www.brw.com.au By Aaron Patrick

It is a tactic that Rupert Murdoch has perfected over five decades: bleed your competitors dry until they close shop or accept an unfavorable merger, then recoup your losses with monopolistic glee. The News Corporation chairman seems to be doing it again in Latin America, where, after years of heavy losses, his main rival in the pay-television market is on the verge of insolvency. The fact that company happens to be DirecTV - the satellite broadcaster Murdoch wants to buy - is the icing on his cake.

SOUTH OF THE BORDER: From Mexico to Argentina, News has been under pressure

DirecTV operates a successful satellite broadcasting service in the United States that has 10 million subscribers, and an unprofitable operation covering South and Central America and the Caribbean.

Murdoch's plan to buy the company has received much attention for the reach it will give him in the US - a broadcaster with 10 million subscribers and the capability to reach almost every home in the country. What has not been highlighted is the potential effect on his interests in Latin America, which happen to be one of the black holes of the News empire.

From Mexico to Argentina, News has been squeezed between expensive US-dollar contracts for Hollywood movies and television shows, and an economic downturn that has savaged the middle class and depressed local currencies.

Sky Latin America lost $US152 million ($259 million) last year, most of it in Brazil and Mexico. To put this in context, News's Australian operations achieved an operating profit of $US125 million ($238 million) last year. The entire profit from Murdoch's 100 or more Australian newspapers was surpassed by the losses in Latin America. Put another way, Murdoch could have doubled the company dividend last year if he had not been subsidising television soap operas for rich Mexicans.

But the size of the operation becomes clear only when it is realised that News is sharing the losses with its partners in Sky Latin America. If News's losses are in proportion to its level of ownership, then the joint ventures that Sky Latin America signed with Brazil's Globopar, Mexico's Grupo Televisa and John Malone's Liberty Media have lost $US1.2 billion ($2 billion) over the past four years.

It is an expensive strategy that increasingly looks like a replay of Sky Television in Britain in the late 1980s, when Murdoch ran up huge losses while running his competitor, BSB Holdings, into the ground. Financially exhausted, BSB's backers agreed to a merger in 1990 that created BSkyB, an asset now worth $12.5 billion to News shareholders.

Just like BSB, DirecTV Latin America is fighting for its life. As Sky's subscriber numbers in Brazil and Mexico increased 3% to 1.4 million last financial year, DirecTV lost $US202 million and 2% of its customers. It expects revenue to fall this year and has not been helped by the fact that two of its operations are in Argentina and Venezuela, which have serious economic and political problems.

In January, DirecTV hired a corporate turn-around expert and said it might seek Chapter 11 bankruptcy protection under US law, a step companies take when they are about to become insolvent. The chief executive, Eddy Hartenstein, says he may take the drastic step if programming contracts cannot be renegotiated by the end of January.

This would not necessarily lead to DirecTV Latin America being wound up because US companies are allowed to trade out of bankruptcy. But it would be a clear signal to suppliers, creditors and customers that Sky is the more stable satellite broadcaster in the region - and may soon be the only one.

DirecTV Latin America's chairman, Kevin McGrath, told investors on January 15: 'Our company's financial position is unacceptable and an acceptable solution must be executed urgently.'

Embarrassingly, DirecTV may be unable to pay the money it owes to the satellite operator PanAmSat. It and DirecTV are owned by the same company, Hughes Electronics.

In News's New York headquarters there is great interest in DirecTV's woes. News is refusing to publicly declare victory but, for months, Murdoch has been confident that he is close to winning the battle.

Analysts assume that DirecTV's problems will strengthen Murdoch's hand in  negotiations to buy a controlling stake. Talks have been going on for two years, and News's chief operating officer, Peter Chernin, says he expects a decision from DirecTV by the end of January. DirecTV said in the second week of January that it would take between 30 and 60 days to reach a decision.

The view on Wall Street is that News and its partner Liberty Media will each take a 17% stake, and Murdoch will assume management control at a cost of about $3.5 billion.

A top priority after a purchase would be to either merge the Latin American networks or close one of them, creating a satellite-TV monopoly from the Rio Grande to Rio de Janeiro. David Gibson, a media analyst for Macquarie Bank in New York, puts a rough estimate on the savings to News at $US200 million. 'The real drivers would be in marketing, lower content costs and lower subscriber acquisition costs,' Gibson says. 'But it is pretty hard to judge exactly how much it would be worth, and they would still have to compete with all the cable companies down there.'

First, Murdoch would have to clear a few regulatory hurdles. Mexico's anti-monopoly watchdog, the Federal Competition Commission, would frown on a merger between DirecTV and Sky, says the chief analyst for Santander Investment in Mexico City, Francisco Rivero.

