Liberty, HMT & F Cement Ties in Argentina

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Buenos Aires, Argentina-The impending exit of Spain's Telefónica Internacional from Argentine MSO CableVisión S.A. has cleared the way for Liberty Media International Inc. to take a more active role in managing one of Latin America's largest MSOs.

Liberty, a subsidiary of AT & T Corp., will boost its stake in 1.5 million-subscriber CableVisión to 50 percent from 28 percent currently.

This will occur as soon as CableVisión's other partner, Dallas-based private-investment firm Hicks, Muse, Tate & Furst Inc., completes its multibillion-dollar breakup with the Spanish telco, its former investment partner.

Liberty officials said they're paying just under $2,000 per subscriber-about the same price HMT & F paid for Telefónica's 35.9 percent stake in the MSO. This would value the transaction at roughly $638 million.

That figure is somewhat on the low side for Argentina, where premium cable properties could fetch north of $2,500 per subscriber, said Bruce Stanforth, who heads Latin American corporate research at BNP Paribas Group in New York. "The price is probably artificially low because Hicks, Muse needed Liberty's credit and business," he added.

Liberty managing director for Latin America Greg Armstrong said a partnership with HMT & F in CableVisión should advance cable's position as a broadband medium in Argentina.

"Differing ownership philosophies have kept CableVisión stagnant for too long," he added. "But in Hicks, Muse, we have a partner that shares our commitment to maximizing the potential of these assets."

Analysts were even more direct in their critique of CableVisión's past ownership squabbles and its much-improved prospects under the joint 50-50 ownership structure.

"Telefónica's investment in CableVisión was part of a defensive strategy," Stanforth said. "Now CableVisión has the green light to develop other business lines, most prominently Internet and telephony services that will be able to compete directly with Telefónica."

An immediate priority, Armstrong said, is preparing CableVisión to better compete in the country's Internet market, in which its subsidiary, Fibertel, has 25,000 dial-up and cable-modem customers out of an estimated 1 million Internet users nationwide.

CableVisión has yet to solicit a license for telephony-a sector scheduled to be deregulated in November. However, Armstrong said, the MSO hopes to enter that sector sometime next year. To do so, it first must resolve a number of more pressing issues related to CableVisión's video service and develop a telephony strategy.

"We need to figure out whether to provide service on our own, to partner with a third party, or to lease our pipes to anyone that's interested," he added.

In anticipation of the new ownership structure, CableVisión recently announced that it will replace chief executive Emilio Rodiño with Julio Gutierrez, until now a director of HMT & F's local management affiliate, BGS Group. Another departure was Julio Hardy, head of Fibertel.

In neighboring Chile, Liberty is also focusing on the Internet and other broadband services at Metrópolis Intercom, a leading Chilean MSO it jointly owns with local entrepreneur Ricardo Claro.

This equity arrangement follows Telefónica CTC Chile S.A.'s exit from Metrópolis. The sale of its 40 percent stake in the Chilean MSO-which the remaining partners bought for $270 million-effectively brings an end to the two-year dispute between Telefónica and its former co-investors over developing the Internet business.

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