Telefonica Given 15 Days Bid Spain's

Purchase would mark further consolidation in Europe’s pay TV sector

MADRID – In a window of opportunity which could signal yet further consolidation in Europe’s pay TV sector, giant Spanish TV Telefonica has 15 days to make an exclusive play for a controlling stake in Canal Plus, Spain’s biggest feevee operator.

Under prexy Cesar Alierta (pictured), Telefonica bought up a 21% stake – now 22% – in 2009. The 15-day window was triggered after the participation of Rucandio, a family investment company owned by the Polanco family fell below 30% after other shareholders exercized warrants on Canal Plus stock.

Having reduced assets, Telefonica is widely expected to make a play for Canal Plus.

The sticking point could be price. Telefonica is said to have bid Euros600 million ($824.4 million) last month for the 56% of Canal Plus controlled by Prisa, whose shareholders include the Polanco family. That bid was reportedly rejected. Two investment banks – one named by Prisa, the other by Telefonica – will now seek to set a fair price for Canal Plus.

“If there are others bidders and the valuation is set by independent banks, so the possibility of the price being higher is greater,” said an analyst.

But with other rivals talked up by the Spanish press as circling Canal Plus, led by Al Jazeera, Telefonica may well not want to pass up on a deal which makes a lot of sense in a bigger picture.

Since its creation in 1989, Canal Plus, which modeled itself on its Gallic namesake as an upscale, pricy premium pay TV operator targeting Spain’s cultured middle classes, has struggled to gain subscription traction in a country without France’s relatively well off grand bourgeoisie.

The lack of a large natural market has been compounded by competition – from a government-backed Via Digital from 1997 to 2003, when bought by Prisa – then rampant piracy.

Operating in a country that will take years to recover from economic crisis, it currently lacks a business model rationale with its traditional HBO-style positioning looking pricy for most Spaniards, while the growth of its Netflix-style YOMVI has been vibrant but far as yet from justifying the weighty prices Canal Plus pays for premium content.

Satellite subs, Canal Plus’ core client base, decreased from 1.719 million, year-end 2012 to 1.633 million on Sept. 30, 2013.

Bought by Telefonica, and merged with Telefonica’s Movistar TV pay TV platform, which had 609,300 subs Sept. 30, Canal Plus makes far more sense as part of a far larger business model with its content – especially soccer rights – driving Telefonica’s roll out of fibre-to-home services in Spain.

“Canal Plus’ model is not viable because it’s positioned at the upper-segment of price. For Telefonica a deal makes more sense because it can bundle Canal Plus with its existing fibre-to-home and try to funnel it through its existing infrastructure,” the analyst said.

“Telefonica could probably extract more synergies than a newcomer, which would have to keep everything that Canal Plus has such, as its satellite dishes. But the deal really depends on the price Telefonica is prepared to pay,” he added.

Per Spanish financial newspaper Expansion, Spanish cable TV operator ONO rejected a recent acquisition bid by Vodafone in favor of an IPO. Swallowing Canal Plus, Telefonica would have a large advantage in its main game:  Rolling out broadband fibre in Spain.

Emiliano de Pablos contributed to this article

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