It would be ironic if Latin American regulators blocked a merger between Sky and DirecTV on the grounds of monopoly, because Murdoch was given his chance to buy the company by US regulators, who rejected the preferred bidder, Echostar, for the same reason.

While Murdoch pursues his latest acquisition, his senior executives have been promoting a new image for the company. They say News has reached the point where decades of assembling an integrated global media business are starting to pay off in the form of huge sums of cash. 'After years of building our assets with patient investment and organic growth, we are now at the point where success begets success,' Chernin told a Salomon Smith Barney conference in January.

The 'new' News provokes responses ranging from sympathy to cynicism. The head of a hedge fund for one large investment bank says Murdoch, 71, has become 'financially respectable' since News's close call with bankruptcy in 1990. 'I don't think he ever really was not respectable, but that was the image around him,' the fund manager says. 'But he is back and he has got a solid balance sheet behind him, and people feel more comfortable with him these days.'

The head of a share-trading desk in New York says: 'If you are posing the question, 'Is Rupert Murdoch the new cleanskin?', for every person who says he is, there are a whole load of people who think he is not. But you talk to investors here about the writedowns at One.Tel or Gemstar and they either don't know about them or don't care.'

In the five years to the middle of January, News Corporation shares rose about 50%, compared with 18% for the S&P/ASX 300 index. But most of News's gain has come in the past four months with a recovery in the US advertising market.

Target tactics

• After years of heavy losses in the Latin American pay-television market, News Corporation's main rival there, DirecTV, is on the verge of insolvency.
• News Corporation has been negotiating to buy DirecTV.
• If DirecTV folds, News Corporation will have a monopoly in Latin America.

Source: BRW The two known events with the most potential to move the share price in the next month are the terms of any deal on DirecTV, and News's first-half profit result, due for release on February 10 or 12. Helped by a weak result last year, it is likely to show that operating earnings are on track for a full-year increase of 20%, to $US2.2 billion.

Some analysts, particularly Merrill Lynch's Jessica Reif Cohen, are talking up the stock and telling investors who want to board the Murdoch bandwagon to look at the US-listed Fox Entertainment Group, 80% owned by News Corporation.

Fox is a pure play in the US media - there is no Sky Latin America in it - and can expect to benefit disproportionally as the US economic recovery continues.

www.guardian.co.uk Thursday January 23, 2003 1:10 AM

CARACAS, Venezuela (AP) - In a setback for opposition efforts to oust Hugo Chavez, the Supreme Court on Wednesday indefinitely postponed a nationwide referendum that would have asked Venezuelans whether the president should quit.

Hours later, President Hugo Chavez moved to bolster Venezuela's strike-damaged economy, saying he would impose foreign exchange controls to prevent Venezuela's currency from further plummeting. The Central Bank had suspended foreign currency trading earlier in the day.

The high court decision came just 11 days before the scheduled vote, the decision stunned the opposition the opposition that delivered 2 million signatures in November to demand the referendum and backed it up with a strike that has lasted 52 days. It was also to pay for the vote because Chavez's government refused to do so.

Opposition leaders reacted angrily to the court's decision, contending that Chavez's government was acting through the court to cling to power despite international pressure to find an electoral solution to end Venezuela's political crisis.

Government leaders rejected the claim, noting that the opposition has embraced past court decisions against Chavez - including a ruling clearing four high-ranking officers of rebellion charges in a brief April coup.

Justices ruled that no national vote - a referendum or election - can be held until it decides whether elections council member Leonardo Pizani, who helped organize the referendum, is eligible to serve on the panel.

Pizani had resigned from the council in 2000, only to rejoin last November. He insisted he could rejoin because Congress, by law, had failed to formally accept his resignation.

Pro-Chavez lawmakers filed suit arguing that Pizani's two-year absence from the council made his resignation legally binding.

``This goes beyond my appointment, this is about politics,'' Pizani said after the ruling.

Chavez opponents vowed to step up street protests - a stark contrast to hopes raised Tuesday by Nobel Peace Prize laureate Jimmy Carter, who presented both sides with electoral proposals to end the crisis.

``Today there is a dictatorship in Venezuela,'' said lawmaker Julio Borges, whose First Justice party led the petition drive in November calling for the referendum.

The government doesn't care about the people's will,'' Borges said. It only cares about staying in power.''

Vice President Jose Vicente Rangel described the court decision as crucial. ``I hope all sectors of the country will respect and adhere to it,'' he said.

The referendum wouldn't be binding, but opponents hoped that a poor showing would increase political pressure on Chavez to quit.

Chavez argued that Venezuela's constitution allows a binding referendum midway through his six-year term, or August. Opponents cited a constitutional clause that allows citizens to petition for referendums on ``matters of national importance'' at any time.

The strike has slashed oil production in the world's fifth-largest petroleum exporter by more than two-thirds - crippling an industry that provides half of government revenue and 70 percent of export revenue.

