Hemisphere Media Group, Inc
FederalRulings
Ask Donna
How this section applies to your facts.
FCC Declaratory Rulings › Hemisphere Media Group, Inc
Text
Federal Communications Commission DA 17-79
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Hemisphere Media Group, Inc.
Petition for Declaratory Ruling
)
)
)
)
)
MB Docket No. 16-238
DECLARATORY RULING
Adopted: January 18, 2017 Released: January 18, 2017
By the Chief, Media Bureau:
I. INTRODUCTION
1. Hemisphere Media Group, Inc. (HMTV) filed a Petition for Declaratory Ruling (Initial
Petition)
1
requesting that the Commission find, pursuant to section 310(b)(4) of the Communications Act
of 1934, as amended (the Act),
2
that the public interest would be served by permitting foreign ownership
in excess of the 25 percent benchmark contained in that subsection.
3
HMTV requests that the
Commission permit foreign investors to own up to 49.99 percent of both its equity and voting interests.
4
The petition is unopposed. Upon consideration of the record, we grant the Petition as set forth below.
II. BACKGROUND
2. Existing Corporate Structure. HMTV, a publicly held Delaware corporation whose
shares are traded on NASDAQ, provides Spanish-language programming to audiences in the U.S. and
Latin America.
5
An indirect wholly-owned subsidiary of HMTV, Televicentro of Puerto Rico, LLC, is
the licensee of three television broadcast stations in Puerto Rico.
6
Through subsidiaries, HMTV operates
seven cable and satellite programming networks providing Spanish-language programming to millions of
subscribers in the U.S., Latin America, and Canada.
7
3
nces in the U.S. and
Latin America.
5
An indirect wholly-owned subsidiary of HMTV, Televicentro of Puerto Rico, LLC, is
the licensee of three television broadcast stations in Puerto Rico.
6
Through subsidiaries, HMTV operates
seven cable and satellite programming networks providing Spanish-language programming to millions of
subscribers in the U.S., Latin America, and Canada.
7
3. In its Petition, HMTV states that it currently has 42,408,228 shares of stock outstanding
1
HMTV also filed a Supplement to Petition for Declaratory Ruling (Supplement), a Second Supplement to Petition
for Declaratory Ruling (Second Supplement), a Third Supplement to Petition for Declaratory Ruling (Third
Supplement), and a Fourth Supplement to Petition for Declaratory Ruling (Fourth Supplement) (Collectively
Petition). The Second Supplement reflects changes in HMTV�s ownership structure pursuant to the Commission�s
grant of a pro forma transfer of control that was consummated on October 21, 2016. See FCC File No. BTCCDT-
20160916ABD-ABF (granted October 19, 2016).
2
47 U.S.C. � 310(b)(4).
3
Initial Petition at 1.
4
Id.
5
Id. at 1-3.
6
WAPA-TV, San Juan, Puerto Rico; WNJX-TV, Mayaguez, Puerto Rico; and WTIN-TV, Ponce, Puerto Rico.
7
Supplement at 1.
Federal Communications Commission DA 17-79
2
that are divided into two classes.
8
There are 21,607,230 shares of Class A common stock with one vote
per share and 20,800,998 shares of Class B common stock with 10 votes per share.
9
The Class A stock
constitutes the class of publicly traded stock.
10
4. Gato Investments, L.P., a Delaware limited partnership (Gato), controls HMTV.
11
Gato
owns 16,494,671 Class B shares of HMTV representing 71.84 percent of the votes and 38.89 percent of
all outstanding stock.
12
Gato�s general partner, Gemini Latin Holdings, LLC, a Delaware limited liability
company (Gemini), holds 100 percent of the votes in Gato
ass of publicly traded stock.
10
4. Gato Investments, L.P., a Delaware limited partnership (Gato), controls HMTV.
11
Gato
owns 16,494,671 Class B shares of HMTV representing 71.84 percent of the votes and 38.89 percent of
all outstanding stock.
12
Gato�s general partner, Gemini Latin Holdings, LLC, a Delaware limited liability
company (Gemini), holds 100 percent of the votes in Gato.
13
Gemini�s sole member, Peter M. Kern, a
U.S. citizen, holds 100 percent of the votes in Gemini, and thereby in Gato, which gives him 71.84
percent of the votes in HMTV.
14
Mr. Kern also holds 2.98 percent of the votes and 1.67 percent of the
equity in HMTV directly, giving him aggregate control of 74.81 percent of the votes in HMTV.
15
HMTV
does not list any other person or entity that either holds an attributable interest in the company under the
Commission�s multiple ownership rules or that owns more than 10 percent of its stock.
16
HMTV states
that foreign investors directly or indirectly hold insulated limited partnership interests in Gato.
17
HMTV
also states that foreign ownership of Gato does not exceed 3 percent and, therefore, does not represent
more than 3 percent of the votes or equity of HMTV.
18
5. One company, Cin�ma Aeropuerto, S.A. de C.V., a Mexican corporation (Cin�ma
Aeropuerto) owns 2,996,999 shares of HMTV�s Class B stock, representing 7.07 percent of its equity and
13.05 percent of its votes.
