Suitors look to control PT Multimedia

Portugal operator to be spun off from parent company

LISBON — Domestic and international investors are jockeying for position to control PT Multimedia, Portugal’s biggest TV and film operator, which is to be spun off by its parent company, in the third quarter of this year.

It’s a big prize, to be sure. Portugal Telecom, the parent group, chaired by Henrique Granadeiro, owns Portugal’s telephone and cable networks and controls more than 80% of the landline telephony market, over 44% of the mobile telephony market, north of 80% of the cable and satellite TV markets and more than 40% of the home entertainment sector and Portuguese theatrical box office.

For investors, the subsid’s principal attraction is Portugal’s extensive cable and satellite network, which reps over 80% of the domestic market and is the source of 89% of PTM’s revenues, with 2.9 million homes passed (70% of homes) and 1.5 million subscribers (35% of homes).

Under the Lusomundo brand name, PTM took 48% of B.O. and holds down vid distribution agreements with Paramount and DreamWorks. The company distributed eight out of Portugal’s 10 top theatrical titles in the first quarter of 2007, including “Apocalypto,” “Norbit” and “Charlotte’s Web.”

Suitors seem to come from PT’s group of core shareholders (including Portuguese banks BES and CGD and the country’s Ongoing Strategy Investments), which will own more than half both companies with a 10% cap on the voting rights of any one shareholder — which analysts consider an obstacle to a takeover by a single investor.

The dark horse in the race to control Portugal’s telecommunications and media business remains rival Sonaecom, whose $15.2 billion takeover bid for PT was thwarted in March.

Over the past few weeks, Sonaecom has purchased two of the country’s main independent landline operators — Oni and Tele2 — thus boosting the company’s broadband Internet share to close to 20% and enabling Sonaecom director Luis Reis to say “Sonaecom has hereby shown that it is Portugal Telecom’s main competitor in Portugal.”

PTM has enjoyed strong growth rates over recent years, with turnover from its core subscription TV and internet business rising from E325 million ($439.1 million) in 2001 to $798.6 million in 2006 — 82% growth over five years.

In first quarter 2007, PTM launched its 3 Play service which offers major potential for additional growth. PT has anticipated this challenge by launching its own triple-play Internet TV service, which PT’s executive president, Rodrigo Costa, has dubbed as “PT’s most important project over the coming years.”

In this year’s annual general meeting in June, PTM appointed a new chairman, lawyer Daniel Proenca de Carvalho, who confirmed that there will be a complete separation of management teams and PTM will be a full-fledged competitor to PT.

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