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April 23, 2014
Wednesday, January 22, 2014

Telefónica fails to convince AFSCA and sale of Telefe edges closer

A January 17 letter shows the Clarín Group had issued new submissions to AFSCA regarding the adjustment of Cablevisión’s channel grid.
By Sebastián Lacunza
Editor-in-Chief

More details about Vila-Manzano, Cablevisión revealed by AFSCA sources

Telefónica de España is on the verge of having to sell its audiovisual holdings in Argentina, which include Telefe, the TV channel with the highest ratings, given that the Autoridad Federal de Servicios de Comunicación Audiovisual (Federal Audiovisual Communications Services Authority, AFSCA) has deemed that there is an insurmountable incompatibility between its holdings and the regulations laid out by the 2009 Media Law.

The Herald has been made aware that the arguments put forward by Telefónica in defence of its current holdings, which include landline and cellular telephone services through its Movistar brand, do not comply with AFSCA’s requirements and that the Spanish company has already been informed.

As such, Telefónica will be forced to find a buyer in the next six months for its primary channel, Telefe, along with other TV stations in Mar del Plata, Rosario, Córdoba, Santa Fe, Tucumán, Salta, Neuquén and Bahía Blanca.

The Media Law, which was passed by Congress in 2009 and declared constitutional by the Supreme Court on October 29, 2013, sets out that companies that provide public services cannot also commercially exploit radio, broadcast television nor cable television licences.

This restriction was not in the original draft of the law but was accepted by President Cristina Fernández de Kirchner’s government in response to demands made by centre-left non-peronist deputies. The Clarín Group, the primary media operator in Argentina, had also demanded that telecommunication companies — the only other companies able to match its strength in the market — be barred from holding audiovisual licences.

Telefónica’s defence before the AFSCA was that its Argentine television channels are property of Telefónica de España and not of its subsidiary Telefónica de Argentina, and that therefore although it provides a public service it does so outside of the national territory.

In response, the AFSCA, as the implementing body for the Media Law, noted that Telefónica de España has corporate control over its subsidiary and thus the argument is inadmissible.

The AFSCA, which has representation from the three primary parliamentary minorities, will hold its next meeting on February 15, when the decision will be formalized, according to the Herald’s source.

The objection has already been communicated to Telefónica. This newspaper tried to reach Telefe representatives last night without success.

Telefónica’s removal from the country’s media spectrum was, until recently, an unforseen consequence of the Media Law. In the middle of an exhausting conflict with the Clarín Group, which has a dominant position in several segments of the media sector, the head of the AFSCA, Martín Sabbatella, often repeated that “the law applies to everybody”.

Although in a first instance he said that the Telefónica plan to adapt to the new law had to be studied, he did not appear to question it. The signals started to change once the Supreme Court ratified the anti-monopoly provisions that had been challenged by Clarín.

Last night, an important source in the media market told the Herald that “the Telefónica plan had very evident flaws. It’s surprising that the AFSCA didn’t identify them sooner.”

Many countries have seen a convergence of providers offering telephone, cable TV and internet services but such a process in Argentina seems uncreasingly unlikely following the Media Law’s implementation.

While the AFSCA head gave the Herald the exclusive that Clarín’s proposals would be accepted provided that if it also modifies the channels that it offers through its cable TV service Cablevisión (see below), the Mexican David Martínez and head of Fintech is preparing to leave the audiovisual industry.

Martínez, who just bought the second-largest landline and cellular telephone operator in Argentina, Telecom, is obliged to sell the 40 percent stake that he has in Cablevisión (the remaining 60 percent belongs to Clarín) for the same reason that Telefónica must sell Telefe. In theory and according to the Government’s understanding, Martínez, born in Monterrey, México and a resident of Manhattan is looking to sell his share to US and Mexican investors, reducing the risk that a Clarín ally would buy his assets in the company.

“As he has to tell his stake in Cablevisión, he is exherting the most pressure so that everything be in order and that is why Clarín is

acting this way”, said an official source that wished to remain anonymous.

There is also news regarding the third-largest media group, which must also comply with the new Media Law. Vila-Manzano, which operates the América TV channel, Supercanal cable TV, radio La Red and various broadcasting stations throughout Argentina, presented a proposal which essentially consists of dividing their assets amongst a group of shareholders and their family members.

The AFSCA has advised that they will not accept that the assets fall into the hands of front men or associates that cannot justify the funds required to make those purchases.

“Barbarita is no longer in the proposal, they had to get rid of her,” said the source, refering to Barbarita Vila, daughter of the main shareholder Daniel Vila, to whom the proposal would have given a radio in Mendoza.

@sebalacunza

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