Argentina: GOA Steals the Ball, May Take over Soccer

UNCLAS BUENOS AIRES 000942 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EINV EFIN ECON PGOV KPAO AR SUBJECT: Argentina: GOA Steals the Ball, May Take over Soccer Broadcast Rights Ref: Buenos Aires 0350 ¶1. (SBU) On August 11, the Argentine Football (soccer) Association (AFA) unilaterally canceled its contract with satellite TV broadcasters (TSC) -- a consortium which includes U.S. firm DirecTV and possibly some other U.S. investors -- amid rumors that the GoA was poised to offer up to US$165 million per year, over double the current royalties, for broadcast rights to show football games for free on government-owned commercial TV. AFA leadership met August 13 with Argentine President Cristina Fernandez de Kirchner (CFK), and while the meeting was described as "very positive" by the AFA side, no agreement was reached. According to press reports, CFK only had two conditions: that football broadcasts be "for everybody" (i.e., on free rather than pay TV) and that no employees of the companies that lost the contract lose their jobs because of the change. Chief of Cabinet Anibal Fernandez also reportedly said that the GoA "will not put a single peso" into the venture. ¶2. (SBU) Marcelo Bombau, President of TyC (which was a joint venture partner with local media conglomerate Clarin Group in the football broadcasting consortium) said August 11 that his company would sue the GoA, adding in televised comments that he would "take his complaint to the U.S. Embassy." Indeed, on August 13 (prior to the AFA/CFK meeting) Bombau, along with DirecTV's Argentine General Manager Manuel de Abelleyra, met with CDA and emboffs to brief him on the unilateral takeover. Bombau claimed that TyC is 80%-owned by U.S. investors, including DirecTV, and will pursue legal remedies for breach of contract, possibly including an expropriation claim under the U.S.-Argentina Bilateral Investment Treaty (BIT). He said that TyC has still not received anything in writing from the AFA regarding termination of the contract, and promised to send the Embassy a paper explaining TyC's ownership, ties to the United States, and current situation. Bombau added that TyC will likely seek USG help at an appropriate time. ¶3. (SBU) CDA urged prudence in order to keep the focus on the alleged breach of contract rather than the USG's potential advocacy role in a case involving Argentina's national sport, but the next day local daily "Critica" reported the meeting itself in a front page article (titled "The Empire Strikes Back" with a large picture of Darth Vader),in which Bombau confirmed having gone to the Embassy. While Critica cited "witnesses" who said Bombau requested "intervention" by Post with the GoA, Bombau was quoted as saying that he only told Post "how we see the situation" and how it affects stockholders such as DirecTV. The Embassy complained to Bombau and several of his associates the next day for flagrantly ignoring the CDA's request for discretion. -------------- Comment -------------- ¶4. (SBU) AFA has been publicly grumbling for a while that it is in dire financial straits and that it was not getting enough money from the television rights to soccer games. The fact that the powerful Clarin Group is a half owner of TSC, the consortium that had held for 18 years the broadcast rights to major league soccer games, is not a minor detail. AFA's sudden cancellation of its contract with TSC and its ensuing dalliance with the Kirchners was quickly and widely interpreted here as another salvo in the long-running clash of the titans between the Kirchners and the Clarin Group. The GoA has clearly placed great importance on this issue. Offering to broadcast games on state-owned television has great populist appeal in soccer-crazed Argentina, with soccer fans now expecting to watch their favorite sport for free, rather than pay for it through cable or satellite TV subscriptions. It also provides an opportunity for the government to strike a blow against the Clarin Group, the dominant Argentine media player (reftel) that was once supportive of the Kirchners but lately has grown more critical. ¶5. (SBU) Post will continue to monitor the situation to see that U.S. investors are treated fairly, but we will also seek to prevent Bombau and friends from pushing the USG into the middle of the controversy. We currently see little chance that AFA will reverse its decision to find a more lucrative television arrangement, and the Kirchners may indeed be delighted to stick the Clarin Group in the eye and get cheers from soccer fans across the country. It seems likely that TSC will have to take its case to court. KELLY