December 6, 2013
POLITICS AND the PRESSSaturday, August 17, 2013
The Clarín call
Whenever Wall Street is happy, Argentines should not, President Cristina Fernández de Kirchner said on Wednesday, in her first speech since a hard voting day’s night. But she did not need to go all the way to the US to find some happy investors.
A couple of blocks away from the Casa Rosada, in the Buenos Aires stock exchange, the shares of the government’s main foe in Argentina’s mainstream media, Grupo Clarín (GCLA), leaped from 9.5 pesos per share on Monday morning to over 13 pesos yesterday. Grupo Clarín is not quoted in Wall Street, but it is in the London Stock Exchange (LSE), where its prize also jumped from 2.5 US dollars on Monday to 3.10 dollars per share during the week. Just over 20 percent of Clarín stock is public.
Grupo Clarín’s stock there and here climbed this week to its highest market value since October 2011, the month Fernández de Kirchner won her re-election with over 54 percent of the votes. Political tides change.
The gains were motivated by the results of the election and also to the Supreme Court’s decision, announced on Wednesday, to summon representatives of both the government and the media mammoth to field their cases pro and against the 2009 Media Act in a public hearing on August 28.
The markets are making a one-plus-one calculation: government loses vote and clout, Court speeds up a much awaited ruling on the constitutionality of the Media Act; ergo a pro-Grupo Clarín ruling is in the works. Time will tell if their hunch is correct. Conspiracy theorists have incorporated a small fact in their favour: the day picked by the Supreme Court happens to be the anniversary of Clarín, the newspaper’s, foundation in 1945.
All this reasoning was maybe in the head of Grupo Clarín’s Investor Relations Manager Alfredo Marín when he woke up on Monday morning to discuss the company’s financial results for the first half of the year with market analysts, a common practice for quoted companies.
Grupo Clarín reported that the conglomerate’s sales went up 22 percent in the first half of 2013 compared to the same period last year. But its net income shrank an impressive 50 percent, from 400 million pesos in the first half of last year to 199 million pesos this year.
Marín said that the company, which has interests in the printing, broadcasting, Internet connection and cable television sectors, among others, was operating under “challenging macroeconomic, business and regulatory conditions.” The Argentine economy, according to Grupo Clarín, has an inflation rate of 26 percent a year and is growing at a one-percent annual rate. Currency exchange restrictions and “strong restrictions on imports” are “taking their toll” on various sectors. Marín also said in his presentation to the market analysts that Grupo Clarín expects a Supreme Court ruling on the Media Act “before yearend.” Following the outcome of the midterm vote primaries and the Court’s public hearing call, the Group might expect it a little earlier than that. The Grupo Clarín spokesman also complained about new legislation passed this year to regulate the capital markets, which he said gives “extraordinary and discretional powers” to the Argentine CNV Securities Commission.
After a certain initial confusion as the bout with the government escalated in the midst of the 2008 conflict over export duties with the farming sector and eventually led to the passing of the Media Act, Grupo Clarín has over the last year put its act together in terms of its public communication. Marín’s line before the market analysts replicated that of a newsletter the Group has been sending out since September last year (called Nuestra Palabra) and with a TV and newspaper ad campaign that picks up on its main defence strategy messages. And also in line, of course, with the pages of the newspaper, still the bestselling in the country.
On Monday, Marín said that an 88 percent nosedive in earnings in the printing and publication segment was the result of the government’s “informal arbitrary ban” imposed on some private companies to advertise on the pages of Clarín and other mainstream newspapers. The ban reportedly came from Domestic Trade Secretary Guillermo Moreno as part of a price freeze agreement and mostly hit on promotional ads from supermarkets and house appliance outlets.
Grupo Clarín’s entire business strategy now relies on its cable distribution and Internet companies Fibertel and Cablevisión. In the conference call, the company announced that it had allocated 95 percent of its total Capital Expenditures (capex) in first half of the year to its cable and broadband segment, which now represents nearly 90 percent of its earnings. “Most of our capex was oriented towards growth and upgrading and digitalizing the cable network,” said Marín. “The company is committed to continuing on this path.”
The possibility of “continuing on this path” is now in the hands of the Supreme Court. One of the core arguments the Court is weighing is whether cable television should be regulated by the State. Clarín argues it shouldn’t because, unlike the airwaves, it is not a scarce resource. “Our business,” Marín told analysts, “depends on the evolution of government attacks on the media.” Some market investors seem pretty confident the war may soon be over.