19
Cin�ma Aeropuerto is 99.99 percent owned by Grupo Frecuencia Modulada
Televisi�n, S.A. de C.V., a Mexican corporation, which is in turn 97.32 percent owned by Grupo MVS,
S.A. de C.V., a Mexican corporation (MVS).
20
MVS is owned 99.56 percent (votes and equity) by HSBC
61549, a trust organized under the laws of Mexico for the benefit of descendants of Mr. Jos� Joaqu�n
Vargas G�mez
.
19
Cin�ma Aeropuerto is 99.99 percent owned by Grupo Frecuencia Modulada
Televisi�n, S.A. de C.V., a Mexican corporation, which is in turn 97.32 percent owned by Grupo MVS,
S.A. de C.V., a Mexican corporation (MVS).
20
MVS is owned 99.56 percent (votes and equity) by HSBC
61549, a trust organized under the laws of Mexico for the benefit of descendants of Mr. Jos� Joaqu�n
Vargas G�mez.
21
The sole trustee of HSBC 61549 is HSBC M�xico S.A., a Mexican corporation (HSBC
Mexico), which is an indirect wholly owned subsidiary of HSBC Holdings plc, which is organized under
the laws of the United Kingdom.
22
HSBC Mexico votes the shares of MVS at the direction of a trust
committee, which consists of the following members, all of whom are children of Jos� Joaqu�n Vargas
G�mez: Joaqu�n Vargas Guajardo, Elsa Gabriela Vargas Guajardo, Ernesto Vargas Guajardo, Andrea
Matilde Vargas Guajardo, Francisco Vargas Guajardo and Alejandro Vargas Guajardo. Mr. Ernesto
Vargas Guajardo is also a member of the board of directors of HMTV.
23
HMTV seeks approval for
8
Initial Petition at 2. Second Supplement at 2.
9
Id.
10
Initial Petition at 3.
11
Second Supplement at 2 and Exhibit A.
12
Id.
13
Id.
14
Id.
15
Id.
16
Second Supplement at Exhibit A.
17
Id. at 3.
18
Id.
19
Initial Petition at 4-5. Second Supplement at 3 and Exhibit B.
20
Initial Petition at 5.
21
Id. HSBC 61549 directly own 98.06% and indirectly owns 1.50% of MVS. Id.
22
Id.
23
Id. All of the other board members are U.S. citizens. Id.
Federal Communications Commission DA 17-79
3
foreign investors, in the aggregate, to own up to 49.99 percent of both its equity and voting interests
19
Initial Petition at 4-5. Second Supplement at 3 and Exhibit B.
20
Initial Petition at 5.
21
Id. HSBC 61549 directly own 98.06% and indirectly owns 1.50% of MVS. Id.
22
Id.
23
Id. All of the other board members are U.S. citizens. Id.
Federal Communications Commission DA 17-79
3
foreign investors, in the aggregate, to own up to 49.99 percent of both its equity and voting interests. In
addition, HMTV seeks specific approval for each of the listed entities and individuals of the Cin�ma
Aeropuerto chain up through HSBC Holdings plc as described above, including the members of the trust
committee, to own up to 49.99 percent of both its equity and voting interests.
24
6. In addition to the investment by Cin�ma Aeropuerto and Gato, there are currently
3,112,566 shares of HMTV stock in HMTV�s SEG-100 account, which represents 1.36 percent of its
votes and 7.34 percent of its equity.
25
HMTV states that these shares are widely held. Based on a review
of SEC filings, HMTV states that it has no reason to believe that any foreign investor with stock in the
SEG-100 account holds 5 percent or more of HMTV�s stock.
26
HMTV states that it has reviewed its list
of registered shareholders
27
and identified those who are foreign other than Cin�ma Aeropuerto and the
foreign interests held through Gato.
28
It states that these foreign registered shareholders hold 0.93 percent
of the votes and 5.06 percent of the equity of HMTV and that none holds 5 percent of the votes or equity
of the company.
29
HMTV estimates that its total foreign ownership may be as high as 18.34 percent of
the votes and 22.47 percent of the equity of the company.
30
7. HMTV�s Monitoring Procedures
rough Gato.
28
It states that these foreign registered shareholders hold 0.93 percent
of the votes and 5.06 percent of the equity of HMTV and that none holds 5 percent of the votes or equity
of the company.
29
HMTV estimates that its total foreign ownership may be as high as 18.34 percent of
the votes and 22.47 percent of the equity of the company.
30
7. HMTV�s Monitoring Procedures. To track its level of foreign ownership, HMTV states
that, in addition to participation in SEG-100, it monitors reports filed with the SEC, including Schedules
13G and 13D, and that its articles of incorporation contain multiple provisions to monitor foreign
ownership and maintain compliance with 310(b)(4), including the ability to:
? restrict the ownership, or proposed ownership, of shares of its capital stock by any person if such
ownership or proposed ownership is or could be in violation of the Communications Act;
? require a person owning or proposing to own stock to furnish such information as HMTV
requests;
? refuse to permit the transfer of shares;
? suspend rights of stock ownership;
? redeem shares;
? require conversion of Class B shares to Class A; or
? exercise any and all appropriate remedies, at law or in equity, in any court of competent
jurisdiction, with a view toward obtaining requested information or curing a violation.
