Spanish media company Prisa has agreed to sell its majority stake in stake in pay TV unit DTS (Distribuidora de Television Digital SA), operating under the brand Canal Plus to Telefonica.
Telefonica will pay €725 million ($1.0 billion) for the 56% stake in the company adding to its existing 22% holding for a total stake of 78%. The other 22% will remain in hands of Italian media company Mediaset. The business retains the name Canal Plus for historical reasons but is no longer owned by Vivendi's Canal Plus Group.
Telefonica is already active in the Spanish pay TV market with IPTV service Movistar TV. At the end of 2013 it had 670,525 subscribers, representing 17.4%. The combined entity will thus control more than half of the total pay TV homes in Spain.
This acquisition makes a lot of sense for both companies. The Spanish pay TV market has been static or decreasing for several years. Growth will only come with the addition of new services for existing customers. Canal Plus will benefit from the telecoms services Telefonica offers, and Telefonica will win access to all the premium content Canal Plus has in Spain, especially top league sports. A combination of Canal Plus pay TV with the telco’s fiber optic and 4G offers will mean attractive triple and quad-play offers become possible.
Prisa needs the money to pay down its debt while Telefonica has cash to invest in new acquisitions after it sold stakes in O2 Deutschland, O2 Central America, O2 Ireland and Telefonica Czech Republic.
Competing pay TV operators Vodafone and Orange have already expressed concerns about the deal and have raised concerns with the regulator.
The interest of telcos and mobile operators in content is an increasingly important trend. Vodafone recently agreed to buy Spanish cable operator ONO in a €7.2bn deal. ONO is the biggest cable operator in Spain with 0.8m TV subscribers.
Vodafone's Spanish bid came just six months after it bought a controlling stake in German cable operator Kabel Deutschland which controls half the German cable market. Mobile operators and telcos are increasingly turning to TV and content to increase revenues in their slow growing or declining fixed line services by either buying content rights directly (like BT did in the UK with the Premier League) or by buying existing pay TV operators.
Telefonica's bid is still pending approval from Spanish and EU competition authorities.