Spanish telco Telefonica and France’s Vivendi have emerged as the sole contenders to buy Digital Plus, Spain’s biggest pay TV operation, which Spanish media group Prisa put up for sale in May in order to cut debt.
Vivendi held a long-term minority stake in Digital Plus before selling last year.
If a joint buy went through, “Vivendi would run the show, while Telefonica could add content to its own pay TV operation, IPTV Imagenio,” said a Madrid analyst.
According to Spanish website Negocio, a joint bid would see Vivendi take a 75% stake in Digital Plus, Telefonica the rest.
Spain’s Socialist government is likely to welcome a bid that sees part of Digital Plus remain in Spanish hands.
The major roadblocks to a deal are price and market conditions.
Prisa can’t afford to sell Digital Plus, which includes premium paybox Canal Plus Espana, for less than s3 billion ($3.8 billion). According to Spanish press reports, Vivendi and Telefonica won’t pay more than $3.2 billion.
“Digital Plus has had difficulty adding subscribers and raising average subscriber payments in a TV environment that has steadily become more competitive and where room for improvement appears limited,” said Francois Godard at Enders Analysis.
Spanish broadcaster Telecinco, controlled by Silvio Berlusconi’s Mediaset, ruled itself out of the running on Thursday given Spain’s tough market conditions.
Prisa needs cash. In December, it borrowed $2.5 billion from a syndicate led by London-based HSBC Bank, in what now seems like a highly overpriced operation, to raise its stake in Digital Plus owner Sogecable from 50% to 100%. The loan is due in March.
Prisa’s share price, 76% down on its peak this year, has already factored in the possibility that a sale won’t go through.
That would force Prisa to renegotiate terms with its bank lenders, sell off other assets or raise cash via a rights or convertible bond issue, said the analyst.
“Prisa is pretty well already in the hands of the banks,” he added.