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TV Azteca’s earnings dip

Higher operating expenses, legal costs to blame

MEXICO CITY — TV Azteca reported a 23% earnings slide for the fourth quarter of 2004 due to higher operating expenses and soaring legal costs associated with an ongoing fraud investigation.

Azteca, Mexico’s second-largest network, reported net income of 480 million pesos ($43 million) compared with $56 million a year earlier. Decrease came despite a 1% increase in revenue, which reached $218 million.

For the whole of 2004, Televisa said that it earned $137 million, a 7% decline from the previous year.

Net spent the year under the shadow of a securities fraud probe being conducted simultaneously by the Securities and Exchange Commission and Mexico’s Banking and Securities Commission.

Net chairman Ricardo Salinas Pliego and other Azteca executives are being probed for their role in the 2003 debt refinancing of Unefon, a cell phone company partially owned by Salinas.

News of the investigations came late in 2003, but it was not until the first week of this January that the SEC announced it would press formal charges. Azteca faces mounting legal bills — $4 million in the fourth quarter alone.

Meanwhile, Azteca said, operating costs soared 10% to $117 million, largely due to an increase in inhouse production. For the quarter, Azteca produced 2,208 hours of programming compared with 2,113 a year earlier.

Earnings also were hurt by sales that were below expectations. Azteca pointed a finger at its soccer coverage. It has transmission rights for selected teams in Mexico’s pro soccer league, and none made the playoffs or international tournaments, affecting ad sales.

Advance ad sales fell 2.2% for the period. Some analysts opined that a more aggressive sales program from rival Televisa might have worked to Azteca’s disadvantage.

Shares in TV Azteca, which is traded on the New York Stock Exchange, fell 41¢ to $8.88 Thursday.

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