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HBO Smokes Peace Pipe in Argentina

Buenos Aires, Argentina-Argentina's two dominant cable operators have agreed to end their long-standing feud with HBO Latin America Group by taking an unusual step.

MSOs Cablevisión and Multicanal have guaranteed the programmer payment for a certain number of subscribers and agreed to carry its movie channels on a premium tier.

On July 6, HBO Latin America announced that the two operators had agreed to relaunch HBO Oléand Cinemax as premium channels throughout the country as of Aug. 1.

The move to upgrade the movie channels from the basic tier to premium in Argentina had been expected since HBO pulled the services from the two operators' basic packages some 17 months ago in a hard-fought license-fee dispute.

Between them, Cablevisión and Multicanal control about 60 percent of Argentina's 5.5 million cable-TV subscribers.

Under terms of the undisclosed agreement, the MSOs guarantee HBO a minimum number of premium subscribers, according to Cablevisión president Julio Gutiérrez. If those targets are not met, the MSOs must make up the shortfall, he said.

Gutiérrez would not give the deadline for those subscriber targets, but said he was confident they could be met within the first year.

The return of HBO should help Cablevisión drive its set-top box deployment from a current base of 200,000 to 450,000 by 2004, for an increase of about 30 percent of its present total.

HBO Latin America president Ele Juarez was even more optimistic, and said he expects set-top box installations to reach 1.4 million within two years.

"We strongly believe that the MSOs' policy of leasing set-top boxes to its customers for free will accelerate growth," he said.

The move of HBO's movie channels to premium is a major development in Argentina, where premium-service penetration remains low.

In the past, the dominant MSOs have been criticized for delaying the launch of premium channels for fear of alienating subscribers already hard pressed by a deep recession and a 10.5 percent sales tax on cable.

In what industry observers contend is further evidence of collusion by Argentina's two main MSOs, both Multicanal and Cablevisión will market the new movie-channel package for $9.90 per month, plus tax.

A difference over fees had held up the return of HBO, according to Gutiérrez. But Juarez attributed the breakthrough to a shift in market conditions.

Competition from Galaxy Latin America's DirecTV direct-to-home satellite platform was a main factor in the MSOs' change of heart, Juarez said.

After HBO Latin America's retreat from Cablevisión and Multicanal last year, DirecTV in Argentina signed an exclusive deal with the programmer. The DTH provider claims the HBO channels have helped boost its subscriber base to roughly 200,000.

Cablevisión and Multicanal's enthusiasm to reinstate HBO is evidenced by the subscriber-level guarantee. The arrangement is not typical of carriage deals in Argentina or the rest of Latin America.

To sell subscribers on the new service, Juarez said, the premium package could be expanded in future to include other channels distributed by HBO Latin America, such as Disney Channel.