31
8. HMTV�s Request for Declaratory Ruling. HMTV requests a declaratory ruling to permit
foreign ownership because its estimated current foreign ownership is near the 25 percent statutory
benchmark and it is a publicly traded company, which does business internationally and attracts foreign
24
Id. at 11-14.
25
Second Supplement at 3.
26
Id. at 3-4.
27
�Registered Shareholders� are Shareholders who hold their shares directly with a company.
https://www.investor.gov/research-before-you-invest/research/shareholder-voting/what-registered-what-beneficial
company, which does business internationally and attracts foreign
24
Id. at 11-14.
25
Second Supplement at 3.
26
Id. at 3-4.
27
�Registered Shareholders� are Shareholders who hold their shares directly with a company.
https://www.investor.gov/research-before-you-invest/research/shareholder-voting/what-registered-what-beneficial.
Registered holders have their names and addresses recorded in the company's share registry, which is usually
maintained by its transfer agent.
28
Second Supplement at 3-4. HMTV states that these foreign registered shareholders acquired their shares pursuant
to the pro forma transaction. Id. Cin�ma Aeropuerto and Gato are registered shareholders. Fourth Supplement at 1.
29
Id.
30
Id. Foreign Voting Interests: 13.05 (Cinema Aeropuerto) + < 3 (Gato) + 1.36 (SEG-100) + 0.93 (Registered
shareholders) = 18.34. Foreign Equity Interests: 7.07 (Cinema Aeropuerto) + <3 (Gato) + 7.34 (SEG-100) + 5.06
(Registered shareholders) = 22.47.
31
Initial Petition at 3-4.
Federal Communications Commission DA 17-79
4
investment.
32
HMTV claims that it needs additional foreign capital to compete against larger, better
funded rival foreign language programmers, such as Telemundo.
33
HMTV also indicates that its future
growth strategy includes potential further expansion into Latin America and that consideration for
acquisition of Latin American assets may include cash and/or HMTV common stock such that, without an
increase in the amount of allowable foreign ownership, HMTV will be limited in its ability to acquire
assets owned by foreign partners.
34
Finally, HMTV argues that permitting more foreign investment in
broadcast companies will encourage reciprocity by other countries and lower barriers to U.S. investment
abroad.
35
9. The Petition was put out for public comment on July 27, 2016 with comments due
August 29, 2016
owable foreign ownership, HMTV will be limited in its ability to acquire
assets owned by foreign partners.
34
Finally, HMTV argues that permitting more foreign investment in
broadcast companies will encourage reciprocity by other countries and lower barriers to U.S. investment
abroad.
35
9. The Petition was put out for public comment on July 27, 2016 with comments due
August 29, 2016. No parties have opposed the Petition or asked for conditions to be placed on it.
36
III. DISCUSSION
10. As described below, we find that the public interest would not be served by refusing to
grant HMTV�s petition for a declaratory ruling to permit foreign ownership of Hemisphere Media Group,
Inc., as described herein, above the statutory cap of 25 percent in Section 310(b) and up to 49.99 percent.
In this section, first we summarize the relevant law and Commission precedent related to foreign
ownership of broadcast licensees. Then we consider facts presented by HMTV regarding its foreign
ownership status and its public interest arguments.
11. Relevant Law and Commission Precedent: Section 310(b) of the Act restricts investment
by non-U.S. citizens in broadcast, common carrier, aeronautical en route, and aeronautical fixed radio
licensees.
37
Section 310(b)(4) of the Act states:
No broadcast or common carrier or aeronautical en route or aeronautical fixed radio station
license shall be granted to or held by . . . any corporation directly or indirectly controlled by any
other corporation of which more than one-fourth of the capital stock is owned of record or voted
by aliens, their representatives, or by a foreign government or representative thereof, or by any
corporation organized under the laws of a foreign country, if the Commission finds that the public
interest will be served by the refusal or revocation of such license.
38
12
ly controlled by any
other corporation of which more than one-fourth of the capital stock is owned of record or voted
by aliens, their representatives, or by a foreign government or representative thereof, or by any
corporation organized under the laws of a foreign country, if the Commission finds that the public
interest will be served by the refusal or revocation of such license.
38
12. In the 2013 Broadcast Clarification Order,
39
the Commission clarified the policies and
procedures for evaluating potential foreign investment in broadcast licensees under Section 310(b)(4) of
32
Id. at 6.
33
Id. at 4-5.
34
Id.
35
Id. at 5. In particular, HMTV states that Mexico permits non-citizens to own up to 49% of the outstanding voting
stock of a Mexican television or radio broadcast licensee, subject to reciprocity by the relevant foreign country.
Petition at 16, n.13; Supplement at 5.
