Telefonica Offers $1 Billion for Prisa’s Pay-TV Division

May 07, 2014 6:07 am ET

(Updates with Mediaset’s stake in fifth paragraph.)

May 7 (Bloomberg) -- Telefonica SA offered 725 million euros ($1 billion) for a controlling stake in Promotora de Informaciones SA’s pay-TV broadcaster, betting on movies and sports programs to offset its shrinking phone business in Spain.

The bid for the 56 percent of Distribuidora de Television Digital SA, or DTS, is binding and subject to regulatory approvals, according to Madrid-based Telefonica, which already owns a 22 percent holding. Prisa, as Promotora de Informaciones is known, rose as much as 17 percent in the Spanish capital.

Telefonica wants to control DTS to expand TV services in Spain, Chief Operating Officer Jose Maria Alvarez-Pallete said in February. Owning the asset would give Telefonica more flexibility in tailoring offers such as Movistar Fusion TV, a new package of TV, landline, mobile-phone and Internet subcriptions starting at 75 euros a month.

The bid comes as Telefonica faces intensifying competition in its home market. Jazztel PLC is winning market share and Vodafone Group PLC has stepped up the fight for landline customers, agreeing in March to acquire cable provider Grupo Corporativo Ono SA.

Telefonica had considered options for DTS including teaming up with Mediaset Espana Comunicacion SA, a unit of former Italian Prime Minister Silvio Berlusconi’s Mediaset SpA that holds the remaining 22 percent of DTS, or with Al Jazeera to buy the asset, a person familiar with the matter said in March.

Antitrust Concern

The proposed transaction faces regulatory hurdles because DTS and Telefonica together control 62 percent of Spain’s pay-TV market, according to Andres Bolumburu, an analyst at Banco de Sabadell SA.

Mediaset would prefer to stay in DTS because of synergies with its Italian pay-TV business Premium, and possibly increase its influence through an agreement with Telefonica, a person familiar with the matter said, asking not to be identified because the deliberations are private. Mediaset also doesn’t rule out exiting DTS if Telefonica makes an offer that is attractive enough, the person said.

A Mediaset representative declined to comment on the company’s plan for the DTS stake.

Mediaset Deputy Chairman Pier Silvio Berlusconi said last month at the annual meeting that the broadcaster is in talks for an industrial partner for Premium while “no binding agreements have been signed.”

Debt Reorganization

Prisa shares climbed 7.9 percent to 42.6 euro cents at 12:06 p.m. in Madrid. Telefonica added 0.5 percent to 11.95 euros.

Prisa plans to hold a board meeting to evaluate Telefonica’s bid and other potential buyers, said a spokeswoman who asked not to be identified, citing company policy.

Shareholders of Madrid-based Prisa, which publishes El Pais newspaper, approved an agreement to restructure about 3 billion euros of debt in December, giving the media company time to turn around the business and reduce debt while looking for a buyer for the broadcasting assets.

Telefonica is scheduled to release first-quarter earnings May 9. It may report sales of 12.3 billion euros, a decline of 13 percent from a year earlier, according to the average of analysts’ estimates compiled by Bloomberg.

--With assistance from Manuel Baigorri in London and Charles Penty in Madrid.