| BUSINESSWEEK ONLINE : OCTOBER 18, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- LATIN AMERICAN COVER STORY
The Man Who's Stalking El Tigre (int'l edition) The head of Televisa rival TV Azteca talks about his recent woes and how he's fighting back Ricardo Salinas Pliego, 43, is one of Mexico's best-known moguls. His family company, Grupo Salinas, controls choice assets in television, retailing, and -- a new venture -- wireless communications. But Salinas has come under heavy pressure from minority shareholders for financial transactions between his publicly traded companies, TV Azteca, and Elektra. Shareholders of TV Azteca -- Mexico's No. 2 television network after Televisa -- are particularly upset. That's because TV Azteca has taken a 50% equity stake in Salina's fledgling wireless phone venture, Unefon, which is years from making a profit. TV Azteca's American depositary reciepts have fallen by 43% since April. Now, Salinas is taking action to counter his critics. He plans to shake up the boards of both of his publicly traded companies, inviting in new outside directors with a mandate to closely scrutinize financial transactions between his companies. On Oct. 7, he also announced a $600 million deal with Nortel Networks to provide phone equipment and financing for the Unefon venture, which will begin offering low-cost wireless phone service to working-class Mexicans by yearend. Salinas recently discussed the board restructuring, his Unefon venture, and his competition with Televisa with Business Week editors in New York. Q: You are planning boardroom changes to counter criticisms of your management by your minority shareholders? Why did you decide to react now? A: We decided it would be better for our business if we could change the perception that minority shareholders were not being treated fairly and address the issues face on. So we have decided to change our corporate structure and corporate governance to include many more outside directors that are not being appointed by me or the family and to organize four very important committees -- all of which will have independent directors. The committees will have the power to actually veto related-parties transactions [dealings between his companies]. Q: Will this mean big changes in the way you do business? A: I think that at the end of the day, we will continue to do business the way we and my family have been doing it because we understand the markets. We know how to create synergy. And precisely because we have this wide group of companies that work well together, this is how we create value. But we need to have an independent check to make sure that [transactions between companies] are really beneficial to all stockholders.... People forget that I have two hats -- stockholder and management. I own 75% of the equity of these companies. It would be very strange if I made a decision that went against the interest of the stockholders [and] that went against my own 75%. Q: How exactly will you shake up your boards? A: In Elektra, we have 13 directors. We are going to reduce the board to nine, of which five will be named by the family, and four will be independent outside directors. The directors will be distinguished Mexican businesspeople as well as people from the retail sector and financial markets. The board of TV Azteca will be a little larger, but the basic outline will be the same. Q: How did you get in the flap with minority shareholders? A: In the past 12 months, we have been through a lot of turbulence because of Unefon. Unefon was conceived about 18 months ago when the Mexican government put up for sale big chunks of spectrum in Mexico. We went and acquired the spectrum in May of 98. Unfortunately, from May to August we went after a high-yield bond [to finance the license]. The day of the pricing was the day that Russia melted down. So we had to pull the bond and could not get financing for the license. It was an extremely hostile environment for raising money, and we knocked on every door, trying every angle to raise $360 million needed to pay for the license.... At this point Unefon was 100% owned by me.... We could not convince investors to [come into the venture]. It was a disaster. So we made a deal with the Saba family [a Mexican father-son investment team run by Moises and Alberto Saba]. They realized that the potential of this was huge, and they came in with a 50% interest. I proposed to the stockholders and board of TV Azteca that TV Azteca take the other 50%. And that's what we did. But in the investment community of TV Azteca, that was not a very popular decision. Some investors in TV Azteca did not like this investment in Unefone, because they thought they were buying a pure TV company and now they have a TV plus a telephone company. So it was a controversial decision. But we had to make a choice -- do the business this way, or don't do it at all. Q: What's your goal now for Unefone? A: Our plan is 2.5 million subscribers. The service will start coming out in December. We have to roll it out on a city-by-city basis. We will reach 25 cities by the end of next year. Q: You are No. 2 in television in Mexico to giant Televisa. Are you stealing market share from your competitor? A: When we came in six years ago, nobody gave us a chance in hell. Televisa was a monster, a monopoly, the big guy, and nobody thought thought we could make a dent in them. Televisa thought it had the monoply on talent and on the customer, and it was not so. They made a lot of mistakes, and we took dvantage of that. Suddenly, there we were with 30%. In an industry when you have two competitors, it's clear that one is going to respond to whatever the other does. So they came back with better programming and with much better cost control. And they have been successful. Q: Emilio Azcarraga Jean, your counterpart at Televisa was just 29 years old when he took over the family business in 1997. How do you rate his performance? A: I think he has definitely done better than expected. He is very young, but he has good people. I think their strategy is to keep on producing Spanish-language programs for the world -- the same thing that we intend to do. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS Son of El Tigre (int'l edition) COVER IMAGE: Son of El Tigre TABLE: Rise of a CEO CHART: A Snapshot of Grupo Televisa ONLINE ORIGINAL: The Man Who's Stalking El Tigre (int'l edition) INTERACT E-Mail to Business Week Online | |||
