Azteca Predicts Good Year Amid Devalued Peso

TV Azteca, junior broadcast rival to Mexican powerhouse Televisa, is putting a brave face on its exchange rate losses and predicting a strong 1995.

Having bagged 500 million pesos in fall presales ($90 million at the current exchange rate), Azteca expects to make another 250 million pesos in spot sales this year, executive president Moises Saba told Variety. Presales more than doubled the previous year’s take, he added.

Some major advertisers, including Chrysler, are increasingly opting for Azteca, Saba said. Many resent the high fees Televisa charges for its upfront plan, despite that company’s superior ratings.

In a move unusual for a nonlisted company, the two-channel network recently issued a financial statement in the wake of the peso’s 40% devaluation. Azteca said its first full year in private hands saw a positive cash flow of 15 million pesos on sales of 390 million ($120 million at an averaged 1993-94 exchange rate).

Azteca owners, led by CEO Ricardo Salinas Pliego, also were cheered by a 78 million peso rebate from the finance secretariat, following from their purchase of the former pubcaster in 1993.

With costs for 1995 forecast at 595 million pesos, Azteca expects to see a second year of cash flow of 155 million pesos ($27 million, at the current rate).

But outstanding debts of $270 million spelled net losses of at least $70 million when the devaluation struck. By contrast, Televisa sustained year-end foreign exchange losses of around $120 million, sources now confirm.

Azteca can cope with the extra debt because of its strong backing, Saba says. Azteca’s debt is held in convertible bonds by a syndicate of three Mexican banks, giving the syndicate an option to buy 24% of the company, he said.

U.S. net NBC also has an option to buy 10% of the company, a stake worth $120 million. NBC has supplied the Mexican web with a multifaceted package involving technology, management and marketing assistance, and programming.

“Through the joint venture, instead of paying $35 million for this know-how, we are paying just $7 million and we can use as much as we need for three years,” Saba said.

While most ad agencies are predicting a downturn in ad spending this year, Saba believes Azteca can benefit as harsh times drive up viewing audiences and make advertisers wary of losing market share to competitors.

An interactive TV gameshow is expected to generate additional ad revenue – some 30 million pesos in the first three months, Saba said. Billed as a Latin American first, the project is tentatively set for a late February launch.

Further Azteca plans for 1995 involve four new telenovelas, one of which Azteca hopes to co-produce with Warner Bros. Warner has past co-production experience in Venezuela with soap factory Marte TV.

The net also plans to improve the reach of its youth-oriented Channel 7 from 80% to 95% of the country, bringing it in line with the reach of its Channel 13.

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