A cable connection

Hicks, Muse and Telefonica reach agreement

BUENOS AIRES — After a year of friction, U.S. investment company Hicks, Muse, Tate & Furst and Spanish telco Telefonica have finally reached a preliminary agreement to divide all of their jointly held Argentine assets.

The agreement, announced by Telefonica, follows on a deal last month whereby the Spanish company took control of the bulk of the partners’ media assets including leading local broadcaster Telefe.

That deal has paved the way for Telefonica to acquire Hicks, Muse’s stake in Telefonica de Argentina, the leading local telephone company, while a new — as yet nameless — company, controlled by the U.S. fund with minority participation by Liberty Media, will take control of No. 1 local MSO Cablevision and Torneos y Competencias, a sports programmer.

End to dispute

With the value of the telephone company far outweighing the other assets, Hicks, Muse’s new holding will receive a sizable chunk of shares in Telefonica to cover the difference. It was unclear, however, what influence that would give the U.S. fund over Telefonica, with which it has waged a long and acrimonious dispute for control of their shared Argentine assets.

The deal — set to close by the third quarter of the year — is likely to spur a new lease on life for Cablevision, with a drive into basic telephony using the company’s extensive cable infrastructure. Until now, the MSO has made only lukewarm attempts to sell cable modem services, with many analysts believing that Telefonica had blocked Cablevision’s attempts to enter into direct competition with its local telephone operator.

Share price may fall

On the other hand, the operation will likely drive down Telefonica de Argentina’s share price. Its Spanish owner will now almost certainly spin off the company’s local Internet assets, absorbing them into its regional Internet holding, Terra Networks.

While that is good news for Terra, minority shareholders in Telefonica’s regional operations have accused the Spanish company of acquiring these assets on the cheap, and local investors fear that the Argentine company may be similarly shortchanged.

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