36
On August 16, 2016, the Commission received a request to defer action on the Petition pending review by
Executive Branch agencies. See Letter from Bermel Paz to Marlene Dortch, Secretary, Federal Communications
Commission, dated August 16, 2016, MB Docket 16-238. A further letter withdrawing the deferral request and
stating that the reviewing agencies have no objection to the Petition was received by the Commission on January 12,
2017. See Letter from Bermel Paz to Marlene Dortch, Secretary, Federal Communications Commission, dated
January 12, 2017, MB Docket 16-238.
37
47 U.S.C. � 310(b).
38
47 U.S.C. � 310(b)(4).
39
Commission Policies and Procedures Under Section 310(b)(4) of the Communications Act, Foreign Investment in
Broadcast Licensees, MB Docket No. 13-50, Declaratory Ruling, 28 FCC Rcd 16244 (2013) (2013 Broadcast
Clarification Order).
Federal Communications Commission DA 17-79
5
the Act to remove apparent uncertainty
7, MB Docket 16-238.
37
47 U.S.C. � 310(b).
38
47 U.S.C. � 310(b)(4).
39
Commission Policies and Procedures Under Section 310(b)(4) of the Communications Act, Foreign Investment in
Broadcast Licensees, MB Docket No. 13-50, Declaratory Ruling, 28 FCC Rcd 16244 (2013) (2013 Broadcast
Clarification Order).
Federal Communications Commission DA 17-79
5
the Act to remove apparent uncertainty.
40
The Commission declined to adopt a standardized review
process in that proceeding, and instead clarified that it would continue to conduct a fact-specific,
individualized case-by-case review of each application or petition for declaratory ruling involving
broadcast stations.
41
The Commission reiterated its position that, in the context of Section 310(b)(4)
review for broadcast licensees, the 25 percent benchmark �is only a trigger for the exercise of our
discretion, which we then exercise based upon a more searching analysis of the circumstances of each
case.�
42
The Commission also recognized that �changes have occurred in the media landscape and
marketplace since the foreign ownership restriction was enacted and that limited access to capital is a
concern in the broadcast industry, especially for small business entities and new entrants, including
minorities and women.�
43
13. In its 2015 Pandora Declaratory Ruling, the Commission granted a petition for
declaratory ruling filed by Pandora Radio LLC (Pandora) to exceed the 25 percent foreign ownership
benchmark set out in Section 310(b)(4), in connection with an application for consent to assignment of
license of KXMZ(FM) Box Elder, South Dakota.
44
In its petition, Pandora sought permission for its
parent company, Pandora Media, a publicly traded company organized and headquartered in the United
States, to have varying levels of foreign ownership (voting and equity) because it could not prove that
foreign entities did not own or vote more than 25 percent of its shares
o assignment of
license of KXMZ(FM) Box Elder, South Dakota.
44
In its petition, Pandora sought permission for its
parent company, Pandora Media, a publicly traded company organized and headquartered in the United
States, to have varying levels of foreign ownership (voting and equity) because it could not prove that
foreign entities did not own or vote more than 25 percent of its shares.
45
Based on the facts specific to
that case and in view of existing broadcast foreign ownership policies, the Commission approved the
request to exceed the 25 percent benchmark under Section 310(b)(4) provided that Pandora obtain prior
Commission approval for (1) aggregate foreign equity and/or foreign voting interests in Pandora Media
exceeding 49.99 percent; (2) any change in the Pandora Media Board of Directors that would result in a
majority of foreign members; or (3) any individual foreign investor or �group� acquiring a greater than 5
percent voting or equity interest (or greater than 10 percent for certain institutional investors) in Pandora
Media.
46
The Commission required Pandora Media to modify its organizational documents to ensure that
its Board of Directors has all necessary powers to maintain compliance with Section 310(b)(4), including
the right to request and obtain information regarding citizenship of Pandora Media�s interest holders, and
the necessary powers to cure noncompliance, specifically: (1) the right to restrict the transfer of shares to
aliens; (2) the right to require disclosure when an alien acquires an equity and/or voting interest; and (3)
the right to compel the redemption of shares held by aliens.
47
14. The Commission recently adopted its 2016 Foreign Ownership Order,
48
which modified
the broadcast licensee foreign ownership review process by extending the streamlined rules and
40
Id
e disclosure when an alien acquires an equity and/or voting interest; and (3)
the right to compel the redemption of shares held by aliens.
47
14. The Commission recently adopted its 2016 Foreign Ownership Order,
48
which modified
the broadcast licensee foreign ownership review process by extending the streamlined rules and
40
Id.
41
The Commission stated that it would not entertain petitions to exceed the foreign ownership limits of Section
310(b)(3) for foreign investment in broadcast licensees. 2013 Broadcast Clarification Order, 28 FCC Rcd at 5752,
para. 15, n.49. Unlike Section 310(b)(4), Section 310(b)(3) does not afford the Commission discretion to approve
foreign investment in broadcast licensees in excess of the limitations contained therein.
