Wall St. Has Become a Major Financier of Overseas TV

In a little-noticed, multibillion-dollar sidelight to Hollywood’s booming program sales to overseas TV, Wall Street has quietly become a major financier of overseas TV infrastructure--the satellite, cable and broadcast outlets that transmit U.S. movies and TV shows.

U.S. investors have poured $9.2 billion into international TV ventures since 1992 in the form of publicly traded stock or debt, according to Newark, N.J.-based researcher Securities Data Co.

One result is that some rather obscure offshore companies now have listings on major U.S. exchanges. They range from a Brazilian wireless microwave TV service to an Israeli cable TV system operator to two Hong Kong satellite TV outfits, one of which brags in its U.S. Securities and Exchange Commission disclosure filings of having close ties to the Beijing government.

Foreign TV media companies generally seek investors in their home countries as well, but investment executives say the U.S. markets typically provide more than 80% of the total for those companies with listings in several countries. Some offshore TV and media companies can’t get listed in their home countries, including TV Filme Inc., a Brazilian multichannel microwave TV service provider, whose stock is only traded on Nasdaq (symbol: PYTV).

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TV Filme Chief Executive Hermano de Albuquerque said Brazilian stock exchanges register only established firms with long histories, thus they exclude his start-up, which had just 4,000 subscribers in 1994. Noting that TV Filme now has more than 100,000 subscribers, he said that “without Nasdaq we wouldn’t have been growing as fast as we have been.”

Competitive broadcast stations as well as cable and satellite services are relatively new to most countries, which has made local investors leery of small new businesses in an unproven area. “There’s often a lack of experience in the home market,” said London-based media analyst Terry Povey at investment firm James Capel & Co., explaining the stampede to U.S. capital markets.

U.S. investors are accustomed to buying into start-up companies whose earnings are nonexistent, particularly in the technology and entertainment industries.

The start-up TV media ventures that Wall Street is funding are typically heavy buyers of Hollywood programming.

“I’d say nearly half of our programming is American, from Stockholm to Budapest,” said Harry Evans Sloan, chairman and chief executive of Scandinavian Broadcasting System. “In the smaller countries, imported programs are needed because local productions can cost 10 times as much.”

SBS, in which Walt Disney Co. is a big investor, owns large stakes in broadcast TV channels in Northern and Central Europe.

Overall, analysts estimate that Hollywood generates more than $3 billion in annual sales to TV channels outside the U.S., a figure that has grown rapidly in the 1990s.

The U.S. exchanges also list companies founded by American entrepreneurs for the purpose of investing in overseas TV. They include Sloan-led SBS and Central European Media Enterprises, whose investors include Ronald Lauder, a former U.S. ambassador to Austria and heir to the Estee Lauder cosmetics fortune. Those two companies are butting heads in Slovenia and Hungary with rival TV ventures.

All told, there are about 30 international TV companies whose stocks or publicly traded debt are registered on U.S. exchanges, mostly listed since 1991. Not all are small. In August, recently privatized Mexican broadcaster TV Azteca mounted a $526-million initial public stock offering on exchanges in Mexico, the U.S. and Europe, which valued the entire company at $2.85 billion.

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Wall Street executives say a big reason foreign TV issues have sold briskly is that U.S.-based mutual funds are eager buyers. Foreign commercial TV networks have tended to be private with no trading stock, so country-focused mutual funds had been under-weighted in the media section until the 1990s spawned a wave of start-up TV ventures.

David Dennis, co-head of the Los Angeles office of Donaldson Lufkin & Jenrette Securities--one of the three biggest underwriters of international TV and telephone securities offerings--said international wireless TV and telephone communications are a good investment bet for several reasons.

Dennis said that local regulators tend to limit competition to just a few players in each country; wireless is a relatively inexpensive way to instantly reach an entire region; and, even if ventures falter, their satellite capacity can be resold to salvage the investment.

While TV issues have raised impressive sums of money, Dennis said they are dwarfed within the communications-business sector by privatizations of foreign telephone companies.

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Despite investor enthusiasm, many of the foreign TV stocks have proved to be poor investments so far. Stock of French digital satellite TV service Group AB (NYSE: ABG) is off sharply from its initial public offering price in December, as it trails two larger competitors in the digital satellite TV business at home. Currently, Group AB trades at about $5.38 a share, down from its $21 IPO price in December 1996.

Elsewhere, APT Satellite Holdings Ltd. (NYSE: ATS), a Hong Kong-based satellite TV outfit developing a digital satellite TV service for the vast but underdeveloped China TV market, has traded between $11 and $12 a share, down from its December 1996 IPO price of $14 a share.

APT Satellite points out in SEC filings that four of its corporate investors--owning 42.8% of the company--are People’s Republic of China government affiliates, giving it “unique opportunities” to do business with Beijing. However, its use of some misfire-prone Chinese rockets to launch satellites and questions about its rights to crucial orbital satellite TV slots have dogged the stock, analysts say.

“There are an awful lot of analysts on Wall Street who don’t understand the [satellite] market on both the U.S. and worldwide level,” said Carmel-based direct broadcast satellite researcher Jimmy Schaeffler. “They’re simply overwhelmed” by the array of ventures sprouting across the globe.

Certainly, Wall Street hasn’t showered money on every aspirant. Thailand-based Asia Broadcasting & Communications Network Ltd. was in advanced stages of mounting a $300-million U.S. debt offering earlier this year that was to trade on the Nasdaq market, but the deal was dropped for lack of investor demand.

That was even before Southeast Asia was rattled by a currency crisis.

Looking ahead, more private foreign TV companies are known to be contemplating IPOs that may involve a Wall Street listing. They include European satellite service giant Societe Europeenne des Satellites (SES); Media Most, the parent of Russia’s top-ranked private commercial network NTV; Canadian cable system operator Shaw Communications; Spain’s second-ranked private network Tele Cinco; and Asia Today, which operates satellite TV channels in India and is 50% owned by Rupert Murdoch’s News Corp.

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Besides raising funding, a U.S. listing is seen as a trapping of legitimacy, said an executive of one U.S.-listed Israeli TV company. “The fact that we are listed on the Nasdaq is a kind of seal of approval” that impresses potential joint venture partners, said Robert Avi-Tal, president and chief executive of Matav-Cable Systems Media Ltd., which owns a quarter of Israel’s cable TV systems and whose stock is traded both in Israel and the U.S. “Everyone looks at you more favorably.”