Christina Fernandez de Kirchner Argentina

Ruling a victory for Cristina Fernandez de Kirchner’s beleagured government

MADRID – Kirchner 1 – Clarin 0.

Big media – Argentina’s Grupo Clarin – lost out to big government – the country’s interventionist President Cristina Fernandez de Kirchner – in an Argentine Supreme Court ruling Monday.

The court’s decision upheld a controversial media law, originally passed in 2009 that, among four clauses contested by Clarin, most polemically, limited cable ownership to a 35% market share in not more than 25% of Argentina’s provinces.

That hits Clarin where it hurts. The Buenos Aires conglom owns 25% of Argentina’s burgeoning Internet market and Artear-Canal 13, Argentina’s most-watched broadcast network, plus three provincial TV channels, radio stations and the country’s biggest newspaper, Clarin.

But, in a country where about 80% of households have cable connections, cable remains Clarin’s cash-cow, repping 89% of its revenues in 2012.

And Clarin’s national market share runs at 47%, according to its own estimates. Cablevision, its cable unit, will now have to slash its 158 licenses across Argentina to a maximum 24, it said after the ruling.

18% owned by Goldman Sachs, Clarin, via CableVision, carries many U.S. channels, including ESPN, Fox Sports, Disney Channel, HBO, TNT, Warner Channel, Sony, Fox Intl. Channel, E! Entertainment TV, Discovery Channel and History. Clarin also is partner with Disney is Patagonik Film Group, Argentina’s biggest movie producer.

The Supreme Court ruling is designed to introduce more competition into the cable market place. The question for Hollywood is whether this could benefit foreign channels more than the current Clarin-spearheaded drive into upgraded digital TV in Argentina.

Fernandez’s supporters hail the Supreme Court ruling as a victory for a governmental anti-monopoly crusade. Clarin and other critics, who are multiplying, see it as part of Fernandez’s ongoing attempt to muzzle media dissent.

“Grupo Clarin laments the ruling, which doesn’t take into account the value of journalistic independence as a precursor for freedom of speech, and as such seriously questions the real possibility of criticizing political power, an indispensable democratic assumption,” the Group said in a statement.

Clarin added that it is studying further legal options, including an appeal to international courts.

The Supreme Court dictated that the government must compensate license owners for their loss of operations.

That will come as little compensation to Clarin, however, which told investors in August that it had invested 96% of its total April-June $81.1 million capex in its cable and broadband segment.

“In the past year, this level of capex has enabled the company to grow its cable and broadband subscribers and in other products such as digital, HD and VOD. The company is committed to continuing on this path,” said Clarin investor relations officer Alfredo Martin.

How Clarin will continue in this direction when shorn to a sub-scale dimension in cable by the Supreme Court ruling is now a large question.

Clarin’s stock fell 5.76% after the decision. The Buenos Aires Bourse then suspended trading until the full text of the ruling is made public.

The Supreme Court victory comes one day after Fernandez’s ruling coalition suffered heavy losses in mid-term elections on Sunday. They ensure that Fernandez will fail to secure a two-thirds majority in Congress that might have allowed her to amend Argentina’s constitution and stand for a third term of office.

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