Spain's Telefonica Takes Stake Berlusconi's Mediaset

ROME – Spanish telecom Telefonica has acquired an 11.1 percent stake in Silvio Berlusconi’s Mediaset Premium pay-TV operation for Euros 100 million $136 million) in a possible prelude to more international partners joining the Italo paybox that competes with Rupert Murdoch’s Sky Italia in Italy, and also to the potential creation of a Spain/Italy pay-TV axis.

Mediaset Deputy Chairman Piersilvio Berlusconi (pictured), who is Silvio Berlusconi’s son, has announced talks are underway with other potential partners, including Qatari-owned broadcaster Al Jazeera, whose beIN Sport is the top sports pay-TV player in the Middle East, and is also active in France, and with Gallic giant Vivendi, which owns Canal Plus.

The announcement of Telefonica’s purchase of a Mediaset Premium stake comes three days after the Spanish giant, which is Europe’s second-biggest telco, purchased Mediaset’s 22 percent stake in Spanish pay-TV operation Digital Plus for a reported $400 million in a clear sign of its energetic expansion into the pay-TV and content industries.

Mediaset in a statement on Monday said it will spin-off its pay-TV side, which is Italy’s number-two pay-TV player, into a new entity with a Euros 900 million ($ 1.2 billion) equity value.

While some analysts, including Italy’s Istituto Centrale delle Banche Popolari Italiane (ICPBI), consider this valuation to be high due to the soaring costs of soccer rights and Italy’s current pay-TV climate, which is cramped by persistent recession, the Milan Bourse on Monday welcomed the deal and the plans for Mediaset Premium’s international expansion.

Mediaset shares rose 3 percent to Euros 3.8 on news of the Telefonica Mediaset Premium purchase.

Mediaset’s partnership with Telefonica in the pay-TV field “marks the start of an important alliance” for further collaborations “in terms of technology, know-how and content,” the Mediaset statement said.

Entry of a major partner like Telefonica in Mediaset Premium also means the beginning “of a process of opening up our Italian pay-TV operation to other international partners in a logic of developing production and distribution activities on all our pay-TV platforms,” it went on to note.

“We are dealing with global competitors who are full of resources and are very aggressive and ruthless,” Pier Silvio Berlusconi said in an interview with Italian daily Corriere della Sera on Saturday, specifying that international alliances will allow it to remain competitive as it faces increasing costs for TV rights.

The ongoing early talks with other partners could “give Mediaset Premium access to the English-speaking market, the world’s top market after the Spanish-language one,” Berlusconi junior told the newspaper.

Since it’s launch in 2006 Mediaset Premium has never managed to turn a profit despite reaching some two million Italian subs thanks to a mix of soccer, other sports, and premium scripted content largely provided by costly output deals with Universal and Warner Bros.

Murdoch’s Sky Italia, which launched in 2003, is profitable and has some 4.7 million subs, but has been feeling a pinch due to Italy’s economic doldrums which have diminished its clientele which exceeded 5 million in 2011.

In late June Mediaset and Sky Italia reached a deal on TV broadcasting rights for the 2015 to 2018 Italian soccer seasons, that maintained the status quo. It  gives Sky Italia all matches during the three soccer seasons for Euros 572 million ($778.9 million) per year, while Mediaset will broadcast the games of the main eight teams in the Italian Serie A league—a total of 248—for Euros 373 million ($507 million) per year.

But in February Mediaset aggressively snapped up prime Champion’s League European football rights for the 2015-2018 seasons for a reported whopping Euros 700 million ($970 million) in a surprise move that it hopes will win over thousands of subs from Sky and which certainly made Mediaset Premium more attractive for prospective partners.

What remains to be seen is how crucial those costly Champion’s League rights will prove to be in attracting the 500,000 additional subs analysts think it needs to break even.

 

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