Mexico Systems Sales Get Muy Caliente

Mexico City -- Distinct signs are emerging that
Mexico's cable industry is finally consolidating, as some larger fish swallow up
smaller ones.

Over recent months, some of the country's top cable
companies have acquired locally based, family-run cable systems in order to grow their
existing regionalized networks.

Two of the hottest current buyers are Guadalajara-based
cable company Megacable and Cablemas, which concentrates its business in Mexico's
northern, frontier region.

Megacable recently bought cable systems in the city of
Puebla and neighboring Cholula, while Cablemas has chosen to add to its northern cluster
of systems by branching out eastward toward Mexico's Yucatan area in Campeche and

Megacable counts among its investors RCN International, a
unit of Princeton, N.J.-based RCN Corp. Cablemas is partially owned by another Stateside
investor, Citibank America Latina.

The two Mexican companies' recent transactions provide
something of a welcome jolt for a market where there has been very little acquisition
activity since Mexico's disastrous peso devaluation in December 1994.

Their significance has been duly noted by industry analysts
such as Mark Sena, senior vice president at Tampa, Fla.-based system seller Communications
Equity Associates Inc. "This is a real milestone for Mexico," he said, "and
I expect that there will be more transactions over the next several months.

Sena cautioned that what's happening in Mexico is not
like recent moves in Argentina, where a huge feeding frenzy of acquisitions and
consolidation has occurred in recent years. "But there are certainly very active
buyers and sellers" in Mexico right now, he added.

One of the stumbling blocks to such dealmaking in the past
has been perceived value. Potential buyers of cable systems in Mexico had complained that
the industry wasn't developed enough to warrant the kind of prices that sellers were

Megacable, though, paid a relatively high amount -- just
under $1,000 per subscriber -- for the systems in Puebla and Cholula, which added a total
of 33,000 subscribers to a company that currently totals 225,000, according to Megacable
president Enrique Yamuni. Observers said Mexican cable systems, on average, go for between
$550 and $1,000 per subscriber.

Yamuni justified the amount he paid, noting that in Puebla,
"We are paying for the fourth-largest city in Mexico, which gives us a lot of
synergies with neighboring systems. There's also great potential for growth."

Yamuni added that he expects to see the number of
subscribers in Pueblo and Cholula increase by at least 50 percent over the next couple of

The big impulse toward acquisitions in Mexico has been
partly triggered by the rollout of new services, most notably high-speed Internet access.
In order to make these businesses viable, cable companies are forced to expand their
potential market by grabbing new subscribers.

In the words of Cablemas president Alejandro Alvarez
Guerrero, "Cable operators like us need greater [subscriber] volume for our new
services, which you can't do with a small subscriber base." Both Cablemas and
Megacable are currently offering high-speed Internet access via cable modems.

While the acquisitions limelight might be on these two
companies, there are other potential buyers in the market.

According to industry sources, those include Grupo Cable TV
S.A., which is among the top five cable companies in Mexico. There is also talk that
Denver-based UnitedGlobalCom is increasing its investment in another leading cabler, Grupo
Telecable Mexicano S.A. Neither of these two companies was available to comment at press