(FORTUNE Magazine) – Now this is must-see TV. In a new Mexican soap opera, Mirada de Mujer (A Woman's Gaze), a 50-year-old woman tires of her husband's philandering. Instead of silently suffering, which she might be expected to do south of the border, the mother of three has an affair of her own. Not just with any man, mind you, but one who is much younger, better looking, and more sensitive than the old creep she's threatening to leave behind. Will she go back to her husband? Or stay with the man who has made her happy? Probing that moral dilemma not only has been great TV but has produced great ratings as well. The show has become a megahit despite (or because of) opposition from family-values groups that have asserted the program promotes adultery. It also challenges the unspoken rule of Mexican marriage--that a man can have a wife and a mistress too. There's even been a petition drive to kick it off the air.

That's just hunky-dory with TV Azteca, the Mexican television broadcaster that airs the program. Ricardo Salinas Pliego, Azteca's chief executive, wants all the controversy he can get. In four short years Azteca has used on-the-edge programming, Mexican-style, to come out of nowhere and seize nearly 40% of Mexico's prime-time audience share from rival Grupo Televisa, Mexico's onetime TV monopoly and the world's largest Spanish-language producer of television programming. Azteca owns the No. 1 evening news broadcast and the No. 1 crime-news magazine show, and A Woman's Gaze, already ruling its time slot, is threatening to overthrow the competition's top telenovela, or soap opera, as the No. 1 show. Fortune 500 companies like Procter & Gamble, Coca-Cola, and Ford are lining up to buy ads. And you can purchase the company's ADRs on the New York Stock Exchange. "Azteca is the hot thing in Mexico," says Irving Plonskier of Young & Rubicam.

TV Azteca is not only a hot television story but one of the more unusual successes in Mexico's checkered privatization movement. The company was created in 1993 when the Mexican government decided to play "let's start another media company" and put up for bid a dumpy group of properties that included two national channels, a TV studio, and a chain of movie theaters. The 42-year-old Salinas, a Tulane University graduate and a native of Mexico City, saw an opportunity. For one thing, he could use Azteca's channels to give his family's $555 million, 450-plus-store appliance chain, Elektra, more advertising play. He also liked the idea of being a media mogul attacking a fat and happy monopoly. Fearing he would lose the bid, Salinas, who isn't related to Mexico's scandal-plagued former president, Carlos Salinas de Gortari, paid a rich $643 million--about $150 million more than the closest bidder. "We saw a tremendous potential for promoting social change," says Salinas. "But we also saw a business opportunity, so we said, 'Let's go for it.' "

Salinas' early days as a mogul were a little shaky. It was revealed he took a $29 million loan to buy TV Azteca from Carlos' brother Raul, who had been arrested and charged with conspiring in the 1994 assassination of a high-level political official and is suspected of having ties to drug traffickers. Azteca's Salinas was absolved of any impropriety. ("Of course, looking back now, I would never do it," he says. "But at that time I had no way of knowing that this money might not have a clean origin.") To foreigners, however, the Raul flap has partly obscured the fact that Salinas' overhaul of TV Azteca has been masterful.

When he took over the network, Salinas hired a group of young, smart executives--his top adviser is 31, and his CFO is 30--and immediately sank $50 million into transmission equipment to boost coverage from as few as 50% of all homes to as many as 97%. Salinas made his real mark in programming, which was so thin that the network aired the same shows at the same time across its two channels. It first bought shows like soap operas from Europe, Brazil, and other Latin countries and entered into a strategic partnership with NBC. That filled the airtime. The NBC deal would later unravel (both companies are in litigation in a contract dispute), but making the Aztec bird logo look like the NBC peacock and running Tom Brokaw's Nightly News did gussy up TV Azteca's image and get it some attention.

Still, Salinas needed more viewers. A year after he bought the network, Salinas controlled a paltry 14% of the prime-time audience. The following year, largely because of the collapse of the peso, Azteca lost $95 million on $126 million in revenues. The company needed a hit. To the rescue came Epigmenio Ibarra, a former TV combat correspondent with leftist sympathies who covered the civil wars in El Salvador and Nicaragua in the 1980s.

In early 1996, Salinas commissioned Ibarra, who had never produced a telenovela in his life, to develop a crime show, a kind of Mexican version of NYPD Blue. Ibarra suggested the show's pivotal event be the assassination of a noted lawyer. But Salinas, intent on broadcasting a program that would closely reflect the violence and corruption of Mexican public life, took it a step further. "A lawyer?" Salinas asked Ibarra. "Who cares about a lawyer? Make him the Attorney General." The show also explored drug trafficking and high-level government corruption. And then came the final touch: Ibarra and Salinas set their political and criminal plot lines in rotation around a melodramatic, ultimately tragic romance: Nada Personal (Nothing Personal), Azteca's first telenovela, was born.

