News Column

Merger Finally Gets Green Light

November 2003, HISPANIC BUSINESS Magazine

Tim Dougherty

It didn't take Univision long to benefit from its acquisition of Hispanic Broadcasting Corp. One day after the Federal Communications Commission (FCC) voted 3 to 2 along partisan lines to approve the controversial transaction, Standard & Poor's (S&P) raised Univision's credit ratings from junk to investment grade.

Citing the company's newly enhanced position as the nation's leading Spanish-language broadcaster following the FCC's September 22nd vote, S&P raised Univision's ratings one notch to BBB–, the lowest investment-grade rating, from BB+. Shares of Univision rose 27 cents to $35.20 the day S&P acted.

Univision's next challenge will be assuaging the fears of critics, who have long argued that its merger with HBC would create a media Goliath with control over 70 percent of the Spanish-language advertising market. The two Democrats on the FCC, who opposed the merger, voiced those same concerns in dissenting press statements issued the day of the commission's vote.

"A Univision-HBC merger will take consolidation to new and threatening heights for those who receive their news and entertainment in Spanish," wrote Commissioner Michael J. Copps. "Putting two-thirds of Spanish-language media revenue under the control of one company will stifle competition before it can take root. And once we confer additional size and power upon Univision, we will likely see advertising rates go up, small advertisers and entrepreneurs frozen out, and any pretense of diversity go by the boards."

"By allowing this transaction to go forward with no protections for consumers, the FCC denies Spanish speakers their right to receive a diversity of perspectives over the nation's airwaves," wrote Commissioner Jonathan S. Adelstein. "The FCC's duty to protect the right of every person in this country to a diverse array of broadcast media should have translated into Spanish. Instead, the FCC is turning a deaf ear to millions of Spanish-speaking Americans."

The $3 billion transaction brings together the nation's top Spanish-language radio and television companies. The new entity boasts 68 radio stations in addition to three television networks – Univision, TeleFutura, and cable channel Galavision – 53 television stations, an Internet business, and three Latin music record labels. HBC's Dallas-based assets, renamed Univision Radio, are being headed by former HBC chairman and CEO Mac Tichenor.

Competitors worry that the radio stations will become a marketing platform to promote Univision recording artists, television programs, and Internet properties. The company controls the top Spanish-language TV station and the number 1 or number 2 Spanish-language radio station in the eight leading U.S. Hispanic markets.

Univision may have to sell two radio stations, in Albuquerque and Houston,
to comply with new media ownership regulations, which have been stayed pending judicial review. The company also has agreed to reduce its ownership stake in Entravision Communications Corp. to 10 percent by March 2009. It currently owns 27 percent of Entravision, which is the nation's largest owner of Univision television affiliates.

First proposed in June 2002, the merger was originally expected to win rapid regulatory approval. However, it quickly became a contentious partisan issue involving concerns about media consolidation and political exploitation. Democrats fretted that the newly constituted Univision would become a Republican tool to woo Hispanic voters.

Much of the debate focused on whether Spanish-language media should be viewed as a distinct media market. The FCC's September decision affirmed an earlier Justice Department ruling that the merger would not create a monopoly because Spanish-language media are part of the general media landscape.

In a statement, the three Republicans on the panel – Chairman Michael K. Powell and Commissioners Kathleen Q. Abernathy and Kevin J. Martin – wrote that the FCC's decision "wisely rejects the call to separate Hispanics into a separate class for government review purposes. The implications of treating Hispanics as an insular group removed from the general mainstream of news, entertainment, and information are troubling."

The national Hispanic fraternity Lambda Theta Phi held a news conference in Washington, D.C., two days after the FCC vote to denounce the merger. A statement issued by the organization read in part, "the Bush administration's decision to allow the approval of the Univision/HBC merger stands as a symbol of the White House's policy and treatment of the Latino community."


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