Chavez, speaking during a military ceremony, said he would impose the new currency controls by early next week. The move will limit the amount of U.S. dollars or other currencies Venezuelans can accumulate. The move is aimed at protecting the bolivar currency, which has lost 25 percent of its value this year. Chavez did not provide further details on the new policy.

Though the move could strengthen the local currency, it could also increase costs for businesses that depend on dollars to pay for imported goods. Venezuela's economy is highly dependent on imports - about 50 percent of food is imported.

Meanwhile, Carter proposed two plans in Caracas on Tuesday.

The first calls for an end to the strike in exchange for a government pledge to amend Venezuela's constitution to shorten presidential and legislative terms of office and allow early elections.

The second plan calls for both sides to prepare for a binding referendum on Chavez's rule in August.

Diplomats from Brazil, Chile, Mexico, Portugal, Spain and the United States were to meet at the Organization of American States in Washington on Friday to discuss Carter's proposals. The six countries, called the ``Friends of Venezuela,'' are trying to strengthen mediation efforts by OAS Secretary General Cesar Gaviria.

Chavez was elected in 1998 and re-elected in 2000 on promises to help the country's poor majority, but he has failed to remedy the nation's economic ills.

Opponents blame Chavez's leftist policies for an estimated 8 percent economic contraction in 2002. Chavez blames it on opposition attempts to destabilize the country.

asia.reuters.com Wed January 22, 2003 08:09 PM ET By Patrick Markey

CARACAS, Venezuela (Reuters) - Venezuela on Wednesday suspended foreign exchange trading in a desperate bid to stem capital flight and a slide in the bolivar as the government battled an opposition-led strike that has drained its oil-reliant economy.

The Central Bank said it would close the foreign exchange market for five trading days and prepare temporary currency exchange and transfer curbs to fend off the impact of the strike aimed at forcing leftist President Hugo Chavez to resign and accept elections.

The economic measures were announced hours before the Supreme Court delivered a blow to the opposition campaign by suspending a nonbinding Feb. 2 referendum they were planning to hold on the president's rule.

Venezuela's bolivar currency has tumbled more than 28 percent during the seven-week-old work stoppage and its international reserves have dipped since the strike began on Dec. 2. The stoppage has slashed oil output in the world's No. 5 petroleum exporter to a fraction of normal levels.

Chavez, a fiery populist who brands foes as "terrorists" trying to topple him again through an "economic coup," said the government planned currency curbs, but did not elaborate.

"This is a measure to defend our economy and the bolivar," Chavez told a military parade in Caracas.

Economists said exchange controls would give the economy short-term relief, but it would suffer later as long-term controls would trigger black market trading and restrict private sector transactions.

"This looks more like a kneejerk reaction to the currency weakness," Jose Cerritelli, an Andean debt strategist for Bear Stearns, said. "But in the long term, people look to escape the controls by taking their money out."

Opposition leaders hope their strike will pressure former paratrooper Chavez to agree to early elections. They say he has driven Venezuela toward economic ruin and Cuba-style communism. But Chavez, who was elected in 1998 and survived a coup in April, has refused to quit and vows to defeat the strike.

COURT DECISION RILES OPPOSITION

Negotiations to resolve the conflict are stalled over the timing of possible elections. Former U.S. President and Nobel Peace Prize winner Jimmy Carter on Tuesday proposed a blueprint for elections that would also end the strike.

His proposal suggested two options: a constitutional amendment to trigger early elections or a binding Aug. 19 referendum as allowed under the constitution. Both sides are analyzing the Carter initiative.

The Supreme Court decision to suspend the Feb. 2 referendum inflamed tensions between Chavez and his foes. At least six people have been killed in clashes since the strike began.

Chavez, who led a botched coup six years before his victory at the polls, welcomed the court decision as "good news."

The president's supporters planned huge rallies throughout the capital on Thursday in a show of strength.

Outraged opposition leaders condemned the court's ruling as a biased political decision and accused Chavez of deliberately blocking their campaign to call elections.

"It's unacceptable. It's a blow to the hopes of millions of Venezuelans who are expecting an electoral solution to the crisis," opposition negotiator Rafael Alfonzo said.

The referendum would not have legally forced Chavez from power. But the opposition hoped a decisive rejection of his government would have vindicated their calls for elections. Chavez dismissed the poll as illegal and urged foes to wait until the August referendum.

ECONOMIC CRUNCH, FEARS OVER DEBT

The economic crunch has raised fears Venezuela may default on its foreign debt. But the Central Bank said the government would maintain the necessary operations to make debt payments.

Venezuela's international reserves have fallen to $11.05 billion, a drop of 7.5 percent so far this year. The government also has $2.85 billion in its FIEM rainy-day savings fund and insisted recently that hard currency levels were sufficient.

