November 27, 2014
Ernestina, Magnetto say goodbye to Clarín brand
Clarín Group name will stay in Unit 1, which includes channels, print publications
The Clarín Group gave up the long-awaited names. Months after first presenting a divestment plan to adjust to the 2009 Broadcast Media Law, the country’s largest media conglomerate yesterday revealed that it wants company owner Ernestina Herrera de Noble and CEO Héctor Magnetto to keep a controlling stake in the business unit that will hold Cablevisión and Fibertel (Unit 2) while directors José Antonio Aranda and Lucio Pagliaro will be majority shareholders in the unit that will control most of the broadcast properties, the newspapers — and the Grupo Clarín name. The move increases the pressure on Telefónica to sell the Telefe broadcast network to adjust to the law.
An initial reading of the proposal suggests that it complies with the Media Law requirements, according to the AFSCA source.
The Unit 1 that will have Channel 13, Todo Noticias (TN) and popular AM radio station Radio Mitre among other assets will keep the Grupo Clarín name. While the one led by Herrera de Noble and Magnetto — the two most public executives — will keep the most profitable assets. As the Herald reported earlier this week, the conglomerate’s cable TV and internet access divisions were by far the most profitable in the first quarter of 2014, on the back of an increase in the average revenue per user and subscriber growth in the cable TV and Internet access segment that Clarín operates through Cablevisión and Fibertel.
Meanwhile, Units 3, 4, 5, 6 — which contain a collection of regional television channels and radio stations — will be sold to as yet unnamed buyers should the proposal be accepted.
The new proposal is expected to speed up the administrative review of Telefónica’s proposal and the corresponding obligation that it sell the Telefe broadcast channel as it presents an incompatability with the Media Law, according to an AFSCA source.
The same AFSCA source told the Herald yesterday that the Clarín proposal was “received with satisfaction and that analysts and the National Securities Commission (CNV) are reviewing it to ensure that there are no hidden loopholes and that the division is effectively carried out.”
The situation of Telefónica, which is widely expected to be forced to sell off Telefe, will be discussed at the next AFSCA Board of Directors meeting, the AFSCA source said.
Announcements regarding the Vila-Manzano proposal to adapt its holdings to the Broadcast Media Law are expected soon. Vila-Manzano is the second-largest player in the media market after Clarín.
Cutting the cake
As outlined by the conglomerate, the group’s main shareholders would split up so that they retain control over the first two units, which also happen to contain the most valuable of the Group’s assets.
Magnetto and Herrera de Noble will have no participation in Unit 1, and will only have stocks in Unit 2, the most profitable of the units within the group.
Although the proposal is still subject to approval from the AFSCA, Unit 1 would also contain the vast majority of assets that are not part of the media law, including newspapers Clarín, Olé and La Razón.
Magnetto and Herrera de Noble would thus relinquish control over the Clarín newspaper, the biggest megaphone for the group. In addition, Aranda and Pagliaro will have ownership over the DyN news agency and the stake in newsprint supplier Papel Prensa.
In addition to the cable television provider and Internet side of the business, Unit 2 will also contain 24 cable TV licences and the Metro cable television channel feed in the Buenos Aires City area. Mexican businessman David Martínez will remain a minority shareholder in Unit 2 through Fintech, provided that he doesn’t have to sell his share due to his controlling stake in Telecom Argentina.
As it stands, the first two units would still be traded on the Buenos Aires and London stock exchanges but as separate entities. The Clarín Group’s minority shareholders will be represented in both spinoffs, “preserving the value of their shares to the greatest extent possible” according to a press release.
Clarín emphasized yesterday that “the plan is technically, legally and economically beyond reproach.”
Cable is king
The lopsided nature of the profitability within the Clarín Group is evident in the group’s balance for its first quarter. As reported by the Herald, Cablevisión had 3,486,754 basic cable subscribers, some 79,000 more than a year earlier, while Fibertel reported 1,740,999 Internet subscribers, almost 200,000 more than during the first quarter of 2013. The segment generated an EBITDA (earnings before interest, tax, depreciation and amortization) of 1.04 billion pesos in the first quarter of 2014.
Publishing sales — which will remain in Unit 1 — not only represent a small part of total income, continuing a long-term trend, but this year contributed to a negative EBITDA of 31.6 million pesos, compared with a 4.5-million profit during the same period of 2013.