42
2013 Broadcast Clarification Order, 28 FCC Rcd at 16249-50, para. 11.
43
Id. at 16249, para. 10.
44
Pandora Radio LLC Petition for Declaratory Ruling Under Section 310(b)(4) of the Communications Act of 1934,
as Amended, MB Docket No. 14-109, Declaratory Ruling, 30 FCC Rcd 5094, 5095-96, para. 4 (2015) (2015
Pandora Declaratory Ruling), recon denied, 30 FCC Rcd 10570 (2015).
45
Id.
46
Id. at 5101, para. 19.
47
Id. at 5101, para. 20.
48
Review of Foreign Ownership Policies for Broadcast, Common Carrier and Aeronautical Radio Licensees under
Section 310(b)(4) of the Communications Act of 1934, as Amended, Report and Order, GN Docket 15-236
30 FCC Rcd 5094, 5095-96, para. 4 (2015) (2015
Pandora Declaratory Ruling), recon denied, 30 FCC Rcd 10570 (2015).
45
Id.
46
Id. at 5101, para. 19.
47
Id. at 5101, para. 20.
48
Review of Foreign Ownership Policies for Broadcast, Common Carrier and Aeronautical Radio Licensees under
Section 310(b)(4) of the Communications Act of 1934, as Amended, Report and Order, GN Docket 15-236
(2016)(2016 Foreign Ownership Order). See note 39 supra.
Federal Communications Commission DA 17-79
6
procedures developed for review of foreign ownership of common carrier and certain aeronautical
licensees under Section 310(b)(4) to the broadcast context, with certain limited exceptions.
49
In the 2016
Foreign Ownership Order, the Commission also reformed the methodology used by both common carrier
and broadcast licensees to assess compliance with the foreign ownership limits in Sections 310(b)(3)
50
and 310(b)(4) of the Act, as appropriate, in recognition of the difficulty that U.S. publicly traded
companies face in attempting to ascertain their level of foreign ownership.
51
This reformed methodology
provides a framework for a publicly traded licensee or its controlling U.S. parent to ascertain its foreign
ownership using information that �is known or reasonably should be known� to the company in the
ordinary course of business and eliminates the need for shareholder surveys.
52
15. The rules adopted in the 2016 Foreign Ownership Order have not yet taken effect, and
thus our foreign ownership review process is still governed by the 2013 Broadcast Clarification Order.
53
As noted, in the 2013 Broadcast Clarification Order the Commission adopted a case-by-case approach to
reviewing petitions for declaratory ruling to exceed 310(b)(4) benchmark
holder surveys.
52
15. The rules adopted in the 2016 Foreign Ownership Order have not yet taken effect, and
thus our foreign ownership review process is still governed by the 2013 Broadcast Clarification Order.
53
As noted, in the 2013 Broadcast Clarification Order the Commission adopted a case-by-case approach to
reviewing petitions for declaratory ruling to exceed 310(b)(4) benchmark.
54
In that order, the
Commission stated that �[b]y their nature, these case-by-case reviews will lead to distinct, factually
driven results.�
55
Thereafter, in the Pandora Declaratory Ruling, the Commission granted such a petition
based on the facts and circumstances of that case and, imposed a series of conditions appropriate to those
circumstances.
56
The 2013 Broadcast Clarification Order allows us discretion in considering petitions
such as the instant one to impose terms and conditions on a licensee if warranted based on the facts and
circumstances of each particular case.
57
Because the Commission clearly acknowledged that fact-specific
inquiries will lead to different results in different cases, we need not conclude that the conditions imposed
in the Pandora Declaratory Ruling are necessarily appropriate under the facts and circumstances of this
case
58
or that we are limited to those conditions here if we conclude new or different conditions would be
more appropriate to the present case.
16. In the context of considering whether to grant this petition, and, if so, whether conditions
49
Id.
50
47 U.S.C. � 310(b)(3)(Prohibiting grant of a broadcast, common carrier, aeronautical en route and aeronautical
fixed radio license to �[A]ny corporation of which more than one-fifth of the capital stock is owned of record or
voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation
organized under the laws of a foreign country��)
50
47 U.S.C. � 310(b)(3)(Prohibiting grant of a broadcast, common carrier, aeronautical en route and aeronautical
fixed radio license to �[A]ny corporation of which more than one-fifth of the capital stock is owned of record or
voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation
organized under the laws of a foreign country��).
51
2016 Foreign Ownership Order, at para. 35-72.
52
Id. at para. 44-53.
53
By its terms, the 2016 Foreign Ownership Order takes effect 60 days after publication in the Federal Register,
except those provisions that contain new or modified information collection requirements that require approval by
the Office of Management and Budget (OMB) under the Paperwork Reduction Act. Id. at para. 113. Those sections
will become effective after the Commission publishes a notice in the Federal Register announcing such approval and
the relevant effective date. Id. The 2016 Foreign Ownership Order was published in the Federal Register on
December 1, 2016. Review of Foreign Ownership for Broadcast, Common Carrier and Aeronautical Radio
Licensees, 81 Fed. Reg. 86568 (Dec. 1, 2016). The order will be effective on January 30, 2017, except for those
sections requiring OMB approval.