Finance Minister Tobias Nobrega said the government planned to slash its 2003 budget by 10 percent, extend a temporary bank debit tax through 2003 and continue with a domestic public debt swap to counter the economic damage of the strike.

Chavez has fought back against the shutdown, sending troops to seize control of oil installations and refineries and importing food and gasoline to offset shortages.

Strike leaders say the government has failed to break the stoppage. But in a first sign of a crack in the strike, some tanker pilots in the key western oil and shipping hub of Maracaibo went back to work this week.

money.cnn.com January 22, 2003: 7:42 PM EST

CARACAS, Venezuela (Reuters) - Venezuela's Supreme Court on Wednesday dashed opposition hopes of testing leftist President Hugo Chavez in a national vote next month by suspending a planned nonbinding referendum on his rule.

Although Chavez was not obliged to abide by the Feb. 2 referendum, his foes had hoped to use it to try to inflict a political defeat on the leftist leader, who is battling a seven-week-old opposition strike in the world's fifth-largest oil exporter.

The shutdown, aimed at forcing Chavez to resign or call early elections, has slashed the country's vital oil exports and pushed the economy deeper into recession.

In its ruling, the Supreme Court accepted a formal government appeal and ordered the National Electoral Council to suspend the February referendum and refrain from organizing other elections for the moment.

"This means that the referendum is frozen," council member Romulo Rangel told reporters.

The government hailed the court ruling. "We always refused to recognize (the Feb. 2 referendum), but now the Supreme Court has confirmed our position," Vice President Jose Vicente Rangel said.

Opposition leaders condemned it as a biased political decision and accused Chavez of deliberately blocking their campaign for early elections on his rule.

"It's unacceptable. It's a blow to the hopes of millions of Venezuelans who are expecting an electoral solution to the crisis," opposition negotiator Rafael Alfonzo told reporters.

Supporters of Chavez, elected in 1998 six years after leading a coup attempt, planned a big show of strength in the capital on Thursday in rallies billed by the government as "the taking of Caracas."

Fearing a repeat of violent clashes that have killed at least six people and wounded dozens since the strike began on Dec. 2, opposition leaders urged their followers to stay home. But opposition marches would be held in other cities.  

www.alertnet.org 23 Jan 2003 00:00

(Recasts, adds quotes, details of Thursday's marches) By Pascal Fletcher

CARACAS, Venezuela, Jan 22 (Reuters) - Venezuela's Supreme Court on Wednesday dashed opposition hopes of testing leftist President Hugo Chavez in a national vote next month by suspending a planned nonbinding referendum on his rule.

Although Chavez was not obliged to abide by the Feb. 2 referendum, his foes had hoped to use it to try to inflict a political defeat on the leftist leader, who is battling a seven-week-old opposition strike in the world's fifth-largest oil exporter.

The shutdown, aimed at forcing Chavez to resign or call early elections, has slashed the country's vital oil exports and pushed the economy deeper into recession.

In its ruling, the Supreme Court accepted a formal government appeal and ordered the National Electoral Council to suspend the February referendum and refrain from organizing other elections for the moment.

"This means that the referendum is frozen," council member Romulo Rangel told reporters.

The government hailed the court ruling. "We always refused to recognize (the Feb. 2 referendum), but now the Supreme Court has confirmed our position," Vice President Jose Vicente Rangel said.

Opposition leaders condemned it as a biased political decision and accused Chavez of deliberately blocking their campaign for early elections on his rule.

"It's unacceptable. It's a blow to the hopes of millions of Venezuelans who are expecting an electoral solution to the crisis," opposition negotiator Rafael Alfonzo told reporters.

Supporters of Chavez, elected in 1998 six years after leading a coup attempt, planned a big show of strength in the capital on Thursday in rallies billed by the government as "the taking of Caracas."

Fearing a repeat of violent clashes that have killed at least six people and wounded dozens since the strike began on Dec. 2, opposition leaders urged their followers to stay home. But opposition marches would be held in other cities.

SHOULD HE STAY OR SHOULD HE GO?

Electoral authorities had set the referendum for Feb. 2, after the opposition collected more than 2 million signatures to request the vote. It would have asked voters whether or not the president should resign.

Chavez, who has refused calls to resign and hold early elections, objected to the vote as unconstitutional, and his supporters appealed to the Supreme Court to stop it from going ahead. Wednesday's decision opened the way for the National Assembly to appoint a new electoral body. The government has a slim majority in the assembly.

Chavez, who survived a brief coup by rebel military officers in April, had already said he would ignore the result of the February referendum, even if he lost by 90 percent.

Chavez tells his foes they should wait until Aug. 19, halfway through his term, when the constitution allows for a binding referendum on his rule, which is scheduled to last until early 2007.