Lighting up Mexico

GE plugs in with plan to land channel

MEXICO CITY — Mexico’s TV duopoly may soon be over.

General Electric and its subsidiary Telemundo aim to rescue Mexico’s bankrupt Canal 40 and challenge broadcasting powerhouses Televisa and TV Azteca.

From GE’s perspective, such a deal would create a natural outlet south of the border for Telemundo’s growing catalog of product — mostly telenovelas. Were they to become popular on a revamped Canal 40, it would mean a proportion of ad revenues indirectly funneled back to GE coffers.

GE general counsel for Latin America Rafael Diaz-Granados told Daily Variety that NBC U wants to re-enter the Mexican market and feels that Canal 40 could become “a third voice” in Mexican television.

The station, which reaches 5 million homes mostly in and around Mexico City, has not had a strongly defined programming strategy for some time, and it is currently most identified with local news. Canal 40 is privately held by businessman Javier Moreno Vall, who is currently wanted by local authorities for tax evasion.

GE wants to increase local production in Mexico via Telemundo’s joint venture with Mexican producer Argos and other possible partners, Diaz-Granados added.

But to make its bid, GE will have to overcome two legal hurdles.

First, it will have to find Mexican investors to take the lead in buying Canal 40, as Mexican law prohibits controlling ownership of TV stations by foreigners. Secondly, it will face a legal battle with TV Azteca, which is also trying to lay claim to Canal 40.

Diaz-Granados said GE has enlisted JPMorgan Mexico and IXE Banco to help drum up Mexican investors. GE would participate in such a deal as a minority shareholder in the channel through “neutral capital” or nonvoting stock.

“We believe there are a variety of local Mexican partners who welcome the opportunity to work with GE and NBC Universal in media,” said Brandon Burgess, NBC’s exec veep of international channels and business development. “The model will be similar to how Televisa and Azteca successfully partner with broadcast systems in the United States.”

GE has put up $5 million in unsecured financing to bail out Canal 40, which has been off air since May, after workers claiming three months of pay went on strike. The station has a mountain of other debts, including $34 million claimed by TV Azteca.

Rumors of the loan, which were not confirmed by GE until late last week, sparked speculation that the company wanted to take over the net.

Televisa twice highlighted the loan during its nightly news broadcast, suggesting that GE could be acting illegally.

Mexico’s version of the Federal Communications Commission called on the nation’s securities regulator to solicit information from GE to insure the loan was legal. GE turned over the information on Thursday.

Even if partners and government approval are won, GE will face a legal challenge from NBC’s former partner in Mexico, TV Azteca.

Latter station has been fighting in court since 2000 to take a controlling share in Canal 40 in the wake of a soured shared production and advertising deal.

Referring to GE’s plans, an official at TV Azteca said, “This won’t go far. TV Azteca will fight for its right to the ownership of Canal 40.”

Diaz-Granados said there were legal options that could allow a GE partnership with Mexican investors to purchase the web, but he said the company fully anticipated a legal tussle with TV Azteca.

“GE is here for the long term,” he said.

Conglom has been operating in Mexico for 108 years and employs 25,000 people. In 1994, NBC formed a partnership with then-fledgling Azteca to provide programming and advisory support. But the deal ended up in court, with NBC seeking $130 million but settling for $46 million.

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