Latin TV brake fast

Recession still has b'casters staggering

MIAMI — Barely out of the “tequila effect,” the Mexico-led regional recession of 1995-96, Latin America’s TV players are still battling a hangover.

Share prices for Mexican broadcasters have tumbled, Argentine companies have put public offerings on ice and would-be investors in Brazilian cable face soaring interest rates.

However, ad markets are quite stable and even the worst-hit media stocks are grounded on solid fundamentals — and willing to cut costs. With an ax.

Reports surfaced Saturday that Mexico’s Televisa, whose stock has dropped by half from its 52-week high, is going to cut one-fifth of its 19,000-strong work force.

Since 1994, Televisa has cut down from 23,600 employees; these and other savings have not impressed Wall Street, however, and recently appointed chief financial officer Gilberto Perezalonso has been charged with whipping the firm into shape.

Inherited debt

Televisa has a further problem: Personal debt inherited by CEO Emilio Azcarraga Jean may exceed $1 billion, much of it backed by now-devalued Televisa shares.

Leonardo Simpser of Deutsche Bank predicted that Televisa’s fundamental strength as a media machine, and the fact that corporate debt is low, will encourage banks to restructure the topper’s debt.

“The best-case scenario would be for it to sell a stake in (holding company) Televicentro to a strategic partner. At these prices, it’s an excellent opportunity,” Simpser added.

Mexico’s No. 2 player, TV Azteca, last week held an open day for dozens of analysts and CEO Ricardo Salinas Pliego voiced a stern gospel of belt-tightening and putting acquisitions on hold.

Plummeting peso

Further, Televisa and Azteca, plus the U.S. programmers, that sell both to them and to cable operators must face a more than 20% drop in the peso this year, making U.S. product that much more pricey.

Whether Mexico’s TV ad pie will remain flat or shrink in 1999 depends greatly on events on Brazil.

A Brazilian devaluation, which is probable, but no one’s sure how great, could spark a further plunge in regional markets and in confidence among advertisers.

Brazil advertisers remain quite calm, although figures for July ad spending show a drop of 7.9% overall and 13% in TV, according to a report published Monday by monitors Projeto Inter-Meios.

But the stats, predating the recent plunges in the Brazilian stock market, could either foretell a more serious second-semester drop, or simply denote a post-World Cup hangover.

“We thought we’d sense mammoth cutbacks, but we have not,” said J. Walter Thompson media VP John Wilson, attributing a current calm to the likely re-election of president Fernando Henrique Cardoso on Oct. 4.

Rising interest rates, however, are causing headaches for Brazil’s cable operators, as many new subscribers are not paying credit-card bills.

High rates may also hinder build-out of new systems, once the first batch of some 1,500 pending licenses are awarded later this year.

Argentine angst

Farther south, Argentina is proving an oasis of relative calm, but caution toward emerging markets is holding up business there too.

Already in June, voracious media conglom CEI yanked a U.S. public offering.

Now the top two cable operators, Clarin’s Multicanal and TCI-affiliated Cablevision, both of them heavy with debt from mass purchasing of systems, have respectively put a public floatation and debt offering on hold.

(Mary Sutter in Mexico City contributed to this report.)

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