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Rival ops in Latin American hotbed stalling deal

MIAMI — News Corp. chairman-CEO Rupert Murdoch may take majority control of the pan-regional Sky business in Latin America, a move that would help clear the way for his company’s labored buyout of Hughes Electronics.

Latin America has proved to be a stumbling block in the News Corp.-Hughes negotiations since it’s the only part of the world where the two have rival operations. The move would combine them, with the blessing of influential partners in Mexico and Brazil (respectively, Televisa and Globo.)

The satellite market south of the border has proved surprisingly robust. When Sky and DirecTV prepared to launch in the region in 1996, no one expected that Latin America would be able to support two platforms. The two have explored a regional merger in the past since neither satcaster is cash-flow positive and a combo would reduce both programming and operating expenses.

But then, as now, regulatory issues loomed. Any deal would have to be reviewed by Mexico’s Federal Competition Commission. Mexican law does not permit majority foreign ownership of television, pay TV or telco operators, and the agency has expressed concerns about the potential lack of competition in the country’s capital. Brazil’s antitrust agency, Cade, would also weigh in.

Idea is for Murdoch to take majority control of a division called Sky Multi-Country Partners in exchange for giving his Latin allies a stake in the merged pan-regional platform. The unit, which handles regional business outside Mexico and Brazil, is owned by News Corp., Televisa, Globo and Liberty Media.

A News Corp. spokeswoman declined comment. But according to a news report Monday, Murdoch is said to have assured both Televisa chairman-CEO Emilio Azcarraga Jean and Globo’s Roberto Marinho that their companies would retain majority control of separate local platforms, called Sky Mexico and Sky Brazil, after Sky merges with Hughes’ DirecTV Latin America.

DirecTV’s wide reach

The DirecTV platform has over 1.4 million subs spread over 27 countries, including the Caribbean, and boasts some powerful regional investors of its own. The Cisneros Group has a 21% stake and Argentinean conglom Clarin owns 4%.

The News Corp. camp collectively serve roughly 1.5 million subs in Mexico, Brazil, Colombia, Chile and Argentina.

A senior Televisa executive who asks not to be identified said no deal has yet been made. “We have agreed to talk about this,” said the exec, who added that Televisa is well disposed and “will not be a roadblock.”

Globo declined comment.

(Jill Goldsmith in New York, Simeon Tegel in Mexico City and Marcelo Cajueiro in Rio contributed to this report.)

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