Nothing Personal's fictitious murder mirrored the 1994 assassinations of two senior officials of the PRI, Mexico's ruling party. In its longtime role as the steward of the PRI's image, Televisa had virtually never associated the party with such sordid dealings. And Salinas took an awful chance that Nothing Personal would simply shock the Mexican people, not intrigue them. Televisa, after all, had lured the mass market to its shows with fantastic tales of beautiful peasant girls winning the hearts of aristocrats, not depictions of government skullduggery. But Mexico was ready for a reality check: Viewers loved Nothing Personal, as the ratings proved. "For so long Mexicans have watched TV to escape reality," says Ibarra, who also produced A Woman's Gaze, "but we wanted to present Mexico with a mirror. We wanted them to watch our shows to see reality, not escape it."

TV Azteca set itself apart in other ways--especially with Mexico's increasingly younger TV audience. For example: Azteca's evening news show is anchored by Javier Alatorre, 35, who reads the news on Hechos (loosely translated: Happenings) with savvy grins and raised eyebrows. Televisa's Jacobo Zabludovsky, the 69-year-old patriarch of the network's 24 Horas, sits like a statue as he recounts the day's events. Guess which broadcast is No. 1?

Such programs--and Mexico's economic recovery too--have enabled Azteca to prosper. In the first six months of this year, it notched an eye-opening profit margin (before interest and taxes) of 59% on revenues of $192 million, double the revenues of the same period last year. Capitalizing on this performance, the company held a $605 million initial public offering in August, with half the shares traded as American depositary receipts on the New York Stock Exchange--the largest Mexican IPO since the peso crisis. many Mexico watchers say it signals that the country's recovery has turned the corner. The company's market value is $3.5 billion, and the ADR, which opened at $18, now sits at about $22.

But the impact of Azteca's success with Nothing Personal and A Woman's Gaze means more than higher ratings and advertising revenues--their success is the key to taking Azteca to its next stage of development. It is impossible to underestimate how powerful a force telenovelas are in Latin America. Millions plot their daily routines around their airtimes. For decades, tele- novelas have been the heart of Televisa's business. It exports them to countries as diverse as the Philippines, Turkey, and Russia, not to mention the rest of Latin America, and leverages the shows' stars through Televisa-produced music albums, concerts in Televisa-owned theaters, and articles in Televisa-owned magazines. If Azteca can consistently create its own set of hit telenovelas--and it plans to add ten next year, at about $5 million a pop--then it could breach this fortress at the center of Televisa's empire and emerge as a major force to be reckoned with, not just in Mexico but among Spanish-speaking media at large.

Azteca, of course, still faces the thorny challenges of adolescence. For starters, Televisa, which posted a $75 million loss on $1.4 billion in revenues in 1996, is preparing a counterattack, and it has four national channels to Azteca's two. Televisa has already radically juggled its prime-time schedule, raided Azteca's production staff for a hipness its own producers apparently lack, and announced a major new restructuring plan to trim away $270 million in excess costs over three years. But more ominous for Azteca are Televisa's awesome production capabilities and stable of stars--the ingredients for major hits are sitting right there. Moreover, Televisa seems to have finally completed an internal power struggle to find a successor to the late Emilio Azcarraga Milmo, the company's legendary patriarch known as "El Tigre" (the Tiger) for his outspokenness and influence. His son, 29-year-old Emilio Azcarraga Jean, has won the helm and is expected to try to make his mark in the months to come. "I don't think Azteca can claim victory quite yet," says Alejandro Galindo, Procter & Gamble's ad-buying chief in Mexico City.

The network could also have problems increasing ad sales. All networks will get a nice bump from the World Cup broadcasts next summer. But Shayne McGuire, a securities analyst in Deutsche Morgan Grenfell's Mexico City office, still expects the $1.9 billion overall ad market in Mexico to flatten next year because of an expected drop in spending by pension funds and political parties.

And then there's Salinas' decision to engage NBC in a nasty legal fight, a move that could cast a shadow over any ventures Azteca chooses to embark on with U.S. media partners. Under the two networks' 1994 strategic alliance, NBC received a 10% option in exchange for providing an array of consulting services. But when NBC informed Azteca this past spring that it would take a 1% stake in the company and cash in the rest of the warrants, Azteca claimed that NBC had failed to provide the required services and refused to honor the option. The dispute is in arbitration.

So Azteca will face a battery of new tests in its young life. But that state of affairs appears to have left Salinas and his team unfazed. They unflinchingly believe that if they continue to produce monster hits, the rest will follow. And this fall, Salinas believes he has his next monster: Demasiado Corazon (Too Much Heart), the third telenovela from Ibarra. Picking up where Nothing Personal left off, Too Much Heart tells the tale of a white-knight cop caught up in Mexico's ultraviolent world of narcotics trafficking and corrupt military officers, a world that erupted as front-page news earlier this year when Mexico's drug czar was arrested and charged with occupying a prominent position on a drug dealer's payroll.

Beyond drawing out the dirty relations between the Mexican military and the narcotraficantes, the show will also allude to the role American drug addicts play in the trafficking equation. This telenovela stands to be a full-blown epic that will draw as much heat as its predecessor. But of course, that's what Salinas has in mind.