Grupo Salinas

Grupo Salinas is a group of dynamic, fast growing, and technologically advanced companies, focused on creating shareholder value. Created by Mexican entrepreneur Ricardo B. Salinas, Grupo Salinas has no equity holdings, but operates as a management development and decision forum for the top leaders of member companies, TV Azteca, Azteca America, Grupo Elektra, Banco Azteca, Seguros Azteca, Afore Azteca, Iusacell, Unefon, Movil@ccess and Azteca Internet.

Each of Grupo Salinas companies operates independently, with its own management and board of directors. Member companies share a common vision, values and strategies to achieve rapid growth, superior results and world-class performance.

History

It started with the store Salinas y Rocha founded by Benjamín Salinas Westrup in 1906 in Monterrey.

Elektra

A second company founded by Salinas was Elektra, a radio factory founded in the 1950. In 1952, under the leadership of Hugo Salinas Price, its CEO, Elektra began manufacturing television sets and increased its work force to 70 employees. Two years later, with the help of door-to-door salespeople, Elektra entered the direct-to-consumer market and began offering credit. In 1957, Elektra retail stores incorporated credit programs. By 1968, Elektra had 12 stores in the region and by 1987, 59 stores. Ricardo Salinas Pliego then became the CEO of Elektra. Under Ricardo Salinas Pliego during the next twenty years the company has grown rapidly to the point where the chain has 1800 stores mostly in Mexico but also in key cities in Central and South America. Offering credit to the poor has been an integral part of growth. Under the management of its new CEO, Elektra partnered with Western Union to offer money transfer services from the United States to Mexico in 1993 and becomes a publicly traded company listed on the Bolsa Mexicana de Valores (BMV, the Mexican Stock Exchange).

The Grupo Elektra and Banco Azteca were criticized in a 2007 BusinessWeek magazine article for abusing microcredit practices in Mexico due to lax bankruptcy, consumer protection and interest rates laws of the country. [ [http://www.businessweek.com/magazine/content/07_52/b4064038915009.htm?chan=rss_topStories_ssi_5 The Ugly Side of Microlending] , "BusinessWeek magazine" , December 13, 2007]

TV Azteca

The same year, Grupo Elektra bought Imevisión (the government television network) and renamed it TV Azteca with 18 advertisers. By next year, the number of advertisers increased to 29 nationwide as the network debuted its news show "Hechos" and was listed in the New York Stock Exchange (NYSE). In 1995, the number of advertisers reached 180 and Grupo Elektra acquired Hecali, a clothing retailer.

In 1996, TV Azteca launched Azteca Digital, the first digital media production center in Mexico and Azteca Music a record company. The station first telenovela ("Nada personal" enjoyed strong ratings.

TV Azteca launched its own initial public offering in 1997 in the BMV and the NYSE. The telenovela production increased to 4 titles, one of which reaches historic rating levels ("Mirada de mujer").

During the 1998 World Cup, TV Azteca surpassed the level ratings of Televisa, the number one producer of Spanish-content in the world.

Financial Scandal Allegations

Financial improprieties allegations

On 5 January 2005 the U.S. Securities and Exchange Commission (SEC) accused TV Azteca executives (including chairman Ricardo Salinas Pliego) of having personally profited from a multi-million-dollar debt fraud committed by TV Azteca and another company in which they held stock. The charges are among the first brought under the provisions of the Sarbanes-Oxley Act of 2002, introduced in the wake of the corporate financial scandals of that year.

On April 28 2005 the Comisión Nacional Bancaria y de Valores [http://www.cnbv.gob.mx/] (CNBV), the Mexican Banking and Securities Commission, notified TV Azteca, Ricardo B. Salinas, Chairman of the Board, and Pedro Padilla L., Board Member of the Company concerning financial penalties being imposed in connection with administrative procedures that were brought by the CNBV in late January 2005 arising from alleged violations of the Mexican Securities Law as a result of transactions that occurred in 2003 among Unefon, Nortel and Codisco. The aggregated amount of the financial penalties equals approximately US$2.3 million, of which the CNBV intends to impose upon TV Azteca a penalty equivalent to approximately US$50,000.

April 30, 2005, Finance Secretary Francisco Gil Díaz asked prosecutors to bring criminal charges against TV Azteca Chairman Ricardo Salinas Pliego on allegations he used privileged information to trade shares, people familiar with the matter said.

Gil Díaz's fiscal prosecutor filed the 1,200-page request to charge Salinas Pliego, who controls the No. 2 broadcaster, with the Attorney General's Office (PGR) April 27, said the people, who asked not to be identified. Regulators yesterday separately fined Azteca, its chairman and board member Pedro Padilla US$2.3 million for securities law violations.

The proposed criminal charges go beyond a civil suit brought by the SEC on January 4 that accused Salinas Pliego and his company of securities fraud for hiding a transaction that netted him US$109 million.

