Telefónica bids over €1B for Spanish pay-TV operator DTS

Telefónica could pay more than €1 billion ($1.35 billion) for Spanish pay-TV operator Distribuidora de Television Digital (DTS) if deals with two existing shareholders go ahead, as the Spanish incumbent seeks to shore up its domestic business.

In one deal, Telefónica may pay as much as €355 million to acquire Italian media company Mediaset's 22 per cent stake in DTS. The operator announced on Wednesday that it offered €295 million for Mediaset's stake in DTS, with provision to add €10 million to the price if a separate deal to acquire Promotora de Informaciones' (PRISA) 56 per cent holding in DTS is accepted.

In a statement, Telefónica revealed it also agreed to pay Mediaset up to €20 million more depending on the number of pay-TV subscribers DTS adds in the four years following the close of the PRISA deal. An additional payment of €30 million would also be made if Mediaset waives its pre-emptive right to acquire PRISA's stake in DTS.

If Telefónica's deals with Mediaset and PRISA go ahead, it will take the total price paid for DTS to over €1 billion. The operator announced early June that it had offered PRISA €750 million for its holding in the pay-TV company.

A media and telecoms professor at the Milan-based Bicocca University told Bloomberg that Mediaset will find it hard to turn down Telefónica's offer, as the Italian company seeks to raise funds to compete in an auction of the country's premier league football rights.

Telefónica is seeking to beef up its Spanish services with TV content in a bid to stem losses from its telephony operation in the country. The operator's domestic operating income before depreciation and amortisation (OIBDA) fell 8.4 per cent year-on-year to €1.4 billion in the opening quarter of 2014, as wireless revenues fell 10.1 per cent, and fixed sales 6.4 per cent, year-on-year.

The company is currently in the process of reorganising its European operations to improve its performance in the region.

In late May, the European Commission approved a sale of the company's O2 Ireland business to Hutchison Whampoa, and the operator is reportedly close to securing clearance for a planned acquisition of KPN's E-Plus business by Telefónica Deutschland.

For more:
- see Telefónica's statement [PDF]
- see Telefónica's PRISA announcement
- see the operator's Q1 results [PDF]
- see this Bloomberg report

Related Articles:
Germany's anti-trust body raises concerns over Telefónica/E-Plus plan
Moody's: M&A may not bring desired benefits for operators
Telefónica close to gaining approval on E-Plus German bid
Telefónica continues to court Liberty Global as part of E-Plus bid
EU clears Hutchison's €780M acquisition of O2 Ireland, with concessions

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