
Spanish telecommunications giant Telefónica S.A. CEI and TISA have jointly invested in
Telefónica de Argentina S.A. and MSO CableVisión/TCI2.

Sources suggested that any split would indicate that CEI
plans to abandon its telecommunications investments and to focus on its core goal of
building a larger stable of cable systems across Latin America.

In addition to CableVisión, Hicks, Muse has direct and
indirect investments in pay TV operators in Mexico and Venezuela, as well as the rights to
develop 10 cable franchises in Brazil.

Among CEI's holdings is Cointel, a holding company it
owns jointly with TISA that controls 51 percent of Telefónica de Argentina, the
country's largest telco. It is widely believed that CEI intends to sell its Cointel
stake to TISA, although both sides declined comment.

Miguel Smirnoff, a media journalist based here, said such a
deal would give Hicks, Muse the financial firepower to pursue its stated aim of building a
panregional cable empire. "Hicks, Muse can use the profits from the sale of its
Cointel stake to strengthen its cable business, and that's the only thing that really
matters to them," Smirnoff added.

Opinion is divided, however, on whether CEI's shift
from partner to competitor of the Spanish telephone giant would strengthen the
company's long-term value.

After all, CEI's Telefónica de Argentina stake --
which analysts valued at $1.56 billion -- represents some 81 percent of its total assets,
and it is the company's main source of revenue.

The juicy management fees it collects from Telefónica de
Argentina help to subsidize its other units, such as CableVisión, which are operating in
the red or generating meager income, according to several media analysts.

"Why CEI would choose to compete with TISA, rather
than to profit from it, makes no sense," Banque Paribas Latin America media analyst
John Graves said. "Selling its lucrative Cointel stake for a larger share in
unprofitable media interests isn't a very equitable swap."

While industry observers pondered these latest power plays,
there's another question to consider: Why did Hicks, Muse decide to make its latest
cable acquisition through its business unit, Teledigital Cable S.A., and not through CEI?
After all, it has often stated that CEI is its principal investment vehicle for acquiring
cable assets in Argentina and elsewhere in the region.

Hicks, Muse officials couldn't be reached for comment,
but according to Graves, the move suggested that the company is asserting itself as an
independent player.

More significant to Smirnoff, it indicated an attempt by
Hicks, Muse to rely more on its own managerial expertise and less on that of CEI, which
has attracted controversial press attention in recent months.

Raul Moneta -- a prominent Argentine banker who formerly
held the biggest stake in CEI through his Grupo República -- went into hiding after
Argentine authorities ordered his arrest on alleged charges of fraud. He is still at
large.

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