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Sogecable spins amid sector flux

Co. results were lower than expected on two counts

MADRID — Leveraged buyouts, rejected mergers, rejigged business plans: pay TV is suddenly boiling in Spain.

On Nov. 15, Spain’s dominant pay TV player, Sogecable, owner of digital DTH platform Digital Plus, announced key third quarter results, reflecting subscriber takeup in September as Spain’s soccer season kicked in.

On two counts, results were lower than expected. Third-quarter operating cash flow came in at E81 million ($105.2 million); and new subs in September reached 51,600. Sogecable shares dropped 3% Nov. 16.

Just as Sogecable unveiled results, news came that Spanish telco Auna, which packages fixed telephony, Internet and cable TV, had launched a hostile $3.1 billion bid for rival telco ONO. On Nov. 16, ONO confirmed it had rejected Auna’s overture, and Sogecable talked analysts through a new business plan.

Sogecable general manager Carlos Abad suggested an Auna-ONO combo would be a stronger client for Sogecable programming. That could be a bottle half full comment. Sogecable’s studio contracts lapse around 2007, and Hollywood’s majors could have two powerful rivals — Sogecable and an Auna-ONO — competing for product.

On Nov. 17, a consortium of five buy-out specialists — Yank groups Blackstone, Carlyle and Providence, and Apax Partners and CVC Capital from the U.K. — made front-page news confirming the thrashing out of a $14.3 billion bid for Auna. That would rank as the biggest ever leveraged buyout in Europe.

Conclusions were immediately being drawn. Per Sogecable CEO Javier Diaz de Polanco, Sogecable’s third-quarter figures mark “renewed growth for pay TV in Spain.”

Nobody’s talking about a Sogecable meltdown. “This is certainly not a crisis. Sogecable set itself very aggressive targets last year. If people ask me, I tell them I’m optimistic,” says Enrique Jimenez, an analyst at Ibersecurities.

Sogecable has met its expectations regarding a whopping third-quarter average revenue per user of $61 a month.

Sogecable’s new business plan simply nears market forecasts. It now predicts 2.5 million digital subs for 2008, down from 2.7 million-2.8 million.

The LBO for Auna targets Auna’s crown jewel, cell phone operator Amena. But it focuses attention on Auna’s nascent cable TV biz. Auna and ONO execs both want a merger.

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