54
2013 Broadcast Clarification Order, 28 FCC Rcd at 16252.
55
Id.
56
Pandora Declaratory Ruling, 30 FCC Rcd at 5101-5103.
57
Id.
58
For example, HMTV has stated that as part of its compliance monitoring processes it already performs the same
broadcast industry best practices set out in the Pandora Declaratory Ruling and that it already has in place the types
of restrictions that required changes to Pandora�s organizational documents. Pandora Declaratory Ruling, 20 FCC
Rcd. at 5101. See also para. 7, supra. We do, however, require that HMTV maintain these practices
s compliance monitoring processes it already performs the same
broadcast industry best practices set out in the Pandora Declaratory Ruling and that it already has in place the types
of restrictions that required changes to Pandora�s organizational documents. Pandora Declaratory Ruling, 20 FCC
Rcd. at 5101. See also para. 7, supra. We do, however, require that HMTV maintain these practices.
Federal Communications Commission DA 17-79
7
are necessary and what conditions should apply, we are cognizant of the Commission�s recent decision in
the 2016 Foreign Ownership Order, which is scheduled to become effective soon after the adoption of
this declaratory ruling. Although the rules adopted in that order are not yet in effect, we note that our
action here is not inconsistent with the policies or rules the Commission adopted.
59
17. Facts Regarding HMTV�s Foreign Ownership Status: HMTV has identified each U.S.
broadcast station license that it currently holds.
60
HMTV has described how it conducted its foreign
ownership review and the methodology it employed, using information that it knew or reasonably should
have known at the time the Petition was filed. It has demonstrated that it has used due diligence to
conduct a thorough review of its existing shareholders. Based on its review, HMTV has shown that there
are no unaccounted for attributable shareholders with a greater than 5 percent interest, equity or voting in
the company, and no alien shareholders with a greater than 5 percent interest, equity or voting in the
company. HMTV has submitted the necessary ownership diagrams and demonstrated that it is currently
in compliance with the 25 percent benchmark under Section 310(b)(4). We find that HMTV has provided
sufficient information regarding its current foreign ownership status and its proposed future foreign
ownership status to inform our decision on the pending petition.
18
uity or voting in the
company. HMTV has submitted the necessary ownership diagrams and demonstrated that it is currently
in compliance with the 25 percent benchmark under Section 310(b)(4). We find that HMTV has provided
sufficient information regarding its current foreign ownership status and its proposed future foreign
ownership status to inform our decision on the pending petition.
18. Public Interest Analysis: In both the 2013 Broadcast Clarification Order and the 2016
Foreign Ownership Order, the Commission emphasized the need to encourage new sources of investment
in the broadcast industry, including foreign investment.
61
The Commission has also emphasized the need
to protect important issues related to national security, law enforcement, foreign policy, trade policy, and
other public policy goals while maintaining compliance with Section 310(b).
62
The relevant Executive
Branch agencies with expertise on issues related to national security, law enforcement, foreign policy, and
trade policy have not filed any objection to issuance of the declaratory ruling or requested that we impose
conditions on the grant. HMTV has submitted information that it is approaching the 25 percent cap and
that, because it is a publicly traded company that does business internationally and attracts foreign
investors, permitting it to increase its foreign investment up to 49.99 percent would facilitate its ability to
do business and to attract additional capital. We find persuasive HMTV�s contention that granting its
petition would serve the public interest in encouraging new foreign investment. HMTV has also
demonstrated that grant of its Petition has the potential to encourage reciprocity in parts of Latin America,
the region in which it does international business.
63
As noted above, no parties have opposed the Petition
for declaratory ruling or asked for conditions to be placed on it.
IV. DECLARATORY RULING
19
rve the public interest in encouraging new foreign investment. HMTV has also
demonstrated that grant of its Petition has the potential to encourage reciprocity in parts of Latin America,
the region in which it does international business.
63
As noted above, no parties have opposed the Petition
for declaratory ruling or asked for conditions to be placed on it.
IV. DECLARATORY RULING
19. Under these circumstances, pursuant to Section 310(b) of the Act, we find that the public
59
HMTV�s petition was on public notice, under review by the Executive Branch, and amended repeatedly during the
pendency of the proceeding that resulted in the 2016 Foreign Ownership Order. Review of Foreign Ownership
Policies for Broadcast, Common Carrier and Aeronautical Radio Licensees Under Section 310(b)(4) of the
Communications Act of 1934, as Amended, GN Docket 15-236, Notice of Proposed Rulemaking, 30 FCC Rcd 11830
(2015) (2015 Foreign Ownership NPRM). The 2016 Foreign Ownership Order NPRM was released on October 22,
2015 and HMTV filed its Initial Petition on July 8, 2016, and supplemented it after the release of the 2016 Foreign
Ownership Order. HMTV�s petition is therefore differently situated then Pandora�s. Pandora did not have the
benefit of the Commission�s guidance in the 2015 Foreign Ownership NPRM or the 2016 Foreign Ownership
Order.
