Hard-pounding for Sogecable

Spanish pay tv giant loses $13 mil-lion July-September

MADRID — Spanish pay TV leader Sogecable added a mere 16,400 subscribers from July to September, ending the third quarter with 2.006 million customers. The modest rise could be a sign of a maturing Spanish pay TV market, at least in its traditional satcaster form.

With a new soccer season kicking off in September, pay TV operators in Spain expect a surge in new subscribers.

New clients have certainly signed on for Sogecable. But the big question is whether Sogecable is on track to reach its management guidance of 2.5 million subs by 2008.

Sogecable reported third-quarter losses of €10.2 million ($12.7 million) from sales of $420.9 million.

Startup costs at Cuatro, Sogecable’s successful free-to-air broadcaster, dragged down the bottom line, posting third-quarter losses of $40.3 million.

Launching last November, the new analog TV station has carved out an upbeat 6.5% all-day market share in just 10 months, thanks in part to performances from U.S. series such as “House” and “Grey’s Anatomy” that are far above the channel average.

But analysts worry about rising costs. “The results are slightly disappointing. The ARPU figure — average payment per subscriber — isn’t showing material growth, and the cost base, up 9% for programming costs in 2006, is hitting upside,” said Javier Marin at Morgan Stanley.

Rising costs come in part from prices paid for Spanish soccer league games, he added.

Sogecable can look, however, to several lifelines. Cuatro is outperforming expectations. Its big studio deals are up for renewal in 2007 or 2008.

Another important change is the lapse at the end of next year of a government embargo on Sogecable’s selling mass product to giant telco Telefonica, which owns Imagenio, one of Europe’s biggest broadband Internet operators.

Telefonica owns 16.65% in Sogecable. A combination of Sogecable product and IPTV outlets could re-energize pay TV for Spain.

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