Nets battle over credit line controversy

Debate brings up issue of debt payoff vs. investment

RIO DE JANEIRO — Brazilian broadcasters are waging an open war over a controversial proposal to create a 4 billion reals ($1.4 billion) government credit line for the local media sector.

The dispute erupted during a Senate hearing March 24 when reps for the five commercial countrywide nets openly attacked each other.

Execs for the two nets with large debts — giant Organizacoes Globo’s TV Globo and fourth-ranked net TV Bandeirantes — welcome the loan. But reps for No. 2 net SBT, No. 3 net TV Record and fifth-ranked Rede TV, which do not have significant debts, want it used for new investments, such as the introduction of digital TV, not to repay debts.

They argue Organizacoes Globo borrowed heavily to consolidate TV Globo’s “monopoly” as the dominant web and now taxpayers are being asked to foot the bill.

TV Globo had an average audience share of 54% during 2003, according to research firm Ibope.

Brazilian media companies have combined debts of about $3.4 billion, of which Organizacoes Globo accounts for half, according to a study. The group’s financial holding Globopar has been renegotiating its debt with international creditors since 2002.

“Since we are dealing with taxpayers’ money, there must be a public debate about this proposal,” says Paulo Totti, spokesman for government bank BNDES, which is organizing the credit line.

“The use of taxpayers’ money to pay debts is unacceptable,” TV Record’s president Dennis Munhoz said in the Senate.

The execs cite Organizacoes Globo’s purchase of exclusive rights for Brazil to the 2002 Soccer World Cup for $220 million as an example of overspending — and using its clout to muscle out the smaller players.

Previously, all local nets paid a small fraction of this value to air the Cup, which is held every four years.

“We are not relying on BNDES’ money to pay our debts — we are relying on our own competence,” TV Globo’s institution relations VP Evandro Guimaraes said at the Senate.

“BNDES is responding to the needs of the entire media sector,” he added.

The local media sector is facing a severe crisis as a result of several factors: the sharp devaluation of the local currency, which inflated the companies’ debts in strong currencies; the downfall in ad investment; and investments in new businesses that have not provided the expected return, such as Web companies.

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