60
Initial Petition at 2.
61
2013 Broadcast Clarification Order at 16249; 2016 Foreign Ownership Order at para. 2.
62
2013 Broadcast Clarification Order, 28 FCC Fcd at 16251; 2016 Foreign Ownership Order at para. 2.
63
Initial Petition at 16, fn 13. U.S. Department of State, 2014 Investment Climate Statement at 4-5 (2014)
5 Foreign Ownership NPRM or the 2016 Foreign Ownership
Order.
60
Initial Petition at 2.
61
2013 Broadcast Clarification Order at 16249; 2016 Foreign Ownership Order at para. 2.
62
2013 Broadcast Clarification Order, 28 FCC Fcd at 16251; 2016 Foreign Ownership Order at para. 2.
63
Initial Petition at 16, fn 13. U.S. Department of State, 2014 Investment Climate Statement at 4-5 (2014). See
also, Ley Federal de Telecommunicaciones y Radiofusi�n, Articulo Segundo (issued July 14, 2014),
http://www.dof.gob.mx.nota_detalle.php?codigo5352323&fecha++14/07/2014 (available in English at
http://www.sct.gob.mx/fileadmin/Comunicaciones/LFTR_english.pdf, Article Two, at pdf p. 86).
Federal Communications Commission DA 17-79
8
interest would not be served by prohibiting foreign ownership of Hemisphere Media Group, Inc. in excess
of the 25 percent benchmark in Section 310(b) of the Act because this increased level of foreign
investment in HMTV will facilitate investment from new sources of capital in HMTV that would not
otherwise be available and encourage reciprocity by foreign governments. Specifically, this ruling
permits aggregate foreign equity and voting interest in Hemisphere Media Group, Inc. to exceed 25
percent and to increase up to and including 49.99 percent.
20. Specific Approval. Furthermore, this declaratory ruling grants specific approval for the
following individuals and entities to hold up to 49.99 percent of the voting interests and 49.99 percent of
the equity of Hemisphere Media Group, Inc:
? Cin�ma Aeropuerto,
? Grupo Frecuencia Modulada Televisi�n, S.A. de C.V.,
? Grupo MVS, S.A. de C.V.,
? HSBC 61549,
? HSBC M�xico S.A.,
? HSBC Holdings plc,
? Joaqu�n Vargas Guajardo,
? Elsa Gabriela Vargas Guajardo,
? Ernesto Vargas Guajardo,
? Andrea Matilde Vargas Guajardo,
? Francisco Vargas Guajardo and
? Alejandro Vargas Guajardo
equity of Hemisphere Media Group, Inc:
? Cin�ma Aeropuerto,
? Grupo Frecuencia Modulada Televisi�n, S.A. de C.V.,
? Grupo MVS, S.A. de C.V.,
? HSBC 61549,
? HSBC M�xico S.A.,
? HSBC Holdings plc,
? Joaqu�n Vargas Guajardo,
? Elsa Gabriela Vargas Guajardo,
? Ernesto Vargas Guajardo,
? Andrea Matilde Vargas Guajardo,
? Francisco Vargas Guajardo and
? Alejandro Vargas Guajardo.
In granting these specific approvals, we have coordinated with the relevant Executive Branch agencies
and given them the opportunity to review the petitioner�s filings and the requests for specific approval in
light of interests related to national security, law enforcement, foreign policy, trade policy, and other
public policy goals. The Executive Branch agencies have filed a letter with the Commission stating that
they have no objections. We also find no grounds to object to the specific approvals and we conclude that
grant of them will facilitate the foreign investment sought by the petitioner.
21. Aggregate and Individual Ownership Limits. HMTV must obtain (1) prior Commission
approval for foreign equity and/or foreign voting interests exceeding 49.99 percent in the aggregate or for
any such interest held by any individual or entity listed above that exceeds 49.99 percent, which are the
limits requested in the Petition; and (2) prior specific Commission approval for any individual foreign
investor or �group� other than those listed above acquiring a greater than five percent voting or equity
interest (or ten percent for certain institutional investors) in HMTV.
64
While these conditions do not bar
HMTV from seeking additional future foreign investment opportunities, they accommodate the relief
requested in the Petition while providing continued protection to important interests related to national
security, law enforcement, foreign policy, trade policy, and other public policy goals
(or ten percent for certain institutional investors) in HMTV.
64
While these conditions do not bar
HMTV from seeking additional future foreign investment opportunities, they accommodate the relief
requested in the Petition while providing continued protection to important interests related to national
security, law enforcement, foreign policy, trade policy, and other public policy goals.
64
See Pandora Declaratory Ruling, 30 FCC Rcd at 5101. A �group� is two or more individuals or entities that have
agreed to act together for the purpose of acquiring, holding, voting, or disposing of their equity and/or voting
interests in the licensee and/or controlling U.S. parent of the licensee or in any intermediate company(ies) through
which any of the individuals or entities holds its interests in the licensee and/or controlling U.S. parent of the
licensee. 17 C.F.R. � 240.13d-5(b).