Just a few days before the charges were formalized, TV Azteca dennounced a blackmail attempt by Gil Díaz to avoid the transmission of an investigation by Azteca's reporter Lilly Téllez of alleged corruption acts during the 1994 economic crisis in Mexico. According to TV Azteca, the charges made by Gil Díaz were in retaliation for the transmission of Téllez report. The rest of the media found the accusations incredibly weak and, given the timing, suspicious: their proof was an unsigned document printed on plain paper stating the terms of the blackmail, supposedly given to a TV Azteca representative by Gil Díaz himself in his own office.

The case will test the country's insider-trading legislation for the first time since the government toughened the law in 2001 to criminally prosecute violators.

"There's recognition worldwide that until securities law violators are prosecuted criminally, civil enforcement will have a limited deterrence effect," said Jacob Frenkel, a former U.S. federal prosecutor and SEC enforcement lawyer who is now a partner at Shulman Rogers in Rockville, Maryland.

Unefon

Salinas Pliego, 49, made a US$109 million profit in 2003 after buying debt that TV Azteca phone unit Unefon SA owed to Nortel Networks Corp. for a discounted price, and then receiving repayment from Unefon at full value three months later, the SEC said in January. The SEC alleged Mexico City-based TV Azteca, whose shares trade in both Mexico and the U.S., failed to tell shareholders about the transaction.

The SEC requires companies to disclose so-called relatedparty transactions because they may involve conflicts of interest.

Dan McCosh, a spokesman for Salinas Pliego and the companies he controls, declined to comment on the possibility of criminal charges. Salinas Pliego and TV Azteca denied any wrongdoing Thursday and said they would appeal the administrative fines imposed by regulators, according to a statement sent to the Mexican stock exchange.

In September, Salinas Pliego told reporters he wasn't concerned about the SEC investigation. "We are totally convinced we acted correctly, and we are going to defend ourselves," he said.

Downgrades

Mexican regulators started investigating Salinas Pliego and the companies he controls in December 2003, after TV Azteca's outside lawyers publicly expressed concern about the Unefon debt transaction.

Analysts from Merrill Lynch & Co. Inc., JPMorgan Chase & Co. and Deutsche Bank reduced their recommendations on TV Azteca stock on Jan. 8, 2004, after the company disclosed details of the Unefon transaction, sending the shares 11 % lower that day to 5.52 pesos. TV Azteca fell 2.8 % in trading today to 5.49 pesos, down 22.4 % this year. Its American Depositary receipts fell 13 cents, or 1.6 %, to US7.99.

Gil Díaz asked Congress last month to revise legislation to expand shareholder rights and facilitate company share listings to spur the stock market. The changes would add to amendments made in 2001 that defined the information controlling shareholders and companies must disclose to minority investors.

The bill that Gil Díaz is now proposing would replace Mexico's 30-year-old securities law and reduce by two-thirds, to 5 %, the amount of stock shareholders must own to bring lawsuits against company executives, among other provisions. He said the new law won't be as strict as U.S. legislation.

Ley Federal de Radio y Television

TV Azteca is infamously known for its attacks on Javier Corral (ex Congressman, PAN) for his opposition to the Ley Federal de Radio y Television (LFRT). The latter was a proposal of law concerning the licensing and regulation of the electromagnetic spectrum. The LFRT was favourable to both TV Azteca and Televisa (who together control 95 percent of all television frequencies) because it allowed them to renew their licenses without paying for them. Javier Corral, by leading the campaign against the LFRT, became the object of attacks by TV Azteca.These attacks were of such nature that the Permanent Commission of the Congress of Union had to vote an 'Agreement Point' (non binding resolution), condemning the overtly propagandistic campaign by the 'TV broadcasters' against Corral and another ex-Senator, Manuel Bartlett. However, in the original proposal of 'Agreement Point', only TV Azteca was mentioned, for Televisa did not attack either of the former. See [http://www.milenio.com/mexico/milenio/firma.php?id=518826] [http://www.reforma.com/editoriales/nacional/778321/]

According to The Economist, the Ley Federal de Radio y Television "raced through Congress confirming the country's longstanding television duopoly" and constituted a "giveaway of radio spectrum and a provision that allows broadcasting licenses to be renewed more or less automatically". [http://www.economist.com/world/la/displaystory.cfm?story_id=9257810] ,

Unefón

The same year, Grupo Elektra, invests in Unefón as it acquires wireless licence. Unefón and Elektra then form a strategic alliance to sell wirless telephone services in Elektra stores.

Grupo Salinas

In 2001, Grupo Salinas is created as Unefon becomes profitable. Two years later Grupo Salinas enters the financial services industry, offering Afores (retirement account programs) and insurance through Seguros Azteca. By the end of the year Azteca América reaches 69% of the Hispanic audience of the United States.

By 2004, TV Azteca and Elektra are traded on LATIBEX, the Spanish stock market.

References

External links

* [http://www.gruposalinas.com Official site] .
* [http://www.sec.gov/news/press/2005-1.htm Charges against TV Azteca And Chairman—Ricardo Salinas] by the Securities and Exchange Commission of the United States.
* [http://www.plata.com.mx/plata Hugo Salinas Price Economic Commentaries] .