Market Insight

Telefonica ups its pay TV investments

July 07, 2014

This product is included in:

Want to learn more?
Have an expert contact you.

Spain’s Telefonica has agreed to buy the 22% of local pay TV service Distribuidora de Television (DTS) owned by Italy’s Mediaset as it moves to take full control of the satellite pay TV platform branded as Canal Plus. The move has been expected since Telefonica agreed in May to buy the 56% held in DTS held by Prisa. Telefonica already owns 22% of the platform. Telefonica will pay €295m for Mediaset’s stake with an additional €30m to buy-out Mediaset’s option on the stake held by Prisa. A further €10m payment will be made subject to performance of the pay TV service. Telefonica has already agreed to pay Prisa  €725 million ($1.0 billion) for the 56% stake it holds. On completion of both deals, Telefonica will control 100% of the pay TV service. The deals value DTS at €1.3bn.

In a related deal, Telefonica also agreed to buy 11.1% of Mediaset’s Italian pay TV platform Mediaset Premium, which operates on digital terrestrial. Telefonica will pay €100m for an 11.1% stake, valuing the operation at €900m. Mediaset is also in talks with other international pay TV groups to sell additional stakes in the platform, which will be split off into a separate company.

Our take

Telefonica already owns Spain’s largest IPTV pay TV platform so the move to take full control of a competing satellite service may, on the face of it, seem unusual. This goes double given the recent performance of Prisa TV/Canal Plus, which has been struggling to maintain its customer base and battled a decline in customers from over two million in 2009 to 1.63m today. The platform, which is the main premium rights holder in Spain, operates in one of Europe’s most pay TV-resistant markets and also suffers from the high piracy rate in Spain. In fact, Telefonica is pursuing a strategy that is becoming increasingly common among European telcos as they focus more and more on pay television. While fixed line telephony, broadband access and mobile telephony are increasingly commoditising, pay TV income continues to grow. Further, bundled services and triple or quad-play that also includes TV offers allow operators to grow revenues even with a flat customer base. The combination of Spain’s premium pay TV brand with Telefonica’s national telecoms services should allow the development of new bundling options for the Spanish market that will allow Telefonica to compete even more strongly with rival cable services from Ono, which was recently acquired by mobile group Vodafone. On completion of the deals, DTS will be the second major European satellite platform to combine premium satellite pay TV with owned-telecoms infrastructure, the other being the UK’s BSkyB.

Geography
Spain
Share facebook Twitter Google Plus Linked In Add This Contact Us