Federal Communications Commission DA 17-79
9
22. Compliance Monitoring. HMTV shall monitor its compliance on an ongoing basis.
65
If,
at any time, HMTV knows, or has reason to know, that it is no longer in compliance with this declaratory
ruling, Section 310(b)(4) of the Act, or the Commission�s rules and policies on foreign ownership, it shall
file a statement with the Commission explaining the circumstances within 30 days of the date that it knew
or had reason to know that it was no longer in compliance and how it intends to correct the overage, either
by filing a new petition for declaratory ruling or by reducing the foreign interest.
66
Ongoing monitoring
will allow the licensee to stay ahead of changes in its foreign ownership levels to ensure that it obtains
Commission approval before it goes out of compliance with this declaratory ruling. The required
remedial action will provide the licensee with the opportunity and the incentive to correct an inadvertent
error prior to enforcement action by the Commission.
23
6
Ongoing monitoring
will allow the licensee to stay ahead of changes in its foreign ownership levels to ensure that it obtains
Commission approval before it goes out of compliance with this declaratory ruling. The required
remedial action will provide the licensee with the opportunity and the incentive to correct an inadvertent
error prior to enforcement action by the Commission.
23. Organizational Changes. This ruling shall apply to all of HMTV�s subsidiaries and
affiliates, whether existing or formed or acquired subsequently, that are wholly owned and controlled by,
or under 100 percent common ownership and control with HMTV. In addition, any foreign owned entity
that has received specific approval may insert a new, foreign-organized company that is under 100
percent common ownership and control in its vertical ownership chain above the controlling U.S.
parent.
67
The flexibility granted here reflects the reality that it is not uncommon for publicly traded
companies to make changes within their corporate structure that in no way affect the operation,
management, or control of those companies. This flexibility does not detract in any way from the
requirement under the Act and our Rules to apply for and receive prior Commission consent to a
voluntary assignment of license or transfer of control before such a transaction may be consummated
68
or
to seek a new declaratory ruling before its foreign ownership exceeds the terms or conditions of this
declaratory ruling.
69
V. PROCEDURAL MATTERS
24. This declaratory ruling is issued pursuant to section 310(b)(4) of the Communications
Act of 1934, 47 U.S.C. � 310(b)(4), and sections 0.61 and 0.283 of the Commission�s rules, 47 C.F.R. ��
0.61 and 0.283.
25. Issuance of this declaratory ruling is without prejudice to the Commission�s action on any
other matter.
26. Pursuant to section 1.103 of the Commission�s rules, 47 C.F.R
MATTERS
24. This declaratory ruling is issued pursuant to section 310(b)(4) of the Communications
Act of 1934, 47 U.S.C. � 310(b)(4), and sections 0.61 and 0.283 of the Commission�s rules, 47 C.F.R. ��
0.61 and 0.283.
25. Issuance of this declaratory ruling is without prejudice to the Commission�s action on any
other matter.
26. Pursuant to section 1.103 of the Commission�s rules, 47 C.F.R. � 1.103, the consent
granted herein is effective upon release of this declaratory ruling.
65
As discussed above, fn. 59, HMTV has demonstrated that it already has in place methods for monitoring and
ensuring compliance with 310(b) benchmarks and we require it to keep these safeguards in place. It has also shown
that it is currently in compliance with 310(b). Therefore, the special biennial certification requirement imposed in
the Pandora Declaratory Ruling is not warranted in this instance. See Pandora Declaratory Ruling, 30 FCC Rcd at
5101-5102. Nothing in this declaratory ruling excuses the petitioner or its subsidiary licensees from the
requirements associated with 310(b) certification at the time of filing a Commission application that requires such
certification.
66
See Pandora Declaratory Ruling, 30 FCC Rcd at 5102.
67
Although this condition was not in the Pandora Declaratory Ruling, we find that it is consistent with that
decision�s condition allowing the creation of new, wholly owned subsidiaries of the licensee�s parent company to be
inserted in the ownership chain.
68
See Pandora Declaratory Ruling, 30 FCC Rcd at 5102.
69
Some of the conditions we adopt here are similar to the terms of the rules adopted in the 2016 Foreign Ownership
Order. See, e.g. 47 C.F.R. �1.5001(i); 47 C.F.R. � 1.5004 (b), (d) and (f However, we adopt these conditions here
not to apply those rules, which are not yet effective, but because we conclude that these conditions are appropriate
under the facts and circumstances of this case
69
Some of the conditions we adopt here are similar to the terms of the rules adopted in the 2016 Foreign Ownership
Order. See, e.g. 47 C.F.R. �1.5001(i); 47 C.F.R. � 1.5004 (b), (d) and (f However, we adopt these conditions here
not to apply those rules, which are not yet effective, but because we conclude that these conditions are appropriate
under the facts and circumstances of this case.
Federal Communications Commission DA 17-79
10
FEDERAL COMMUNICATIONS COMMISSION
William T. Lake
Chief
Media Bureau
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.